JUDGMENT
U.C. Maheshwari, J.
1. This appeal is directed on behalf of the Objector State of Madhya Pradesh under Section 96 of CPC being aggrieved by the order dated 25.11.2005 passed in Execution Case No. 562/05 by 4th Additional District Judge, Bhopal dismissing its application filed under Order 21 Rule 58 and 59 r/w Section 151 of CPC.
2. The facts giving rise to this appeal in short are that the respondent No. 1 being Non-Banking Finance Company had financed the acquisition of 99 buses to respondent No. 2 on higher purchase with lease agreement. According to terms the respondent No. 2 had to make the payment of such sum as per agreed schedule but inspite making various demands the same was not paid. On which as per terms respondent No. 1 referred the dispute to Arbitrator for its adjudication. After holding such proceedings the claim of the respondent No. 1 was awarded on 23.5.2003 for the sum of Rs.4,26,11,623/-up to the period of 30th June 2002 and also awarded the interest on such sum @ 9% p.a. from 1.7.2002, till it’s realization. Besides this the direction for handing over such buses was also given. Apart this the cost of arbitration proceeding Rs.85,000/-was also awarded. Subsequent to such award when the payment was not made by the respondent No. 2 then respondent No. 1 initiated its Execution proceedings, in which some immovable properties of Bhopal were attached on 12.1.2005 and while the same was being placed for auction. On such occasion the official of the appellant, appeared on 14.2.2005 and took time to file its objections against attachment of such property and the same were filed on 13.10.2005 under Order 21 Rule 58 and 59 r/w Section 151 of CPC contending that plots of such buildings are the properties of the appellant, and the same were never given to the respondent No. 2 either under ownership or on lease. The same was given to it only for opening its office to manage and operation of its commercial activities. The impugned award had passed without impleading the appellant as party in such arbitration proceedings. Thus the same is not binding against it. In such premises the aforesaid property of the appellant could neither be attached nor placed on auction under the execution of such award. Besides this such attachment is also objected on the ground of outstanding balance of road tax Rs.29,79,73,853/-i.e. more than Rs.29 crores against the respondent No. 2 regarding operation of its buses in the State including the aforesaid 99 buses. Such recovery is to be made as arrears of land revenue from the properties of of the respondent No. 2 as first charge and in order to recover the same some properties of respondent No. 2 have already been attached under such proceedings. In addition to it, it is pleaded that proceeding for winding up the respondent No. 2 is also going on. Therefore, the respondent No. 1 had a right to recover the alleged sum along with the other creditors of respondent No. 2 only in the ratio which would be decided by the concerned official of winding up proceedings out of the available fund after satisfying the first chare over the property. With these averments the prayer for staying the auction proceedings of the aforesaid properties is made.
3. In reply of respondent No. 1, the averments of the objections are denied. In addition to it, it is pleaded that as per notification published by the Central Government on re-organization of State of Madhya Pradesh and Chhatisgarh the appellant owned the assets and liabilities of respondent No. 2 till some extent, therefore, firstly in such premises and secondly the respondent No. 2 being the constituted corporation and enterprises of the appellant, the appellant is bound to indemnify and satisfy the impugned award. It is also stated that the alleged land of the aforesaid building were transferred by the appellant to respondent No. 2 under the ownership in 1964, and subsequent to such transfer the respondent No. 2 enjoyed and dealt with as its own properties; the same was never objected by the appellant. Therefore, the appellant is precluded to claim such property as owner against the right of respondent No. 2. It is also stated that aforesaid property by staying the auction proceedings cannot be released from the attachment on the ground of alleged outstanding balance of the road tax. The papers relating to attachment of the property and road tax are prepared by the appellant, subsequent to execution proceedings with intention to defeat the claim and recovery of the respondent No. 1. With these averments the prayer for dismissal of the objection is made.
4. On consideration by dismissing the appellant’s objection the aforesaid attached properties have been placed on auction. Being dissatisfied with this order the appellant State has come forward with this appeal.
