• , COLLECTOR OF AURANGABAD & Anr. v. CJ<~NIRAL BANK OF INDIA May 2 & Anr.

Respondent No. 2, the firm of Chandmal Manmal was m· debted to the 1st respondent, Central Bank of India, Aurangabad branch. On March 11, 1955 the first respondent filed a suit being Civil Suit No. 28/l of 1955 against the second respondent for recovering a sum of Rs. 14,541/· and odd in the Court of Subordinate Judge at Aurangabad. On the application of first respondent an order for interim injunction was passed in respect of certain properties belonging to the second respondent. The Court had ordered the second respondent to furnish secu<ity for the amount of the decree which may be passed against the firm in the suit. On April 28, 1955 Jogilal Mulchand, one of the partners of the second respondent furnished security by creating a charge on his immovable property, which was a house at Aurangabad. After th~ security bond was furnished, the attach ment was released. The security bond furnished by Jogilal Mul chand read as follows : surety "I, the Defendant No.

2 therefore stand as a surety and declare that . if the Hon'ble Court decides the suit against the Defendants, he will abide by every order I passed by the Court and if he fails to do so, then defendant No. 2 stand as the extent of Rs. 20,000/- (Rupees Twenty thousand) in O.S. coins and declare that I shall pay the amount of security into Court and for fulfilling the same I create a charge on my one pucca two storied house possessed by me known as 'Chandi Posh' bearing No. 167 situate at Kasba and Taluka Vijapur, District Aurangabad of the value of Rs. 25,000/- ............ If I fail to pay the amount .of the security, the Court will.then be entitled to recover II A the amount of the security from the property hereby charged ............ " On April 30, 1955 the Subordinate Judge granted a decree against the 2nd respondent for a sum of Rs. 14,541/· and odd. The 1st respondent filed an application for execution of the decree under s.

145 of the Civil Procedure Code. In the execution of the decree the house which was charged under the security bond was sold and one Girdhardas purchased it in auction sale which was confirmed by the Court on Al/gust 14, 1958 and the sale proceeds thereof were deposited by the said Girdhardas executing Court. On August 17, 1958 the Sales Tax Officer, Aurangabad Circle wrote a letter to the District Judge,. Aurang abad pointing out that a sum of Rs. 9,672/ • and odd wa~ due to the Government from the second respondent on account of arrears of sales-tax for the years 1950-51 to 1955-56. On Sep tember 23, 1958 the District Judge sent a letter to the Subordinate Judge asking him not to pay the sale proceeds of the house to the decree holder I.e., the first respondent. Subsequently, the Col- lector of Aurangabad made an order on November 20, 1958. distraining the amount of Rs. 9,672/· out of the sale proceeds. under s.

119 of the Hyderabad Land Revenue Act (Hyd. Act VIII of 13 l 7F.). The order of the Collector stated as follows : "Sanction is therefore accorded under Section 119 of Hyderabad Land Revenue Act to attach the amount of Rs. 9,672-1-0 out of the sale proceeds realised from the auction sale of the defaulter Shri Chandrnal's pro perty and deposited with the Court of Sub-Judge, Aurangabad, towards satisfaction of the Decree No. 28/1 of 1955 passed against Shri Chandmal Manmal. the Sales Tax The amount should be remitted Officer, Aurangabad. " " Thereupon the 1st respondent made an application to the court challenging the validity of the order of the Collector. The Subor~inate ~udge held .that the Civil Court had no jurisdiction to set aside, revise or modify the order of the Co!Tector and it could be done only by the Superior Revenue Authorities. From the order of. the ~ubordinate Judge. the I st respondent preferred an appeal G bemg First Appeal No.

341 of 1959 in the Bombay High Court. The appeal was heard by Naik, J. who by his judoment dated June 22, 1960 held that in view of the provisions c~ntained in ss. I 04 .and 119 of the Hyderabad Land Revenue Act the Gov ernment was entitl.~d to priority for the arrears of sales, tax due from the second respondent over the claim of the 1st respondent. The. learned Judge ~ccordingly dismissed the First Appeal. From the Judgment of Naik, J. the 1st respondent took the matter appeal under the Lett~rs Patent. A Division Bench consisting of Patel and K. K. Desai, JJ. allowed the appeal by their judgment. " .. dated December 17, 1962 holding that s .. 119 of the Hyderabad Land Revenue Act applied only to property which was in the custody and possession of the judgment-debtor and not custody or possession of a Court. It was. observed by the Divi sion Bench that the provisions of the Hyderabad Land Revenue Act contained in ss.

104, 116, 117 and 144 made it abundantly clear that the priority applied only in respect of land revenue and not in respect of other taxes. It was further held that the 1st respondent as a decree-holder had a prior charge as the quality of his debt was not the same as that of the debt due to the Gov ernment and therefore in respect of the sales-fax, the State had no priority. The first question to be considered in this appeal is whether the order of distraint dated November 20, 1958 made by Collector of Aurangabad is legally valid. The order of the Col lector was made under s. 13(2) of the Hyderabad General Sales Tax Act read with ss. 1 i ·' -•ld 119 of the Hyderabad Land Reve nue Act. Section 13 of the Hyderabad General Sales Tax Act (Hyd. Act No. XIV of 1950) provides as follows : "13. (1) The tax assessed under ibis Act shall be paid in such manner, in such instalments, if any, and within such time, not being less· than fifteen days from the date of service of the notice of assessment, as may be specified in such notice.

