Skip to content


Calcutta Loans Pvt. Ltd. Vs. Prakash Krishna Mitter - Court Judgment

LegalCrystal Citation
SubjectDirect Taxation
CourtKolkata High Court
Decided On
Case NumberSuit No. 1270 of 1960
Judge
Reported in(1975)2CompLJ87(Cal),[1978]114ITR487(Cal)
ActsEstate Duty Act, 1953 - Section 74(1) and 74(3)
AppellantCalcutta Loans Pvt. Ltd.
RespondentPrakash Krishna Mitter
Appellant AdvocateGoutam Chakraborty and ;Ajit Sengupta, ;Somenath Chatterjee and ;R.N. Bajoria, Advs.
Respondent AdvocateDipankar Ghosh and ;S.C. Ukil, Advs.;Jayanta Mitra, Adv.
Cases ReferredC.H. Kinch v. E.K. Walcott
Excerpt:
- s.k. roy chowdhury j.1. this is an application by the union of india through the assistant controller, 'a' ward, estate duty-cum-income-tax circle, calcutta, for an order directing the registrar, original side, to pay to the petitioner rs. 99,300 towards pro tanto satisfaction of the estate duty liability of the estate of jiban krishna mitter and in particular the liability of the defendant, prakash krishna mitter, and for an ad interim order restraining the registrar, original side, from making over any money to the plaintiff, calcutta loans private ltd., out of the sale proceeds lying in his hands until the disposal of this application. 2. it appears that on the 5th september, 1974, the present application was moved and an ad interim order of injunction restraining the registrar,.....
Judgment:

S.K. Roy Chowdhury J.

1. This is an application by the Union of India through the Assistant Controller, 'A' Ward, Estate Duty-cum-Income-tax Circle, Calcutta, for an order directing the Registrar, Original Side, to pay to the petitioner Rs. 99,300 towards pro tanto satisfaction of the estate duty liability of the estate of Jiban Krishna Mitter and in particular the liability of the defendant, Prakash Krishna Mitter, and for an ad interim order restraining the Registrar, Original Side, from making over any money to the plaintiff, Calcutta Loans Private Ltd., out of the sale proceeds lying in his hands until the disposal of this application.

2. It appears that on the 5th September, 1974, the present application was moved and an ad interim order of injunction restraining the Registrar, Original Side, from making over the said sale proceeds to the plaintiff until the disposal of this application was passed. Thereafter, directions for filing affidavits were given and ultimately it appeared before me for hearing when I directed notices of this application to be served on all the accountable parties and also the purchasers at the Registrars of the properties mentioned in the application. Pursuant to such notices being given, affidavits have been filed by the auction purchasers. I may mention here that Prakash Krishna Mitter never appeared in spite of notice being served on him.

3. The facts of this case appear to be somewhat interesting and give an idea how payment of large amount of revenue payable by way of estate duty can be delayed or avoided, taking advantage of the unsatisfactory; machinery for realisation of the same.

4. It appears that one Jiban Krishna Mitter of No. 2, Raja Raj Ballav Street, Calcutta, died on the 16th of September, 1955, leaving him survivingthe defendant, Prakash Krishna Mitter, and one Sri Gopal Krishna Mitter, two sons and Srimati Asalata Mitter, widow, since deceased. The said Jiban Krishna Mitter appears to have been a very wealthy person who left considerable movable and immovable properties including the premises No. 13, Arabinda Sarani, 40, Mahatma Gandhi Road, and 3(B), Nanda Kishore Street, Calcutta, which are the properties being sold by the Registrar's sale in this suit.

5. It appears that there are two deeds of settlement dated the 16th of February, 1954, and 25th of April, 1955, pursuant to which one Santi Chaya Mitter, Rama Bai Dutta and Srimati Mira Ghosh were also treated as accountable persons under the provisions of the Estate Duty Act apart from the said Prakash Krishna Mitter, Gopal Krishna Mitter and Srimati Asalata Mitter, the heiress and legal representatives of the deceased, Jiban Krishna Mitter. It also appears that a partition suit was filed in this court by the said Prakash Krishna Mitter against the said Srimati Asalata Mitter, since deceased, and Gopal Krishna Mitter, being Suit No. 1666 of 1956 and a consent decree was passed on the 15th of May, 1958, by which Prakash Krishna Mitter was, inter alia, allotted the said three properties which are the subject-matter of this application. It also appears that under the said consent decree the parties thereto undertook to pay the liabilities, inter alia, the estate duty in equal shares.

