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TMI Blog1964 (11) TMI 8X X X X Extracts X X X X X X X X Extracts X X X X ..... in connection with the construction of the Mint and in that behalf it had to make a deposit of Rs. 50,000 as security for the due execution of the contract. In connection with the execution of the said contract, respondent No. 2 obtained a supply of building materials from the appellant. The appellant was unable to secure payment for the goods thus supplied by it, and so, it had to sue respondent No. 2 for recovery of the dues. In that suit, on the 18th April, 1949, the appellant obtained an order for attachment before judgment of Rs. 5,000 out of the aforesaid security deposit of Rs. 50,000. This deposit was lying with the Superintending Engineer, Calcutta, Central Circle No. 1. Subsequently, on the 16th June, 1950, the appellant's suit was decreed by the 5th Additional Subordinate Judge, 24 Parganas, for a sum of Rs. 12,275-9-0. This decree was put in execution by the appellant on the 14th February, 1952, in the court of the 7th Sub-Judge and in consequence, Money Execution Case No. 9 of 1952 was started. Four days thereafter, the Subordinate Judge issued an order for the attachment of a further sum of Rs. 7,275-9-0 out of the aforesaid security amount deposited by respondent No. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or adjournment on several occasions. On every such occasion, the Commissioner intimated to the Executing Court that respondent No. 1 would show cause why the amount in question should not be paid to the appellant. During the course of these proceedings, on June 17, 1953, the Certificate Officer addressed a letter to the Executing Court under rule 32 of Schedule II to the Public Demands Recovery Act (hereinafter called the " Recovery Act ") and asked the court to hold the amount subject to further intimation from him. This letter was received by the Executing Court on June 24, 953, and, in consequence, the Executing Court passed an order withholding payment to the appellant until further orders. Finally, on July 15, 1953, respondent No. 1 made an application to the Executing Court in which it claimed that the tax amount due to it from respondent No. 2 had a priority over the judgment debt due to the appellant from the same debtor, and so, the whole of the amount under attachment ought to be paid to it towards partial satisfaction of the said income-tax dues. A similar application was made on the 11th September, 1953, and this application gave material details in respect of the incom ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The High Court rejected the appellant's contention that the relevant provisions of the Recovery Act prevented a claim for priority made by respondent No. 1 in the present case. The appellant had also urged before the High Court that the claim for priority made by respondent No. 1 could no longer be sustained, having regard to the fact that it was inconsistent with the provisions of the Constitution of India. This claim, it was urged, was based on the common law doctrine of the Crown prerogative and it could not be claimed by respondent No. 1, inasmuch as it did not fall within the scope of article 372(1) of the Constitution. This contention has been rejected by the High Court, and the High Court has also held that the said claim cannot be said to be covered by any of the provisions of the Recovery Act and as such can be legitimately enforced by respondent No. 1. As a result of these findings, the High Court has discharged the rule which was issued at the instance of the appellant in the revision application preferred by it before the High Court under section 115 of the Code. The appellant then applied for and obtained a certificate from the High Court and it is with this certifica ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t in the particular case. Similarly, it was held that a judgment debt due to the Secretary of State in Council for India was in Bombay entitled to the like precedence for the reason that such debt is vested in the Crown, and when realised, fall into the State Treasury. Tracing the origin of this doctrine, the learned judge referred to the Commentary of Lord Coke on Littleton, where Lord Coke has put the matter in these words : " The King, by his prerogative, regularly is to be preferred, in payment of his duty or debt, before any subject although the King's debt or duty be the latter ". The learned judge then referred to some English decisions bearing on this point and concluded that " in England the right of the Crown to precedence does not arise out of any peculiar quality in the writ of extent. The reasoning of Lord Coke an Chief Baron Parker rests on a broader foundation, namely, that the destination of the debt, when recovered, is the State Treasury ". It is significant that Westropp J. considered the question from a larger juristic point of view and observed that the common law doctrine was " no novelty in India " and he referred to the rule enunciated by Yajnavalkya in tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ipal tax or local rate imposed under any enactment for the time being in force in any part of the State, the Income-tax Officer may proceed to recover the amount due by such process. This provision prescribes an alternative procedure for the recovery of the debts in regard to cases falling under it. Section 46(5) provides yet another alternative remedy ; it lays down that if any arrear is in respect of any income chargeable under the head " salaries " the Income-tax Officer may require any person paying the same to deduct from any payment subsequent to the date of such requisition any arrears due from such an assessee ; and it requires that such requisition shall be complied with. The Explanation to section 46 provides that it shall be lawful for the