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TMI Blog2022 (1) TMI 310X X X X Extracts X X X X X X X X Extracts X X X X ..... , 2005, if any dealer fails to pay the tax due or fails to pay any tax assessed or penalty levied within the time prescribed, he shall pay, in addition to the amount of such tax or penalty that may be calculated at the rate of one percent per month for the period of default. Therefore, Commissioner of Commercial Taxes was requested to take necessary action and to confirm the sale by collecting the balance 85% of the tax dues and interest from 10.02.2003 till actual payment of the tax dues. Gupta Metallics had not paid the remaining 85% of the sale price within the prescribed period, in contravention of paragraph No.3 of Form No.7 Notice dated 07.12.2002 as well as in terms of Section 36 of the Revenue Recovery Act. That being the position, the auction sale had failed. The question as to whether the 15% deposit made by Gupta Metallics pursuant to the auction sale held on 10.01.2003 is liable to be forfeited or not and if not, whether it should be refunded to Gupta Metallics or to the secured creditor (Asset Reconstruction Company) since Gupta Metallics is facing proceedings under the Recovery of Debts and Bankruptcy Act, 1993 as well as under the SARFAESI Act, should be left t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re arrayed as respondents. 4. By filing this writ petition under Article 226 of the Constitution of India, petitioner M/s. Gupta Metallics Power Limited (for short, Gupta Metallics , hereinafter) seeks a declaration that the action of the respondents in forfeiting an amount of ₹ 61,80,000-00 paid by the petitioner Gupta Metallics towards 15% of the price for purchase of the auctioned land pursuant to Gazette Notification dated 18.12.2002, if the balance amount was not paid within 30 days from the date of sale is arbitrary, unreasonable and illegal and seeks a direction to the first respondent not to forfeit the said amount of ₹ 61,80,000-00. 5. Case of the petitioner Gupta Metallics is that it is a company incorporated under the Companies Act, 1956, having its registered office at Nagpur in the State of Maharashtra. Gupta Metallics is carrying on the business of trading in coal products. First respondent in accordance with the provisions of the Andhra Pradesh Revenue Recovery Act, 1864 (for short, Revenue Recovery Act hereinafter) and the Rules framed thereunder, issued a Gazette Notification on 18.12.2002, whereby the property mentioned in the said Gazette w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s (Special Provisions) Act, 1985 (briefly, the 1985 Act hereinafter). 10. In view of the aforesaid order dated 16.01.2003 passed by the BIFR, petitioner Gupta Metallics made enquiries with the officials of the Commercial Taxes Department. However, Commercial Taxes Department authorities insisted upon the petitioner Gupta Metallics to deposit the balance 85% of the bid amount failing which it was stated that the amount deposited by the petitioner would be forfeited. 11. Contending that the aforesaid action of the first respondent is arbitrary and unreasonable, thus violative of Article 14 of the Constitution of India, petitioner Gupta Metallics has filed the present writ petition seeking the reliefs as indicated above. 12. Commissioner of Commercial Taxes, Government of Andhra Pradesh got himself impleaded as third respondent in W.P.No.2353 of 2003. In the counter affidavit filed by the third respondent on 18.02.2003 it was stated that M/s. Vinedale Distilleries Limited, Gagahpahad, Ranga Reddy District, is a registered dealer under the Andhra Pradesh General Sales Tax Act, 1957 and the Central Sales Tax Act, 1956. M/s. Vinedale Distilleries Limited (referred to as Vined ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... under what circumstances he had approached the Collector of Ranga Reddy District for sale of the land under the Revenue Recovery Act without the consent of BIFR. 17. Assailing the order dated 16.01.2003 passed by the BIFR, State of Andhra Pradesh filed a writ petition before this Court which was registered as W.P.No.2139 of 2003. A Division Bench of this Court, by order dated 06.02.2003 directed that any confirmation of sale would be subject to further orders of the Court. 18. Petitioner Gupta Metallics, despite being the highest bidder, did not approach the Commercial Taxes Department for confirmation of sale. However, it is stated that as and when petitioner approaches the Commercial Taxes Department, it would be asked to pay the balance amount before confirmation of sale. It is further stated that as on 18.02.2003, there was no attempt to forfeit the amount of ₹ 61,80,000-00 paid by the petitioner Gupta Metallics. 19. This Court by order dated 07.02.2003 issued notice and passed an interim order not to forfeit the amount of ₹ 61,80,000-00 deposited by the petitioner Gupta Metallics. 20. Subsequently, third respondent i.e. Commissioner of Commercial Taxes ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f land) dated 07.12.2002. As per Condition No.3, the purchaser was required to deposit 15% of the purchase price at the time of sale and the balance 85% within 30 days from the date of sale failing which the money deposited by the purchaser would be liable to forfeiture. This is also the requirement of Section 36 of the Revenue Recovery Act. In view of the stay order granted by this Court, there was no restraint on the petitioner Gupta Metallics to pay the balance 85%, which it failed to do. Petitioner having acquiesced to the auction conducted and having failed to deposit 85% of the balance amount as per auction condition, is estopped from seeking refund of the 15% deposit. 