P L D 1962 Dacca 595 (PLP)

AKBAR, J.‑These two appeals arise from a common set of facts. They have been heard together and it will be convenient to dispose of these appeals by one judgment.

2. The facts in these cases are briefly as follows. In 1954 a sum of Rs. 40,274 was due from Machertich & Co. of Daida, Lohaganj, Dacca on account of income‑tax and penalty. The said Company had two partners namely, Machertich and Mohammad Singh. Machertich and Mohammad Singh having died, the Income‑tax Officer, on 24‑5‑54, ordered issue of a certificate under section 46 (2) of the Income‑tax Act against their heirs. On 8‑7‑54 the order of attachment was passed. On‑ 16‑11‑55 in Money Execution Case No. 3 of 1955 certain properties belonging to Machertich & Co. were sold for Rs. 35,

325. In the said case the decree‑holders' claim amounted to Rs. 23,823‑5‑

9. In Money Execution Case No. 4 of 1955, certain other properties belonging to the said company were sold for Rs. 33,

250. In this case the decree‑holders' claim amounted to Rs. 11,377‑7‑0.

3. On 23‑11‑56, the Income‑tax Officer sent a notice under section 46 (5‑A) of the Income‑tax Act to the Executing Court asking them to pay Rs.40,274 being the amount due from Machertich & Co. out of the sale proceeds of the properties of the said Company. On 8‑12‑55 the Certificate Officer, Dacca wrote as follows to the Executing Court:‑ "The undersigned has the honour to inform him that the above‑noted certificate case is pending with this Court for reali sation of arrear income‑tax dues amounting to Rs. 40,274 plus sub‑interest Rs. 3,765 and cost of Rs. 10, total Rs. 44,049 from the above‑mentioned C. Ds. The immovable properties of the C. Ds. at Lohaganj in the shape of Godown and other tin sheds were attached on 8‑7‑54 under the P. D. R. Act. The Income‑tax Officer, Dacca Circle `D' informs (vide his Memo. No. TR. 1459/D/II) dated 25‑11‑55 that the major part of these attached properties have been sold in the auction by him in connection with Money Suits Nos. 3/55 and 4/55 for Rs. 67,

000. As the Government has the prior claim over the money by attachment under the P. D. R. Act and as there is no other assets of C. Ds. for attachment and sale towards the satisfac tion of the dues he is requested to please credit Rs. 44,049 in favour of the Certificate Officer, Dacca for satisfaction of the Government dues. As the certificate case mentioned above is still pending in this Court so he is also requested not to deliver possession of the auction‑sold property to the A. P. for the interest of the Government revenue."

4. On 14‑1‑56 Mst. Badarunessa and others, the heirs of Mohammad Singh, who was a partner of Machertich & Co., filed an objection under section 47 of the Civil Procedure Code in Money Execution Case No. 3 of 1955 praying for rejection of the claim of the Income‑tax Department and the said objection was numbered as Miscellaneous Case No. 2 of 1956. On the said date, a similar objection was also filed in Money Execution Case No. 4 of 1955 and it was numbered as Miscellaneous Case No. 9 of 1956. Their contention in the said Miscellaneous Case No. 2 of 1956 was that as the assessment was illegal they were entitled to get the balance of the sale proceeds after satisfying the dues of the decree‑holders. In Miscellaneous Case No. 9 of 1956, they contended that the suit out of which the Execution Case No. 4 of 1955 arose has been dismissed as against them and hence the attachment and sale of their 8 annas share was illegal. They further contended that the notice of the execution case had not been served on them. On 14‑1‑56 the Income‑tax Department wrote to the Executing Court claiming priority in respect of their dues over the unsecured creditor.

5. The Executing Court heard both the Miscellaneous cases together after giving notice to the Income‑tax Department.

6. The learned Subordinate Judge who heard the said cases found (1) that in both the execution cases the decretal dues had to be paid first ; (2) that out of Rs. 11,501‑10‑3 being the surplus sale pro ceeds of Money Execution Case No. 3 of 1955 half i.e. Rs. 5,757‑13‑711 will be paid to Badarunessa a group i.e. the objectors ; (3) that the Income‑tax Department could lay claim ; (a) to Rs. 5,750 13‑11 being half the surplus Execution Case No. 3 of 1955, and (b) to the entire surplus of Rs. 18,769‑3‑9 of the other Execu tion case but as they did not proceed in accordance with law i.e. by an attachment under section 17 of the Public Demands Recovery Act, the order of payment could not be passed in their favour; and (4) that the notice under section 46 (5A) of the Act was misconceived and the request of the Certificate Officer was also not legal and proper.

7. He, therefore, allowed Miscellaneous Case No. 2 of 1956 in part and dismissed Miscellaneous Case No. 9 of 1956. In other words, he permitted Badarunessa group half shares of the surplus sale proceeds in Money Execution Case No. 3 of 1955. He further directed that the Income‑tax Department, in order to get the, surplus lying to the credit of the aforesaid two Execution cases should take steps to attach the same under section 17 of the Public Demands Recovery Act. He therefore withheld payment of the surplus to the judgment‑debtors for a month to enable the Income‑tax Department to take necessary action in the matter.

