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TMI Blog2013 (3) TMI 205X X X X Extracts X X X X X X X X Extracts X X X X ..... purchaser in the year 2004 and it was not a direct purchase from the defaulter. There is nothing on record to indicate that action has been taken against the vendor of the purchaser. There are no averments to suggest collusion of the petitioner with the defaulting dealer. Though the respondent has contended that the petitioner ought to have obtained a 'No Objection' from the revenue before purchasing the property, no provisions have been quoted by the respondent in the counter affidavit. Needless to say that a purchaser in normal course would only verify from the Registration Department as to whether the property to be purchased has any encumbrance. Unless the charge is duly registered in the Registration Department, it would not be possible for any prospecting buyer to know whether there is any charge over the property, for any arrears of tax or any statutory dues to be paid to the Government or statutory body. As stated supra, no materials have been produced before this Court to prove that notice demanding arrears of tax, has been served on the defaulter. No materials have been placed before this Court to prove that steps have been taken under the provisions of the Revenu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he year 2004, from the said Mr. S. Prabhakaran, the petitioner has been in possession and enjoyment of the property. She had let out some portion of the said property for commercial purpose. While so, the Deputy Commercial Tax Officer I, Pattukkottai I, Assessment Circle, Pattukottai, Thanjavur District, the respondent herein, issued a notice on 01.12.2005, directing the petitioner to pay a sum of ₹ 82,593/-, being arrears of tax payable by the said Mr.R.Thirupathy, S/o.Ramasamy Chettiar, a dealer, who had been running business, in the name and style of Ramu Steel Furniture at Pudukkottai. 4. In the aforesaid notice, the respondent has further stated that the properties of the said Mr. R. Thirupathy have been purchased by the petitioner, without obtaining No Due Certificate from the respondent herein, and therefore, she must take full responsibility for the arrears of tax, payable by the said Mr. R.Thirupathy, S/o. Ramasamy Chettiar, otherwise, appropriate action would be taken, under the provisions of the Revenue Recovery Act. Similar notice dated 02.02.2006 was also issued. In response to the aforesaid notices, the petitioner, through her reply dated 06.02.2006, expl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pendency of any of the proceedings under the Sales Tax Act and that she was a bona fide purchaser of the aforesaid property. In such circumstances, the transfer of the property effected in her name cannot be set at naught, and therefore, the respondent has committed an error in passing a distraint order, under Section 8 of the Revenue Recovery Act, when a bona fide purchaser is protected under the proviso to Section 24-A of the Act. 7. Placing reliance on the Judgments of the Division Bench in Deputy Commercial Tax Officer Vs. R.K.Steels reported in (1998) 108 STC 161 (Mad) and D.Senthilkumar and others Vs.Commercial Tax Officer, Erode and another reported in (2006) 148 STC 204 (Mad), learned counsel for the petitioner submitted that when the Writ Petitioner had no actual or constructive notice of the charge, prior to the transfer of the property, she should be treated as a bona fide purchaser and under such circumstances, it is not open to the Commercial Tax Officer to fasten any liability on the petitioner to pay tax. 8. Distinguishing an unreported Judgment of the Hon'ble First Bench of this Court made in W.A.(MD).No.130 of 2005, dated 07.02.2008 [R. Balasubramaniam Vs ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a bona fide. In the light of the above decisions coupled with the statutory protection granted under the proviso to Section 24-A of the Act, learned counsel for the petitioner submitted that the impugned distraint order issued under Section 8 of the Revenue Recovery Act has to be set aside. 10. On the basis of the counter affidavit filed by the Deputy Commercial Tax Officer I, Pattukottai I Assessment Circle, Pattukottai, the first respondent herein, Mr. S. Kumar, learned Additional Government Pleader, submitted that the dealer Mr. R. Thirupathy, S/o. Ramasamy Chettiar, did business in the name and style of Ramu Steel Furniture at T.S.No.3083, East Main Street, Pudukkottai. He was in arrears of sales tax to the tune of ₹ 82,593/- for the assessment years 1994 - 1995 and 1995 - 1996 respectively. Therefore, to realise the arrears, demand notices were also duly served on the petitioner. To recover the aforesaid arrears of sales tax, action was initiated under the Revenue Recovery Act, by attaching the immovable properties, by issuing a notice in Form IV, on 13.02.2006 and that the said notice was duly served on the petitioner on 27.02.2006. 11. Learned Additional Gov ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ayment the whole of the amount outstanding on the date of default shall become immediately due and shall be a charge on the properties of the person or persons liable to pay the tax or interest under this Act. 24-A. Transfers to defraud revenue void.