1975 (2) TMI 94 - HC - VAT and Sales Tax

Summary

Issues Involved:
1. Validity of the public auction sale conducted by the Commercial Tax Officer.
2. Applicability of Section 42 of the Tamil Nadu Revenue Recovery Act.
3. Rights of the fourth defendant as a purchaser in the public auction.
4. Impact of the mortgage on the suit property.

Issue-Wise Detailed Analysis:

1. Validity of the Public Auction Sale Conducted by the Commercial Tax Officer:
The plaintiffs, as mortgagees, initiated action based on a mortgage deed dated 27th September 1957 (Exhibit A-1), seeking sale of the suit property not released under Exhibit A-2. They contended that the public auction held by the Commercial Tax Officer on 28th December 1965, where the fourth defendant purchased the property, did not bind them. The plaintiffs argued that their mortgage rights were unaffected by this auction as the mortgage was prior to the auction. The fourth defendant claimed unawareness of any encumbrance and relied on the auction notice stating the property was sold free of encumbrances.

2. Applicability of Section 42 of the Tamil Nadu Revenue Recovery Act:
The fourth defendant argued that the sale conducted under the Central Sales Tax Act and Tamil Nadu General Sales Tax Act should be deemed free of all encumbrances per Section 42 of the Tamil Nadu Revenue Recovery Act. Section 42 states that lands sold for arrears of revenue shall be sold free of all encumbrances. The court examined whether this provision applied to sales conducted for recovery of tax arrears.

3. Rights of the Fourth Defendant as a Purchaser in the Public Auction:
The fourth defendant contended that the sale should be free from all encumbrances, making his title to the property unimpeachable. The court reviewed the statutory provisions and relevant case law to determine whether the sale of the property for tax arrears could extinguish prior encumbrances such as the plaintiffs' mortgage.

4. Impact of the Mortgage on the Suit Property:
The court analyzed the provisions of the Central Sales Tax Act, Tamil Nadu General Sales Tax Act, and the Tamil Nadu Revenue Recovery Act. Section 9(2) of the Central Sales Tax Act allows state authorities to collect taxes as per state laws. Section 24(2) of the Tamil Nadu General Sales Tax Act permits recovery of tax dues as arrears of land revenue. Section 29 grants Commercial Tax Officers powers akin to Collectors under the Revenue Recovery Act. However, the court noted a distinction in the statutory language: taxes recoverable "as if" they were arrears of land revenue do not equate to actual land revenue, thus not automatically freeing the property from prior encumbrances.

Conclusion:
The court concluded that the sale conducted by the Commercial Tax Officer did not pass the property free of prior encumbrances, including the plaintiffs' mortgage. The reasoning was supported by precedents, including Ramachandra v. Pitchaikanni and Ibrahim Khan Sahib v. Rangaswami Naicken, which held that sales for tax arrears recoverable "as if" they were land revenue do not extinguish prior encumbrances. The court upheld the plaintiffs' mortgage rights, affirming the trial court's mortgage decree. The appeal by the fourth defendant was dismissed, with no order as to costs. The court appreciated the assistance of the learned Additional Government Pleader.