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Judgment
A.P. Bhangale, J—Rule returnable forthwith. Heard finally with the consent of the learned Counsel representing the rival parties.
The petitioner has prayed to quash & set aside the orders respectively dated 27th February, 2008 passed by the Assistant Commissioner of Sales Tax, Nagpur whereby the objection by the petitioner to the proposed auction Sale of Plot No. C-49, M.I.D.C., Hingna Road, Nagpur, was rejected, auction Sale was confirmed on 29-02-2008, Certificate of Sale was issued on 27-07-2010 by the Joint Commissioner of Sales Tax (Appeal). Nagpur. (The order confirmed by Judgment and Order passed by the Maharashtra Sales Tax Tribunal at Nagpur on 14-08-2013 in Appeal No. 23 of 2010). Petitioner also prayed that the petitioner be declared as an owner of the aforesaid plot.
The facts, briefly stated, are as under:-
"The State Bank of India, Industrial Finance branch, Bharat Nagar, Nagpur (hereinafter referred to as "the SBI") had extended loan facility to M/s. Paramount Sinters Pvt. Limited at Nagpur. Borrower had mortgaged Plot No. C-49 and Plot No. D-32, M.I.D.C., Industrial Area, Hingna, Nagpur along with Plant and Machinery and a residential Flat No. 9 ''Pukhraj'' on Plot Nos. A and B, Mouza Lendra, Nagpur at Laxminagar, Nagpur owned by one of the Guarantors, was also mortgaged. As the borrowers did not repay the loan, the SBI had filed the proceedings O.A. No. 51 of 2003 under the Securitisation and Reconstruction of Financial assets and enforcement of security interest Act, 2002 (hereinafter referred to as "the SARFAESI Act") before the Debt recovery Tribunal (DRT), Nagpur for recovery of the sum of Rs. 7,78,09,350/-. According to the petitioners, some talks were held between the parties and the SBI had agreed to accept the sum of Rs. 2.10 crores as full satisfaction/settlement. It is case of the petitioners that the said sum was tendered to the SBI. The lender Bank accepted it towards full satisfaction of the debt. On 7-7-2006, a pursis was filed by the SBI. The SBI delivered back physical possession of the mortgaged & hypothecated property to the petitioners. Certificate of Sale were issued by the SBI accordingly and documents of title were also handed over and thus, according to the petitioner, the properties were transferred back free from encumbrances & liabilities in favour of the petitioners as owner thereof, by the SBI upon receipt of Rs. 2.10 crores as full consideration. The SBI had intimated it''s ''No objection'' to the M.I.D.C., Nagpur to transfer the said leasehold property to the petitioner. The M.I.D.C. consented for transfer of Plot No. D-32. The petitioner prepared the Deed of Assignment required to be executed and then name of the petitioner was mutated in the record of the M.I.D.C. vide order passed on 20-9-2006. Petitioner had paid the requisite stamp duty in the sum of Rs. 93,240/- on 20-11-2006. The SBI had then refused to execute the Deed of Assignment on the ground that it had received the notice from the Sales Tax Department. The Sales Tax department had attached Plot No C-49. Hence, the issue of Mutation was shelved. The Sales Tax department had issued show cause notice under Section 62(A) of the Bombay Sales Tax Act, 1959 (hereinafter referred to as "the BST Act") to the Director of the borrower with a copy to the petitioner alleging that the borrower transferred the property intending to defraud the Sales Tax. The petitioner was called upon to show cause as to why the transfer of assets in question shall not be declared as void. Petitioner replied on 15-1-2007 pointing out that the said notice was not tenable."
