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1989 DIGILAW 452 (KER)

State Bank of Travancore v. Tahsildar

1989-10-19

JAGANNADHA RAJU

body1989
Judgment :- 1. This is a Petition filed under Art.226 of the Constitution of India. The petitioner prays for the following reliefs: "(1) to call for records relating to Ext.P2(a) notice and to quash the same by a writ of certiorari or any other appropriate writ direction or order; (2) by a writ of mandamus or any other appropriate writ direction or order to direct the 2nd respondent to dispose of Ext.P3 objection as provided under S.46 of the Revenue Recovery Act". Though the Writ Petition mentions relief No.1 as the main relief, Shri. K.C. John frankly conceded at the time of arguments that at present he is not pressing the first relief. He would be satisfied if a writ of mandamus is issued directing the second respondent to consider and dispose of Ext.P3 petition as per law. 2. The short facts leading to the filing of the Writ Petition may be stated as follows: The petitioner is the State Bank of Travancore. The fourth respondent is the owner of 688 acres and 53 cents of land is Sy.Nos.329/4C, 329/1, 329/2, 329/3 in Vythiri amsom, South Wynad Taluk. The above property was mortgaged by the fourth respondent to the State Bank of Travancore, Calicut Branch on 28th July, 1969 for an amount of Rs.10,18,549.56. As the amount was not paid the Bank filed a suit and obtained a decree in O.S.No.104 of 1976 on the file of the Subordinate Judge, Kozhikode. The decree was passed on 10th February, 1977. For realising the amount execution proceedings were commenced and E.P.No.223 of 1979 for the sale of the property was pending. At that stage the fourth respondent by filing C.R.P.No.4015 of 1981 got the execution proceedings stayed. Subsequently, the first respondent, the Tahsildar, South Wynad Taluk commenced proceedings under the Kerala Revenue Recovery Act for recovery of a sum of Rs. 12,88,094.57 being the Agricultural income-tax and sales tax arrears due from the Southern Plantations Ltd., the fourth respondent. Exts.P2 and P2(a) are the letter and sale notice. On receiving the same on 19-2-1985, immediately Ext.P3 objection petition was filed before the District Collector, the second respondent, on 20th February, 1985. 12,88,094.57 being the Agricultural income-tax and sales tax arrears due from the Southern Plantations Ltd., the fourth respondent. Exts.P2 and P2(a) are the letter and sale notice. On receiving the same on 19-2-1985, immediately Ext.P3 objection petition was filed before the District Collector, the second respondent, on 20th February, 1985. It was specifically brought to the notice of the revenue authorities that the fourth respondent created a first charge in favour of the bank over the property and that the bank has already obtained a decree for realising the mortgaged amount, which is now more than Rs. 15 lakhs. The objection-petition, Ext.P3, was not considered by the revenue authorities and no disposal was given for the same. 3. Though it was specifically pointed out to the revenue authorities that in view of the pre-existing mortgage the State has no right under the Revenue Recovery Act to sell the property free of encumbrance, the revenue authorities tried to proceed with the proceedings under the Revenue Recovery Act. Hence the Writ Petition. 4. The Writ Petition is resisted by filing a common counter on behalf of respondents 1 and 2. Their main contention is that the arrears of sales tax and agricultural income-tax are recoverable under the Revenue Recovery Act and that a total amount of Rs. 13,09,286.47 is recoverable from the fourth respondent. The details of the amounts due and as to when the proceedings commenced are given in page 2 of the counter. The revenue authorities mentioned about their taking some steps for realising the amount, and proceedings against other properties for attachment. Since the movable properties were not sufficient to satisfy the entire amount due, action was taken for attachment of the immovable properties as per the legal advice and that the property was actually attached on 21-6-1984. It is further contended that the sale notice in form No. 16 was published in the gazette on 27-11-1984 and it was served on the defaulter on 17-11-1984. It is contended in the counter that under S.46 of the Revenue Recovery Act claim for release of attachment by third parties will have to be filed within 14 days from the date of attachment and in this case as the immovable property was attached and as the objection-petition was not filed within the stipulated time, the objection-petition is time barred and hence it need not be entertained. The agricultural income-tax due from any land is a first charge on that property and it has first priority over any other claim of any individual. It is contended in Para.10 of the counter that as the objection-petition was not filed within the 14 days, the Collector or the Authorised Officer is not bound to make any enquiry and enquiry will have to be made only where there is a valid petition as contemplated under S.46 of the Revenue Recovery Act. It is claimed that as the objection-petition was filed beyond the time-limit it was ignored. Hence the Writ Petition may be dismissed as regards respondents 1 to 3. 5. The crucial questions that arise for consideration in this Writ Petition are: (1) whether the proceedings under the Kerala Revenue Recovery Act taken for recovery of arrears of agricultural income-tax and sales tax will have precedence over the mortgage decree obtained by the petitioner; and, (2) whether respondents 1 and 2 are obliged under law to consider the objection-petition filed by the petitioner. 