PETITIONER: PADRAUNA RAJKRISHNA SUGAR WORKS LTD. & ORS. Vs. RESPONDENT: LAND REFORMS COMMISSIONER, U.P. & ORS. DATE OF JUDGMENT: 31/01/1969 BENCH: SHAH, J.C. BENCH: SHAH, J.C. RAMASWAMI, V. GROVER, A.N. CITATION: 1969 AIR 897 1969 SCR (3) 468 1969 SCC (1) 485 ACT: U.P. Zamindari Abolition & Land Reforms Act (U.P. 1 of 1951), ss. 279 and 286-Dues under other statutes recoverable as arrears of land revenue-Whether restrictions under ss. 279 and 286(1) applicable. HEADNOTE: The amount of dues under the Indian Income-tax Act, 1922 the U.P. Sugar Factories Control Act. 1938 and the Co-operative Societies Act, 1912 were recoverable as arrears of land revenue. Section 286(1) of the U.P. Zamindari Abolition & Land Reforms Act provides that if any arrears of land revenue could not be recovered by any of the processes mentioned in cls. (a) to (e) of s. 279, the Collector may realise the same by attachment and sale of the interests of the defaulter in any other immovable property of the defaulter, and s. 286(2) provided that money recoverable as arrears of I" revenue, may be recovered by process "under this section" from any immovable property of the defaulter. As the appellant company was unable to meet its liabilities in respect of income-tax dues, sugar cess and the amount due for cane supplied to it, the immovable property of the company were sold to meet the dues. The appelant challenged the sale contending that (i) the immovable prop" of the company would be attached and sold only after the processes prescribed in cls. (a) to (a) of a. 279 ie. by the age of movable properties were resorted to; (ii) the sale was illegal or irregular as the Collector ignored the intimation of the Income-tax Officer staying the sale for recovery of income-tax; and (iii) the appellant was prevented from raising funds for making the deposit as provided by r. 285H (of the rules framed under the Act) for setting aside the sale as the purchaser was appointed as the Authorised Controller and put in possession of all the properties of the appellant. Dismissing the appeal this Court, HELD : (i) Power to recover arrears of land revenue from a defaulter is governed by the processes mentioned in cls. (a) to (e) of s. 279 of the Act and s. 286(1) places certain restrictions upon the power of the Collector to recover land revenue by attachment and sale of lands other than the holding in respect of which the land revenue is due. But the restrictions on the power of the Collector operated only when land revenue is in arrears. Restrictions, if any, upon the p ower of the Collector to recover dues under statutes, as arrears of land revenue arise, from the statute which is the source of the liability and not from the U.P. Zamindari Abolition & Land Reforms Act, which merely sets out the processes for recovery of the dues. To hold that sub-s. (2) of s. 286 requires the Collector in the first instance to recover out of the movable property or by arrest and detention of the defaulter before immovable property of the defaulter is attached and sold is to amend the substantive provisions of the Acts under which the liability for money due is recoverable as land revenue. For instance, under a. 46 of the Income-tax Act, 1922, the powers exercisable by the Collector in recovering arrears of income-tax, which are recoverable as arrears of land revenue are not restricted to the Land Revenue Code; the Collector is entitled to exercise all the powers of' a Civil Court for the purpose of recovery of an amount due under a decree under the Code of Civil Procedure, an the Code, of Civil procedure im- 469 poses no obligations to recover the dues by sale of movables or by arrest and detention of the defaulter before immovable property may be attached. The provisions of the Act, which authorise recovery of sums of money as arrears of land revenue, do not require the Collector to follow any sequence of the processes for recovery; it is competent to the Collector to resort to any process prescribed by s. 279 in aid of recovery of the dues which are recoverable as arrears of land revenue, [473 H-474 D; 475 H] (ii) The sale was not illegal or irregular for the reason that the Collector ignored the intimation of the Income-tax Officer staying the sale for recovery of income-tax dues. The immovable property could have been put up for sale for recovery of sugar cane cess and the cane price which were many times more than the income-tax dues. [476 G] (iii) There was no force in the contention that the appellant was unable to raise funds and make the deposit under r. 285H because the purchaser was appointed the Authorised Controller, who took possession of all the properties of the Company. The appellant could not comply with the provision of r. 285H for having the sale set aside as the movables were not sufficient to enable the appellant to raise the amount required for deposit under r. 285H. [476 H] JUDGMENT:
CIVIL APPELLATE JURISDICTION: Civil Appeal No. 130 of 1966.
