MULRAJ A

.V MURTI RAGHONA TllJI MAHARAJ March 2, 1967

[K. N. WANCHOO, R. S. BACHAWAT AND .Y. BHARGAVA, JJ.]

Stay order-When takes effect.

While an application of the r""pondent-landlord for penn1ss1on to sue for ejectment of his tenant, the appellant, under the U.P. (Temporary) Rent Control Act was pending before a Magistrate, the appellant applied for the transfer of proceedings relating to permission from that C Magistrate's Court.

On that transfer application an order was passed staying further proceedings. This stay order was not cqmmunicated to the Magistrate with the result that the Magistrate granted permission to sue. The respondent filed the suit for ejectment where the appellant raised the plea that the permission granted subsequent to stay order was. a nullity as the Magistrate dealing with the matter h11d lost his jurisdiclfon thereunder. The trial court accepted the appellant's plea, but High Court in appeal rejected it, In appeal to this court : D

HELD : The appeal must be dismissed.

An order of stay in an execution matter is in the nature of a prohi bitory order and is addressed to the court that is carrying out e<ecution. lt is not of the same nature as an order allowing an appeal and quashing execution proceedings. That kind of order takes effect immediately it is passed, for such an order takes away the very jurisdiction of the E court executing the decree as there is nothing left to execute thereafter.

But a mere order of stay of execution does not take away the jurisdic~ lion of the court.

All that it does is to prohibit lhe court from proceedings with the execution further, and the court, unless it knows of the order cannot be expected to carry it out.

As soon as a stay order is withdrawn, the executing court is entitled to carry Qn execution and there is no question of fresh conferment of jurisdiction by the fact that the stay order has been withdrawn.

The jurisdiction of the court is F there all along.

In effect a stay order is more or less in the same position as an order of injunction with one difference.

An order of injunction is generalty issued to a party and it is forbidden from doing certain acts. [870-880, HJ

The court may receive knowledge either on receipt of an order of stay from the court that passed it or 1hrouh one party or the other supported by an affidavit or in other way. [89B-F] G

The court can always act under s. 151 C.P.C. and set aside steps taken between the time the stay order was passed and the time it was brought to its notice, if that is necessary in the ends of justice and the party concerned asks it to do so. [90E]

What have heen said about execution proceedin_gs applies with greater force to stay orders passed in transfer applications. [90H)

The above principle may not be applicable where stay is made for ministerial officers. [910)

MULllAJ v. llAGHONATHJl (Wanchoo, I.) as.

Besmswarl Chowdhura11y v. Horro Sunder Moz; madar (1896-97) 1 C.W.N. 226, Hukum Chand Bold v. Kamalanand Sillgh, l.L.R. (1906) XXXlll Cal. 227, Llakat Mlan v. Padampat Slnghania,

A.I.R. 1951 Pat. 130, Din Dyal Lakhl Ram v. Union of India, A.I.R. 1954 Punj. 46 and Kasarlbada Venkatachalpati Rao v. Maddlpatla Kameshwaramma, l.L.R. (1918) Xl.1 Mad. 151, approved.

Hukum Chand Bold v. Kamalanand Singh, l.L.R. (1906) XXXlll Cal. 227 and L. Parsotam Saran v. B. Barhma Nand, A.LR. 1927 All. 401, disapproved.

CIVIL APPELLATE JURISDICTION : Civil Appeal No. 1938 of 1966.

Appeal by special leave from the judgment and order dated.

April 20, 1966 of the Allahabad High Court in Second Appeal No. 2648 of 1964.

Yogeshwar Prasad and S .. S. Khanduja, for the appellant.

Hardev Singh, for the respondent.

The Judgment of the Court was delivered by

Wanchoo, J.

This is an appeal by special leave against the judgment of the High Court of Allahabad. Brief facts necessary for present purposes are these.

The respondent filed a suit against the appellant for eviction from a shop whih the appellant had taken on monthly rent from the respondent.

The suit was filed after permission had been obtained under the U.P. (Temporary) Control of Rent and Eviction Act, No. III of 1947, {hereinafter referred to as the Act), in the court of the Munsif in Jhansi.

It was contested by the appellant and one of the points raised before the trial court was that as the permission to sue had been granted at a time when there was a stay order, th.e Magistrate granting the permission had no jurisdiction to do so and therefore the permission was a nullity.

On that basis it was contended that the suit should fail for no suit could continue under the Act without such permission.

The Munif dismissed the suit.

The respondent then went in appeal.

The appeal court upheld the order of the Munsif taking the view that the permission granted after the stay order had been passed ws a nullity.

The respondent then came in second appeal to the High Court, and the only point con.sidered there was whether the permission granted by the Magistrate was a nullity or not.

It may be mentioned that though

th~ say ordr had been pas.sed on September 2 9, 1961 by the D1stnct Magistrate, the Magistrate who was dealing with the

mattr ?f permission, had no knowledge of it when he granted the permission on October 4, 1961.

The question that arose before the High Court therefore was whether the permission granted in

SUPREME COURT REPORTS

(1967) 3 S.C.R.

these cireurnstances could be said to be a nullity. The High Court held. that the stay order could not and did not take away the jurisdiction of the Magistrate from the moment it was passed and that as th~ Magistrate had no knowledge of or information about the stay order when he granted the permission on October 4, 1961, that permission was witl'l jurisdiction and the suit would therefor~ be maintainable.

As no other point was apparently in dispute in the High Court it allowed the appeal and granted a decree for ejectment and . reni in favour of the respondent.

The appellant then obtained special leave from this Court, as there is some conflict of opinion between the High Courts on this question.

As we have already indicated, the facts on the question raised before us are not in dispute. When the application for permission was pending before Sri Nigam, Magistrate I Class, who had jurisdiction to deal with that application by virtue of the authority delegated to him by the District Magistrate, it appears that the appellant applied for the transfer of proceedings relating to per mission from. Sri Nigam's court.

On that transfer application, the District Magistrate passed an order staying further proceedings till the disposal of the transfer application.

This order was not communicated to the Magistrate concerned by the office of the District Magistrate: Nor does it appear that the appellant infom1ed the Magistrate of the order of stay with the result that on October 4, 196 l , the Magistrate gave permission to the respondent to file a suit for eviction.

When however the respondent filed the suit in the Munsif's court, the appellant raised the question that as a stay order had been passed on September 29, 1961, the permission granted on October 4, 1961, was a nullity as the Magistrat~ dealing with the ma:ter had lost his juri, diction thereunder.

There has been difference of opinion amopg the High Court' on the question of the effect of a stay order, particularly with reference to execution proceedings.

The High Courts of Calcutta.

Patna and Punjab have held that in such a case the stay order takes effect from the moment it is passed and the fact that the court executing the decree has no knowledge of it makes no difference and all proceedings taken in execution after the stay order has been passed are without jurisdiction. On the other hand, th~ High Courts of Madras and Kerala have taken the view that the executing court does not lose its jurisdiction from the moment , the stay order is passed and that the order bein~ in the nature of a prohibitory order the court carrying on executon does not l<Be

its jurisdiction to do so till the order comes to .its knowledge amt that proceedings taken in between are n.ot a nullty. 'f\'e A1Iahab:,1d Hih Court seems to have taken an mtermedtate view and .h"s heid that where rights of third parties like a stra1'.cr ; uctton purchaser have intervened the .fact tht the executmg court had no knowledge would protect third parties.

G ,

The earliest case on the point is Bessesswari Chowdh1, ran.v v.

Horro Sunder Mozmadar a11d oihers(' ). In that case a Division Bench of 'the Calcutta High Court Ji.el<l that "an order staying execution of a jecree against which an appeal is pending is in the nature of a: prohibitory order, and as such would only take effect when communicate~. If a property is sold before such an order is communicated to the court holding the sale, such sale is not rnid and cannot be treated as a nullity". In Hukum Chand Bo:.r

v. Kamalanand S!ngh('), another Division Bench of the same High.

Court dissented from the view taken in BPssesswari Chowdlwrany's case(') and held that an order of stay takes effect from the moment it is passecl and the knowledge of the court to which it

i> ddessed is immaterial and from the moment the order is passed the court to which the application is made for execution has n.i authority to execute it. It is these two cases of the Calcutta High Court which are the pasis of .. the decisions of other High Courts.

Some High Courts, as l\lready indicated, have accepted the view in Bessesswari Chdwdhurany's case(') while other High Courts have followed the view taken in Hukum Chand Boid's(') case.

