IN THE SUPREME COURT OF INDIA

CIVIL APPELLATE JURISDICTION

CIVIL APPEAL NOS. 9234-9250 OF 2016 (Arising out of SLP (C)Nos. 13807-13823 of 2016)

17:19:21 IST Reason:

K GOVINDARAJ ... Appellant

VERSUS

M/S VARUNI BIOMASS ENERGY PRODUCTS (P) LTD. AND ANR. ETC ETC. ... Respondents

O R D E R

We have heard learned counsel for the parties finally. Leave granted.

Having regard to the nature of dispute which needs to be resolved, it is not necessary to recapitulate the facts in detail. However, narration of the following facts would serve our purpose:

The respondent-Company herein started an industry for the manufacture of sulfuric acid and elemental sulphur. The company took on lease, a land owned by K.K. Surendranath. K.K. Dinakaran and K.K. Gnanaprabhakaran and K.K. Karunakaran. All of them were shareholders in the company and the land was to the extent of about 3.82 acres in Survey No. 235/6B of Kullallkundu Village, Taluk Nilakottai, District Dindigul. The company was granted the facility of Digitally signed by NIDHI AHUJA Date: 2016.09.22 Signature Not Verified

deferred payment of sales tax by the Government of Tamil Nadu

for the period from 29.05.1994 to 28.05.2003. The facility was governed by an agreement dated 27.09.2004 entered into between the company and the Assistant Commissioner of Commercial Taxes (East). After the advent of Sterlite industries into the locality, the aforesaid company went into severe financial crises and it made an application in the year 2001 to the Government for rehabilitation under the Tamil Nadu Industrial Undertakings (Rehabilitation) Act. However, the Commercial Tax Officer issued a notice on 09.01.2002 to the company stating that it had become ineligible for the continuance of the deferral scheme, in view of the stoppage of production for six months continuously. The company gave a reply dated 25.01.2002 pointing out that it had become a sick industrial undertaking and that it had applied to the Government for rehabilitation. However, the Commercial Tax Officer, made a demand on 22.01.2002 for payment of arrears of sales tax to the tune of Rs.45,67,264/-. Since the company could not pay the amount, the Deputy Commercial Tax Officer initiated revenue recovery proceedings by issuing a sale notice dated 30.07.2004. The said notice was challenged by the company by way of Writ Petition being WP (MD) No. 1964 of 2004. A fresh notice was issued on 01.11.2004 by the Assistant Commissioner (CT) seeking to cancel the agreement facilitating the deferral payment of tax, on the ground of stoppage of production for

six months. The notice was challenged in another writ petition in WP (MD) No. 4842 of 2004. However, on 09.07.2007, the first writ petition being WP (MD) No. 1964 of 2004 was dismissed but the second writ petition being WP(MD) 4842 of 2004 was disposed of on 21.07.2007 directing the company to file objections to the notice within four weeks. Since the company did not submit objections within the time, a sale notice was issued by the Deputy Commercial Tax Officer on 12.03.2008. On 19.03.2008, an auction was conducted. On 26.03.2008, the Deputy Commissioner (Commercial Taxes) approved the highest bid of one K. Govindraj/ appellant herein and sale certificate was issued on 21.04.2008.

Immediately, a writ petition being WP(MD) No. 3847 of 2008 was filed by the company, challenging the sale notice dated 12.03.2008. Subsequently, a second writ petition being WP(MD)4378 of 2008 was also filed challenging the order of approval of the auction dated 26.03.2008 and the sale certificate dated 21.04.2008. While both the said writ petitions were filed by the company, yet another writ petition being WP (MD) No. 5324 of 2008 was filed by one of the shareholders of the company by name K.K. Dinakaran, challenging the sale notice, sale confirmation and sale certificate on the ground that his personal property, which was not the property of the company, has also been sold in public auction, without the authority of law.

All these writ petitions were taken up together and by common order dated 17.09.2008 these were allowed on the following grounds:

(1) There was a total violation of Section 36 of Tamil Nadu Revenue Recovery Act, 1864, inasmuch as the sale took place within a period of seven days from the date of sale notice, as against the statutory prescription of 30 days;

(2) The sale confirmation took place within 30 days contrary to the prescription contained in section 38 of Tamil Nadu Revenue Recovery Act, 1864;

(3) The valuable property rights of an individual shareholder of the company stood violated by the sale of his property for the dues of the company.

While allowing the writ petitions, the High Court took into account the interest of the State and, therefore, the High Court raised a query regarding discharging the dues of the State by the company. Then the High Court observed that one of the shareholders of the company had filed an affidavit of undertaking, agreeing to pay a sum of Rs.45,67,264/ together with poundage (wrongly mentioned as interest) at 5% as a pre-condition for setting aside the sale. The High Court directed the company also to deposit, as per the undertaking. At the same time, the High Court left it open to the company to move the Government for waiver of interest

due to the declaration of sickness of the industry. The High Court made it clear that if the company failed in its commitments or if the Government did not grant any relief, it will be open to the Department to bring the property for sale once again.

As against the common order, the appellant/auction purchaser filed writ appeals being WA(MD) Nos. 600 to 602 of 2008. The Government filed three writ appeals bearing WA (MD) Nos. 46 to 48 of 2009. Respondent/company herein also filed two appeals bearing WA (MD) Nos. 632 and 633 of 2008. The appeals filed by the Company were later withdrawn by it.

