Gujarat High Court
Vrushti Industries - Through ... vs Gujarat Industrial ... on 31 July, 2018
Author: R.Subhash Reddy
Bench: R.Subhash Reddy, Vipul M. Pancholi
C/LPA/2100/2017 CAV JUDGMENT
IN THE HIGH COURT OF GUJARAT AT AHMEDABAD
R/LETTERS PATENT APPEAL NO. 2100 of 2017
In SPECIAL CIVIL APPLICATION NO. 3361 of 2013
With
CIVIL APPLICATION NO. 1 of 2017
FOR APPROVAL AND SIGNATURE:
HONOURABLE THE CHIEF JUSTICE MR. R.SUBHASH REDDY
and
HONOURABLE MR.JUSTICE VIPUL M. PANCHOLI
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1 Whether Reporters of Local Papers may be allowed to No
see the judgment ?
2 To be referred to the Reporter or not ? No
3 Whether their Lordships wish to see the fair copy of the No
judgment ?
4 Whether this case involves a substantial question of law No
as to the interpretation of the Constitution of India or any
order made thereunder ?
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VRUSHTI INDUSTRIES - THROUGH PROPREITOR NARESH RAICHAND
SHAH
Versus
GUJARAT INDUSTRIAL DEVELOPMENTCORPORATION THRO
MANAGING
==========================================================
Appearance:
MR YN RAVANI(718) for the PETITIONER(s) No. 1
MR RD DAVE(264) for the RESPONDENT(s) No. 1,2
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CORAM: HONOURABLE THE CHIEF JUSTICE MR. R.SUBHASH REDDY
and
HONOURABLE MR.JUSTICE VIPUL M. PANCHOLI
Date : 31/07/2018
CAV JUDGMENT
(PER : HONOURABLE MR.JUSTICE VIPUL M. PANCHOLI)
1. This appeal is filed under Clause15 of the Page 1 of 29 C/LPA/2100/2017 CAV JUDGMENT Letters Patent against the CAV judgment dated 25.09.2017 passed by the learned Single Judge in Special Civil Application No.3361 of 2013 by which the learned Single Judge has dismissed the petition filed by the appellant - original petitioner.
2. Heard learned advocate Mr.Y.N. Ravani for the appellant - original petitioner and learned advocate Mr.R.D. Dave for the respondents.
3. Learned advocate Mr.Ravani appearing for the appellant - original petitioner submitted that plot/shed bearing No.A2/2411 situated at GIDC Ankleshwar was earlier occupied by M/s. Manish Group of Industries (Firm). The said plot was allotted to the said Firm on 27.04.1984 and Lease Agreement was executed by the respondents with the said Firm. However, the said Firm could not pay the amount or financial assistance provided by the concerned Bank. Proceedings against said Firm were initiated before Debt Recovery Tribunal (DRT), Mumbai. It is submitted that the DRTII, Mumbai, pursuant to the orders passed in the said proceedings, put the said plot in Page 2 of 29 C/LPA/2100/2017 CAV JUDGMENT question in auction. Auction notice was issued, pursuance to which, the petitioner participated in the said process which was held on 19.04.2010. As the petitioner was the highest bidder, Sale Certificate was issued in favour of the petitioner on 13.07.2010. Thereafter, Deed of Assignment came to be executed by the Recovery Officer, DRT, in favour of the petitioner on 23.08.2010. Thus, it is contended that the petitioner is the bonafide purchaser, who has purchased the property in question in the auction held before the DRT.
3.1 Learned advocate Mr.Ravani, thereafter, would contend that the petitioner applied for transfer of the plot in question in its favour. On the basis of the Deed of Assignment as well as Sale Certificate issued in its favour, the petitioner had cleared the dues indicated by the respondent Corporation for the period commencing from 13.07.2010 to 31.03.2012 and various charges as well as transfer fee as per the demand of the respondent Corporation were paid to the respondents. However, thereafter, when the petitioner requested to issue No Due Certificate in favour of Page 3 of 29 C/LPA/2100/2017 CAV JUDGMENT the petitioner by its request letters, which are produced at Pages 32 to 35 of the compilation, no reply has been given by the respondent Corporation and, therefore, the petitioner was constrained to prefer the captioned petition before this Court, wherein the petitioner has prayed that the respondents be directed to issue No Due Certificate in favour of the petitioner in respect of shed/plot in question.
