IN THE HIGH COURT OF HIMACHAL PRADESH, SHIMLA CWP No.171 of 2003 alongwith CWP No.737 of 2003 Decided on: 19.4.2011 CWP No.171 of 2003 M/s.Plato Industries Ltd. …..Petitioner VERSUS State of H.P & ors. …..Respondents. CWP No.737 of 2003 M/s.Plato Industries Ltd. ……Petitioner VERSUS State of H.P & ors. ……Respondents. _____________________________________________________ Coram The Hon’ble Mr. Justice Deepak Gupta, Judge. Whether approved for reporting?Yes For the petitioner: Mr.M.M.Khanna, Senior Advocate with Mr.Vayur Gautam, Advocate. For the respondents: Mr.Vivek Singh Thakur, Add.A.G for the respondents-State. Mr.Ajay Kumar, counsel for HPSIDC. Mr.Karan Singh Kanwar, counsel for respondent No.3. Mr.Rajnish K.Lal, counsel for M/s.Chanana Steel Tubes (P) Ltd. …2… Deepak Gupta,Judge (Oral) These two writ petitions are being disposed of by one judgment since similar questions of law and fact are involved in the same. Briefly stated the facts of the case are that there was a company working under the name and style of M/s.Chanana Steel Tubes Private Limited at Parwanoo. This company had its factory on lease hold land provided by the H.P Housing Board. M/s.Chanana Steel Tubes had taken loans from the HPFC and HPSIDC. Since these loans were not repaid within time and M/s.Chanana Steel Tubes defaulted in the re-payment of its loan(s), the unit was taken over in terms of Section 29 of the State Financial Corporations Act. Thereafter, the unit of M/s.Chanana Steel Tubes was put to sale. An advertisement was issued by the H.P State Industrial Development Corporation in this regard, relevant portion of which reads as follows:- “THE HIMACHAL PRADESH STATE INDUSTRIAL DEVELOPMENT CORPORATION LTD. NEW HIMRUS BUILDING, CART ROAD, SHIMLA INDUSTRIAL UNITS AVAILABLE FOR SALE xxx xxx xxx xxx M/s.CHANANA STEEL TUBES PVT. LTD., PARWANOO, DISTT. SOLAN. Factory on lease hold land measuring 1987 Sq. meters app. together with built up area of …3… 2036.49 sq. meters approx. with plant and machinery capable of manufacturing around 15,000 Mt.P.A of ERW Black and galvanised steel tubes and pipes as available at site. xxs xxx xxx xxx TERMS AND CONDITIONS 1. Offer for each unit on “As is where is basis” should be given separately in sealed cover superscribing the word “Offer for the purchase of” alongwith earnest money @ 10% of the offered price in form of Bank draft only drawn on any scheduled bank in the name of H.P STATE INDUSTRIAL DEVELOPMENT CORPORATION LTD. PAYABLE AT SHIMLA. Offers should reach this office on or before 3.9.1998 by 5.00 P.M. Offers will be opened on 4.9.1998 at 11.00 A.M. in the presence of bidders/their representatives present. xxx xxx xxx xxx 6. All statutory liabilities will have to be borne by the prospective buyers. They will also have to bear the arrears of electricity, unearned increase of least hold plot, expenses on registration of free hold plot and water and maintenance charges etc., if any. These liabilities can be confirmed from the respective departments by the bidders.” The petitioner was the highest bidder and initially offered an amount of Rs.41.25 lacs vide its letter dated 28th August, 1998 relevant portion of which reads as follows:- …4… “In response to your advertisement, released recently in the newspapers for sale of Industrial Units, we hereby offer Rs.41.25 lacs (Rupees Forty one lacs and twenty five thousand only) for purchasing the total assets including Plant and Machinery, land and building, vehicles (if any), as are reflected in the Company’s balance sheet are in possession of the Corporation. We are enclosing herewith our Cheque No: RDY008480 of date, drawn in favour of the H.P State Industrial Development Corporation Limited, on Punjab National Bank, for Rs.4,12,500/- (Rupees Four lac twelve thousand and five hundred only) on account of 10% of our offer on account of Earnest Money alongwith our offer. Other terms and conditions as mentioned in the advertisement, published, in connection with the balance payment, in case the bid is released in our favour are acceptable to us.” Subsequently, further negotiations were carried out between the petitioner-company and the HPSIDC and the petitioner enhanced its offer to Rs.65.00 lacs without the liability of the H.P Housing Board and this offer was accepted by the HPSIDC vide its letter dated 15.9.2001. Relevant portion of the letter with which we are concerned reads as follows:- “You will bear all the statutory liabilities including arrear of electricity, un-earned increase of lease hold plot of H.P Housing Board …5… including enhanced cost of compensation, expenses of registration and arrears of water and maintenance charges, if any.” Thereafter, demands were raised in respect of sales tax dues and municipal tax dues relating to the period when the M/s.Chanana Steel Tubes was running the unit. The authorities asked the HPSIDC to pay