Another show cause notice dated 28-11-2006 was served under Section 44(4) of the Maharashtra Value added Tax Act, 2002. It was issued to the petitioner on the ground as to why the recovery of arrears from the borrowers shall not be affected from the petitioner. According to the petitioner, the stand taken by the SBI in its reply dated 19-9-2007 was contrary to the pursis filed before the DRT. In view of the order dated 27-2-2008, respondent No. 3 proceeded to auction plot No. C-49 to the highest bidder Mr. Kailash Chandra Agrawal of Kamthi for 2 Crores. This was followed by the prohibitory order issued from respondent No. 3 herein dated 29.2-2008. According to the petitioner, the Joint Commissioner of the Sales Tax, Nagpur Division confirmed the auction held on 28-2-2008 in favour of M/s. Rama Entertainment Private Limited. This order, according to the petitioner, being consequential in nature, was liable to be quashed and set aside.
Earlier, on 27-04-2008, Writ Petition No. 1148 of 2010 was permitted to be withdrawn with liberty to challenge the order impugned in this Petition. On 27-07-2010, Joint Commissioner of Sales Tax, who heard the petitioner, had rejected the contentions by the petitioner and declared that the Certificate of Sale, Dt. 7-7-2006 is void hit by Section 62(A) of the BST Act, 1959. The said order was challenged in appeal under Section 55 of the BST Act before the Maharashtra Sales Tax Tribunal. The appeal was dismissed on 14.8.2013.
The submission advanced before us is that if any person transfers or encumbers the property/assets intending to defraud the revenue, such transfer is void. But the rule stated has exception provided under Section 62(A) is that if such charge or transfer created is made for valuable consideration and without notice of pendency of the proceedings under the BST Act, then it is protected. The statutory safeguard of inquiry by the Commissioner is provided under Section 62(A) if the Commissioner has reason to believe that such charge or transfer is created during pendency of the proceedings under the Maharashtra Sales Tax Act. The Commissioner is obliged to issue show cause notice and hold inquiry to decide and declare by an order whether the transfer or charge created, if any, became void. The term ''asset '' has exhaustive meaning to include land, building, machinery, plant, shares, securities & fixed deposits in Banks excepting the stock in trade of the business of the assesses.
The learned Tribunal held that despite repeal of the BST Act with effect from 1-4-2005, proceeding under Section 62(A) of the BST Act can continue. The Tribunal relied upon Section 95 of the Maharashtra Value Added Tax, read with Section 7 (C) of the Bombay General Clauses Act, 1904 and order dated 27-4-2010 passed by the High Court in Writ Petition No. 1148 of 2008 to support its conclusion. It is submitted that later referred provisions do not even remotely save the provision of Section 62(A) of the BST Act. It is submitted on behalf of the Petitioners that, in the case in hand, the property was transferred to the petitioner on 7-7-2006 and the proceedings under Section 62(A) of the BST Act were initiated vide show cause notice Dt. 5-9-2006. As the BST Act already stood repealed on 1-4-2005, Section 62(A) was not available either on 7.7.2006 or 5.9.2006. Section 7 (C) of the Bombay General Clauses Act, 1904 is a general provision which was also not applicable because the Maharashtra Value Added Tax Act provides for Section 95, which is specific saving clause. While, in Writ Petition No. 1148 of 2008, the High Court had directed the matter to be decided "in accordance with law". The law applicable alone was to be taken into consideration. The jurisdiction/power to decide is vested by a legislative Authority and cannot be conferred by an order upon the Authority which does not have jurisdiction/power. Thus, it is vehemently submitted that the learned Tribunal in this case committed an error of law apparent on the face of record as it also ignored the material evidence as to the factum of outstanding dues.
