Holding

Section 15 of the Karnataka Sales Tax Act applies only to a transfer of the whole business as a going concern, and a purchaser of only assets without notice of a charge is not liable for the transferor's tax arrears.

Summary

The State of Karnataka appealed against Shreyas Papers Pvt. Ltd., which had purchased the land, building, plant and machinery of a defaulting company after the Karnataka State Industrial Investment and Development Corporation took over those assets under the State Financial Corporation Act. The Commercial Tax Officer issued a notice under Section 15 of the Karnataka Sales Tax Act claiming the purchaser was liable for the seller's sales‑tax arrears. The Supreme Court held that Section 15(1) applies only when the "ownership of the business" is transferred as a going concern, not merely the transfer of individual assets, and therefore the purchaser was not a successor‑in‑interest. It further held that a charge created under Section 13(2)(i) of the Sales Tax Act cannot be enforced against a transferee who bought the property for value without actual or constructive notice of the charge. Consequently, the appellant could not recover the tax arrears from Shreyas Papers, and the Court declined to consider any new relief concerning the State Financial Corporation’s liability as it was not raised before the High Court. The appeals were dismissed.

Issues considered

Whether the purchaser of assets transferred by a State Financial Corporation is liable under the Karnataka Sales Tax Act for the transferor's tax arrears.
Whether a charge created on the property of a defaulting company is enforceable against a transferee without notice.
Whether a novel relief not raised before the High Court can be claimed before the Supreme Court.

Legislation cited

Constitution of Indias. Article 136
Karnataka Sales Tax Act, 1957s. 13(2)(i), s. 15(1), s. 2(f-2)
State Financial Corporation Act, 1951s. 29
Transfer of Property Act, 1882s. 100

Subjects

sales tax liabilitytransfer of businessgoing concerncharge without noticeState Financial Corporation ActTransfer of Property Actnew reliefSupreme Court of India

Judgment

')
ST ATE OF KARNA TAKA AND ANR A
y.
SHREYAS PAPERS PVT. LTD. AND ORS

JANUARY 5, 2006

[RUMA PAL AND B.N. SRlKRlSHNA, JJ.] B

\
Karnataka Sales Tax Act, 1957:

Section 15-Purchaser-transferee of assets of defaulting Company-
transferor, if liable for sales tax arrears of defaulting Company-Held: Section C
15(I) operates only when there is complete transfer of ownership of business-
Defau/ting Company not sold as a going concern but there was transfer of
individual assets of the Company, thus, section 15 not attracted and transferee
not liable for transferor's sales tax liabilities-State Financial Corporation
Act, 1951-Section 29. D
Section 13 (2)(i)-Creation of charge over properties of defaulter-
Charge, enforcement of, against purchaser-transferee of property-Held:
Transferee was purchaser for value without notice of sales tax arrears of
defaulting Company or consequent charge on property-Thus, transferee held
property free ofcharge and not liable for tax arrears of defaulting Company- E
Further, State Financial Corporation as transferee of assets not liable for
charge created since no such issue raised or argued before High Court-
Transfer of Property Act, 1882-Section JOO-State Financial Corporation
Act, 1951-Section 29.

Practice and Procedure: New relief-Permissibility of-Neither raised F
nor argued before, or decided by High Court-Held: It cannot be claimed
before this Court unless exceptional circumstances occur-Constitution of
India, 1950-Article 136.

Karnataka State Industrial Investment and Development
Corporation-second respondent granted loan to a Company. However, the G
Company defaulted in its repa-yment. Corporation then took over the assets
viz., land, building, plant and machinery of the defaulting Company and
advertised it for sale. First respondent purchased the assets excluding any
statutory liabilities. Charge was created on the properties of the defaulting
235 H
236 SUPREME COURT REPORTS [20061 I S. C.R.
I ,
A Company since they defaulted in payment of sales tax. Second appellant-
recovery officer issued notice under section 15 of Karnataka Sales tax Act,
1957 to first respondent to discharge sales tax arrears of defaulting
Company. First respondent filed writ petition challenging the notice. High
Court held that since only land, building, plant and machinery had been
B transferred, there was no transfer of the ownership of business of the
defaulting Company, as such section 15 was not applicable to first
respondent and he was not liable to pay sales tax arrears of the Company.
Hence the present appeals.

