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Katragadda Ramakrishnaiah Vs. Repalle Co-operative Bank Ltd. and anr. - Court Judgment

LegalCrystal Citation
SubjectDirect Taxation
CourtAndhra Pradesh High Court
Decided On
Case NumberAppeal Against Appellate Order No. 26 of 1976
Judge
Reported in[1980]123ITR884(AP)
ActsIndian Income Tax Act, 1922 - Sections 46; Income Tax Act, 1961 - Sections 281 - Schedule - Rule 60; Andhra Pradesh Co-operative Societies Act, 1964 - Sections 70; Revenue Recovery Act - Sections 25 and 59; Andhra Pradesh Co-operative Societies Rules - Rule 49(6) and 49(8)
AppellantKatragadda Ramakrishnaiah
RespondentRepalle Co-operative Bank Ltd. and anr.
Appellant AdvocateT. Seshagiri Rao, Adv.
Respondent AdvocateC.V. Kanyaka Prasad, Adv. for respondent No. 1
Excerpt:
.....provisions of section 281 cannot be invoked or applied to mortgage executed prior to coming into force of said act - provisions of section 281 would not render mortgage in favour of bank void - next contention was sale held for recovery of arrears of income-tax would be subject to mortgage created in favour of bank - it answered that sale effected in favour of appellant would be subject to mortgage on basis of which award was passed in favour of bank - also in circumstances it cannot be said that rules are ultra vires powers of rule-making authority - appeal dismissed. - - 19. in the result all the contentions raised by the appellant fail and the civil miscellaneous second appeal is dismissed with costs......favour of the bank was not void by reason of the proviso to section 281 of the act, and that the sale effected on april 12, 1964, in favour of the appellant would not prevail over the mortgage in favour of the bank. accordingly, the objections raised by the appellant were overruled and the petition was posted for further steps.7. against the said order, the appellant preferred an appeal to the court of the subordinate judge, tenali. before the learned judge, several contentions were raised.8. the learned subordinate judge held that the date of attachment was material, that the attachment was actually effected on september 14, 1959, though it was issued on may 4, 1959, that the mortgage was effected in favour of the bank on june 9, 1959, long prior to the attachment and that as the sale.....
Judgment:

Ramachandra Rao, J.

1. The facts giving rise to this civil miscellaneous second appeal are as follows: One Kotammasu Sriramamurthy, the second respondent herein, was in arrears of income-tax to the tune of Rs. 1,518.81. For recovery of the said arrear amount, a certificate was issued under Section 46 of the Indian I.T. Act, 1922, by the ITO, Bapatla, to the Special Deputy Collector, Vijayawada, who sent proceedings to the Special Deputy Tahsildar, Nellore. The Special Deputy Tahsildar issued a notice of demand, Ex. A-3, dated March 30, 1959, under Section 25 of the Revenue Recovery Act, and this notice was served on the defaulter by affixture on the house. An attachment warrant, Ex. A-2, dated March 30, 1959, was issued on the same date, and this was also served by affixture.

2. While so, on June 9, 1959, the 2nd respondent executed a mortgage in respect of the said house in favour of the first respondent, the Repalle Co-operative Bank Limited, Repalle (hereinafter called ' the Bank '), for a sum of Rs. 2,500.

3. The 2nd respondent executed another mortgage, Ex. B-1, on August 20, 1959, in favour of one Gaddipati Venkateswara Rao. The attachment notice, Ex. A-2, was served on the 2nd respondent on September 13, 1959, and it was affixed on the house on September 14, 1959. The said attached property was brought to sale on November 26, 1959, January 25, 1960, April 29, 1960, and August 19, 1960, vide the sale notices, Exs. A-6 to A-9, but the sale was stopped for want of bidders. In the said sale notices it was mentioned that the property was being brought to sale subject to the mortgages in favour of the bank and G. Venkateswara Rao. The suit property was again brought to sale on September 14, 1960, and the sale was knocked down in favour of the second mortgagee, G. Venkateswara Rao, for Rs. 100, vide bidders' list, Ex. A-10. This sale was admittedly set aside, and the property was once again brought to sale on May 12, 1964. The upset price was fixed at Rs. 1,700. But in the sale notice, it was not mentioned that the property was being brought to sale subject to the mortgages. The appellant became the highest bidder for Rs. 2,000.

4. At this stage, the Taluk Co-operative Officer, passed an award, Ex. A-1, on May 28, 1964, in favour of the bank for recovery of the amount due under the mortgage, Ex. A-5, executed by the 2nd respondent in favour of the bank. On the basis of the said award, the bank filed a petition before the Special Deputy Collector, Vijayawada, for setting aside the sale under Rule 60 of Schedule II of the new I.T. Act, 1961, which had come into force by then. The Special Deputy Collector, by an order dated April 27, 1965, rejected the application of the bank, firstly, on the ground that the mortgage in favour of the bank was void under Section 281 of the new I.T. Act, 1961, as the mortgage was effected during the pendency of the proceedings for recovery of income-tax, that it was intended to defraud the revenue and that the sale was effected after proper publication. On the same date, the Special Deputy Collector passed an order, Ex. B-3, dated April 27, 1965, confirming the sale and issued a sale certificate, Ex. B-4, dated April 27, 1965, in favour of the appellant. On July 15, 1965, the Special Deputy Tahsildar, issued notice, Ex. B-5, to the appellant to take delivery of the property and actual delivery was effected on August 11, 1965, vide Ex. B-6.