Learned Advocate for the petitioner submitted that the SBI had filed O.A. No. 51 of 2003 before the Debt Recovery Tribunal for recovery of its loan from the borrowers under Section 62(A) of the BST Act. The SBI took action under the SARFAESI Act and has taken over possession of Plot No. C-49 on 16.7.2004. Negotiation between the SBI and the Director of the dealer led to settlement and O.A. No. 51 of 2003 in DRT was withdrawn in terms of settlement. Sale was made by the SBI and not the dealer as Plot No. C-49 was sold by the SBI and it gave the two Sale Certificates in respect of the sold properties. Sale in favour of the petitioner was made by the SBI and not by the dealer. The Scheme of Section 13(6) of the SARFAESI Act vests all the rights in or in relation to the secured asset transferred to the purchaser of such secured asset, as if it is transfer by the owner of such secured asset. It is argued that the Tribunal misunderstood or misinterpreted the said provision. It does not mean by any stretch of imagination that the transfer was by the dealer as he had ceased to be a dealer on 1.4.2003 as he had stopped the business of buying and selling goods. The transfer was not by the dealer but by the Secured Creditor SBI. It is, thus, contended that the Tribunal failed to consider this vital aspect. The Tribunal held that the Sales Tax dues were already quantified and facility to pay the same by instalment was granted to the dealer. Thus, according to the Tribunal, the recovery proceedings were contemplated rather than pending. Pendency of the proceedings under Section 62(A) of the BST Act is sine qua non to invoke Section 62(A) of the BST Act.
According to the learned Advocate for the petitioner, assessment proceedings were not pending on the date of transfer i.e. 7.7.2006, so as to apply or invoke Section 62(A) of the BST Act. He submitted that the entire proceedings under Section 62(A) of the BST Act were without jurisdiction. He also submitted that the registration Certificate of the dealer was cancelled by the Assistant Commissioner of Sales Tax, Nagpur under Section 22(6) of the BST Act, 1959 by order dated 3.7.2006 with effect from 1.4.2003 as the dealer had closed the business w.e.f. 1.4.2003. Thus, the owner had ceased to be dealer after stoppage of his business of selling and buying goods. The Sales Tax department had not registered the Charge as required under Section 125 of the Companies Act, 1956. The Tribunal failed to note that provision do not differentiate between Statutory Charge and Non-Statutory Charge so as to reject the Search Report Dt. 26.4.2013 filed by the petitioner on the pretext that the statutory first Charge is not required to be registered with the Registrar of the Companies. It is submitted that the petitioner could not had even the constructive notice of the Sales Tax dues as the Sales Tax department had not registered its Charge on the immovable property of the dealer with the Registrar of the Companies. Order Sheet Dt. 21.9.2006 before the Recovery Officer indicated that the Sales Tax Officer had intimated the Registrar of the Companies on 21-9-2006 and by that time, the SBI had transferred the properties including the disputed plot No. C-49 to the petitioner as on 7-7-2006. Hence, the Tribunal had wrongly rejected the Search Report submitted by the petitioner.
Reliance is placed upon the ruling reported in U.P. Glass Works (Public) Ltd. Company v. Commissioner of Sales Tax U.P. STC (Vol. 66 at Page No. 46) (Allahabad H.C.). It was held that if the amount mentioned in the recovery notice is incorrect, the recovery proceeding cannot continue.
In the instant case, the demand notice, Dt. 16-10-1996 and Dt. 7-1-1997 are also relied upon by the Sales Tax department. The Tribunal held that the Sales Tax Department was making genuine efforts to serve the Directors of the Dealer who were avoiding the service. According to the learned Advocate for the petitioner, the recovery notice under the Maharashtra Land Revenue Code was ordered to be issued on 3-7-2006 and was served upon the dealer on 18-7-2006. Prior to that, the order sheets Dt. 16.6.2006 and 30.6.2006 show that the Sales Tax Inspector visited the registered Office of the dealer, but was informed that the dealer was not functioning from the said Office. The Tribunal held that Shri Chetana Bagadia as one of the promoters of M/s. Jigar Metals took part in negotiations. Hence, it cannot be said that Shri Chetana Bagadia was not aware of the Sales Tax dues. The Tribunal found that the Bank had no reason to issue Sale Certificates as it had already received and recovered the amount of Debt.
