Madras High Court
Virgo Polymer (India) Limited vs The Tamil Nadu Industrial Investments on 24 July, 2017
Author: M.Sundar
Bench: M.Sundar
IN THE HIGH COURT OF JUDICATURE AT MADRAS
DATED: 24.07.2017
CORAM :
The Hon'ble MR.JUSTICE M.SUNDAR
W.P. No.12576 of 2005
Virgo Polymer (India) Limited,
A-1-A, MMDA Industrial Complex,
Maraimalai Nagar, Kancheepuram District .. Petitioner
-vs-
1.The Tamil Nadu Industrial Investments
Corporation Limited, SIDCO Project
Office Buildings, Thiru-Vi-Ka Industrial
Estate, Guindy, Chennai 600 032.
2.Commissioner of Commercial Taxes,
Chepauk, Chennai 600 005.
3.Deputy Commercial Tax Officer,
Nandanam Assessment Circle,
Chennai 600 028.
(RR 2 and 3 impleaded as per order
dt.11.04.2012 in WPMP.116/2012) .. Respondents
Petition filed under Article 226 of the Constitution of India praying for issue of Writ of Mandamus to direct the respondent to return the title documents, deposited with them by the petitioner as Collateral security for the loan availed by the petitioner, without insisting on any payment of sales tax or such other levy.
For Petitioner : Mr.V.Kuberan
for M/s.Rank Associates
For Respondents : Mrs.Rita Chandrasekaran for R-1
for M/s.Aiyar & Dolia
: Mr.T.M.Pappiah,
Spl.G.P. For RR 2 and 3.
* * * * *
O R D E R
Subject matter of the writ petition is a Hire Purchase Agreement dated 31.01.1996 (hereinafter referred to as 'said HP agreement').
2.Said HP agreement is between the writ petitioner company, i.e., Virgo Polymer (India) Limited, and respondent no.1 before me, i.e., The Tamil Nadu Industrial Investments Corporation Limited ('TIIC' for brevity).
3.Said HP agreement is for purchase of Circular Weaving Machine Model LSHD N 4 and the name of the supplier is M/s.Lohia Starlinger Limited, Bangalore-80. To be precise, subject matter of said HP agreement is 16 nos. of such machines (hereinafter collectively referred to as 'said machineries' for the sake of brevity).
4.As would be evident from the prayer in the writ petition, which has been extracted supra in this order, the writ petitioner has come up with a prayer to mandamus TIIC (respondent no.1 before me) to return title documents deposited with them by the writ petitioner as collateral security for loan availed by the writ petitioner for purchase of said machineries under the said HP agreement. To be noted, this is a collateral security besides hypotheca under the said HP agreement.
5.To be noted, intriguingly, the prayer in the writ petition does not give details about the properties which have been given as collateral security. Today, in the hearing, this was put to the learned counsel for the writ petitioner.
6.Thereafter, on instructions, both the learned counsel for the writ petitioner, Mr.V.Kuberan, of M/s.Rank Associates, as well as Mrs.Rita Chandrasekar of M/s.Aiyar and Dolia, appearing for TIIC/respondent no.1, submit that properties that were given as collateral security consisting of two industrial sheds in SIDCO Industrial Estate, Maraimalainagar, one bearing No.B37 with land admeasuring an extent of 22 cents or thereabouts with 3000 sq. ft. of superstructure thereon in the form of shed and the other bearing No.B48, with land admeasuring an extent of 42 cents or thereabouts with 9000 sq.ft. of superstructure in the form of shed (hereinafter referred to as 'collateral security properties').
7.The entire writ petition turns on a very narrow compass. That narrow compass is sales tax payable on said machineries.
8.TIIC would contend that sales tax payable on said machineries has to be paid by the writ petitioner vide clause 8 of the said HP agreement, which reads as follows:
8.The HIRER further covenants and agrees to pay to the OWNER sales tax and any other taxes, levies or dues, that may become payable under any rules or law in force at the time of transfer of ownership of the machinery and equipments from the OWNER to the HIRER.
9.Per contra, learned counsel for the writ petitioner would contend that the sales tax component has already been split into 60 Equated Monthly Instalments ('EMIs' for brevity). In support of his contention, learned counsel for the writ petitioner, Mr.Kuberan, draws my attention to the general conditions governing the loan, particularly Clause 16. In the light of the order that I propose to pass, I am not embarking upon the exercise of resolving the above controversy in this writ petition.
