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TMI Blog1977 (6) TMI 12X X X X Extracts X X X X X X X X Extracts X X X X ..... with whom Vasudevan had a lease-cum-sale agreement entered into between him and the board in or about July 15, 1965. We shall presently refer to the terms of the said agreement. The insolvency petition filed as above by the petitioning creditor was heard and by an order dated March 23, 1971, Vasudevan was adjudicated as an insolvent. Whilst these proceedings were pending, Govindaswamy, on the strength of the agreement for sale dated January 15, 1970, which was indeed oral and further on the footing that he has paid a sum of Rs. 43,000 to the insolvent pursuant to the said agreement of sale desired to bring himself on record in the insolvency proceedings so as to secure his rights as intending purchaser who parted with a part of the purchase price to the vendor. Fearing that Govindaswamy was likely to claim an interest as a secured creditor pursuant to the payment of the part of the agreed purchase price in furtherance of the agreement of sale referred to above, the insolvent filed Application No. 589 of 1971, and sought for a declaration that Indra Nagar house as above did not vest in the official assignee, as he had no transferable or assignable interest therein. The application o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... indaswamy resisted this application and asserted that he has secured a statutory charge as per the provisions of the Transfer of Property Act and that, therefore, the Income-tax Officer representing the State, cannot dislodge the vested rights in him and sought for a dismissal of the said application. Paul J. heard the application and held that under the terms of the lease-cum-sale agreement entered into between Govindaswamy and the State Housing Board, Govindaswamy had a right in the property and was entitled to become full owner on the fulfilment of the stipulations under it and in that sense he agreed with Palaniswamy J. He upheld the charge over the property in favour of Govindaswamy to the extent of Rs. 43,000. On the question whether the Government can claim priority over the debt due to Govindaswamy, he held that as such a priority can be claimed over unsecured creditors only and as the debt in question is a secured debt, in consequence of which Govindaswamy secured a statutory charge under section 55(6)(b) of the Transfer of Property Act, he would not agree with the State and dismissed the said application. The present appeal is by the Income-tax Officer, representing the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion of the parties appears to be to create a saleable interest in the property provided the allottee-lessee (insolvent herein) complies with the terms and conditions therein. The allottee-lessee is entitled to occupy the property on the terms and conditions mentioned therein and under clause 15 thereto, the board shall sell the property to the lessee for such price as the chairman of the board may fix ; the allottee-lessee is bound to bear all the expenses of sale, besides paying the price fixed by the board. If the allottee-lessee commits default, the agreement is liable to be terminated. Clause 24 provides that if the allottee-lessee commits breach of any of the terms of the agreement, the board is at liberty but is not bound to determine the lease and the agreement of sale without prejudice to the rights of the board to recover from the allottee-lessee any loss incurred by the board. No doubt clause 29 interdicts the lessee from assigning, transferring or dealing with his rights in favour of third parties and provides that the lessor-board is not bound to recognise any such transfer or assignment in favour of third parties. The agreement is, however, silent in the case where th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he property from the board and the board has no option except to sell it to the allottee-lessee. There is no discretion in the Housing Board to avoid such a result. This right to obtain a conveyance of immovable property which is apparent in the lease-cum-sale agreement is not equable to a contingent right. It has to be fairly held that this right is a right in immovable property and is certainly property which comes within the meaning of the expression "property over which he has the capacity to exercise and take proceedings for exercising such powers in or over or in respect of property". Palaniswamy J. rightly relied upon the decision in Willingham v. Joyce [1796] ER 951 and Buckland v. Papillon [1867] 2 Ch App 67, and held that the benefit of the rights which flow from the lease-cum-sale agreement being property rights would pass on to the official assignee. In our view, the rights inbuilt in the lease-cum-sale agreement are not bare expectancies or possibilities, but are rights which could be transmitted in accordance with law and, in this sense, the right, title and interest of the insolvent over the property under the said agreement would vest in the official assignee after ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in anticipation of the delivery and for interest on such amount ; and, when he properly declines to accept the delivery, also for the earnest (if any) and for the costs (if any) awarded to him in a suit to compel specific performance of the contract or to obtain a decree for its recession. In the instant case, it is nobody's case that Govindaswamy improperly declined to accept delivery of the property. On the other hand, he was ready to complete the sale but for the attitude of the official assignee, who wanted to bring the property to sale in the interest of body of creditors. It was in those circumstances, and under directions of court, Govindaswamy gave up his right to purchase the property but insisted upon a charge on the property being created to the extent of his interest in the property for the amount of the purchase money paid by him as buyer in anticipation of the delivery of the property and completion of the sale and for interest on such amount. Govindaswamy, therefore, secured a statutory charge for the pre-paid price, that is, the price paid by him in anticipation of completion of sale. The principle under section 55(6)(b) of the Transfer of Property Act is indeed a c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , all debts due to the Government or to any local authority, etc. Undoubtedly, the arrears of income-tax due to the Government would certainly come within the meaning of debt which has been ascertained and has become due and payable by the insolvent. In particular, the tax payable need not be quantified by the assessing authority. This is because there is inherent in the tax liability a concept that the assessee is obliged to pay it as and when it is quantified. The proposition that the Government's priority to claim its dues over other dues is a common law right is unassailable and is preserved even after the coming into force of the Constitution by reason of article 372. But the question is whether the Government or the Crown can have priority over all dues. Salus populi suprema lex (Regard for the public welfare is the highest law) is the origin for such claims of priority made by the Government. The Full Bench of our court in Collector of Tiruchirapalli v. Trinity Bank Ltd., AIR 1962 Mad 59 [FB], following another Full Bench of our court in Manickam Chettiar v. Income-tax Officer [1938] 6 ITR 180 (Mad) [FB] observed as follows at page 62 : "But this rule of priority in favour ..... X X X X Extracts X X X X X X X X Extracts X X X X
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