The Sales Tax Department had taken action under Section 38 (C) read with Section 39 of the BST Act and had written the letter Dt. 23-8-2007 to the SBI to pay the Sales Tax dues of Rs. 2,78,02,005/-. The SBI did not pay though bound in law. Reliance is placed upon the ruling on the case of Union of India (UOI) Vs. Rajeswari and Co. and Others, AIR 1986 SC 1748 : (1986) 58 CTR 102 : (1986) 161 ITR 60 : (1986) 1 JT 161 : (1986) 2 SCALE 6 : (1986) 3 SCC 426 : (1986) 3 SCR 175 : (1986) 27 TAXMAN 258 : (1986) 2 UJ 506 , wherein it is observed as under:
"It is open to the debtor to prefer one or more Creditor over the others in payment of his debts, and so long as he retains no benefit in the property it cannot be said it is a case of fraudulent transfer."
Section 62(A) of the BST Act apply when the transfer is with an intention of defrauding the revenue. The Tribunal held that the "unholy nexus " cannot be ruled out between the petitioner and its Directors and the dealer and its Directors with connivance of the Bank.
Rule 9(10) of the Security Interest Rules, 2002 reads as under:-
"(10) The certificate of Sale issued under Sub -rule (6) shall specifically mention whether the purchaser had purchased immovable secured asset free from any encumbrances known to the secured creditor or not"
The Certificate of Sale Dt. 7-7-2006 recites as under:
"The Sale of the Scheduled property was made free from any encumbrances and liabilities known to the secured creditor listed below on deposit of money demanded and appropriated by the undersigned "
On behalf of the petitioner, Senior Advocate Mr. M.G. Bhangade has contended that, by merely signing the pursis, it cannot be said that the petitioner became a party to the settlement between the SBI and the Debtor. While, on the other hand, the learned Advocate for the respondent/Department contended that the petitioner had signed below the endorsement with consent and was fully aware of the proceedings before the Tribunal and the Tribunal had specifically observed that both - M/s. Jigar Metals and its Directors and Dealer and its Directors had failed to file affidavits before us. On behalf of the petitioner, it is argued that the petitioner had no opportunity to cross-examine Mr. Batukbhai Bagadia, who had sworn in affidavit before the Tribunal. Hence, it is contended that the Tribunal''s observations were baseless to the effect that the petitioner and its Director had either actual or constructive notice of the Sales tax dues or that the petitioner and the dealer had an intention to defraud the revenue. Gross negligence cannot be equated with the fraud as they are different concepts. According to the petitioner, it had acquired ownership of Plot No. C-49 vide Certificate of Sale, Dt. 7-7-2006. The plot no longer being the property belonging to the dealer could not have been put to attachment and sale at the instance of the Sales Tax Authorities. An order to confirm the Sale by the Tribunal is contrary to law and without authority of law.
The revenue had raised the demand of Rs. 9,53,502/- under the BST Act and Rs. 11,01,32/- under the Central Sales Tax Act by notice Dt. 3-7-2006 served upon the borrower. Ex-parte assessment was made and an order was passed on 23-3-2007 for the year 1998-99 and by another ex parte order Dt. 17-5-2007 for the year 2000-01 raising total demand of Rs. 2,39,13,995/-. Revenue has not placed the record of notices issued to the dealer for initiating the assessment proceedings. The order of the Tribunal is sought to be assailed on the ground that it is fragile, irrelevant and arbitrary. It is argued that the Tribunal failed to take into account the relevant facts and considered the facts which were irrelevant for the decision. The contention that the petitioner is bona fide purchaser is not all referred to while recording the reasons.
The case of the petitioner that it had inquired with the Bank about the no dues and that the property is free from the encumbrances and liability. Petitioner had decided to pay and purchase the property after transaction with M/s. Mahalaxmi Metals Mart fizzled out. The Petitioner feigns ignorance of the proceedings before the DRT and audit reports of the dealer, though it pleads that it is aware of the fact of stoppage of business of the borrower/Company. The petitioner also contended that it was duty of the Bank to inform encumbrance, if any, on the property offered for sale.
