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TMI Blog2009 (2) TMI 470X X X X Extracts X X X X X X X X Extracts X X X X ..... d Company Judge by an Order dated 15-9-2006. 3. Appellant was served with a notice dated 15-2-2007 by Bhatpara Municipality claiming payment of arrears of property tax amounting to Rs. 47,59,597.19 for the period from 1991-92 and 2006-07, stating : "that before adopting the said stringent measure for realizing the arrear property tax once again give you and opportunity to pay all arrear property tax in respect of the said holdings being 1, West Ghoshpara Road, Ward No. 12, amounting to Rs. 47,59,597.19 plus statutory interest within seven days from the receipt thereof." 4. Appellant contends that it has no liability to pay the said dues and the same has to be adjusted from the sale proceeds. It is furthermore stated that on and from the date of purchase it had paid all municipal rates and taxes subsequent to the date of sale. Appellant on receipt of the said notice took out a Chamber Summons praying, inter alia, for the following reliefs : "( a )Necessary clarification be made that Sale confirmed in favour of applicant by order dated 15-9-2006 would make the applicant liable for payment of property tax only on and from the date of confirmation of sale i.e., 15-9 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ention to the advertisement for sale to contend that the appellant had a duty to make an enquiry in regard to the Company s encumbrance as also in terms of the provisions of section 55(1) and 55(2)( g ) of the Transfer of Property Act. The learned counsel appearing on behalf of the Official Liquidator would support the said contention. 9. The company went in liquidation. It was directed to be wound up. The Official Liquidator indisputably took charge of both movable and immovable assets of the company. The fact that the company went in liquidation was given due publicity. Respondent-Municipality did not file its claim before the Official Liquidator. It did not stand in queue to get the same recovered and/or adjusted from the sale proceeds. Indisputably the manner in which the claim of a creditor in respect of the dues of the company in liquidation is to be realized has been laid down in sections 529 and 529A of the Companies Act, 1956. 10. Dues in relation to the Municipal Tax in terms of the provisions of the said Act do not create any encumbrance on the property. It does not create any charge. It is considered to be a personal liability. On the aforementioned premise, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... under a subsequent title." In Supreme Court on Words and Phrases it is stated that "the word encumbrance means a burden or charge upon property or a claim or lien upon an estate or on the land." In Advanced Law Lexicon Encumbrance is defined as an infringement of another s right or intrusion on another s property. In Black s Law Dictionary Encumbrance is defined as any right to, or interest in, land which may subsist in another to diminution of its value, but consistent with the passing of the fee. 13. Encumbrance, therefore, must be capable of being found out either on inspection of the land or the office of Registrar or a statutory authority. A charge, burden or any other thing which impairs the use of the land or depreciates in its value may be a mortgage or a deed of trust or a lien or an easement. Encumbrance thus must be a charge on the property. It must run with the property. If by a reason of the statute no such burden on the title which diminishes the value of the land is created, it shall not constitute any encumbrance. 14. If the property tax was merely a statutory dues without creating any encumbrance on the property which had cast a duty upon al ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eration and without notice of the charge." 16. There cannot, thus, be any doubt or dispute that a provision of law must expressly provide for an enforcement of a charge against the property in the hands of the transferee for value without notice to the charge and not merely create a charge. 17. In Ahmedabad Municipal Corpn. of the City of Ahmedabad s case ( supra ) itself it was held : ". . .According to the submission it is not necessary for the saving provision to expressly provide for the enforceability of the charge against the property in the hands of a transferee for consideration without notice of the charge. This submission is unacceptable because, as already observed, what is enacted in the second half of section 100 of Transfer of Property Act is the general prohibition that no charge shall be enforced against any property in the hands of a transferee for consideration without notice of the charge and the exception to this general rule must be expressly provided by law. The real core of the saving provision of law must be not mere enforceability of the charge against the property charged but enforceability of the charge against the said property in the hands o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to the contrary, the rights and obligations of the parties to a sale would be as indicated in section 55. Such a contract to the contrary must be express and not implied, as a result whereof the meaning of term encumbrance would be expanded. The advertisement did not specify that all public charges have to be paid. Municipal Corporation indisputably is not a preferential creditor. Companies Act in relation to winding up of proceeding is otherwise a special law. While distributing the assets between the creditors and unsecured creditors, the provisions of sections 529 and 530 must be complied with. 20. All claims against the companies were required to be filed before the liquidator until the property was sold as provided for under section 457 of the Companies Act. In terms of section 456 thereof once an order for winding up is made the liquidator has to take into custody the properties, effects and actionable claims to which the company is or appears to be entitled. Section 528 provides that all debts payable on a contingency and all claims against the company, present or future are admissible to proof against the company. Section 529 provides for the same rule as in force ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... means the debts due to the State or the king; debts which a prerogative entitles the Crown to claim priority for before all other creditors. [ See Advanced Law Lexicon by P. Ramanatha Aiyear (3rd Edn.) p. 1147]. Such creditors, however, must be held to mean unsecured creditors. Principle of Crown debt as such pertains to the common law principle. A common law which is a law within the meaning of article 13 of the Constitution is saved in terms of article 372 thereof. Those principles of common law, thus, which were existing at the time of coming into force of the Constitution of India are saved by reason of the aforementioned provision. A debt which is secured or which by reason of the provisions of a statute becomes the first charge over the property having regard to the plain meaning of article 372 of the Constitution of India must be held to prevail over the Crown debt which is an unsecured one. It is trite that when a Parliament or State Legislature makes an enactment, the same would prevail over the common law. 12. Thus, the common law principle which was existing on the date of coming into force of the Constitution of India must yield to a statutory provision. 13. To ach ..... X X X X Extracts X X X X X X X X Extracts X X X X
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