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Hi there,

Whether the liability due is to be paid by the purchaser or seller.

FACTS – 

The appellant, in this case, is Wave Industries Pvt. Ltd. and the respondent is Uttar Pradesh State Sugar Corporation (UPSSCL). The appellants were unsuccessful in their challenge before the High Court and the liability of payment of Rs. 5,68,797/- is declared to be borne by the Wave Industries Ltd.

The appeal relates to the sale of Amroha Sugar mill which is one of the mills of UPSSCL and a slump sale agreement was entered into on 17.07.2010, followed by a sale deed dated 4.10.2010 between the respondent and the appellant.

A pre-bid meeting was held on 10.07.2009 with the prospective buyers where, inter alia, concern was raised on outstanding liabilities against the units on sale. The appellant submitted bid for 13.94 crores for the Amroha Unit and as per Clause 12 of the Slump Sale Agreement dated 17.7.2010, all liabilities referred to in the said clause, accruing before the date of signing agreement were to be borne by the Seller and those of subsequent period, were to be borne by the Purchaser. The sale agreement was registered accordingly on 9.8.2010 and possession of the Amroha unit was taken over by the appellant on 17.8.2010 and since then the appellant has been managing the unit.

Subsequent to the Slump Sale Agreement, a formal sale deed was executed on 4.10.2010 and in Clause 9 thereof it was made clear that the seller shall be liable to bear all assessments, rents, rates, taxes, outgoing and impositions of whatsoever nature Page 4 of 17 relating to the Unit upto the signing date and thereafter these will be the liability of the purchaser.

DISPUTE

The dispute here relates to liability of unpaid duty, penalty, and interest of the Amroha sugar mill.

FACTS – (CONTD.)

The High Court disposed the appellant representation and by declaring that the purchaser is liable for the outstanding liabilities in respect to the sugar mill upto 30.11.2011.  The appellants were unsuccessful in their challenge before the High Court and the liability of payment of amount Rs. 5,68,797/- is declared to be borne by the Wave Industries Ltd.

RATIO DECIDENDI

The business liabilities has arisen from the operation of the unit during the period before it 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 in our view be fastened on the purchaser who were not operating the unit.

JUDGEMENT

 The Supreme Court found the rejection of representation of the appellant to be arbitrary.

In view of the foregoing, the liability in question, not being a contingent liability, cannot be fastened on the shoulders of the appellant.

The appeal is accordingly allowed by setting aside the impugned judgment leaving the parties to bear their own cost.

JUDGEMENT NAMEWave Industries Pvt. Ltd. vs State Of U.P & ORS –

https://main.sci.gov.in/supremecourt/2018/3241/3241_2018_7_1501_40620_Judgement_15-Dec-2022.pdf

WRITTEN BY – KUMAR ANKUR, NATIONAL LAW UNIVERSITY, LUCKNOW

 

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