The High Court Gujarat has held that in case of recovery of property tax, Municipal Corporation cannot have first charge over property sold through E-Auction by liquidator.
The applicant, M/S Alpesh Gems purchased a property in the E-auction proceedings conducted by the Liquidator of the Kohinoor Diamonds Private Limited. The Surat Municipal Corporation has to recover an amount of Rs.19,87,171/- from the Kohinoor Diamonds towards arrears of property tax. The applicant clarified with the Surat Municipal Corporation that it is liable to pay property tax for the period after the auction proceedings and not for the liability which Kohinoor Diamonds incurred in the past i.e. before the liquidation proceedings.
The applicant submitted that a purchaser, in the normal course, would only verify from the Registration Department as to whether the property to be purchased has any encumbrance; unless the charge is duly registered in the Registration Department, it would not be possible for any prospective buyer to know whether there is any charge over the property for arrears of tax or statutory dues to be paid to the Government or statutory body.
The High Court observed that no charge could be enforced against any property in the hands of a transferee for consideration without notice of the charge; the exception to this general rule must be expressly provided by law; the real core of the saving provision of the law must not be the mere enforceability of the charge against the property charged, but enforceability of the charge against the said property in the hands of a transferee for consideration without notice of the charge.
The High Court further observed that we declare that the Surat Municipal Corporation cannot claim any first charge or precedence over the subject property as the auction proceedings have attained finality. The writ applicant as on date is the lawful owner of the subject property. The Surat Municipal Corporation may recover the property tax from the writ applicant from the date of purchase of the subject property in the E-auction proceedings.
The division bench presided by Mr. Justice J.B.Pardiwala and MS. Justice Nisha M. Thakore has held that “we reserve the liberty in favour of the Surat Municipal Corporation to recover the requisite amount towards the property tax by taking up the issue with the Official Liquidator i.e. the respondent No.2 in accordance with the provisions of the Companies Act”.
Subscribe Taxscan Premium to view the JudgmentSupport our journalism by subscribing to Taxscan AdFree. Follow us on Telegram for quick updates.
