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1957 Supreme(P&H) 164
PUNJAB & HARYANA HIGH COURT
D.Falshaw, J.
Union Of India
Versus
Amar Nath
Civil Revision No. 19 of 1956,
Decided On : DECEMBER 9, 1957
The old Crown priority over unsecured creditors survived the enactment of the Constitution of India and was preserved under Article 372(1) of the Constitution.
Headnote:
CONSTITUTIONAL LAW - CROWN PRIORITY - ARTICLE 372(1) - COMMON LAW PRINCIPLE - SURVIVAL - PRIORITY OF STATE OVER UNSECURED CREDITORS - VALIDITY.
Fact of the Case:
The Union of India claimed priority over unsecured creditors for a sum of money attached in execution of a decree, relying on the old Crown priority recognized before the Constitution of India came into force. The Sub Judge held that this priority had ceased to exist after the Constitution.
Finding of the Court:
The court held that the old Crown priority over unsecured creditors survived the enactment of the Constitution of India and was preserved under Article 372(1) of the Constitution, which kept alive the principle of law by which the State claimed priority over other unsecured creditors.
Issues: Whether the old Crown priority over unsecured creditors had disappeared with the inauguration of the Republic of India.
Ratio Decidendi: The court reasoned that the principle of Crown priority was part of the Common Law of England, which was preserved under Article 372(1) of the Constitution. This principle was not inconsistent with the fundamental rights embodied in Part III of the Constitution, as it did not discriminate between creditors but gave the State priority over all competing creditors if the debts were of the same quality.
Final Decision: The court held that the Government was entitled to claim the sum in dispute on behalf of the Delhi Improvement Trust.
D.Falshaw, J.
1. This is a revision petition filed by the Union of India in the following circumstances.
2. Amar Nath respondent had obtained a simple money decree against certain persons as legal representatives of one Devi Chand who had been a contractor and in execution of the decree he got attached and remitted to the executing court the sum o£ Rs. 2312/- which was lying with the Deputy Accountant General, Industries and Supplies, in the name of one of the judgment-debtors. This sum was received by the Court on the 6th of April 1955 and on the 15th of April a letter was received from Mr. J, D. Sharma, Assistant Collector 1st Grade stating that the Union of India laid claim to a sum of Rs. 914/6/- which was due to the Delhi Improvement Trust and was apparently recoverable as arrears of land revenue. It was accordingly requested that this sum should not be paid to the decree-holder.
3. The matter was ultimately argued before the learned Sub Judge, who held in the order now challenged that after the coming into force of the Constitution of India in January 1950 the old Crown claim to priority over unsecured creditors had ceased to exist. However while ordering that the money should be paid to Amar Nath decree-holder the learned Sub Judge suspended the operation of the order for a month in order to give the government time to file an appeal. This order has been challenged by a revision since no appeal under Section 47 C. P. C. lay as the Union of India was not a party in the ordinary sense of the suit or execution proceedings.
4. In arguing that the old Crown priority over unsecured creditors, which was recognised in India before the Republic came into existence still remains in force, and is not contrary to any provisions of the Constitution, the learned counsel for the Government has relied on the decisions in Builders Supply Corporation V. Union of India, (S) AIR 1958. Cal 26 and Bank of India v. John Bowman AIR 1955 Bom 305.
5. In the latter case there was a dispute between the Government and a Bank both of which had advanced loans to a certain company. The loans obtained from the Bank were guaranteed by one of the Directors, and the loans from the Government were guaranteed by the Directors as a whole including the Director who had guaranteed the Banks loan, one of the terms of the Directors guarantee being that the loan was recoverable as arrears of land revenue. Proceedings were taken by the Government to recover this sum by attachment and sale through the Collector of Bombay of certain immovable properly belonging to those Directors.
6. In the meantime the Bank filed a suit and a consent decree was passed in its favour and a struggle then began between the Government and the Bank. The matter was considered by Chagla C. J. and Dixit J. whose views are set out in the Following passages taken from the judgment delivered by Chagla C. J. :
"The claim of the State would have been justified if the claim had been put forward under Section 11, Bombay City Land Revenue Act, but as we have already pointed out, the Advocate General has conceded that its claim does not come within the ambit of that section, and therefore we had to ask the Advocate General to point out to us any provisions o£ the law by which the claim of the State must be preferred to the decree passed by a competent Court and the execution taken out by a competent Court, and again the Advocate General fairly conceded that there was no provision in any law, but what he relied on was the Common law doctrine that if the debts due to the Crown are of equal degree to the debts due to a private citizen, then the Crown must have priority in recovering those debts as against the private citizen, and this takes us to the very interesting question that has been debated at the Bar as to what are the rights of the State after the Indian Constitution was enacted.
According to the Common law doctrine if the debts due to the Crown are of equal degree to the debts due to
