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2008 (9) TMI 888 - HC - VAT and Sales TaxRecovery proceedings - sale of property - auction sale - Held that - In the present case the procedure for selling the properties by revenue recovery proceedings the legal procedure was not followed. No wide publicity was given. The time gap provided under sections 36 and 38 of the TNRR Act was not followed. The right of the independent owners including the petitioner in W.P. No. 5324 of 2008 was infringed as no notice was given to him and his brother who were no way connected with the company. (Though such a notice was given to them when auction notice was issued during the year 2004). In the light of the same these writ petitions are liable to succeed and the impugned notice are bound to set aside. In the present case on behalf of the company one director K.K. Gnanaprabakaran had filed an affidavit of undertaking to pay a 45, 67, 264 together with five per cent interest as a precondition for setting aside the sale. Therefore the petitioner-company in W.P. Nos. 3847 and 4378 of 2008 are directed to deposit as undertaken by them vide undertaking dated June 25 2008 within a period four weeks from the date of receipt of a copy of this order. The sale made in favour of K. Govindaraj the successful auction purchaser is hereby set aside and the Commercial Tax Department is directed to refund the amount taken from the auction purchaser within two weeks from the date of receipt of the order.
Issues Involved:
1. Procedural irregularities in the auction held under the Tamil Nadu Revenue Recovery Act (TNRR Act). 2. Lack of notice to joint property owners. 3. Personal liability of directors for company arrears. 4. Compliance with statutory requirements for auction notice and sale confirmation. 5. Applicability of previous court orders and res judicata. Issue-wise Detailed Analysis: 1. Procedural Irregularities in the Auction Held Under the TNRR Act The petitioner-company challenged the auction notice and the subsequent sale confirmation on the grounds of procedural irregularities. They argued that the auction notice dated March 12, 2008, and the auction held on March 19, 2008, did not comply with the statutory requirements under sections 36 and 38 of the TNRR Act. Specifically, the notice was not affixed one month prior to the sale, and the sale was confirmed within 14 days, violating the 30-day waiting period mandated by section 38(3). The court found these procedural lapses to be significant and ruled that the auction was vitiated by these irregularities. 2. Lack of Notice to Joint Property Owners The petitioner in W.P. No. 5324 of 2008, a joint owner of the property, contended that no notice was given to him or the other joint owners before the auction. The court observed that the auction notice was only marked to the company and one of the directors, K.K. Surendranath, but not to the other joint owners. Citing legal precedents, the court held that the failure to notify all interested parties constituted an illegality, thereby vitiating the sale. 3. Personal Liability of Directors for Company Arrears The petitioners argued that the directors of the company should not be held personally liable for the company's arrears. The court agreed, citing the principle that a company is a separate legal entity. Therefore, the properties of the directors cannot be brought to sale for the company's tax dues. The court emphasized that only the company's properties could be auctioned, not the personal properties of its directors. 4. Compliance with Statutory Requirements for Auction Notice and Sale Confirmation The court scrutinized the compliance with statutory requirements under the TNRR Act. It was found that the auction notice was not given adequate publicity, and the timelines for affixing the notice and confirming the sale were not adhered to. The court reiterated that strict compliance with statutory procedures is essential, and any deviation would render the auction invalid. 5. Applicability of Previous Court Orders and Res Judicata The respondents argued that the petitioners' claims were barred by res judicata due to a previous court order dismissing a similar writ petition (W.P. No. 1964 of 2004). However, the court clarified that the earlier order did not address the current procedural irregularities and lack of notice issues. Therefore, the principle of res judicata did not apply in this case. Conclusion The court concluded that the auction was vitiated by procedural irregularities and lack of notice to joint property owners. The sale in favor of the successful bidder was set aside. The petitioner-company was directed to deposit Rs. 45,67,264 with five percent interest within four weeks. The Commercial Tax Department was instructed to refund the auction amount to the successful bidder. The court also allowed the petitioner-company to seek waiver of interest from the government due to its status as a sick unit. If the waiver is not granted within eight weeks, the department may initiate fresh revenue recovery proceedings in accordance with the law. All writ petitions were disposed of without costs, and all miscellaneous petitions were closed.
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