C/SCA/1977/2013                               ORDER




         IN THE HIGH COURT OF GUJARAT AT AHMEDABAD

            SPECIAL CIVIL APPLICATION NO. 1977 of 2013



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     SANDEEP TEXTURISERS PRIVATE LIMITED & 1....Petitioner(s)
                          Versus
            STATE OF GUJARAT & 3....Respondent(s)
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Appearance:
MR ISHAN MIHIR PATEL, ADVOCATE for the Petitioner(s) No. 1 - 2
GOVERNMENT PLEADER for the Respondent(s) No. 1
MR PARESH M DARJI, ADVOCATE for the Respondent(s) No. 4
MR VAIBHAV A VYAS, ADVOCATE for the Respondent(s) No. 2
NANAVATI ASSOCIATES, ADVOCATE for the Respondent(s) No. 3
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        CORAM: HONOURABLE MR.JUSTICE AKIL KURESHI
               and
               HONOURABLE MR.JUSTICE J.B.PARDIWALA

                           Date : 20/08/2014


                            ORAL ORDER

(PER : HONOURABLE MR.JUSTICE J.B.PARDIWALA) By this writ application, the petitioner-purchaser of a property in an auction proceedings conducted by the Kalupur Commercial Cooperative Bank has prayed for an appropriate writ to quash and set aside the demand notices dated 29th November 2011 and 15th March 2012 respectively issued by the respondent No.2, Gujarat Pollution Control Board, for the purpose of realizing the dues of the erstwhile owner towards the water cess assessed by the assessing order Nos.594 and 4274 with interest thereon.

C/SCA/1977/2013 ORDER The case of the petitioner may be summed up thus:

The respondent No.4, Kinariwala Spinners Ltd. had availed of financial assistance from the respondent No.3 Bank. It appears that the respondent No.4 defaulted in making the payment of the sum borrowed. Accordingly, the respondent No.3 initiated proceedings under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (for short "the Securitisation Act"). As a part of the proceedings initiated under the Securitisation Act, the property which was mortgaged by the respondent No.4 with the respondent No.3 Bank was put to auction. In the auction proceedings conducted by the respondent No.3 Bank, the petitioner herein emerged as the highest bidder. It also appears from the materials on record that on payment of the sale price, a sale certificate cum deed of conveyance was executed on 29 th December 2006 by the respondent No.3 Kalupur Commercial Cooperative Bank in favour of the petitioner. Thus, on the issue of such sale certificate, the ownership of the respondent No.4 got extinguished and it vested in favour of the petitioner. The sale of the mortgaged property attained finality on 29th December 2006.

Almost after a period of five years, the petitioner was served with a notice by the respondent No.2, GPCB, calling upon him to deposit an amount of Rs.66,449/- towards the water cess for the period between 1st April 2002 and 31st March 2003, and 1st April 2003 and 31st March 2004.

C/SCA/1977/2013 ORDER The petitioner being aggrieved by such recovery of water cess at the instance of the GPCB has come up with this petition.

The stance of the respondent No.3 Bank is that the subject dues of the GPCB were neither intimated nor informed by the respondent No.4, i.e. defaulter to the Bank nor the GPCB had made any demand thereof in response to the auction notice published by the Bank. According to the Bank, they do not owe any liability so far as the payment is concerned and at the best such liability could be fastened upon the respondent No.4 or the petitioner.

Mr.Ishan Patel, the learned advocate appearing on behalf of the petitioner has submitted that he had purchased the property in the auction proceedings on "as is where is" basis. He has drawn our attention to the relevant portion of the sale certificate which reads as under:

"All other outstanding dues such as all rates, taxes, assessment, dues and duties and payments of Central and/or State Government or any other local body etc. now outstanding and/or chargeable upon the same as at present is agreed to be and shall be paid by the Borrower or the Bank on behalf of the Borrower.

Thus, according to Mr.Patel, his client could not have been fastened with such liability to pay the dues of the erstwhile owner towards the water cess sought to be recovered by the GPCB.

Mr.Patel, the learned advocate appearing on behalf of the Page 3 of 7 C/SCA/1977/2013 ORDER petitioner has also drawn our attention to the relevant portion of the Deed of Indemnity executed by the respondent No.3 Bank in favour of the petitioner in addition to the sale certificate referred to above. The relevant portion of the Deed of Indemnity reads thus:

"1. The Bank has sold the said property more particularly described in the Schedule hereunder written, which belonged to KINNARIWALA as an Authorised Officer under the said Act, 2002 as per offer of the Company wherein the Company has agreed to pay entire dues of Gujarat Electricity Board and rest of all Government or semi-Government, local authorities, dues just as all rates, taxes, assessment, duties which are payable by KINNARIWALA shall be paid by the Bank on behalf of KINNARIWALA being original owner of the said property. The Bank irrevocably agree and undertake to pay such duties as and when demanded by the Government or semi-Government Departments, local authorities for KINNARIWALA only on intimation or furnishing copies of such demand if received by the Company. In case of any dispute regarding any dues of KINNRIWALA the Bank shall settle the same without any objection of whatsoever kind or nature.