5. Shri P. N. Dubey, learned Dy. Advocate General assailed the impugned order firstly saying that executing court ought to have adjudicated its objection filed under Ordrer 21 Rule 58 and 59 of CPC after holding inquiry by extending the opportunity to the parties for adducing the evidence in support of their respective case, because the various documents placed by the parties could not be considered without proving the same by examining the concerning witnesses. He further said that Order 21 Rule 58 of CPC gives the mandate to the Executing Court to adjudicate such objections by holding the trial in a manner in which the trial of suit is held. Such objections could not be disposed of without recording the evidence. By elaborating his argument he said that undisputedly, and admittedly the appellant was not impleaded as party in the arbitration proceedings. Thus, the award under Execution is not binding against it. So for letter dated 7.10.1964 issued by General Administration Department, State of Madhya Pradesh for allotment of three plots to the respondent No. 2 is concerned, he said that firstly this document could not be considered as admissible document unless the same is proved by adducing the evidence as the same is not a public document. Secondly, on the basis of this letter it could not be inferred that the mentioned plots were given to respondent No. 2 under the ownership or lease. Unless the validly executed documents in this regard are proved on record, no inference could be drawn that such property was transferred to respondent No. 2 under its ownership. He also said that respondent No. 2 had its own identity and not related with the State regarding its function and commercial activities, therefore, the award passed against respondent No. 2 without impleading the appellant as party could not be executed against it. He also relied on the settled principle of law based on natural justice and said that a person/party should not be unheard before passing any order against him. He further said that appellant has to recover more than twenty nine crores rupees from the respondent No. 2 as arrears of road tax arising out of the operation of its buses including the aforesaid 99 buses in the State. The same is to be recovered as arrears of land revenue for which the proceeding is going on. He also referred some documents in this regard from the record and said that in comparison of other debts in view of the provision of Section 137 of the M. P. Land Revenue Code and as per provision of Motoryan Karadhan Adhiniyam aforesaid arrears of tax is the first charge over the property of respondent No. 2. He also placed his reliance on some reported cases of the Apex Court and the High Courts.
6. Responding the aforesaid argument Shri Brain D’silva, learned senior Advocate assisted by Shri V. Bhide justified the impugned order and said that the Executing court has not committed any error in passing the same as the objection filed by the appellant neither covered nor entertainable under Order 21 Rule 58 of CPC. He further said that on earlier point of time some sale deeds were executed on behalf of respondent No. 2 in favour of some developers stating that property belonging to it, on such occasion the same was not objected by the appellant. Thus, in view of such conduct of the appellant, it could not be said that after transferring the aforesaid land in 1964 to respondent No. 2 it was remained it’s properties. In such premises the appellant is stopped to challenge the same. Besides this there is no evidence on record to hold the properties under attachment are belonging to the State and not to respondent No. 2. It was also argued that as per notification of the Central Government dated 27.12.2002 the appellant consented to receive the assets and liabilities regarding loan and advance etc of the respondent No. 2 till some extent on reorganization of State of Madhya Pradesh and Chhatisgarh. Hence, he did not have any authority to raise the objection against the auction of the aforesaid properties. Besides this it was also argued that respondent No. 2 being constituted corporation of the appellant, it is liable to indemnify and satisfy the award under Execution. Under such premises it was not necessary for the respondent No. 1 to implead the State of Madhya Pradesh as party in the Arbitration proceeding. It was also argued that aforesaid land was transferred to respondent No. 2 under Government Grant Act 1985 for which the registration of any document by virtue of Section 90 of the Registration Act was not required and provision of 107 of Transfer of Property Act was also not applicable. In the aforesaid circumstances the trial court was not bound to hold any inquiry by extending the opportunity to the parties for adducing the evidence as the documents filed by the parties were not disputed between them and prayed for dismissal of this appeal. He also placed his reliance on some reported decisions.
7. Having heard the Learned Counsel, after examining the papers placed by the parties on record and perusing the impugned order, I am of the considered view that executing court has committed error in dismissed the appellant’s objections because of the following reasons:
8. As per impugned order the objection of the appellant has been dismissed only on the ground that appellant has failed to prove its title over the attached properties. Firstly such finding has not been given by speaking order and considering all the material and papers placed by the parties on record. Secondly before dismissing the aforesaid objections as per prescribed procedure of Order 21 Rule 58 of CPC, the opportunity to adduce the evidence was not extended to either of the parties to prove their case. Thirdly, the provision of Order 21 Rule 58 and 59 gives the mandate to executing court to hold the inquiry of such objections in the manner in which the Civil Suit is tried and apparently such procedure has not been adopted by the executing court.