Appeal from the judgment and decree dated December 13, 1961
of the Allahabad High Court in Special Appeal No. 217 of
1958.
C. K. Daphtary, B. Sen, J, P, Goyal and A. Banerjee, for
the appellants.
C. B. Agarwala and O. P. Rana, for respondents Nos. 1, 2,
3 and 8.
T. A. Ramachandran and R. N. Sachthey, for respondent No.
4.
M. C. Chagla, G. D. Srivastava, B. Datta and J. B. Pada-
chanji, for respondents Nos. 5 and 6.
The Judgment of the Court was delivered by
Shah, J. The Padrauna Rajkrishna Sugar Works Ltd.hereinafter
called ‘the Company carried on the business of manufacture
and sale of sugar and supply of electricity. The Company
was in financial difficulties in 1954 and was unable to meet
its obligations. The principal liabilities of the Company
in July 1955 were Rs. 81,821-2-0 due as income-tax
provisionally assessed for the assessment year 1952-53 in
respect of which an order for recovery was made under s.
46(2) of the Income-tax Act, 1922; Rs. 5,64,301-14-9 due as
sugarcane cess under s. 29 of the Sugar Factories Control
Act, 1938, for the years 1952-53 to, 1954-55: and Rs.
1,92,053-12-3 due by the Company to the Co-operative
Development Union Ltd. as arrears of cane price for the year
1954-55.
470
By order dated July 14, 1954, issued under the Essential
Supplies (Temporary Powers) Act, the Government of U.P.
appointed the Collector, Deoria as the Authorised Controller
of the Company. On August 8, 1955 the Land Reforms Commis-
sioner sanctioned the proposal submitted by the Collector,
Deoria, to sell the holdings and the property of the Company
for realizing Rs. 8,38,176-13-0. Sardar Jagjit Singh, Chief
Engineer, Indian Institute of Sugar Technology, Kanpur,
valued the movables belonging to the Company i.e. tools and
workshop plant, mill stores, spare parts and furniture at
Rs. 7 , 64,817/-,and the lands and the factory at Rs.
23,75,000/-. Thereafter a sale proclamation was issued on
October 4, 1955, for recovery of the total amount of Rs.
8,38,176-13-0. The sale was fixed for November 8, 1955. In
the first instance only the movables were put up for sale by
the Collector, Deoria, but the highest bid offered was Rs.
2,75,000/-. The Collector then put up for sale the immov-
able property for which a bid of Rs. 13,50,000/-was made and
accepted. The movables were then put up for sale, and the
highest bid for Rs. 2,75,000/- was accepted. The purchasers
of both the lots were the Cawnpore Sugar Works Ltd., through
their managing agent Tulsidas Mundra-respondent No. 7 in
this appeal.
On December 6, 1955, the Company moved an application before
the Commissioner, Gorakhpur Division, under r. 285-1 of the
U.P. Zamindari Abolition and Land Reforms Rules praying that
the sale be set aside. The Commissioner rejected the peti-
tion, observing that an application under r. 285-1 of the
U.P. Zamindari Abolition and Land Reforms Rules, 1952, to
set aside a sale on the ground of material irregularity or
mistake in publishing or conducting a sale may be granted
only if the applicant proves to the satisfaction of the
Commissioner that he has sustained substantial injury by
reason of such irregularity or mistake, and that no material
irregularity or mistake was proved to be committed in
publishing or conducting the sale, far less, a mistake or
irregularity which could have caused substantial injury to
the applicant. The sale was confirmed by order dated July
2, 1956, by the Land Reforms Commissioner.