27. Respondent No.3 has stated that in the meanwhile it received a communication dated 06.07.2021 from M/s. Edelweiss Asset Reconstruction Company Limited (referred to hereinafter as the Asset Reconstruction Company ). By the said letter, third respondent was informed that the Asset Reconstruction Company is the assignee of the debts of the petitioner M/s.Gupta Metallics, which had borrowed money from the State Bank of India and other consortium lenders. It was mentioned that the amount of ₹ 62,00,000 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dated 04.02.2012 giving liberty to the petitioner Gupta Metallics to pay the balance amount. 32. There were serious property disputes as regards ownership of the fourth respondent between M/s.Sanman Distributors Private Limited, Satish Kumar Agarwal and Anil Agarwal, which resulted in several suits before the Delhi High Court. In view of above, the property in question of the fourth respondent was placed in custody of the Court Commissioner by the Delhi High Court by order dated 13.02.1995 which was confirmed by the Supreme Court by order dated 10.05.1995. That being the position, Commercial Taxes Department could not have resorted to auction sale of the properties which were in custodia legis of the Delhi High Court. 33. Adverting to various provisions of the Revenue Recovery Act, it is stated that no such notices were issued under the said Act before the auction sale. 34. Additionally it is contended that first and third respondents did not obtain valuation of the land put to auction sale on 10.01.2003. 35. It is reiterated that petitioner Gupta Metallics had failed to deposit the balance 85% as is the requirement under the law. It is the stand of the petitioner Gupt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on made by the answering respondent that petitioner did not take any steps for confirmation of sale by depositing the remaining amount is not correct. As a matter of fact, in view of the order dated 16.01.2003 of BIFR and categorical refusal by the Commercial Taxes Department to accept the payment of balance amount by the petitioner, question of non-payment of the 85% of the sale price by the petitioner does not arise. In the circumstances the State is not entitled to forfeit the amount deposited by the petitioner. 41. Regarding the additional counter affidavit filed by the third respondent, it is stated that the Commercial Taxes Department has changed its stand after 18 long years and is now supporting the defaulter which is difficult to comprehend. According to the petitioner, Commercial Taxes Department had induced it to participate in the auction sale and collected ₹ 61,80,000-00 in the year 2003 with the assurance to confirm the sale. But, instead, petitioner has been made to suffer for the last 18 years for various reasons which are totally unconnected to the petitioner. W.P.No.5335 of 2012: 42. This petition has been filed by M/s.Sanman Distributors Pri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the High Court. 47. In the meanwhile, the auction purchaser i.e. fifth respondent Gupta Metallics filed an application before the first respondent in April, 2003 for withdrawal of its bid and for return of the amount deposited. 48. However, the writ petition filed by the first respondent against the order dated 16.01.2003 passed by BIFR was withdrawn. 49. Second respondent i.e. Principal Secretary to the then Government of Andhra Pradesh, Revenue Department issued the impugned Memo dated 04.02.2012 calling upon the first respondent to confirm the sale in favour of Gupta Metallics. It is this Memo which has been impugned in the present writ petition. 50. This Court, by order dated 05.03.2012, admitted the writ petition for hearing and passed an interim order directing the first respondent not to pass orders or to take steps to confirm the sale of the schedule property in favour of Gupta Metallics. 51 Respondent Nos.1 and 2 have filed a common affidavit through Smt. Neetu K. Prasad, Commissioner of Commercial Taxes, Government of Telangana. 52. Putting the facts in perspective, answering respondents have stated that Vinedale Distilleries was a registered dealer u ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... way of bankers cheques on the same day i.e. 10.01.2003 being 15% of the sale price. 57. However, BIFR passed an order dated 16.01.2003 staying the execution of sale of land belonging to Vinedale Distilleries auctioned on 10.01.2003. 58. Against the order of BIFR dated 16.01.2003, Commercial Taxes Department filed Writ Petition No.2139 of 2003 before this Court. By orders dated 10.02.2003 and 24.02.2003, this Court clarified that confirmation of sale if any would be subject to result of the writ petition. 