TMI Blog1955 (6) TMI 14X X X X Extracts X X X X X X X X Extracts X X X X ..... nable to obtain payment for the goods supplied and they brought a suit for the recovery of their dues. In that suit, they obtained an order for an attachment before judgment of ₹ 5,000 out of the security deposit of ₹ 50,000 made by Messrs. R.K. Das and Co. and lying in the hands of the Superintending Engineer, Calcutta Central Circle No. 1. The order for attachment was made on April 18, 1949 and the attachment was in due course made. Subsequently, on June 16, 1950, the Petitioners' suit was decreed by the 5th Additional Subordinate Judge, 24-Parganas, for a sum of ₹ 12,275-9-0. On February 14, 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 ₹ 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 ₹ 5,000 already attached before judgment. On receipt of that communication, the Superintending Engineer placed a further sum of ₹ 7,275-9-0 under ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tificate Officer addressed a letter to the executing court under Rule 22 of Schedule II to the Public Demands Recovery Act and asked the court to hold the amount, subject to further intimation from him. That letter was received by the executing court on June 24, 1953 and an order withholding payment until further orders was made. Previously, the case had been adjourned to the 8th July and when that date came, there was again an application by the Union of India for a week's time. The application was granted. The case was then adjourned to the 15th July and on the 15th July the Union of India, as represented by the Commissioner of Income-tax, made an application by which they claimed to be entitled to receive the whole amount of ₹ 12,275-9-0 towards satisfaction of the income tax dues of R.K. Das and Co. and in their right of priority in respect of a tax-debt. A further and a fuller application to the same effect was filed on September, 11. 1953, in which the details of the income-tax demand against R.K. Das and Co. were given. It was stated that the demand was for a sum of ₹ 81,537-8-0 and it was on account of the assessment years 1946-47 and 1947-48. In both the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the amount. That letter referred specifically to Rule 22 and its contents followed literally the language of the rule. In those circumstances, there was clearly an attachment of the amount by the Certificate Officer and whether the matter be regarded as governed by Order 21, Rule 52 of the Code of Civil Procedure or Rule 22 of the Rules framed under the Public Demands Recovery Act, the learned Judge, in whose custody the amount was, was by law required to determine the question of priority raised before him. It is therefore not necessary at all to complicate matters by importing Section 151 of the Code. 7. I must say, however, that the responsibility for introducing Section 151 of the Code lies on the Union of India whose lawyers invoked the section before the learned Judge and gave cause to the Petitioners to raise the procedural point before us. Why anybody's thoughts should have turned to Section 151 at all it is difficult to say, but perhaps, upon discovering the case of Manikkam Chettiar v. The Income-tax Officer, Madura South I.L.R. (1938) Mad. 744 , where in similar circumstances a bare application under Section 151 succeeded, the lawyers thought that the Gover ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he certificate-holder and any other person, not being 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. What the Union of India did by the two applications filed on July 15, and September 11, 1953, was that they appeared before the executing court through the Commissioner of Income-tax, raised the question of their priority and prayed that it might be determined in their favour. I may leave aside Rule 52 of Order 21, because the attachment for the realisation of the tax-debt was not made under the Code, nor through the court of the learned 5th Subordinate Judge or any other court, though I do not decide that those facts would exclude the operation of the rule. I exclude R ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... se even against unsecured creditors, Crown claims could prevail over private claims only if they met at the same point of time. Taken as a question of fact, the question whether priority in respect of Crown debts has or has not been a part of the law of India admits of only one answer. There was a fairly exhaustive citation of authority before us from which it clearly appeared that the principle of the priority of Crown debts had been accepted and given effect to by the courts whenever it had been invoked and that instances without number could be found among the decisions of the Calcutta, Bombay, Madras, Allahabad and Rangoon High Courts. I do not consider it necessary to burden this judgment by setting out those citations. Mr. Das Gupta who appeared for the Petitioners relied on a single decision of the Madras High Court in the case of Ramachandra v. Pitchaikammi I.L.R. (1184) Mad . 