On, July 30, a petition was moved by the Company in the High
Court of Allahabad for a writ in the nature of certiorari
quashing the order dated June 25, 1956, of the Commissioner,
Gorakhpur Division. The petition was dismissed by Oak, J.
In appeal under the Letters Patent the order was confirmed
by the High Court. Mukherji, J., was of the view that s.
286 of the U.P. Zamindari Abolition and Land Reforms Act did
not oblige the Collector to exhaust the processes prescribed
by, cls. (a) to (e) in s. 279 of that Act before resorting
to the sale of immovable property of the Company and that it
was not proved that
471
there was any material irregularity or mistake_ in
publishing or conducting the sale or that any substantial
injury had resulted to the Company., Jagadish Sahai, J., was
of the view that s. 2861(2) of the U.P. Zamindari Abolition
and Land Reforms Act provides that where an amount is
recoverable as arrears of land revenue, the Collector has
first to attempt under cls. (a) to (e) of s.279 to recover
the amount due, and if he is unable to recover the amount,,
he may proceed to sell the immovable property of the
defaulter. But the learned Judge was of the opinion that
the provision was merely directory and not. mandatory. He
observed:
“…….. the provision relating to the
exhaustion of the processes contemplated by
clauses (a) to (e) of section 279 of the Act
is merely directory. In view of the provisions
of the various Acts which make the
realization of sums becoming due under those
Acts as arrears of land revenue and in view of
the provisions of the Act the, Collector has
got a duty and a statutory obligation to
realise those sums. He has no discretion in
the matter. Consequently I read the words “may
realise the same from the interest of the
defaulter in any immovable property” in sub-
section (1) or “may be recovered from any
immovable property of the defaulter” in sub-
section (2) as meaning that if the Collector
does not succeed in- recovering the amount by
having recourse to the processes mentioned in
clauses (a) to (e) of section 279 of the Act
he shall sell immovable property of the
defaulter.”
The learned Judge also observed that the Collector
acted inviolation of the statutory provision contained in
s. 286(2) of the Act in selling the immovable property
before selling the movable property, but the sale could not
be set aside, because substantial injury was not shown to
have been caused. The Company has appealed to this Court
against the order passed by the ‘High Court confirming the
order passed by Oak, J.
In this appeal, it is urged in the first instance, that the
Company possessed stocks of sugar of value exceeding the
liability for payment of Rs. 8,38,000/- odd. But the stocks
of sugar were not mentioned in the Collector’s report to the
Land Reforms Commissioner : they were not included in the
sale proclamation as property put up for sale, nor were
they valued in the report of Sardar Jagjit Singh. The
Company asserted in the petition ,before the High Court that
it possessed stocks of sugar worth Rs. 9 lakhs. which had
not been, attached earlier, but no such. contention was
advanced in support of the application for setting.
472
aside the sale before the Commissioner, nor was any argument
advanced before the High Court. It appears that the stocks
of sugar were mortgaged separately and the amount for which
they were mortgaged was not included in the claim, made for
which the property of the Company was to be put up for sale.
It was then urged that under S. 286(2) of Act 1 of 1951, the
Collector, was bound in the first instance to exhaust, the
processes for recovery of arrears prescribed by cls. (a) to
(e) of S. 279 of the Act and he could not attach and sell
immovable property of the Company until those processes were
exhausted. It was urged that s. 286(2) of the Act was
mandatory and the Collector not having sold the movables in
the first instance, the sale must be declared void.
The amount for the recovery of which the sale of the assets
of the Company was held, included income-tax dues, sugarcane
cess and the amount due for cane supplied to the Company.
This amount was recoverable as arrears of land revenue
because of the provisions of the Indian Income-tax Act,
1922, the U.P. Sugar Factories Control Act, 1938, and the
Co-operative Societies Act 1912. Section 286(2) of the U.P.
Zamindari Abolition and Land Reforms Act provides:
“Sums of money recoverable as arrears of land
revenue, but not due in respect of any
specific land, may be recovered by process
under this section from any immovable
property of the defaulter.”