Income-tax Officer, if for any special reasons to be recorded he so thinks fit, to have recourse to any such mode of recovery notwithstanding that the tax due is being recovered from an assessee by any other mode. These provisions indicate the several remedies open to the Income-tax Officer to adopt in order to recover arrears of income-tax due from any assessee. In construing the relevant provisions of section 46, the High Courts in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... private debts due from the same debtor. His attention was drawn to a note of dissent on this point which had been struck by an earlier decision of the Madras High Court in Ramachandra v. Pitchaikanni, but he did not attach any importance to the opinion there expressed, because, in his opinion, " the weight of authority in favour of the recognition of the priority in question even in this country is so strong that this expression of doubt cannot help the petitioner to any material degree." In Bank of India v. John Bowman, the Bombay High Court had occasion to consider the same point. In dealing with the question, Chagla C. J. observed that the priority given to the Crown is not on the basis of its debt being a judgment-debt or a debt arising out of statute, but the principle is that if the debts are of equal degree and the Crown and the subject are equal, the Crown's right will prevail over that of the subject. It was urged before the High Court that the democratic set-up which had been ushered in this country by the Constitution was inconsistent with the doctrine of Crown priority, but the learned Chief Justice rejected this argument and observed that whatever may have been the h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion with limited powers of sovereignty delegated to it, and in the courts it was treated as a subject ; the second reason was that the right of Government to priority to a mortgage was not recognised in the mufassil which was evident by the express language of the Act which declared the land revenue to be a first charge on the land ; and, according to the court, such a provision would have been unnecessary, if by common law every debt due to the Crown was a first charge on the land. The third reason given by the court was that the court hesitated to import into places outside the Presidency towns the doctrine of the common law of England which would cause inconveniences to purchasers. Having set out these reasons, the court, however, took the precaution of adding that it was not necessary for the purpose of the appeal before it whether debts due to Government in this country have the same preference over private debts as Crown debts in England. This observation was made, because in the case with which the court was concerned, the hypothecation was in 1874, and the abkari revenue fell into arrear in a subsequent year, and it was held that even in England the lien of the Crown attach ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is validly altered, repealed or amended. This question can no longer be in doubt because of the decision of this court in Director of Rationing and Distribution v. Corporation of Calcutta. In that case, this court was called upon to consider the question as to whether the decision of the Privy Council in Province of Bombay v. Municipal Corporation of the City of Bombay, which had laid down a certain rule of interpretation, could be said to be " law in force " within the meaning of article 372(1). The majority judgment indicates that the rule of interpretation of statutes enunciated by the Privy Council amounted to law in force and as such, it continued to be in force even after the Constitution was adopted, with the result that, according to the majority opinion, the rule of interpretation of statutes that the State is not bound by a statute unless it is so provided in express terms or by necessary implication, is still good law. On this part of the decision, there was some difference of opinion. Sarkar J. held that the rule that the Crown is not bound by the provisions of any statute unless it is directly or by necessary implication referred to, is really a rule of constructi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to make it clear that in the present appeal we are dealing with a very narrow point, and that relates to respondent No. 1's claim that arrears of tax due to it have precedence or priority over money debts due to a private creditor from the same debtor. We think it necessary to emphasise this aspect of the matter, because the basic doctrine of Crown privileges as originally evolved by common law in England may lead to different categories of claims made in different circumstances and by different States in India ; and we want to make it clear that our present decision should be confined only to the narrow point with which we are directly concerned. Questions may arise as to whether the relevant common law doctrine was accepted in some Indian States. If it is shown that it was not, it may have to be considered whether article 372(1) would " assist the enforcement of the said doctrine in such States. One thing is clear that if the said doctrine was accepted as a part of the law in any part of the country, it will not cease to be operative, because it is included in the expression " law in force " under article 372(1), but the position would be different in respect of such parts of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... which Mr. Das Gupta has raised is that the doctrine of the priority of Crown debts cannot be enforced because it is specifically provided for and covered by the provisions of section 46 of the Income-tax Act and by the relevant provisions of the Recovery Act. He argues that if it is shown that the particular doctrine has become the subject-matter of legislative provision, it is the legislative provision