M/S Gem Vivendas PVT. LTD vs. Union Of INDIA

Facts

The petitioner, M/s Gem Vivendas Pvt. Ltd., entered into a Development Agreement cum General Power of Attorney with respondent No. 5, the owner of a plot of land, on December 15, 2014. The petitioner took possession and made payments. On February 22, 2016, the petitioner received a notice from respondent No. 4, the Assistant Commissioner, Central Tax, Shamshabad division, informing them not to sell or transfer the property until arrears of central excise duties and penalties owed by M/s Vuppalaamritha Magnetic Components Ltd., of which respondent No. 5 was the Managing Director, were paid. The petitioner was informed that the property might be attached for recovery. Subsequently, an e-auction was conducted by respondents 1-4 on November 27, 2020, for the sale of the property, with respondent No. 6 being the successful bidder. A sale deed was executed in favour of respondent No. 6 on August 25, 2021. The petitioner filed the present writ petition seeking to declare the e-auction and sale deed illegal and arbitrary.

Held

The Court held that the petitioner had notice of the default of respondent No. 5, of whom it was the General Power of Attorney Holder, as far back as February 22, 2016. Despite this notice, the petitioner did not take any steps as per law to extricate the property from the departmental dues, either by paying the dues or by instituting legal action against respondent No. 5. The Court found that in the interim, third-party rights had been created and crystallized in the form of the execution of the sale deed. The Court considered it wholly inequitable to put the clock back by re-opening settled matters at this stage, stating that no case was made out for such belated interference. The Court noted that the default persisted, necessitating the departmental authorities to resort to the auction sale of the property. Consequently, the Court found no merit in the writ petition and dismissed it.

Key Issues

1. Whether the e-auction conducted by the respondents on November 27, 2020, and the consequential execution of the sale deed dated August 25, 2021, in favour of the sixth respondent are illegal, arbitrary, and contrary to the principles of natural justice and without notice, thereby warranting a writ of mandamus to declare them so? Petitioner's argument: The petitioner contends that the e-auction and sale deed are illegal and arbitrary. They claim they were not properly notified about the auction and that their rights as a developer with possession and a registered agreement were disregarded. They argue that the sale was conducted without adhering to due process and natural justice principles. Respondents' argument: The respondents, through their counsel, argued that the petitioner had notice of the recovery proceedings as early as February 22, 2016. They highlighted that the petitioner, despite being aware of respondent No. 5's default and the potential attachment of the property, failed to take any legal steps to clear the dues or resolve the matter. The respondents emphasized that third-party rights have been created and crystallized through the sale deed, making it inequitable to reverse the situation at this belated stage.