Though the amount for which the property was put up for sale
was recoverable as arrears of land revenue, no part of it
was due in respect of any specific land. The amount could
prima facie be recovered from the immovable property of the
defaulter. But relying upon the expression “under this
section” in S. 286(2) of Act 1 of 1951 it was contended that
the immovable property of the Company could be attached and
sold only after the processes prescribed in s. 279 cls. (a)
to (e) were resorted to and the Collector was unable to
recover the dues. It was urged that this is the true effect
of s. 286(1) and s. 279 of Act 1 of 1951. Section 286(1)
provides :
“It any arrears of land revenue cannot be
recovered by any of the processes mentioned in
clauses (a) to (e) of Section 279, the
Collector may realize the same by attachment
and sale of the interest of the defaulter in any
other immovable property of the
defaulter.”
Section 279 of the Act set-, out the procedure for recovery
of land revenue. The section as it stood at the. date of We
provided
473
An arrear of land revenue may be recovered by
any one or more of the following processes :
(a) by serving a writ of demand or a
citation to appear on any defaulter,
(b) by arrest and detention of his person,.
(c) by attachment and sale of his movable
property including produce,
(d) by attachment of the holding in respect
of which the arrear is due,
(e) by sale of the holding in respect of
which the arrear is due.
(f) by attachment and sale of other
immovable property of the defaulter.”
Section 280 deals with the mode of recovery prescribed by
cl. (a) of s. 279; s. 281 with the mode prescribed by cl.
(b) i.e. by arrest and detention; and s. 282 with the mode
prescribed by cl. (c) i.e. by attachment and sale of the
movable property including produce. Section 284 sets out
the procedure for sale of the holding in respect of which
the arrear was due and s. 286(1) deals with the power to
proceed. against the interest of the defaulter in other
immovable property.
For recovery of arrears of land revenue, the Collector is
bound to resort to one or more of the processes mentioned in
s. 279 read with ss. 280, 282, 284 & 285 of the Act, before
he attaches and sells the immovable property of the
defaulter, other than the holding in respect of which the
land revenue is due. That clearly follows from the terms of
sub-s. (1) of s. 286. Subsection (2) of s. 286 makes the
same process applicable for recovery of sums of money which
are recoverable as arrears of land revenue. But the
liability to pay the amount so recoverable arises by virtue
of the provisions of other Acts and is not due in respect of
any holding of the defaulter. It is only recoverable as
arrears of, land revenue by virtue of the provisions of the
Act under which the liability has arisen. Since U.P. Act 1
of 1951 provides by s. 286(2) that sums of money recoverable
as arrears of land revenue may be recovered from any
immovable property of the defaulter, the procedure
prescribed by the Act applies to such recovery. Because of
the use’ of the expression “under this section” in sub-s.
(2) of s. 286 it is not intended that the Collector must
resort in the first instance to the processes prescribed by
cls. (a) to (e) before he resorts to cl. (f), of s. 279.
Cls. (d) & (e) of s. 279 have no application, where income-
tax dues and sugarcane cess or cane price are recoverable
from the defaulter : and cl. (b) is inapplicable where the
defaulter is an artificial person like a Company. Power to
recover arrears of land reve-
414
nue from a defaulter is governed by the processes mentioned
in S. 279 cls. (a) to (e), and s. 286(1) places certain
restrictions upon the power of the Collector to recover land
revenue by attachment and sale of lands other than the
holding in respect of which the land revenue is due. But
the restrictions-on the power of the Collector operate only
when land revenue is in arrears. Restrictions if any upon
the power of the Collector to recover dues under other
statutes, as arrears of land revenue arise from the statute
which is the source of the liability and not from Act 1 of
1951 which merely sets out the processes for recovery of the
dues.
