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TMI Blog1978 (3) TMI 37X X X X Extracts X X X X X X X X Extracts X X X X ..... f the instalments within the stipulated time whether legally demanded or not, becomes insolvent or attempts to pledge or sell or otherwise alienate or transfer the vehicle, etc., then the rights of the hirer shall forthwith be determined ipso facto without any notice to the hirer and all the instalments previously paid by the hirer shall be forfeited to the petitioner, who shall thereupon be entitled to seize, remove and retake possession of the vehicle with its accessories. Only upon the hirer paying the entire amount specified in the schedule, the said vehicle will become the sole and absolute property of the hirer. As per the agreement itself the petitioner had agreed to permit the hirer to have the registration of the vehicle in his name provided that he should transfer the registration in the name of the petitioner whenever required to do so by them and especially when the hirer commits breach of any of the conditions of the agreement and the petitioner was obliged to seize the vehicle. What happened in this case was that the third respondent defaulted payment of the instalments in accordance with the agreement. The petitioner seized the vehicle. On that day, an amount of R ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he agreement, is the owner, under the hire purchase agreement, Ext. P-2. The transaction evidenced by Ext. P-2 is indeed one of loan to be repaid in twenty-four regular instalments spread over a period of twenty-four months and the agreement really amounted only to giving of security of the bus for the loan advanced by the petitioner. He points out that the possessor of the vehicle under the hire purchase agreement, the third respondent, is the owner. Mr. V. R. Venkitakrishnan, learned counsel for the petitioner, placing reliance on the decision of the Supreme Court in K. L. Johar Co. v. Dy. CTO [1965] 16 STC 213, contended that the petitioner is the real owner of the vehicle. It was a case of a financing firm having its main business to advance money to persons who intended to purchase motor vehicles but were themselves not in a position to find ready money to pay the price, The firm entered into hire purchase agreement with the purchaser. The Supreme Court pointed out in that case that the agreement therein showed that the financier was the owner of the vehicle and the intending purchaser was merely a hirer thereunder. The clauses in the agreement gave power to the financier ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a typical hire-purchase agreement is that the property does not pass when the agreement is made but only passes when the option is finally exercised after complying with all the terms of the agreement. Mr. V. R. Venkitakrishnan, learned counsel for the petitioner, points out that that feature is clearly there in Ext. P-2 agreement. Though there is much force in what Mr. Venkitakrishnan contends, I do not think, I need go as far as that, for allowing this original petition. Admittedly, it is as per Ext. P-2 that the third respondent gets possession of the vehicle and, according to the TRO he becomes the owner of the vehicle. But then by that agreement itself, at least a security is created over the vehicle in favour of the petitioner in respect of the amounts advanced by him if the transaction is taken to be a purchase in favour of the third respondent. If that be so, then the revenue cannot have a superior right over the claim of the petitioner in regard to the vehicle. It is only whenever the right of the Crown and the right of a subject with respect to the payment of a debt of equal degree come into competition, the Crown's right prevails. The principle postulates that, when t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eeding against the mortgaged property itself. On the making of that order, the mortgagor is deprived of his right to possession and to collect the rents. Thereafter, neither the mortgagor nor persons claiming under him such as a purchaser or a mortgagee of the equity of redemption can have a higher right than the mortgagor him self. So too, none of the creditors who have no prior mortgage or security over the property, can claim to have a right to the amounts realised in so far as the said amounts were necessary to discharge the mortgage debts for, in the case of unsecured creditors, they can only claim that amount in the shoes of the mortgagor and when the mortgagor himself has no right, a fortiori they will have none. Whatever privileged position the Crown occupies, in a competition inter se among unsecured creditors, it is settled law that the Crown is not a secured creditor and, therefore, it can only claim just like any other unsecured creditor and as the mortgagor lost the right to possession and to collect the rent, to the extent indicated above, the State also cannot claim any priority in the sums collected by the receiver. " Therefore, if, in a case where a person has g ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dividend or other monies contrary to such attachment, shall be void as against all claims enforceable under the attachment. The provision for recovery of tax by any of the modes specified under s. 222, and which is provided in detail in Sch. II, cannot, in the absence of any specific statutory provision, take away the rights of any party in whose favour the security has already been created. This is so held by the Allahabad High Court in Suraj Prasad Gupta v. Chartered Bank [1972] 83 ITR 494. That case was originally heard by a Division Bench consisting of S. N. Dwivedi and Hari Swarup JJ. and, on difference of opinion between them, the question was referred to the opinion of a third judge, Justice Kirty. Justice Kirty agreeing with Justice Dwivedi, held that nothing can be read in r. 16 of Sch. II of the I.T. Act, which may have the effect of denying the legal right of a mortgagee or a mortgagee in whose favour a decree for sale under O. XXXIV, r. 5, of the Code, has been passed and that r. 16 must be strictly construed and no extended or wide meaning can be given to the language of r. 16(1). It might be noted that an attachment can be effected only after a demand notice had bee ..... X X X X Extracts X X X X X X X X Extracts X X X X
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