In the meantime, the Tamil Nadu Sales Tax (Settlement of Arrears) Act, 2010, was passed by the State Legislature on 25.07.2010. The Act was intended to be a 'Samadhan Scheme'. The assessee filed an application for settlement of arrears and the same was accepted by the Department. The assessee paid the amounts as prescribed under Section 7 of the Tamil Nadu Sales Tax (Settlement of Arrears) Act, 2010. The competent authority issued a Certificate of Settlement on 16.03.2011.

Though the question of settlement of arrears under the 'Samadhan Scheme' was actually between the assessee and the Government, the auction purchaser filed a petition for revocation of the Sales Certificate on the ground that behind his back, there cannot be a settlement between the Government

and the assessee. Instead of throwing out this petition at the threshold, the Joint Commissioner entertained the same for obvious reasons, and issued a show cause notice on 27.12.2012 for revocation of the Certificate of Settlement. Challenging the show cause notice for revocation of Settlement Certificate issued by the Joint Commissioner at the behest of a third party, who was not an assessee under the Act, the assessee as well as the Directors filed a batch of eleven writ petitions in W.P. (MD) Nos. 754 to 764 of 2013. These eleven writ petitions were tagged along with six writ appeals arising out of the order of the learned Judge. The auction purchaser filed impleadment applications. Therefore, the Division Bench withdrew the writ petitions from the file of the learned Judge and took them along with the writ appeals. By a common order passed on 04.07.2014, the Division Bench dismissed all the writ appeals filed by the auction purchaser and by the State. The writ petitions filed by the assessee were allowed and directions were issued to enable the Department to hand over the possession of the property to the assessee. The Department was directed to refund to the auction purchaser the amount deposited by him after deducting the value of the machinery which was forcibly removed by them.

Against the order dated 04.07.2014, SLP (C)Nos.16720-30 of 2014, along with Writ Petition (C) No. 897 of 2014, and

SLP(C)Nos.28199-28204 of 2014 were filed. The special leave petitions were dismissed by this Court vide order dated 03.11.2014 with permission to file review petition and Writ Petition (C) No. 897 of 2014 was also dismissed with the liberty to approach the High Court.

The appellant herein filed review application in the High Court which has also been dismissed by the High Court vide the impugned judgment.

Challenging the orders passed in the review application, these special leave petitions are preferred and in these petitions, limited notice was issued on the aspect of the grant of interest only. The said order dated 13th May, 2016 reads as under: -

"The petitioner is the auction purchaser and the said auction was held to be illegal by the Courts below with a direction to refund the amount of Rs.80 lakhs which was paid by the petitioner. The High Court has, however, denied the interest on the paid amount. Issue notice limited to the issue as to whether interest should be granted or not, returnable in six weeks.

In the aforesaid circumstances, we have heard the parties only on the aspect of interest.

It may be noted that the prayer for grant of interest has been denied by the High Court without going into the merits of this claim and on the ground that non grant of interest on the amount deposited by the appellant cannot be a

matter of review.

The facts narrated above would show that the amount was deposited by the appellant way back in the year 2008 who had purchased the property in auction. This auction has been held to be illegal as proper procedure was not followed. That was not the fault of the appellant. The appellant's money got stuck for all these years. When he was denied the benefit of the auction purchase despite being the highest bidder on the procedural grounds which resulted in refund of the money deposited by him, he should have been granted interest thereupon.

In the interest of justice, we deem it proper that Simple Interest at the rate of 9 per cent be awarded to the appellant from the date of deposit till the date of release of this amount which shall be payable by the Respondent No.2 viz., the Joint Commissioner, Commercial Tax (FAC), Madurai. The interest shall be calculated and paid within a period of three months.

We make it clear that, in case, the property is to be ultimately sold for realising the dues payable to respondent No.2, the respondent No.2 shall be entitled to recover the aforesaid interest as well which would be paid to the appellant.

The appeals stand disposed of in the aforesaid terms.

......................, J. [ A.K. SIKRI ]

......................, J. [ N.V. RAMANA ]

New Delhi; September 09, 2016.

ITEM NO.5 COURT NO.11 SECTION III

S U P R E M E C O U R T O F I N D I A RECORD OF PROCEEDINGS

Petition(s) for Special Leave to Appeal (C) Nos. 13807-13823/2016

(Arising out of impugned final judgment and order dated 14/12/2015 in RA (MD) Nos. 56 to 66 of 2015 and R.A. (MD) Nos. 162 to 167 of 2015 passed by the High Court of Madras at Madurai)

K GOVINDARAJ Petitioner(s)

VERSUS

M/S VARUNI BIOMASS ENERGY PRODUCTS (P) LTD. AND ANR. ETC ETC. Respondent(s)

(with appln. (s) for permission to file additional documents, interim relief and office report)

Date : 09/09/2016 These petitions were called on for hearing today.

CORAM :

HON'BLE MR. JUSTICE A.K. SIKRI HON'BLE MR. JUSTICE N.V. RAMANA

For Petitioner(s)

Ms. Mahalakshmi Pavani, Sr. Adv. Mr. G. Balaji, Adv. Ms. Shiva Vijaya Kumar, Adv.

For Respondent(s)

UPON hearing the counsel the Court made the following O R D E R Leave granted.

The appeals are disposed of in terms of the signed order.

In view thereof, pending application also stands disposed of.

(Nidhi Ahuja) (Tapan Kr. Chakraborty) Court Master Court Master

[Signed order is placed on the file.]