To hold that sub-s. (2) of s. 286 requires the Collector in
the first instance to recover out of the movable property or
by arrest and detention of the defaulter before immovable
property of the defaulter is attached and sold is to amend
the substantive provisions of the Acts under which the
liability for money due is recoverable as land revenue. For
instance , under s. 46 (2) of the Indian Income-tax Act,
1922, it is provided
“The Income-tax Officer may forward /to the
Collector a certificate’ under his signature
specifying the amount of arrears due from an
assessee, and the Collector, on receipt of
such certificate, shall proceed to recover
from such assessee the amount specified
therein as if it were an arrear of land
revenue. :
Provided that without prejudice to any other
powers of the Collector in this behalf, he
shall for the purpose of recovering the said
amount have the powers which under the Code of
Civil Procedure, 1908 (V of 1908), a Civil
Court has for the purpose of the recovery of
aim amount due under a decree.
The power exercisable, by the Collector in recovering
arrears of income-tax which are recoverable as arrears of
land revenue are, it is clear, not restricted to the Land
Revenue Code: the Collector is entitled to exercise all the
powers of a Civil Court for the purpose of recovery of an
amount due under a decree under the Code of Civil Procedure,
and the Code of Civil Procedure imposes no obligation to
recover the dues by sale of movables or by arrest and
detention of the defaulter before, immovable property may be
attached. Section 51 of the Code of Civil Procedure
provides:
“Subject to such conditions and limitations as
may be prescribed, the Court may, on the
application of the decree-holder, order
execution of the decree-
(a) by delivery of any property
specifically decreed;
(b) by attachment and sale or by sale
without attachment of any property;
475
(c) by arrest and detention in prison;
(d) in such other manner as the nature of
‘the relief granted may require
Provided……………..
By virtue of 0. 2 1 r. 30(e) of the Code of Civil Procedure
simultaneous execution both against the property and person
of the judgment-debtor is allowed. To hold, therefore, that
in seeking to recover income-tax dues the Collector is in
the first instance, by virtue of sub-s. (2) of s. 286,
restricted to the recovery of arrears by attachment and sale
of movables or by arrest and detention in prison of the
defaulter and it he cannot recover the amount then and then
only to have recourse to the immovable property of the
judgment-debtor is to seek to amend both the, Income-tax
Act, 1922, as well as the Code of Civil Procedure. The U .
P. Legislature is competent to alter the provisions of the
Income-tax Act.
We are, therefore, unable to agree with the opinion
expressed by jagadish Sahai, S., that the use of the words
“under this ,section” points to the applicability of the
whole section i.e. subsection (1) in the recovery dues
recoverable under sub-section (2) of section 286, and “that
the two sub-sections have got to be read together and the
effect of sub-section (2) is that even in connection with
the recovery of miscellaneous dues as arrears of land
revenue it is permissible to sell immovable property of the
defaulter but subject to what is provided for in sub-section
(1)”. We are also unable to agree with the observations
made by the learned Judge that
“…….. if sub-section (2) of section 286 of
the Act were to be read in isolation and
detached from subsection (1) it would become
impossible to administer the same. Sub-
section (2) only provides that the arrears of
miscellaneous dues may be recovered from any
immovable property of the defaulter without
specifying the manner in which they are to be
recovered, that is to say, without indicating
whether it would be recovered from the
usufruct of the property or by its sale or by
mortgage or lease.”
The provisions of the Act which authorise recovery of sums
of money as arrears of land revenue do not require the
Collector to follow any sequence of the processes for
recovery: it is competent to the Collector to ‘resort to any
process prescribed by s. 279 in aid of recovery of the dues
which are recoverable as arrears of land revenue. It is
unnecessary in the circumstances to
476
consider whether the provisions of s. 286(1) are mandatory
or directory.
It was urged in the alternative that after selling the
immovable property which realized more than Rs. 23,50,000/-
the Collector should not have sold the movable property, for
the claim for which the properties of the Company were put
up for sale, was only Rs. 8,38,176-13-0. At first blush
there is force in this argument. Why the Collector thought
it necessary to sell the movables after the immovable
property was knocked down to the Cawnpore Sugar Works Ltd.
for Rs. 23,50,000/- was never explained. After the
immovable property belonging to the Company was knocked down
to the purchasers for an amount of Rs. 23,50,000/- it was
apparently not necessary to hold the auction for sale of
movables valued at Rs. 7,64,817/- and to accept a bid of
only Rs. 2,75,000/-. The argument that the movables were of
no use to any person other than the purchaser of immovable
property is without substance. The movables sold we’re the
tools and workshop plant, mill stores, spare parts and
furniture, and it is difficult to accept the contention that
these movables were of no value except to the purchaser.