6. The estate duty assessment of the estate of the said Jiban Krishna Mitter is alleged to have been completed on the 30th of December, 1958, and demand notices in respect thereof were served upon all the said accountable persons. The original estate duty assessed by the said order was Rs. 6,15,029.61. It also appears that the said five accountable persons without prejudice to their joint and several liabilities to pay the said estate duty, as a matter of convenience, got specified shares of the said liabilities apportioned to the said five accountable parties. It further appears that a certain amount was payable by the official receiver towards the said estate duty liabilities. It is now alleged that the accountable persons failed and neglected to pay their shares of the estate duty assessed on the estate of Jiban Krishna Mitter according to their specified shares and recovery proceedings are alleged to have been duly instituted against the said accountable persons by the petitioner. It is further alleged that in spite of opportunities being given to the accountable persons for payment of the said estate duty they failed and neglected to pay the outstanding dues and accordingly penalty was levied on Sri Prakash Krishna Mitter and Santi Chaya Mitter. It appears that the said accountable persons preferred an appeal from the said assessment order dated the 30th of December 1958, to the Central Board of Revenue and by an order dated the 29th of August, 1961, the Central Board of Revenue disposed of the said appeal by modify-ing the said order of assessment obviously reducing the liabilities of the said estate of Jiban Krishna Mitter. It is alleged by the petitioner that after giving effect to the said order of the Central Board of Revenue and after giving credit for the payments made up to 26th of March, 1974, a sum of Rs. 2,29,334.95 was found due and payable by the said accountable persons. A statement of the outstanding demands including statutory interest and penalty as on 26th of March, 1974, is set out in annexure 'A' to the petition. It further appears that the said Srimati Asalata Mitter died on 23rd of November, 1961, leaving a will and the said Gopal Krishna Mitter and others were treated as accountable persons representing the estate of Srimati Asalata Mitter being the executors of her will.

7. It is alleged by the plaintiff-company that in the usual course of its business the plaintiff-company lent and advanced diverse sums of money to the defendant, Prakash Krishna Mitter, who duly executed several mortgages in favour of the plaintiff including the properties which are the subject-matter of this application and on failure of the defendant to pay the mortgage dues the plaintiff filed the present suit in 1960 and a final mortgage decree for sale was passed in this suit on the 21st of June, 1965. It is alleged by the plaintiff that the sale of the mortgaged properties was, inter alia, fixed on the 17th of April, 1971, after proper advertisement in three different newspapers in accordance with the rules of this court. As on the said date fixed for sale there was no outside bidder, the plaintiff-company was given the liberty to bid at the sale and it offered the prices mentioned in paragraph 17 of the affidavit-in-opposition affirmed by one Surendra Mukherjee on the 6th of December, 1974, in this application. The said offers of the plaintiff being below the reserved prices were not accepted and, thereafter, the Registrar fixed 26th of February, 1972, and 11th of March, 1972, for the sale of the said mortgaged properties but the said dates were declared holidays and the sale could not be held. Thereafter, the Registrar fixed 21st of April, 1972, for sale of the said mortgaged properties and directions for advertisement were given. The defendant asked for adjournment of the sale which was granted and the next date for sale was fixed on the 17th of February, 1973, and, thereafter, direction was given for advertisement. In spite of advertisements there was no bidder in respect of any of the mortgaged properties. As such the sale was withdrawn. In the circumstances it appeared that there was no purchaser willing to bid in the said auction sale held by the Registrar from time to time and it is alleged that in the circumstances the plaintiff, made an application for sale of the said mortgaged properties without any reserved price and this court directed the Registrar to sell the same without any reserved price. It appears that several advertisements were made from time to time for the sale of the said mortgaged properties in execution of the decree for sale inthis suit. A notification of sale was duly issued and finally the date for sale was fixed on the 4th of May, 1974, and the said three mortgaged properties were sold to the highest bidders as set out in paragraph 14 of the petition and a total sum of Rs. 99,500 is now lying in the hands of the Registrar, Original Side, High Court.

8. The petitioner alleges that the said properties belonged to the deceased, Jiban Krishna Mitter, and formed part of his estate after his death and as the accountable persons failed and neglected to pay the balance due on account of the estate duty payable in respect of the said estate, under Section 74(1) of the Estate Duty Act, there is a first charge on the said properties and as such it is claimed by the petitioner that the said sale proceeds of the said properties being Rs. 99,500 is liable to be paid to the petitioner towards the pro tanto satisfaction of the outstanding estate duty liability of the estate of late Jiban Krishna Mitter and particularly the liability of Prakash Krishna Mitter in respect of the same. It is alleged that the said defendant, Prakash Krishna Mitter, either himself or through his authorised representative wanted time to clear all the dues of the said estate in respect of the estate duty payable. In fact, certificate proceedings have been initiated against the said Prakash Krishna Mitter, the defendant, but by some pretext or other, realisation has been held up and the Certificate Officer, Alipore, has not been able to take any effective steps for recovery of the said dues. In the premises it is submitted by the petitioner that unless the said sale proceeds of Rs. 99,500 lying with the Registrar, Original Side of this court, is directed to be paid to the petitioner, interest of the revenue will be seriously prejudiced.

9. The plaintiff contended that the present application is not maintainable and is misconceived, inter alia, on the ground that the sale in execution of the mortgage decree in this suit of the properties belonging to the estate of late Jiban Krishna Mitter was subject to the statutory charge under the Estate Duty Act in respect of the estate duty payable by the accountable parties, and, therefore, the rights of the purchasers who are not parties to this application would be affected. That contention appeared to me of considerable substance as no order can be made in the absence of some parties who might be affected by the said order, and that would amount to violation of the principles of natural justice. Therefore, with a view to avoid multiplicity of proceedings I directed notices of this application to be served on the purchasers and after such notices were served the purchasers appeared and leave was given to them for filing affidavits which were duly filed by them and the matter was finally heard.