3.2 Learned advocate Mr.Ravani submits that the learned Single Judge by way of the impugned order dismissed the petition and, therefore, the appellant
- original petitioner has preferred this appeal. 3.3 Learned advocate Mr.Ravani has assailed the impugned decision rendered by the learned Single Judge mainly on the ground that the petitioner is a bonafide purchaser, who has purchased the property in question in the public auction held by DRT, Mumbai. The petitioner has paid the required charges as well as the transfer fee to the respondent Corporation after the issuance of the Sale Page 4 of 29 C/LPA/2100/2017 CAV JUDGMENT Certificate in favour of the petitioner. No other demand was raised by the respondent Corporation from the petitioner and, therefore, when the petitioner asked the respondent Corporation to issue No Due Certificate with regard to the property in question, the respondent Corporation was obliged to issue the same. However, the learned Single Judge has failed to consider the aforesaid important aspects of the matter. It is contended that the respondent Corporation had never challenged the sale proceeding, which has been carried out by DRT, Mumbai. There was no charge recorded by the respondent Corporation as required under Section 100 of the Transfer of Properties Act, 1882.
3.4 Learned advocate further submits that the respondent Corporation had never demanded any amount from the petitioner till the filing of the petition by issuing any notice and even when the petitioner requested to issue No Due Certificate at that time also no reply was given by the respondent Corporation and, therefore, the respondent Corporation be estopped from taking the contention that there are Page 5 of 29 C/LPA/2100/2017 CAV JUDGMENT outstanding dues of the erstwhile owner i.e. M/s. Manish Group of Industries and, therefore, No Due Certificate cannot be issued in favour of the petitioner.
3.5 It is further submitted that the learned Single Judge has committed an error by holding that the arrears of rent remains attached with the property and would travel with the property. In fact, the respondent Corporation is not empowered under the provisions of the Gujarat Industrial Development Act, 1962 to recover the dues of the erstwhile owners from the petitioner. At this stage, it is contended that there was no transfer of ownership of business from M/s. Manish Group of Industries to the petitioner, a going concern. The petitioner has purchased the property in question by way of public auction held before DRT.
3.6 Learned advocate Mr.Ravani has placed reliance upon the following decisions in support of his contentions:
Page 6 of 29 C/LPA/2100/2017 CAV JUDGMENT
(1) State of Karnataka & Anr Vs. Shreyas Papers (P) Ltd & Anr. Reported in (2006) 1 SCC 615 (2) Lamifab AB Industries Vs. Union of India reported in 2015(326) ELT 601 (Guj) (3) Rana Griders Ltd Vs. Union of India reported in (2013) 10 SCC 746 (4) Southern Power Distribution Company of Telengana Ltd., Thr. Its CMD and others Vs. Gopal Agarwal and Ors reported in AIR 2017 SC 3862 3.7 Learned advocate for the appellant, therefore, urged that the impugned order passed by the learned Single Judge be set aside and, thereby, the respondent Corporation be directed to issue No Due Certificate to the appellant - original petitioner.
4. On the other hand, learned advocate Mr.R.D. Dave appearing for the respondent Corporation submitted that there are outstanding dues of M/s. Manish Group of Industries, in whose favour Lease Agreement was executed by the respondent Corporation. The said Firm did not pay the outstanding dues of the Dena Bank.Page 7 of 29 C/LPA/2100/2017 CAV JUDGMENT
Therefore, the proceedings were initiated before DRT II at Mumbai. On 03.08.1994, the respondent Corporation informed the Dena Bank about the pending dues of the Corporation from the said Firm. Learned advocate has referred the said letter which is produced at Page 42/A of the compilation. It is further submitted that when the Recovery Officer issued a public advertisement in the local newspaper on 14.02.2009 for the purpose of auction of the property in question, the respondent Corporation informed the said Recovery Officer by communication dated 17.02.2009 that dues of the respondent Corporation are pending and requested to drop the auction proceedings. However, the public auction was held and sale certificate was issued in favour of the petitioner. Thereafter, the Deed of Assignment came to be executed in favour of the petitioner. The petitioner, thereafter, paid transfer fee and other charges payable during the period from 13.07.2010 to 31.03.2013. However, when the dues of the erstwhile owner are outstanding, No Due Certificate cannot be issued in favour of the petitioner.