5. The bank then filed a petition, E.P. No. 37/1973, on the file of the court of the Principal District Munsif, Repalle, for sale of the mortgaged property in execution of the award passed by the Taluk Co-operative Officer in claim No. 607/63-64 on May 28, 1964.

6. The appellant opposed the said petition on the ground that the mortgage in favour of the bank was null and void under Section 281 of the I.T. Act, 1961 (hereinafter called 'the Act'). The Principal District Munsif held that though the mortgage was effected during the pendency of the recovery proceedings, the mortgage having been made for valuable consideration and there being no evidence that the bank had notice of the pendency of the recovery proceedings the mortgage in favour of the bank was not void by reason of the proviso to Section 281 of the Act, and that the sale effected on April 12, 1964, in favour of the appellant would not prevail over the mortgage in favour of the bank. Accordingly, the objections raised by the appellant were overruled and the petition was posted for further steps.

7. Against the said order, the appellant preferred an appeal to the court of the Subordinate Judge, Tenali. Before the learned Judge, several contentions were raised.

8. The learned Subordinate Judge held that the date of attachment was material, that the attachment was actually effected on September 14, 1959, though it was issued on May 4, 1959, that the mortgage was effected in favour of the bank on June 9, 1959, long prior to the attachment and that as the sale was subsequent to the mortgage in favour of the bank, the said sale would not prevail over the mortgage which was for valuable consideration and without notice of attachment. In that view, the learned Subordinate Judge dismissed the appeal.

9. In this Civil Miscellaneous Second Appeal, Sri T. Seshagiri Rao, learned counsel for the appellant, sought to contend that the mortgage was effected during the pendency of the proceedings for recovery of arrears of income-tax and, therefore, the mortgage in favour of the bank would be void under Section 281 of the Act.

10. I do not think this contention can be accepted because by the date of the execution of the mortgage, Ex. A-5, dated June 9, 1959, the new I.T. Act of 1961 had not come into force. Therefore, the provisions of Section 281 of the Act cannot be invoked or applied to a mortgage executed prior to the said Act coming into force. It is not contended that the provisions of Section 281 of the Act have retrospective effect. Therefore, the provisions of Section 281 of the Act would not render the mortgage in favour of the bank void.

11. The next contention urged by the learned counsel for the appellant is that the order passed by the Special Deputy Collector, rejecting the application filed by the bank for setting aside the sale and the order confirming the sale, should have been challenged by way of suit within six months as required by the provisions of Section 59 of the Revenue Recovery Act, and the bank not having done so, the said order had become final.

12. In the instant case, the bank applied for setting aside the sale under Rule 60 of Schedule II of I.T. Act, 1961. That apart, the bank is not challenging the sale itself. What is contended by the bank is that the sale held for recovery of arrears of income-tax would be subject to the mortgage created in favour of the bank. Admittedly, the sale effected for recovery of arrears of income-tax would not be free from encumbrances subsisting on the property brought to sale. Moreover, the bank preferred a claim under the provisions of Sections 61 and 62 of the Andhra Pradesh Co-operative Societies Act, on April 1, 1964, prior to the sale in favour of the appellant and the award was passed on May 28, 1964, on the foot of the mortgage and, therefore, the sale effected in favour of the appellant would be subject to the mortgage on the basis of which the award was passed in favour of the bank.

13. It is then contended that the application filed by the bank for setting aside the sale was under Rule 60 of Schedule II of the Rules framed under the Act, and that the said application having been rejected, the bank should have preferred an appeal and not having done so the said order would become final.

14. But this contention also is devoid of any merit. The bank is not challenging the sale itself but it is only contending that the sale is subject to the mortgage created in favour of the bank, and that the bank is entitled to execute the award against the mortgaged property. Even assuming that the sale in favour of the appellant is valid, it would be subject to the mortgage effected in favour of the bank.

15. The last contention urged by the learned counsel for the appellant is that the civil court has no jurisdiction to execute the award.

16. There is no merit in this contention. Rule 49(6)(c) and (8) of the rules framed under the Andhra Pradesh Co-operative Societies Act, provide for execution of ah award by a civil court. Therefore, the civil court has jurisdiction to entertain the petition for execution of the award filed by the bank.

17. Sri Seshagiri Rao, learned counsel for the appellant, contended that Rule 49(6)(c) and Rule 49(8) of the Rules framed under the Andhra Pradesh Co-operative, Societies Act, are ultra vires the powers of the rule-making authority, as under the provisions of Section 70 of the Andhra Pradesh Co-operative Societies Act, only the Registrar can execute an award passed under Sections 61 and 62 of the said Act.

18. Section 70 of the Andhra Pradesh Co-operative Societies Act says that the award can be executed by the Registrar notwithstanding any other mode of recovery under the Act and, under Section 130, rules can be made for giving effect to the provisions of the Act, and, in exercise of the said power, Rule 49(6)(c) and Rule 49(8) have been made. In the circumstances, it cannot be said that the said rules are ultra vires the powers of the rule-making authority.

19. In the result all the contentions raised by the appellant fail and the Civil Miscellaneous Second Appeal is dismissed with costs.


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