10.It is not in dispute that the total hire rent is 148.50 lakhs (Rupees one crore forty eight lakhs fifty thousand only) payable in 60 EMIs of Rs.2,47,500/- each. It is also not in dispute between the parties that all the 60 EMIs have been duly paid without any default.
11.Therefore, as stated supra, the only point on which the entire writ petition turns is sales tax payable on the said machineries.
12.It is also not in dispute before me that a sum of Rs.13,13,075/- (Rupees thirteen lakhs thirteen thousand seventy five only) has been paid by the first respondent / TIIC to the sales tax department (TN) i.e., respondents 2 and 3 before me.
13.In this regard, Mrs.Rita Chandrasekar, learned counsel appearing for the first respondent / TIIC, draws my attention to Clause 33 of the said HP agreement and it is useful to extract the same hereinbelow:
33.The hirer further agrees to pay the owner sales tax and other taxes, levies and other dues payable by the owner in respect of the machinery and equipments even after the ownership of the same is transferred to the hirer and in default, the owner may proceed against the hirer for such payment by all legal means.
14.Documents pertaining to collateral security properties, i.e., two sheds set out supra, are not being returned by TIIC only because the aforesaid sales tax amount paid by TIIC to the sales tax department has not been made good by the writ petitioner.
15.On whether the writ petitioner has to make good the aforesaid sum of Rs.13,13,075/- with interest to TIIC is pivoted on two aspects of the matter. One aspect of the matter is whether this sum is also covered in the aforesaid 60 EMIs. The other aspect is whether the sales tax payable on said machineries is 4% or 8%.
16.This Court is informed by both the learned counsel that even on a thumb rule estimate, the value of the collateral security properties, i.e., aforesaid two sheds, is not less than Rs.5 crores put together.
17.Therefore, the issue as to whether sales tax is 4% or 8% or as to whether the sale tax component is included in the 60 EMIs, boils down to arithmetics and mere reconciliation of accounts and numbers.
18.The first respondent / TIIC would submit that if this sum of sales tax paid by them is protected by way of a bank guarantee, they are willing to release the title deeds for the collateral security properties, with a rider that the bank guarantee can either be invoked or returned subject to a decision being taken on the writ petitioner approaching them on the aforesaid two aspects touching upon the lone issue being sales tax payable on said machineries.
19.Therefore, the following order is passed:
a)The writ petitioner shall furnish a bank guarantee from a reputed bank favouring TIIC (making TIIC the beneficiary) for a sum of Rs.17,00,000/- (Rupees seventeen lakhs only), within a fortnight from the date of receipt of a copy of this order;
b)On such bank guarantee being produced, as aforesaid by the writ petitioner, the first respondent / TIIC shall cancel the charge, if any and release the original title deeds and all other attendant documents pertaining to collateral security properties being two industrial sheds at SIDCO Industrial Estate, Maraimalainagar, bearing No.B37, land admeasuring an extent of 22 cents or thereabouts with 3000 sq. ft. of superstructure in the form of shed and No.B48, land admeasuring an extent of 42 cents or thereabouts with 9000 sq.ft. of superstructure in the form of shed, to the writ petitioner within a fortnight therefrom;
c)After furnishing the bank guarantee as aforesaid, the writ petitioner shall submit a representation to the first respondent/TIIC raising the two pivotal aspects pertaining to the lone issue of sales tax payable on said machineries;
d)The first respondent / TIIC shall make every effort to reconcile / resolve the issue and respond suitably in writing to the same within six (6) weeks therefrom;
e)Though obvious, it is made clear that all questions pertaining to sales tax payable on said machineries are left open for being decided without being swayed by the contents of this order.
f)It is made clear that if the ultimate decision of TIIC regarding the sales tax payable on said machineries is adverse to the writ petitioner, either in full or in part, this order will not preclude the writ petitioner from assailing the same in a manner known to law.
20.The writ petition is disposed of on the aforesaid terms. No costs.
24.07.2017 Index : Yes/No Website : Yes/No sra To
1.The Commissioner of Commercial Taxes, Chepauk, Chennai 600 005.
2.The Deputy Commercial Tax Officer, Nandanam Assessment Circle, Chennai 600 028.
M.Sundar, J.
(sra) W.P.No.12576 of 2005 24.07.2017