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SUPREME COURT OF INDIA
J.C. SHAH, S.M. SIKRI AND V. RAMASWAMI, JJ.
Collector of Aurangabad and another Appellants
Versus
Central Bank of India and another, Respondents.
Civil Appeal No. 1128 of 1965,
D/- 2-5-1967.
Advocates appeared
Mr. S. T. Desai, Senior Advocate, (M/s. R. Ganapathy Iyer and S. P. Nayyar, Advocates, with him), for Appellants; Mr. Hans Raj Sawhney, Senior Advocate, (Mr. P. C. Bhartari, Advocate and Mr. O. C. Mathur, Advocate of M/s. J. B. Dadachanji and Co. with him), for Respondents.
HYDERABAD LAND REVENUE ACT - SECTION 119 - DISTRRAINT AND SALE OF DEFAULTER'S MOVABLE PROPERTY - APPLICATION TO PROPERTY IN CUSTODY OF COURT - PRIORITY OF CROWN DEBTS - COMMON LAW DOCTRINE - APPLICABILITY IN HYDERABAD STATE.
Fact of the Case:
The Central Bank of India obtained a decree against Chandmal Marmal, who furnished security by creating a charge on his immovable property. The property was sold in execution of the decree and the sale proceeds were deposited in court. The Sales Tax Officer claimed arrears of sales tax from Chandmal Marmal and sought to attach the sale proceeds. The Collector of Aurangabad issued an order of distraint under Section 119 of the Hyderabad Land Revenue Act.
Finding of the Court:
The Court held that Section 119 of the Hyderabad Land Revenue Act empowered the Tahsildar to distrain and sell the defaulter's movable property, regardless of whether it was in the custody of the judgment-debtor or a court. The Court also held that the priority given to land revenue under Section 104 of the Act did not apply to other taxes, including sales tax. Finally, the Court held that the English Common Law doctrine of priority of Crown debts did not apply in the Hyderabad State prior to its incorporation into the Indian Republic.
Issues: 1. Whether Section 119 of the Hyderabad Land Revenue Act applied to property in the custody of a court. 2. Whether the debt due to the Government in respect of arrears of sales tax had priority over the dues of the decree-holder. 3. Whether the appellants were entitled to claim priority towards payment of sales tax according to the Common Law doctrine of Priority of Crown debts.
Ratio Decidendi: 1. The language of Section 119 of the Hyderabad Land Revenue Act was general and did not restrict the power of distraint to property in the custody of the judgment-debtor. 2. The priority given to land revenue under Section 104 of the Act did not apply to other taxes, including sales tax, as the language of the section made it clear that the priority applied only in respect of land revenue. 3. The English Common Law doctrine of priority of Crown debts did not apply in the Hyderabad State prior to its incorporation into the Indian Republic, as there was no proof that the doctrine was given judicial recognition in the Hyderabad State.
Final Decision: The appeal was dismissed, and the judgment of the Bombay High Court was affirmed.
Judgment
RAMASWAMI, J. : This appeal is brought, by special leave, from the judgment of the Bombay High Court, dated December 17, 1962 in Letters Patent Appeal No. 29 of 1960.
2. Respondent No. 2, the firm of Chandmal Marmal was indebted to the 1st respondent, Centra1 Bank of India, Aurangabad branch. In March 11, 1955 the first respondent filed a suit being Civil Suit No. 28/1 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 the 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 security 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 immoveable property, which was a house at Aurangabad. After the security bond was furnished, the attachment was released. The security bond furnished by Jogilal Mulchand read as follows :
"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 passed by the Court and if he fails to do so, then I defendant No. 2 stand as surety to 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 storeyed 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 the amount of the security from the property hereby charged"
3. On April 30, 1955 the Subordinate Judge granted a decree against the 1st 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 August 14, 1958 and the sale proceeds thereof were deposited by the said Girdhardas in the executing Court. On August 17, 1958 the Sales Tax Officer, Aurangabad Circle wrote a letter to the District Judge, Aurangabad pointing out that a sum of Rs. 9,672 and odd was due to the Government from the second respondent on account of arrears of sales tax for the years 1950-51 to 1955-56. On September 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 Collector of Aurangabad made an order on November 20, 1958 destraining the amount of Rs. 9,672 out of the sale proceeds under S. 119 of the Hyderabad Land Revenue Act (Hyd. Act VIII of 1317 F.). The order of the Collector stated as follows :
"Sanction is, therefore, accorded under S. 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 Chandmal s property 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 amount should be remitted to the Sales Tax Officer Aurangabad."
4. Thereupon the 1st respondent made an application to the trial Court challenging the validity of the order of the Collector. The Subordinate Judge held that the Civil Court had no jurisdiction to set aside. revise or modify the order of the Collector and it could be done only by the Superior Revenue Authorities. From the order of the Subordinate Judge the 1st respondent preferred an appeal being First Appeal No. 341 of 1959 in the Bombay High Court. The
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