Agrl. Income Tax Officer & Ors. vs Thankamma Parameswaran & Anr. on 22 January, 1986

Kerala High Court
Agrl. Income Tax Officer & Ors. vs Thankamma Parameswaran & Anr. on 22 January, 1986
Equivalent citations: (1988) 67 CTR Ker 186
Author: K Sukemaran


K. Sukemaran, J. :

The two writ appeals are at the instance of the State Government and its officials. They question the correctness of the judgment in the two writ petitions -O.P. Nos. 2925 and 2929 of 1979 – whereunder the ld. Judge quashed the revenue sale of the property of the two petitioners. The reason as given by the ld. Judge for nullifying the revenue sale is that the writ petitioners had become the owners of the property at the time when the revenue sale was actually conducted, that the properties did not therefore belong to the defaulter at the time of the sale and that the revenue sale in favour of the petitioners was void.

2. The correctness of the reason so given has to be adjudged in the light of the facts and the provisions of the Kerala Revenue Recovery Act, 1969 (hereinafter referred to as the Act) particularly s. 44 thereof.

3. We shall, at the outset, set out the relevant brief facts. The properties originally belonged to one A. P. Ramaswamy Gounder. He was an assessee to agricultural income-tax. Demands made for payment of the tax to the extent of Rs. 30,563.29 remained unresponded to and the dues thus remained unpaid. The machinery for recovery under the Revenue Recovery Act dated 18-10-1971 was served on the defaulter on 18-11-1971. There was no reaction from the defaulter even to that notice. A notice under s. 36 attaching the property was issued on 22-6-1972. The property was notified for sale under s. 49, the notification having been published in the Gazette dated 26-6-1973 but was adjourned to 27-8-1973 due to want of bidders. It was again postponed for the same reason and on 24-9-1973, the Government purchased the property under s. 50 of the Act. The petitioner in O.P. No. 2929/1979, who is the husband of the petitioner in the connected case O.P. No. 2925/1979 had participated in the auctions held on 27-8-1973 and 24-9-1973. That sale was confirmed under s. 54 on 17-1-1974. The land had been taken possession of by the village officer on 18-10-1974. On 6-7-1979, the Village Officer notified that the ripe cardamom in the property would be sold in auction on 21-8-1979. That auction was confirmed in favour of the highest bidder.

4. It was at this time that the two petitioners approached Court praying, inter alia, for quashing the revenue sale. A writ of mandamus to dispose of the representations filed by them to the Collector and the Minister under Exts. P-1 dated 29-3-1976 and P-2 dated 1-6-1976 was also sought for. According to them, those representations had remained undisposed of. The petitioners pleaded that they purchased the property under a private sale from the defaulter on 16-7-1973 and that they had not been notified about the recovery proceedings taken thereafter.

5. The fact of the case clearly established that the private sales in favour of the petitioners were effected after the service of notice of demand under the Act on the defaulter as referred to in s. 44. According to the Revenue the private sales so effected after service of the demand notice came within the mischief of the section and consequently were denuded of any efficacy whatever. The contention of the petitioners has been pointedly dealt with and answered in the counter affidavit filed on behalf of the respondents. The relevant passage can be usefully extracted.

“It is submitted that as per section 44 of the Act any engagement entered into by the defaulter with anyone in respect of any immovable property after the service of the written demand notice on him shall not be binding upon the Government. In this case the demand notice was served on the defaulter on 8-11-1971. Therefore, any transaction after 8-11-1971 is not valid and not binding on the Government. The contention of the petitioner is that she purchased the property from Sri. A. P. Ramaswamy as per sale deed No. 1412 dated 16-71973. Even if she has made such transaction with the defaulter with the land in question it is not valid and binding on the Government as per s. 44 of the Revenue Recovery Act.

6. The same idea is reiterated in other paragraphs in the counter-affidavit. In paragraph 12, it was stated :

“Any engagement entered into by the defaulter in respect of a property in question, after the service of demand notice is not binding on the Government under s. 44 of the Revenue Recovery Act.”