434, where also all that the learned Judges said that they would hesitate to import into places outside the Presidency-towns the doctrine of the common-law of England relating to Crown debts. But it was not necessary to decide the matter in the case before them, inasmuch as even if the doctrine appli ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... name for priority, was limited to such property and did not extend to the moveables of the debtor. In respect of the moveables of the debtor therefore, the section intended the State to be in the same position as other creditors. The second implication of the section, it was said, was that apart from the statute-made priority, the State had no other, because if it had, the provision freezing the immoveable property and creating a first charge thereon would be redundant. In my view, the first branch of the argument proceeds on a total misconception of what priority means. There is nothing like priority as between different kinds of property owned by the debtor: the priority contemplated by the principle of the priority of Crown claims a priority vis-a-cis and over claims of other creditors, though only unsecured creditors. I find it impossible to see how any indication of any kind as to the existence or non-existence of the Crown's or the State's right to priority can be found in the provisions of Section 8 of the Public Demands Recovery Act. The first paragraph of the section virtually reproduces Section 64 of the Code of Civil Procedure, except that it is limited to immove ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s, can have any bearing on the existence or otherwise of the State's right of priority in respect of debts due to it, I find it impossible to see. 11. The third argument which was also based upon the Public Demands Recovery Act is equally untenable. It was said that the effect of the Act was to limit the State to its provisions as respects the recovery of public demands and necessarily recovery of income-tax and the reason given for the contention was that if, for what could previously have been done under a prerogative right, a legislative provision was subsequently made, the prerogative right could no longer survive. Strong reliance for the proposition was placed on the well-known case of Attorney-General v. D. Keyser's Royal Hotel Limited (1920) A.C. 5081 . I am unable to see what application the decision cited has in the present case and how it can be said that the whole or any part of the prerogative right, previously enjoyed, had not been codified in the provisions of the Public Demands Recovery Act. The case cited dealt with the King's power to acquire the property of a subject in times of emergency and the question was whether a particular acquisition ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... I have already pointed out, is the Public Demands Recovery Act limited to the recovery of State debts. I cannot therefore agree that the principles of D. Keyaer's Hotel (Supra) case invoked by the Petitioners have any application. I cannot see that either the Income-tax Act or the Public Demands Recovery Act takes over and makes exclusive provision for the Crown's or the State's right to recover income-tax which could previously be recovered in exercise of some prerogative right. Indeed, as I have endeavoured to point out, the Public Demands Recovery Act only deals with the particular method of recovering among other dues, income-tax, if the Income-tax Officer be minded to resort to Section 46(2) of the Income-tax Act, but it does not bear upon the priority attaching to tax-claim dues which is quite independent of the method of their recovery. In my opinion, the third ground urged by the Petitioners must also fail. 12. It was lastly contended, rather half-heartedly, that whatever might have been the position before the commencement of the present Constitution of India, the principle of priority attaching to debts due to the State was no longer a part of the law o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt of the day as representing the State. The old explanation of the Crown's priority, given in Coke on Littleton, is that it attaches to certain debts, because they are debts due to flow into the public treasury. The justification of the priority, therefore, is that the debts to which it attaches feed the public funds and the reason why they are preferred to debts owed to private individuals is that the needs of the State are Supreme and the necessity of keeping the State functioning is the first necessity of any organised society. This conception of the priority of State debts is equally valid in the case of States which are republican in form, because they also require funds to maintain themselves and to perform the high functions which are among the responsibilities of any State. I do not therefore think that the principle of the priority of State debts can be said to be repugnant to the provisions of our Constitution. The principle must therefore 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. 13. On behalf of the Union of India Mr. Meyer contended that besides that Article 372(1) imp ..... X X X X Extracts X X X X X X X X Extracts X X X X
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