2. In the aforementioned premises and in consideration of the Company taking liability for discharge of GEB's outstanding dues in respect of the said Property, the Bank hereby undertakes to pay all outstanding dues save and except GEB's dues such as of Government (both Central and State) or semi-Government, local authorities by way of rates, taxes, cess, assessments, duties etc. which are payable by KINNARIWALA and accepts liability for the same and releases the Company from the payment of thereof and further undertakes to indemnify and to always keep indemnified against payment of such rates, taxes, cesses, etc. by the Company for and on behalf of KINNARIWALA or the Bank and all costs, charges and expenses incurred and damages suffered by the Company by reason of default in payment of aforementioned dues and discharge of liabilities."

A plain reading of para 2 of the Deed of Indemnity would suggest that the Bank undertook to pay all the outstanding dues save Page 4 of 7 C/SCA/1977/2013 ORDER and except the dues of GEB's such as of Government (both Central and State) or semi-Government, local authorities by way of rates, taxes, cess, assessments, duties etc. payable by the defaulter. No liability was fastened on the petitioner as the auction purchaser of the property in question.

Mr. Patel thereafter has drawn our attention to section 3 of the Water Cess Act, 1977 which reads thus:

"3. Levy and Collection of Cess (1) There shall be levied and collected a cess for the purpose of the Water (Prevention and Control of Pollution) Act, 1974 (6 of 1974) and utilisation thereunder.

(2) The cess under sub-section (1) shall be payable by -

(a) every person carrying on any specified industry; and

(b) every local authority, and shall be calculated on the basis of water consumed by such person or local authority, as the case may be, for any of the purposes specified in column (1) of Schedule II, at such rate, not exceeding the rate specified in the corresponding entry in column (2) thereof, as the Central Government may, by notification in the Official Gazette, from time to time, specify.

2(2A) Where any person carrying on any specified industry or any local authority consuming water for domestic purpose liable to pay cess fails to comply with any of the provisions of section 25 of the Water (Prevention and Control of Pollution) Act, 1974 (6 of 1974) or any of the standards laid so down by the Central Government under the Environment (Protection) Act, 1986, cess shall be and payable at such rate, not exceeding the rate specified in column (3) of Schedule II, as the Central Government may, by notification in the Official Gazette, from time to time specify.

C/SCA/1977/2013 ORDER (3) Where any local authority supplies water to any person carrying on any specified industry or to any other local authority and such person or other local authority is liable to pay cess under sub-section (2) or sub-section (2A) in respect of the water so supplied, then, notwithstanding anything contained in that sub- section, the local authority first mentioned shall not be liable to pay such cess in respect of such water.

Explanation-- For the purpose of this section and section 4, "consumption of water" includes supply of water."

On the other hand, Mr.Vyas, the learned advocate appearing for the Gujarat Pollution Control Board submits that since the petitioner purchased the property in the auction proceedings, all dues of the erstwhile owner could be recovered through the petitioner.

Having heard the learned counsel appearing for the parties and having gone through the materials on record, the only question that falls for our consideration in this petition is, whether the respondent No.2 Gujarat Pollution Control Board, is justified in seeking recovery of the amount towards water cess from the petitioner being dues of the erstwhile owner.

Indisputably, the auction proceedings were finalized way back in the year 2006. At the time of issue of the sale certificate also, the petitioner was not fastened with any liability to make good the payment due and payable by the erstwhile owner. The Kalupur Commercial Cooperative Bank has also made its stance clear that when the advertisement for public auction was issued, the GPCB Page 6 of 7 C/SCA/1977/2013 ORDER had not made any demand towards the water cess. Mr.Vyas, the learned advocate appearing for the GPCB has not been able to point out any provisions of law or anything from the record to indicate that such liability could be fastened upon the petitioner as purchaser of the mortgaged property.

We are of the view that in such circumstances referred to above, the demand notices dated 29th November 2011 and 15th March 2012 respectively issued by the GPCB upon the petitioner are not justified. However, we clarify that it would be open for the GPCB to recover the requisite amount towards the dues of water cess in accordance with law by initiating appropriate proceedings before appropriate forum, but at least the same cannot be recovered through the petitioner.

For the aforementioned reasons, we allow this petition. The impugned notices dated 29th November 2011 and 15th March 2012 issued by the GPCB are ordered to be quashed and set aside.

(AKIL KURESHI, J.) (J.B.PARDIWALA, J.) (vjn) Page 7 of 7