The petitioners have not challenged the correctness of the factual details referred to in the counter-affidavit.

7. Confronted with such a contention, counsel for the writ petitioners urged an extreme – and in a sense a novel -contention that the term engagment occuring in s. 44(1) will not take in a regular contract of sale and that the term is intended to cover transactions other than transfer as they are ordinarily known. Novelty of an argument is no reason to condemn it outright as observed by Lord Roskill in Home Office v. Harman (1982) 1 All ER 532 (550). This pointed contention has not been dealt with as such by the ld. Judge. In the appeal, it has been complained that the ld. Judge had not adverted to the statements in the counter-affidavit and arguments advanced in that behalf. We find force in those submissions. The question about validity of the private sale in the light of s. 44 of the Act, clearly pleaded in the counter-affidavit of the State, thus arises for consideration and a final decision by this Court.

8. The answer to the question is dependant upon the scope and ambit of the term engagement referred to in that section. While Bill leading to the enactment was being discussed on the floor of the Kerala Legislative Assembly, an Honble Member sought and got an answer. This is reflected in the passage reading :

See Proceedings of the Kerala Legislative Assembly (1968) Vol. XXII No. 12, Page 1835.

9. We shall now endeavour to deal with the question. It is advantageous to read the section itself at the outset.

Sec. 44 reads :

“44. Effect of engagments and transfers by the defaulter. – (1) Any engagement entered into by the defaulter with anyone in respect of any immovable property after the service of the written demand on him shall not be binding upon the Government.

(2) Any transfer of immovable property made by a defaulter after public revenue due on any land from him has fallen in arrear, with intent to defeat or delay the recovery of such arrear, shall not be binding upon the Government.

(3) Where a defaulter transfers immovable property to a near relative or for grossly inadequate consideration after public revenue due on any land from him has the fallen in arrear, it shall be presumed untill the contrary is proved, that such transfer is made with intent to defeat or delay the recovery of such arrear and the Collector or the authorised officer may, subject to the orders of a competent court, proceed to recover such arrear of public revenue by attachment and sale of the property so transferred as if such transfer had not taken place :

Provided that, before proceedings to attach such property the Collector or the authorised officer shall

(i) give the defaulter an opportunity of being heard; and

(ii) record his reasons therefor in writing

The Explanation to s. 44(3) is omitted as unnecessary for the purpose of this case.

10. A prefatory note on Revenue Recovery Legislation may be useful in the context. Recovery of public revenue is an important function of the State. On the effective and timely recovery of such public dues depends the timely implementation of the projects and policies of the Government, including the welfare measures and benevolent activities undertaken by a welfare State. The snail slow process of realisation of overdue payments by resort to conventional litigation with its notorious tardy pace is doomed to failure having regard to the objective of immediate realisation of public dues. It therefore stands to reason that the State Government is armed with an extraordinary remedy which would expedite realisation of the public revenue. This is based on public policies and is conceived in the larger public interest.

11. Certain public revenues are charged on the land. Some others are not. Quite often, substantial amounts due by way of public revenue partake the character of dues in respect of which there is not charge on the property of the defaulter. He who defaults payment of public revenue is ordinarily likely to be aware of the aftermath and the unsavoury consequences of the States attempt at realisation of such does. It is understandable human nature that such a defaulter may attempt to salvage for himself properties which may otherwise be proceeded against, and if need be, sold in public auction. It is not unknown that in such situations, means fair and foul are taken by such defaulters for secreting their properties. The State has to provide against such contingencies also, while not attempting to obstruct ordinary and honest transactions by those with whom government have to deal.