6. Points 1 and 2: It should be remembered that non-filing of an objection-petition before the revenue authorities is not a bar for maintainability of a Writ Petition under Art.226 of the Constitution of India. The direct authority for this is the Division Bench decision in Gourikutty Amma v. District Collector, Alleppey, 1974 K.L.T. 103. The Division Bench observed in Para.6 at page 104 as follows: "Counsel for the respondent brought to our notice S.46 of the Act and contended that is is open to the appellants to file a claim petition. It was certainly open to the appellants to file a petition under S.46 of the Act. But the failure to do so will not by itself preclude the appellants from contending before the Court that the attachment under the Act was effected without authority " It should be remembered that this decision is given by a Division Bench of this Court in a Writ Appeal. 7. S.3 of the Kerala Revenue Recovery Act creates a charge on the property for public revenue. The Section reads as follows: "3. 7. S.3 of the Kerala Revenue Recovery Act creates a charge on the property for public revenue. The Section reads as follows: "3. Charge and security for public revenue:- The public revenue due on any land shall be the first charge on that land, the buildings upon it and on the produce thereof." It is significant to remember that in the Kerala Revenue Recovery Act there is no provision which gives overriding effect to the provisions of this enactment notwithstanding anything contained in any other law for the time being in force. The Agricultural Income-tax Act, 1950 (Act 22 of 1950) provides for a charge over the properties. The relevant Section is Sub-section (2) of S.40. It reads as follows: "40. Recovery of Tax and Penalties:- (1) (2) If default is made in paying any amount referred to in sub-section (1) or any instalment thereof, the whole of the amount outstanding on the date of the default shall become immediately due and shall, subject to the claims of Government in respect of basic tax payable under the provisions of the Kerala Land Tax Act, 1961 (13 of 1961), be a first charge on the properties of the assessee liable to pay such amount and where such amount or part thereof relates to the agricultural income from properties transferred by the assessee which is included in his total agricultural income in pursuance of sub-section (2) of S.9, also on such properties." In the Agricultural Income-tax Act also there is no provision giving overriding effect to sub-section (2) of S.40. What all this particular Section lays down is that subject to the provisions of the Kerala Land Tax Act, 1961, arrears of agricultural income-tax shall be a first charge on the properties of the assessee. It is significant to remember that sub-section (2) which creates a charge was actually introduced in the statute book by Amendment Act 9 of 1974 which came into force on 1-4-1974. The introduction of this particular provision in the statute is significant in the sense that equitable mortgage was created in favour of the bank-petitioner, on 28-7-1969, as subsequent introduction of provision in the statute cannot obliterate or override the pre-existing rights of the parties. In the very nature of things, S.40(2) cannot wipe out the right in favour of the petitioner-bank which is a pre-existing right and which has arisen in 1969 July. In the very nature of things, S.40(2) cannot wipe out the right in favour of the petitioner-bank which is a pre-existing right and which has arisen in 1969 July. In the absence of overriding effect for S.40(2) the rights of the petitioner-bank under the mortgage are protected. 8. In this context it is significant to remember that even according to the counter filed by respondents 1 and 2 the arrears of sales tax arose in the years 1975-76 to 1979-80. The proceedings for recovering these sales tax arrears appear to have commenced in the year 1981-82. As regards arrears of the agricultural income-tax, the arrears arose in the years 1975-76 to 1977-78. Proceedings for recovering the same appear to have been initiated from the year 1982-83 onwards. The attachment by the revenue authorities under the Revenue Recovery Act is on 21-6-1984 as per the statement at the end of Para.7 and it is 23-8-1984 as per the statement in Para.9 of the counter. 9. The claim of the Government that by reason of the Revenue Recovery Act and the Agricultural Income-tax Act the arrears have a first charge on the property and that the first charge overrides the mortgage rights of the petitioner is not tenable for more than one reason: (1) there is no overriding effect for the provisions of the Kerala Revenue Recovery Act as well as the Agricultural Income-tax Act; (2) that apart, the decisions of the courts have held that under the Revenue Recovery Act the first charge is created only with regard to the "amount due as public revenue" and such a charge is not created with regard to certain other amounts which the State is entitled to recover by applying the provisions of the Revenue Recovery Act. In this context is would be pertinent to refer to the language of Ss.3 and 68. While S.3 categorically lays down that the public revenue due on any land shall be the first charge on that land, S.68 is only an enabling provision and it lays down: "68. In this context is would be pertinent to refer to the language of Ss.3 and 68. While S.3 categorically lays down that the public revenue due on any land shall be the first charge on that land, S.68 is only an enabling provision and it lays down: "68. Application of the Act for the recovery of certain other dues to Government:-(1) All sums due to the Government on account of quit rent or revenue other than public revenue due on land; all moneys due from any person to the Government which under a written agreement executed by such person are recoverable