Appellant contended that the business of the defaulting Company
had been transferred to the first respondent, as such the sales tax dues of
C the defaulting Company could rightfully be claimed and recovered from
the first respondent; that since a charge over the properties of the
defaulting Company had been created under the KST Act, the first
respondent as the transferee held the properties subject to the charge; and
that in any event, the Corporation as the transferee of the assets, by virtue
D of the provisions of Section 29 of the State Financial Corporation Act,
would be liable to the extent of the charge created on the assets transferred.

Dismissing the appeals, the Court
HELD: I.I. A careful reading of Section 15(1) of the Karnataka Sales
Tax Act, 1957 shows that foisting of the liabilities of the defaulting
E transferor onto the transferee, would come into effect only if the
"ownership of the business" is transferred. It cannot be said that the
'business' could not be separated from the assets of the business. Business
is an activity, directed with a certain purpose, more often towards
producing income or profit. Ownership of assets is merely an incident
F rather than a characteristic of business. Hence, the mere transfer of one
or more species of assets does not necessarily bring about the transfer of
the "ownership of the business" for "ownership of a business" is much
wider than mere ownership of discrete or individual assets. In fact
"ownership of business" is wider than the sum of the ownership of the
business" constituent assets. Above all, transfer of"ownership of business"
G requires that the business be sold as a going concern. Therefore, Section
15(1) is intended to operate only when there is complete transfer of
"ownership of business" so as to render the transferee as a successor-in-
interest of the transferor. Only in such an eventuality, it makes the
transferee liable for the transferor's sales tax liabilities. (242-F-H; 243-A(
H 1.2 In the instant case, there was only transfer of individual assets
STATE OF KARNATAKA v. SHREYAS PAPERS PVT. LTD. 237
of the Defaulting Company, rather than the Defaulting Company being A
sold as a going concern, thus, Section 15 of the Act is not attracted and
the transferee is not liable for the artears of sales tax of the concern.
(243-A(

Karnataka State Industrial Investment and Development Corporation Ltd
v Assistant Commissioner of Commercial Taxes, Bangalore (2001) 121 STC B
t \ 520 (Karn.); Alpha Silicones v. Assistant Commercial Tax Officer (Recovery),
Gulbarga and Anr., (1990) 77 STC 68 (Karn.), disapproved. (243-B-D(

Commissioner of Income Tax v. K. H. Chambers, (1965( 2 SCR 43,
relied on. (243-H(
c
2.1. Section JOO of Transfer of Property Act, 1882 unambiguously
indicates, a charge may not be enforced against a transferee if he/she has
had no notice of the same, unless by law, the requirement of such notice
~·y has been waived. (244-D(

2.2. In the instant case, no provision of law has been cited that D
exempts the requirement of notice of the charge for its enforcement against
a transferee who had no notice of the same. Further, it is evident from
the facts of the case that the first rt!spondent had no actual or constructive
notice of the charge-sales tax arrears, prior to the transfer. First
respondent was a purchaser for value without notice of the sales tax E
arrears of the Defaultin.g Company or the consequent charge on the
property. Thus, the property in the hands of the first respondent was free
of the charge and it is not open to the appellants to enforce the liabilities
of the Defaulting Company against the first respondent.
(245-C, F; 246-AJ F
Dattatreya Shanker Mote v. Anand Chitaman Dater, (19741 2 SCC 799;
Deputy Commercial Tax Officer, Thudiyalur Assessment Circle, Coimbatore
and Anr v. R. K. Steels (1998) 108 STC 161 (Mad), referred to.
(244-D; 245-HJ

Ahmedabad Municipal Corporation of the City of Ahmedabad v. Haji G
Abdul Gafur Haji Hussenbhai, AIR (1971) SC 1201, relied on. (244-DJ.

3. It is well accepted that save for exceptional circumstances, new
reliefs, not argued or claimed before the High Court, cannot be prayed
for before this Court. In the instant case, only two issues, first with regard H
238 SUPREME COURT REPORTS (20061 I S.C.R.

