Validity of the sale done by Income Tax Department of one item of hypothecated properties.

RAMAPRASADA RAO J.

The first and the second defendants, the former being the Union of India, represented by the Finance department dealing with income-tax matters, and the latter being the District Collector of Salem, who were unsuccessful in O.S. No. 146 of 1965 on the file of the Subordinate Judge's Court, Salem, are the appellants. Certain relevant facts which led to the present litigation may be traced. The plaintiff in the action appealed against, on the foot of a hypothecation bond dated August 31, 1960 (exhibit A-1), filed O.S. No. 106 of 1964 on the file of the Subordinate Judge's Court, Salem, for the recovery of a sum of Rs. 69, 778.99 with interest and costs by directing the sale of the hypothecated properties mentioned in the plaint and for the passing of the usual charge decree. In the above suit a Commissioner was appointed to take an inventory of the goods over which the plaintiff claimed to have a right of hypothecation, but which were admitted in the possession of the hypothecator, namely, the third defendant. In the course of such an inventory prepared by the Commissioner, it was discovered that a camera, which is the subject-matter of the present action and which the plaintiff claimed was also included in the hypothecation bound as above, was missing. During the pendency of the above suit, the third defendant, as owner of the hypothecated goods and as an assessee, was subject to penalty and assessment proceedings under the provisions of the Indian Income-tax Act. For a period prior to the assessment year 1958-59, penalty proceedings as also assessment proceedings were initiated under exhibits B-1 to B-6 for the recovery of various sums due by him as assessee under the Act. Under exhibits B-7 and B-8 distraint proceedings were also issued directing the distraint of certain articles including the said camera. It is common ground that under exhibit B-8 the camera was attracted by the second defendant pursuant to the usual orders of the tax recovery officers functioning under the Indian Income-tax Act, and it is also common ground that on February 22, 1963, the camera was attached pursuant to the tax recovery certificate issued by the authorised officer under the Act and it was brought under the possession of the second defendant. After the attachment was effected, which, as we said, was during the pendency of O.S. No. 106 of 1964, on the file of the Subordinate Judge's Court, Salem, the plaintiff had to file a claim petition for the release of the said camera. Before we trace the necessary details connected with the claim petition and the orders passed thereon subsequently, it is necessary at this stage to notice the course which the attachment proceedings took and which were undertaken by the statutory officers functioning under the Indian Income-tax Act. As we said, the third defendant was in arrears of income-tax for a period prior to the assessment year 1958-59 and for the said assessment year as well. Under exhibit A-19 dated September 17, 1963, consequent upon the payment of the amounts due by the assessee for the period earlier to the assessment year 1958-59, the attachment of the camera and other materials which were distrained earlier was raised on that date. But it is common ground that under exhibit B-10 a fresh warrant of attachment was issued for the attachment of the said camera in respect of arrears due for the assessment year 1958-59. Pursuant to the said order of attachment issued under exhibit B-10, the Tahsildar of the District issued a notice calling upon the third defendant to pay the amount by then due by him as defaulter under the Income-tax Act, 1961, within a period named by him in exhibit B-11. The third defendant having committed default, under exhibit B-13 a sale notice was issued whereunder it was proclaimed, inter alia, that the said camera would be the subject-matter of a public sale on the date named in exhibit B-13. Coming to know of such a sale which was duly announc