10. Mr. Goutam Chakraborty, appearing with Mr. Ajit Sen Gupta, for the petitioner after drawing my attention to the admitted facts that the said Jiban Krishna Mitter died leaving considerable properties on the 16th ofSeptember, 1955, and after various proceedings in respect of the estate duty assessment and payments made from time to time a total sum of Rs. 1,55,741.12 is due and payable in the share of the defendant, Prakash Krishna Mitter, as on 26th of March, 1974, out of the total liability of the said e'state of Jiban Krishna Mitter of Rs. 2,29,33.95 in respect of the estate duty payable, and drawing my attention to paragraphs 5, 10, 11 and 17 read with annexure 'A' to the petition, submitted that after taking into account payments made by the said five accountable parties from time to time up to 26th of March, 1974, according to the apportionment of their respective liabilities, the said amount of Rs. 1,55,741.12 is admittedly the outstanding dues from the defendant, Prakash Krishna Mitter, up to 26th of March, 1974. Mr. Chakraborty drew my attention to the provisions of Section 74(1) and (3) of the Estate Duty Act, and submitted that the first charge on the said properties was never released by the Controller but only the liability of the estate was apportioned among the said five accountable persons according to their shares in the said estate of Jiban Krishna Mitter as set out in annexure 'A' to the petition. Therefore, Mr. Chakraborty submitted that the said properties are still subject to the said statutory charge under Section 74(1) and in any event the sale proceeds are liable to be paid to the petitioner towards pro tanto satisfaction of the outstanding estate duty payable by the said defendant, Prakash Krishna Mitter, in respect of the estate of late Jiban Krishna Mitter. Mr. Chakraborty also drew my attention to the provisions of Order 21, Rule 52, of the Civil Procedure Code; and submitted that as the sale proceeds are lying with the Registrar, Original Side of this court, and the question of title or priority arising between the decree-holder and the petitioner who is not the judgment debtor but who claims an interest in the said mortgaged properties by virtue of the said provisions of Section 74(1) of the Estate Duty Act, should be determined by the court in this application. Mr. Chakraborty referred to the decision in Lalta Prosad Goenka v. Biratnagar Jute Mills Ltd. : [1963]48ITR653(Cal) for the proposition that the plaintiff or the said alleged auction purchasers of the properties were subject to the first charge under Section 74(1) of the Estate Duty Act, because of the fact that the alleged mortgage and the sale of the properties in execution of the mortgage decree cannot give a preferential right over the claim of the petitioner over the said properties for the arrears of estate duty payable by the estate of Jiban Krishna Mitter to which the said properties admittedly belong. Mr, Chakraborty also referred to the decision of the Supreme Court in Builders Supply Corporation v. Union of India : [1965]56ITR91(SC) , where priority of State dues like arrears of income-tax over the private debts of the assessee is recognised. Relying on the said decisions, Mr. Chakraborty submitted that the present application must be held to be maintainable andas all the purchasers in the court sale in execution of the mortgage decree in this suit have been given notice of this application and they have also duly filed their affidavits and they have been duly heard and as such there is no question of their being prejudiced in any way by the petitioner claiming the statutory first charge on the said properties vis-a-vis the sale proceeds. Mr. Chakraborty also submitted that, even assuming that there is an arrangement for apportioning the liabilities of the said estate of Jiban Krishna Mitter in respect of the estate duty payable by the said five accountable parties in the manner as set out in annexure 'A' to the petition, that does not give any release of the properties which is alleged to have been allotted to the share of Prakash Krishna Mitter pursuant to the said consent decree in the partition suit. Mr. Chakraborty submitted that in any event those properties always remained charged for payments of estate duty in respect of the estate of Jiban Krishna Mitter and the defendant was liable to pay his share of the liabilities as apportioned by the petitioner and as such there is no question of release or discharge of the said properties in any way under Section 74(3) of the Estate Duty Act. Therefore, Mr. Chakraborty submitted that this application is maintainable and order should be made as the court may think fit and proper for realisation of the statutory dues and charge payable by the said defendant as aforesaid.

