P NAGAPPAN Vs. H A RAMASWAMY CHETTIAR

JUDGEMENT

(1.) THE fourth defendant is the appellant. THE plaintiffs laid an action on a mortgage deed dated 27th September, 1957, marked as exhibit A-1 in the case, impleading defendants 1 to 3, who were the persons interested in the hypotheca as mortgagors. As we shall presently state, it may not be quite necessary for us to treat at length on the pleading relating to the mortgage and the basis of the claim. In fact, the plaintiffs, as mortgagees, released, under exhibit A-2 dated 29th March, 1963, one portion of the hypotheca after obtaining the consideration therefor. THE result was that the plaintiffs came to the court on the foot of the mortgage deed (exhibit A-1) for sale of the suit property which was the property not released by them under exhibit A-2. THE plaintiffs were conscious of the fact that prior to their coming to court, the Commercial Tax Officer, Erode, publicised the suit property for a public sale on the ground that the mortgagors were in arrears of Central sales tax. THE plaintiffs' case is that the fourth defendant, in such a public auction held on 28th December, 1965, by the Commercial Tax Officer, purchased the same and obtained a sale certificate on 1st March, 1966, under exhibit B-3 of which exhibit B-4 is a carbon copy. THE plaintiffs' specific allegation is that the auction held by the Commercial Tax Officer, Erode, would not bind him and, in any event, as the fourth defendant is only a subsequent purchaser in the sense that the mortgage is prior to the purchase, their rights are unaffected and that they would be entitled to the usual mortgage decree as against the hypotheca without reference to the sale conducted by the State for the recovery of tax arrears of the mortgagors. It was in those circumstances, the plaintiffs, after issuing a registered notice dated 22nd January, 1966, under exhibit B-6, filed the action and sought for a mortgage decree.Defendants 1 to 3, obviously, remained ex parte. THE fourth defendant's contention is that he was not aware of any encumbrance over the suit property and as it was publicised under exhibit B-1 that the property was being sold free of encumbrances, he participated in the auction and purchased the same. In the alternative, he would plead that as the sale was held under the provisions of the Central Sales Tax Act, 1956 read with the Tamil Nadu General Sales Tax Act and the Tamil Nadu Revenue Recovery Act, the sale should be deemed to be free of all encumbrances and that his property should be held to be not burdened with the suit mortgage.

(2.) THE learned trial Judge, after framing the relevant issues, passed the usual mortgage decree and did not agree with the contentions of the fourth defendant. It is, in these circumstances, that the fourth defendant has come up in appeal.

(3.) THE only question agitated before us by the learned counsel for the appellant is that as the appellant was a purchaser in a public sale held by the tax recovery authorities for the recovery of arrears of tax from a defaulter and as the sale was in relation to the defaulter's property and as it was conducted under the provisions of the Revenue Recovery Act, then under section 42 of the said Act, the sale shall be deemed to be free of all encumbrances. If the process of the sale is thus understood and interpreted, the fourth defendant's title to the property is unimpeachable and should be held free from the suit mortgage. Mr. Sivamani, the learned counsel for the appellant, took us through the relevant provisions of the Central Sales Tax Act, 1956, the Tamil Nadu General Sales Tax Act and the Revenue Recovery Act and contended that the sale in the instant case should be one which was initiated, conducted and concluded under the provisions of the Revenue Recovery Act and that the tax arrears should, in the circumstances and in the light of the statutory provisions, be deemed to be public land revenue, and that, therefore, a sale to recover such land revenue, though held by a statutory functionary under the provisions of the Central Sales Tax Act, 1956 read with the Tamil Nadu General Sales Tax Act, should be upheld as being free from all encumbrances. As this matter relates to revenue and, particularly, sales tax, we requested the learned Additional Government Pleader, who is specially in-charge of sales tax cases, to assist us to arrive at a decision in this case. THE learned Additional Government Pleader as also the learned counsel for the appellant brought to our notice certain decisions. On a conspectus of the ratio in those decisions before us, we are unable to dislodge the finding rendered by the trial Judge that the fourth defendant should, in the circumstances, be held to have not purchased the property free from all encumbrances.Section 9(2) of the Central Sales Tax Act, 1956 provides that the authorities for the time being empowered to assess, reassess, collect and enforce payment of any tax under the general sales tax law of the appropriate State shall, on behalf of the Government of India, assess, reassess, etc., and for the purposes of the Act, the authorities may exercise all or any of the powers they have under the general sales tax law of the State. It is necessary, therefore, to see the Tamil Nadu General Sales Tax Act of 1959 to find out what are the powers which can be exercised by the taxing authorities under the Central Sales Tax Act, 1956. Section 24(2) of the Tamil Nadu General Sales Tax Act provides that any tax assessed, or any other amount due under this Act from a defaulter or person, etc. ...... may, without prejudice to any other mode of collection, be recovered as if it were an arrear of land revenue, etc. ..... Under section 29, a Commercial Tax Officer shall have the powers of a Collector under the Revenue Recovery Act (Tamil Nadu Act 2 of 1864), for purposes of recovery of any amount due under this Act. It is necessary, at this stage, to refer to the relevant provisions of the Revenue Recovery Act. THE preamble to this Act makes it clear that it is an Act to consolidate the laws for the recovery of arrears of revenue in the Madras Presidency. "Public revenue", as defined in section 1 of the Act, is referable to such revenue due on land and shall, for the purposes of the Act, be taken to include cesses or other dues payable to the State Government on account of water supply for irrigation, etc., and includes assessment, quit rent, ground rent or other charge upon the land payable to the State Government. Section 5 provides for the procedure which enables the Collector to recover arrears of revenue in the manner provided therein. To recover such arrears, the defaulter's movable or immovable property could be sold. THEn, the relevant section which is necessary for our consideration is section 42. That section says :