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TMI Blog1975 (3) TMI 12X X X X Extracts X X X X X X X X Extracts X X X X ..... judgment-debtors from the civil court of Badayun (U.P.), which was transferred to this court for execution. Even before the execution came to this court, it was being entertained by a subordinate judge of Delhi, but on the setting up of the High Court of Delhi, the execution was transferred to the Delhi High Court, on the original side. In the course of the execution certain house property situated at 152/48, Diplomatic Enclave, Malcha Marg, New Delhi, which was partly owned by the judgment-debtors was attached and then ordered to be sold. Just a few days before the sale was to take place, the Commissioner of Income-tax moved the present application pointing out that the property in question had already been attached by the Tax Recovery Officer under the Second Schedule to the Income-tax Act, 1961. It was prayed in this application that the property in question should be released from attachment and the proclamation of sale should be withdrawn and the sale already fixed should be cancelled. In the alternative, it was prayed that in case the property was not released from attachment, the sale proceeds should be paid to the applicant to the extent necessary to satisfy the public due ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... esentative-in-interest shall not be competent to mortgage, charge, lease or otherwise deal with any property belonging to him except with the permission of the Tax Recovery Officer,............. " Now follow the most important words, as far as this case is concerned : " Nor shall any civil court issue any process against such property in execution of a decree for the payment of money. " The question for consideration by me is what is the effect of this rule in relation to the execution proceedings already pending in this court. To my mind there is no doubt that after a notice has been issued by the Tax Recovery Officer under rule 2 of this Schedule of the Income-tax Act, then the intention of the rule is to prevent the court issuing any process for execution a money-decree against the defaulters. However, there is a clear deficiency in the section, because the court cannot be made aware of the giving of this notice unless somebody informs the court that, in fact, a notice has been given under rule 2. The provisions of the Schedule are such that the Income-tax Officer sends a certificate to the Tax Recovery Officer and the Tax Recovery Officer in turn sends a notice unde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... suing a process in execution in relation to the property, it becomes the duty of the court to stop issuing any further process for realising the money sought to be realised in execution of a decree for the payment of money. The present case is a case in which execution id sought on a money decree. It follows that the court has to desist from any further execution of the decree. One point which has arisen during the course of arguments before me is the question whether an application under section 151 of the Code is competent at the instance of a person who is not a party to the suit and is certainly not either a judgment-debtor or a decree-holder. I think that even if there was no authority to support the moving of such application the application would be competent as otherwise the court would never be informed that a notice under rule 2 has been issued to a defaulter. As there is no obligation on the defaulter to bring this matter to the notice of the court, it clearly lies on the department to move the court pointing out that a notice had been issued under rule 2, and, thereafter, no process in execution should be issued by the court for proceeding against the defaulter's proper ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that the provisions of rule 16 and in fact almost all the provisions of Schedule II of the Income-tax Act, 1961, are ultra vires of the Constitution and particularly articles 19(1)(f) and (g) of the Constitution. As this is not a point which has been raised in the pleadings, and even otherwise I do not find that the provisions are unreasonable, I have not allowed this question to be fully urged before me. In my view, once it is accepted that the State has priority over other creditors as was held in the Builders Supply case by the Supreme Court, I fail to see what difference it makes whether the execution is carried out by the court or by the Tax Recovery Officer. In either case, the State has the priority and is entitled to get its dues realised first from the proceeds of the sale, and only then can the balance be used for the benefit of other creditors. The only drawback that I see in the present procedure from the point of view of the decree-holder is that he is not entitled to get at the money which may remain after satisfying the tax dues from the proceeds of the sale effected by the Tax Recovery Officer. This drawback is partially met by the procedure that I intend to adopt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... th the provisions of Schedule II of the Income-tax Act, 1961. Now the next question to be considered is, what is to happen to the decree-holder's claim to execute his decree when further execution of the decree is to be stayed. The revisions of Schedule II of the Income-tax Act, 1961, indicate the manner in which a Tax Recovery Officer has to proceed to make recoveries, and also indicate the procedure which is to be followed by him in disbursing the realisations made after he has effected a sale of the defaulter's property. It is indicated in rule 8 of Schedule II that the amount realised from such sale is first to be utilised to pay the costs incurred by the Income-tax Officer ; then, to pay the amount indicated in the certificate issued by the Income-tax Officer ; and then, to pay any other dues that may be payable in respect of income-tax arrears by the defaulter ; and, finally, any balance remaining has to be paid to the defaulter. Mr. Roshan, the learned counsel for the Commissioner of Income-tax, has submitted that he is willing to make the payment of the balance remaining, if any, after the sale has been held by the Tax Recovery Officer, to the court, in satisfaction or p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that an attachment order will issue to the Tax Recovery Officer prohibiting the payment of any balance which may remain payable due to the two judgment-debtors in the present case, after the property situated at 152/48, Diplomatic Enclave, Malcha Marg, New Delhi, has been sold by the Tax Recovery Officer and the deductions allowable under rule 8 of Schedule II of the Income-tax Act, 1961, have been made therefrom. The balance remaining due under that provision to Shri Jagjeet Singh Sawhney and Shri Gurcharan Singh Sawhney will not be paid to them, but the same may be paid into this court under Order 21, rule 46(3) of the Code, for utilisation in respect of the decree now being executed in this court. Thus, the result of this application may now be summarised. I have come to the conclusion that this court can no longer execute the decree under consideration, by selling property No. 152/48, situated at Diplomatic Enclave, Malcha Marg, New Delhi, because of the issue of the notice by the Tax Recovery Officer under Schedule II of the Income-tax Act, 1961, to the judgment-debtors and the subsequent attachment of that property by that officer, and, therefore, this property can be sol ..... X X X X Extracts X X X X X X X X Extracts X X X X
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