(2) In default of such payment, a penalty not ex ~eding the tax remaining unpaid may be imposed and the total amount due, including the penalty, if any, may be recovered as if it were an arrear of land revenue. " Section 116 of the Hyderabad Land Revenue Act (Hyderabad Act VIII of 1317 F) states: "An arrear of land revenue may be recovered by the following measures and as far as possible, the measures shall be employed in the order.mentioned below:- (a) by issuing a notice to the defaulter under sec tion 118; (b) by distraint and sale of the defaulter's movable property under section 119; ( c) by distraint and sale of the defaulter's immov able property under section 120; ( d) by arrest and detention of the defaulter under section 122; ( e) by forfeiture of the right of occupancy. in res pect of which the arrear is due under section 124; .. C:OI.LECTOR v. CENTRAL BANK (Ramaswami, l.) 859 (f) by temporary attachment of a non-khalsa village or part of such village in respect of which the arrear is due under section 125." Section 119 of the same Act is to the following effect : "The Tahsildar may distrain and sell the defaulter's movable property.

Such distraint shall be made by officers or clerks appointed by him for this work. " The High Court has taken lhe view that s. 119 can only apply to property which is in the custody and possession of the judgment In our debtor and not in the custody and possession of a Court. opinion, the construction put by the High Court on the language of s. 119 of the Hyderabad Land Revenue Act is not correct and is not warranted by the languaiie of the section or the context in which it is placed. The section empowers the Tahsildar "distrain and sell the defaulter's movable property" and distraint shall be made by officers or clerks appointed by him for this work. The language of the section is general and there is no reason why any restriction should be put on the power of distraint conferred upon the Tahsildar with regard to the defaul ter's movable property. In the present case, the Collector of Aurangabad sent ,the order of distraint to the Subordinate Judge requesting him to remit to the Sales Tax Officer the amount of Rs.

9,672/· out of the amount of sale proceeds dep(Jsited in his Court. We are of the opinion that the procedure followed by the Collector is justified by the provision of s. 119 and nothing in the language or context of the section which prohibit> the Collector from making an order of distraint with regard to the movable property in !he custody and possession of a Court. We accordingly reject the argument of respondent No. 1 on this aspect of the case. We proceed to consider the next question arising appeal, viz., whether the debt due to the Government in respect of arrears of sales-tax has priority over the dues of respondent No. I. It appears that the sales-tax was due for the years 1950- 51 to 1955-56, i.e., for a period of six years. It was submitted on behalf .of the appellants that since s. 13(2) of the Hyderabad General Sales Tax Act makes a provision for recovery of sales-tax due as "arrears of land revenue" and since priority as to the land revenue is provided under the Hyderabad Land Revenue Act, the arrears of sales-tax also must be granted priority over other demands whether in respect of debts or mortgage or based on a decree or attachment of a Court.

The argument of the appellants is based upon ss. 104, 116, 119 and 144 of Hyderabad Land Revenue· Act. Section 104 provides as follows , ' B c D F G H "The demand on any land, for its land revenue shall have priority over other demands whether in respect of debts or mortgage or based on a decree of or attach- ment by a Court, and if the title to any land on which such Government demand is due is transferred, land or its transferer shall not be discharged from such demand. If the demand for land revenue which cannot be recovered from the title to or existing produce of that land is due from a person, the liability for the pay- ment of the land revenue shall have precedence over debt or decree of a Court also on his property other than _the land on which the demand is due; provided such property before it is forfeited for recovery of the said demand, is not sold or mortgaged or given as a gift or otherwise transferred or hypothecated or attached.

" Section 144 is to the following effect : "All the Government sums under the following heads may be recovered under the provisions of this Chapter : (1) Land revenue. (2) Quit-rent. (3) Nazrana. ( 4) Peshkesh. (5) Taxes. ( 6) Local cess. ( 7 ) Fine and penalties. ( 8) Income from lands. (9) Rusum. ( 10) Fees. ( 11) Charges. (12) Penal interest. (13) Lease money. (14) Moneys recoverable from sureties. ( 15) Taccavi loans. (16) All sums in respects of which provision has been made in this Act or in any ~ther Act that they be recovered as arrears of land revenue. " Section 144 enumerates the nature of taxes in respect of which the provision under the Land Revenue Act could be adopted for recovery. But the language of s. 104 makes it clear that the priority specified in that section applies only in respect of land Ii. ' . COLLECTOR \'. CENTRAL BANK (Ramas1rami, J.) 8 61 revenue and not in respect of other taxes.

