Case Note & Summary
The petitioners, Anchor Health & Beauty Care Ltd. and Deepak & Co., purchased immovable property of M/s. Nihon Electronics Ltd. (in liquidation) through an auction conducted by the Official Liquidator. The auction took place on 23rd July 2003, and the petitioners paid the full consideration of Rs.4.10 crores on 6th August 2003. Physical possession was handed over on 12th August 2003, and a Deed of Assignment was executed on 17th October 2003. After the property vested in the petitioners, the Municipal Corporation of Greater Bombay, through its Assistant Assessor and Collector, issued a warrant of attachment and pasted it on the property for alleged arrears of property tax. The petitioners challenged this attachment by way of a writ petition. The court considered whether the Municipal Corporation could attach the property for pre-sale tax arrears after the property had been sold by the Official Liquidator. The court held that once the property is sold and title vests in the purchaser, the property cannot be attached for arrears that accrued prior to the sale. The Municipal Corporation must recover such arrears from the previous owner or the Official Liquidator, not by attaching the property in the hands of the purchaser. The court allowed the petition, quashed the attachment, and directed the Municipal Corporation to recover the arrears from the Official Liquidator or the company in liquidation.
Headnote
A) Property Tax - Attachment after Auction Sale - Liability of Purchaser - Bombay Municipal Corporation Act, 1888, Section 146 - The petitioners purchased the property through auction by the Official Liquidator and paid full consideration. The Municipal Corporation sought to attach the property for arrears of property tax due prior to the sale. The Court held that once the property is sold by the Official Liquidator and title vests in the purchaser, the property cannot be attached for pre-sale tax arrears. The liability for property tax after the sale is on the new owner, but the Corporation must recover arrears from the previous owner or the Official Liquidator, not by attaching the property in the hands of the purchaser. (Paras 1-5) B) Companies Act - Priority of Dues - Official Liquidator's Sale - Section 529A of the Companies Act, 1956 - The Court noted that the Official Liquidator's sale is for the benefit of all creditors, and the property vests in the purchaser free of all encumbrances. The Municipal Corporation's claim for arrears of property tax would rank as a debt payable out of the sale proceeds, but cannot be enforced against the property after sale. (Para 4)
Issue of Consideration
Whether the Municipal Corporation can attach property for arrears of property tax after the property has been sold by the Official Liquidator and title has vested in the purchaser.
Final Decision
The court allowed the writ petition, quashed the warrant of attachment, and directed the Municipal Corporation to recover the arrears of property tax from the Official Liquidator or the company in liquidation.
Law Points
- Property tax liability
- attachment of property
- auction sale by Official Liquidator
- vesting of title
- liability of purchaser
- Section 146 of the Bombay Municipal Corporation Act
- 1888
- Section 529A of the Companies Act
- 1956