Learned Senior Advocate Shri.Jaiswal contended that notice under Section62(A) of the BST Act was for recovery of the outstanding dues. Notice, accordingly, was sent to Directors as well as the petitioner/Company on 23-6-2010 from the Sales Tax Authority. Dealer was assessed under Section 33 of the BST Act for the period between 1-7-1987 to 31-3-1995, 1-4-1997 to 31-3-1998 and 1-4-1999 to 31-3-2000 with the outstanding dues, as stated in the detailed notice by the Sales Tax Authority. Demand notices under Section 38 of the BST Act were sent and served. Pursuant to the notice, Dt. 2-11-1996, the Dealer had admitted the dues to the demand under Section 38 of the BST Act and had requested for the instalments to repay the dues. Upon failure to repay the outstanding dues, the Dealer was liable to further proceeding for recovery of the outstanding dues. Any transfer with an intention express or implied to defraud the revenue was void. When the amounts were payable to the Sales Tax Department, the SBI could not have transferred the property charged or mortgaged by the Dealer as Sales Tax Department could not have been defrauded in the facts and circumstances by creating a transfer so as to defeat the claim of the Sales Tax Authority. The petitioners were aware and had, in fact, responded to the notice Dt. 23-6-2010. It is argued that, in view of Section 13 (6) of the SARFAESI Act, the nature of the Sale/transfer under the SARFAESI Act indicates that the ownership remain with the borrower, though transfer of possession of the property may have taken place.
Learned Senior Advocate Mr. Jaiswal submitted that the proceedings the borrower has to face under the BST Act continued against him and any transfer made in order to defraud the Sales Tax Department is rendered void. In view of Section 62(A) of the BST Act, dealer is liable to the Sales Tax Department in any proceedings which continued for recovery of the outstanding dues recoverable under the BEST Act. That being so, the Sales Tax department cannot be defrauded by any transfer by the borrower to another person.
Our attention has been invited to the copies of documents sought to be relied as annexures to the petition. The petitioner had replied in detail to the show cause notice Dt. 23-6-2010 issued from the Joint Commissioner of Sales Tax, Nagpur Division under Section 62-A of the BST Act on 30-6-2010. It indicated awareness of the petitioner as to the facts in the case. (Annex. Director No. 43) Shri Sharad Chandra Gupta of the petitioner was fully aware of the facts stated by the Sales Tax Department. Order Dt. 27-7-2010 is a detailed order passed by the Joint Commissioner of Sales Tax (Appeals) Nagpur Division declaring the transfer of assets from M/s. Paramount Sinters Pvt. Ltd., Nagpur to M/s. Jigar Metal Technology Pvt. Ltd., 230, Jigar Palace, East, Wardhman Nagar, Nagpur as void in view of Section 62-A of the BST Act read with Section 9 (2) of the Central Sales Tax Act, 1959.
Shri Jaiswal, learned Senior Advocate argued that the SARFAESI Act would indicate that ownership of the assets would remain with the borrower, though possession may have been handed over to the third party. Here, in the case in hand, the petitioner was not the third party to the transaction concerned, but an interested party in purchase of the property involved in the Debt, in connivance with the borrower. It is submitted that the borrower is bound to remain owner of the assets, though handing over possession had taken place. The procedure prescribed under the Security Interest Enforcement Rules needs to be followed. Our attention is also invited to unequivocal admission of the petitioner that the SBI handed over possession to the purchaser. The SBI, as an agent, executed the documents at the request of the petitioner. The SBI as well as the dealer had the knowledge of the proceedings under the Sales Tax Act. The Bank was acting under the instructions of the dealer. The dealer in this case had no valid escape route to avoid repayment of the dues of the Sale Tax Proceedings. The dealer in this case was continued to be liable to pay the unpaid dues of the Sales Tax Department and no one could have been allowed to defraud the Sales Tax Department by creating transfer to another person, without the borrower fully paying off the outstanding Sales Tax dues. The Director of the petitioner in the background of facts and circumstances could not have feigned ignorance of outstanding dues payable to the Sales Tax department in this case. The Sales Tax department had demanded outstanding dues recoverable with high priority, as if they were arrears of land revenue. The proceeding for recovery was continued. In the facts and circumstances of the case, no escape route was available for the petitioner to enter into transaction of purchase and claim benefit of proviso under Section 62-A of the BST Act as also repeal of the BST Act.