9. It was undisputed fact before the Executing Court that the award under execution was passed in the proceeding in which the appellant was neither impleaded as party nor given any opportunity of hearing before passing the same, then, how this award is binding against it for which no specific findings have been given by the Executing Court.
10. In the aforesaid premises This Court has to consider that in which manner the executing court had to deal and inquire the appellant’s objection and adjudicate the same. Before giving any finding on this question I would like to reproduce the provision of Order 21 Rule 58 of CPC for ready reference, which reads as under: 1[58. Adjudication of claims to, or objections to attachment of, property
(1) Where any claim is preferred to, or any objection is made to the attachment of, any property attached in execution of a decree on the ground that such property is not liable to such attachment, the Court shall proceed to adjudicate upon the claim or objection in accordance with the provisions herein contained: Provided that no such claim or objection shall be entertained
(a) where, before the claim is preferred or objection is made, the property attached has already been sold; or
(b) where the Court considers that the claim or objection was designedly or unnecessarily delayed.
(2) All questions (including questions relating to right, title or interest in the property attached) arising between the parties to a proceeding or their representatives under this rule and relevant to the adjudication of the claim or objection, shall be determined by the Court dealing with the claim or objection and not by a separate suit.
(3) Upon the determination of the questions referred to in Sub-rule (2), the Court shall, in accordance with such determination,
(a) allow the claim or objection and release the property from attachment either wholly or to such extent as it thinks fit; or
(b) disallow the claim or objection; or
(c) continue the attachment subject to any mortgage, charge or other interest in favour of any person; or
(d) pass such order as in the circumstances of the case it deems fit.
(4) Where any claim or objection has been adjudicated upon under this rule, the order made thereon shall have the same force and be subject to the same conditions as to appeal or otherwise as if it were a decree.
(5) Where a claim or an objection is preferred and the Court, under the proviso to Sub-rule (1), refuses to entertain it, the party against whom such order is made may institute a suit to establish the right which he claims to the property in dispute; but, subject to the result of such suit, if any, an order so refusing to entertain the claims or objection shall be conclusive.
11. The aforesaid provision gives the statutory and substantial right to the person objecting the attachment of any property under the execution proceeding on the basis of his rights. On filing such objection the Executing Court while exercising the power under the aforesaid provision may dismiss such application at the initial stage if the property attached has already been sold out, or such objections are initiated to protract the proceedings and in that process the application was designedly or unnecessarily filed. But when the application is not dismissed on such grounds then Executing Court in such situation is duty bound to hold the inquiry by extending the opportunity to the parties for adducing the evidence to vindicate their rights as the opportunity is extended in the suit. The executing court dealing with the claims or objections shall determine all the question including the question relating to the right, title or interest in the property attached. For this purpose the legislature casted the duty on the Court to hold an inquiry and inquiry means an opportunity to be given to the parties to adduce necessary evidence in respect of their claim, objections or to resist the claim of the opposite party and thereafter the rival contention between the parties should be adjudicated as such order is not only conclusive between the parties but have an effect of decree also which is made appealable under Sub-rule 4 of aforesaid Order and if this procedure has not been followed by the Executing Court then such order cannot be sustained in the appeal. My aforesaid view is fully fortified by the decision of the Andhra Pradesh High Court in the matter of K. Venkarayappa, v. Ellen Industries, Coimbatore and Ors. , in which it was held as under: 3. Order 21, Rule 58, C.P.C. gives a statutory and substantial right to a person to object to the attachment of any property in execution of a decree. When an application, in exercise thereof, has been filed, Clauses (a) and (b) of proviso to Sub-rule (1) of Rule 58 clothes Court with power to dismiss such an application in limine, or (a) that the property attached had already been sold out; or (b) it was intended to protract the proceedings and in that process the application was designedly made or unnecessarily has been filed. If the Court exercises that power, the applicant is relegated to vindicate his rights by way of a regular suit as contemplated under Sub-rule (5) of Rule 58 of Order 21 thereof. If the Court did not exercise the