12. It is desirable to bear in mind the back-ground of the Act and particular statutory provision. Different enactments relating to revenue recovery were in force in the component parts of the Kerala State. Madras Revenue Recovery Act, 1864, the Cochin Revenue Recovery Act, 4 of 1083 M.E. and the Travancore Revenue Recovery Act, 1068 M.E. The latter to enactments were modelled after the Madras Act. Sec. 29 of the Travancore Act corresponded to s. 32 of the Madras Act. On the formation of the Travancore Cochin State in 1959, a unified statute, the Travancore-Cochin Recovery Act, 1951 was enacted for the Travancore-Cochin area of the state. The Kerala Revenue Recovery Act came into force in 1968, and was in effect throughout the entire State of Kerala. The ideas which found expression in a fairly stuffed up statutory provision were given cuter forms under s. 44. An invalidation of all private engagements in specified contingencies is common to all these enactments.

13. The word engagement, even according to accepted Dictionaries like Shorter Oxford Websters or Random House, takes in a contract or a promise. Ordinarily therefore a contract of sale would also be enveloped within the term engagement as referred to in s. 44(1). There is no good ground for excluding contracts such as sale, mortgage or gift from the purview of the term engagement.

14. In addition to the dictionaries, decided cases also have understood and interpreted that term in that width and plenitude. We have already noted that the term was employed in the Madras Revenue Recovery Act of 1964. Other contemporaneous enactments also employed that term, such as for example the Madras Irrigation Cess Act VII of 1865. Under the Irrigation Cess Act, exemption from the case was granted by a proviso to the section if there was an anterior engagement between the Government and the ryot for the supply of water. The scope and ambit of the term engagement, in that context, came up for judicial determination in Kandalam Rajagopalacharyulu v. Secretary of State for India in Council 22 Ind Cas 107. The Division Bench of the Madras Aiyar, JJ. ruled that the term engagment was more comprehensive than a contract or promise. The view of the Court is lucidly expressed in the following words :

“The Legislature was evidently used the comprehensive word engagement instead of the word agreement or contract in order that implied undertaking (based on equitable considerations) made by Government and not merely the ordinary contracts based on regular deeds signed by parties or arising out of formal proposals and acceptances made orally or to be gathered from correspondence might be relied on by landlords, proprietors and Inamdars in support of their claims for exemption form water cess.”

We are in respectful agreement with the elucidation of the concept of engagement as given by the aforesaid decision.

15. We are further fortified in our conclusion by the legislative description of the term engagement as attempted when the Travancore-Cochin State enacted the Revenue Recovery Act of 1951. The latter portion of s. 32 of that enactment reads :

“…… and all engagements, such as private alienation of the property attached whether by sale, mortgage of gift or otherwise, or creation of any tenancy in respect of the said property made subsequent to the issue of demand notice under section 24, shall be null and void against the Government and any person who may purchase the property under this Act ……”.

This provision makes it abundantly clear that term takes in the well-known and regular deeds of transfer such as sale, mortgage and gift. The Legislative attempt has been to rope in not merely such well recognised transfers of sale etc. The Legislative attempt has been to rope in not merely such well recognised transfers of sale etc. but also other transactions and arrangements which may virtually hinder the realisation of the public revenue, even if such transactions may not be of the higher order of transfers with acknowledged status of transfers under the Pristine Property Law. The term engagement therefore cannot be given a restricted or narrower meaning in truth and fact. It has a wider and more comprehensive important effect.

16. Counsel for the respondent further submitted that the above interpretation would lead to anomalies and redundancies, which should be avoided by this Court in interpreting statutory provisions. According to him, s. 44(2) (whereunder all transfers with intent to defeat or delay the revenue were to be not binding on the Government) employed the term transfers, in contradistinction to the term engagement in s. 44(1). If the Legislature intended that all transfers after the service of the written notice of demand should be null and void, it could have easily provided so by employing the term transfer in s. 44(1) itself. The fact that a different term engagement is used, according to him would suggest that s. 44(1) does not take in ordinary and regular transfers but only other transactions of a lesser category. We are unable to accept the above submission; for, the submission overlooks the basic scheme of the Revenue Recovery Act and the background of amendments which have been introduced into the provisions relating to revenue recovery during the past period of more than one century.

