ASSOCIATED PICTURES LTD Vs. UNION OF INDIA

JUDGEMENT

(1.) The facts in this case are shortly as follows : On 23-2-1951 the petitioner obtained a decree against respondent No. 3, Messrs. Kali Films Ltd., for a sum of Rs. 19,900/- in suit No. 4122 of 1950 in the Original Side of this Court with interests and costs. On or about 15-11-1951, the said decree was transferred to the Alipore Court. It ultimately came to be allotted to the Second Court of the Subordinate Judge for execution. In execution, certain movables and machinery belonging to the judgment-debtor, respondent No. 3, were attached. On or about 15-1-1952, the petitioner obtained leave of the High Court for attaching certain goody in the possession of the Official Receiver. The attachment was effected on 21-1-1952, So far as the execution case was concerned, there were various proceedings. Claims were field and investigated, as also the applications made by the judgment-debtor were considered. Finally, upon application of the petitioner, the attached goods were sold through Messrs. Mackeizie Lyall & Co. inside the Court premises. The goods were sold on 14-3-1952. The judgment-debtor Messrs. Kali Films Ltd. owed Rs. 1,49,912/-as income-tax due to Government. On 21-3-1951, a certificate under Section 46(2) of the Indian Income-tax Act had been forwarded to the Collector of 24-Parganas for recovery of Rs. 16,684-15-0 on account of arrears of income-tax for 1947-48 and a certain case had been started. On 17-3-1952, the Certificate Officer, 24-Parganas, sent a letter to the executing Court, namely, the Second Subordinate Judge of Alipore, requesting the Court to hold the sale proceeds and not distribute the same and to make over to the certificate officer the amount recovered by sale of the articles which were sold as mentioned above. It was made clear in the letter that this was for income-tax due front Messrs. Kali Films Ltd. and that this was being done in execution of the certificate relating to dues of income-tax by that company. It appears that on 26-5-1952, the actual cheque was received by the Court from Messrs. Mackenzie Lyall and Co. for the sum of Rs. 6,403-14-3. On 5-6-1952, there are two orders passed by the executing Court, one stating that the amount received should be credited towards the decree, and the very next order of the same date stating that in view of the letter of the certificate officer dated 17-3-1952, the sale proceeds should be held up until further orders. It appears that for nearly two years thereafter nothing of importance happened until 17-12-1954, when an application was made by the Union of India through the Commissioner of Income-tax, West Bengal, before the executing Court, purporting to be under Section 151 of the Code of Civil Procedure, for determination of priority, and payment of the money to the Union of India, in respect of arrears of income-tax due from the judgment-debtor. The matter was considered by the second Court of the Subordinate Judge at Alipore and by his judgment dated 24-1-1955 the learned Subordinate Judge held that the Union of India was entitled to priority for payment of income-tax, and that the money should be paid over to the Union of India. It is against this order that this Rule came to be issued on 28-2-1955.

(2.) Mr. Sinha appearing on behalf of the petitioner argues that this application under Section 151 of the Code of Civil Procedure was entirely misconceived and that the order made by the learned Subordinate Judge was entirely without jurisdiction and void. He has also argued that in any event the Union of India had no priority in respect of income-tax, firstly because in India the rule of priority of Crown debts should not be followed, and secondly because the money having been credited to the decree obtained by his client, it had ceased to be the money of the judgment-debtor and therefore there could be no question of priority. The argument really can ho divided into two parts. The first part relates to the substantive right of the Union of India as regards priority of its claim for the payment of income-tax, which has been duly assessed under the Indian Income-tax Act, and had been properly quantified and finalized. The second aspect of the question relates to procedure.

(3.) The question is as to what procedure must be followed in order to enforce this right of priority, provided that the Union of India is entitled to priority in respect of claims relating to income-tax. With regard to this question of procedure, we have to deal with two aspects again. The first aspect is as to whether an application under Section 151 lies. In other words. if the money is in Court, which may either be the original Court or the Court to which the decree had been transferred for execution, then, is it open to the Union of India to make an application under Section 151 to such a Court for payment of its dues? The other aspect of the question is as to whether it can do so under the Public Demands Recovery Act, that is to say, if there is a demand for income-tax in respect of which a proper certificate has been issued and a proper procedure has been taken under the Public Demands Recovery Act, then could any step be taken to enforce this right of priority and if so. what would be the proper procedure.