LexJANATHA TEXTILES & ORS. versus TAX RECOVERY OFFICER & ANR.
Open in Lexace · Ask the AI about this caseJudgment (excerpt)
{2008) 8 S.C.R. 1148
A
JANATHA TEXTILES & ORS.
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v.
TAX RECOVERY OFFICER & ANR.
(Civil Appeal No.6539 of 2003)
B
MAY 16, 2008
[ASHOK BHAN AND DALVEER BHANDARI, JJ.]
Income Tax:
c
Auction sale of attached property for recovery of debt -
Registered partnership firm - In arrears of tax - For recovery
of outstanding dues, agricultural land owned by partners at-
tached and sold in public auction - Sale challenged on vari-
ous grounds - Rights of bona fide purchaser for value - Held:
In a third party auction, purchaser's interest in the auctioned
+
D property continues to be protected notwithstanding that the
underlying decree is subsequently set aside or otherwise -
Clear distinction between a stranger who is a bona fide pur-
chaser of the property at an auction sale and a decree holder
purchaser at a Court auction - Strangers to the decree are
E afforded protection by Court because they are not connected
with the decree.
Appellant No.1 is a registered firm with four partners.
The firm and its partners were in arrears of tax. For recov-
'(
F
ery of the outstanding dues, agricultural land owned by
the partners of Appellant No.1 firm were attached and sold
in public auction. The sale was confirmed in favour of
Respondent No.2 who offered the highest price. Appel-
lant challenged the sale by filing writ petition before the
High Court. The judgment passed by the High Court is
G challenged in the present appeal.
*
The Appellants contended that even though they had
filed objections at various stages of the notice issued for
th~ auction sale, but Respondent-department without dis-
H
1148
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JANATHA TEXTILES & ORS. v. TAX RECOVERY
1149
OFFICER
posing of the said objections proceeded with the sale and,
therefore, on that ground the sale conducted by Respon-
dent-department was illegal and unsustainable. The Ap-
pellants further contended that with reference to the rel-
evant assessment year, the application for waiver of in-
terest was pending before the authorities and the stay ap-
plication filed before the Commissioner was also not dis-
posed of, and, hence on that count also, the sale con-
ducted by Respondent-department was illegal and unsus-
tainable. The Appellants contended that the High Court
had failed to notice that the nature of the land in the auc-
tion notice was wrongly mentioned as dry lands when in
fact the said lands were mango orchards and hence the
auction ought to be vitiated on this ground. The Appel-
lants challenged the sale also on the ground that though
they received the notice of demand as defaulters in their
individual capacity and also as partners of the firm, but
Respondent-department had failed to give notice of de-
mand to them qua their share in the partnership firm.
Respondent No.2, on the other hand, contended that
the said lands were agricultural dry lands and there were
no mango gardens as alleged by the appellants though
there were few mango trees scattered all over the land.
He stated that it was totally incorrect to suggest that the
auction sale did not fetch the actual market value of the
property. Respondent No.2 further contended that he was
a bona fide purchaser of the property for value and he
had purchased the said property in a valid auction and
he could not be disturbed according to the settled legal
position.
Dismissing the appeal, the Court
HELD:1.1. In a third party auction, purchaser's inter-
est in the auctioned property continues to be protected
notwithstanding that the underlying decree is subse-
quently set aside or otherwise. [Para 18] [1155-C]
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B
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D
E
F
G
H
1150
SUPREME COURT REPORTS
[2008] 8 S.C.R.
A
1.2. There is a clear distinction between a stranger
who is a bona fide purchaser of the property at an auc-
tion sale and a decree holder purchaser at a Court auc-
tion. The strangers to the decree are afforded protection
by the Court because they are not connected with the
B decree. Unless the protection is extended to them, the
Court sales would not fetch market value or fair price of
the property. [Para 26] [1158-E-F]
Janak Raj v. Gurdial Singh & Anr (1967) 2 SCR 77;
Gurjoginder Singh v. Jaswant Kaur (Smt.) & Another (1994) 2
C SCC 368; Padanathil Ruqmini Amma v. P K. Abdu!la (1996)
7 SCC 668 and Ashwin S. Mehta & Anr v. Custodian & Oth-
ers (2006) 2 sec 385 - relied on.
D
Nawab Zain-U/-Abdin Khan v. Muhammad Asghar Ali
Khan & Ors. (1887) 15 I.A. 12 - referred to.
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