Before we consider the question raised before us, we may indicate the leading cases on the two sides briefly. The Patna High Court in Li11kat Mian v. Padampat Singhania( 8 ) and the Punjab High Court in Din Dayal Lakhi Ram v. Un!on of India(') follow Hukum Chand Boid's(') case.

The Madras High Court in Kasaribada Venkatachalpati Rao v. Maddipatla Kameshwaramma(') follows Bessesswari Chowdhurany's case('). The Kerala High

Court in Cheeramparambila/ikutty v. Thalavanaparambila/ikutty(") also follows Bessesswari Chowdhurany's case(').

It is unneces sary to refer to other cases of these courts which were cited before us for they follow the view taken in these leading cases.

The Allahabad High Court in L. Parsotam Saran v. B.

B"rhma Nand('), as already indicated, took an intermediate view and held that where a third party's interest intervened. the stay order does not nullify a sale in favour of a third party.

But where only the parties to the execution proceedings were concerned it followed the view taken in Hukum Chand Bald's case(').

We are of opinion that the view taken in Bessesswari ChoH'- dhurany's case(') is the correct one.

An order of stay in' an executien matter is in our opinion in the nature of 3 prohibitory order and is addressed to the court that is carrying

(I) [1896-97) t C.W.N. 226.

(3) A.LR. 1951 P.11. 130.

(5) l.L.R. (t918) XL! Mad. ISi.

12) I.LR. [1906) XXXJJ[ Cal. 227.

(4) A.LR. 1954 Punj. 46.

(6) l.L.R. (196) Ker. 528.

(7) A.LR. 1927 All. 4Jl.

88 SUPllMB COURT 11.BPOR.TS

(1967) 3 S.CJ..

out e; i1.ecution. It is not of the same nature as an order allowin2 an appeal and quasliing execution proceedings. That kind o1 order takes effect immediately it is passed, for such an order takes away the very jurisdiction of the court executing the decrco as there is nothing left.,µ> execute thereafter.

But a mero order of stay of execution does' not take away the jurisdiction of the court.

All that it does is to prohibit the court from proceeding with the execution further, and the court unless it knows of the order cannot be expected to carry it out. Therefore, till the order comes to the knowledge of the court its jurisdiction to "8I'l'Y on execution is not affected by a stay order which must in the very nature of things be treated to be a prohibitory order directing the executing court which continues to have jurisdiction to stay its hand till further orders.

It is clear that as soon .as a stay order is withdrawn, the executing court is entitled to carry on execution and there is no question of fresh conferment of jurisdiction by the fact that the stay order has been withdrawn. The jurisdiction of the court is there all along. The only ellect of the stay order is to prohibit the executing court from proceeding further and that can only take effect when the executing Court has knowledge of the order.

The executing court may have knowledge of the order on the order being communicated to it by tl).e court passing the stay order or the executing court may be informed of the order by one party or the other with an affidavit in support of the information or in any other way.

As soon therefore as the executing court has come to know of the order either by communication from the court passing the stay' order or by an affidavit from one party or the other or in any other way the executing court cannot proceed further and if it does so it acts illegally. There can be no doubt that no action for contempt can be taken against an executing court, if it carries on execution in ignorance of the order of stay and this shows the necessity of the knowledge of the executing court before its jurisdiction can be affected by the order.

In effect therefore a stay order is more or less in the same position as an order of injunction with one difference.

An order of injunction is generally issued to a party and it is forbidden from doing certain acts.

It is well-settled that in such a case the party must have knowledge of the injunction order before it could be penalised for disobeying it. Further it is equally well-settled that the injunction order not being addressed to the court, if the court proceeds in contravention of the injunction order, the proceedings are not a nullity.

In the case of a stay order, as it is addressed to the court and prohibits it from proceeding further, as soon as. the court has knowledge of the order it is bound to obey it and if it does not it acts illegally, and all proceedings taken after the knowledge f the order would be a nullity. . at !n our opinion

i~ the only difference between an order of miuncuon to a party and an order of stay to a court. In both cases knowledge of the

party concerned or of the court is necessary before the prohibition takes effect.

Take the case where a stay order has been passed but it is never brought to the notice of the court, and the court carries on proceedings in ignorance thereof.

It can hardly be said that the court has lost jurisdiction because of some order of which it has no knowledge.

This to our mind clearly follows from the words of 0: XLI r. 5 of the Code of Civil Procedure which clearly lays down that mere filing of an appeal does not operate as stay of proceedings in execution, but the appellate court has the power to stay the execution.

Obviously when the appellate court orders stay of execution the order can have affect only when it is made known to the executing court. We cannot agree that au order staying execution is similar to an order allowing an appeal and quashing execution proceedings.

In the case where the execution proceeding is quashed, the order takes effect' immediately and there 1s nothing left to execute.

But where a stay order is passed, execution still stands and can go on unless the court executing the decree has knowledge of the stay order.

It is only when the executing court has knowledge of the stay order that the court must stay its hands and anything it does thereafter would be a nullity so long as the stay order is in force.

It is argued that this view would introduce uncertainty inasmuch as proceedings may go on and it may take sometime-whether long or short-for the stay order to reach the court.

There is in our E opinion no question of uncertainty, even if we hold that the stay order must come to the knowledge of the court to which it is addressed before it takes effect. The court may receive knowledge either on receipt of an order of stay from the court that passed it or through one party or the other supported by an affidavit or in any other way.

There is in our opinion no uncertainty by reason of the fact that the court to which the stay order is add- F ressed must have knowledge of it before it takes effect for it can always be proved that the court to which the 'stay order was addressed had knowledge of it and that is not a matter which should really create any difficulty or uncertainty.

Once it is clear that a stay order is in the nature of a prohibitory order, knowledge of it by the court which is prohibited is essential beore the court is deprived of the power to carry on the proceedings.

As was G pointed out in Basesswari Chowdhurany's case('), "the appellate court has nothing to do with the xecution of the de.cree; the execution proceeds under the directJon of the c?urt which made the decree and it has full authority to execute 1t: An order of s\ay does not undo anything which has been done: its utmst affect is to. stop further action in the direction of execut1011, but 1t would H only have that effect when it reached the court or person whose duty it was to obey it."

(I) (l 896-97) I C. W. N. 226.

M4Sup. CI/67-7

90 SUPIUIMB COtaT llBPOllTS [lb7] 3 S.C.R.

As we have already indicated, an or<lcr of stay is as much a prohibitory order as an injunction order and unl~ the court to which it is addressed has knowledge of it, it cannot deprive that court of the jurisdiction to proceed with the execution before it.

But there is one difference between an order of injunction and an order of stay arising out of the fact that an injunction order is usually passed against a party while a stay order is addressed to the court.

As the stay order is addressed to the court, as soon as the court has knowledge of it, it must stay its hand; if it does not do so, it acts illegally.

Therefore, in the case of a stay order as opposed to an order of injunction, as soon as the court has knowledge of it, it must stay its hand and further proceedings are illegal; but so long as the court has no knowledge of the stay order it does not lose the jurisdiction to deal with the execution which it has under the Code of Civil Procedure.

Though the court which is carrying on execution is not deprived of the jurisdiction the moment a stay order is passed, even though it has no knowledge of it, this does not mean that when the court gets knowledge of it, it is powerless to undo any pos siblc injustice that might have been caused to the party in whose favour the stay order was passed during the period till the court 11as knowledge of the stay order.· We arc of opinion that s. lSl

of the Code of Civil Procedure would always be available to the court executing the decree, for in such a case, when the .stay order is brought to its notice it can always act under s. 151, and set aside steps taken between the time the stay order was passed and the time it y.'as brought to its notice, if that is necessary in the ends of justice and the party concerned asks it to do so.

Though, therefore, the court executing the decree cannot in our opinion be deprived of its jurisdiction to carry on execution till it has knowledge of the stay order, the court has the power in our view to set aside the proceedings taken between the time when the stay order was passed and the time when it was brought to its notice, if it is asked to do so and it considers that it is necessary in the interests of justice that the interim proceedings should be set aside.

But that can only be done by the court which has taken the interim proceedings in the interest of justice under s. 151 of the Code of Civil Procedure provided the order is brought to its knowledge and a prayer is mllde to set aside the interim proceedings within a reasonable time.

Otherwise the interim proceedings in our opinion are not a nullity and in the absence of such exercise of power by the court executing the decree under s. 151, they remain good for all purposes. ·

What we have said about execution proceedings applies with greater force to stay orders passed in transfer applications, as in the present case.

