Liability – Slump Sale Agreement dated 17.07.2010, followed by a sale deed, was entered into between U.P State Sugar Corporation Limited-Seller (UPSSCL) and Appellant-Purchaser for UPSSCL’s loss making Amroha sugar mill – Dispute arose w.r.t outstanding liability of unpaid duty, penalty, and interest, if to be discharged by the seller or the purchaser – Subsisting dues arising out of transactions occurring on dates prior to the sale, if contingent or conditional liability or an accrued liability which may be computed or discharged at a subsequent date – Held: There is no dispute that the liability towards the duty in question for the Amroha unit are in respect of business transactions for the period anterior to the signing date of the Slump Sale Agreement – The business liability for the Amroha unit had arisen out of the operation of the unit during the period before the same was sold to the appellant, although the liability is to be quantified and discharged at a future date – When the liability is capable of being estimated with reasonable certainty, the liability is not to be treated as a contingent one and should be considered as a liability which may be discharged at a future date – Thus, the liability in question not being a contingent one, the same cannot be fastened on the purchaser who were not operating the unit, prior to the Slump Sale Agreement dated 17.7.2010 – Further, in clause 12.1 and 12.2 of the Agreement read with Clause 9 of the Sale Deed, the liability of the purchaser, for the operation and activities of the unit, arose only after the signing date – Thus, dues relating to the activities and operation of the unit upto 17.7.2010 (signing date), were the liabilities of the UPSSCL – Also, prior to 17.7.2010, the appellant was neither a dealer nor a manufacturer and therefore, had no tax or duty obligations to satisfy for the operation of the Amroha unit – Impugned order erroneously held that the liabilities for the transactions made prior to the sale agreement are to be borne by the purchaser, set aside.
Disposing of the appeals, the Court
Held : 1.1 There is no dispute that the liability towards the duty in question for the Amroha unit are in respect of business transactions for the period anterior to the signing date of the Slump Sale Agreement. Moreover assessment orders and recovery citations have been issued by the taxing authorities in the name of the UPSSCL. The business liability for the Amroha unit had definitely arisen out of the operation of the unit during the period before the same was sold to the appellant, although the liability is to be quantified and discharged at a future date. When the liability is capable of being estimated with reasonable certainty, the liability is not to be treated as a contingent one and should be considered as a liability which may be discharged at a future date. Such being the position in law and the liability in question not being a contingent one, the same cannot be fastened on the purchaser who were not operating the unit, prior to the Slump Sale Agreement dated 17.7.2010. In clause 12.1 and 12.2 of the Slump Sale Agreement read with Clause 9 of the Sale Deed, the liability of the purchaser, for the operation and activities of the unit, arose only after the signing date. This would suggest that dues relating to the activities and operation of the unit in the period upto 17.7.2010 (signing date), were the liabilities of the UPSSCL while the dues relating to activities and operation of the unit for the period subsequent to 17.7.2010, were to be the responsibility of the purchaser. The liability of the purchaser for the dues relating to activities and operations of the unit for the period anterior to 17.7.2010, could not therefore have been fastened on the appellant in view of the clear provisions made in clause 9 of the Sale Deed read with Clause 12.1 and 12.2 of the Slump Sale Agreement as both are specific in nature. In the same context, the clause 2.6 which speaks of contingent liabilities and legal cases pending in respect of the unit, to be fastened on the purchaser and the seller being absolved of such liability, are generic conditions provided under clause 2.6 of the Slump Sale Agreement and this Court is not impressed by those. The reason being the contradictions in the specific conditions mentioned in the Slump Sale Agreement. In such circumstances, clause 9 of the sale deed being specific will govern the parties and will override anything contrary, contained in the Slump Sale Agreement. [Paras 15, 17 and 18][1138-E; 1139-B-G]
1.2 In view of the specific and detailed provisions with regard to the distribution of liabilities in respect of the dues whereby duties in respect of the transactions upto the date of agreement are to be borne by the Seller i.e. UPSSCL and the buyer is made responsible only for dues in respect of post-sale transactions it is observed that the impugned order dated 1.11.2017 has erroneously held that the liabilities for the transactions made prior to the sale agreement, are to be borne by the purchaser. That apart, prior to 17.7.2010, the appellant was neither a dealer nor a manufacturer and therefore, had no tax or duty obligations to satisfy for the operation of the Amroha unit. It is the UP State Sugar Corporation Limited which had collected all the dues from their customer on behalf of the State Government and they are under an obligation to deposit the collected sum in the government treasury. In view of the foregoing, the liability in question, not being a contingent liability, cannot be fastened on the shoulders of the appellant. The impugned judgment is set aside. [Paras 19, 20][1139-G-H; 1140-A-B, D]
Bharat Earth Movers v. Commissioner of Income Tax, Karnataka (2000) 6 SCC 645 : [2000] 2 Suppl. SCR
295 – relied on.
As published in the Supreme Court Reports, Supreme Court of India. Text from the Indian Supreme Court Judgments open data set (Dattam Labs), CC BY 4.0.
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