power at its inception in terms of the above provisions, then Sub-rule (2) thereof enjoins the Court that all questions including the question relating the right title or interest in the property attached shall be determined by that Court dealing with the claim or objection and not by a separate suit. Thereby, the Legislature intended that it is a mandatory duty cast on the court to hold an enquiry. The enquiry thereby posits that an opportunity to be given to the parties to adduce all necessary evidence in support of the claim or to resist such a claim by the opposite party and thereafter to give finality to the objection by that Court, subject to a right of appeal provided under Sub-rule (4) thereof treating the order thereunder as a decree. The order thus becomes conclusive. Thereby the Legislature has manifested that holding an enquiry in adjudicating the right title and interest of the objector in dealing with the claim or objection is mandatory and the order passed thereon shall be conclusive. Broached from this perspective, when we gleaned through the order passed, it must but be held that the lower Court passed the order under Sub-rule (2) of Rule 58 of Order 21, without holding an enquiry and without giving an opportunity to the Party. It straightway passed the order on merits. Therefore the order is per se contrary to the mandatory language and scheme of the Code; thereby it is not only in excess of the jurisdiction but also is vitiated by material irregularity in exercise of its jurisdiction.
12. It is noted that the provision of Order 21 Rule 58 CPC has been amended in the year 1976 and thereafter it is not a summary provision, it requires inquiry in respect of validity of rights of the party, on which the findings can be given by the court only after extending the opportunity for adducing the evidence to the parties. Admittedly in the case at hand in order to enquire the right and title of the appellant even after filing the documents such procedure has not been followed by the Executing Court and in that way the impugned order has been passed contrary to the provision of Order 21 Rule 58 of CPC. On earlier occasion this question was answered by the Division Bench of the Madras High Court in the matter of M/s Southern Steelmet and Alloys Ltd., Appellant v. B. M. Steel , in which it was held as under:
4. …Wehavealready expressed the view that the adjudication referred to under Order 21 Rule 58 C. P. Code not being summary and as it is the intention of the Legislature under the amended Civil Procedure Code that it should be a decision as if rendered in a regular suit resulting in an appealable decree, we are of the view that a fuller examination of the rights of parties has to be held in the instant case after giving them adequate opportunity to place all relevant materials before the trial court, so that it could ultimately decide and adjudicate on all questions including questions relating to right, title or interest in the property attached which either directly or indirectly arise between the parties to the proceedings. This not having been done, we are constrained to set aside the order of the learned Judge and remit the subject matter to the Original Side of This Court for a fuller and detailed examination as contemplated under the amended provision and for an ultimate decision after adjudication of the rights of parties. To the above extent, the appeal is allowed. There will be no order as to costs.
13. In view of the aforesaid discussion, it is held that the impugned order is not sustainable as the same is passed without following the prescribed procedure provided under Order 21 Rule 58 of CPC.
14. Apart the above it is undisputed fact on record that the appellant was not impleaded as party in the Arbitration proceeding, in which the impugned arbitration decree was passed. Hence, before placing the attached property on auction, the claim of the appellant should be inquired by extending the ample opportunity of hearing to it. It is settled proposition of law that the person should not be unheard; in other words the party should be given sufficient opportunity of hearing before passing any order against him/it. Such principle is laid down by the Apex Court in the matter of Smt. Maneka Gandhi v. Union of India , in which it was held as under:
57. …althoughtherearenopositive words in the statute requiring that the party shall be heard, yet the justice of the common law will supply the omission of the legislature”. The principle of audi alteram partem which mandates that no one shall be condemned unheard,….
58. …Naturaljusticeisagreat humanising principle intended to invest law with fairness and to secure justice and over the years it has grown into a widely pervasive rule affecting large areas of administrative action Lord Morris of Borth-y-Gest spoke of this rule in eloquent terms in his address before the Bentham Club.
15. In view of the aforesaid I am of the considered view that before passing the impugned order on objection of the appellant the sufficient opportunity should have been given to it for adducing the evidence to prove the case, the same was not given, in such premises the impugned order could not be held to be in accordance with law.