A to the validity of Section 15 of the KST Act and the other with regard to
the liability of the first respondent for the charge created on the properties
of the defaulting company, were raised in the writ petition and seem to
have argued before the High Court and dealt by it. No issue as to the
liability of the Corporation was raised or argued before, or decided by
B High Court. In these circumstances, this Court cannot enter into the said
issue and it is left open to be sorted out between appellants and second
respondent in any appropriate proceedings. ,
CIVIL APPELLATE JURISDICTION : Civil Appeal Nos. 3170-3 I 73
of 2000.
c From the Judgment and Order dated 22.9.1999 of the Karnataka High
Court in W.P. Nos. 32428/93 C/w 14332/98 and 14442-43/98.

Sanjay R. Hegde, Anil K. Mishra, A.K. Mishra and A. Rohen Singh for
the Appellants.

D L.N. Rao, N.D.B. Raju, Ms. Bharathi, R, Goodwill Indeevar, Guntur
Prabhakar, L.N. Rao, Naveen R. Nath, Ms. Lalit Mohini Bhat, Ms. Anitha
Shenoy and Ms, Hetu Arora for the Respondents.

The Judgment of the Court was delivered by

E SRI KRISHNA, J. There are three questions of law to be decided in
these appeals:

Firstly, whether the purchaser of assets of a concern sold by a State •
Financial Corporation, in exercise of its powers under Section 29 of the State
Financial Corporations Act, 1951 (hereinafter "the SFC Act"), would be liable
F under the Karnataka Sales Tax, 1957 (hereinafter "the KST Act"), for the
arrears of sales tax of the concern wliose assets have been transferred?

Secondly, under what circumstances does a charge created on a property
become unenforceable against a transferee of such a property'>

G Finally, whether a completely novel relief, not argued/claimed before
the High Court or decided by the impugned judgment, may be claimed before
•
this Court?

The Facts in Civil Appeal 317012000

H A company by name Misha! Paper Mills (P) Ltd. (hereinafter ''the
STATE OF KARNATAKA v. SH!lEYAS PAPERS PVT. LTD. [SRIKRISHNA, J.] 239
~- !
Defaulting Company"), was ru)lning a medium-scale duplex board A
manufacturing unit. The Second Respondent, Kamataka State Industrial
Investment & Development Corporation Ltd. (hereinafter "the Corporation"),
had extended financial assistance to the Defaulting Company. However, the
Defaulting Company defaulted in repayment of the loans granted to it by the
Corporation. Acting under the provisions of Section 29(1) of the SFC Act, B
the Corporation took over the assets of the Defaulting Company. On 17.3.1992,
the Corporation advertised the sale of the "assets" of the Defaulting Company
i.e. the land, building, plant and machinery. In response to the advertisement,
and after several rounds of negotiations, Shreyas Papers (P) Ltd. (hereinafter
"the First Respondent") entered into an agreement with the Corporation for
purchase of the land, building, plant and machinery of the Defaulting Company, C
which was put up for sale. In Clause (2) of th(~ offer to purchase (dated
5.6.1992), the First Respondent specifically stated:

"We shall be taking over the unit with 'zero' liabilities and shall not
be held responsible for any existing statutory liabilities of the above
said unit like Sale Tax, Excise Duty, Municipal taxes, E.S.I. and P.F. D
development loan, Central and State subsidy and rank liabilities etc.
except as agreed in the meeting for KEB. and labour dues."

