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TMI Blog1954 (12) TMI 21X X X X Extracts X X X X X X X X Extracts X X X X ..... and the extent of the guarantee of respondent 3 was ₹ 2,56,125. Time for the performance of the contract was extended to 31-3-1955. The contract provided that the amount advanced by Government was to be repaid by a certain date. There was default in payment of that amount. Now, under the agreement of 12-6-1953, respondent 3 along with the other directors had agreed that the sum payable by them was recoverable by the State as arrears of land revenue. On 7-10-1953, the sum of ₹ 2,56,125 was demanded by the State. On 10-12-1953, the Collector of Bombay issued a warrant of attachment against three immoveable properties of respondent 3 under Section 13, Bombay City Land Revenue Act. On the same day notices intimating the date of the sale were pasted on these properties. On 5-1-1954, the Bank of India filed a suit in this Court to realise the loan advanced by them on 14-2-1953, and in this suit a consent decree was passed on 23-2-1954. By this consent decree respondent, 3 along with others made himself liable to pay the decretal amount. On 16-2-1954, respondent 3 filed a petition challenging the warrant of attachment and the threatened sale by the Collector. The pet ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y the contract which he had solemnly entered into with the State of Bombay. The second important aspect of the matter which is clearly referred to in our judgment is that we expressed the opinion that whatever the legal rights of the petitioner might be we were not inclined to give him relief under our special jurisdiction under Article 226 of the Constitution. We pointed out that the petitioner had no defence on the merits and he had agreed to the particular procedure by which his debt should be realised and justice did not demand that this Court should give any relief to the petitioner. Now, in our opinion, the position that arises on this petition is entirely different, and the position that arises is whether the contract between the State and respondent 3, even though it be a valid contract, can be enforced against the petitioners who were not parties to that contract. In our opinion it is open to the Bank of India to contend that however valid the contract may be, as between the State and respondent 3, and whatever our view might have been about the contractual rights and liabilities of the State and respondent 3, as far as the Bank of India is concerned that contract ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n comes Section II and that section provides: The claim of the Provincial Government to any moneys recoverable under the provisions of this Act shall have precedence over any other debt, demand or claim whatsoever, whether in respect of mortgage, judgment, decree, execution, attachment or otherwise howsoever, against any land, or the superior holder thereof. Therefore, this section gives precedence to the State Government in respect of any claim which is recoverable, under the provisions of this Act. But unless the claim arises under the provisions of this Act the State cannot claim the precedence given to its claims under this section. The moneys recoverable under the provisions of this Act are either moneys recoverable for arrears of land revenue or they are moneys recoverable under Section 37 of 'the Act, and that section provides: All arrears of rent payable by any person in respect of the occupation of any house the property of the Crown, and all fees, fines and penalties chargeable under this Act, and all moneys leviable under the provisions of this Act on account of the value of any land, or on account of the alteration, removal, renewal or repair of survey-boundar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... herein are to be realised in the same manner as other revenue demands under the provisions of Section 13. It is because of this that the Advocate General has placed reliance on Section 5, Revenue Recovery Act. That section provides; Where, any sum is recoverable as an arrear of land-revenue by any public officer other than a Collector or by any local authority, the Collector of the district in which the office of that officer or authority is situate shall, on the request of the officer or authority, proceed to recover the sum as if it were an arrear of land-revenue which has accrued in his own district, and may send a certificate of the amount to be recovered to the Collector of another district under the foregoing provisions of this Act, as if the sum were payable to' himself. Now, what happened in this case was that the Secretary to Government, Public Works Department, Mr. Dravid, requested the Collector to recover from respondent 3 a sum 'of ₹ 2,56,125 and acting on that request the Collector proceeded to recover it as if it were an arrear of land revenue and put into operation the machinery provided in Section 13 for the arrears of land revenue. Now, Se ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... with Section 187, Land Revenue Code. But the question that we have to address ourselves to is whether the right to recover any sum by the State is confined to a right arising out of a statute or whether Section 5, Revenue Recovery Act, also contemplates a right arising out of contract. ,We considered this very question in 'Bhagwandas Narottam Divecha v. The State of Bombay (A)' and we came to the conclusion that there was no reason why we should give a narrow restricted interpretation to the expression recoverable used by the Legislature in Section 5, and our view was that whether the right to recover a sum arose out of statute or out of contract, Section 5 was equally applicable. Adhering to that view it follows that the State had the right to