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 ofIndia had no priority in respect of income-tax, firstlybecause in India the rule of priority of Crown debtsshould not be followed, and secondly because themoney having been credited to the decree obtainedby his client, it had ceased to be the money of thejudgment-debtor and therefore there could be noquestion 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, whichhas been duly assessed under the Indian Income-taxAct, 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.
4. Both aspects of this question have been dealt with in a Bench decision of this Court. Messrs. Builders Supply Corporation v. Union of India, : 28ITR97(Cal) . The learned Chief Justice has dealt with the question of priority exhaustively and has come to the conclusion that under the Indian Law as it now stands, there is a priority for Crown debts, which of course mean debts of the Union. The learned Chief Justice has dealt with another single Bench decision of this Court of Mukherji, J., in Murli Tahilram v. T. Asoomal & Co., : AIR1955Cal423 , and has not agreed with the conclusions reached by Mukherji J. On this point, however, it is unnecessary for me to deal with the authorities, because they have been exhaustively dealt with in the Bench decision, which is binding on me. It is, therefore, sufficient to hold that following that decision I must hold that the Crown, that is to say, the Union of India, is entitled to priority for the realisation of income-tax which has been properly assessed and which remained due. The second aspect is the question of procedure. On this point there is some conflict between the authorities. The question as to whether an application could be made under Section 151 of the C. P. Code came up for decision in the case of Manickam Chettiar v. Income-tax Officer, Madura, ILR (1938) Mad 744: (AIR 1938 Mad 360). The case first of all came up before Varadnchariar, J.. The learned Judge had some doubts as to whether an application could be made under Section 151, by a person not a party to the proceedings, for payment of arrears of revenue. The matter was referred to a Full Bench presided by Leach C. J. The judgment of the Full Bench was that such an application did lie. The decision was primarily based on reasons of convenience. The learned Chief Justice held that in a case where the claim for revenue was finalised and was not disputed or was indisputable, there was no point in relegating the Crown to a suit, because in such a suit there would be no defence and it will merely cause delay. Varadachariar J. who was one of the Judges sitting in the Full Bench, stated in his judgment that he was not still satisfied but was not prepared to dissent. This aspect of the matter has also been dealt with by the learned Chief Justice in : 28ITR97(Cal) (supra) and he said as follows :
'Had it been necessary to decide whether after a decree-holder had attached some money belonging to his judgment-debtor and caused it to be brought to Court, the State might obtain it for the satisfaction of a public debt by a simple application under Section 151, I would have required strong reasons to agree with the view taken in the Madras case.'
5. With respect, I not only share the doubts expressed by the learned Chief Justice, but I am myself firmly convinced that no such application lies. The reasons given in the Madras Full Bench case mentioned above do not appear to me to be impressive, It has been pointed out by Leach C.J., that a suit would involve useless delay. If that be a reason, them the Union can take recourse to the more expeditious remedy under the Public Demands Recovery Act. I find no reason however, why in the garb of doing justice, strangers should be allowed to make application in a suit or proceeding for the payment of money. It is said that the income-tax having been assessed may be considered to be an amount which is not disputed or indisputable. Supposing that there had been an assessment, against which an appeal had been preferred, but no stay of realisation had been granted. It cannot be said that the income-tax in such a case was undisputed or indisputable. Where a certificate is issued, the certificate-debtor has many opportunities of preferring his objections. No such opportunities are provided in an application under Section 151 of the Code of Civil Procedure.
6. If the matter stood there, then this petition might have succeeded. But there are other matters to be considered. As I have mentioned above, the application which was stated to have been made under Section 151, was preceded by the issue of a certificate under Section 46(2) of the Indian Income-tax Act and a certificate case was started. In that case, at a certain stage, the certificate officer intimated to the executing Court that the monies realised by the sale should not be disbursed but paid to the certificate officer. This request is under Rule 22 of Schedule II of the P.D.R. Act That Rule runs as follows :
'Where the property to be attached is in the custody of any court or public officer the attachment shall be made by a notice to such Court or officer, requesting that such property, and any interest or dividend becoming payable thereon, may be held subject to the further order of Certificate-officer by whom the notice is issued: Provided that, where such property is in the custody of a Court, any question of title or priority arising between the certificate-holder and any other person, not being the certificate-debtor, claiming to be interested in such property by virtue of any assignment, attachment or otherwise, shall be determined by such Court.'
7. I have no doubt that the request made by the certificate officer on 17-3-1952, was in compliance with this rule. Mr. Sinha appearing on behalf of the petitioner his attacked it from many angles. Firstly, he says that an order under Rule 22 should be in the prescribed form, and he has drawn my attention to form No. 17. hE SAYS THAT these forms are statutory forms and any order under rule 22 should be in such form. That Rule 84 lays down that the forms prescribed in the appendix shall be used with such variation as circumstances may require. Therefore, the forms are by no means inflexible In this particular case, there has been a slight variation, but in substance it may be taken to be in compliance with Rule 22, because there no other rule under which the notice could be issued. By the notice, the certificate officer has requested the executing Court to hold the money, and I do not see why it should not be taken to be a valid notice under Rule 22.
8. The next point that is taken is that the money was at that time not in Court and therefore there could not have been a notice under Rule 22. As I have mentioned above the goods were sold on 14-3-1952 by M/s. Mackenzie Lyall and Co. under orders of the court within the court premises. Since the property was sold, the sale proceed which was held by the auctioneers, must be deemed to be money held by the court. In fact, the execution was proceeding, the goods had been under attachment and the court was selling the same through an auctioneer. It would be futile to suggest that at this point of time either the goods or the money was not in the custody of the court. That being the position, it is only necessary to go back to the Division Bench judgment of this court, : 28ITR97(Cal) (sapru), because there, a similar situation arose and the case was decided on the strength of it. There also a certain application made which was stated to be under Section 151 of the C. P. Code. While the learned Chief Justice was extremely doubtful as to the legal position in respect of the application stated to be under Section 151, he has pointed out that an order was made by the certificate officer under Rule 22 of the Rules and the properties attached were in the custody of a Court. The learned Chief Justice pointed cut that under such circumstances, the rule itself provided that the custody-Court should decide the priority and it was unnecessary to make any application under Section 151, and even if such an application was made it might be ignored. There being an attachment by the certificate officer in exercise of powers granted under Rule 22 of Schedule II of the P.D.R. Act, the executing Court was quite in order in deciding the priority between the income-tax dues and the dues of the petitioner, and he rightly came to the conclusion that income-tax dues had priority. Here also, it was unnecessary to make an application under Section 151 of the Code of 'Civil Procedure. Under Rule 22 the executing Court could be called upon to decide the priority and was in fact bound to determine it. This is what the learned Chief Justice has decided in the case mentioned above, and his findings thereon arc fully applicable to the facts of this case. From this point of view, I cannot come to the conclusion that the procedure that has been adopted is illegal, and even if the application under Section 151 may be considered to be contrary to law, in the background of the facts and circumstances of this case, the executing Court had jurisdiction and properly decided the priority between the petitioner decree-holder and the Union of India, which had arrears of income-tax to collect from the judgment-debtor. In that view of the matter, no grounds have been made out or established to warrant interference by this Court and this application must be dismissed.
9. The Rule is discharged. Interim orders are vacated. There will be no order as to costs.
10. The operation of this order will remain in abeyance upto 19-9-195S in order to enable the petitioner to prefer an appeal.