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TMI Blog1969 (9) TMI 4X X X X Extracts X X X X X X X X Extracts X X X X ..... er section 46(2) of the Indian Income-tax Act, 1922, to the Collector of Coimbatore, by the authorities of the income-tax department for the purpose of recovery under the Revenue Recovery Act. The income-tax assessees were the owners of shares in Kaleeswarar Mills Ltd., Coimbatore. On receiving the certificates the Collector of Coimbatore issued prohibitory orders on March 30, 1957 to Kaleeswarar Mills Ltd. against transferring the shares. The Collector also issued exhibit A-11 proceedings appointing the Tahsildar of Coimbatore receiver of the shares in respect of which he had issued prohibitory orders to Kaleeswarar Mills. The Tashildar was directed to take immediate steps to sell the attached shares of the defaulters in auction and report the result in due course. Unfortunately, the Tahsildar did not take action accordingly but, as the lower court has described, " slept over the matter ". In the meantime, the third defendant, a creditor of defendants Nos, 1 and 2, who had obtained a simple money decree againist them in O.S.No. 102 of 1957, attached the aforesaid shares of Kaleawarar Mills and sold them in court auction subject to the first charge in favour of one Umayal Achi, t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o priority is a common law right which was recognised in India before the Indian Constitution, and is preserved after the coming into force of the Indian Constitution by reason of article 372. Before priority can be claimed, when the assets are in the possession of the executing court, the Crown (or the Government) has to apply to the court for getting priority. The request may be made in a simple application no special form is necessary. At the time of the application of the Crown (or the Government) the assets should be the property of the debtor and not of the decree-holder. If the assets have become the property of the decree-holder the claim for priority cannot be enforced. If the Crown (on the Government) had been negligent and had failed to apply before the amounts were paid over to the decree-holder, his rights would have supervened, and thereafter it is not open to the Crown (or the Government), in exercise of the claim for priority, to demand that the amounts paid over should be returned to them. We shall briefly refer to the decisions cited in this connection. Builders Supply Corporation v. Union of India lays stress upon the fact that this right of priority is a commo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to such order, a letter of attachment in respect of a public demand due from the judgment-debtor is money by the executing court the latter cannot take any action on such letter on the basis that it is still the judgment-debtor's money. The executing court having once declared that it is decree-holder's money would be clearly wrong in complying with the letter of request of the ,certificate officer to remit the sale proceeds to him. In such a case the question of priority of State's claim does not arise. This decision as well as the earlier decision of Mukharji J. in Murli Tahilram v. Asoomal Co. draw a dividing line, even at an earlier stage before the actual payment to the decree-holder. If the court had passed an order for payment to the decree-holder before the application by the Government for claim to priority had been received, even at that stage according to the Calcutta decision, the money ceases to belong to the judgment-debtor, and must be deemed to belong to the decree-holder ; therefore, the Crown's claim for priority could not be granted, if it was made after the passing of the order. But in the present case such a situation does not need to be visualised; not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... case where payment has also been made to the decree-holder before the application was made by the department to the executing court. It was next urged by the learned counsel for the department that it would suffice to give the right of priority to the Government if their application is made before the entire assets attached in execution are realised and distributed. It is urged that in the present case the application has been made before the entire set of lots of shares bad been sold out following their attachment, and that therefore priority should be given even as against the proceeds of the lots sold earlier and the decree-holder should be asked to refund the amounts. With this contention also we are unable to agree. It is well-known that in the course of execution the lots attached by the decree-holder need not be sold all together, that they could be sold piecemeal, and that the sale could be stopped when a sufficient number of lots has been sold to meet the decree-holder's claim. The sale in such a case of each lot is viewed independently and the proceeds, as and when the lot is sold, are adjusted towards the decree and paid over to the decree-holder without waiting for th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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