Jn the case of execution proceedings at

1!.

. MULR.\J \/, R.\GHONATHJI (Wanchoo, J.) 91

any rate there is an appeal in which a stay order is passed; the transfer proceedings are collateral Jlroceedings and even though the superior authority may have the power to stay it cannot deprive the inferior authority having jurisdiction of that jurisdiction, unless the inferior authority is apprised of the order by the superior authority. In the present case the order of stay never came to the knowledge of the Magistrate concerned till he gave the permission on October 4, 1961. Later on the District Magistrate himself dismissed the transfer petition. The order was not brought to the knowledge of the Magistrate concerned by the appellant at any time.

Nor did he ever apply to the Magistrate to set aside the permission passed in ignorance in the interest of justice. In these circumstances, the appellant cannot challenge the permission as a nullity in the suit which has been brought on the basis of that permission. "'

We may, however, add that what we have said above refers only to proceedings being carried on by courts or authorities after the stay order has been passed and before they have knowledge of it.

But this may not apply in a ase where stay is made for ministerial officers, as for example in the case of a court

asking a bailiff not to sell and the bailiff selling without knowledge of the order of the court prohibiting it to carry on the sale.

The position in such a case may be diff!l.l"ent, but as to that we express no final opinion in the present appeal.

The appeal therefore fails and is hereby dismissed with costs.

Y.P.

Appeal dismissed.

MULRAJ

V MURTI RAGHONA TllJI MAHARAJ

March 2, 1967

K. N. WANCHOO

R. S. BACHAWAT

Y. BHARGAVA, JJ.

Rent Control Act

s. 151

C.P.C

CIVIL APPELLATE JURISDICTION

Yogeshwar Prasad

S .. S. Khanduja

Hardev Singh

Wanchoo

Control of Rent and Eviction Act

Jhansi

September 2 9, 1961

October 4, 1961

Nigam

Nigam

October 4, 196 l

September 29, 1961

High Courts of Calcutta

Patna

Punjab

High Courts of Madras and Kerala

BPssesswari Chowdlwrany

Calcutta High Court

Bessesswari Chdwdhurany

Hukum Chand Boid

Patna High Court

Punjab High Court

Madras High Court

Bessesswari Chowdhurany

Kerala High

Court

Allahabad High Court

Hukum Chand Bald

Bessesswari ChoH'- dhurany

the Code of Civil Procedure

Basesswari Chowdhurany

SUPIUIMB COtaT llBPOllTS [lb7] 3 S.C.R.

the Code of Civil Procedure

the Code of Civil Procedure

s. 151

s. 151

the Code of Civil Procedure

s. 151

R.\GHONATHJI


COLLECTOR OF AURANGABAD & ANR. v.

CJ<~NIRAL BANK OF INDIA & ANR.

May 2, 1967

(J. C. SHAH, S. M. SIKRI AND V. R.AMASWAMI, JJ.]

Hyderubrul Land Revenue Act (8 of 1317F), ss. 104, 116 and 119- Whether s. 119 applies to movable property in the custody and possession of the Court-Whether ta; fes due to Govent have priority over debts to others-Doctrine of "Priority of Crown debts" applicab//ily in Hyderabad State before the Constitution came iltto force.

In execution of a decree obtained by the first respondent against the second respondent, a firm in Aurangabad in the erstwhile Hyderabad State, a holllle which was furnished as security for the amount of decree which might be passed against the second respondent, Was sold and the sale proceeds were deposited in the executing Court. Subsequently, the Collector of Aurangabad made an order under s. 119 of the Hyderabad Land Revenue Act, 1317F, distraining a part of the amount on account Of arrears of sales-tax due from the second respondent.

On the question of the validity of the Collector's order, the High Court held that the order was not valid because : (I} s. 119 of the Hyderabad Land Revenue Act applied only to property which was in tho custody and possession of the judgment-debtor and not in the custody and possession of the court; (2) the debt due to the Government in respect of arrears of sales-tax had no priority over the dues of tlie first respondent; and (3) the first respondent as a decree-holder had a prior charge; and the debt due to the Government in respect of salestax .:.n account of the quality of the debt due to the first respondent, had no priority.

In appeal to this Court, HELD : (I) The construction put by the High Court on s. 119 was not correct. The section in general terms empowers the distraint and sale of the defaulter's movable property and there is nothing in its

language or context which prohibits tile Colldctor from making an order of distraint with regard to the movable property in the custody and posses•ion of a court. [859 C-FJ

(2) But, a reading of ss. 104 and 116 of the Hyderabad Land Revenue Act, shows, that in respect of taxes other than Land revenue, only the Procedure for recovery under s. 116 applies and not the substantive law of priority under s 104 of the Act; and therefore the Government had no prionty in repect of arrears of sales-tax over the dues of the ftrst respondent. [860 H-861 BJ

(3) The Government could claim priority regarding payment of sales-· tax according to the doctrine of "Priority of Crown debts" quite apart from the provisions of the Hyderabad Land Revenue Act, but there was no proof that the doctrine was given judicial recognition in the Hyderabad State prior to January 26 1950 and therefore the doctrine w.as not a "law in force" in that 'territory which was 'continued by virtue of Art. 3720) of the Constitution. (862 H-863AJ

Builders Supply Corporation v. Union of India, .(1965] 2 S.C.R. 289; 56 I.T.R. 91 (S.C.) and Superintendent & Remembrancer of Legal Affairs, L9Sup.CI/67-ll ·

SUPREMB COURT REPORT~

[1967) 3 S.C.R.

W•st Be11g<1/ v. 1'/ie C01porc11io11 of C<dc1111a [1967]

2 S.C.R. 170 A referred to.

CIVIL APPELLATE J UR!SOICTION : Civil Appeal No. 1128 of 1965.

Appeal by special leave from the judgment and order dated December 17, 1962 of the Bombay High Court in Letters Patent Appeal No. 29 of 1960.

 S. T. Desai, R. Ganapathy Iyer and S. P. Nayyar, for the appellants.

Hans Raj Sawhney, P. C. Bhartari and 0. C. Mathur, for the respondents.

The Judgment of the Court was delivered by Ramaswami, J. This appeal is brought, by special leave, from the judgment of the Bombay High Court dated December 17, 1962 in Letters Patent Appeal No. 29 of 1900.

Respondent No. 2, the firm of Chandmal Manmal was m debted to the 1st respondent, Central Bank of India, Aurangabad branch.

On March 11, 1955 the first respondent filed a suit being Civil Suit No. 28/l of 1955 against the second respondent for recovering a sum of Rs. 14,541/· and odd in the Court of Subordinate Judge at Aurangabad.

On the application of the first respondent an order for interim injunction was passed in respect of certain properties belonging to the second respondent.

The Court had ordered the second respondent to furnish secu<ity for the amount of the decree which may be passed against the firm in the suit. On April 28, 1955 Jogilal Mulchand, one of the partners of the second respondent furnished security by creating a charge on his immovable property, which was a house at Aurangabad. After th~ security bond was furnished, the attachment was released. The security bond furnished by Jogilal Mulchand read as follows :

"I, the Defendant No. 2 therefore stand as a surety and declare that . if the Hon'ble Court decides the suit against the Defendants, he will abide by every order passed by the Court and if he fails to do so, then I defendant No. 2 stand as surety to the extent of Rs. 20,000/- (Rupees Twenty thousand) in O.S. coins and declare that I shall pay the amount of security into Court and for fulfilling the same I create a charge on my one pucca two storied house possessed by me known as 'Chandi Posh' bearing No. 167 situate at Kasba and Taluka Vijapur, District Aurangabad of the value of Rs. 25,000/-............ If I fail to pay the amount .of the security, the Court will.then be entitled to recover

the amount of the security from the property hereby charged ............ "

On April 30, 1955 the Subordinate Judge granted a decree against the 2nd respondent for a sum of Rs. 14,541/· and odd.

The 1st respondent filed an application for execution of the decree

under s. 145 of the Civil Procedure Code. In the execution of the decree the house which was charged under the security bond was sold and one Girdhardas purchased it in auction sale which was confirmed by the Court on Al/gust 14, 1958 and the sale proceeds thereof were deposited by the said Girdhardas in the executing Court.

On August 17, 1958 the Sales Tax Officer, Aurangabad Circle wrote a letter to the District Judge,. Aurangabad pointing out that a sum of Rs. 9,672/ • and odd wa~ due to the Government from the second respondent on account of arrears of sales-tax for the years 1950-51 to 1955-56. On September 23, 1958 the District Judge sent a letter to the Subordinate Judge asking him not to pay the sale proceeds of the house to the decree holder I.e., the first respondent.