This offer was accepted by the Corporation and the sale took place
consequent thereto.
E
On 8.1.1993, the Commercial Tax Officer (Recovery), Dharwad
(hereinafter "the Second Appellant") addressed a letter to the Secretary, ~andal
Panchayat, Aloor, Haliyal Taluk, Kamataka, requesting him to enter
encumbrance into the Record of Rights of the properties spe:cified therein, on
the ground that those properties were the properties of a defaulter of sales F
tax-the Defaulting Company-to the extent of Rs.21, 79, 715. The First
Respondent wrote a letter (dated 31.5.1993) to the Corporation thereby
requesting that a letter be addressed to the Second Appellant to withdraw his
letter dated 8.1.1993, as the Corporation was the first charge holder and the
assets had been sold to it by the Corporation free of all charges. A letter was
addressed, as requested, on 5.7.1993 by the Corporation to the Second G
Appellant. On 11.8.1993, the Second Appellant issued a notice under Section
15 of the KST Act informing the First Respondent that a charge had been
created on the properties of the Defaulting Company on 17 .2.1992 as the
latter had defaulted in payment of sales tax. It also noted that the assets of
the Defaulting Company had been transferred from the Corporation to the H
240 SUPREME COURT REPORTS (2006) I S.C.R.

A First Respondent on 12.8.1992. It was further stated that the First Respondent
being the transferee of the business, was jointly liable to discharge th-e arrears
of sales tax of the Defaulting Company by virtue of Section 15( I) of the KST
Act.

As the sales tax authorities were not willing to relent, the First
B Respondent moved a Writ Petition No. 32428/93 before the High Court of
Kamataka, assailing the claim of the Second Appellant. The substantive reliefs
claimed therein were two fold:

"(A) Declare that the provisions of Section 15 of the Kamataka Sales
Tax Act are void;
c (B) Issue a writ of mandamus or any other appropriate writ or order
or direction restraining the respondents I and 2 not to take any
action against the petitioner for the recovery of the alleged sales
tax recovery as mentioned in the communication No.
RRY.CR.3.92-93.1168 dated 11.8.1993 ... " .,..
D
By a common judgment (dated 22.9.1999)' rendered in four similar
writ petitions, the High Court of Kamataka allowed the writ petition. The
High Court held that the petitioner, being the purchaser in the auction from
the Corporation, only of the land, building, plant and machinery, could not
be considered as the transferee of the ownership of the business of the
E Defaulting Company. The High Court found that although land, buildings,
plant and machinery of the Defaulting Company had been transferred to the
First Respondent, since the goodwill of the business had not been transferred,
there was no transfer of the ownership of the business. On this reasoning, the
High Court took the view that Section 15 of the KST Act would not apply
F to the First Respondent and consequently that the First Respondent was not
liable for the sales tax arrears of the Defaulting Company. Being aggrieved
thereby. the State of Kamataka (hereinafter "the First Appellant") and the
Second Appellant are before us.

The Appellant's Contentions
G
Mr. Hegde, learned counsel for the appellants, made three broad
submissions: Firstly, he placed heavy reliance on certain relevant provisions
of the KST Act, and contended that the High Court had completely

'Reported in: Shreyas Papers Pvt. lid v. Stale of l\arnataka (200 I) 121 STC 94 Karn.
H
STATE OF KARNATAKA v. SHREYAS PAPERS PVT.LTD. [SRIKRISHNA,J.] 24)

misunderstood the import of these sections. He urged that upon a true A
interpretation of the provisions of the KST Act, particularly Sections 13 and
15 read with Section 2(f-2), it would be clear that the First Respondent was
the entity to whom the business of the Defaulting Company had been
transferred. Therefore, Mr. Hegdt; urged, the sales tax dues of the Defaulting
Company could rightfully be claimed and recovered from the First Respondent. B
Secondly, Mr. Hegde submitted that since a charge over the properties
of the Defaulting Company had been created under the KST Act, the First
Respondent as the transferee held the properties subject to the charge.

Finally, and as an alternative submission, Mr. Hegde contended that,
merely because the Corporation had acted in exercise of its power under C
Section_ 29 ·of the SFC Act, it did not get any priority over the dues of the
State. Therefore, he argued, the Corporation was liable to make good the
amount of sales tax arrears of the Defaulting Company, at least to the extent
of the sale proceeds of the assets of the Defaulting Company.
D
Transfer of "Ownership of Business" under Section 15 of the KST Act

To determine whether the First Respondent is liable for sales tax arrears
of the Defaulting Company, a survey of the applicable provisions in the SFC
Act and KST Act becomes necessary.
E
Section 2(f-2) of the KST Act defines the expression "business" in an
inclusive manner and provides that activities of different nature, as
contemplated in sub-sections (i) and (ii), would be included within the
definition of the expression. Section I3(2)(i) of the KST Act provides that if
a default is made in making payment of sales tax, then:
F
" ...the whole of the amount outstanding on the date of default shall
become immediately due and shall be a charge on the properties of
the person or persons Iiable to pay the tax or any other amount due
under this Act."