But the Company raised no contention in this behalf before
the Commissioner, nor in the petition before the High Court.
The question was also not argued before the High Court in
that form. We cannot at this stage investigate the reasons
why movables valued at Rs. 7,64,817/- were put up for sale
and sold when it was not necessary to sell them to realise
the dues.
It was then urged that the Income-tax Officer had, by
intimation dated December 11, 1954, asked the Collector to
stay the sale proceeding for recovery of income-tax dues
amounting to Rs. 81,821-2-0. For some reason, which is not
clear from the record, the Collector ignored the intimation
given by the Income-tax Officer and proceeded to put the
property to sale. He included the amount in the sale
proclamation, overruling the protests of the Company, and
sold the properties for recovery of a consolidated amount
which included Rs. 81,821-2-0 due as income-tax. But on
that account the sale is not illegal or irregular. An
amount exceeding Rs. 7 lakhs was recoverable for the
sugarcane cess and the cane price and the immovable property
of the Company could have been put up for sale for recovery
of those dues. The sale is not proved to be vitiated on the
ground of any material irregularity or mistake in publishing
or conducting it, and it is therefore not liable to be set
aside.
It was finally con that the Company was prevented from
exercising its right under r. 285-H of the rules framed
under U.P. Act 1 of 1951, because the purchaser at the sale
was appointed, by order of the Central Government,
Authoriged Con-
477
troller of the factory of the Company, and all the
properties of the ‘Company were put in +.he possession of
the purchaser, and that the Company was unable to raise the
requisite amount to be deposited under r. 285-H. Under r.
285-H any person whose holding or other immovable property
has been sold under the Act may, at any time within thirty
days from the date of sale, apply to have the sale set aside
on his depositing in the Collector’s office-
(a) for payment to the purchaser, a sum
equal to 5 per cent. of the purchase money;
and
(b) for payment on account of the arrear,
the amount specified in the proclamation in
Z.A. Form 74 as that for the recovery of which
the sale was ordered, less any amount which
may, since the date of such proclamation of
sale, have been paid on that account; and
(c) the cost of the sale.
If the deposit is made, the Collector shall pass an order
setting aside the sale. It was open to the Company under r.
285-H even after the bids were accepted to deposit 5 per
cent. of the sum realised by sale of the immovable property
and to pay the amount due for the recovery of which the sale
was ordered and the cost of the sale. But no attempt was
made to deposit the amounts mentioned in cls. (a), (b) & (c)
of r. 285-H. The contention that the Company was unable to
make the deposit under Rule 285-H because the purchaser was
appointed Authorised Controller was also not raised before
the Commissioner and the High Court. The argument that if
the movable property had not been sold, the Company may have
raised the amount liable to be deposited under cls. (a), (b)
& (c), but by sale of those properties and purchase of the
same by a person who was shortly after the purchase
appointed the Authorised Controller prevented the Company
from exercising the right under r. 285-H is hypothetical.
Again even that argument was not raised before the Commis-
sioner, nor in the petition, nor in the arguments before the
High Court. Evidently, the Company was required to comply
with the provisions of r. 285-H for having the sale set
aside to deposit an amount of Rs. 9,50,000/- besides the
cost of the sale. Even if the movables had not been sold,
and assuming that they were of the value of Rs. 7,64,817/-
the movables were not sufficient to enable the Company to
raise the amount required for deposit under r. 285-H.
The contentions raised by the Company fail and the appeal is
dismissed. We are, however, of the view, especially because
of the action of the Collector in putting the movables to
sale even
Sup CI/69-12
478
after the immovable property realised an amount very much in
excess of the dues, and ignoring the intimation sent by the
Income-tax Officer to stay the sale proceeding, which has
involved the Company in loss of property of substantial
value, that the parties should bear their own costs
throughout.
Y.P. Appeal dismissed.
479