Subsequently, the Collector of Aurangabad made an order on November 20, 1958. distraining the amount of Rs. 9,672/· out of the sale proceeds. under s. 119 of the Hyderabad Land Revenue Act (Hyd. Act VIII of 13 l 7F.). The order of the Collector stated as follows :

"Sanction is therefore accorded under Section 119 of Hyderabad Land Revenue Act to attach the amount of Rs. 9,672-1-0 out of the sale proceeds realised from the auction sale of the defaulter Shri Chandrnal's property and deposited with the Court of Sub-Judge, Aurangabad, towards satisfaction of the Decree No. 28/1 of 1955 passed against Shri Chandmal Manmal.

The amount should be remitted to the Sales Tax Officer, Aurangabad."

Thereupon the 1st respondent made an application to the trial court challenging the validity of the order of the Collector. The

Suborinate udge held .that the Civil Court had no jurisdiction to set aside, revise or modify the order of the Co!Tector and it could be done only by the Superior Revenue Authorities. From the order of. the ubordinate Judge. the I st respondent preferred an appeal G bemg First Appeal No. 341 of 1959 in the Bombay High Court.

The appeal was heard by Naik, J. who by his judoment dated June 22, 1960 held that in view of the provisions cntained in ss. I 04 .and 119 of the Hyderabad Land Revenue Act the Government was entitl.d to priority for the arrears of sales, tax due "

from the second respondent over the claim of the 1st respondent.

The. learned Judge ccordingly dismissed the First Appeal. From the Judgment of Naik, J. the 1st respondent took the matter in appeal under the Lettrs Patent. A Division Bench consisting of Patel and K. K. Desai, JJ. allowed the appeal by their judgment.

dated December 17, 1962 holding that s .. 119 of the Hyderabad Land Revenue Act applied only to property which was in the custody and possession of the judgment-debtor and not in the custody or possession of a Court. It was. observed by the Division Bench that the provisions of the Hyderabad Land Revenue Act contained in ss. 104, 116, 117 and 144 made it abundantly clear that the priority applied only in respect of land revenue and not in respect of other taxes. It was further held that the 1st respondent as a decree-holder had a prior charge as the quality of his debt was not the same as that of the debt due to the Government and therefore in respect of the sales-fax, the State had no

priority.

The first question to be considered in this appeal is whether the order of distraint dated November 20, 1958 made by the Collector of Aurangabad is legally valid. The order of the Collector was made under s. 13(2) of the Hyderabad General Sales Tax Act read with ss. 1 i ' -•ld 119 of the Hyderabad Land Revenue Act. Section 13 of the Hyderabad General Sales Tax Act (Hyd. Act No. XIV of 1950) provides as follows :

"13. (1) The tax assessed under ibis Act shall be paid in such manner, in such instalments, if any, and within such time, not being less than fifteen days from the date of service of the notice of assessment, as may be specified in such notice.

(2) In default of such payment, a penalty not ex-

eding the tax remaining unpaid may be imposed and the total amount due, including the penalty, if any, may be recovered as if it were an arrear of land revenue."

Section 116 of the Hyderabad Land Revenue Act (Hyderabad Act VIII of 1317 F) states:

"An arrear of land revenue may be recovered by the following measures and as far as possible, the measures shall be employed in the order.mentioned below:-

(a) by issuing a notice to the defaulter under section 118;

(b) by distraint and sale of the defaulter's movable property under section 119; ( c) by distraint and sale of the defaulter's immovable property under section 120;

( d) by arrest and detention of the defaulter under section 122; ( e) by forfeiture of the right of occupancy. in respect of which the arrear is due under section 124;

C:OI.LECTOR v. CENTRAL BANK (Ramaswami, l.) 859

(f) by temporary attachment of a non-khalsa village or part of such village in respect of which the arrear is due under section 125."

Section 119 of the same Act is to the following effect :

"The Tahsildar may distrain and sell the defaulter's movable property. Such distraint shall be made by officers or clerks appointed by him for this work."

The High Court has taken lhe view that s. 119 can only apply to property which is in the custody and possession of the judgmentdebtor and not in the custody and possession of a Court. In our opinion, the construction put by the High Court on the language of s. 119 of the Hyderabad Land Revenue Act is not correct and is not warranted by the languaiie of the section or the context in which it is placed. The section empowers the Tahsildar to

"distrain and sell the defaulter's movable property" and such distraint shall be made by officers or clerks appointed by him for this work.

The language of the section is general and there is no reason why any restriction should be put on the power of distraint conferred upon the Tahsildar with regard to the defaulter's movable property.

In the present case, the Collector of Aurangabad sent , the order of distraint to the Subordinate Judge requesting him to remit to the Sales Tax Officer the amount of Rs. 9,672/· out of the amount of sale proceeds dep(Jsited in his Court. We are of the opinion that the procedure followed by the Collector is justified by the provision of s. 119 and there is nothing in the language or context of the section which prohibit> the Collector from making an order of distraint with regard to the movable property in !he custody and possession of a Court.

We accordingly reject the argument of respondent No. 1 on this aspect of the case.

We proceed to consider the next question arising in this appeal, viz., whether the debt due to the Government in respect of arrears of sales-tax has priority over the dues of respondent No. I. It appears that the sales-tax was due for the years 1950-

51 to 1955-56, i.e., for a period of six years. It was submitted on behalf .of the appellants that since s. 13(2) of the Hyderabad General Sales Tax Act makes a provision for recovery of the sales-tax due as "arrears of land revenue" and since priority as to the land revenue is provided under the Hyderabad Land Revenue Act, the arrears of sales-tax also must be granted priority over other demands whether in respect of debts or mortgage or based on a decree or attachment of a Court. The argument of the appellants is based upon ss. 104, 116, 119 and 144 of the Hyderabad Land Revenue Act. Section 104 provides as follows

"The demand on any land, for its land revenue shall Ii. have priority over other demands whether in respect of debts or mortgage or based on a decree of or attachment by a Court, and if the title to any land on which such Government demand is due is transferred, such land or its transferer shall not be discharged from such demand. If the demand for land revenue which cannot B be recovered from the title to or existing produce of that land is due from a person, the liability for the payment of the land revenue shall have precedence over debt or decree of a Court also on his property other than _the land on which the demand is due; provided that such property before it is forfeited for recovery of the c said demand, is not sold or mortgaged or given as a gift or otherwise transferred or hypothecated or attached."

Section 144 is to the following effect :

"All the Government sums under the following heads may be recovered under the provisions of this Chapter :

(1) Land revenue.

(2) Quit-rent.

(3) Nazrana. ( 4) Peshkesh.

(5) Taxes. ( 6) Local cess. ( 7 ) Fine and penalties. ( 8) Income from lands.

(9) Rusum. ( 10) Fees. ( 11) Charges.

(12) Penal interest.

(13) Lease money.

(14) Moneys recoverable from sureties. ( 15) Taccavi loans.

(16) All sums in respects of which provision has been made in this Act or in any ther Act that they be recovered as arrears of land revenue." Section 144 enumerates the nature of taxes in respect of which the provision under the Land Revenue Act could be adopted for recovery. But the language of s. 104 makes it clear that the priority specified in that section applies only in respect of land

' .

COLLECTOR \'. CENTRAL BANK (Ramas1rami, J.) 8 61

revenue and not in respect of other taxes.

In respect of other taxes, we consider that only the procedure for recovery under s. 116 applies and not the substantive' Jaw of priority under s. 104 of the Land Revenue Act. In our opinion, Counsel for the appellants has not been able to make good his argument on this aspect of the case.

We pass on to consider the next question arising in this case, namely, whether the appellants are entitled to claim priority towards payment of sales-tax according to the Common Law <loctrine of 'Priority of Crown debts' quite apart from the provisions of the Hyderabad Land Revenue Act. The Common Law doctrine was evolved in the English Law as part of the Crown prerogative which is described by Halsbury• as follows :-

"The royal prerogative may be defined as being that pre-eminence which the Sovereign enjoys over and above all other persons by virtue of the common law, but out of its orc; nary course, in right of her regal dignity, and comprehends all the special dignities, liberties, privileges, powers and royalties allowed by the common law to the Crown of England."

The question about the applicability of the priority of Crown debts was considered by the Bombay High Court in 1868 in Secretary of State in Council for India v. Bombay Landing & Shipping Co.

