2004 (5) TMI 597 - HC - Indian Laws

Summary

Issues:
1. Mandamus for releasing factory and restraining interference.
2. Validity of possession of disputed premises.
3. Allegations of fraudulent transaction to avoid tax recovery.
4. Applicability of doctrine of piercing the veil of corporate personality.

Analysis:
1. The writ petition sought a mandamus to direct respondents to release the petitioner's factory and restrain interference with business operations. The petitioner, a proprietorship firm, claimed to have purchased the industrial plot and shed in NOIDA, but respondent No. 5 sealed the factory due to outstanding tax dues of the previous tenant, respondent No. 4. Petitioner alleged suffering losses and requested relief. Respondents contended the transaction was fraudulent and collusive to avoid tax recovery, leading to the dismissal of the petition by the court.

2. The possession of the disputed premises was under scrutiny, with respondent No. 3 acquiring possession from the previous owner and subsequently transferring it to the petitioner. The court found the transaction between respondent No. 3 and the petitioner to be fraudulent and collusive, aimed at evading tax recovery. The court cited legal precedents emphasizing that fraud vitiates all proceedings, leading to the dismissal of the petition.

3. The court analyzed the fraudulent nature of the transaction, highlighting collusion between the petitioner and respondents to avoid tax recovery. It referenced legal decisions discussing fraud and collusion, emphasizing that the transaction was an attempt to circumvent tax liabilities. The court found no merit in the petition based on the fraudulent and collusive nature of the transaction.

4. The doctrine of piercing the veil of corporate personality was invoked to address the issue of dues owed by respondent No. 4, a limited liability company. The court referred to legal precedents and a Division Bench decision discussing the doctrine's applicability in cases where attempts are made to evade tax dues. The court concluded that the doctrine should be applied in the present case due to the fraudulent transaction aimed at avoiding substantial tax liabilities, leading to the dismissal of the petition.