Section 15( I) of the KST Act provides: G
"When the ownership of the business of a dealer liable to pay the tax
or penalty, or any other amount under the provisions of this Act, is
transferred, the transferor and the transferee shall jointly and severally
be liable to pay any tax or penalty or any other amount payable in
respect of such business and remaining unpaid at the time of transfer, H
'.
242 SUPREME COURT REPORTS [2006] I S.C.R.

A and for the purpose of recovery from the transferee such transferee
shall be deemed to be the dealer liable to pay the tax or penalty or
other amount under this Act."

Section 29 of the SFC Act gives an extraordinary power to the
Corporation. It provides that in the event of a borrower making a default in
B its obligations towards repayment or in relation to any guarantee, then the
Corporation:
>
" ... shall have the right to take over the management or possession or
both of the industrial concerns, as well as the right to transfer by way
of lease or sale and realise the property pledged, mortgaged,
c hypothecated or assigned to the Financial Corporation."

Sub-section (2) of Section 29 provides that:

"Any transfer of property made by the Financial Corporation, in
exercise of its powers under sub-section (I), shall vest in the transferee
D all rights in or to the property transferred as if the transfer had been
made by the owner of the property."

Finally, sub-section (5) of this Section provides:

"Where the Financial Corporation has taken any action against an
E industrial concern under the provisions of sub-section (I), the Financial
Corporation shall be deemed to be the owner of such concern, for the
purposes of suits by or against the concern, and shall sue and be sued
in the name of the concern." '·
A careful reading of Section 15( I) of the KST Act shows that the
F consequences contemplated therein, namely, foisting of the liabilities of the
defaulting transferor onto the transferee, would come into effect only if the
"ownership of the business" is transferred. Although, Mr. Hegde strenuously
urged that "business" could not be separated from the assets of the business,
we are unable to accept this contention. Business is an activity, directed with
G a certain purpose, more often towards producing income or profit. Ownership
of assets is merely an incident rather than a characteristic of business. Hence,
the mere transfer of one or more species of assets does not necessarily bring
about the transfer of the "ownership of the business" for "ownership of a
business" is much wider than mere ownership of discrete or individual assets.
In fact, "ownership of business" is wider than the sum of the ownership of
H a business' constituent assets. Above all, transfer of "ownership of business"
-r
STATE OF KARNATAKA v. SHREYAS PAPERS PVT LTD. [SR!KRISHNA,J.] 243
requires that the business be sold as a going concern. 2 In our view, therefore, A
Section 15( I) is intended to operate only when there is complete transfer of
"ownership of business" so as to render the transferee as a successor-in-
interest of the. transferor. Only in such an eventuality does Section 15( I)
make the transferee liable for the transferor's sales tax liabilities.

Mr. Hegde referred to two judgments of the Karnataka High Court both B
f ~ of which, unfortunately, take an erroneous view of the matter. In Karnataka
\
State Industrial Investment and Development Corporation Ltd v. Assistant
Commissioner of Commercial Taxes, Bangalore,3 the High Court held that
when Section 29 of the SFC Act was read with.Section 15 of the KST Act,
the transferee would be jointly liable with the State Finance Corporation C
concerned. As we have already held, Section 15 operates only in a situation
where the ownership of the business is transferred. The learned Single Judge,
however, did not notice this point. Similarly, we are unable to accept the
..,._ I
correctness of the judgment in Alpha Silicones v. Assistant Commercial Tax
Officer (Recovery), Gulbarga and Anr. 4 as it held that even the mere transfer
of assets would amount to transfer of ownership of the business. We overrule D
these two judgments to the extent that they conflict with the views expressed
herein.