Limited('), in which it was held that a judgment debt due to the Crown was in Bombay entitled to the same precedence in execution as a like judgment debt in England, if there is no special legislative provision affecting that right in the particular case. The same vi.ew has been taken by the Bombay High Court in a later case-Bank of India v. l<>hn Bowman(2)-in which Chagla, C.J., pointed out that the priorty given to the Crown was not on the basis of its debt being a judgment-debt or a debt arising out of statute, but the principle was that if the debts were of eq, ual. degree and the Crown .and the subject were equal, the Cr<;>wn s nght would prevail over that of the subject. The same View has been adopted by a Full Bench of the Madras High

ourt. in !Janickam Chettiar v. Income-tax Officer, Madura('), m. which It was held that the income-tax debt had priority over pnvate debts and the court had inherent power to make an order for payment of moneys due to the Crown. A similar view has been expressed by the High Court in Kaka Mohamed Ghouse Sahib Co. v. United Commercial Syndicate('). All these :uthontJes have been quoted with approval by this Court in

(•) Halsbury's Laws of England, 3rd Edn., Vol. 7, page 221.

(1) (1868-69) 5 Born. H.C.R. 23

(2) A.I.R. 1955 Born. 305.

(3) (1938) 61.T.R. 180.

(4) 491.T.R. 824.

Builders Supply Corporation v. Union of India('), in which it was held that the Government of India was entitled to claim priority for arrears of income-tax due to it from a citizen over debts from him to uns.ecured creditors and that the English common law doctrine of the priority of Crown debts has been given judicial recognition in the territory known as "Btitish India" prior to 1950 in regard to the recovery of tax dues in priority to other private debts of the tax-payer.

It was pointed out therefore that the English Common Law doctrine having been incorporated into Indian law, was a 'law in force' in the territory of India, and, by virtue of Art. 372 (1) of the Constitution of India, it continued to be in force in India until it was validly altered, repealed or amended. It was, however, argued tor the respondents that the authority of the decision of this Court in Builders Supply Corporation v. Union of India(') has been affected to some extent by the later decision of a larger Bench of this Court in The Super

intendent & Remembrancer of Legal Affairs, West Bengal v. The Corporation of Calcutta,('), in which it was held that the rule of English Common law that the State was not bound by the provisions of a statute unfess it was expressly named or brought in by necessary implication, was not accepted as a rule of construction throughout India and therefore . it has not become law of the land. It was further held that even on the assumption that it was accepted as a rule of construction throughout India, it was only a rule of construction and not a rule of substantive law and therefore cannot be said to be "a law in force" within the meaning of Art. 372. Lastly, this Court expressed the view that the rule of construction was incongruous in a democratic republic and it was inconsistent with the rule of law based on tl1e doctrine of equality and therefore the said canon of construction should not be applied for construing statutes in India.

Tn our opinion, there is nothing in this judgment which affects the authority of the previous decision of this Court in Builders Supply Corporation v. Union of India(').

On the other hand, the majority judgment of the learned Chief Justice has referred to the decision in H. Snowden Marshall v. People of the State of New York(') which lays down a similar doctrine, namely, that the State of New York has the common law prerogative right of priority over unsecured creditors, and distinguished the case on the ground that it had nothing to do with the rue of construction but was based upon the common law prerogative of the Crown.

We are, however, unable to apply the English Common Lav doctrine of priority of Crown debts in this case, because there is H no proof that the doctrine was given judicial recognition in the

(I) 561. T. R. 91

(2) [1967] 2 S.C.R. J7,).

(3) (1920) 65 Law.Ed. 315.

A territory of Hyderabad State prior to January 26, 1950 when the Constitution was brought into force. We granted time to Counsel for the appellants to ascertain whether there were any reported decisions recognising such a doctrine in the Hyderabad State, but sufficient material has not been placed before us fo. this case to show that the doctrine was given judicial recognition in the Hyder- B abad State before its incorporation into the Indian Republic.

For these reasons we hold that the judgment of the Bombay High Court dated December 17, 1962 m Letters Patent Appeal No. 29 of 1960 must be affirmed and this appeal must be dismissed with costs.

V.P.S.

Appeal dismissed.

COLLECTOR OF AURANGABAD & ANR

NIRAL BANK OF INDIA & ANR.

May

C. SHAH

S. M. SIKRI

Hyderubrul Land Revenue Act

ss. 104, 116 and 119

s. 119

Aurangabad

s. 119

Hyderabad Land Revenue Act, 1317

s. 119

s. 119

ss. 104 and 116

s. 116

s 104

Hyderabad

January 26 1950

Art. 3720

(1965] 2 S.C.R. 289

[1967]

2 S.C.R. 170

S. T. Desai

R. Ganapathy Iyer

S. P. Nayyar

Hans Raj Sawhney

P. C. Bhartari

0. C. Mathur

Ramaswami

Chandmal Manmal

Central Bank of India, Aurangabad

March 11, 1955

April 28, 1955

Jogilal Mulchand

April 30, 1955

s. 145

Girdhardas

Al/gust 14, 1958

August 17, 1958

Aurangabad Circle

September 23, 1958

November 20, 1958

s. 119

Section 119

Hyderabad Land Revenue Act

Chandrnal

Chandmal Manmal

Naik

Patel

K. K. Desai

ss. 104, 116, 117 and 144

s. 13(2)

ss. 1

Section 13

Section 116

Hyderabad Act VIII of 1317

section 118

section 119

section 120

section 122

section 124

section 125

Section 119

s. 119

s. 119

s. 119

s. 13(2)

ss. 104, 116, 119 and 144

Section 104

Section 144

Section 144

s. 104

s. 116

s. 104

Halsbury•

England

Bombay High Court

Bombay

Chagla

Madras High

Government of India

India

Art. 372

Constitution of India

Art. 372

State of New York

December 17, 1962


G. EKAMBARAPPA & ORS.

EXCESS PROFITS TAX OFFICER, BELLARY

May 2, 1967

[J. C. SHAH, S. M. S!KRI AND V. RAMASWAMI, JJ.]

Aclap1<1tio11 of Laws, Order (No. 3) dated December 31, 1956- Excess Profits Tax Act, 1940 made i11app/lcable to all areas forming part of a Part B State immediately before November I, 1956-IVhetlier tunounts to 'repeal' of Act in respect of such area-General Clauses Acl. s. 6 1vhether attracted.

General Clauses Act, S• 6(e)-Liabillty 'acer :ed or incurred'- Bellary district i11cluded i11 Part B State Immediately before NO\ember

I, 1956-Notice under E.tcess Profits Tax Act, s. IS Issued in 1960 ln respect of business carried on in sahl district in 1943-44-Terms of s. 6(e) General Clauses Acl whether satisfied-Liability 10 tax ll'hetlier .arises at eud of chargeable accounting period or lvhen assessntent pro ceedings completed.

The District of Bellary originally belonged to the Part 'A' State of Madras in British India. On October l. 1953 it merged in the Part 'B' State of Mysore. The Excess Profits Act, 1940 applied only to British India. When Bellary District went to the Part 'B' State of Mysore the Act ceased to apply to it. After the States Reorganisation Act, 1956, .\lysore also became a Part 'A' State.

But according to s. 1(2) of the Adaptation of Laws (No. 3) Order dated December 31. 1956. the aforesaid Excess Profits Tax Act was to extend "to the whole of India except the trritories which immediately before November 1, 1956 were comprised in a Part 'B' State." In 196Q the Excess Profits Tax Officer,

Bellary gave a notice to the appellants under s. 15 of the Act in respect of the period October 30, 1943 to October 30, 1944. The appellnnts objecied that the Act did not apply to Bellary district as immec; liately before November 1, 1956 it was in a Part 'B' State. The plea was re- 1ected by the departmental authorities as well as by the High Court

m a wnt petition under Art. 226 of the Constirution. In appeal. by special leave, to this Court it was contended that so far as Bella11 Dis-· trict was concerned it was not a case of repeal but only of non-application of the Act, and thus s. 6 of the Genral Clauses Act was not attracted.

It was further urged that even if s. 6 applied no liability had accrued or been incurred in terms of cl. ( e) of the section as there was no assessment of escaped profits before November l, 1956 when the adaptation was made.