recover the amount due from respondent 3 under a contract and by reason of that right a certain sum became recoverable within the meaning of Section 5, Revenue Recovery Act, and if that sum became recoverable by any public officer -- in this case it was Mr. Dravid-- then the Collector of Bombay on the request of that public officer was given the power to proceed to recover that sum as if it were an arrear of land revenue. If ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... State and which provided for imprisonment for an indefinite period and therefore jeopardized both his person and property, and Mr. Seervai says that a Court will not countenance a contract of so servile a nature. Now, it is very difficult to take the view that a contract is against public policy when the Legislature itself countenances such a contract and permits the State to enter into such a contract. It is difficult to accept the position that if a contract was opposed to the best interests of the public, the Legislature would put on the statute book a legislation which would permit the State to enter into such a contract, because admittedly under Section 187 the Legislature has permitted the State to enter into a contract by which the debtor might agree to have his debt realised as if it was an arrear of land revenue. Even Section 13, Bombay City Land Revenue Act, permits the Government to recover at least the arrears of land revenue and the dues by the mode laid down in Section 13. Therefore we refuse to be appalled by what Mr. Seervai suggests are the barbarous incidents of this contract mildly and meekly entered into by respondent 3. When we analyse it, all that it mea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gally and properly taken action under Section 13, Bombay City Land Revenue Act, what is the position of the Bank of India and what are the rights of the Bank in this matter. We agree with Mr. Seervai that it is not open either to private parties or even to the State contracting with a private party to deprive a third party of his rights under the law. That is the function only of the Legislature and it is only the Legislature that can affect or prejudice the rights of third parties. The doctrine that parties 'sui juris' can contract to do or perform anything subject to its not being against public policy cannot apply to the contracting parties affecting the rights of third parties who are not parties to the contract. Therefore, even if the State and respondent 3 purported to override the provisions of the Civil Procedure Code to the extent that those provisions could be availed of by a third party, such an attempt would be entirely futile. It would not be open to the debtor to contract with the State that not only will the State recover its dues by the procedure laid down in Section 13, Bombay City Land Revenue Act, but that the State will have priority over any decre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... may also be true that without there being a judgment-debt, if there was a specialty-debt in the sense of the debt due to the Crown under a statute, the Crown might have priority over the debts due to a private individual. But Mr. Seervai contested the position that where the debt due to the Crown was a contractual debt which had not been crystallised into a judgment-debt, the Crown could claim priority over the judgment-debt in favour of the private individual. It is true that as far as our High Court is concerned the question has been considered in a very early decision reported in -- 'Secy, of State for India v. Bombay Landing Shipping Co.', 5 Bom HCR (OC) 23 (B), and the bench consisting of Couch C. J. and Westropp J. held that the judgment-debt due to the Crown is in Bombay entitled to the same precedence in execution as a like judgment-debt in England, if there be no special legislative provision affecting that right in the particular case. It is true that the Court was only considering a judgment-debt due to the Grown, but it will be noticed that priority was conceded to the Crown not by reason of any legislative provision but by reason of the position obtain ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ave alluded comes in, namely, that in competition with subjects the right of the Crown, must prevail. Perhaps we might notice the expression prerogative used by Lord Justice Brett, because we have had a very able argument advanced by Mr. Seervai on this aspect of the case with which we shall have to deal a little later. The Privy Council in -- New South Wales Taxation Commissioners v. Palmer , (1907) AC 179 (E) approved of the decision in 'In re Henley Co, (D). At page 185 Lord Macnaghten who delivered the judgment of their Lordships quoted with approval the remarks of Macdonald C. B. in -- 'The King v. Wells', (1812) 16 East 278 (F) that the prerogative of the Crown rested upon a principle (p. 282): ...perfectly distinct . and far more general; determining a preference in favour of the Crown in all cases and touching all rights of what kind so ever, where the Crown's and the subject's right concur, and so come into competition, In that case in the administration of the assets of a bankrupt the Crown was claiming preferential payment over all other creditors in respect of amounts due for land and income-tax and fines. It is true that this was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ue to the Crown under the Income-tax Act and the demand of the Income-tax Officer is not open to question. Therefore, in the opinion of the learned Chief Justice it had never been disputed in India that the Crown had priority with regard to its debts over all unsecured debts. No question arose of the debts being judgment-debts or otherwise. If the other competing debts were unsecured, then the right of the Grown to priority or precedence arose. 