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TMI Blog1998 (10) TMI 519X X X X Extracts X X X X X X X X Extracts X X X X ..... the respondent/Revenue cannot deprive their right of protection from any interference by bringing these properties for sale and therefore the notices issued by the Revenue are not sustainable and are to be quashed. They have not disputed the liability of their vendors to pay the tax and they have not said anything against the order of assessment against their vendors. As mentioned above their only contention is that they are bona fide purchasers for value without notice. 2.. It is no doubt true that an honest and a bona fide purchaser who had no knowledge about the encumbrance of the tax liability of the original owner is protected under the proviso (i) of section 24-A of the Act which reads as follows: 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 payabl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 the property when claims the transaction to be bona fide without notice, the yardstick to be applied for the notice is given in section 3 of the Transfer of Property Act, 1882 and only by the application of this provision, a purchaser who seeks protection under section 24-A of the Tamil Nadu General Sales Tax Act, is to be identified, whether he is a purchaser for value without notice. The necessity of the purchase, the intention of the transfer, the relationship between the vendee and vendor are all vital factors to find out the reasonableness of the person in purchasing the property. Sometimes unexplained secrecy or the haste in the transactions may also throw some light as to the bona fide or mala fide. To decide whether a transaction was genuine or bona fide or mala fide, all facts relating to the conduct of the parties to the transaction have to be weighed as a whole. Such enquiry on disputed facts is not possible in the proceedings under article 226 of the Constitution of India, becau ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... when the petitioner was directed to pay the arrears, they filed W.P. No. 2388 of 1990 which was dismissed on March 6, 1990 and thereafter this proceedings has been initiated to quash the notice under the Revenue Recovery Act. From the counter it is made clear that already there were orders of assessment against the vendors who were neighbours to the petitioners in the industrial plot. 9.. In T.P. No. 2121 of 1997, the case of the petitioners M/s. Emmar Photos Limited, is that this property originally belonged to one K.R. Udayanan, who run hotels in the name and style of Hotel Cannimara and Mini Cannimara in the same building and he leased out the building to four persons by names S.K. Devendran, D. Navaneethakrishnan, G. Devika and Mohandoss who also were running hotels. According to the petitioner the original owner Udayanan sold the building under a sale deed dated March 18, 1992 to three persons by names (1) S. Gnanadesikan, (2) Smt. G. Devikarani and (3) Smt. S. Gandhimathi. It is admitted in the petition itself that the purchaser Devikarani was running the hotel before the purchase as a lessee. There was a second sale by those three purchasers in favour of three persons ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rs from the assessee, the petitioners have purchased the property nearly 10 years after the liability that arose against the assessee. Even though no separate counter is filed in this case by the Revenue the typeset filed by the petitioners shows that the claim of the petitioners that they purchased the property without notice has been rejected by the Revenue and therefore they again issued the notice to proceed under Revenue Recovery Act. 11.. In T.P. No. 1430 of 1997 the petitioner has purchased the plot of the assessee on May 30, 1984 for a sum of Rs. 20,000. The notice dated August 8, 1988 from the Revenue reads that the assessee Lakshmi Ranga Trailer Works, was in arrears to the tune of Rs. 5,63,786 for the assessment year 1982-83 and the purchaser was asked to furnish the particulars of the purchased property to clear the arrears. The Revenue has issued another notice dated November 7, 1989 to the petitioner, to pay the arrears of the tax, as he is the purchaser of the property of the assessee. The assessment for the year 1982-83 should have been over, even before the end of 1983, but the petitioner has purchased the property only in the year 1984. Therefore, already there ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... up to the Supreme Court on a suit initiated by the court auction purchaser and the court auction purchaser, when threatened by the municipality with a notice of distress warrant for the arrears of the municipal tax filed the suit for declaration that he was the owner of the property purchased in good faith in the court sale. The Supreme Court has thoroughly discussed the evidence adduced on both sides and the conduct of the parties to come to a conclusion that the purchaser had no notice of the charge in the property for the arrears of the municipal tax, that in spite of his best efforts to verify whether there was any tax due, he was not informed about the arrears and the municipal corporation was not active in recovering the arrears. The subject-matter of the property in that suit had vested with the official receiver, as the owner became insolvent and the official receiver sought the permission of the court to pay the tax arrears to the municipal corporation. But subsequently the receiver had stated to the court that he did not possess sufficient funds to pay the tax to the municipal corporation and sought the direction of the court. The insolvency court also gave certain direc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 14.. In that case a regular suit was filed by the purchaser himself and the apex Court has thoroughly considered the entire evidence relating to the conduct of the purchaser to hold that in spite of his best efforts to find out from the receiver with regard to the tax for the property he could not get the details from the receiver and therefore he could not be blamed for the non-payment of the tax and he was protected by the proviso to section 100 of the Transfer of Property Act, 1882. This decision on a suit, cannot be compared with the proceedings under article 226 of the Constitution. Another decision relied upon by the petitioners is Pooranchand Ved Prakash v. State of Madhya Pradesh [1973] 31 STC 170 (MP). It is a decision of the Bench of the Madhya Pradesh High Court, which simply reads that there is a proviso under section 33-A of the Madhya Pradesh General Sales Tax Act, 1958 (corresponding to section 24-A of the TNGST Act) to give protection to a bona fide transferee for consideration and as the transferee had acquired the property without notice, in spite of all the proceedings for recovery of the arrears of sales tax against the dealer, the transfer will be saved unde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ies comprised in the trust deed were proceeded with and the trustees filed the writ petition against the revenue, for the notice under section 17 of the Andhra Pradesh General Sales Tax Act which directed for the payment of the arrears of the tax. The High Court did not accept the trust as a genuine body and in the view of the High Court, it was a fraudulent creature. But the apex Court applying certain tests to the trust deed has found that the trust itself was created only with a view of discharging the debts of the settler and he had not reserved any benefit for himself by the creation of the trust and as a trust was neither forbidden by law nor did it defeat any legal provision, it was valid. Under those circumstances, the apex Court accepting the trust, has held that as the trustees had the obligation of discharging the debts of the creditors, the notice issued by the Revenue was not proper. However, it gave liberty to the Revenue to file the suit, to avoid the document of trust, if they claimed priority. As the settler of the trust had not reserved any benefit in that case, the proceedings of the Revenue was quashed, directing the Revenue to file the suit. But in these cases, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . No. 1019 of 1989) dated October 29, 1992 reported in [1993] 3 MTCR 8, has accepted that creation of charge for the arrears of sales tax is enforceable against the transferee. Similarly it is expressed in Deputy Commercial Tax Officer, Nannilam Taluk v. Asha Kumari [1985] WLR 240 that once assessment was served on the assessee and the tax remained unpaid, the statutory charge under section 24(1) of the Act is enforceable against the transferee of the property. 18.. On a thorough consideration of all these circumstances, as a full fledged enquiry cannot be made in these proceedings with regard to the claim of the petitioners/purchasers to substantiate their version of bona fide purchase, they are directed to initiate civil suit to establish their title to the properties purchased by them. Therefore, these petitions are not sustainable and are liable to be dismissed and accordingly they are dismissed subject to their right of filing, the civil suits. There will be, however, no order as to costs. And this Tribunal both further order that this order on being produced be punctually observed and carried into execution by all concerned. Issued under my hand and the seal of this Tri ..... X X X X Extracts X X X X X X X X Extracts X X X X
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