16. Coming to the question whether alleged more then twenty nine crores rupees of the appellant was outstanding against respondent No. 2 in respect of road tax. If so, then even after holding that the attached building and property to be the property of respondent No. 2, the recovery of the aforesaid tax is a first charge over the property in comparison of the recovery the sum of respondent No. 1 under execution.
17. Some papers regarding outstanding balance of road tax issued by the Regional Transport Authority are placed on record. According to which more than twenty-nine crores rupees of road tax was outstanding against respondent No. 2 for which recovery proceedings are pending. It is undisputed fact that Arbitration award has been passed on account of commercial transaction between respondent No. 1 and 2 in that way respondent No. 1 comes under the category of such creditors having outstanding sum against the respondent No. 2on account of their commercial transaction. But the recovery of road tax is a different act of the State, which could not be termed as commercial transaction between the appellant and respondent No. 2. Such tax is levied for the purpose of the welfare of citizen at large that always remains the first charge over the property of the defaulter. Such question is also dealt with by the Apex Court in the matter of Dena Bank v. Bhikhabhai Prabhudas Parekh and Co. , in which it was held as under:
8. The principle of priority of Government debts is founded on the rule of necessity and of public policy. The basic justification for the claim for priority of State debts rests on the well recognised principle that the State is entitled to raise money by taxation because unless adequate revenue is received by the State, it would not be able to function as a sovereign government at all. It is essential that as a soverign, the State should be able to discharge its primary governmental functions and in order to be able to discharge such functions efficiently, it must be in possession of necessary funds and this consideration emphasises the necessity and the wisdom of conceding to the State, the right to claim priority in respect of its tax dues. (See M/s Builders Supply Corporation, (AIR 1965 SC 1061) (supra). In the same case the Constitution Bench has noticed a consensus of judicial opinion that the arrears of tax due to the State can claim priority over private debts and that this rule of common law amounts to law in force in the territory of British India at the relevant time within the meaning of Article 372(1) of the Constitution of India and therefore continues to be inforce thereafter. On the very principle on which the rule is founded, the priority would be available only to such debts as are incurred by the subjects of the Crown by reference to the State’s soverign power of compulsory exaction and would not extend to charges for commercial services or obligation incurred by the subjects to the State pursuant to commercial transactions. Having reviewed the available judicial prononouncements Their Lordships have summed up the law as under:
1. There is a consensus of judicial opinion that the arrears of tax due to the State can claim priority over private debts.
2. The common law doctrine about priority of crown debts which was recongnised by the Indian High Courts prior to 1950 constitutes “law in force” within the meaning of Article 372(1) and continues to be in force.
3. The basic justification for the claim for priority of State debts is the rule of necessity and the wisdom of conceding to the State the right to claim priority in respect of its tax dues.
4. The doctrine may not apply in respect of debts due to the State if they are contracted by citizens in relation to commercial activities which may be undertaken by the State for achieving socioeconomic good. In other words, where welfare State enters into commercial fields which cannot be regarded as an essential and integral part of the basic government functions of the State and seeks to recover debts from debtors arising out of such commercial activites the applicability of the doctrine of priority shall be open for consideration.
18. In view of such dictum of the Apex Court and by virtue of Section 52 and 53 of Madhya Pradesh Karadhan Adhiniyam read with Section 137 of the Madhya Pradesh Land Revenue Code even on holding the attached property to be the property of respondent No. 2, the outstanding road tax is the first charge on such property. Although such findings could be given by the Executing Court only after extending the opportunity to the parties to adduce the evidence in respect of the property under attachment and also regarding arrears of tax. Therefore, at this stage I am not expressing any opinion in this regard. This question shall remain opened before the Executing Court for its adjudication.
19. Although I have not been apprised by any provision by the counsel for the respondent No. 1 that appellant is bound to indemnify the awarded sum of impugned arbitration award passed against respondent No. 2, in which it was not made the party. It is undisputed fact on record that respondent No. 2 is duly constituted autonomous corporation constituted under the provision of Madhya Pradesh Rajya Pariwahan Nigam Act, in that way the State of Madhya Pradesh and respondent No. 2 had different identity. Although this question shall remain opened before the Executing Court for its adjudication, whether the State is bound to indemnify the aforesaid sum of impugned award under execution to respondent No1, even if it was not a party in the Arbitration proceedings.