- In the present case, since it is not a matter of dispute that there was
only the transfer of individual assets of the Defaulting Company, rather than
the Defaulting Company being sold as a going concern, in light of our E
expressed views, Section 15 of the KST Act is not attracted. The first limb
of Mr. Hegde's arguments must, therefore, fail.

Enforceability of the Charge

The next limb of Mr. Hegde's arguments was that since Section 13(2)(i) F
of the KST Act creates a charge on the property of the Defaulting Company,
the charge would continue on the properties, even if it changes hands by
transfer.

While the expression "charge" is not defined by the KST Act, this G
concept is well known in property law and has been defined by Section I00
of the Transfer of Property Act, 1882 (hereinafter "the TP Act"). Here "charge"
'Commissioner of Income Tax v. K.11. Chambers, [1965] 2 SCR 43 at p.49

'(200!) 121 STC 520 Karn.

'(1990) 77 STC 68 Karn. H
244 SUPREME COURT REPORTS [20061 I S.C.R.

A is defined as:
"Where immoveable property of one person is by act of parties
or operation of law made security for the payment of money to another,
and the transaction does not amount to a mortgage, the latter person
is said to have a charge on the property; and all the provisions
B hereinbefore contained which apply to a simple mortgage shall, so far
as may be, apply to such charge.

Nothing in this section applies to the charge of a trustee on the
trust-property for expenses properly incurred in the execution of his
trust, and, save as otherwise expressly provided by any law for the
C time being in force, no charge shall be enforced against any property
in the hands of a person to whom such property has been transferred
for consideration and without notice of the charge." (emphasis
supplied)

As the section itself unambiguously indicates, a charge may not be
' .
D enforced against a transferee ifs/he has had no notice of the same, unless by
law, the requirement of such notice has been waived. This position has long
been accepted by this Court in Dattatreya Shanker Mote v. Anand Chitaman
Datar, 5 and in Ahmedabad Municipal Corporation of the City of Ahmedabad
v. Haji Abdul Gafur Haji Hussenbha1~ (hereinafter "Ahmedabad Municipal
E Corporation"). In this connection, we may refer to the latter judgment, which
is particularly relevant for the present case.

Ahmedabad Municipal Corporation was a case where a person was in
\..
arrears of property tax, due under the Bombay Provincial Municipal
Corporation Act, 1949. Consequently, the Municipal Corporation created a
F charge over the property of the defaulter. However, the property was sold in
execution of a mortgage decree. When the Municipal Corporation purported
to exercise their charge over the property, the purchaser in court auction filed
a suit for a declaration that he was the owner of the property and that the
arrears of municipal taxes due by the transferor were not recoverable from
G him by proceeding against the property purchased in auction. In the appeal
before this Court, the Municipal Corporation's main argument was that where
,
the local law provided for the creation of a charge against a property for

'[1974] 2 sec 799 at p. 811(paragraph18).

H "AIR (1971) SC 1201 at pp. 1202-1204 (paragraph J.)
STATE OF KARNATAKA v. SHREYAS PAPERS PVT. LTD. [SRIKRISHNA, J.] 245
.... ; '
which municipal taxes were due, transferees of such properties were imputed A
with constructive knowledge of any charge created against the properties that
they had purchased. This argument was, however, rejected. This Court held
that while constructive notice was sufficient to satisfy the requirement of
notice in the proviso to Section IOO of the TP Act, whether the transferee had
constructive notice of the charge had to be determined on the facts and
circumstances of the case. 7 In other words, this Court held that there could B
be no fixed presumption as to the transferee having constructive notice of the
... charge against the property, In fact, the principle laid down in Ahmedabad
'
Municipal Corporation has been correctly applied in a sales tax case similar
to the present case. 8