Page 8 of 29 C/LPA/2100/2017 CAV JUDGMENT 4.1 learned advocate Mr.Dave thereafter referred terms and conditions of sale of the properties and more particularly, placed reliance upon Clause3 of the same. The said document is produced at Page 54 of the compilation. Similarly, he has referred Page 58 of the compilation i.e. the schedule of immovable property. At this stage, it is also pointed out from the communication addressed by the petitioner to the Recovery Officer, DRT, dated 13.07.2009 produced at Page 59 that the petitioner was aware about the dues of GIDC, notified tax and water and drainage charges and it is also stated by the petitioner that the same would be their responsibility.
4.2 Learned advocate Mr.Dave thereafter has referred the Deed of Assignment executed between the Recovery Officer of DRT and the petitioner and contended that the said document also indicates that the property in question is conveyed to the use and benefit of the purchaser subject to the payment of all rents, taxes, rates, assessments, rates and duties and dues upon the same or which may thereafter become payable in respect thereof to the State of Gujarat or to the Page 9 of 29 C/LPA/2100/2017 CAV JUDGMENT Municipal Corporation or any other body. Thus, it is submitted that when the dues which are attached to the land or property in question, which are of erstwhile owner, the new purchaser is liable to make payment thereof. It is, therefore, urged that the learned Single Judge has not committed any error while dismissing the petition and, therefore, this appeal be dismissed.
4.3 Learned advocate Mr.Dave has placed reliance upon the decision rendered by the Hon'ble Supreme Court in the case of Rana Griders Ltd Vs. Union of India (supra) and Full Bench of this Court in the case of Champaklal Dahyabhai Natali Vs. Saraswatiben W/o. Shambhubhai Atmaram Mehta reported in 1977 GLR
186.
5. Having heard learned advocates appearing for the parties and having gone through the material produced on record, the following undisputed facts emerged from the record.
(a) For the plot in question, Lease Agreement came Page 10 of 29 C/LPA/2100/2017 CAV JUDGMENT to be executed by the respondent Corporation in favour of one M/s. Manish Group of Industries in April, 1984. The said Firm took financial assistance from Dena bank. However, the said Firm could not repay the outstanding dues of the said Bank and, therefore, proceedings were initiated before the DRT II at Mumbai.
(b) Recovery Officer issued public advertisement in local newspaper on 12.01.2009 for the purpose of auction of the property in question. In response to the same, the respondent Corporation sent a communication on 17.02.2009 whereby it was informed that there are outstanding dues of the respondent Corporation and, therefore, requested to drop the auction proceedings.
(c) Public auction was to be held on 19.02.2009, however, it was held on 19.04.2010. The petitioner was the highest bidder and, therefore, sale certificate was issued on 13.07.2010 in favour of the petitioner. Thereafter, Deed of Assignment was executed by the Recovery Officer, DRT, on 23.08.2010.Page 11 of 29 C/LPA/2100/2017 CAV JUDGMENT
(d) The petitioner paid required charges as well as transfer fee to the respondent Corporation for the period from 13.07.2010 to 31.03.2013.
(e) The petitioner thereafter, asked for issuance of No Due Certificate. However, the respondent Corporation has not issued the same.
6. In the aforesaid undisputed facts, certain relevant material placed on record as well as Deed of Assignment and terms and conditions of auction of the property in question are required to be examined. Clause No.3 of the terms and conditions of the sale of the properties by way of auction, which was to be held on 19.02.2009 at DRT, Mumbai, provides as under:
"3. So far as known to this Tribunal/Recovery Officer, there are no claims,liabilities or encumbrances other than those notified in the schedule. The sale is subject to all such claims, liabilities or encumbrances, known or unknown, and the Tribunal/Recovery Officer undertakes no liability thereunder either to purchaser or to any authority whatever."Page 12 of 29 C/LPA/2100/2017 CAV JUDGMENT
8. In the said terms and conditions, schedule of immovable property is given and the said schedule provides as under: SCHEDULE OF IMMOVABLE PROPERTY Sr Description of Revenue Details Claims, if Reserve No property to be assessed of encum any, which Price sold with names upon the brances have been below of coowners property to which put forward which where property or any the to the the belongs to the part property property property defendant & any thereof is liable and any will not other persons as other known be sold1 coowners particulars being on its nature and value 1 Office at 2411, Not Mortgaged Not Known Rs.18 A2 GIDC known to lacs EMD Ankleshwar Applicant Rs.2 Industrial Bank lacs Estate, Ankleshwar 393 002 Dist.:
Bharuch, Gujarat, Admg 1500 sq. mtrs.
