1933 (7) TMI 24 - HC - Income Tax

Summary

Issues:
1. Priority of Crown in payment over unsecured creditors.
2. Crown's entitlement to precedence in payment in various legal scenarios.

Analysis:

Issue 1: Priority of Crown in payment over unsecured creditors
The judgment addresses the issue of the Crown's right to priority in payment over unsecured creditors. It is established that the Crown has a prerogative of preference in payment by Common Law, which is the foundation of Magna Charta. The Court refers to the case of Secretary of State v. Bombay Landing and Shipping Co., Ltd., where it was held that a judgment debt due to the Crown is entitled to the same precedence in execution as in England, unless there is a specific legislative provision affecting that right. The Court emphasizes that the Crown's rights to Indian revenue were preserved even after 1858, and the Government of India Act upholds the Crown's prerogatives.

Issue 2: Crown's entitlement to precedence in payment in various legal scenarios
The judgment discusses several legal scenarios where the Crown's entitlement to precedence in payment is upheld. In the case of Ganpat Putaya v. Collector of Kanara, it was held that the Crown had the first claim to the proceeds of a pauper suit. The Court rejected the argument that Section 309 of the Civil Procedure Code precluded the Crown from asserting its prerogative. The judgment also cites cases like Gulzari Lal v. Collector of Bareilly and Ramdas v. Secretary of State, where the Court approved of the Crown being paid the money due on mere application and allowed recovery through execution proceedings.

The judgment further discusses the case of Gayanoda Bala Dassee v. Butto Kristo, where the Court held that Court-fees certified as due to the Government form a Crown debt and are entitled to precedence in payment over all creditors. The Court rejected the argument that the Crown must enforce the charge on the subject matter of the suit, emphasizing that the Crown's right to precedence does not require attachment of funds before claiming payment.

In conclusion, the judgment affirms that the Secretary of State for India in Council, representing the Crown, is entitled to priority in payment over unsecured creditors. The Court can order payment to the Crown without prior attachment if there are funds in Court, provided that interested parties are given notice. The judgment highlights the Crown's prerogative of precedence in payment and its entitlement to priority in various legal contexts.