as arrears of public revenue due on land or land revenue, and all specific pecuniary penalties to which such person renders himself liable under such agreement or contract; all sums declared by any other law for the time being in force to be recoverable as arrear of public revenue due on land or land revenue; and all fees and other dues payable by any person to the Government. may be recovered under the provisions of this Act. (2) Any person who has received from the Government a free grant of money for any agricultural or other purpose, on default to refund the same consequent on his failure to observe any of the conditions of the grant, shall be liable to be proceeded against under the provisions of this Act for the recovery of the amount granted to him together with interest thereon and cost of process. (3) Arrears of rent due to the Government, recoverable as a result of any agreement, through a civil court, shall notwithstanding anything contained in such agreement, be recoverable as an arrear of public revenue due on land under the provisions of this Act. (4) For the removal of doubts, it is hereby declared that the provisions of Ss.44 and 50 shall apply in the case of recovery of any sum under the provisions of this Section. (4) For the removal of doubts, it is hereby declared that the provisions of Ss.44 and 50 shall apply in the case of recovery of any sum under the provisions of this Section. (5) Without prejudice to the provisions of sub-section (4) where any person has, by a written agreement, agreed that specific immovable property belonging to such person shall be security for the payment by him of any tax or other amount due by him to the Government, any engagement entered into by such person with any one in respect of such property, during the period when the agreement is in force, shall not be binding on the Government." The language of S.68 clearly indicates that certain other amounts due to the Government other than public revenue due on land can be recovered as arrears of land revenue by resorting to the provisions of this Act. S.68 does not create a first charge on the property as was done by S.3. In Nedungadi Bank Ltd. v. Tahsildar,1977 K.L.T. 826, George Vadakkel, J. has laid down in Para.4 as follows: "4. S.68 of the Act enables the Government to have resort to the provisions of the Act for recovery of certain other dues-dues other than public revenue due on land Neither of these sub-sections makes a sum recoverable under S.68 a charge on any immovable property. (A word of caution is called for and that is: S.68 also enables the Government to recover all sums declared by any other law to be recoverable as an arrear of public revenue due on land or as land revenue; it is possible that such 'other law' may make the sum so declared a first charge on the defaulter's immovable property with the result the State will be entitled to priority as first charge holder over other creditors, secured or unsecured). It is not contended that S.68(5) is attracted to the case on hand." The learned judge after dealing with Lord Mansfield's remarks in Cooper v. Chitty (1 Burr.36) observed as follows: "This means that once the debtor is divested of his property in discharge or satisfaction of the debt due to the ordinary creditor before the conflict arises by the king advancing his claim, be cannot proceed against the property which is no longer the debtor's. In other words the royal prerogative is available against the properties of the debtor only and only so long as they are his. The rule he who is first in time has the strongest claim to an immovable property governs such cases as those mentioned first". Judged in the light of this observation, in the present case, I find that the properties of the fourth respondent were mortgaged to the bank in 1969 July. A decree was obtained and the execution proceedings commenced longer before the State tried to apply the provisions of the Revenue Recovery Act for recovering arrears of sales tax and agricultural income-tax. The rights of the State cannot have precedence over the rights of the secured debtor, the Bank. 10. Under S.46 of the Revenue Recovery Act it is the bounden duty of the revenue authorities, namely, District Collector to dispose of the objections filed by the petitioner. In this particular instance, the second respondent failed to do it. The contention of the State that the objection-petition was not filed within 14 days is not factually correct, because the notice, Ext.P2, was issued on 19-2-1985, and on the very next day, 20-2-1985, Exst.P3 objection-petition was filed. It is bounden duty of the second respondent to consider and dispose of Ext.P3 on merits. 11. For the reasons given above, I hold both the points in favour of the petitioner. In the result there shall be a writ of mandamus issued directing the second respondent to dispose of Ext.P3 objection-petition filed by the petitioner. Both the parties will bear their own costs in this Writ Petition. 12. This Court in C.M.P.No. 8387 of 1985 granted interim stay directing respondents to stay the revenue recovery proceedings in respect of 688.53 acres of land in Sy.No.329 of Vythiri Village belonging to the fourth respondent. That stay shall continue till the revenue authorities dispose of exst.P3 objection-petition. Both the parties will bear their own costs in this Writ Petition. 12. This Court in C.M.P.No. 8387 of 1985 granted interim stay directing respondents to stay the revenue recovery proceedings in respect of 688.53 acres of land in Sy.No.329 of Vythiri Village belonging to the fourth respondent. That stay shall continue till the revenue authorities dispose of exst.P3 objection-petition. Issue photo copy of this judgment to counsel for the parties on usual terms. Allowed.