8. The Income‑tax Department hits filed these two appeals against the order of the learned Subordinate Judge.

9. At the outset I may observe that the learned Judge in deciding these cases has not applied his mind to the law appli cable in such cases. The first question is: whether the Income- tax Department could claim priority at all in respect of the tax debt? Mr. Guha, the learned Advocate for the decree‑holder, has found it difficult to contend that in these cases the decretal dues will get precedence over the Government debt. I had occasion to consider a somewhat similar question in the case of Federation of Pakistan v. Pioneer Bank, Ltd. and others (P L D 1958 Dacca 535). There I held that the Government was not entitled to get precedence over secured debt. It is however well settled that Government` debt takes precedence over unsecurable debt. I therefore do not] consider it necessary to burden this judgment by citing authorities. In the instant case, the claim in the Money Suit was not covered by any security. It is thus clear that the ‑ Income‑tax Department could claim priority in respect of the tax debt.

10. The next question is as to what procedure must be follow ed in order to enforce this right of priority. Now under proviso to section 46 (2) of the Income‑tax Act, the Collector has two alter native modes of recovery of the dues, one by proceeding under the Public Demands Recovery Act and the other by proceeding' in the manner laid down in section 51 of the Code of Civil Pro cedure and the relevant rules under Order XXI: From the letter of the Certificate Officer dated 8‑12‑55, it appears that a Certi ficate case had been started and the assessee's properties had been attached under the Public Demands Recovery Act on 8‑7‑

54. It is thus clear that the Government's lien to the attached properties commenced on 8‑7‑54.

11. The attached properties were sold in the Money Execu tion case on 16‑11‑

55. On 23‑11‑55 the Income‑tax Officer sent notice under section 46 (5A) of the Act to the Executing Court and on 8‑12‑55 the Certificate Officer wrote to the Executing Court "As the Government has the prior claim over the money by attachment under the P. D. R. Act and as there is no other assets of C. Ds. for attachment and sale towards the satisfaction of the dues, he is requested to please credit Rs. 44,049 in favour of the Certificate Officer, Dacca for satisfaction of the Govern ment dues. As the certificate case mentioned above is still pending in this Court, so he is also requested not to deliver possession of the auction sold property to the A. P. for the interest of the Government revenue." Now rule 22 of Schedule 11 of the Public Demands Recovery Act provide as follows:‑ "Where the property to be attached is in the custody of any Court or public officer, the attachment shall be made by a notice to such Court or officer, requesting that such property and any interest or dividend becoming payable thereon, may be held subject to the further order of Certificate Officer by whom the notice is issued: Provided that, where such property is in the custody of a Court, any question of title or priority arising between the certificate holder and any other person, not being the certificate debtor, claiming to be interested in such property by virtue of, any assignment, attachment or otherwise, shall be determined by such Court." Hence the question is : can the above letter dated 8‑12‑55 be regarded as one under rule 22 of Schedule II ? I have no doubt that the request made by the Certificate Officer on 8‑12‑55 was in compliance with this rule. A somewhat similar letter of request came up for consideration in the case of Associated Pictures v. Union of India and others (37 I T R 487) and Sinha, J. observed at page 491: ‑ "Mr. Singha appearing on behalf of the petitioner has attack ed it from many angles. Firstly, he says that an order under rule 22 should be in the prescribed form, and he has drawn my attention to Form No.

17. He says that these forms are statu tory forms and any order under rule 22 should be in such form. The rule 84 lays down that the forms prescribed in the appen dix shall be used with such variation as circumstances may require. Therefore, the forms are ‑by no means inflexible. In this particular case, there has been a slight variation, but in substance it may be taken to be in compliance with rule 22, because there is no other rule under which the notice could be issued. By the notice the Certificate Officer has requested the executing Court to hold the money, and I do not see why it should not be taken to be a valid notice under rule 22." Similar, in the case of Builders Supply Corporation v. Union of India and others (28 I T R 797) it was held that under the proviso to rule 22 of the rules issued under the Public Demands Recovery Act the Executing Court was bound to determine the question of priority as between the State and the attaching creditor. From the above decisions it is clear that the Executing Court had jurisdiction to decide the question of priority between the decree‑holders and the Income‑tax Department, which had arrears of income‑tax to collect from the judgment‑debtors.

10. Lastly, the question is: whether in such cases the learn ed Subordinate Judge could limit himself to determine the ques tion of priority and holding the money till the attachment of the same under section 17 of the Public Demands Recovery Act? We fail to see why in such cases the Executing Court after deciding priority would not be competent to issue payment orders. E It will suffice to say that in the case of Associated Pictures Ltd. referred to above, the Executing Court after deciding priority directed that the money should be paid over to the Union of India and the High Court upheld the order of the Executing Court.

11. Before leaving this case, I would like to observe that the learned counsel for the objectors, Badarunessa and her group, filed an application for leave to adduce additional evidence to show that they were not liable for the tax debt. As the learned counsel failed to show that the order on which he proposes to rely was passed in connection with the present assessment, we did not permit him to adduce additional evidence at this stage.

12. In the result, we hold that the claim of the Income‑tax Department will get precedence over the decretal dues and the Executing Court should issue the necessary payment order. The balance, if any, will go to the respective decree‑holder.

13. The appeals are, therefore, allowed. There will how ever be no order as to costs. Appeals allowed.