- Where, during the pendency of any proceedings under this Act or after the completion thereof, any dealer creates a charge on, or parts with the possession (by way of sale, mortgage, gift, exchange or any other mode of transfer whatsoever) of any of his assets in favour of any other person, with the intention to defraud the revenue, such charge or transfer shall be void as against any claim in respect of any tax, or any other sum payable by the dealer as a result of the completion of the said proceeding or otherwise Provided that, such charge or transfer shall not be void, if it is made, (i) for adequate consideration and without notice of the pendency of such proceeding under the Act or, as the case may be, without notice of such tax or other sum payable by the dealer; or (ii) with the previous permission of the assessing authority. 14. The issue to be considered is when a bona fide purchaser of a property would ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iable and therefore, their properties cannot escape for the tax liability. When such a person has effected transfer of his property during the pendency of the proceedings under the Act or after the completion thereof, it cannot be stated that he did not intend to evade the tax and therefore, if the sale was to defraud the Revenue, the sale will be ab initio void. But, at the same time, the Legislature has intended to protect an honest person who had purchased the property from such a seller, if he had not colluded with the seller and he had no notice of the liability of the vendor. Under the proviso (i) to Section 24-A of the Act, not only adequate consideration, but also the want of notice, are the two ingredients to safeguard the purchaser. 6. A reading of Section 3 of the Transfer of Property Act, 1882, leads to the conclusion that, not only a wilful absention from an enquiry which a person ought to have made, but the gross negligence to make enquiry also would amount to notice of a fact to him. When the prudence of a person requires to make enquiry, but due to his own negligence he failed to make enquiry, he falls in the category of a person, with notice. A purchaser of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .130 of 2005, has been dismissed on 07.02.2008. However, in D. Senthil Kumar's case, reported in (2006) 148 STC 204 (Mad), cited supra, the First Bench of this Court, presided over by the Hon'ble The Chief Justice, who was also a party to the unreported Judgment in W.A.(MD).No.130 of 2005, dated 07.02.2008, has considered a similar issue, as to whether a purchaser of a property in execution of the Recovery Certificate issued by the Debts Recovery Tribunal and who was not aware of the arrears of sales tax dues under the Act, can claim exemption from the action for recovery of the said arrears and whether a charge can be enforced against the transferee, if he had no notice thereof and whether the requirement of such notice had been waived, if there is a bona fide purchase. 16. In W.A.(MD).No.130 of 2005, dated 07.02.2008, decided subsequently, there is no reference to the earlier decision of the Hon'ble First Bench in D. Senthilkumar's case, reported in (2006) 148 STC 204 (Mad). Probably, the parties to W.A.(MD).No.130 of 2005, would not have brought to the notice of the earlier decision to the Bench. 17. When the correctness of a notice of recovery issued to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s hereinbefore contained which apply to a simply mortgage shall, so far as may be, apply to such charge. Nothing in this section applies to the charge of a trustee on the trust- property for expenses properly incurred in the execution of his trust, and save as otherwise expressly provided by any law for the time being in force, no charge shall be enforced against any property in the hands of a person to whom such property has been transferred for consideration and without notice of the charge . [emphasis supplied]. As the Section itself indicates, a charge may not be enforced against a transferee if he/she has had no notice of the same, unless by law, the requirement of such notice had been waived. The provisions of Section 100 of the Transfer of Property Act fell for consideration of the Supreme Court in Ahamedabad Municipal Corporation of the City of Ahamedabad v. Haji Abdul Gafur Haji Hussenbhai [1971] 1 SCC 757. In that case, the respondent was in arrears of property tax, due under the Bombay Provincial Municipal Corporation Act, 1949. Consequently, the Municipal Corporation created a charge over the property of the defaulter. However, the property was sold in execu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , there was no mention of any sales tax arrears. The sale of the assets took place pursuant to the agreement dated August 12, 1992, in which a specific clause was inserted that the first respondent would be liable to pay all property taxes, other taxes, electricity bills, water taxes and rents from the date of the agreement (i.e., August 12, 1992). For the first time, by letter dated January 8, 1993 of the second appellant to the Mandal Panchayat, Aloor Taluk, the issue of sales tax dues of the defaulting company was brought to the surface. This is further borne out by the correspondence between the first respondent and the Corporation. Thus, it is evident that the first respondent had no actual notice of the charge prior to the transfer. As to whether the first respondent had constructive notice of the charge, no substantive argument on this issue was made, either before the High Court or at any rate before us. Hence, we cannot hold that the first respondent had constructive notice of the charge. 