59. Writ Petition No.2139 of 2003 was dismissed as infructuous on 08.09.2011 as BIFR had disposed of the case before it i.e. Case No.70 of 1989 on 10.04.2006 on account of Dena Bank taking over possession of the assets of Vinedale Distilleries on 26.01.2006 under the SARFAESI Act. 60. Thereafter, reference has been made to the Writ Petition No.2353 of 2003 filed by Gupta Metallics before this Court. Respondent Nos.1 and 2 have stated that even though there was no restraint on Gupta Metallics to pay the remaining 85% of the bid amount, it did not pay the same. 61. It is further stated that Gupta Metallics had taken a stand in W.P.No.2353 of 2003 that the amount deposi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ents have stated that Vinedale Distilleries through Mahalaxmi Hyderabad Projects LLP has now come forward to pay all the commercial tax arrears along with interest amounting to ₹ 21.75 Crores (Tax: ₹ 4-37 Crores and Interest: ₹ 17.38 Crores) 67 Gupta Metallics i.e. fifth respondent has filed counter affidavit. After narrating and reiterating the facts, it is contended that Gupta Metallics had participated in a statutory auction and became the successful bidder. Therefore, it is entitled to confirmation of sale. There was no default on the part of Gupta Metallics as it had offered the balance sale consideration of 85% by way of demand drafts. Since the proceedings before BIFR stood abated, the bar under Section 22 of the 1985 Act would no longer apply. Therefore, the auction held on 10.01.2003 can be confirmed by the State Government. Gupta Metallics, facing SARFAESI proceedings at the hands of the secured creditors, cannot in any manner influence or effect the auction sale conducted by the State on 10.01.2003 for recovery of the dues of Vinedale Distilleries. In the circumstances, Gupta Metallics seeks dismissal of the writ petition. 68. Gupta Metallics has ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... llics has no enforceable right to demand refund of the amount deposited. However, allegation made by Gupta Metallics regarding encroachment over the auctioned property has been denied. 75. Respondent No.4 - Vinedale Distilleries has also filed counter affidavit. Subject counter affidavit of Vinedale Distilleries is identical to the counter affidavit filed in W.P.No.2353 of 2003 and the stand taken in W.P.No.5335 of 2012 as the petitioner. 76. Vinedale Distilleries has asserted that Gupta Metallics was never a bona fide bidder. This would be borne out by the fact that it had failed to pay the balance 85% of sale price within the stipulated period of 30 days. Contention that auctioned property is in the custody of respondent Nos.1 and 2 has been denied. It is stated that the said property was never attached nor possession thereof was taken over by respondent Nos.1 and 2. Vinedale Distilleries is still in possession over the said property. 77. Insofar submission of representation dated 31.05.2021 by Gupta Metallics is concerned, it is stated that the same was filed only as a ground work for filing the present writ petition. 78 It is stated that there has been a change of mana ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he said respondents in accepting the aforesaid amount from Vinedale Distilleries which will put a quietus to all the disputes. In any case, Gupta Metallics is now facing action at the hands of the Asset Reconstruction Company under the SARFAESI Act. Therefore, it is in no position to pay the balance amount as per the auction sale, which in any event is not legally permissible. On the other hand, the amount deposited by it is liable to be forfeited because of non-compliance to the provisions of Section 36 of the Revenue Recovery Act. Even if a liberal view is taken and forfeiture is not insisted upon, the aforesaid deposited amount is liable to be appropriated by the Asset Reconstruction Company as part of the recovery of outstanding dues of Gupta Metallics under the SARFAESI Act. 80. Mr.B.S.Prasad, learned senior counsel and Advocate General for the State of Telangana submits on behalf of the State respondents that the stand of the State has been consistent right from the beginning from the first affidavit filed by the Commissioner of Commercial Taxes in W.P.No.2353 of 2003. He submits that Commercial Taxes Department took steps to recover the arrear tax amount of Vinedale Disti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... etary to the then Government of Andhra Pradesh, Revenue Department, had issued Memo dated 04.02.2012 calling upon the Commissioner of Commercial Taxes to confirm the sale in favour of Gupta Metallics by collecting the balance 85% of the sale amount with interest, this Court passed an interim order on 05.03.2012 restraining the State from taking steps to confirm the sale in favour of Gupta Metallics. He categorically submits that in view of the provisions of the Revenue Recovery Act and Condition No.3 in Form No.7 and as Gupta Metallics had failed to comply with such condition by depositing the balance 85% of the sale amount within the stipulated period of 30 days, the auction proceedings had failed. This is the categorical and clear stand of the State. In the circumstances the Government Memo dated 04.02.2012 would have no legal consequence. 80.5 In the event it is directed to release/refund the amount deposited by Gupta Metallics, Commercial Tax Department is bound to act in accordance with law and would have to release the said amount in favour of the Asset Reconstruction Company in view of Gupta Metallics facing action under the Recovery of Debts and Bankruptcy Act, 1993 as w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted on 10.01.2003. Nine years thereafter the said writ petition came to be filed to declare the auction sale as null and void. On the ground of delay and laches itself W.P.No.5335 of 2012 should be dismissed. Analysis: 82. Submissions made by learned counsel for the parties have received the due consideration of the Court. Also perused the materials on record and the cited judgments. 