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HIGH COURT OF CALCUTTA
CHAKRABARTI, LAHIRI
BUILDERS SUPPLY CORPORATION - Appellant
Versus
UNION OF INDIA (UOI) REPRESENTED BY THE COMMISSIONER OF INCOME-TAX, WEST BENGAL - Respondent
Civil Revn. Case 231 Of 1954
Decided On : JUNE 21, 1955
PUBLIC DEMANDS RECOVERY ACT - PRIORITY OF CROWN DEBTS - ATTACHMENT OF MONEY BY CERTIFICATE OFFICER - DETERMINATION OF PRIORITY BY EXECUTING COURT - PROCEDURE - PUBLIC DEMANDS RECOVERY ACT, 1918, S. 46(2), R. 22 - CIVIL P. C., 1908, O. 21, R. 52.
Fact of the Case:
The petitioners, Messrs. Builders Supply Corporation, obtained a decree against Messrs. R. K. Das and Co. for a sum of Rs. 12,275-9-0. They attached before judgment a sum of Rs. 5,000/- out of a security deposit of Rs. 50,000/- made by Messrs. R. K. Das and Co. with the Superintending Engineer, Calcutta Central Circle No. 1, in connection with a building contract obtained from Government. The petitioners' suit was decreed on 16-6-1950. On 14-2-1952, the petitioners' decree was put into execution and a further sum of Rs. 7,275-9-0 was attached out of the security deposit. On 9-3-1953, the Superintending Engineer sent the whole amount attached by the petitioners to the executing Court. In the meantime, the Certificate Officer of 24-Parganas had, on 23-7-1952, addressed a letter to the Subordinate Judge requesting him to withhold payment of the money to the petitioners, as Government had a priority over all unsecured creditors in respect of income-tax dues of Messrs. R. K. Das and Co. exceeding Rs. 50,000/-. The Certificate Officer also sent a copy of another letter which he had addressed to the Superintending Engineer, asking him to make no payment of any money out of the deposit in his hands, but to retain the whole amount after deducting the departmental dues. On 17-6-1953, the Certificate Officer addressed a letter to the executing Court under Rule 22 of Schedule II, Public Demands Recovery Act and asked the Court to hold the amount subject to further intimation from him. The executing Court heard the parties and by an order made on 19-12-1953, directed a sum of Rs. 12,275-9-0, lying in his custody, to be paid out to the Union of India.
Finding of the Court:
The executing Court was required to determine the question of priority raised before it, under Rule 22 of the Rules framed under the Public Demands Recovery Act, 1918. The Union of India, acting through the Commissioner of Income-tax and an Officer of his, had issued a certificate under Section 46 (2), Income-tax Act and the Certificate Officer had attached the money in the hands of the executing Court in execution of the certificate and in the manner prescribed by Rule 22 of the Rules framed under the Public Demands Recovery Act. The proviso to the rule says that where the property attached thereunder is in the custody of a Court, any question of title or priority arising between the certificate-holder and any other person, not being a certificate debtor, claiming to be interested in such property by virtue of any assignment, attachment or otherwise, shall be determined by such Court. The language of the proviso is the same as that of the proviso to Rule 52 of Order 21 of the Code and indeed the whole of Rule 22 is a reproduction of Rule 52 with the necessary substitution of the Certificate Officer in the place of the Court as the authority issuing the notice of attachment. Under the proviso contained in both these provisions, the question of priority has got to be decided by the custody Court.
Issues: 1. Whether the executing Court erred in procedure in determining the question of priority between the petitioners and the Union of India? 2. Whether the Union of India could claim any priority at all in respect of the tax-debt?