HELD : (i) The result of the Adaptation of Laws Order 1956 so far as the Act was concerned, was that the provisions of the Act were no longer opplicable or in force in Bellary district. To put it differently the Act was repealed so far as the area of Bellltry dIStrict was con-

, crned. Repeal of the Act means revocation or abrogation of the Act and s. 6 of the General Clauses Acr applies even in the case of a partial repeal, or repeal of part of an Act.

[866H; 867A]

(ii) The case was covered by s. 6(e) of the General Clauses Act.

The liability of an assessee to tax arises immediately at. the end f te chargeable accounting period and not merely at the ttme when 1t tS quantified. bv assessment proceedings. It followed trefore that the

EKAMBARAPPA v. P..P.T.O, (Rama.swami, J,) 865

notice issued under s. 1 S of the Act was legally va)id and tho "f; Pllants representing the original partners of the firm continued t!> be ta e to be proceeded against under that section for the profits which had escap ed taxation. [867 E-Fl Wallace Brothers & Co. v. Commissioner of Income-tax, 16 I.T.R. 240 (P.C.), Chatturam Hori/ram Ltd. v. C.l.T., 27 J.T.R. 709. Kalwa Dcvadattwn v. Union of India, 49 J.T, R. !65 and State of Kera/a v, N.

Sami Iyer, A.l.R. 1966 S.C. 1415, rehed on.

CIVIL APPELLATE JURISDICTION: Civil Appeal No. 185 of 1966.

Appeal by special leave from the judgment and order dated March 20, 1962 of the Mysore High Court in Writ Petition No.

109 of 1960.

A. K. Sen, R. Ganapathy Iyer and R. Gopa/akrishnan, for the appellants.

D. Narsaraju, T. A. Ramachandran and R. N. Sachthey, for the respondent.

The Judgment of the Court was delivered by Ramaswami, J.

This appeal is brought, by special leave, from the judgment of the Mysore High Court dated March 20, 1962 dismissing writ petition No. 109 of 1960. The appellants had prayed therein for the grant of writ for quashing a notice dated January 16, 1960 issued by the respondent under s. 15 of the Excess Profits Tax Act, 1940 (Act XV of 1940), hereinafter called the 'Act', calling upon the appellants to submit a return of the standard profits and the profits actually made during the chargeable accounting period from October 30, 1943 to October

30, 1944 on the ground that the profits had been under-assessed.

The appellants carried on a business constituting themselves into a partnership called 'Guduthur Thimmappa & Brothers in

1934. On the date of commencement of the business the partners were G. Thimmappa, G. Ekambarappa, and G. Padmanabhan, each of the partners representing their respective joint families. The business of the firm was in Bellary town and the

parners of the firm were _residents f Bellary town during the penod the firm was carrymg on busmess. The firm was dissolved on <?ctober 16, 1944.

Thimmappa, one of the partners, died on ApnL13, 1955. For the chargeable accounting period from October 30, 1943 to April 30, 1944, the Excess Profits Tax Officer had taken steps to assess the "escaped'' profits of the firm.

He issued the necessary notices to G. Padmanabhan and G. Ekambarappa as the partners of the dissolved firm. He also issued notice to G. M. Prabhu and G. Lakshmidevamma as the representatives of G. Thimmappa.

The contention of the appellants before the High Court was that as from November 1, 1956 the Act must be

deemed to have been repealed so far as Bellary district is con- A cerned and therefore the respondent was not competent to take any proceedings for determining the escaped income under s. 15 of that Act. The High Court rejected the contention on the ground that, though the Act stood repealed by reason of the inclusion of Bellary district in Mysore State, the liability to pay tax on the escaped profits continued by virtue of s. 6 of the B General Clauses Act.

The question to be considered in this appeal is whether l'ie appellants continued to be liable to be proceeded against under s. 15 of t.he Act on the profits which had escaped taxation.

The present Bellary district was a part of the old Madras State which was a Part "A" State under the Constitution of India till its merger with the Mysore State on October l, 1953 which was a Part "B" State. The Mysore State continued to be a Part "ff'

State till November 1, 1956. The Act extended, when first promulgated, to the territory of fonner British India.

After the Constitution came into force, s. 1 (2) of the Act was adapted so as to extend the operation of the Act "to the who!~ of India except Part 'B' States" by the Adaptation of Laws Order, 1950. After the formation of new States in pursuance of the States Reorganisation Act, 1956 (Act 37 of 1956), sub-s. (2) of s. I of the Act was adapted by the President by Adaptation of Laws (No. 3) Order, 1956 dated December 31, 1956.

Section 1(2) of the Act as adapted read as follows :

"It extends to the whole of India except the territories which immediately before the 1st November, 1956 were comprised in part 'B' state."

The result of the adaptation was that all the provisions of the Act stood repealed so far as the district of Bellary was concernea with effect from December 31, 1956. It was contended on behal1 of the appellants that it is not a case of repeal of the Act and so the provisions of s. 6 of the General Clauses Act could not be invoked to sustain the validity of the notices issl!ed by the respondent under s. 15 of the Act. It was argued that so far as the Act was con cerned, the Adaptation of the Laws Order, 1956 only modified the provisions of s. I (2) of the Act and did not repeal the. Act as such and the effect of the modification was that the provisions of the Act were no longer applicable to the Bellary district _which was comprised in the territory of Part 'B' State of Mysore immediately before November 1, 1956.

In our opinion there is no justification for the argument put forward on behalf of the appel !ants. The result of the Adaptation of Laws Order, 1956 so far as the Act was concerned, was that the provisions of that i\Ct were no longer applicable or in force in Bellary district. To put it differently, the Act was repealed so far as the area of Bellary

district was concerned. Repeal of an Act means revocation or abrogation of the Act and, in our opinion, s. 6 of the General Clauses Act applies even in the case of a partial repeal or repeal of part of an Act. Section 6 of the General Clauses Act slates :

"Effect of repeal.-Where this Act or any Central Act or Regulation made after the commencement of this Act, repeals any enactment hitherto made or hereafter to be made, then, unless a different intention appears, the repeal shall not-

( c) affect any right, privilege, obligation or liability C acquired, accrued or incurred under any enactment so repealed; or

" Section 3 ( 19) of the General Clauses Act defines an "enactment'' as including "a Regulation and also as including any provision contained in any Act <lr in any such Regulation as aforesaid".

The argument was also stressed on behalf of the appellants that even if s. 6 ( c) of the General Clauses Act )Vas applicable there was no "liability incurred or accrued" as there was no assessment of escaped profits before November 1, 1956 when the adaptation was made. We do not think there is any substance in this argument. The liability of the appellants to tax arose immediately at the end of the chargeable accounting period and not merely at the time when it is quantified by assessment proceedings. It follows tb.erefore that the notice issued under s. 15 of the Act was legally . valid and the appellants representing the original partners of the firm continued to be liable to be proceeded against under that section for the profits which had escaped taxation. In Wallace Brothers and Co. Ltd. v. Commissioner of Income-tax('), the Judicial Committee expounded in clear terms the scope of a tax liability under the Income-tax Act. It was observed by the Judicial Committee as follows :

" ...... the rate of tax for the year of assessment may be fixed after the close of the previous year and the assessment will necessarily be made after the close of that ye.ar. Bu.t the liability to tax arises by virtu.e of the charging sect10n alone, and it arises not later than the close of the previous year, though quantification of the amount payable is postponed."

The. same view has been expressed by this Court in Chatllram Hori/ram Ltd. v. C.I.T. (2) in which the legal position was revieed

(I) 16 l.T.R. 240, 244, (P.C.)

(2) 27 l.T.R. 709.

with regard to the question of charge to income.-tax.

In that case, the assessee-company carrying on business in Chota Nagpur was assessed to tax for the year 1939·40, but the assessment was set aside by the Income-tax Appellate Tribunal on March 28, 1942, on the ground that the Indian Finance Act, 1939, was not in force during the assessment year 1939-40, in Chota Nagpur which was a partially excluded area. On June 30, 1942, a Regulation was promulgated by which the Indian Finance Act of 1939 was brought into force in Chota Nagpur retrospectively as from March 30, 1939. Thereupon the Incometax Officer made an order holding that the income of the assessee for the year 1939-40 had escaped assessment and issued to the assessee a notice under s. 34 of the Income-tax Act. The validity of the notice was questioned. It was held by this Court that though the Finance Act was not in force in that area in 1939-40, th~ income of the assessee was liable to tax in that year and, therefore, it had escap dently of the passinl( of the Finance Act but until the Finance Act It was pointed out that the income was chargeable to tax indepen dently of the passing of the Finance Act but until the Finance Act was passed no tax could be actually levied. The same principle was reiterated by this Court in Ka/wa Devadattam v. Union of lndla(').

