KOLKATA: The Calcutta High Court ruled on September 25 that auction purchasers must cover the property tax liabilities of previous owners. This decision arose when a company requested a waiver for outstanding property taxes amounting to Rs 1,23,84,142, which the KMC deemed unacceptable for mutation.
Justice Gaurang Kanth indicated that the auction purchaser holds the responsibility for the property’s tax arrears, stating, “The petitioner, being the auction purchaser, is obliged to settle the outstanding property tax dues. The sale notice and expression of interest (EOI) highlighted that all bidders should conduct their own investigations and due diligence before bidding.”
The case involved Cotton Casuals India Private Limited and others against KMC, claiming that in August 2024, they were asked to pay property tax arrears exceeding Rs 1.2 crore dating back to 2008. This debt was attributed to the former owner. They acquired four factory modules in Paridhan Garment Park, Tangra, from the liquidator of Enfield Apparels Limited during its liquidation under the Insolvency and Bankruptcy Code (IBC) 2016. The property was handed over on January 19, 2022, and assignment deeds were executed on May 7, 2022. The company argued that the e-auction sale notice and the EOI did not mention any property tax liabilities, and the official liquidator as well as the creditor committee did not identify such a responsibility. They acknowledged their liability for property tax starting from January 19, 2022.
Referring to a Supreme Court ruling, Justice Kanth noted that in a resolution process, the intention is to restore the company as a viable entity, and the resolution applicant must be informed in advance of the liabilities they will incur. However, this principle does not hold in liquidation scenarios where the liquidator sells assets to distribute the proceeds among creditors.
