2001 PLP 3610 (PTD)

"If there is not a debt payable in praesenti, but there is a debt in existence, debitum in praesenti, but payable in futuro, it seems to me that such an order could be made with regard to that debt, although it be the only debt and there is no debt payable in praesenti, because such third person is indebted to the judgment -debtor, and that would satisfy the words of the rule." In Stroud's Judicial Dictionary of Words and Phrases, third edition, the meaning of the word "due" is as under:‑‑ "Due (1) A debt is 'due' when it is payable (per James, V.C. Re: European Life Assurance, L. R. 9 Eq. 122) and (2) 'Due' may mean immediately payable (its common signification) or a debt contracted but payable in future." In Law Lexicon, reprint 1987 edition, the word "due" is defined at page 367 as under:‑‑ "Due ‑‑‑ As a noun, an existing obligation; an indebtedness; a simple indebtedness without reference to the time of payment; a debt ascertained and fixed though payable in future; As an adjective, capable of being justly demanded claimed as of right; owing and unpaid, remaining unpaid; payable; regular; formal; according to rule or form (4MHC 385) 'Due' in an instalment bond means payable (15 IC 231; Re: European Life Assurance Co. 39 LJ Ch. 326. " In Law Lexicon at page 956, the word "payable" is defined as under. "Payable‑‑‑ The words 'payable' is a descriptive word, meaning capable of being paid; suitable to be paid; admitting or demanding payment; justly due; legally enforceable. Where a bank issued a paper which recited that a certain person deposited in the bank a certain sum payable to the order of another, the word 'payable' should be construed as an express promise to pay on demand." In Bouvier's Law Dictionary, A Concise Encyclopaedia, third edition, at page 946, the meaning of the word "due" is as under''‑‑ "The word 'due' unlike arrears, has more than one signification and expresses two distinct ideas. At times it signifies a simple indebtedness without reference to the time of payment; at others it shows that the day of payment has passed." In Jowitt's Dictionary of English Law, second edition, 1977, the word "due" is defined as under:‑‑ " 'Due' (Old Fr. deu; Fr. Du; Lat. Debitum) anything owing; that which one contracts to pay or perform to another that which law or justice requires to be paid or done. As applied to a sum of money "due means either that it is owing or that it is payable; in other words, it may means that the debt is payable at once or at a future time. It is question of construction which of these two meanings the word 'due' bears in a given case. It is stated that since the amount is not payable immediately by the bank to its customers in respect of the fixed deposit receipts obtained by them and is payable at a future date, the Income‑tax Department at the most could attach them and that the order may continue till its maturity and on maturity the amount could be remitted to the Income‑tax Department. On behalf of the respondents, Mr. Indra Kumar relied on the decision given in the case of I. Devarajan v. Tamil Nadu Farmers Service Cooperative Federation (1981) 51 Comp. Cas. 682 (Mad.), wherein it was observed that so far as the law relating to banking is concerned, when a customer pays in money on deposit, the money paid in cannot be considered as a fund held by the banker in trust for the customer. It is merely a loan to the banker and the customer is entitled to no more than the repayment of equivalent sum at the time which the agreement between the two parties specifies. Following Halsbury's Laws of England, Fourth Edition, Volume 3, para.89, it was observed that (page 699):‑‑ "Even if a deposit is payable at a future date or after the lapse of a specified tithe it is liable to attachment and when the account is attached the whole amount is impounded irrespective of the sum recovered by the judgment unless the order otherwise directs. What is, attached is the money in the deposit account. It being a debt due is of no significance as far as the law relating to attachment is concerned. Debts can always be attached." It is submitted that the deposit with the bank represents the money held by the bank and liable for attachment under garnishee proceedings. Reliance is placed on the decision in ITO v. Maysor Spun Silk Mills Ltd. (In Liquidation) (1963) 50 ITR 67 (Mys.). It is submitted that the effect of service of garnishee notice by the Income‑tax Officer under section 46(5A) of the Indian Income‑tax Act, 1922, corresponding to section 226(3) of the Income Tax Act, 1961, is that the Income‑tax Officer serving the notice gets an enforceable claim against the debtor. Reliance is also placed on the decision in Rekstin v. Severo Sibirsko Gosudarstvemmpe Akcionernoe Obschestvo Komserverputj and Bank of Rusian Trade Ltd. (1933) 1 KB 47, at page 66 for the proposition that the service of any garnishee order is a sufficient demand by operation of law and revokes any direction given by the debtor in respect of the fund. The observations of Lord Hanworth M.R. in the case of Rogers v. Whiteley (1889) 23 QBD 236 (CA), were taken into consideration wherein it was observed that "the effect of an order attaching all debts owing or accruing due by him to the judgment‑debtor is to make the garnishee custodier for the Court of the whole funds attached; and he cannot except at his own peril, part with any of those funds without the sanction of the Court". Both learned counsel for the parties relied on the decision given in ITO v. Buddha Pictures (1967) 65 ITR 620 (SC). In that case it was observed by the apex Court that there should be subsisting a relationship between the garnishee and the assessee. The person to whom the notice has been issued has only to object that the sum demanded or part thereof is not due to the assessee or that he does not hold any money on account of. the assessee. He has not to say that he is not likely to owe or to hold money. The expression "may become due" or "may subsequently hold money" was incorporated to that subsisting relationship between the person served with a notice and the assessee, e.g. the assessee's employer, or banker or debtor, or a person paying annuity to him; they do not suggest a bank with which he has never dealt, a person he has never lent money to or dealt with, or all persons who may possibly in future employ an assessee out of job or work. I