1. Recovery of interest on public demands under the Bihar and Orissa Public Demands Recovery Act, 1914, following payment of the principal amount of certificates. (Para 1 )
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1966 Supreme(SC) 276
SUPREME COURT OF INDIA
K. SUBBA RAO, C.J.I., R.S. BACHAWAT AND J.M. SHELAT, JJ.
M/s. R. B. H M. Jute Mills, Katihar and others, Appellants
Versus
Certificate Officer Katihar and others, Respondents.
Civil Appeals Nos. 551 to 554 of 1965, dated 13-10-1966.
Advocates appeared
Mr. A. K. Sen Senior Advocate, Mr. R. C. Prasad, Advocate, with him), for Appellant; Mr. S. P. Varma, Advocate, for Respondents.
Advocates:
A.K.SEN GUPTA, R.C.Prasad, S.P.Varma
A.K.SEN GUPTA, R.C.Prasad, S.P.Varma
Under the Bihar and Orissa Public Demands Recovery Act, 1914, interest is recoverable from the date of signing the certificate until realisation per Section 17(a). This right is independent of the disposal of proceeds under Section 32, and payment of the principal does not extinguish interest liability.
Headnote:(A) Bihar and Orissa Public Demands Recovery Act, 1914 - Sections 17(a) and 32 - Recovery of interest on public demands - A certificate signed and filed under the Act has the effect of a decree and is executable - Section 17(a) provides that interest upon the public demand to which the certificate relates is recoverable at the prescribed rate from the date of the signing of the certificate up to the date of the realisation - Simple interest is payable on the principal amount and is recoverable in the proceedings in execution thereof (Para 2).
(B) Execution of Certificate - Right to claim interest - The right to claim interest is granted by Section 17 and is not contingent upon assets being realised by sale or otherwise under Section 32 - Section 32 merely lays down the mode of disposal of the proceeds of execution and the priorities to be observed in such disposal - A certificate debtor cannot escape liability to pay the accrued interest by paying only the principal amount of the certificate (Para 2).
Facts of the case:
A registered dealer was assessed for sales tax, and certificates were filed for the recovery of arrears as public demands. During execution proceedings, the dealer paid the principal amounts of the certificates but filed objections disputing the liability to pay the accrued interest. The objections were dismissed by the Certificate Officer, and subsequent writ applications were dismissed by the High Court.
Findings of Court:
The court found that under Section 17(a) of the Act, interest is recoverable from the date of signing the certificate until the date of realisation. The payment of the principal amount does not discharge the liability for the interest that has accrued and remains outstanding.
Issues: Whether the certificate-holder is entitled to recover interest under Section 17(a) independently of the realisation of assets under Section 32, and whether payment of the principal amount absolves the debtor of interest liability.
Ratio Decidendi: The court ruled that Section 17(a) creates the substantive right to recover interest, while Section 32 only governs the procedural mode of disposal of proceeds from execution. Consequently, the right to interest is not dependent on the sale of assets, and the debtor remains liable for accrued interest despite paying the principal.
Result: Appeals dismissed.
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Table of Contents
2. Whether interest on a certificate is recoverable only upon the realization and disposal of assets under Section 32 of the Bihar and Orissa Public Demands Recovery Act, 1914. (Para 2 )
3. Section 17(a) provides for interest from the date of signing to realization, while Section 32 merely governs the disposal of proceeds from execution. (Para 2 )
4. Interest on the unpaid principal amount of a certificate is recoverable under Section 17(a) regardless of whether assets are realized through sale under Section 32. (Para 2 )
5. Appeals dismissed with costs. (Para 3 )
6. Is interest recoverable on a certificate filed under the Bihar and Orissa Public Demands Recovery Act, 1914?
Yes, Section 17(a) of the Act provides that simple interest at the rate of 6 1/4 per cent per annum is recoverable from the date of signing the certificate up to the date of realization. (Para 2 )
7. Does the payment of the principal amount of a certificate discharge the debtor's liability to pay accrued interest?
No, the certificate debtor cannot escape liability to pay accrued interest by paying only the principal amount; the certificate-holder is entitled to realize outstanding interest by executing the certificate. (Para 2 )
8. Is the right to claim interest contingent upon the realization of assets under Section 32 of the Act?
No, the right to claim interest is granted by Section 17. Section 32 only prescribes the mode of disposal of proceeds and priorities for payment once assets are realized through execution. (Para 2 )
Judgment
BACHAWAT, J. : The appellant, a registered dealer under the Bihar Sales Tax Act, was assessed to pay sales tax for four different periods. The arrears of taxes were public demands within S. 3 (6) read with item .3, Sch. 1 of the Bihar and Orissa Public Demands Recovery Act, 1914 (B. and O. Act No. 4 of 1914). On the requisition of the Superintendent, Sales Tax, Purnea, the Certificate Officer, Purnea, signed and filed four certificates under S. 6 of the Act stating that the demands were due from the appellant. The certificates were put in execution. In the course of the execution proceedings the appellant paid the principal amounts of the certificates. The Certificate Officer claimed payment of the interest due on the certificates. The appellant filed objections disputing its liability to pay any interest. By his orders, dated March 20 1958, the Certificate Officer dismissed the objections. The appellant filed four writ applications challenging these orders. The Patna High Court dismissed the writ applications. The appellant now appeals to this Court by special leave.
2. A certificate signed and filed under S. of the Bihar and Orissa Public Demands Recovery Act, 1914 has the effect of a decree passed by the Certificate Officer and is executable as such, subject to the provisions of the Act. Section 17 (a) of the Act provides that there shall be recoverable in the proceedings in execution of every certificate filed under the Act, interest upon the public demand to which the certificate relates, at the rate of 61/4 per cent per annum from the date of the signing of the certificate up to the date of the realisation. In view of S. 17 (a), simple interest at the prescribed rate is payable on the principal amount of the certificate, and is recoverable in the proceedings in execution thereof. It was suggested in argument that the certificate-holder has no right to claim interest unless assets are realised by sale or otherwise in execution of the certificate and are disposed of in accordance with S. 32 of the Act. This suggestion is baseless. Section 32 lays down the mode of disposal of the proceeds of execution and the priorities to be observed in such disposal. Out of the proceeds of execution the certificate-holder is entitled to payment of the amount of the certificate interest and costs. His right to claim interest is given by S. 17. Interest on the unpaid principal amount runs from the slate of the certificate anal the certificate-holder is entitled to recover the interest in the execution proceedings. The certificate debtor cannot escape liability to pay the accrued interest by paying the principal amount of the certificate. If any interest has accrued due and is outstanding the certificate-holder is entitled to realise it by executing the certificate. The question as to how much is due from the appellant on account of interest is not in issue in these appeals and we express no opinion on it.
3. The appeals are dismissed with costs one hearing fee.
Appeals dismissed.
For Citation : AIR 1967 SC 400
