1. The question involved in this second appeal is whether a sale held for recovery of penal assessment imposed under the Madras Land Encroachment Act III of 1905 prevails over prior encumbrances.
2. A sum of Rs. 1,182 and odd was the assessment and penalty imposed by the Government for the encroachments on certain lands belonging to the Government by one Venkata Satteyya. The plaintiff in the suit had obtained two mortgages from Satteyya on his properties and had filed a suit and obtained a final decree on foot of those mortgages. As the Government was bringing the property to sale under the provisions of Madras Act III of 1905 read with Madras Act II of 1864 the plaintiff protested that the land should be sold subject to his mortgages. But the Government ordered the sale to be held free of all prior encumbrances. The plaintiff then paid the amount under protest and filed the present suit for recovery of the sum. If a sale for penal assessment and penalty imposed under Madras Act III of 1905 does not prevail over prior encumbrances of the defaulter's properties, then the plaintiff is entitled to recover the sum which he paid under protest in order to save the property from being sold for such penal assessment and penalty. Section 9 of Madras Land Encroachment Act III of 1905 lays down:
The amount of assessment and penalty imposed under this Act on any person unauthorisedly occupying any land shall be deemed to be land-revenue and may be recovered from him as arrears of land-revenue under the provisions of the Madras Revenue Recovery Act, 1864, or the Madras City Land Revenue (Amendment) Act, 1867, as the case may be.
This section provides that the amount of assessment and penalty imposed under this Act should be deemed to be land revenue and it provides further that such amount may be recovered as arrears of land revenue under the provisions of the Madras Revenue Recovery Act. Where the Legislature says that the amount of penalty and penal assessment shall be deemed to be land revenue, though it is not in reality land revenue, we must take it that it is land revenue for the purposes of the Act. The Judicial Committee had to consider a similar case under the Indian Income-tax Act. By Section 43 of the Act:
Any person employed by or on behalf of a person residing out of British India, or having any business connection with such person, or through whom such person is in the receipt of any income, profits or gains upon whom the Income-lax Officer has caused a notice to be served of his intention of treating him as the agent of the non-resident person shall, for all the purposes of this Act, be deemed to be such agent.
The Judicial Committee say this in Commissioner of Income-tax, Bombay Presidency v. Bombay Trust Corporation, Ltd.:
Now when a person is 'deemed to be' something, the only meaning possible is that whereas he is not in reality that something the Act of Parliament requires him to be treated as if he were.
Therefore though the penal assessment and penalty are not in fact land revenue, we must take them to be land revenue. The next portion of Section 9 makes the matter further clear by providing that the amount may be recovered as arrears of land revenue under the provisions of the Madras Revenue Recovery Act. Thus, the amount is to be and revenue and may be recovered as arrears of land revenue.
This being so, it is difficult to escape the conclusion that all the consequences which result in the case of a sale under the Revenue Recovery Act for arrears of land revenue strictly so called also result in the case of a sale for recovery of penal assessment and penalty levied under Madras Act III of 1905.
3. Reliance is placed by Mr. Raghava Rao upon various decisions of this Court which have considered the effect of sales under the Abkari Act or the Income-tax Act--whether they pass the property free of prior encumbrances or only subject to the encumbrances then existing. The earliest of these cases is the case of Ramachandra v. Pitchaikanni I.L.R.(1884) Mad. 434. The sale was held under the provisions of Section 10 of the Madras Abkari Act which provided that the Collectors may proceed against abkari renters or other persons licensed under the Act for the recovery of arrears due by them 'in like manner as for the recovery of arrears of land revenue'. Turner, C.J., and Muttuswami Aiyar, J., held that such a sale did not pass the property free of prior encumbrances. They held that it was only the procedure laid down in Madras Act II of 1864 that was to be followed for recovering arrears due by an abkari renter and that a sale under the Abkari Act did not carry the consequences provided by Section 42 of the Madras Revenue Recovery Act, II of 1864. Emphasis was laid on the expression 'in like manner as for the recovery of arrears of land revenue'. After referring to the various sections of Madras Act II of 1864 the Judges said this:
Section 42 declares that all lands brought to sale on account of arrears of revenue shall be sold free of all encumbrances. Taking these sections together, the intention is clear that the purchase is free of prior encumbrances only when the arrear is of public revenue of which the land is the first security by statutory declaration....The question is--Has Section 42 been extended by Section 52 to sales for arrears of Abkari revenue? We must certainly answer it in the negative. The expression, 'In like manner as for the recovery of arrears of land revenue', indicates only that the same procedure is to be followed, and the language used in Section 52 is to the same effect.