Learned Senior Advocate by placing reliance upon the language of Section 13 (6) of SARFAESI Act has submitted that the sale by secured creditor (bank) in terms thereof is treated " as if " it is by borrower. By placing reliance upon the Judgment of Hon''ble Apex Court reported at The Rajasthan State Industrial Development and Investment Corporation and Another Vs. Diamond and Gem Development Corporation Ltd. and Another, (2013) 3 AD 73 : AIR 2013 SC 1241 : (2013) 3 JT 417 : (2013) 3 JT 409 : (2013) 2 SCALE 452 : (2013) 5 SCC 470 : (2013) AIRSCW 1244 , it is urged that this fiction is only for the purposes of the SARFAESI Act and cannot be extended to the provisions of Section 62(A) of the Maharashtra Sales Tax Act. Coupled with this, his other contention is that as alleged transfer is by bank and not by the dealer, the provisions of Section62(A) are not relevant at all. Defence of the Bank that it has not transferred the property is also highlighted. Perusal of the Judgment of the Hon''ble Apex Court in the case of Rajasthan State Industrial Development and Investment Corporation and another (supra) shows that, in paragraph 26, the Hon''ble Apex Court has explained that the said words " as if " create a legal fiction. Thus, a person not in reality to be something is deemed to be that something for the purposes of such enactment by legislature. The Hon''ble Apex Court has stated that, in construing scope of such legal fiction, it is necessary to assume all those facts on the basis of which such fiction can operate. The words " as if ", in fact, show the distinction between two things and such words must be used only for the limited purposes. The object behind use of such words in Section 13(6) is to create a fiction that transfer or sale envisaged therein is to be accepted as by the dealer for all practical purposes; though, in fact, he may not have executed it. Effort of the petitioner before this Court is to demonstrate that it did not hand over possession and Sales Certificate issued by the secured creditor Bank, therefore, are not relevant. The property was delivered in possession of petitioner and the concerned Authority namely the Maharashtra Industrial Development Corporation also accepted petitioner as its owner. The petitioners also claim right over that property & has also transferred some property so received by it. The limited purpose of employing words " as if " in Section 13(6) is to treat the sale or transfer by bank as one executed by the borrower itself. This Judgment, therefore, does not help the cause of the petitioner. The property vests in the transferee free of encumbrances as if it is sold by borrower itself. Secured creditor has been given special treatment by the SARFAESI Act and accordingly, the sale executed by it has been treated as a sale by the borrower. In present matter, we only note that such sale or transfer may not prejudice the entitlement of other creditors - secured or otherwise, who may rank as per their status in the recovery proceedings. The encumbrances of bank is extinguished after such sale.
Section 62 (A) prohibits a sale or transfer, creation of charge, a parting with possession by a dealer. The wording in sub-section (1) are wide enough and apart from usual modes of transfer like sale, mortgage, gift and exchange, State Legislature has used the words "any other mode of transfer whatsoever". In the earlier part, creating a charge on or parting with possession are also mentioned and prohibited. Thus, this sub-section 62 (A) is very widely worded and the said language is only to protect the interest of Sales Tax Department. The dealer cannot create a charge or part with possession as mentioned in Section62 (A). Proviso thereto reads thus:
"Section 62 (A).Transfer to defraud revenue void -
(1) ................
Provided that, such charge or transfer shall not be void if made for valuable consideration and without notice of pendency of the proceedings under the Act."