23. In these circumstances, we are of the view that the first respondent was a purchaser for value without notice of the sales tax arrears of the defaulting company or the consequent c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... overy of sales tax arrears, due to the Government. In the above reported A.Senthilkumar's case, at Paragraph No.10, the Hon'ble Division Bench has held as follows:- .....The tax due would be a charge as per Section 24(1) of the Act. Section 24(1) creates charge whereas Section 24(2) gives preference/priority to the tax arrears over other claims except the claim of the Land Development Bank over property mortgaged under Section 28(2) of the Tamil Nadu Co-operative Land Development Bank Act, 1934. Therefore, it is very evident that except the claim of the Land Development Bank, the tax arrears would be given priority and it would be the First Charge on the property and would have priority over other claims. 21. Following the aforesaid decision in A.Senthilkumar's case, a Hon'ble Judge of this Court in W.P.No.36547 of 2007, dated 06.06.2011, has set aside the recovery notice issued Section 11(2) of the Employees Provident Funds and Miscellaneous Provisions Act, 1952, in respect of arrears of contribution, wherein a charge was created in respect of the property. For the purpose of better appreciation, this Court deems it fit to extract the facts made in the su ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Thus, in the light of the above Judgments, it could be seen that even though a charge is created on the properties on the finalisation of the assessment of tax or contribution to the Regional Provident Fund Commissioner, as the case may be, and a demand is raised, the same would not preclude the bona fide purchaser from seeking protection under Section 24-A of the Act. Constructive notice means, legal inference from established facts. Notice imputed by the law to a person not having actual notice . Knowledge of any fact which would put a prudent man upon inquiry. Knowledge of such facts as should induce inquiry, and as would lead to injury in the case of an ordinarily prudent man and which cannot be neglected without a voluntary closing of the eyes, and conduct inconsistent with good faith. 26. In the case on hand, the contention of the learned counsel for the petitioner is that prior to the purchase of the property in the year 2004, the petitioner had verified with the encumbrance details in the Registration Department and finding that there was no encumbrance over the property, she had purchased the same, which would show that she had made bona fide efforts to find out ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is required to be substantiated by facts, the party raising the point, if he is the writ petitioner, must plead and prove such facts by evident which must appear from the writ petition and if he is the respondent, from the counter-affidavit. If the facts are not pleaded or the evidence in support of such facts is not annexed to the writ petition or to the counter-affidavit, as the case may be, the court will not entertain the point. In this context, it will not be out of place to point out that in this regard there is a distinction between a pleading under the Code of Civil Procedure and a writ petition or a counter-affidavit. While in a pleading, that is, a plaint or a written statement, the facts and not evidence are required to be pleaded, in a writ petition or in the counter- affidavit not only the facts but also the evidence in proof of such facts have to be pleaded and annexed to it. 27. Going through the judgments relied on by both parties, this Court is inclined to accept the submissions of the learned counsel for the petitioner that the decision rendered in R.K. Steels's case (cited supra) has been approved in D. Senthilkumar's case (cited supra) followi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... espondent has contended that the petitioner ought to have obtained a 'No Objection' from the revenue before purchasing the property, no provisions have been quoted by the respondent in the counter affidavit. Needless to say that a purchaser in normal course would only verify from the Registration Department as to whether the property to be purchased has any encumbrance. Unless the charge is duly registered in the Registration Department, it would not be possible for any prospecting buyer to know whether there is any charge over the property, for any arrears of tax or any statutory dues to be paid to the Government or statutory body. As stated supra, no materials have been produced before this Court to prove that notice demanding arrears of tax, has been served on the defaulter. No materials have been placed before this Court to prove that steps have been taken under the provisions of the Revenue Recovery Act, against the defaulter or the subsequent first purchaser, from whom the petitioner has purchased the property in the year 2004, after six long years, since the date of finalisation of the assessment. In the absence of any specific plea of collusion, rebuttal of even ..... X X X X Extracts X X X X X X X X Extracts X X X X
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