In respect of other taxes, we consider that only the procedure for recovery under s. 116 applies and not the substantive' Jaw of priority under s. 104 of In our opinion, Counsel for the appel the Land Revenue Act. lants has not been able to make good his argument on this aspect of the case. We pass on to consider the next question arising in this case, namely, whether the appellants are entitled to claim priority to wards payment of sales-tax according the Common Law <loctrine of 'Priority of Crown debts' quite apart from the provi sions of the Hyderabad Land Revenue Act. The Common Law doctrine was evolved in the English Law as part of the Crown prerogative which is described by Halsbury• as follows : - "The royal prerogative may be defined as being that pre-eminence which the Sovereign enjoys over and above all other persons by virtue of the common law, but out of its orc; nary course, in right of her regal dignity, and comprehends all special dignities, liberties, privileges, powers and royalties allowed by the common law to the Crown of England.

" in which The question about the applicability of the priority of Crown debts was considered by the Bombay High Court in 1868 in Secretary of State in Council for India v. Bombay Landing & Shipping Co. judgment debt that a it was held Limited('), due to the Crown was in Bombay entitled to the same pre cedence in execution as a like judgment debt in England, if there is no special legislative provision affecting that right in the par ticular case. The same vi.ew has been taken by the Bombay High Court in a later case-Bank of India v. l<>hn Bowman(2)-in which Chagla, C.J., pointed out that the prior~ty given to Crown was not on the basis of its debt being a judgment-debt or a debt arising out of statute, but the principle was that if the debts were of eq, ual. degree and the Crown .and the subject were equal, the Cr<;>wn s nght would prevail over that of the subject. The same View has been adopted by a Full Bench of the Madras High ~ourt. in !Janickam Chettiar v.

Income-tax Officer, Madura('), m. which It was held that the income-tax debt had priority over pnvate debts and the court had inherent power to make an order for payment of moneys due to the Crown. A similar view has been expressed by the High Court in Kaka Mohamed Ghouse Sahib ~ Co. v. United Commercial Syndicate('). All :uthontJes have been quoted with approval by this Court (•) Halsbury's Laws of England, 3rd Edn., Vol. 7, page 221. (1) (1868-69) 5 Born. H.C.R. 23 (3) (1938) 61.T.R. 180. (2) A.I.R. 1955 Born. 305. (4) 491.T.R. 824. 8G Builders Supply Corporation v. Union of India('), in which it was held that the Government of India was entitled to claim priority for arrears of income-tax due to it from a citizen over debts from him to uns.ecured creditors and that the English com mon law doctrine of the priority of Crown debts has been given judicial recognition in the territory known as "Btitish India" prior to 1950 in regard to the recovery of tax dues in priority to other It was pointed out therefore that private debts of the tax-payer. the English Common Law doctrine having been incorporated into Indian law, was a 'law in force' in the territory of India, and, by virtue of Art.

372 (1) of the Constitution of India, it continued to be in force in India until it was validly altered, repealed or amended. It was, however, argued tor the respondents that the authority of the decision of this Court in Builders Supply Corporation v. Union of India(') has been affected to some extent by the later decision of a larger Bench of this Court in The Super· intendent & Remembrancer of Legal Affairs, West Bengal v. The Corporation of Calcutta,('), in which it was held that the rule of English Common law that the State was not bound by the provi sions of a statute unfess it was expressly named or brought in by necessary implication, was ·not accepted as a rule of construction law of throughout India and therefore . it has not become the land. it was accepted as a rule of construction throughout India, it was only a rule of construction and not a rule of substantive law and therefore cannot be said to be "a law in force" within the meaning of Art.

372. Lastly, this Court expressed the view that the rule of construction was republic and it was inconsistent with the rule of law based on tl1e doctrine of equality and therefore the said canon of ·con struction should not be applied for construing statutes in India. Tn our opinion, there is nothing in this judgment which affects the authority of the previous decision of this Court in Builders Sup- ply Corporation v. Union of India('). On the other hand, the majority judgment of the learned Chief Justice has referred to the decision in H. Snowden Marshall v. People of the State of New York(') which lays down a similar doctrine, namely, that the State of New York has the common law prerogative right of priority over unsecured creditors, and distinguished the case on the ru~e of the ground construction but was based upon the common law prerogative of the Crown. It was further held that even on the assumption it had nothing to do with incongruous democratic in a I 8 c D G We are, however, unable to apply the English Common La~v doctrine of priority of Crown debts in this case, because there is H no proof that the doctrine was given judicial recognition in (I) 561.

T. R. 91 (2) [1967] 2 S.C.R. J7,). (3) (1920) 65 Law. Ed. 315. A B territory of Hyderabad State prior to January 26, 1950 when the Constitution was brought into force. We granted time to Counsel for the appellants to ascertain whether there were any reported decisions recognising such a doctrine in the Hyderabad State, but sufficient material has not been placed before us fo. this case to show that the doctrine was given judicial recognition in the Hyder- abad State before its incorporation into the Indian Republic. For these reasons we hold that the judgment of the Bombay High Court dated December 17, 1962 m Letters Patent Appeal No. 29 of 1960 must be affirmed and this appeal must be dismiss ed with costs. C V.P.S. Appeal dismissed.