Money Management

The auctioneer is not required to pay the former owner’s dues: High Court: The Tribune India

Saurabh Malik

Tribune press service

Chandigarh, October 23

In an important judgment that will change the way debts are collected from defaulting debtors, the High Court of Punjab and Haryana has ruled that an auction buyer is not required to pay the dues initially payable by the former owner-borrower and claimed by central excise.

The matter was brought to the notice of the Chamber composed of Judge Jaswant Singh and Judge Ashok Kumar Verma after a petition was filed against the Punjab National Bank, Ludhiana and other defendants by Kamla Engg & Steel Industries by the intermediary of lawyer Aalok Jagga.

The Court was informed that the bank had initiated collection proceedings against a borrower by filing a claim under the Debt Collection and Bankruptcy Act 1993 with the Debt Collection Court. The claim was made in favor of the bank and the bank was found to be entitled to recover the amount from the borrowers, after which the secured assets / mortgaged goods were put up for sale by open auction.

After the successful auction, the petitioner contacted the Greater Ludhiana Area Development Authority, but the latter expressed reluctance to transfer ownership. He added that a letter issued by the central excise department stated that Rs 3,139.70 lakh was unpaid. The Chamber ruled: “If the auctioneer-purchaser bought the property from the pledge-bank creditor, it is the pledgee who exercised his right of priority to sell the pledged property in order to collect and appropriate its due. Therefore, the auction buyer cannot be called upon to pay the former owner / borrower’s contributions.

The court ruled that the petitioner-auctioneer was under no obligation to discharge the recoverable liability of the former owner-borrower-appraiser from Central Excise. However, the Centrale des Excises was free to recover the contribution by continuing the assessed, in accordance with the law.

The magistracy added that it was also obvious that the power of seizure of the Central Excise was limited only to the goods subject to excise and / or to the movable goods of the appraised and not to the real estate, for which it should issue a certificate to the collector. He would then proceed to collect contributions for arrears of land income, in accordance with section 67 of the Punjab Land Revenue Act, 1887.

The bench said that if the electricity charges were pending and payable, the liability could not be avoided by the auction buyer. He should pay these contributions before requesting a new connection or reconnection of the electrical connection.

Before separating, the judiciary recognized and appreciated the “sincere and dedicated help” provided by lawyers Aalok Jagga and Sunish Bindlish.