SOMASUNDARAM MILLS PRIVATE LIMITED Vs. UNION OF INDIA

JUDGEMENT

(1.) THIS appeal is filed by Messrs. Somansundaram Mills (Private) Limited, Coimbatore, the third defendant in O. S. No. 182 of 1961, on the file of the learned Subordinate Judge of Coimbatore. The plaintiff, the principal respondent in this appeal as the Union of India, represented by the Commissioner of Income-tax Madras. The first defendant is a partnership firm represented by its partners, Somasundaram Chettiar and Kalaraja Chettiar. One Arunachalam Chettiar is the second defendant. The point in issue in this appeal is the nature of the priority to be given to the claims of the State over the claims of other money creditors.

(2.) THE facts necessary for the consideration of the present appeal can now be set down briefly. For recovery of arrears of income-tax due by the first and second defendants to the income-tax department seven certificates were issued under section 46 (2) of the Indian Income-tax Act, 1922, to the Collector of Coimbatore, by the authorities of the income-tax department for the purpose of recovery under the Revenue Recovery Act. THE income-tax, assessees were the owners of shares in Kaleeswarar Mills Ltd., Coimbatore. On receiving the certificates the Collector of Coimbatore issued prohibitory orders on March 30, 1957 to Kaleeswarar Mills Ltd. against transferring the shares. THE Collector also issued exhibit A-11 proceedings appointing the Tahsildar of Coimbatore as receiver of the shares in respect of which he had issued prohibitory orders to Kaleeswarar Mills. THE Tahsildar was directed to take immediate steps to sell the attached shares of the defaulters in auctions and report the result in due course.

(3.) THIS decision as well as the earlier decision of Mukharji J. in Murli Tahilram v. Asoomal and Co. draw a dividing line, even at an earlier stage before the actual payment to the decree-holder. If the court had passed an order for payment to the decree-holder before the application by the Government for claim to priority had been received even at that stage according to the Calcutta decision, the money ceases to belong to the judgment-debtor, and must be deemed to belong to the decree-holder; therefore the Crowns claim for priority could not be granted if it was made after the passing of the order. But in the present case such a situation does not need to be visualised; not merely has the court made a direction for payment of the money toe the decree-holder but it has also been paid to the decree-holder the Governments application was made to the executing court.