Civic Authority Can't Retrospectively Revalue Property Or Fasten Past Tax Dues On Auction Buyer: Calcutta High Court
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The Calcutta High Court has held that municipal authorities cannot retrospectively revalue property or saddle an auction purchaser with property tax dues relating to a period when the purchaser was not the owner, particularly when the property formed part of liquidation proceedings.
Allowing a writ petition against the Kolkata Municipal Corporation (KMC), Justice Rai Chattopadhyay ruled that municipal dues constitute “operational debt” under the IBC and must be claimed before the liquidator and satisfied strictly in accordance with the waterfall mechanism under Section 53 of the Code, and cannot be independently enforced against a subsequent purchaser.
The petitioners had purchased a commercial office space through an e-auction conducted by the liquidator of Nicco Corporation Limited, which was undergoing liquidation. After seeking mutation and offering to pay taxes from the date of purchase in 2019, they were issued notices proposing retrospective revaluation and tax liability for several earlier periods dating back to 2005–06. Challenging the action, they argued that any pre-liquidation dues could only be recovered within the insolvency process and that an auction purchaser could not be burdened with legacy liabilities of the corporate debtor.
Accepting this contention, the Court emphasised the overriding effect of the IBC and the “clean slate” principle, observing that once liquidation commences, all statutory authorities — including municipal bodies — must submit their claims to the liquidator and cannot initiate parallel recovery proceedings under their own statutes.
The Bench clarified that contractual clauses such as “as is where is” or “whatever there is” in auction terms cannot revive or preserve municipal claims that were neither crystallised nor lodged during liquidation. It held that purchasers cannot be made liable for taxes for periods when they were complete strangers to the property.
Accordingly, the Court set aside the impugned revaluation notice, consequential assessment order and tax bills insofar as they related to the period prior to the date of transfer of title, and permitted the Corporation to assess and recover property tax only from the date of purchase. The amount already deposited by the petitioners was directed to be adjusted toward their lawful post-purchase liability.
Case: Mamta Binani & Anr. v. Kolkata Municipal Corporation & Ors.
Case No.: WPO 2435 of 2022