In Ibrahim Khan Sahib v. Rangasami Naicken I.L.R.(1905) Mad. 420 Benson and Boddam, JJ., followed the decision just cited and held that a purchase at a sale for arrears due by an Abkari renter did not pass the land free of encumbrances as in the case of a sale for arrears of land revenue. In the old Abkari Act of 1864 the provision was that the arrears may be recovered in like manner as for recovery of arrears of land revenue. In the Abkari Act I of 1886 the provision was that abkari arrears may be recovered as if they were arrears of land revenue--see Section 28 of Madras Act I of 1886. It was held that this change did not affect the applicability of the decision in Ramachandra v. Pitchaikanni (1884) I.L.R. 7 Mad. 434.
4. Cases of sales under the provisions of the Income-tax Act came up for decision more than once. In Kadir Mohideen Marakkayar v. Muthukrishna Aiyar : (1902)12MLJ368 , this Court, had to deal with the provisions of the Income-tax Act then in force (Act II of 1886). Under Section 30 of that Act:
The Collector may in default of payment of the tax recover the amounts as if they were arrears of land revenue or by any process applicable to the recovery of a municipal or local tax or may pass an order for recovery of the amount from the defaulter, and such order may be executed as a decree for payment of money passed under the Civil Procedure Code.
Act II of 1886 is an Imperial Act and the question was whether a sale under Section 30 of that Act which provided that the tax may be collected by the Collector as if it was arrear of land revenue passed the property free of encumbrances. The Judges applied the principle of the decision in Ramachandra v, Pitchaikanni1, and pointed out that the difference in the wording between the provisions of the Income-tax Act and the Abkari Act was merely verbal. They say this at page 233:
We are clearly of opinion that Section 30 of the Income-tax Act has not the effect of converting income-tax into an arrear of land revenue due in respect of the land which may be brought to sale for realisation of the income-tax, but that its effect simply is to extend the procedure prescribed by (Madras) Act II of 1864 and (India) Act I of 1890, to the recovery of arrears of income-tax.
5. Section 46(2) of the Indian Income-tax Act of 1922 provides:
The Income-tax Officer may forward to the Collector, a certificate under his signature specifying the amount of arrears due from an assessee, and the Collector, on receipt of such certificate, shall proceed to recover from such assessee the amount specified therein as if it were an arrear of land revenue,
and the same result would follow even in respect of sales held under the present Income-tax Act.
6. The question has next been considered with reference to loans granted under the Land Improvement Loans Act (XIX of 1883). Section 7 of that Act provides for the recovery of the loan. It was held by this Court in Sankaran Nambudripad v. Ramaswami Aiyar : (1918)34MLJ446 , that a sale held under Section 7 (c) of that Act passed the property free of encumbrances. This is a decision on the other side of the line.