9. The respondent Corporation when came to know that public auction is to be held, sent the communication dated 17.02.2009 to the Recovery Officer, DRTII, in which, it is specifically stated that shed in question is allotted to M/s. Manish Group of Industries on lease hold basis and said Firm is in arrears of outstanding dues of Rs.35,24,481/ Page 13 of 29 C/LPA/2100/2017 CAV JUDGMENT as well as outstanding dues of water charges and drainage. The first right remains with the respondent Corporation as per the agreement and, therefore, it was requested to stop the public auction and safe guard the interest of the respondent Corporation. The said communication is produced at Page 44 of the compilation.
10. The Deed of Assignment is produced at Page 16 of the compilation, in which, it has been specifically stated after Clause5 as under:
"NOW THIS INDENTURE WITHNESSTH that in pursuance of the aforesaid and in consideration of the sum of Rs.19,00,000/ (Rupees Nineteen Lac's Only) for immovable property of M/s. Manish Group of Industries situated at A/22411, GIDC, Ankleshwar - 393002 admeasuring 1500 Sq. Mtrs. paid by the purchaser to the Assignor herein on or before the execution of these presents (the payment and receipt whereof the Assignor and hereby acknowledge). The assignor doth hereby sell, grant, release, convey and transfer property i.e. Shed No.A2/2411, GIDC, Ankleshwar
- 393 002 (hereinafter referred as "THE SAID PROPERTY" for the sake of brevity) assure unto the Purchase all that the said property more Page 14 of 29 C/LPA/2100/2017 CAV JUDGMENT particularly described in the Schedule hereunder written with all and singular, courtyards, compounds sewers, ditches, fences, trees, drains, wells, water sources, Paths, Lights, liberties, privileges, easements, profits, advantages, right, members, and appurtenances, whatsoever to the said property or any part thereof belonging to or an any way appertaining to or with the same or any part thereof or at any time hereto for usually held, used occupied enjoyed herewith or reputed or known as part or member thereof or be appurtenant thereof and the said property or any part thereof and the estates, right, easement, paths, land little, interest use, inheritance, property, possession benefit, claim and demand whatsoever both at law and in equity of the said Assignors unto the said property or any part thereof TO HAVE AND HOLD ALL and singular the said property hereby granted, released, conveyed and assured or intended so to the with their appurtenance unto and to the use and benefit of the purchaser subject to payment of all rents, taxes, rates, assessments, rates & duties and dues upon the same or which may hereafter become payable in respect thereof to the state of Gujarat or to the municipal corporation or any other body in respect thereof and the assignor doth hereby for himself his successor[s] in office and/or assigns covenant with the purchasers ....."
(emphasis supplied) Page 15 of 29 C/LPA/2100/2017 CAV JUDGMENT
11. At this stage, it is required to be noted that while participating in the public auction, the petitioner vide its communication addressed to the Recovery Officer, DRTII, dated 20.06.2009, quoted the offer of Rs.21 lacs. Thereafter, it was initially written to give exemption from statutory dues of GIDC, GEB, notified tax and water and drainage charges as it is not affordable. However, thereafter, said lines were scored off. The said communication is produced at Page 60 of the compilation. However, thereafter, on 13.07.2009, in another communication, the petitioner has stated as under: "We are enclosing here with a draft bearing No.042624 dated 09/07/2009 on HDFC Bank Ltd payable at Mumbai for Rs.2,00,000.00 being the payment against EMD of the above said property and if any statutory dues of GIDC, DGVCL, Notified Tax and water & Drainage charges shall be our responsibility but We kindly request you to waive off all the interest and penal interest on the above dues that is charged from the time the court received the possession till the time we receive the possession of the above said property."
