Summary
Property and water taxes accruing between winding up and confirmation of the asset sale were payable by the Official Liquidator as liquidation expenses in the circumstances. The sale terms addressed physical condition but did not warn the purchaser to assume encumbrances or tax arrears. The Court upheld priority payment of those expenses and dismissed the appeals without costs.
Issues
- Whether the sale disclaimer transferred post-liquidation tax arrears to the auction purchaser.
- Whether those taxes were expenses of winding up payable before distribution to creditors.
Provisions considered
- Rule 338, Companies (Court) Rules, 1959The taxes for the period in issue qualified on these facts as expenses of preserving, realising or getting in the company’s assets, payable in priority. (¶¶ 15.2, 24, 26-28)
- Sections 529A and 530, Companies Act, 1956Creditor preferences did not displace prior payment of properly incurred winding-up costs and expenses. (¶¶ 15.1, 26)
- Section 100, Transfer of Property Act, 1882A charge could not be enforced against a purchaser for value without notice merely because a statute created it; express statutory provision for such enforcement was required. (¶ 21-24)
- Section 185, Madhya Pradesh Municipal Corporation Act, 1956The statutory charge and proviso were considered in holding that the purchaser could proceed on the footing that the disputed earlier arrears would not be recoverable from it. (¶¶ 15.3, 25)
Held
- The precise sale terms controlled. Here the as-is-where-is disclaimer and inspection provisions concerned nature, extent, location, quantity and quality. They omitted an obligation to investigate or assume encumbrances, liens and claims. United Bank of India, involving comprehensive express terms on those matters, was distinguishable. (¶¶ 17-17.4, 18.1)
- General caveat-emptor principles did not cure that omission or establish notice of the tax charge. Under the section 100 principles applied, a charge was not enforceable against a transferee for value without notice absent express statutory provision authorising that result. Section 185 furnished an additional basis for the purchaser’s assumption that the earlier arrears were not recoverable from it. (¶ 21-25)
- The disputed taxes covered the period from the winding-up order on 10 July 1997 to confirmation of sale on 4 July 2003. On these facts they were costs of preserving, realising or getting in the assets under Rule 338, payable by the Official Liquidator in priority. The company’s winding up did not eliminate them. (¶¶ 14, 24, 26-28)
- The preferences under sections 529A and 530 concern distribution among the specified creditors after properly incurred winding-up expenses. Possible reduction of funds available to pre-liquidation creditors was therefore no basis to reject the tax expenses at issue. (¶ 26-28)
Result
Official Liquidator’s appeals dismissed without costs; liability for the disputed post-liquidation property and water taxes upheld as priority winding-up expenses in the circumstances of this sale.