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TMI Blog2009 (2) TMI 911X X X X Extracts X X X X X X X X Extracts X X X X ..... 9, 2003, pursuant to an order of the company court dated April 4, 2003. The assets of the company in liquidation were to be sold on as is where is whatsoever there is basis . 3. By an order dated July 4, 2003, the company court was pleased to confirm the sale in favour of one Nagendra Jain at a sum of ₹ 20 crores. Subsequently, the offer was increased to ₹ 20.50 crores. After sale as referred to above, the official liquidator had invited claims from the creditors of the company in liquidation by publishing advertisements. In response thereto, Ujjain Nagar Palika Nigam (hereafter the Nigam ) being a local authority governed by the provisions of the Madhya Pradesh Municipal Corporation Act, 1956, filed its affidavit of proof of debts for realisation of unpaid property tax amounting to ₹ 4,66,49,092 and unpaid water tax amounting to ₹ 11,14,612. 4. A meeting was convened for adjudication of the Nigam's claim. A sum of ₹ 2,79,955 was admitted by the official liquidator as preferential claim of the Nigam up to the period of winding up while the balance claim for a sum of ₹ 4,63,69,137 was rejected as the claim pertained to post liquidation ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... property and assets are sold. He relied on the decisions reported in [1991]189ITR90(Bom) (Rajratna Naranbhai Mills Co. Ltd. v. Sales Tax Officer, Petlad): (1996)6SCC660 (United Bank of India v. Official Liquidator) 79(1999)DLT441 (Karamchand Appliances P. Ltd. v. Bharat Carpets Ltd. (in liquidation)) and 2003(3)ALT573 (K. Ramachandra Rao v. Ranks Cables Ltd. (in liquidation)), in support of his submissions and prayed for orders to allow the appeals. 7. Mr. Debal Banerjee, learned senior counsel representing the Nigam, supported the order under appeal by contending that the learned judge did not commit any error in holding that the official liquidator would be liable to pay the property and water taxes due and payable to the Nigam out of the sale proceeds. He reiterated the submissions which have been recorded in the order under appeal by the learned judge. By relying on the decision reported in [2002] 111 Comp Cas 82 (HL) : [2002] 1 WLR 671 (Toshoku Finance UK plc, In re), in support of his submission, he urged that the appeals be dismissed. 8. Mr. Sen, learned senior counsel appearing for the purchaser/respondent No. 3, contended that his client was neither the owner nor occ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed notices of rejection were set aside. While holding that the official liquidator would be bound to discharge the tax liability as per the claim of the Nigam even for the post-liquidation period, the official liquidator was granted liberty to file an appeal against the demands raised by the Nigam within the date specified therein and it was further directed that if such an appeal is filed within the date specified, the appeal shall be considered on merits waiving limitation, if any. 11. We are of the considered view that the question as to whether the liability to pay arrears of taxes due and payable to the Nigam has to be answered keeping in mind the terms and conditions of the notice of sale. As has been noticed hereinbefore, the assets of the company in liquidation were put up for sale on as is where is whatever there is basis. Relevant clauses of the terms and conditions of sale read thus: 1. The sale will be as per inventory made by the valuer on 'as is where is whatever there is' basis subject to the confirmation by the hon'ble court. The official liquidator shall not provide any guarantee and/or warranty as to quality, quantity or specification of the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 0 of the Companies Act and Rule 154 of the Companies (Court) Rules. We have failed to find the materiality of the said provisions for a decision on the present dispute. Section 530 provides for preferential payments. According to Clause (a) of Sub-section (1) of Section 530 read with Clause (c) of Sub-section (8) thereof, all revenues, taxes, etc., due from the company in liquidation to a local authority on the date of the winding up order and having become due and payable during the preceding 12 months thereof would be entitled to priority over all other dues. Section 530 has nothing to do with payment of taxes which might have mounted between the date of winding up and sale of its assets by the purchaser. Rule 154 also cannot have any manner of application since it provides the manner of estimation of value of debts and claims on the date of the order of winding up of the company. 14. It would be, in our opinion, thoroughly unreasonable to foist the liability on a purchaser without first letting him know prior to the sale about such liability. Enquiries at site must have been made by the ultimate purchaser before he offered his bid. The purchaser could have been informed there ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of Clause (2) of the terms and conditions of sale that the apex court proceeded to hold as under (page 272 of 79 Comp Cas): When the official liquidator sells the property and assets of a company in liquidation under the orders of the court he cannot and does not hold out any guarantee or warranty in respect thereof. This is because he must proceed upon the basis of what the records of the company in liquidation show. It is for the intending purchaser to satisfy himself in all respects as to the title, encumbrances and so forth of the immovable property that he proposes to purchase. He cannot after having purchased the property on such terms then claim dimunition in the price on the ground of defect in title or description of the property. The case of the official liquidator selling the property of a company in liquidation under the orders of the court is altogether different from the case of an individual selling immovable property belonging to himself. There is, therefore, no merit in the application made on behalf of Triputi that there should be a dimunition in price or that it should not be made liable to pay interest on the sum of ₹ 1 crore and 98 lakhs. 17. It is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 530 of the Companies Act. Since we have already concluded that Section 530 of the Companies Act is not material for a decision on this case, the principle of law laid down in the said decision does not assist the appellant in any manner whatsoever. 23. Although the decision in K. Ramachandra Rao (supra) supports the contention of the appellant, a closer look at the decision reveals that the same was rendered in the peculiar facts and circumstances. There, the preferential claims like the claims of the secured creditors could not be met in full and there was no amount available with the official liquidator to meet any other demand including the debts of the unsecured creditors and regard being had to such factual scenario, the court considered it unreasonable to direct the official liquidator to meet the demand of payment of property tax, electricity consumption charges and building maintenance charges. It further appears from the said decision that the intending purchaser had notice of dues towards property tax, electricity consumption charges and building maintenance charges before making payment of the entire sale consideration. The court held that having paid the balance sal ..... X X X X Extracts X X X X X X X X Extracts X X X X
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