Page 16 of 29 C/LPA/2100/2017 CAV JUDGMENT
12. Thus, from the aforesaid terms and conditions of the auction of the property in question as well as Deed of Assignment executed in favour of the petitioner, it is revealed that the sale is subject to all such claims and liabilities or encumbrances known or unknown. The property in question is granted, released, conveyed and assured with their appurtenance to the use and benefit of the petitioner subject to payment of all rents, taxes, rates, assessments, rates and duties and dues upon the same. It is further revealed that there is a specific clause in the Deed of Assignment that the said dues may be of State of Gujarat or of the Municipal Corporation or any other body. The communication made by the petitioner before such Deed of Assignment is executed in favour of the petitioner to the Recovery Officer informing that GIDC, GEB, notified tax and water and drainage charges etc. are not affordable. However, the said lines were scored off and in other communication dated 13.07.2009, the petitioner informed the Recovery Officer that if there are any statutory dues of GIDC, DGVCL, notified tax and water and drainage charges, it would be the responsibility Page 17 of 29 C/LPA/2100/2017 CAV JUDGMENT of the petitioner. However, it was further requested to waive off the interest and penal interest on the said dues. Thus, we are of the view that the petitioner was aware about the outstanding dues of erstwhile owner before Deed of Assignment was executed in its favour.
13. In the case of State of Karnataka & Anr Vs. Shreyas Papers (P) Ltd & Anr. (supra), the Hon'ble Supreme Court has observed in Paragraphs15 to 20 as under:
"15. A careful reading of Section 15(1) of the KST Act shows that the consequences contemplated therein, namely, foisting of the liabilities of the defaulting transferor onto the transferee, would come into effect only if the "ownership of the business" is transferred. Although, Mr. Hegde strenuously urged that "business" could not be separated from the assets of the business, we are unable to accept this contention. Business is an activity, directed with a certain purpose, more often towards producing income or profit. Ownership of assets is merely an incident rather than a characteristic of business. Hence, the mere transfer of one or more species of assets does Page 18 of 29 C/LPA/2100/2017 CAV JUDGMENT not necessarily bring about the transfer of the "ownership of the business" for "ownership of a business" is much wider than mere ownership of discrete or individual assets. In fact, "ownership of business" is wider than the sum of the ownership of a business' constituent assets. Above all, transfer of "ownership of business"
requires that the business be sold as a going concern. In our view, therefore, Section 15(1) is intended to operate only when there is complete transfer of "ownership of business" so as to render the transferee as a successorin interest of the transferor. Only in such an eventuality does Section 15(1) make the transferee liable for the transferor's sales tax liabilities.
16. Mr. Hegde referred to two judgments of the Karnataka High Court both of which, unfortunately, take an erroneous view of the matter. In Karnataka State Industrial Investment and Development Corporation Ltd. v. Assistant Commissioner of Commercial Taxes, Bangalore, the High Court held that when Section 29 of the SFC Act was read with Section 15 of the KST Act, the transferee would be jointly liable with the State Finance Corporation concerned. As we have already held, Section 15 operates only in a situation where the ownership of the business is transferred. The learned Single Judge, however, did not notice this point. Similarly, we are Page 19 of 29 C/LPA/2100/2017 CAV JUDGMENT unable to accept the correctness of the judgment in Alpha Silicones v. Assistant Commercial Tax Officer (Recovery), Gulbarga and Anr. as it held that even the mere transfer of assets would amount to transfer of ownership of the business. We overrule these two judgments to the extent that they conflict with the views expressed herein.
17. In the present case, since it is not a matter of dispute that there was only the transfer of individual assets of the Defaulting Company, rather than the Defaulting Company being sold as a going concern, in light of our expressed views, Section 15 of the KST Act is not attracted. The first limb of Mr. Hegde's arguments must, therefore, fail.
Enforceability of the Charge
18. The next limb of Mr. Hegde's arguments was that since Section 13(2)(i) of the KST Act creates a charge on the property of the Defaulting Company, the charge would continue on the properties, even if it changes hands by transfer.
19. While the expression "charge" is not defined by the KST Act, this concept is well known in property law and has been defined by Section 100 of the Transfer of Property Act, Page 20 of 29 C/LPA/2100/2017 CAV JUDGMENT 1882 (hereinafter "the TP Act"). Here "charge" is defined as:
"100. Where immovable property of one person is by act of parties or operation of law made security for the payment of money to another, and the transaction does not amount to a mortgage, the latter person is said to have a charge on the property; and all the provisions hereinbefore contained which apply to a simple mortgage shall, so far as may be, apply to such charge.
