Madras High Court
Hi-Q Electronics Pvt. Ltd. 679, 10Th ... vs Branch Manager, Tamil Nadu Industrial ... on 19 July, 2000
Equivalent citations: 2000(4)CTC342
ORDER
1. The respondents 1 and 2 exercising powers under section 29 of the State Financial Corporation Act, 1951 brought in the properties question for auction. The petitioner has submitted tender to purchase the said properties. The petitioner's offer was confirmed for a sum of Rs.11,60,000 on 26.4.1999. On such confirmation, the petitioner was called upon to remit the balance sum of Rs.10,44,000 within one month thereof, failing which, the petitioner was warned that the deposit amount would be taken as forfeited.
2. Subsequently, the petitioner received a communication dated 26.5.99 from the 3rd respondent informing that the proprietor, M/s.Maxima Electronics was in arrears of sales tax to the tune of Rs.1,80,814 for the assessment year 1994-95 to 1998-99. Immediately the petitioner approached the third respondent. The 3rd respondent informed the petitioner that the properties purchased by the petitioner were attached, and the same was notified in the District Gazette, dated 22.1.99, fixing the date of auction of the said properties. Immediately, the petitioner addressed a letter dated 28.6.99 to the first respondent, informing that the abovesaid facts regarding arrears of sales tax were not informed to the petitioner and so he requested to refund the deposit amount. But, it was not acceded to, and the petitioner was again informed on 31.12.99 that the 10% of the bid amount has been forfeited, as informed to the petitioner in the letter dated 28.7.99. Hence the writ petition.
3. The respondents 1 and 2 filed a counter stating that exercising powers under section 29 of the said act, they have taken possession of the properties and brought the same for auction. It is also stated that the respondents 1 and 2 came to know about the arrears of sales tax due to the 3rd respondent through the letter dated 26.3.99 in which it is stated that the assets of M/s.Maxima Electronics were attached by issue of Form No.4 on 29.7.98, and the same was published in the District Gazette on 22.1.99. It was also informed to the respondents 1 and 2 that they had proposed to sell the assets on 14.4.99, and subsequently it has been adjourned to 16.4.99. The respondents 1 and 2 were requested to defer further action or to settle the arrears of sales tax. In spite of the same, the petitioner's offer was confirmed by the respondents 1 and 2 by communication dated 26.4.99. It is not in dispute that the respondents 1 and 2 have not informed the petitioner about the said attachment by the Sales Tax Department.
4. It is the further case of the respondents that once the petitioner accepted the terms and conditions for sale, he has to pay the electricity dues, property tax and other dues to the Government, including the other statutory liabilities in respect of the properties advertised for sale. This stand has been taken on the basis of clause 16 of the terms and conditions. It is also stated that it is the duty of the petitioner to verify the dues payable on the properties on the principle of "Caveat emptor". On that basis it is prayed to dismiss the writ petition.
5. From the above pleadings, it is clear that the petitioner's bid was confirmed on 26.4.99 by the respondents 1 and 2. Before such confirmation, the respondents 1 and 2 knew about the arrears of sales tax payable by M/s.Maxima Electronics, and the properties which are sought to be sold by the respondent 1 and 2 had been attached by the Sales Tax Department invoking the provisions of Tamil Nadu General Sales Tax Act. As per clause 16 of the terms and conditions, the purchaser has to pay the property taxes, electricity dues and other statutory and other liabilities if any in respect of the properties advertised for sale.
6. On the basis of the abovesaid facts, we have to decide whether the petitioner is entitled for refund of the amount paid towards Earnest Money Deposit.
7. The learned counsel appearing for the petitioner has submitted that after inspection of the properties, the petitioner has offered the price of Rs.11,60,000. Though the respondents 1 and 2 knew about the arrears of sales tax and the attachment, they have not informed about the same to the petitioner even before the acceptance of the petitioner's bid. Only after acceptance of the bid and after receipt of the notice from the Sales Tax Department, the petitioner came to know about the said facts. According to the learned counsel for the petitioner, the petitioner cannot be burdened with further huge sum and the petitioner had offered the bid only on the basis that there is no further amount need be paid for the bid. So, the respondents cannot rely on clause 16 of the terms and conditions so as to enable them to refuse to refund the E.M.D.
8. The learned counsel appearing for the respondents 1 and 2 while reiterating the contentions raised in the counter has submitted that in view of clause 16 of the terms and conditions, it is for the petitioner to pay the said amount, and on that basis he cannot come forward with the plea that he will not pay the full amount of sale consideration. The learned counsel has also relied on the decision in Thakarlal v. Smt. Rama, .
