Allowed

M/S Standard Agro Vet (P) Ltd. v. State of Haryana & Ors.

Punjab & Haryana HC7 Sept 2010CWP/11129/2010

Case brief

AI extract

What is this about?

The High Court allowed a writ petition seeking quashing of an auction notice and recovery proceedings against the petitioner. The court held that a bona fide purchaser in a public auction from a statutory authority is not liable for the dues of the previous owner, relying on Supreme Court precedents regarding auction sales and lack of finding of fraud.

What did the court decide?

The auction notice dated 17.5.2010 and recovery proceedings initiated against the petitioner are quashed.

M/S Standard Agro Vet (P) Ltd. Vs… — Public Procurement and Tenders | Punjab & Haryana HC (2010)

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IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH.

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C.W.P. No.11129 of 2010 Date of decision: 7.9.2010

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M/s Standard Agro Vet (P) Ltd.

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-----Petitioner.

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Vs.

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State of Haryana and others.

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-----Respondents

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CORAM:- HON'BLE MR. JUSTICE ADARSH KUMAR GOEL HON'BLE MR. JUSTICE AJAY KUMAR MITTAL

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Present:Mr. Gunjan Rishi, Advocate for the petitioner.

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Mr. Gagandeep Singh Vasu, DAG, Haryana.

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Ms. Jarnail Kaur, Advocate for respondent No.7.

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ADARSH KUMAR GOEL, J.

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This petition seeks quashing of Auction Notice dated 17.5.2010, Annexure P-5, for the recovery of sales tax dues.

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Case of the petitioner is that it purchased the land in dispute in open public auction from Haryana Financial Corporation and sale deed dated 25.4.2000 was executed in its favour by the Haryana Financial Corporation. Prior to the said purchase by the petitioner, the land was owned by M/s Chaudhary Glue Industries which had raised a loan from the Haryana Financial Corporation against security of land and for

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CWP No.11129 of 2010

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non-payment of the said loan, the land was auctioned. The petitioner was, thus, not liable for the liability of the debtor whose land was sold in public auction to the petitioner.

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In reply to the notice issued, stand taken on behalf of the State is that sale deed in favour of the petitioner was fake and fictitious and the petitioner on account of understanding with the Haryana Financial Corporation, purchased the property. The registered mortgage deed with the Haryana Financial Corporation was not entered in the revenue records.

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Counsel for the petitioner stated that he was merely proxy and knew nothing about the case. However, we have heard learned counsel for the respondents. 5. A perusal of the reply of the respondents shows that the property was attached vide order dated 11.7.2006. It has not been mentioned in the reply as to which was the period when the liability arose and what steps were taken for recovery of the amount. The petitioner purchased the property ten years back by a registered sale deed in public auction by a statutory authority. It acquired title free from all encumbrances and without any liability to meet debts of previous owner. The stand taken by the respondents, that sale was collusive or fraudulent is not based on any finding by any competent authority. Haryana Financial Corporation is manned by senior officers of Haryana Government and if it is case of the State that the said officers were responsible for fraud or collusion, it is not understood why no action was

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CWP No.11129 of 2010

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taken by them. The plea appears to have been taken without any sense of responsibility. In absence of sale being vitiated by fraud or being otherwise void, a person purchasing property in a public auction is not liable for dues of previous owner. Reference may be made to judgment of the Hon’ble Supreme Court in Isha Marbles v. Bihar State Electricity Board 1995(2) SCC 648 and AI Champdany Industries Ltd. v. Official Liquidator & another 2009(4) SCC 486. In AI Champdany Industries Ltd., it was observed;

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“28. Almost a similar question in regard to the dues of the electrical charges came up for consideration before this Court in Isha Marbles V. Bihar SEB (1995) 2 SCC 648. In that case sale of the assets of an industrial undertaking took place in terms of the provision so of the State Financial Corporations Act, 1951. Having regard to the provisions of the Electricity Act, 1910 a three-Judge Bench of this Court held that a liability on the purchaser cannot be imposed which was not incurred by them state (SCC p.644, para 63)

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“63. We are clearly of the opinion that there is great reason and justice in holding as above. Electricity is public property. Law, in its majesty, benignly protects public property and behoves everyone to respect public property. Hence, the courts must be zealous in this regard. But, the law, as it stands, is inadequate to enforce the liability of the previous contracting party against the auction-purchaser who is a third party and is in no way connected with the

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CWP No.11129 of 2010

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previous owner/occupier. It may not be correct to state, if we hold as we have done above, it would permit dishonest consumers transferring their units from one hand to another, from time to time, infinitum without the payment of the dues to the extent of lakhs and lakhs of rupees and each one of them can easily say that he is not liable for the liability of the predecessor-ininterest. No doubt, dishonest consumers cannot be allowed to play truant with the public property but inadequacy of the law can hardly be a substitute for overzealousness.”

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Dues of the municipality would also not even otherwise come within the purview of the Crown debt. Even a Crown debt could be discharged only after the secured creditors stand discharged.

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In Union of India v. Sicom Ltd. (2009) 2 SCC 121 it is stated (SCC pp 126-127, paras 9-10)

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“9. Generally, the rights of the Crown to recover the debt would prevail over the right of a subject. Crown debt means the ‘debt due to the State of the Kind; debts which a prerogative entitles the crown to claim priority for before all other creditors’. (See Advanced Law Lexicon by P.Ramanatha Aiuyar (3^rd Edn.) p.1147} Such creditors, however, must be held to mean unsecured creditors. Principle of Crown debt as such parents to the common law principle. A common law which is a law within the meaning of Article 13 of the Constitution is save in terms of Article 372 thereof. Those principles of common law, thus, which were existing at the

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time of coming into force of the Constitution of India are save by reason of the aforementioned provision. A debt which is secured or which by reason of the provisions of a statute becomes the first charge over the property having regard to the plain meaning of Article 372 of the Constitution of India must be held to prevail over the Crown debt which is an unsecured one.

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It is trite that when Parliament or a State Legislature makes an enactment, the same would prevail over the common law. Thus, the common law principle which was existing on the date of coming into force of the Constitution of India must yield to a statutory provision. To achieve the same purpose, Parliament as also the State Legislatures inserted provisions in various statutes, some of which have been referred to hereinbefore provisions that the statutory dues shall be the first charge over the properties of the taxpayer. This aspect of the matter has been considered by this Court in a series of judgments.”

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In view of above, this petition is allowed and proceedings initiated against the petitioner are quashed.

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The respondents will pay Rs.50,000/- towards costs for their irresponsible stand. The costs be paid to the High Court Legal Aid Committee and an affidavit of compliance be filed within one month from today. The State will be at liberty to recover the costs from the persons who may be responsible for this conduct.

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CWP No.11129 of 2010

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(ADARSH KUMAR GOEL) JUDGE

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September 07, 2010 ( AJAY KUMAR MITTAL ) ashwani JUDGE

M/S Standard Agro Vet (P) Ltd. v. State of Haryana & Ors.

Case brief

What is this about?

What did the court decide?

M/S Standard Agro Vet (P) Ltd. v. State of Haryana & Ors.

Case brief

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What did the court decide?

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