which will prevail, and during the operation of the said legislative provision, the doctrine will remain in abeyance and cannot be enforced. In support of this argument, he has relied on the decision of the House of Lords in Attorney-General v. De Keyser's Royal Hotel Ltd. In that case, it was held that the Crown was not entitled as of right, either by virtue of its prerogative or under any statute, to take possession of the land or buildings of a subject for administrative purposes in connection with the defence of the realm without paying compensation for their use and occupation. One of the points which arose for decision in that case was, what was the effect of regulation 2 of the Defence of the Realm Regulations issued under the Defence of the Realm Consolidation Act, 1914, wh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g up proceedings. Clauses (a) to (f) of section 230(1) lay down the order of preference in which the payments should be made ; clause (a) gives the highest priority in that order to all revenues, taxes, cesses and rates, whether payable to the Government or to a local authority, due from the company at the date hereinafter mentioned and having become due and payable within the twelve months next before that date. Reading this section along with section 232(2) which provides that nothing in section 232 applies to proceedings by the Government, the Federal Court held that it was difficult to think of any reason for qualifying the priority in respect of the Crown debts specified in section 230(1)(a), if it was intended that other debts due to the Crown should enjoy unqualified priority. Spens C.J., who spoke for the court, contrasted the provision contained in section 230(1)(a) with the provisions of section 49 of the Presidency Towns Insolvency Act, 1909 (111 of 1909), and section 61 of the Provincial Insolvency Act, 1920 (V of 1920), and held that priority could be claimed by the Crown in winding up proceedings only as prescribed by section 230(1)(a) and within the limits specified ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cause it was held that though the proedure prescribed by the different Acts prevailing in different States was not uniform or even similar, the classification on which the application of the different statutes rested was justified inasmuch as the grouping of the income-tax defaulters into separate categories or classes Statewise was certainly a territorial classification which is based on an intelligible differentia and the subjection, for the purposes of the recovery of the certified demand, of each of such classes of defaulters to the same coercive process devised by their own State, on a consideration of local needs, for the recovery of their own public demands, cannot be regarded as bereft of a reasonable nexus or correlation between the basis of classification and the object sought to be achieved by the Indian Income-tax Act anymore than it can be so regarded with respects to the respective State laws. We have referred to this decision, because it brings out emphatically the real character of the provisions prescribed by section 46(2). Section 46(2) does not deal with the doctrine of the priority of Crown debts at all ; it merely provides for the recovery of the arrears of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Recovery Act seems to require that when any requisition is received by the Certificate Officer, he has to examine whether the demand in question is recoverable and whether the recovery by suit is not barred by law. On this prima facie examination, if he is satisfied that further action is justified, he proceeds to sign a certificate stating that the demand is due ; that is the effect of section 6. A certificate so issued is then served on the certificate-debtor under section 7, and section 8 prohibits private transfer of the immovable property of the certificate-debtor after the service of notice of any certificate has been effected on him under section 7. It is at that stage that the certificate-debtor is empowered to file a petition denying his liability under section 9 ; and his objections are heard under section 10. That, in brief, is the scheme of Part II with which we are concerned. There is one more provision of the Recovery Act to which we ought to refer, and that is section 26. This section deals with the disposal of proceeds in execution, and sub-section (1) of this section provides that where assets are realized, by sale or otherwise in execution of a certificate, they ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... which we are concerned. These provisions merely indicate the manner in which and the procedure according to which public debts should be recovered. There is no positive provision in respect of respondent No. 1's claim to recover arrears of tax. Rule 22 to which we have referred which corresponds to Order XXI, rule 52, of the Code of Civil Procedure, can no doubt be invoked to recover arrears of tax ; but that is because the procedure prescribed by the said rule applies to the recovery of public debts and tax arrears can be treated as public debts inasmuch as by virtue of section 46(2) of the Income-tax Act they become recoverable as arrears of land revenue. In our opinion, it is difficult to accept the argument that the application of the doctrine of priority of arrears of tax over private debts can be said to be displaced by any of the provisions of the Recovery Act. That being so, we must hold that the High Court was right in coming to the conclusion that respondent No. 1 was entitled to claim priorty in the matter of arrears of tax due from respondent No. 2 over the decretal debt due to the appellant from the same debtor. The result is, the appeal fails and is dismissed with ..... X X X X Extracts X X X X X X X X Extracts X X X X
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