11. Mr. Somenath Chatterjee, appearing with Mr. R.N. Bajoria for the plaintiff-company, Calcutta Loans Private Ltd., submitted that the application is not maintainable as this is not the proper forum and neither is the application in the proper form. Mr. Chatterjee also referred to paragraph 13 of the petition where the petitioners themselves admitted and acknowledged the said consent decree passed in, the partition suit on the 15th of May, 1958, whereby the said properties were allotted to the defendant, Prakash Krishna Mitter, and the liabilities of the said estate in respect of the said estate duty payable were apportioned according to the shares of the said accountable parties in the estate of Jiban Krishna Mitter. Therefore, Mr. Chatterjee submitted that the petitioner released the said first charge under Section 74(1) of the Estate Duty Act, and held the accountable parties personally liable for payment of their respective shares of the estate duty payable in respect of the said estate of Jiban Krishna Mitter. Mr. Chatterjee referred to Chapter 27, Rule 57 of the High Court Original Side Rules, which gives the right to an encumbrancer who is not a party to a suit to apply to the court before sale for being made a party or leave to join in the sale but the petitioner having not done so must be deemed to have waived or given up its charge and as such cannot claim any right in respect of the said mortgaged properties or the sale proceeds in this application. Mr. Chatterjee thereafter drew my attention to the conditions of sale-clauses 15 and 16 and submitted that the right, title, of the properties werebased on the said mortgage in favour of the plaintiff-company. Mr. Chatterjee also referred to Clause 10 of the conditions of sale and submitted that only subsequent tax and charges on the said properties are to be apportioned. The said Clauses 10, 15 and 16 of the conditions of sale are set out hereunder.

'10. The purchaser shall not be liable to pay the outgoing previous to the day of payment of the purchase money and the rents and outgoings shall be apportioned where necessary. In the event of there being a statutory charge on the property sold such charge shall be discharged and paid from the purchase money and shall form a first charge thereon.

15. Arrears of rates and taxes, if any, shall be apportioned under Clause 10 above.

16. The purchaser will not be entitled to call for any documents except those abstracted in the abstract of title or to object to the title on the ground of non-production thereof. '

12. Mr. Chatterjee referred to a decision in Kanti Ram v. Kutubuddin Mahomed ILR [1895] Cal 33, in support of his contention that the petitioner has no prior claim over the said sale proceeds. He also referred to Mulla's Civil Procedure Code, 13th edition, page 1428. Mr. Chatterjee submitted that the petitioner has ordinary remedy in law and for enforcement of the statutory charge, if any, under Section 74(1) of the Estate Duty Act, and as such the application is not a proper application and should be dismissed.

13. Mr. Dipankar Ghosh appearing for Manik Chandra Mallick submitted that the purchaser of the premises No. 13, Arabinda Sarani, in the court sale cannot be affected by the alleged right of the petitioner under the Estate Duty Act. He submitted that his client is a purchaser in the court sale and certificate of sale has been duly issued under the relevant provisions of the High Court Rules of the Original Side of this court. He referred to Chapter 27, Rule 57, of the Original Side Rules, and submitted after drawing my attention to Clause 10 of the conditions of sale that the purchaser has taken the property free from all statutory charges which were to be paid out of the sale proceeds. Therefore, Mr. Ghosh submitted that the purchasers' rights cannot be affected in any way in this application. Mr. Ghosh also submitted that the purchasers are not party to this application and no order can be made against them.

14. Mr. S.C. Ukil appearing for Srimati Alaka Bhattacharyya, purchaser of the premises No. 40, Mahatma Gandhi Road, submitted after drawing my attention to the letter dated the 4th of May, 1974, annexed to the petition and marked with the letter 'B' that the petitioners only asking for a charge on the purchase money and in prayer 'a' of the petition for payment of the purchase money which is lying with the Registrar, OriginalSide, is being asked for. Therefore, the petitioners are now estopped from contending that the said sale is void. The petitioners by its conduct has released the statutory charge and the claim of the petitioner, if any, has shifted to the purchase money. Mr. Ukil also drew my attention to the conditions of sale settled by this court before the said court sale held on the 4th of May, 1974. He also submitted drawing my attention to paragraphs 2(c) and (e) of his earlier affidavit that his client is a bona fide purchaser for value without notice of any claim of the petitioner and as such the title of the said purchaser cannot be questioned or disputed.

15. Mr. Jayanta K. Mitter appearing for Srimati Rama Bai Dutta and Srimati Mira Ghosh, two out of the five accountable parties who, have been served with the notice of application, submitted after drawing my attention to paragraph 3 of the petition that they are the trustees under the deed of settlement dated the 16th of February, 1954. Mr. Mitter submitted that it will appear from annexure 'A' to the petition that the said two persons have paid their shares of the estate duty assessed on the estate of Jiban Krishna Mitter and only a portion of the interest payable is outstanding. Mr. Mitter after drawing my attention to paragraphs 13, 17 and 18 of the petition submitted that the petitioner by its act and conduct has released the share of the properties of the said two accountable parties from the statutory charge under Section 74(1) of the Estate Duty Act by acting under Section 74(3) of the said Act. Mr. Mitter submitted that by the consent decree passed in the said partition suit, Prakash Krishna Mitter is the only person liable to pay the estate duty out of the said properties which were sold in the mortgage sale in this suit. Mr. Mitter submitted that, in any event, the said two persons being Srimati Rama Bai Dutta and Srimati Mira Ghosh have been released from payments of the estate duty which is in arrear in the share of the said Prakash Krishna Mitter and no order can be made against them in this application.