Nothing in this section applies to the charge of a trustee on the trustproperty for expenses properly incurred in the execution of his trust, and, save as otherwise expressly provided by any law for the time being in force, no charge shall be enforced against any property in the hands of a person to whom such property has been transferred for consideration and without notice of the charge." (emphasis supplied)
20. As the section itself unambiguously indicates, a charge may not be enforced against a transferee if s/he has had no notice of the same, unless by law, the requirement of such notice has been waived. This position has long been accepted by this Court in Dattatreya Shanker Mote v. Anand Chitaman Datar, and in Page 21 of 29 C/LPA/2100/2017 CAV JUDGMENT Ahmedabad Municipal Corporation of the City of Ahmedabad v. Haji Abdul Gafur Haji Hussenbhai (hereinafter "Ahmedabad Municipal Corporation"). In this connection, we may refer to the latter judgment, which is particularly relevant for the present case.
14. In the case of Lamifab AB Industries Vs. Union of India (supra), the Division Bench of this Court has observed in Paragraph18 as under:
"18. The respondents also seek to recover the central excise dues of the defaulter unit from the petitioner in view of the above referred condition imposed by GIIC at the time of sale in favour of M/s Poonam Enterprise. In the opinion of this court, the terms and conditions of sale are an agreement between GIIC and M/s Poonam Enterprises and may also be binding on the petitioner as its successor in title. However, the said agreement does not create any right in favour of the Central Excise authorities and merely protects the rights of GIIC qua M/s Poonam Enterprise or its successor. Reliance placed upon the said condition, therefore, does not carry the case of the respondents any further and in the absence of any statutory power being vested in the authorities under the Central Excise Act empowering them to recover Page 22 of 29 C/LPA/2100/2017 CAV JUDGMENT the outstanding dues from the petitioner or its predecessor in title, the sale being of the assets of the defaulter unit and not a going concern, it is not permissible for the respondents to seek to recover the outstanding dues of M/s Nakhua Poly Containers P. Ltd. from the petitioners."
14. In the case of Rana Griders Ltd Vs. Union of India (supra), the Hon'ble Supreme Court has observed in Paragraphs14 to 16 as under:
"14. Before us, it was strenuously argued by the learned counsel for the Revenue that since the excise duty is a statutory liability such a duty has to be paid by the person who purchased the property of borrower in default even when sold in auction under section 29 of the State Financial Corporation Act. He further argued that in any case the High Court was right in holding that by virtue of the stipulations in the Sale Deed as well as in the Agreement of Sale, so far as the appellant is concerned, it was liable to discharge the excise liability. In the circumstances, two questions arise for consideration, namely:
(1) on the interpretation of stipulation contained in the Sale Deed of the land and building and Agreement of Sale of plant and Page 23 of 29 C/LPA/2100/2017 CAV JUDGMENT machinery, whether the appellant had agreed to discharge the dues payable to the excise department by the borrower.
(2) Whether such a liability arises in law (de hors the stipulation in Sale Deed /Agreement of Sale) having regard to the legal provisions contained in the Excise Act and State Financial Corporation Act?
15. We shall discuss the second question in the first instance. As noted above, in so far as second question is concerned, though the High Court has discussed the position in law in detail but has refrained from giving its final opinion on this question.
16. Whether UPFC would have priority being a secured creditor by virtue of Deed of Mortgage or the Central Excise in respect of its dues having regard to the Rule 230(2) of the Central Excise Rules, came up for consideration before this Court in State of Karnataka & Anr. Vs. Shreyash Papers (P) Ltd. & Ors. JT 2006 (1) SC
180. Dealing with the provisions of Rule 230 of the Excise Rules, the Court held that this provision authorises detention of all excisable goods, materials, preparations, plant, machinery, vessels, utensils, implements and articles, in the custody or possession of the person or persons carrying on such trade or Page 24 of 29 C/LPA/2100/2017 CAV JUDGMENT business or from person succeeding the business or trade or part thereof for such time till dues are paid or recovered. However, the rule does not in any way create a charge over any of the goods enumerated therein. After explaining the term "charge" as defined in Section 100 of Transfer of Property Act, it was held that charge would be different from the word "detained". As Rule 230 only empowers detention and there was no other provision under the Central Excise Act or the Rules which envisages to create any charge over the assets of a unit to enable the realization of the Central Excise Duty on top priority. The Court held that UPFC had a priority being a secured creditor on the one hand and Central Excise having no "charge" over the property. The Court specifically took note of the fact that the petitioner in that case was not the successor of the erstwhile owner in business or trade and having acquired the property without any charge independent of business or trade of the previous owner, was not a person in custody or possession of the property as a successor of the previous owner against whom there was a demand of excise duty."