this amount but the HPSIDC relying upon the terms and conditions quoted hereinabove stated that the petitioner had undertaken to pay the statutory liabilities of M/s.Chanana Steel Tubes and hence requested the authorities to recover the amount from the petitioner-company. When the authorities proceeded to start recoveries against the petitioner, the present petitions were filed. The main issue which arises in these cases is whether the liabilities in the nature of sales tax liabilities and municipal tax liabilities payable by M/s.Chanana Steel Tubes can be said to be the statutory liabilities which the petitioner had agreed to pay. Sh.M.M.Khanna, learned Senior counsel appearing on behalf of the petitioner submits that the sales tax liability cannot be termed to be a statutory liability. He has drawn my attention to Sections 26 and …6… 36 of the H.P General Sales Tax Act which read as follows:- “26. Transfer of business.- where the ownership of the business of a registered dealer is entirely transferred and the transferee carries on such business either in its old name or in some other name, the transferee shall, for all the purposes of this Act (except for liabilities under this Act already discharged by such dealer), be deemed to be and to have always been registered as if the certification of registration of such dealer had initially been granted to the transferee; and the transferee shall on application to the prescribed authority be entitled to have the registration certificate amended accordingly. 36.Directors of defaulting companies to be liable to pay tax, etc.- Where any tax assessed or penalty imposed under this Act on a company cannot be recovered by reason of the company having gone into liquidation or for any other reason, then every person, who was Director of such company at any time during the relevant period for which the tax is due or in respect of which the default for which the penalty is imposed was committed, shall be jointly and severally liable for the payment of such tax and penalty unless he proves that the non-payment or non-recovery cannot be attributed to any neglect, mis-feasance or breach of duty on …7… his part in relation to the affairs of the company.” It is contended by Sh.Khanna that only when a business is transferred, i.e., the entire business is taken over by the purchaser then the transferee is required to discharge the liabilities of the previous owner. In all other cases, recovery has to be made in accordance with the provisions of Section 26 of the Act and subsequent owner cannot be made liable. As far as the legal preposition is concerned, there can be no doubt that in case a person only purchases a part of the assets of the unit, he cannot be made liable to pay the sales tax liability. But the question which arises here is whether the petitioner voluntarily agreed to discharge the statutory liabilities of M/s.Chanana Steel Tubes or not. The advertisement referred to hereinabove especially clause 6 thereof clearly indicates that all statutory liabilities would have to be borne by the prospective buyers. The buyer was put to notice that it would have to bear the statutory liabilities payable by the unit. In addition to this, the buyer was also made aware that he would also have …8… to bear the arrears of electricity, unearned increase of lease hold plot, expenses on registration of free hold plots etc. etc. The prospective buyers were also put to notice that they could confirm these liabilities from the respective departments. It is true, that this clause could have been worded much more clearly and in a happier manner but the fact is that a reading of this clause shows that the buyer was told that he would have to bear the statutory liabilities. According to Sh.Khanna, statutory liabilities would mean only those liabilities which were to be paid by the buyer under any statute. I am unable to accept this submission because if that was the intent and purpose then there was no requirement of placing such a condition. The reading of the condition as a whole clearly indicates that the HPSIDC had informed the prospective buyers that all statutory liabilities of the unit(s) would have to be borne by the prospective buyers. The petitioner in its letter dated 28th August, 1998 accepted all the terms and conditions of the advertisement. When the offer of the petitioner was accepted then again it was clearly spelt out that the petitioner would have to …9… bear all the statutory liabilities. In these circumstances, the only conclusion which can be drawn is that the petitioner voluntarily entering into a contract agreeing to pay the statutory liabilities of the erstwhile unit, M/s.Chanana Steel Tubes (P) Ltd. In view of the above discussion, I find no merit in the petitions which are accordingly rejected. No order as to costs. April 19, 2011 ( Deepak Gupta ) (m) Judge.