16. Considering the matter very carefully, I am of the view having regard to the nature of the claim of the petitioner being arrears of public revenue and enforcement of the statutory charge under Section 74(1) of the Estate Duty Act that the technical objections regarding the form of this application and non-compliance with procedure in making this application should not stand in the way of the court enforcing the mandatory provisions of a statute. I must also observe that the bungling of the estate duty authorities in the matter of realisation of outstanding estate duties in respect of the estate of Jiban Krishna Mitter is so glaring that I cannot resist myself from making the observation that collections of public revenue are at great jeopardy due to the laxity, inaction and inefficient working of the recovery machinery under 'the said Act, allowing the tax dodgersopportunity to take recourse to various subterfuges and dilatory tactics,thereby endangering the collection of public revenue promptly and efficiently. Further, I do not find any reasonable explanation for the petitionernot to take any notice of the scries of advertisements in respect of the saleof the said three properties which are the subject-matter of this application in execution of the mortgage decree passed in this suit by publicauction through this court. Further, I am unable to see any reasonwhy the petitioner should claim payment of the sale proceeds which arclying in court after the said court sale of the said three propertieswhich are the subject-matter of this mortgage suit. The statutory provisions for release by Controller of any charged property under Section 74(3) of the Estate Duty Act are not matters of more act and conduct on thepart of the said statutory public officer dealing with public revenue but,must be conducted strictly according to the said Act and Rules thereunder. When the application was made before me in this suit only, Icould not resist myself directing the petitioner to serve notices on allthe accountable persons besides the defendant, Prakash Krishna Mitter,and the purchasers in the said auction sale of the said three propertieswhich are the subject-matter of this mortgage suit, so that attempt maybe made to settle the matter by clearing up the arrears of estate dutiespayable by accountable parties at the first instance or by declaring that thesaid sales are subject to the statutory charges in the presence of the purchaser whose rights will be directly affected. At the initial stage I wasnot in a position to understand how a mandatory provision of a statutecreating a charge on the property for payment on the estate duty of adeceased person can be released by the public officer under the said statutewithout complying with the statutory provisions and making an orderfor release after due consideration of all relevant facts under Section 74(3)of the Estate Duty Act. The statutory officer, it appears to me, mustact within the four corners of the statute, that is, the Estate Duty Actand Rules made thereunder, and cannot by his act and conduct particularly by inaction and negligence jeopardise the collection of public revenueand forgo or release the statutory charges on the immovable propertiescreated under Section 74(1) of the Estate Duty Act. In order to preventmultiplicity of proceedings I gave full opportunities to all the parties,that is, the accountable persons in respect of the estate duty payable onthe estate of Jiban Krishna Mitter and the purchasers at the court salein the mortgage suit where final decree for sale has been passed and theproperty sold through court and after hearing the parties and their respective contentions, I am of the opinion that in the facts and circumstances ofthis case it cannot be said that there was any release under Section 74(3) ofthe Estate Duty Act of the said three properties which were sold in execution of the mortgage decree passed in this suit through the court from the statutory charge under Section 74(1) of the Estate Duty Act, There cannot be any question of estoppel against statute or waiver of a mandatory statutory provision by any public officer. The Estate Duty Act is a fiscal statute and must be very strictly construed so that nobody can avoid the liability of payment of duties and taxes and likewise nobody who has not been made specifically liable to pay taxes can be brought into the net. In the construction of fiscal statutes there is no room for equitable construction as equities are strangers for a construction of a taxing statute.

'In a taxing Act one has to look merely at what is clearly said. There is no room for any intendment. There is no equity about a tax. There is no presumption as to a tax. Nothing to be read in, nothing is to be implied. One can only look fairly at the language used.' See Law and Practice of Income-tax by Kanga and Palkhivala, 6th edition, volume 1, page 2. It is true that there is a distinction regarding the rules of construction of charging sections and machinery sections of a taxing statute as the former should be strictly construed whereas the latter should not be subjected to rigorous construction but should not be construed in a manner that makes the machinery unworkable. Applying those principles to the present case for construction of Section 74(1) and Section 74(3), in my view, the same should be very strictly construed as it relates to creating a statutory charge for payment of the estate duty in respect of an estate of a deceased. There is no scope for liberal construction as that would lead to a disastrous consequence causing great loss of revenue and encourage large scale evasion of estate duty by the accountable persons due to inefficiency, inaction and negligence on the part of the estate duty authorities concerned.

17. The admitted facts of this case appears to be that the said three properties which have been sold in execution of a mortgage decree passed in this suit were subject to the paramount statutory charge created by Section 74(1) of the Estate Duty Act. Any private transfer of the said properties during the subsistence of the said statutory charge would be void against any claim in respect of the estate duty of the deceased to whom the said property belonged. It will be convenient to set out Section 74(1) of the Estate Duty Act which runs as follows:

'Subject to the provisions of Section 19, the estate duty payable in respect of property, movable or immovable, passing on the death of the deceased, shall be a first charge on the immovable property so passing (including agricultural land) in whomsoever it may vest on his death after the debts and incumbrances allowable under Part VI of this Act; and any private transfer or delivery of such property shall be void against any claim in respect of such estate duty.'