9. In this case, admittedly, the petitioner is the successful bidder and his bid has been confirmed. It is not the case of the petitioner that the respondents 1 and 2 have no right to sell the properties. Now it is alleged by the petitioner that he cannot pay the entire amount, in view of the fact that the Sales Tax Department has attached the properties so as to enable them to recover the sales tax arrears. The respondents 1 and 2 relying on clause 16 have come forward with the plea that having agreed for the terms and conditions of the sale, the petitioner cannot now refuse to pay the entire amount, and so they are entitled to forfeit the Earnest Money Deposit amount. It is also not the case of the petitioner that the sale in his favour has been set aside and the respondents 1 and 2 have no right at all to bring the properties for sale. While dealing with similar issue, in the decision in Thakarlal v. Smt. Rama, , it has been held as follows:-
"(10) In the Lahore case, AIR 1932 Lah.401 (FB) the decision of the Privy Council in Kissorimohan Roy v. Harsukh Das, ILR 17 Cal.436 in which it was held that an illegal attachment under the Code of Civil Procedure is a direct act of the decree-holder, for which he is responsible in law was referred to together with the provisions of 0.21 and the forms prescribed in Appendix E.Schedule I, C.P.C. and it was inferred that in a Court sate there was representation by the decree-holder that the judgment-debtor had a saleable interest in the property against which he was proceeding in execution.
In the execution application which is filed in form No.6 Appendix E.Schedule 1, C.P.C. with regard to the particulars furnished under columns 1 to 10 the decree-holder is required to declare that what is stated therein is true to the best of his knowledge and belief. But with regard to the interest of the judgment-debtor in the immovable property sought to be proceeded against all that the decree-holder is required to declare is that, so far as he has been able to ascertain, his interest in the property is as specified.
No publicity is given to the declaration contained in the execution application. Publicity is only given to the sale proclamation which is issued by the Court, It is this proclamation which invites bidders to come and bid for the property at the auction sale. Whatever representation is made to the auction purchaser is contained in the sale proclamation. This representation is not made on behalf of the decree-holder. It is made by the Court on its behalf. It is in Form No.29, Appendix E, Schedule I, C.P.C. The following condition of sale is specifically mentioned in this proclamation:
"The particulars specified in the Schedule below have been stated to be the best of the information of the Court, but the Court will not be answerable for any error, misstatement or omissions in the proclamation.
It is thus clear that there is no question of any representation by the decree-holder to the auction-purchaser that the judgment-debtor has a saleable interest in the property.
(11) The Oudh and Labour cases have also taken the view that the sale can be rescinded at the instance of the auction- purchaser on the ground of mistake. Section 20 of the Contract Act lays down that where both parties to an agreement are under a mistake as to a matter of fact essential to the agreement, the agreement is void. It is clear that to attract the provisions of Sec.20 there must be a mutual mistake of the contracting parties. An auction sale cannot be regarded as a sale by the decree-holder in favour of the auction purchaser. It cannot therefore the regarded as a case of mutual mistake.
.. .. .. .. ..
(15) Now the auction purchaser is not bound to purchase the property at an auction sale. His mistake in thinking that the judgment-debtor has a saleable interest in the property does not therefore entitle him to a refund of the purchase money merely on the ground that he subsequently discovers that he has no such interest. It appears to me that money paid under a mistake of fact can only be recovered in the circumstances specified by Farwell,J., in the above case.
(16) Another aspect of the matter is that a purchaser at an auction sale knows that no one guarantees to him that the judgment-debtor has good title and he purchases the property with his eyes open and regulates the price which he bides for the property with reference to the circumstances under which he is purchasing and the risk he runs. There seems to be no reason why the decree-holder who is bona fide trying to reaslise his decree by executing it should be penalized in order to safeguard the interest of the auction purchaser.
In case the decree-holder is ordered to refund the money to the auction purchaser, he shall have no right to further execution or his decree which has once been satisfied in full. As was pointed out in the Allahabad Full Bench case, AIR 1988 All 593, if the decree-holder perpetrates a fraud on the auction purchaser then certainly the latter would have an independent right of action to recover the purchase-money".
10. In view of the abovesaid decision, and also in view of clause 16 of the terms and conditions of sale, I do not find any reason to grant the relief as sought for by the petitioner.
11. It cannot also be accepted that the non-disclosure of the fact regarding the letter from the Sales Tax Department to the petitioner, by the respondents 1 and 2 amounts to a fraud and on that basis the petitioner can ignore the same. The sale pursuant to the auction has already been concluded by confirmation of the same.
12. For all the reasons stated above, I do not find any reason to interfere with the impugned order. Accordingly, this writ petition is dismissed. No costs. Consequently, W.M.P.Nos.6141 and 6142 of 2000 are also dismissed.