15. Mr. Seervai has contended that the English principle of the debts of the Crown having priority is based upon the prerogative of the Crown, and that principle would not apply to India. In our opinion, whatever may have been the historical origin of the principle which gives priority to the debts duo to the Crown, when the English Courts came to consider this question the principle had become a part of the Common law of England. It is not so much because the Crown has any special privileges in England that this principle has been upheld, 'but it is because the State in England has taken the place of the Crown and the English Courts have continued the privilege which was once the privilege of the King and have afforded the sa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... should not be upheld as forming part of the Common law of England. If this principle formed part of the Common, law of England, then that law has been preserved under Article 372(1) of the Constitution. This was the law in force in India immediately before the commencement of the Constitution and it must continue in force until altered or repealed or amended by a competent Legislature or other competent I authority. 16. It has then been urged by Mr. Seervai that this part of the Common law is incompatible with Article 14 of the Constitution and by reason of Article 13 as it is inconsistent with the provisions of Part III it must be declared to be void. Now, it is not true to say that the State is denying equality before the law to any person by claiming this special privilege. Article 14 would only be offended against if the State made a discrimination between one creditor and another or between one class of creditors and another. The principle of Common law is that the State has priority over all competing creditors if the debts are of the same quality. Mr. Seervai says that the competition here is between two creditors and one creditor cannot be preferred to another, an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e which Mr. Scervai lias emphasised and in our opinion lightly emphasised. All the cases to which our attention has been drawn have one significant feature and that is that the State always made an application to the civil Court to establish its precedence with regard to its debts over the debts claimed by private parties, and even in the Full Bench case to which reference has been made the Madras High Court exercised its inherent jurisdiction under Section 151, Civil P. C. in order to direct the executing Court to pay to the State in preference to the judgment-creditor. Therefore, in our opinion, inasmuch as the property of respondent 3 has been lawfully attached by the Bank of India and inasmuch as that property is in the custody of the Court, the proper procedure for the State to follow is-to make an application to the executing Court for payment of the amount duo to it in priority to the debt of the judgment-creditor, the Hank of India. We understand that as a matter of fact the State has taken out a summons. Therefore it would be on that summons that the Court will have to decide whether the State should be paid in priority to the executing creditor. 19. Now, it is just ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... also been argued by Mr. Seervai that there is no valid attachment in this case and therefore no question of the right of sale by the Collector can arise. It is true that under Section 13, Bombay City Land Revenue Act, the Collector can levy the revenue due under that Act by attachment and sale, and therefore before the Collector can sell the property of the defaulter that property has to be attached, and the question that falls for determination is whether there was a proper attachment in this case. Now, the Privy Council in dealing with attachments under the Civil Procedure Code has laid down that the attachment is the real thing and that attachment itself is something separate from the mere order of attachment. The Civil Procedure Code contains elaborate rules as to how an attachment is to be effected. When we turn to the Bombay City Land Revenue Act no procedure is laid down as to how an attachment is to be effected, and therefore in order to come to the conclusion that there is an attachment under the provisions of that Act all that we have to be satisfied about is that the provision with regard to attachment has been substantially complied with. 22. Now, Mr. Seervai in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the property. This warrant authorises him to enter into possession, and the mere fact that he does not act upon this authority does not mean that in law there was no attachment. There is the evidence of respondent 3 himself that Ramalingam came to him and demanded the moneys from him, whereupon respondent 3 informed him that he was unable to pay. He then told him that Government would attach his properties and he produced a piece of paper and asked for details of his properties which were set out on that piece of paper. Although respondent 3 denies the fact that the warrant of attachment was shown to him,-the learned Judge below has accepted the evidence of Ramalingani on this point when he says that he showed respondent 3 the warrant of attachment and told him that if he did not pay the amount his properties would be attached. He has also given evidence that after showing respondent 3 the warrant of attachment he went to the property and he pasted there the notices of sale and that was done with a beat of 'battaki'. This evidence, therefore,- clearly establishes that the real purpose for which the attachment is made was carried out by what Ramalingam did in connec ..... X X X X Extracts X X X X X X X X Extracts X X X X
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