18. It is true that under Section 74(3) the Controller may release the whole or any part of any property from the said statutory charge provided he acts under Section 74(3) of the Estate Duty Act which runs as follows :

'The Controller may release the whole or any part of any property, whether movable or immovable, from charge under this section in such circumstances and on such conditions as he thinks fit.'

18. In this particular case there is no material or evidence before me to show that the Controller has exercised his discretionary power after consideration of circumstances of the case releasing the said three properties from the statutory charge. In my view, by mere apportionment of the estate duty liabilities amongst the accountable persons according to their shares in the estate of the deceased pursuant to a consent decree passed in a partition suit does not and cannot amount to a release of any part of the property from the said statutory charge by the Controller within the meaning of Section 74(3) of the Estate Duty Act. It is well settled and is an elementary principle that there cannot be any estoppel against a statute and as such the estate duty authority cannot be said to have waived and/or released the said statutory charge on the said three properties. As I have already observed that a fiscal statute has to be construed very strictly and unless the Controller acts within the four corners of the said Act in terms of the provisions of Section 74(3) of the Estate Duty Act, there cannot be any question of any release of the said properties from the said statutory charge created under Section 74(1) of the Estate Duty Act.

19. It is also unbelievable and highly improbable that the plaintiff, the mortgagee of the said three properties belonging to the estate of the deceased, Jiban Krishna Mitter, had no knowledge or at least could not have any knowledge of the said statutory charge under Section 74(1) of the Estate Duty Act, on the said property, at the time the said mortgage was created by the defendant, Prakash Krishna Mitter, one of the accountable parties in favour of the plaintiff. However, the said mortgage is nothing but a private transfer of the charged property by the said Prakash Krishna Mitter in favour of the plaintiff and which is made void under the provision of Section 74(1) of the Estate Duty Act. Thereafter, by merely describing the said properties as free from encumbrances in the court sale in execution of the mortgage decree cannot validate the said mortgage which is void under the said provision of Section 74(1) of the Estate Duty Act. I could have understood, had the said mortgage been made subject to the statutory charge under Section 74(1) of the Estate Duty Act, in that event there would have been no question then, on the face of it, the sale would have been subject to the statutory charge and the purchaser in auction sale in execution of the mortgage decree passed in this suit would have taken subject to the said statutory charge. But merely not takingany notice of the said statutory charge and creating a mortgage on the said charged properties by the said defendant, Prakash Krishna Mitter, in favour of the plaintiff cannot validate such mortgage which is nothing but a voluntary private transfer of the property which has to be declared void under the provision of Section 74(1) of the Estate Duty Act.

20. The decision relied on by Mr. Somenath Chatterjee on behalf of the plaintiff, decree-holder in Kanti Ram v. Kutubuddin Mahomed ILR [1895] Cal 33 has no application to the present case. The principle laid down therein is well known, that is, a puisne mortgage is entitled to an order for sale of the mortgaged property subject to the lien of the prior mortgagee on the said property, but in the present case, it appears that the plaintiff-mortgagee is claiming the said property free from the statutory charge in favour of the estate duty authorities under Section 74(1) of the Estate Duty Act and that its mortgage is not subject to the said statutory charge; accordingly, the private transfer between the plaintiff and the defendant creating the said mortgage on the charged properties is valid. But by the operation of law all private transfer is void if it has been made in violation of the provisions of Section 74(1) of the Estate Duty Act. It is nobody's case that the plaintiff's mortgage was specifically made subject to the statutory charge ; on the other hand, it appears that the property has been sold free from all encumbrances including the statutory charge in the court sale in execution of the mortgage decree passed in this suit and the auction purchasers are claiming to have purchased without notice of such statutory charges. But in my view when there is specific provision in Section 74(1) of the Estate Duty Act making all private transfer void as against the claim of the estate duty in respect of the said properties, no question of protection of a bona fide purchaser for value without notice of the charge arises. It has been expressly provided in the said Section 74(1) that all private transfers, which includes the mortgage of the said properties which is not subject to the statutory charge, is void and, therefore, anyone deriving title from such void transaction subsequently would not get any title free from the said statutory charge. See Ahmedabad Municipal Corporation of the City of Ahmedabad v. Haji Abdul Gafur Haji Hussenbhai, : AIR1971SC1201 , where on the construction of Section 141 of the Bombay Provincial Municipal Corporation Act, 1949, it was held that the said section, apart from creating a statutory charge, does not further provide that this charge is enforceable against the property charged in the hands of a transferee for consideration without notice of the charge and as such it was held that the said statutory charge was not enforceable against the bona fide purchaser for value without notice of such statutory charge as the said provision under Section 141 of the Bombay Municipal Act did not expressly made it applicable against the purchaser for value withoutnotice. Whereas in my view in this particular case there is express provision in Section 74(1) of the Estate Duty Act making all private transfers of the said properties void as against the statutory charge created under the said statute for estate duty payable by the estate of the deceased. It is also now well settled that an auction purchaser in court sale in execution of a mortgage decree takes the property subject to all defects of title. See Ahmedabad Municipal Corporation v. Haji Abdul Gafur Haji Hussenbhai, : AIR1971SC1201 , which runs as follows :

'To begin with it was contended that there is no warranty of title in an auction sale. This general contention seems to us to be well founded, because it is axiomatic that the purchaser at auction sale takes the property subject to all the defects of title and the doctrine caveat emptor (let the purchaser beware) applies to such purchaser.'

