RAMJI LAL RAIS Vs. INCOME TAX OFFICER

JUDGEMENT

(1.) THE Income-tax Appellate Tribunal Delhi, has, at the instance of the assessee, referred a statement of the case to this court for its opinion on the three questions given below :

(2.) FROM the statement I find that the assessee advanced a loan of Rs. 1,50,000 to two brothers, Wahiduddin and Bashiruddin on a mortgage of the property at a certain rate of interest. In 1930 the assessee field a decree for Rs. 2,27,699 made up as follows : <FRM>JUDGEMENT_167_ITR49_1963Html1.htm</FRM>

(3.) I shall take up the question, No. 1 first. My answer to it is an emphatic no&quot;. Before I give reasons I should mention that his contention was not advanced on behalf of the assessee in the earlier assessment proceedings terminating with this courts order in I. T. R. No. 117 of 1953, referred to above. I do not treat this fact as a bar, but the fact that it did not occur to the assessee or his counsel to advance this plea in the earlier proceedings shows that there is not much force in it. Section 14(7) of the Encumbered Estates Act simply provides for the passing of a simple money decree by the special judge after ascertaining the amount due from the debtor-applicant to the creditor. It is deemed to be a decree of a court of a court of competent jurisdiction but not capable of being executed within Uttar Pradesh except as provided in the Act : vide sub-section (8). Section 18 states the effect of the special judges findings. It is to extinguish the previously existing rights, if any, of the claimant (e.g. the creditor), together with all rights, if any, mortgage or lien by which the same are secured and... to substitute for those rights a right to recover the amount of the decree in the manner and to the extent hereinafter prescribed. What is extinguished by the decree is not the right of the creditor to recover the money found due to him from the debtor but simply his right as a mortgagee or lienholder. The debt due to him is not extinguished; it is only the right to the security that is extinguished. The debtor does not cease to be his debtor and of course there is no question of the State being substituted as a debtor. The State is not even referred to in either section 14 or section 18 and I fail to comprehend how the effect of these two provisions can be said to be to substitute in place of the debtor the State of U. P., which is not mentioned in them even impliedly or indirectly. The effect of the decree is simply to alter the previously existing right of the creditor as against the debtor. His right over the money due from the debtor to him remains intact and so also does the debtors obligation to pay the money; only the mode of realising the debt is altered. Chapter V of the Act contains provisions about the execution of a simple money decree passed by the special judge. Section 22 requires the Collector to allow the debtor two months within which to pay into court the whole or any part of the decretal amount; this provision is important in two respects. One is that after the passing of the decree under section 14 the person against whom it is passed is still designated as the debtor. The word debtor is not defined, and given an artificial meaning in the Act; it means the person from whom a debt is owning. Even after the passing of the decree under section 14, the original debtor in his place as a consequence of the passing of the decree and that the State certainly has not become the debtor. The result is that the liability to satisfy the decree continues to rest on the original debtor and is not transferred to the State. If the debtor pays into court the full decretal amount section 23 requires the Collector to discharge all his debts; this confirms that he retains the liability to discharge the debt. Section 24 authorises the Collector to realise the value of the debtors property other than proprietary rights in land and to expend it in discharging the decretal debts. It is only when a creditors decree is not satisfied in this manner that he is given bonds by the State to the extent to which his decree remained unsatisfied and the debtor is required to pay certain instalments to the State. Even when this is done it cannot be said that the State has become a debtor of the creditors in place of the original debtor against whom the decree had been passed. Moreover, this is not the question referred to us; the contention advanced on behalf of the assessee was not that the State has become a debtor in place of Wahiduddin when it issued bonds to the assessee but whether it became in Wahiduddins place when the special judge passed a decree against him and in the assessees favour.