Thus, the charge or transfer in proviso is qualified by the words " such " which necessarily refers to charge or transfer created by the dealer under sub-section (1). The other important word used in this proviso is " made ". This word when looked into in the backdrop of the arrangement of Section 62(A)(i), it foresees a transfer made by the dealer. The purchaser cannot create charge or make any transfer which is prohibited u/s. 62(A). Hence, the bona fide purchaser without notice does not & can not figure in the Scheme u/s. 62(A) at all. The learned Senior Advocate Mr.M.G. Bhangde has invited our attention to the Judgment of Pooranchand Ved Prakash Vs. The State of Madhya Pradesh, (1972) JLJ 525 : (1972) 17 MPLJ 772 : (1972) MPLJ 772 : (1973) 31 STC 170 . There, the Division Bench of the High Court has considered Section 33(A) of the M.P. General Sales Tax Act, 1958 which is pari materia provision. After reproducing Section 33-A, the Division Bench notices that transfer of property is to be made by a dealer. Thereafter, while construing the proviso, it held that it exempts transfer made for valuable consideration and without notice. The Hon. Division Bench of M.P. High Court concludes that the said proviso is apparently to protect the transferee who acquired the property for valuable consideration and without notice. However, the words noted by us (supra) do not find appreciation. If intention to protect bona fide purchaser without notice is read into Section 62(A), it''s purpose may itself be defeated. A dealer having due notice may then tend to deceive a purchaser without giving him full information about pending sales tax proceedings. The proviso is intended to operate only when sale tax proceedings are not within the knowledge of dealer. Once it is shown that the proceedings are within knowledge of the dealer, the language of proviso itself shows that it cannot operate.
The petitioner can claim to be a bona fide purchaser without notice in civil law if it comes up with the case that it could not get knowledge of sales tax proceedings despite due efforts and inquiries. The petitioner was aware that the borrower in default was before the Debt Recovery Tribunal and secured creditor (respondent No. 5) sold/transferred the plot to it in those recovery proceedings. The petitioner, therefore, should have pointed out that inquiry is made by it with sales tax Authorities to find out dues of sales tax and the status of proceedings for its recovery. The petitioner should have mentioned that respondent No. 4 did not deliberately inform it about these proceedings, though inquiry was made with it. In the impugned order, the Tribunal has observed that one of the directors of the petitioner had knowledge of sales tax proceedings. It is seen that the petitioner appears to have been formed just prior to transfer in its favour by respondent No. 5/bank. The petitioner appears to have been registered few days prior to sale by respondent No. 5/bank in its favour. In these facts, it is apparent that the Judgment delivered by the M.P. High Court in the case of Pooranchand Ved Prakash (supra) cannot be applied in these facts. The contention of petitioner that it must get benefit of said proviso is erroneous and liable to be rejected.
The learned Senior Advocate also pressed into service a Division Bench Judgment of this Court reported at The Thane Janata Sahakari Bank Ltd. Vs. The Commissioner of Sales Tax, Asstt. Commissioner of Sales Tax, The Office of the Assistant Commissioner (Assessment) and The State of Maharashtra, (2006) 6 BomCR 186 : (2006) 132 CompCas 823 : (2006) 4 MhLj 594 : (2006) 70 SCL 319 : (2006) 148 STC 32 . There, the secured creditor who had proceeded under the SARFAESI Act has approached the High Court. The secured creditor found that the Sales Tax Authorities had affirmed a notice on properties which were mortgaged with it. The bank proceeded to auction the property on 13.5.2005. On 11.7.2005, the Assistant Commissioner of Sales Tax sent a letter to the petitioner bank informed that the Sales Tax dues constituted first charge. On 16.8.2005, the Assistant Commissioner of Sales Tax called upon the said bank to show cause as to why action under Section 39 of the Bombay Sales Tax Act and action for repayment of sum of Rs. 49,68,614/- in addition to auction proceeds of Rs. 66,31,001/- should not be taken against it. The bank prayed for quashing of this notice. Thus, the High Court has considered this controversy and after noticing Section 38-C of the Bombay Sales Tax Act, it found that the sales tax dues had precedence over the bank''s charge based on contract. The petition was, therefore, dismissed and the petitioner/bank was directed to deposit sales proceeds amount of Rs. 66,31,001/- with the Sales Tax department. This direction to deposit auction proceeds does not mean that the this High Court approved the auction. This Court was also not required to look into a provision like Section 62(A) of the Bombay Sales Tax Act. This Judgment, therefore, does not help the petitioner at all. Dismissal of the Special Leave Petition against it by the Hon''ble Apex Court does not, therefore, assist the petitioner in any way. The contention that respondent Nos. 1 to 3 must follow money received by respondent No. 5/bank to recover their Sales tax dues is, therefore, rejected. Such a contention in fact militates with primacy of sales tax dues due to S. 62(A). It also overlooks the effect of use of words "as if" in S. 13(6) of the SARFAESI Act. Petitioner itself has demonstrated that these words can not be used to defeat the scheme of said S. 62(A).