21. Therefore, the position boils down to this that the statutory charge under Section 74(1) of the Estate Duty Act on the said three properties came into operation immediately on the death of the deceased, Jiban Krishna Mitter, and that cannot be affected in any way by the said partition suit between the accountable parties in which the consent decree was passed declaring their shares and partition by metes and bounds of the properties of the deceased which were subject to the statutory charge. The mortgage which is nothing but a private transfer created by the said Prakash Krishna Mitter in favour of the plaintiff appears to be void as it cannot invalidate the said statutory charge and the auction sale held in execution of the mortgage decree passed in this suit cannot be made free from the said statutory charge which is still subsisting. The estate duty authority has a right to enforce the said statutory charge notwithstanding the said consent decree in the partition suit or the sale in execution of the mortgage decree against the said properties: See fayaram Mudaliar v. Ayyaswami, : [1973]1SCR139 . Any other construction of the said statutory provision under Section 74(1) of the Estate Duty Act would lead to large scale evasions of estate duty by making the property belonging to the deceased free from the said statutory charge by the contrivance which has been adopted in this particular case. It appears that for strange reasons the estate duty authority in spite of the fact that final assessment of the estate duty and certificate has been issued for realisation of the arrears against the accountable parties to the estate of Jiban Krishna Mitter has failed to expedite the matter and enforce the said statutory charge against the properties of the deceased for such a long time and thereby enabled the said delinquent and dishonest defendant, Prakash Krishna Mitter, who has not appeared in this proceeding, in spite of notice being served, to deal with the property in collusion and conspiracy with the plaintiff-company. It is hardly believable or in any wayacceptable that the plaintiff had or could have no knowledge of the said statutory charge. In any event, the statutory charge is effected by the operation of law and cannot vanish by the procedure which the plaintiff and the defendant have adopted in creating the said mortgage and getting a mortgage decree for sale passed therein and the said charged property being sold in execution of the mortgage decree free from the said statutory charge. When the statute has made all private transfers void, in my view, the mortgage created by the defendant in favour of the plaintiff being nothing but a private transfer must be declared to be void under the provision of Section 74(1) of the Estate Duty Act.

22. Now, the question is whether it can be said that the statutory charge remains and the mortgage sale is subject to the statutory charge under Section 74(1) and as such the estate duty authority being the petitioner can proceed to enforce the charge against the said properties. In my view, that principle would not apply in the facts of this case as there is specific provision in Section 74(1) of the Estate Duty Act making all private transfers void which includes a mortgage which has been created on the said statutory charge on the face of it. The mere inaction, negligence and acquiescence on the part of the estate duty authority cannot, in my view, operate as an estoppel against the statute and free the properties from the said statutory charge. It does not appear anywhere that the Controller has released the properties by exercise of his statutory power under Section 74(3) of the Estate Duty Act. Therefore, it follows as a necessary consequence that the said mortgage being void as it has been purported to be created free from the said statutory charge and as such all subsequent proceedings by way of sale in execution of the mortgage decree must be declared to be void. That is the construction or the effect of the statutory provisions under Section 74(1) of the Estate Duty Act, which appeared to me of the specific and clear provision of the said Act, and having regard to the scope and object of the Estate Duty Act for realisation by enforcement of the statutory charge against the estate of a deceased which cannot be affected by private transfer or inaction, negligence and inefficiency of the estate duty authority. Having regard to the said disastrous consequences having far-reaching effect as to the title to the said property which have been purchased by the auction purchaser in court sale, I directed notice to be served on all of them so that they can take appropriate steps in the matter if the said court sale is declared to be void having regard to the statutory provisions of Section 74(1) of the Estate Duty Act. The auction-purchasers appeared and made their submissions which I have noted before but in my view when the title of the mortgagor and the mortgagee is defective and the whole transaction of the mortgage is void under the provision of Section 74(1) of the Estate Duty Act, consequent sale of theproperty must be held to be void and a nullity. The petitioner seems to be free to enforce the said statutory charge against the said properties by due process of law as I have held that there is no release by the Controller under Section 74(3) of the Estate Duty Act of the statutory charge in respect of the said three properties which are alleged to have been sold in execution of the mortgage decree passed in this suit.

23. But the question is whether the petitioner is entitled to the relief asked for by the petitioner in this application for payment of the purchase money to the petitioner in pro tanto satisfaction of arrears of estate duty. In my view, the petitioner is not entitled to the said order as the entire mortgage created by the defendant in favour of the plaintiff is void as I have observed before. Therefore, the petitioner cannot have any right to get the said sale proceeds which may be available to the purchasers of the said properties in due course. It will not be proper to make any order in this application enforcing the statutory charge under Section 74(1) of the Estate Duty Act read with Section 100 of the Transfer of Property Act in favour of the petitioner as that, in my view, would be contrary to principles of justice and equity and against the specific statutory provisions for enforcement of the said statutory charge in the regular manner. Therefore, I hold that this application is not maintainable in the present form and must be dismissed.

