2009 (4) TMI 896 - HC - VAT and Sales Tax

Equitable mortgage - whether any equitable mortgage was created by the third respondent or not? - Whether it is not necessary always that an original title deed alone should be deposited for creating an equitable mortgage? Held that - The issue as to whether any equitable mortgage was created by the third respondent or not is a question of fact to be pleaded in a suit and decided on the basis of the evidence to be adduced in the suit. Such disputed questions of fact cannot be gone into in the writ petition. Hence, we do not find any error or infirmity in the reasoning of the learned judge and accordingly, as stated above, the writ appeal fails and the same is dismissed.

Summary

Issues:
Property purchase dispute involving sales tax arrears and equitable mortgage creation.

Analysis:
The appellant purchased a property and later discovered that the property was under threat of being attached and sold in auction due to sales tax arrears of the previous owner, the second respondent. The appellant contended that as a bona fide purchaser for valuable consideration without notice of the arrears, he should not be held liable. The appellant challenged the order of the first respondent seeking to attach the property through a writ petition, which was dismissed by the learned judge basing reliance on a previous decision. The appellant then filed a writ appeal against this dismissal.

The appellant argued that the previous decision relied upon by the court was not applicable to the present case as the vendor, the third respondent, was not an assessee in default at the time of the property sale. The appellant claimed lack of knowledge about the arrears and that the property was purchased in good faith. The appellant further contended that no equitable mortgage was created by the vendor in favor of the first respondent.

On the other hand, the Government Advocate submitted that an equitable mortgage had been created by the vendor through a letter and the deposit of the sale deed, giving rise to a charge over the property. The Government Advocate cited legal precedents to support the contention that the deposit of a copy of the sale deed could create an equitable mortgage, even without the original title deed. The Government Advocate emphasized that such factual disputes should be resolved in a civil suit rather than a writ petition.

The court considered the arguments presented and concluded that the question of whether an equitable mortgage was created by the vendor was a factual issue to be determined in a civil suit based on evidence. The court upheld the decision of the learned judge and dismissed the writ appeal, stating that disputed questions of fact cannot be resolved in a writ petition. Consequently, the court ruled against the appellant, emphasizing the need for a civil suit to address the disputed issues.