20. Coming to the notification dated 27.12.2002, firstly I would like to reproduced the concerning part of such notification.
Now, therefore, in exercise of powers conferred by Sub-section (3) of Section 58 of Madhya Pradesh Reorganization Act.2000, the Central Government hereby makes the following manners for the apportionment of the assets rights and liability of the Madhya Pradesh State Road Transport Corporation between the States of Madhya Pradesh and Chhatisgarh namely;
(1) The field staff, buses and stores of the Madhya Pradesh State Road Corporation shall be divided on the basis of ‘as is where as’ as on 1st November 2000. The head office staff shall be shared by the ratio of 18:82 between Chhatisgarh and Madhya Pradesh. The respective States shall be responsible for their share of staff from the date of the dissolution.
(2) The sharing of current assets (excluding buses and stores) and liabilities including loans advance, etc shall be made by arriving at the formula midway between the formula suggested by Government of Madhya Pradesh and Chhatisgarh, i. e. between 18:82 suggested by the Chhatisgarh and 26.49:73.51 suggested by Madhya Pradesh.
(3) One representative of Government of Chhatisgarh shall be taken on the Board of Madhya Pradesh State Road Transport Corporation for the transitional period till division is complete.
21. According to aforesaid notification so far assets and liabilities regarding loan, advances are concerned, the suggestions of State of Madhya Pradesh and State of Chhatisgarh are mentioned in it but no final verdict in this regard has been given. Therefore, at this juncture this notification is not helping to the respondent No. 1 for rejecting the objection of the appellant.
22. Although on behalf of the respondent No. 1 the case laws in the matter of Shri Bhimeshwara Swami Varu Temple v. Pedapudi Krishna Murthi is cited. This Court did not have any dispute regarding the principle that documentary proof of title of property can not be displaced by oral evidence, but in the case at hand in the above mentioned circumstance the same is not helping to the respondent at this stage as the documents placed by the parties have not been proved by them as per procedure as held earlier.
23. He also cited a case of this Court in the matter of State of Madhya Pradesh v. Jhankar Singh reported in AIR 1973 S. C. 274 in which it was held that by virtue of Section 19 of Registration Act the lease granted by the Government under the Government Grants Act 1895 does not require any registration and Section 107 of Transfer of Property Act is not applicable to such lease. In the present case except the letter dated 7.10.1964 issued by the General Administration Department of the State of Madhya Pradesh for transferring some plots to respondent No. 2 no any other document of title or lease deed is neither produced nor referred by the counsel for the respondent No. 1. Therefore, this citation is also not giving any benefit to the respondent No. 1 at this stage.
24. Under the aforesaid premises the order of the Executing Court is apparently perverse, capricious and contrary to the law and the same is not sustainable. Hence, the same is set aside.
25. The respondent No. 1 shall be at liberty to file all those documents before the executing court in accordance with the prescribed procedure which have been filed here with I. A. No. 2017/06 and I. A. No. 13766/07, under Order 41 Rule 27 of CPC and the executing court is also directed to consider the same in accordance with law. Accordingly these two I.As are disposed off.
26. Under the aforesaid premises by allowing this appeal the impugned order is set aside and the case is remitted back to the Executing Court with a direction to adjudicate the objection of the appellant after holding inquiry by extending the adequate opportunity to both the parties for adducing the evidence. It is further directed that till adjudication of the aforesaid objection the auction proceedings of the aforesaid attached properties be kept in abeyance. In view of disposal of this appeal the I. A. No. 10438/05, appellants application for grant of interim stay I. A. No. 1785/08, an application of respondent No. 1 for some direction and I. A. No. 13899/07, an application of respondent No. 1 for vacating the interim stay do not require any further consideration, hence, the same are hereby disposed off.
27. In the facts and circumstances of the case there shall be no order as to the costs. Decree be drawn up accordingly.
28. Appeal is allowed.