Ratio Decidendi: 1. The executing Court was required to determine the question of priority raised before it, under Rule 22 of the Rules framed under the Public Demands Recovery Act, 1918. The Union of India, acting through the Commissioner of Income-tax and an Officer of his, had issued a certificate under Section 46 (2), Income-tax Act and the Certificate Officer had attached the money in the hands of the executing Court in execution of the certificate and in the manner prescribed by Rule 22 of the Rules framed under the Public Demands Recovery Act. The proviso to the rule says that where the property attached thereunder is in the custody of a Court, any question of title or priority arising between the certificate-holder and any other person, not being a certificate debtor, claiming to be interested in such property by virtue of any assignment, attachment or otherwise, shall be determined by such Court. The language of the proviso is the same as that of the proviso to Rule 52 of Order 21 of the Code and indeed the whole of Rule 22 is a reproduction of Rule 52 with the necessary substitution of the Certificate Officer in the place of the Court as the authority issuing the notice of attachment. Under the proviso contained in both these provisions, the question of priority has got to be decided by the custody Court. 2. The principle of the priority of Crown debts had been a part of the law uniformly current in India before the commencement of the Constitution and it must be held to have crossed over the dividing line between Crown-ruled and Republican India and become a part of the law of the latter.
Final Decision: The Rule was discharged, but no order for costs was made.
( 1 ) AT the earlier stages of the argument on this Rule, it appeared as if a broad question of fundamental importance would have to be decided, but a closer examination of the record revealed that the point actually calling for decision was a far narrower one.
( 2 ) THE facts are these: Messrs. R. K. Das and Co. , who are opposite party No. 2 to this Rule, obtained a building contract from Government in connection with the construction of the Mint and had to make a deposit of Rs. 50,000/- as security for the due execution of the contract. In connection with that undertaking, Messrs. R. K. Das and Co. , obtained a supply of building materials from the petitioners, Messrs, Builders Supply Corporation. The petitioners appear to have been unable' to obtain payment for the goods supplied and they Drought a suit for the recovery of their dues, tin that suit, they obtained an order for an attachment before judgment of Rs. 5,000/- out of the security deposit of Rs. 50,000/- made by Messrs. R. K. Das of Co. , and lying in the hands of the Superinceriaing Engineer, Calcutta Central Circle No. 1. The order for attachment was made on 18-4-1949 and the attachment was in due course made. Subsequently, on 16-6-1950 the petitioners' suit was decreed by the 5th Additional Subordinate Judge, 24-Parganas, for a sum of Rs. 12,275-9-0. On 14-2-1952 the decree was put into execution in the Court of the 7th Subordinate Judge and Money Execution Case No. 9 of 1952 was started. On the 18th February, following, the Subordinate Judge issued an order for the attachment of a further sum of Rs. 7,275-9-0 out of the amount of the security deposited and while communicating that order to the Superintending Engineer, asked him to transmit to the Court the sum of Rs. 5,000/- already attached before judgment. On receipt of that communication, the Superintending Engineer placed a further sum of Rs. 7,275-9-0 under attachment, but did not send to the Court the sum of Rs. 5,000/-, as requested. On 30-4-1952, the executing Court wrote to the Superintending Engineer, asking him to transmit the whole amount of Rs. 12,275-9-0, attached under the two orders, but the request was not complied with till 9-3-1953. In the meantime, the Certificate Officer of 24-Parganas had, on 23-7-1952, addressed a letter to the Subordinate Judge whereby he made a request that if the Superintending Engineer had transmitted any money to the Court, payment thereof to the petitioners before us might be withheld in order that "a claim under Order 21, Rule 52, Civil P. C. ", might be preferred on behalf of Government. Along with that letter, the Certificate Officer sent a copy of another letter which he had addressed to the Superintending Engineer, asking him to make no payment of any money out of the deposit in his hands, but to retain the whole amount after deducting the departmental dues. It was said that arrears of income-tax due from Messrs. R. K. Das and Co. , exceeded Rs. 50,000/-and therefore the whole of the security deposit less departmental dues, was liable to be applied to the satisfaction of the tax-debt in respect of which Government had a priority over all unsecured creditors. It appears that there was a prior attachment order, issued by the Certificate Officer on 24-9-1951. In' spite, however, of the letter from the Certificate Officer, the Superintending Engineer sent, as I have already stated, the whole amount attached by the petitioners to the executing Court and the same, paid in one sum and by a single cheque, was received on 9-3-1953. Thereafter on 21-3-1953, the executing Court addressed a letter to the Certificate Officer, apparently in consequence of the letter received from him earlier, requesting him to state why the money which had been brought to Court at the instance of the petitioners should not be paid out, to them and adding that in the absence of any step taken by 10-4-1953, the money would be paid out. Then followed a succession of adjou
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