Page 21 - Banking Finance November 2025

LEGAL UPDATE

Auction purchasers liable

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to pay property tax dues:
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HC Ô Ô Ô Ô Ô » »» »¹ ¹¹ ¿ ¿¿ ¿ ´ ´´ ´
Auction purchasers are liable to pay
the property tax dues of erstwhile
owners, the Calcutta HC held on Sept
25 in a case where a company sought Ò»©­
a waiver of the outstanding property
tax of Rs 1,23,84,142, for which KMC
refused to grant mutation.
Justice Gaurang Kanth stated: "This
court is of the considered view that the
petitioner, being the auction purchaser
ited. They accepted their liability to Writing 140-page judgment, Justice
of the premises in question, is liable to
pay property tax from Jan 19, 2022. Pardiwala said, "We humbly urge the
pay the outstanding property tax dues.
The official liquidator through sale no- Ministry of Finance to take a serious
tice and expression of interest (EOI) has Borrowers can't redeem look at these provisions and bring about
made it evident that all the bidders are property after publication necessary changes, before it is too late
supposed to make their respective bids in the day." The bench went on, "It has
based on their own investigation and of auction notice under been almost 23 years since the
due diligence." SARFAESI: Top court SARFAESI Act has remained in force.
The facts of the case are that Cotton The Supreme Court held that borrow- It is indeed very sad to note that even
Casuals India Private Limited and oth- ers cannot redeem property after the after these many years procedural is-
ers filed a case against KMC, and stated publication of auction notice as pur- sues such as the one involved in the
that when they applied for property chasers acquire indefeasible rights case at hand, have continued to plague
mutation in Aug 2024, KMC demanded once the sale certificate is issued by the legislation." The bench noted it
over Rs 1.2 crore as arrears for prop- creditor banks and financial institutions came across a "glaring anomaly" in
erty tax dating back to 2008, which under the SARFAESI Act. respect of Section 13(8) of the
were dues accumulated by the previous A bench of Justices JB Pardiwala and R SARAFESI Act and Rule (s) 8 and 9 of
owner. They purchased four factory Mahadevan rued the fact that the the SARFAESI Rules.
modules in Paridhan Garment Park in Securitisation and Reconstruction of "We are, however, at our wit's end to
Tangra from the liquidator of Enfield Financial Assets and Enforcement of note how the ill-wording of Section
Apparels Limited, which was undergo- Security Interest Act (SARFAESI Act) 13(8) of the SARFAESI Act has resulted
ing the liquidation process under the was enacted in 2002 to protect banks in a glaring inconsistency between the
Insolvency and Bankruptcy Code (IBC) and financial institutions but certain aforesaid provision and the SARFAESI
2016. It was handed over to them on ambiguities in its Section 13(8) and a Rules framed in lieu thereof.
Jan 19, 2022, and deeds of assignment few rules had prolonged litigations. It is unfortunate that the ambiguities
were executed on May 7, 2022. The court also held that the 2016
amendment to Section 13(8) of the within the statutory provisions of the
The company's case was that neither SARFAESI Act and Rules thereunder
SARFAESI Act, which extinguishes a
the e-auction sale notice nor the terms borrower's right of redemption once have left the interests of secured credi-
and conditions contained in the EOI the secured creditor publishes an auc- tors and auction purchasers high and
made any mention of property tax dues. dry. The interpretative deadlock be-
tion notice will apply even to loans
No such liability was ever identified by taken before the amendment came tween the provision and the rules has
the official liquidator or the committee into force if the default occurred after single handedly resulted in a huge
of creditors of Enfield Apparels Lim- September 1, 2016. mess...," it said.

BANKING FINANCE | NOVEMBER | 2025 | 19