83. From the materials on record, we find that the Collector of Ranga Reddy district had published notice of sale of land in Form No.7 (Section 36) on 07.12.2002 in the Ranga Reddy District Gazette. It was notified thereunder that the surplus land belonging to Vinedale Distilleries would be sold by public auction on 10.01.2003 at 11.00 AM for recovery of arrears of sales tax and revenue default. As per paragraph No.3 of the said Form No.7 it was mentioned that the purchaser would be required to deposit 15% of the purchase money at the time of sale and if it failed to pay the remainder of the purchase money within 30 days from the date of sale, the money deposited by it would be liable to forfeiture. In the said notice of sale the name of the defaulter was mentioned as Vinedale Distilleries ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oceed further in the matter and therefore the reference pending before it stood abated in terms of the third proviso to Section 15 (1) of the 1985 Act, as amended. In view of the aforesaid development, W.P.No.2139 of 2003 was withdrawn by the State on 08.09.2011. 89. We find from the materials on record that Commissioner of Commercial Taxes had written to the then Principal Secretary to the Government of Andhra Pradesh (Revenue Department) on 14.12.2011 seeking guidance from the Government whether to confirm the auction sale by collecting the balance 85% of sale price. The Principal Secretary, vide Memo dated 04.02.2012 informed the Commissioner of Commercial Taxes that as per Section 16 of the Andhra Pradesh General Clauses Act, 1957 and Section 22 of the Andhra Pradesh Value Added Tax Act, 2005, if any dealer fails to pay the tax due or fails to pay any tax assessed or penalty levied within the time prescribed, he shall pay, in addition to the amount of such tax or penalty that may be calculated at the rate of one percent per month for the period of default. Therefore, Commissioner of Commercial Taxes was requested to take necessary action and to confirm the sale by collecting ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... loss or expense which may attend such refusal or omission shall be recoverable from such purchaser in the same manner as arrears of public revenue. Where the lands may, on the second sale, sell for a higher price than at the first sale, the difference or increase shall be the property of him on whose account the said first sale was made. Fifth-Agents to name principals:- All persons bidding at a sale may be required to state whether they are bidding on their own behalf or as agents, and, in the latter case, to deposit a written authority signed by their principals. If such requisition be not complied with, their bids may be rejected. 92. Thus Section 36 envisages five stages in the sale of immovable property. As per the first stage, the sale should be by a public auction to the highest bidder. The second stage provides for issuance of notice notifying the details which should be fixed up one month at least before the sale. As per the third stage, a sum of money equal to 15% of the price of the land shall be deposited by the purchaser to the Collector or to the empowered officer at the time of purchase. If the remainder of the purchase money is not paid within 30 days, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... provision can be traced to the third stage envisaged by Section 36 of the Revenue Recovery Act, which says that when the remainder of the purchase money is not paid within 30 days, the money so deposited shall be liable to forfeiture. 95. Having noticed the above, we may first advert to the stand of Gupta Metallics in W.P.No.2353 of 2003 and W.P.No.13206 of 2021. In the first case, a direction has been sought for against the State not to forfeit the deposit of 15% made by it. On the other hand, in W.P.No.13206 of 2021 Gupta Metallics has sought for a direction to the State to consider its representation dated 31.05.2021 and to take steps for protection of the auctioned land. The representation dated 31.05.2021 pertains to alleged encroachment by third parties on the auctioned land. As already noticed above in none of the two writ petitions Gupta Metallics made any statement or sought for any order from the Court for deposit of the balance 85% of the sale price subject to outcome of the two writ petitions. Therefore, we are of the view that Gupta Metallics cannot insist on taking the auction sale held on 10.012003 to its logical conclusion by allowing it to pay the balance amount ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it would have been better if the State itself had sought leave of the Court to withdraw the said Memo dated 04.02.2012. 99. As to challenge to the auction sale held on 10.01.2003 by Vinedale Distilleries is concerned, we find that the challenge was made after nine years in 2012. There is no explanation for such belated challenge. Therefore, it would not be just and proper to examine the legality and validity of the auction sale and the preceding sale notice at this distant point of time. In any case, such a challenge has only become academic in view of what we have discussed above holding that the auction sale has failed. 100. Though learned senior counsel for Gupta Metallics argued that Vinedale Distilleries did not file any application under Section 38 of the Revenue Recovery Act, we are of the view that we need not enter into this aspect of the matter in view of what we have discussed above. Even otherwise, the said provision providing for filing of application to set aside the auction sale, may not be applicable insofar the present case is concerned, inasmuch as there was no concluded sale. Gupta Metallics had only deposited 15% of the sale price. Till the full sale price ..... X X X X Extracts X X X X X X X X Extracts X X X X
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