15. We have considered the aforesaid decisions rendered by the Hon'ble Supreme Court as well as the Division Bench of this Court. However, in the facts and circumstances of the present case, the aforesaid Page 25 of 29 C/LPA/2100/2017 CAV JUDGMENT decisions would not render any assistance to the learned advocate appearing for the appellant.
16. On the contrary in the decision rendered by the Hon'ble Supreme Court in the case of Rana Griders Ltd Vs. Union of India (supra), the Hon'ble Supreme Court has observed and held in Paragraph23 as under:
"23. We may notice that in the first instance it was mentioned not only in the public notice but there is a specific clause inserted in the Sale Deed/Agreement as well, to the effect that the properties in question are being sold free from all encumbrances. At the same time, there is also a stipulation that "all these statutory liabilities arising out of the land shall be borne by purchaser in the sale deed" and "all these statutory liabilities arising out of the said properties shall be borne by the vendee and vendor shall not be held responsible in the Agreement of Sale." As per the High Court, these statutory liabilities would include excise dues. We find that the High Court has missed the true intent and purport of this clause. The expressions in the Sale Deed as well as in the Agreement for purchase of plant and machinery talks of statutory liabilities "arising out of the land" or statutory liabilities "arising out Page 26 of 29 C/LPA/2100/2017 CAV JUDGMENT of the said properties" (i.e. the machinery). Thus, it is only that statutory liability which arises out of the land and building or out of plant and machinery which is to be discharged by the purchaser. Excise dues are not the statutory liabilities which arise out of the land and building or the plant and machinery. Statutory liabilities arising out of the land and building could be in the form of the property tax or other types of cess relating to property etc. Likewise, statutory liability arising out of the plant and machinery could be the sales tax etc. payable on the said machinery. As far as dues of the Central Excise are concerned, they were not related to the said plant and machinery or the land and building and thus did not arise out of those properties. Dues of the Excise Department became payable on the manufacturing of excisable items by the erstwhile owner, therefore, these statutory dues are in respect of those items produced and not the plant and machinery which was used for the purposes of manufacture. This fine distinction is not taken note at all by the High Court."
17. The Full Bench of this Court in the case of Champaklal Dahyabhai Natali Vs. Saraswatiben W/o. Shambhubhai Atmaram Mehta (supra), considered the issue as to whether the arrears of rent due in Page 27 of 29 C/LPA/2100/2017 CAV JUDGMENT respect of the property could be transferred to the buyer. In the present case, Lessor has not transferred all his rights in the property but the petitioner purchased the property along with interest therein, in an auction. As observed hereinabove, the Assignment Deed clearly stipulated that the transfer was subject to payment of of all rents, taxes, assessments and dues upon the same. Thus, it was transferred with the encumbrance and the amount due from M/s. Manish Group of Industries to the GIDC. The petitioner was, therefore, bound by the terms and conditions which it agreed upon.
18. In the present case, the liability of the erstwhile owner i.e. M/s. Manish Group of Industries is arising out of the land i.e. attached to the property and, therefore, as per the terms and conditions of the auction notice as well as the Deed of Assignjment, the appellant cannot escape from the said liability. However, it is required to be noted that till date, the respondent Corporation has not demanded any outstanding amount of the erstwhile owner from the appellant and, therefore, at this stage, whether the respondent GIDC is entitled to Page 28 of 29 C/LPA/2100/2017 CAV JUDGMENT recover such dues from the appellant, or not, is the issue which is not required to be decided in the present proceedings. Therefore, we have not examined the said issue. However, when such dues are outstanding, the respondent Corporation is justified in denying issuance of No Due Certificate to the appellant.
19. In view of the aforesaid discussion and in view of the reasoning recorded by the learned Single Judge, we see no reason to interfere with the impugned order passed by the learned Single Judge. Accordingly, the appeal is dismissed. Consequently, Civil Application does not survive and is disposed of, accordingly.
(R.SUBHASH REDDY, CJ) (VIPUL M. PANCHOLI, J) piyush Page 29 of 29