24. It is a cardinal principle of construction of statutes that it must, be interpreted on its own wording and if the same is clear and unambiguous the meaning must be given effect to, and in case of doubt or ambiguity various rules and aid of construction have to be called for, inter alia, the scope and object of the Act, to construe the Act and to give effect and if possible harmonize and in some cases similar wording in other Acts may have to be taken recourse to for aid to construction. To my mind Section 64 of the Civil Procedure Code which also makes private transfers void as against all claims enforceable under an attachment in execution of a decree of the property of the judgment-debtor may be looked into. Section 64 of the Civil Procedure Code is set out hereunder :

'Where an attachment has been made, any private transfer or delivery of the property attached or of any interest therein and any payments to the judgment-debtor of any debt, dividend or other monies contrary to such attachment, shall be void as against all claims enforceable under the attachment.'

25. The word private transfer under the said Section 64 of the Civil Procedure Code has been held to mean a voluntary sale, gift or mortgage in contravention of the attachment. See Mulla's Civil Procedure Code, 13th edition, page 312, note 5. So it is quite clear, in my view, that the said mortgage created by Prakash Krishna Mitter in favour of the plaintiff is a privatetransfer and must be held to be void as against the petitioner's claim in respect of the estate duty of the deceased, Jiban Krishna Mitter. Therefore, so far as the petitioner is concerned, the said mortgage is a nullity as it is founded on a void mortgage so far as the estate duty is concerned and consequently the auction purchasers also cannot have any right under the said purchases in the court sales so far as it relates to the claim of estate duty of the petitioner against the said estate of Jiban Krishna Mitter to whom the said three properties admittedly belong and subject to the statutory charge under Section 74(1) of the Estate Duty Act. A decision of the Privy Council under the corresponding Section 272 of the Civil Procedure Code, 1882, in Dinobundhu Shaw Chowdhry v. Jogmaya Dasi [1902] LR 29 IA 9 ; ILR 29 Cal 154 , where it has been held that, so far as a mortgage created after attachment of the property of the judgment-debtor prejudiced the execution creditor, it is void as against him but the section does not render void a transaction which in no way prejudices him. On the facts of that case, it was held that the intention of the parties were to give the new mortgage the first charge and only charge over the property being substituted in place of the party's existing mortgage by payment of his dues but the principle is recognised that any mortgage created after the attachment which would prejudice the execution creditor is void against him. By parity of reasoning, in my view, the statutory charge under Section 74(1) of the Estate Duty Act, of which the plaintiff in this suit and the auction purchasers in the execution sale of the mortgage decree in this suit must be deemed to have, notice of the same and such sales certainly prejudice the petitioner's right to realise the estate duties payable by the estate of Jiban Krishna Mitter. In another decision of the Privy Council in C.H. Kinch v. E.K. Walcott, AIR 1929 PC 289, where in a suit for recovery of possession of certain properties it was held that if the sale under which the defendant was claiming possession was invalid they must surrender possession of the same and the plaintiff was held to be entitled to possession. Therefore, in this case also if the mortgage in favour of the plaintiff in this suit is void being a private transfer in violation of Section 74(1) of the Estate Duty Act, the consequential sales in execution of the mortgage decree passed in this suit must be held to be void as against the petitioner's claim for arrears of estate duty of the estate of Jiban Krishna Mitter to which the said three properties belong. The said mortgage by the plaintiff and auction purchases and the sale certificate of the auction purchasers cannot be set up as against the petitioner's claim for arrears of estate duty against the estate of Jiban Krishna Mitter. As I have already held that there is no release of the said three properties under Section 74(3) of the Estate Duty Act by the Controller as mere apportionment of the estate duty liabilities amongst the accountable personscannot, in my view, in any way affect the said statutory charge under Section 74(1) of the Estate Duty Act and cannot amount to an order of release from the said charge. The statutory provisions under Section 74(3) must be strictly construed otherwise revenue will suffer immensely due to inaction, negligence or error of judgment on the part of the estate duty authorities to realise duties payable by the accountable parties expeditiously.

26. In that view of the matter, I hold that the application is not maintainable in the present form and is dismissed.

27. This order is without prejudice to the petitioner's right to take appropriate steps for enforcement of the statutory charges against the said three properties under Section 74(1) of the Estate Duty Act, in due process of law and as such I have declared that the said mortgage of the said three properties and the consequential sale in execution of the mortgage decree in this suit being void as against the petitioner's claim in respect of the estate duty payable by the estate of Jiban Krishna Mitter to whom the said three properties admittedly belonged at the time of his death. The plaintiff, decree-holder and the auction purchasers would be at liberty to take appropriate steps in respect of their respective rights, if any, as they may be advised. The ad interim order to continue for two months from date.

28. No order as to costs.


Save Judgments// Add Notes // Store Search Result sets // Organizer Client Files //