have considered over the matter. It is not in dispute that the assessee in default has deposited the money and obtained a fixed deposit receipt from the petitioner's bank which was done with a view to earn interest and the date of maturity of those fixed deposit receipt is at a later date. Fixed deposits are normally payable after the expiry of the period specified in the receipts itself. The banker becomes a debtor of the assessee in default the moment the fixed deposit receipt is obtained. Normally the payment of the fixed deposit receipt is made on the due dates. But on forgoing interest or paying lesser rate of interest the bankers generally permit customers to withdraw the amount of the fixed deposits before the maturity date. The fixed deposit receipt is not a negotiable instrument, but could be assigned with the concurrence of the bank in favour of other persons. Attachment of the amount in the fixed deposit could be made by the Income‑tax authorities under the proviso to section 226(3) of the Income‑tax Act. Power under section 226'has been given to the Income‑tax Officer to recover in the modes provided the amount which is outstanding. Power under section 226 could be exercised by one or more of the methods provided in the section and the certificate of the Tax Recovery Officer has been issued under section

222. Section 226(3) contemplated that the Income‑tax Officer may require any person at any time or from time to time (1) from whom money is due; (2) or my become due to the assessee; (3) any person who holds money for an assessee; (4) or‑may subsequently hold money on account of an assessee, to pay to the Assessing Officer or Tax Recovery Officer either forthwith or upon the money becoming due or being held or at or within the time specified in the notice (not being before the money becomes due or is held). There should be an obligation on the person on whom notice is served to pay money to the assessee, i.e. the subsisting relationship of a debtor and creditor is a sine qua non for the exercise of the power under the section. The relationship of the petitioner‑bank and the assessee is that of a debtor and creditor and therefore, the Income‑tax Officer has jurisdiction to attach the amount of fixed deposit receipt irrespective of the fact that the amount is payable at a later period, as on the date of service of notice the relationship of the bank and the assessee as that of debtor and creditor cannot be denied. Section 226(3)(iv) of the Act provides that every person to whom a notice is issued is bound to comply with such notice and with reference to the banking company it is provided that it is not necessary for any deposit receipt to be produced before payment is made notwithstanding any rule, practice or requirement to the contrary. In view of the judgment of the apex Court in Buddha Pictures' case (1967) 65 ITR 620, there has to be a subsisting relationship between the granishee and the assessee. The words "money is due or may become due or any person who holds or may subsequently hold money" were interpreted for that subsisting relationship. The relationship of a banker and the assessee in default is not in dispute. The bank is holding money for the assessee. The dispute is only that according to the petitioner the amount has not become due. In the case of a tenant and landlord that subsisting relationship exists because of the tenancy agreement and the amounts become due every month. In such a situation the power under section 226(3) of the Act cannot be exercised to demand the rent for the period for which it has not become due. In order to find out as to whether the amount has become due, it has to be seen whether there is a subsisting claim existing on that date. If the deposit receipt matures even at a subsequent date and the assessee wants to get the fixed deposit encashed earlier than the date of maturity, it is considered permissible. Though the contract is entered into by the assessee while obtaining the deposit receipt for receiving the money at a lacer date yet for the sake of the reputation of the bank or for the facility of the assessee or otherwise, payment is made before maturity of the deposit receipt. The Department steps into in the shoes of the assessee and can claim payment even before its maturity. Even the production of such receipt, deposit receipt is not required in terms of section 226(3)(iv). In these circumstances, the respondent has the jurisdiction to attach the fixed deposit and the bank is under obligation to make the payment of the amount even before the maturity of the fixed deposit receipt. It may be observed that according to the instructions which are issued by the Reserve Bank from time to time if a depositor wants to encash the fixed deposit receipt before its maturity, the bank is bound to refund the amount with lesser interest as is permissible looking to the time involved. The position of contracts entered into by an assessee with other companies or partners, where there is no such express or implicit contract for payment before the maturity date, the position stands on a different footing since according to the banking norms, the fixed deposit can be encashed before its maturity date. Copy of the notice under section 226(3) is required to be served on the assessee. Sufficient safeguard has been provided to adjudicate the objections which the garnishee may raise and even Departmental instructions have been issued which have to be complied with. In these circumstances, the notice issued under section 226 cannot be considered bad in law. While upholding the validity of the action of the respondents it may be observed that if the appeal is pending and the assessee has applied for stay, the Tax Recovery Officer/Assessing Authority should give a minimum time of ten days to the assessee so that the appellate authority may decide the stay application and only unstayed amount is required to be deposited. In the case of the petitioners since the matter is pending before the Income‑tax Appellate Tribunal and in Writ Petitions Nos.9742‑49 of 1999, dated July 29, 1999, directions have been given to dispose of stay application of the assessee afresh. Recovery action would be taken in accordance with the order of the Tribunal. The fixed deposit receipts, however, shall remain attached. The petition stands disposed of with the above observations. M.B.A./567/FC Order accordingly.