7. Mr. Raghava Rao urges that the decision in Ramachandra v. Pitchaikanni I.L.R.(1884) Mad. 434 and the cases following it, proceed upon the principle that it is only where a land is sold for arrears of land revenue accruing on that very land, that the sale passes the property free of encumbrances and not where the sale is for recovery of an amount due on another land of the landholder. In Secretary of State for India in Council v. Pisipati Sunkarayya : (1910)20MLJ794 , Miller and Munro, JJ., decided that for the arrears of land revenue due on the land included in one patta, the land in another patta in another village may be sold free of encumbrances. They pointed out that under Section 5 of the Revenue Recovery Act all the lands and buildings of the defaulter are a charge. This view of Miller and Munro, JJ., was followed by this Court in Sankaran Nambudripad v. Ramaswami Aiyar : (1910)20MLJ794 . Seshagiri Aiyar, J., says at page 700:
During the course of the argument I felt some little doubt as to whether the decision of Justices Miller and Munro in The Secretary of State for India in Council v. Pisipati Sunkarayya : (1918)34MLJ446 , was right. But on closely examining the sections of the Revenue Recovery Act, I feel that the effect of Section 42 is not only to discharge pre-existing incumbrances upon the property on which the arrear is due but also pre-existing incumbrances upon every property which is brought to sale for arrears of revenue due from the defaulter.
See also Gunnam Dorayya v. Ayyama Charrulu : AIR1915Mad481 .
8. Therefore, though the amount which is sought to be recovered did not accrue in respect of the land which is now sought to be proceeded against, the Government has the right to proceed against that property and to enforce all the rights given to them under the Madras Revenue Recovery Act. No doubt in the case of arrears under the Abkari Act or the Income-tax Act, they do not accrue on any land of the defaulter. So, likewise in the case of penal assessment and penalty, they do not accrue on the lands which are now sought to be proceeded against.
9. Once the amount levied as penal assessment and penalty is to be deemed to be land revenue and is to be recovered as such, it is impossible to come to any other conclusion than that a sale of the defaulter's property for such an amount passes the property free of all encumbrances.
10. Mr. Raghava Rao then argued that if it is so, the Legislature need not provide that the amount may be recovered as arrears of land revenue. He says that these words will be superfluous if under the expression 'shall be deemed to be land revenue', the amount in question became land revenue. I think the Legislature used the expression 'and may be recovered as land revenue' only for the purposes of further clarification and that the addition of this expression does not cut down the effect to be given to the expression 'shall be deemed to be land revenue.' All the decisions referred to by Mr. Raghava Rao proceed upon the wording of the provisions of the particular Acts all of which have this common feature that the arrears due under these Acts were to be recovered as if they were land revenue or in the like manner as land revenue. But here the provision is 'that the amount shall be deemed to be land revenue' and 'may be recovered as land revenue' and not 'in the manner provided for the recovery of land revenue.' Therefore the Legislature has expressed in the clearest terms possible that for the purpose of recovery, penal assessment is land revenue and if this is so, Section 42 of Madras Act II of 1864 applies.
11. Before closing the judgment, it is only necessary to say that Madras Act III of 1905 was necessitated by the decision of the Full Bench of this Court in Madathapu Ramayya v. The Secretary of State for India in Council (1903) 14 M.L.J. 37 : I.L.R. Mad. 386 which held that the provisions of Madras Act II of 1864 could not be applied to recovery of penalties and other amounts of like nature from persons who were not landholders and who were treated by the Government as trespassers. It was said that the impost was not land revenue, that the trespasser was not a landholder within the meaning of the Revenue Recovery Act, that he was only in improper possession of Government property and that his act was a wrongful act and a trespass. It is because the Full Bench held that the impost in such cases was not land revenue that Madras Act III of 1905 was passed and the acceptance of Mr. Raghava Rao's argument will be to defeat one of the main purposes of the Legislature in enacting Madras Act III of 1905.
12. I hold that Section 9 equates the penal assessment to land revenue and also provides that it may be recovered as land revenue. This being so, the view of the lower appellate Court is wrong. I reverse the decision of the lower appellate Court and restore that of the District Munsif with costs here and in the lower appellate Court.
C.R.P. No. 204 of 1941.
13. In view of my decision in the second appeal, the civil revision petition does not arise. It is dismissed without costs.
14. Leave refused.