The question in that case was whether the liability of a Hindu undivided family arose before or after partition of the family.

In that case, this Court speaking through Shah, J. stated in clear terms thus :

"Under the Indian Income"tax Act liability to pay income-tax arises on the accrual of the income, and not from the computation made by the taxing authorities in the course of assessment proceedings; it arises at a point of time not later than the close of the year of account."

The same view has been taken in a recent case by this Court in State of .Kera/a v. N. Sami lyer( 2).

In view of the principle expressed in these authorities we are of the opinion that the liability to pay excess profits tax accrued immediately at the end of th.~ chargeable accounting period and that liability was preserv ed under s. 6 ( c) of the General Clauses Act even though the Act stood repealed so far as Bellary district was concerned with effect from November 1, 1956.

Mr. Narsaraju contended in the alternative that on the combined operation of s. 53 of the Andhra Pradesh Act (Act 30 of

1953) ands. 119 of the State Reorganisation Act (Act 37 of

1956) all the provisions of the Excess Profits Tax Act, 1940 remained .in operation in Bellary district i11 spite of the Adaptation of Laws Order, 1956. Section 53 of the Andhra Pradesh Act states as follows :

(I) 49 l.T.R. 165.

(2) A.T.R, 1966 S.C. 141 l.

"Tho provisions of Part II shall not be deemed to have effected any change in tho territories to which any law in force immediately before tho appointed day eit tends or applies, and territorial references in any such law to the State of Madras or of Mysore shall, until otherwise provided by a competent Legislature or other competen! authority, continue to have the same mean ing."

Section 119 of the State Reorganisation Act reads as follows :

"The provisions of Part II shall not be deemed to have effected any change in the territories to which any law in. force immediately before the appointed day ex tends or applies, and territorial references in any such law to an existing State shall, until otherwise provided by a competent Legislature or other competent autho rity, be construed as meaning the territories within that State immCdiately before the appointed day."

Section 120 of this Act states :

"For the purpose of facili'ating the application of any law in relation to any of the States formed or terri torially altered by .the provisions of Part II, the appropriate Government may, before the expiration of one year from the appointed day, by order make such adaptations and modifications of the law, whether by way of repeal or amendment, as may be necessary or expedi ent, and thereupon every such law shall have effect subject to the adaptations and modifications so made until altered, repealed or amended oy a competent Legislature or other competent authority.

Explanation.-In this section, the expression "ap propriate Government" means-

(a) as respects any law relating to a matter enume

rated in the Union List,. the Central Govern ment; and ( b) as respects any other law,- ( i) in its application to a Part A State, the

State Government, and

(ii) in its application to a Part C State, the Central Government."

It was pointed out that the Act was in force in Bellary district when the Comtitution came into force and the effect of s. 53 of the Andhra Pradesh Act was to continue the operation of that Act so far as Bellary district was concerned. The effect of s. 119

870 SUPll.BMB COUll.T 11.BPORTS

[1967) 3 S.C.R.

<>f the State Reorganisation Act was to preserve the territorial <>peration of the Jaw which was jmmediately in force before the date-of the promulgation of that Act until such lw was repealed by the competent legislature or a competent legislative authority.

There is great force in the argument advanced by Mr. Narsaraju on this point. But it is not necessary for us to express any conduded opinion on this aspect of the case because we have already given reasons for holding that the appeal must be dismissed on the ground that the Act stood repealed by reason of the Adaptation of Laws Order, 1956 and the liability to pay tax on .escaped profits continued under s. 6 of the General Clauses Act.

We accordingly affirm the judgment of the Mysore High Court <lated March 20, 1962 and dismiss this appeal with costs.

G.C.

Appeal dismissed.

G. EKAMBARAPPA & ORS

EXCESS PROFITS TAX OFFICER, BELLARY

C. SHAH

V. RAMASWAMI, JJ.

Excess Profits Tax Act, 1940

s. 6

General Clauses Act

Profits Tax Act

s. 6(e)

Excess Profits Act, 1940

British India

Bellary District

State of Mysore the Act

s. 1(2)

December 31. 1956

Excess Profits Tax Act

November 1, 1956

s. 15

Bellary

Art. 226

s. 6

s. 6

November l, 1956

s. 6

s. 6(e)

General Clauses Act

s. 1

CIVIL APPELLATE JURISDICTION

A. K. Sen

R. Ganapathy Iyer

R. Gopa

D. Narsaraju

T. A. Ramachandran

R. N. Sachthey

Ramaswami

Mysore High Court

s. 15

Excess Profits Tax Act, 1940

October 30, 1943

October

30, 1944

Guduthur Thimmappa & Brothers

G. Thimmappa

G. Ekambarappa

G. Padmanabhan

ctober 16, 1944

Thimmappa

April 30, 1944

G. M. Prabhu

G. Lakshmidevamma

s. 15

s. 6

General Clauses Act

s. 15

Madras

Constitution of India

October l, 1953

India

s. 1

December 31, 1956

Section 1(2)

1st November, 1956

s. 6

General Clauses Act

s. 15

s. 6

General Clauses Act

Section 6

General Clauses Act

Section 3

General Clauses Act

s. 6

General Clauses Act

s. 15

Income-tax Act

Chota Nagpur

March 28, 1942

Indian Finance Act, 1939

June 30, 1942

March 30, 1939

s. 34

Income-tax Act

Shah

s. 6

General Clauses Act

Narsaraju

s. 53

Excess Profits Tax Act, 1940

Bellary district

Section 53

Section 119

Section 120

s. 53

s. 119

s. 6

General Clauses Act

March 20, 1962


STATE OF ANDHRA PRADESH

MADIGA BOOSENA & ORS.

May 2, 1967

[M. HIDAYATULLAH AND C. A. VAIDIALINGAM. JJ.J

Andhra Pradesh (Andhra Area) Prohibition Act, 1937 (Act 10 of

1937) S. 4(1) (a)-Seized commodity not chemically examined-Witnesses' s111ell,, if conclusive proof-

The respondents were prosecuted under S. 4(l)(a) of the Andhra Pradesh (Andhra Area) Prohibition Act, on the allegation that they were found transporting arrack. The respondents denied the offence and pleaded that a mere statement by the witneS'Ses that there was a strong smell of arrack, emanating from the tins, when they were pierced was not sufficient to establish that the tins contained arrack and that the samples of the commodity should have been sent for opinion of the Chemical Examiner.

The trial and the appellate courts rejected the respondents'J.leas and convicted them but the High Court acquitted them. In appe , to this Court.

HELD : The prosecution has not established that the respondents were guilty under s. 4(1) (a) of the Act.

Merely trustin~ to the smelling sense of the Prohibition Of&ers, and basing a conviction, on an opinion expressed by those officers, could not justify the conviction of the respondents. Better proof, by a technical person, who had considered the matter from a scientific point of Yicw, was not only desirable, but even necessary, to establish that the

article seized was one coming within the definition of 'liquor'. (874-E]

Baidyanath Mishra v. The State of Orissa, Crl. Ap. No. 270/1964 dtXided on 17-4-1967: distinguished.

CRIMINAL APPELLATE JURISDICTION: Criminal Appeal No. 6 of 1965.

Appeal by special leave from the judgment and order dated January 17, 1964 of the Andhra Pradesh High Court in Criminal Revision Case No. 215 of 1963. ·

P. Ram Reddy and K. layaram, for the appellant.

The respondent did not appear.

The Judgment of the Court was delivered by

Vaidialingam, J. In this appeal, by special leave, on behalf of the S'.ate of Andhra Pradesh, the appellant herein, Mr. P. Rim Reddy, learned counsel, challen&es the order dated January 17.

1?6.4, of the Andhra Pradesh Htgh Court, setting aside the con: v1ctlon of the re; pondents, for an offence under s. 4(1 )(a) of the Andhra Pradesh (Andhra Area) Prohibition Act 1937 (Act X of 1937), hereinafter called the Act. ' L9Sup. Cl/67-12

According to the prosecution, the respondents were found transporting, in a bullock cart, on the early morning of June 1 O,

1962, fifty gallons of arrack. It is the case of the prosecution that the.prohibition staff found, on the day in question, a bullock cart, dnven by the first respondent, in which the fifty gallons of arrack were found in 13 tins. Accordingly, they were prosecuted for an offence under s. 4(1)(a), of the Act. All the respondents subs'.antially denied, having committea the offence, with which they were charged.