One of the contentions has been - if the borrower elects to clear the dues of one of the creditors, that does not tantamount to playing fraud. The Judgment of the Hon''ble Apex Court in the case of Rajeswari and Co. and Others (supra) relied upon by Mr.M.G. Bhangde, learned Senior Counsel shows consideration of the provisions of Section 53 of the Transfer of Property Act. The Hon''ble Apex Court has found that preference by a debtor to one of the creditors is not ipso facto fraudulent. The Hon''ble Apex Court has found that so long as he does not retain any benefit in the property, mere circumstances that some creditors have been paid while other remained unpaid does not attract the provision of Section 53 of the Transfer of Property Act. The Hon''ble Apex Court was not required to consider the provision like Section 62(A) of the Bombay Sales Tax Act. It is apparent that the petitioner who, at one stage, has contended that as dealer has not executed any sale deed or document, the provision of Section 62 (A) are not attracted is raising roving pleas to defeat the sales tax recovery. The record shows that, at one stage, the petitioner also approached respondent No. 5/bank and sought refund of Rs. 1.61 crores with interest by moving letter Dt. 19.11.2007. In that letter, the petitioner expressly mentioned that it has been placed in possession after it entered into transaction only because of representation made by the borrowers and the bank. It further states that, out of the properties so received, it sold some of the immovable properties and one of the immovable properties for the amount of Rs. 49,00,000/-. It, therefore, sought refund of Rs. 1.61 crores interest as also compensation. In the present order, the Authority has found that an account was jointly opened in the name of one Ninad Pande and Chetan Bagdiya. Chetan Bagdiya happens to be promoter and director of the petitioner. This account was opened in March, 2006 and M/s. Jigar Metal is born in May, 2006. Thus, it was not incorporated when joint account was opened. Ninad Pande happens to be one of the directors of dealer. Before the immovable property came to be transferred to Jigar Metals, negotiations were held with M/s. Mahalaxmi Metal Mart. M/s. Mahalaxmi Mart is found to be a firm under the control of these persons. In this situation, contention that there is no finding of collusion against the petitioner or then no finding that the dealer has transferred the property to petitioner merit no consideration.
Having heard the rival submissions at the bar at length and bearing in mind the facts and circumstances revealed from the record of the case, in our view, since the proceedings for recovery of the outstanding dues did continue under Section 62-A of BST Act and the outstanding dues were recoverable as if they were arrears of land revenue, there was no scope for accepting the argument to protect the petitioner/Company on the pretext that the Sales Tax department shall follow the money in the hand of purchaser on the premise that the petitioner can claim benefit of the proviso contained in Section 62-A of the BST Act. No case is made out to award ownership of the disputed property to the petitioner, as prayed in the petition. The petitioner is not entitled to claim as a bona fide transferee for value without notice in this case.
We, therefore, find the petition meritless and challenge to the impugned reasoned orders as unsustainable. The petition is, therefore, dismissed with costs. Rule stands discharged accordingly.
At this stage, Shri Bhangade, learned Counsel seeks continuation of interim order for protection of possession for a period of nine weeks more. Request is being opposed by Shri Pande, learned Counsel for respondent No. 4 and Shri Anilkumar, learned Counsel for respondent No. 5. However, as the interim orders were operating and the petitioner claims to be in possession, we continue the interim order for a period of nine weeks. The same shall cease to operate automatically thereafter.