17. The submission does not bear closer scrutiny. Sec. 44(2) deals with a situation anterior to the one covered under s. 44(1) : it take in a period when the arrear of public revenue has become due. An arrear of public dues could be the basic tax which is a principal source of revenue covered by the enactment. It could be other types of revenue deemed as public revenue under this enactment such as the sales tax or the agricultural income-tax (Under s. 23 of the Kerala General ST Act, 1963, sales tax remaining unpaid after a demand under that enactment gets transmuted to an arrear of public revenue. That is the position with regard to the agricultural income-tax by virtue of s. 41 of the Act). The situation which prevails immediately after public revenue becomes due is covered by s. 44(2). The situation is one in which the liability for payment of public revenue has crystallised itself. If at that juncture, a transfer of the property of the defaulter is effected, that it nullified by statutory provision; the process of nullification, however, would be operative only in a limited contingency, namely, when the transaction is effected with an intent to defeat or delay the payment of revenue. This requirement (of establishing an intent to delay or default the payment of public revenue) is important and would ordinarily cast a none-too-insignificant burden on the State. The burden, however, is lightened by the leverage obtained under the presumptions provided under s. 44(3) when the transfer is to near relative or for grossly inadequate consideration.

18. Unrealised revenue under diverse enactments could be realised inter alia, by recourse to the Revenue Recovery Act. The Administrative Department or agency which has to collect the public revenue can invoke the machinery under the Act by forwarding to the revenue recovery authorities a certificate as provided under the enabling section of the concerned enactment. One of the important steps under which the machinery of the Revenue Recovery Act is set in motion, is the service of notice under the Revenue Recovery Act. One such a notice is issued, matters become more serious. It is consistent with the statutory scheme of realisation of public revenue that the defaulter does not have an unmerited advantage by manipulative tactics; After the defaulter is served with a notice under the Act, all his powers of private alienation get attenuated by the provision. It is in that context that s. 44(1) declares that all engagements after service of such a notice shall be null and void against the Government. The obvious and clear idea is to rope in all kinds of transfers and even other arrangements and implied undertakings. There is therefore no inconsistency between the various sub-sections of s. 44. They have their effect and operation at different stages in the process of the realisation of the revenue. We may incidentally note that the different stages in which sub-ss. (1) and (2) of s. 44 operate had been projected in the course of the deliberations in the Assembly when that Member wanted deletion of sub-s. (1) and an amendment of the wording in sub-s. (2), it was ultimately abandoned. See Proceedings of the Kerala Legislative Assembly, p. 1715, 1835 and 1884, (1968) Vol. XXII, No. 12).

19. In the light of our above conclusion, the sale deeds in favour of the respondents writ petitioners have to be declared as null and void as against the Government. The State in under no obligation to take note of persons who purport to acquire interest in the property, when such acquisition is void and ineffective as against the Government. The contentions of the State as put forward and based on s. 44(1) has necessarily to be unheld in the above circumstances. We do so. This will necessarily entail the dismissal of the original petitions to the extent they seek invalidation of the revenue sale.

20. In the light of our above conclusion, it has become unnecessary to discuss the further question about the ineffectiveness of the sales in favour of the writ petitioners after the property had been attached in pursuance to the revenue recovery proceedings taken against the defaulter. It has become equally unnecessary in that context to consider the question whether the revenue sales held in 1973, could be assailed by the writ petitioners by moving this Court in the year 1979. When the petitioners cannot base their claims to the property on any valid or legal title, it will only be a wasteful and futile exercise for the Government to formally consider and dispose of the highly belated petitions Exts. P. 1 and P. 2 of 1976. We would decline the prayer for a writ of mandamus in the above circumstances. In the light of the above discussion, the writ appeals would stand allowed and the original petitions would stand dismissed. We do not however, make any order as to costs.

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