The prosecution let in the evidence of the Prohibition Sub- Inspector, P.W.1, and another petty officer of the prohibition staff; P.W.4. The evidence of these two witnesses, was to the effect that when the bullock cart, in question, came near them .. there was a smell of arrack.

In particular, P .W.4 has stated that the tins, which were in the bullock cart, were pierced with bayonet,. and when smelt, they gave a strong smell of arrack. To corroborate the evidence of these two officers, the other witnesses, P.Ws. 2 and 3, who were stated to have witnessed this occurrence, along with the prohibition party, were also examined. They stated that when the bullock cart came near them, they got a strong smell of arrack, and that the 12 tins were pierced with bayonet ends and their contents verified.

Only some of the witnesses have been cross-examined, and the respondents, have suggested to them that during that hour of the night, it would not have been possible for them to identify the persons, who were stated to have been in the bullock cart. No doubt, no specific suggestion, that the commodity that was seized, is not one to which the Act applies, has been made. During the trial, however the question appears to have been raised, among other contentions, that the prosecution has not established the necessary ingredients for establishing that the respondents have committed the offence, under s. 4 ( 1) (a), of the Act. The trial Court, adverting to this aspect, has referred to the evidence of P.Ws.l to 4, who speak to a strong smell of arrack, emanating from the cart, and the tins being pierced with bayonet ends. In view of this evidence, the trial Court is of the opinion that the ground for coming to the conclusion, that it was arrack that was being transported, is established. Ultimately, the trial Court accepted the evidence of the prosecution, found the respondents guilty of the offence under s. 4(1)(a) of the Act, and sentenced each of them to undergo rigorous imprisonment for six months.

The respondents challenged their conviction, before the learned Sessions Judge, Kurnool. Before the appellate Co1,1rt also, the respondents pleaded that there is no proper proof, in this case, that the tins contained arrack. A mere statement, by the witnesses. that there was a strong smell of arrack, emanating from the tins, when they were pierced with bayonet ends, is not sufficient to

establish the guilt of the accused.

They have also specifically raised the contention that samples of the commodity should have been i; ent for the opinion of the Chemical Examiner. This pli;_a, of the respondents, was again brushed aside, by the learned Sessions Judge, on the ground that the prohibition officer must be considered to have got sufficient experience of smelling and knowing whether a liquid was arrack, or not, and, inasmuch a> he has deposed that the liquid was found to be arrack, by smell, that statement can be accepted as proof of the nature of the liquid that was being transported, by the respondents. The learned Sessions Judge has also stated that no further testing is called for.

The learned Sessions Judge in the end, confirmed the conviction of the respondents.

The respondents carried the matter further, to the High Court of Andhra Pradesh, in revision. The High Court has accepted the plea of the respondents that, in this case, there has been no proper proof that the commodity that was found to be transported, was arrack. The High Court is of the view that when the accused have denied the offence of carrying any arrack, the prosecution should have got the commodity examined, by a Chemical Examiner, and, inasmuch as that procedure has not been adopted, the High Court ultimately, set aside the conviction of the respondents.

On .behalf of the appellant State, Mr. Ram Reddy urged that, in this case, inasmuch as the prosecution has let in the evidence of the Prohibition Inspector and the petty officer, who must be considered to be well aware of arrack the High Court was not justi fied in interfering with the decisions of the subordinate Courts Counsel has also pointed out that the prosecution witnesi; es have spoken to the fact that the contents of the tins were examined, by being pierced with bayonet ends and it is, after such examination, the Prohibition Sub-Inspector satisfied himself that the tins contained arrack.

.Ther.e is no appearance, on behalf of the respondents before us, m this Court. '

. This will be a conv_enient stage to refer to the relevant provis1os of th~ ct. Section 3 defines certain expressions. 'Intoxicating dg 1s defined, un_der s. 3(8), ands. 3(9) defines 'liquor'

nder which the C'?modity,, in question, is stated to fall. 'Liquor; mcludes toddy,. spmts o~ i:vme, methylated spirits, spirits, wine, beer and all liqmd cons1sttng of or containing alcohol Under s: 4 ( 1 )(a), whoever imports, exports, transports or Possesses liquor or. any intoxicating dmg, shall be punished with imprisonment which may extend to six months or with fine which may

xtend to one thousand rupees, or with both. In this case accordmg to the prosecution, the respondents had transported liquor.

The expression 'liquor', as mentioned earlier, is defined under s. 3 ( 9). The prosecution will therefore have to establish that the commodity in question comes under one or other of the various items referred to in the definition of 'liquor'.

The question is whether the prosecution has so established, in this case.

In our opinion, in the circumstances of this case, the High Court was perfectly justified in holding that the prosecution has not established that the respondents are guilty of an offence, under s. 4(1)(a) of the Act. It is needless to state th.at, in this case, unless the prosecution proves the contravention of the provisions of the Act, in question, it cannot succeed in establishing the guilt of the accused. For that purpose, the prosecution will have to .establish two things: (i) that the article seized from the accused is 'liquor', under s. 3(9) of the Act; and (ii) that the accused 'transported' the same.

Except for a general statement, contained in the evidence of the witnesses, particularly P.Ws. 1 and 4, that there was a strong :smell of alcohol, emanatin~ from the tins, which were pierced •Open, there is no other satisfactory evidence to establish that the article is one coming within the definition of the expression "liquor'. Merely trusting to the smelling sense of the Prohibition Officers, and basing a oonvictiiln, on an opinion expressed by those officers, under the circumstances, cannot justify the conviction of the respondents. In our opinion, better proof, by a technical person, who has ccnsidered the matter from a scientific point of view, is not only desirable, but even necessary, to establish that the article seized is one coming within the definition of "liquor'.

Mr. Ram Reddy, learned counsel for the State, no doubt pointed out that the accused have not challenged effectively the answers given by the prosecution witnesses that the commodity is arrack.

In our opinion, the circumstance; ; pointed out by the learned counsel, will not absolve the prosecution from establishing the ingredients of the offence, for justifying the conviction of the respondents. Even otherwise, it will have to be noted that all of them have, categorically, denied the offence and have also stated in general terms, that no arrack was seized from them.

Before we close the discussion, it is necessary to refer to a recent decision of this Court in Baidyanath Mishra v. The State of Orissa('). In that case, the question was as to whether the appellants, therein, were in possession of opium, so as to make them liable for an offence. The Opium Act of 1878, defines the H expression 'opium'. The appellants contended that the article

(I} Cr!. Ap. No. 270/1964 dcci<lcd on 17-4-1967.

seized from them was not opium, as defined in that Act, and pointed out that the only evidence, relied on by the prosecution, to establish that the article recovered from them was opium, was the evidence of the Prohibition staff, and that the article has not been subjected to any chemical analysis. This Court rejected that contention, in the particular circumstances of the case, and stated :

"It is true that opium is a substance which once seen and smelt can never be forgotten because opium possesses a characteristic appearance and a very strong and characteristic scent. It is possible for people to identify opium without having to subject the product to a chemical analysis. It is only when opium is in a mixture so diluted that its essential characteristics are not easily visible or capable of being apprehended by the senses that a chemical analysis may be necessary . . . . . Tw0 other witnesses who were cultivators and who knew what they were talking about said that it was opium. If the appellants, who themselves were licensed vendors of opium, had the slightest doubt about the correctness of these statements they could have challenged them either by cross-examination or by suggesting to the court that the substance be analysed to determine whether it was opium or not."

These observations will clearly show as to why this Court in that cases has expressed the view that there is no infirmity in the prosecution case, simply because there has no chemical analysis made, of the commodity, which, according to the prosecution, was opium. The facts in the instant case before us, are entirely different, and the observations, extracted above, do not apply.

In the result, the order of the High Coort is confirmed, and this appeal, dismissed.

Y.P.

Appeal dismissed.

STATE OF ANDHRA PRADESH

MADIGA BOOSENA & ORS

May 2, 1967

M. HIDAYATULLAH

Prohibition Act, 1937

S. 4(1)

S. 4(l)(a)

s. 4(1)

P. Ram Reddy

K. layaram

Vaidialingam

P. Rim Reddy

s. 4(1 )(a)

Prohibition Act 1937

s. 4(1)(a)

s. 4

s. 4(1)(a)

Sessions Judge, Kurnool

High Court of Andhra Pradesh

Ram Reddy

Section 3

s. 3(8)

s. 3

s. 4(1)(a)

s. 3(9)