As the issue involved in both these cases is the same, they are taken up together for consideration and disposed by this common judgment.
2. The petitioners in both the writ petitions are persons who purchased land in an auction sale conducted by the 2nd respondent on 07.06.2007, for recovery of sales tax arrears from various assessees who were in default under the Kerala General Sales Tax Act (hereinafter referred to as 'the KGST Act'). Although, the auction sale was conducted in accordance with the provisions of the Kerala Revenue Recovery Act, and sales certificates were duly issued to the petitioners, when the petitioners approached the 3rd respondent for transferring the buildings purchased by them, in their names, the 3rd respondent took a stand that the buildings could not be so transferred in the name of the petitioners, in view of the fact that there were arrears of property tax due in respect of the buildings in question, and unless the said arrears of property tax was paid by the petitioners, it would not be possible to transfer the buildings in the names of the petitioners. It is aggrieved by the said stand of the 3rd respondent that the petitioners in both these writ petitions have approached this Court challenging the stand of the 3rd respondent, inter alia on the ground that, pursuant to the auction sale conducted by the respondents in terms of the Kerala Revenue Recovery Act, they had got a title in the property free from all encumbrances as is contemplated under Section 60 of the said Act.
3. In a statement filed by the Secretary, Corporation of Cochin, the action of the 3rd respondent is sought to be justified by relying on the provisions of Section 237 of the Kerala Municipalities Act, and stating that the property tax liability in respect of the building is a first charge on the building as per the said Act and, therefore, the petitioners who purchased the property in the auction would take the property only subject to the charge specified under Section 237 of the Act. In the counter affidavits filed on behalf of the 4th respondent, it is stated that the auction was conducted strictly in accordance with the provisions of the Kerala Revenue Recovery Act, and that the petitioners had obtained a title in the property free from all encumbrance as stipulated under Section 60 of the said Act. In the case of the petitioner in W.P.(C).No.30320 of 2008, it is pointed out that pursuant to the sale conducted, the sale proceeds were appropriated towards the debts due to various persons and an amount of Rs.5,30,337/- is still pending with the State Government, which is kept in a revenue deposit.
4. I have heard Sri.M.P.M.Aslam, the learned counsel for the petitioners in both the writ petitions and Sri.K.Anand, the learned Standing counsel for the Cochin Corporation and the learned Government Pleader Smt.K.T.Lilly, appearing on behalf of the official respondents.
5. On a consideration of the facts and circumstances of the case as also the submissions made across the Bar, I am of the view that the writ petitions, in their challenge against the stand of the 3rd respondent that the request for transferring the buildings purchased by the petitioners in their names will not be considered till such time as the arrears of property tax in respect of the building, for the period prior to the sale building to the petitioners, is discharged by the petitioners, must necessarily succeed. It is apparent from a perusal of the records that the sale in terms of the Revenue Recovery Act was conducted pursuant to the requisition from the sales tax authorities, and on the basis of a finding that there were substantial dues owing from the erstwhile owners of the property towards sales tax liability under the KGST Act. The proceedings initiated under the Revenue Recovery Act were pursuant to the express provisions of Section 26A and 26B of the KGST Act whereunder, the sales tax dues of an assessee are to be treated as a first charge on the property of the defaulter. The provisions under Section 26B of the KGST Act begin with a non- obstante clause and make it notwithstanding anything to the contrary contained in any other law for the time being in force. By virtue of the said provision, therefore, the dues to the Sales Tax Department would be entitled to a prior charge over the property, as against the dues under the Kerala Municipalities Act, although as per the provisions of Section 237 of the Kerala Municipalities Act, the property tax dues also constitute a first charge on the buildings in respect of which they have become dues. This is because the latter provision, unlike the former, does not commence with a non-obstante clause and, therefore, vis-a-vis the charge created under Section 237 of the Kerala Municipalities Act and that created under S.26B of the KGST Act, it is the latter that will prevail for getting the status of a first charge on the property. It is also relevant to note that, while the proceedings under the Kerala Revenue Recovery Act were pursued by the authorities under the said Act, and the procedure followed contemplated the issuance of public notice bringing it to the notice of all concerned that there was a sale of the property proposed, the respondent Corporation did not take any steps to bring their charge to the notice of the Revenue Recovery Authorities, prior to the conduct of the sale under the said Act. It followed, therefore, that on a sale being conducted in accordance with the provisions of the Kerala Revenue Recovery Act, the only charge, of which the purchasers at the auction had notice was the one created under Section 26B of the KGST Act and, in respect of the recovery of which, the proceedings under the Kerala Revenue Recovery Act were initiated in the first case. It also followed that, on the sale being conducted and the sales certificate being issued in terms of the Revenue Recovery Act, the petitioners who purchased the property at the auction sale obtained a title that was free from all encumbrance as contemplated under Section 60 of the Kerala Revenue Recovery Act. Under such circumstances, the 3rd respondent Corporation cannot look to the petitioners, who were bona fide purchasers of the property at an auction conducted in terms of the Kerala Revenue Recovery Act, for realisation of the property tax arrears in respect of the building, prior to the sale in favour of the petitioners. The remedy of the 3rd respondent Corporation, for recovery of the property tax arrears in respect of the buildings in question, would lie in proceedings against the defaulters of the property tax dues, or in the alternative, to look to the proceeds of the auction sale for an appropriation of the property tax amounts therefrom. In taking the said view, I am fortified by the decision of the Supreme Court in State of Karnataka and Another v.
Shreyas Papers (P) Ltd and Others [(2006) 1 SCC 615]
where the concept of a charge, in transactions relating to immovable property, has been considered by the Supreme Court. In the light of the above discussion, I allow the writ petitions by declaring that the 3rd respondent shall not insist on the petitioners clearing the arrears of property tax due in respect of the buildings in question, for the period prior to the date of sale of the property to them under the Kerala Revenue Recovery Act. The 3rd respondent Corporation is also directed to transfer the buildings in question in the name of the petitioners, without insisting on the payment of the arrears aforementioned. The 3rd respondent shall do this within a period of one month from the date of receipt of a copy of this judgment.
A.K.JAYASANKARAN NAMBIAR JUDGE mns