In the present case, firstly, no provision of law has been cited before
c
us that exempts the requirement of notice of the charge for its enforcement
against a transferee who had no notice of the same. It remains to be seen,
therefore, if in the facts of the present case, the First Respondent had notice-
.,, actual or constructive-of the charge. At the outset, in the advertisement/notice
f
dated 17.3.1992 issued by the Corporation, mention is only made of the sale D
of the Defaulting Company's assets and there is no indication, whatsoever,
of any sales tax arrears. Further, the bid offer made on behalf of the First
Respondent on 5.6.1992 specifically excludes any statutory liabilities, including
sales tax. This offer was accepted by the Corporation on 15.7.1992. Even at
that stage, there was no mention of any sales tax arrears. The sale of the
assets took place pursuant to the agreement dated 12.8.1992 in which a
E
specific clause was inserted that the First Respondent would be liable ~o pay
all property taxes, other taxes, electricity bills, water taxes and rents from the
date of the agreement (i.e. 12.8.1992), For the first time, by letter dated
""'
8.1.1993 of the Second Appellant to the Manda! Panchayath, Aloor Taluk, '
the issue of sales tax dues of the Defaulting Company was brought to the F
surface. This is further borne out by the correspondence between the First
Respondent and the Corporation. Thus, it is evident that the First Respondent
. had no actual notice of the charge prior to the transfer. As to whether the
First Respondent had constructive notice of the charge, no substantive argument
on this issue was made, either before the High Court or at any rate before us.
Hence, we cannot hold that the First Appellant had constructive.notice of the
G

>:
'Ibid at pp. 1207-1208 (paragraph 8.)

'Depmy Commerica/ Tax Officer, Tlmdiyalur Assessment Circle, Coimbatore and Anr. v. R.K.
Steels. (1998) 108 STC 161 Mad.
H
246 SUPREME COURT REPORTS (2006) I S.C.R.

A charge. '~
In these circumstances, we are of the view that the First Respondent
was a purchaser for value without notice of the sales tax arrears of the
Defaulting Company or the consequent charge on the property. This would,
therefore, attract the principle laid down by this Court in Ahmedabad Municipal
B Corporation, which is also embodied in the proviso to Section 100 of the TP
Act. Thus, the property in the hands of the First Respondent was free of the
charge and it is not open to the appellants to enforce the liabilities of the '
Defaulting Company in this manner against the First Respondent.

The Liability of the State Financial Corporation
c
Mr. Hegde then turned to his final argument that, in any event, the
Corporation as the transferee of the assets, by virtue of the provisions of
Section 29 of the SFC Act, would be liable to the extent of the charge created
on the assets transferred.

D In our view, it is not necessary for us to go into this question. As we ' '
have pointed out at the commencement, only two issues were raised in the
writ petition and seem to have been argued before the High Court: First, with
regard to the validity of Section 15 of the KST, the High Court has dealt with
it, and in this appeal by the State, this contention could not have been advanced.
The second issue urged before us was with regard to the liability of the First
E
Respondent for the charge created on the properties of the Defaulting
Company. The High Court, rightly in our view, held that the First Respondent
before us was not liable for the tax arrears of the Defaulting Company. No
issue as to the liability of the Corporation was raised or argued before, or
decided by the High Court.
F
It is well accepted that, save for exceptional circumstances, new reliefs,
not argued or claimed before the High Court, cannot be prayed for before this
Court. In these circumstances, we decline to enter into the said question, and
leave it open to be sorted out between the appellants and the Second
Respondent in any appropriate proceedings.
G
The Final Findings
'
In light of our findings above, we find no merit in C.A. No. 3170/2000
and consequently it is dismissed.

H Civil Appeal Nos. 3171-3173/2000 pertained to the tax dues of M/s
STATE OF KARNATAKA v. SHREYAS PAPERS PVT. LTD. [SRIKRISHNA, J.] 247

Alpha Pharmaceuticals, which is the Second Respondent in these three appeals. A
At the stage of admission before this Court, the appeal against the Second
Respondent was dismissed. During the final arguments, Mr. Hegde, stated
that the sales tax arrears arising out of the common judgment of the High
Court of Kamataka in Writ Petition Nos. 14332/98 and 14442-43/98 have
already been recovered from the transferee concerned namely Mis Bal Pharma
Ltd., which is the First Respondent in these appeals. Consequently, these B
appeals are dismissed as infructuous.

There shall be no order as to costs.

N.J. Appeal dismissed. C