Kerala High Court
Denny Fernandez vs State Of Kerala on 20 December, 2002
Equivalent citations: 2003(1)KLT280, 2003 A I H C 1923, (2003) 1 KER LT 280, (2003) 2 BANKCAS 46, (2003) 1 KHCACJ 305 (KER), (2003) 1 BANKJ 722
Author: Pius C. Kuriakose
Bench: Pius C. Kuriakose
JUDGMENT K.A. Mohamed Shafi, J.
1. This Second Appeal has come up before us on the basis of a reference made by a single Judge of this Court who is of opinion that the decision in Roman Kannan v. State of Kerala reported in 1977 KLT 657 requires reconsideration in view of the judgment of the Supreme Court in State of Kerala v. Radhamany (1996 (6) SCC 287).
2. The above Second Appeal is filed by the plaintiff in a suit for injunction filed by her to restrain the State and its officials from proceeding against the plaint schedule property under the Revenue Recovery Act by selling in auction to realise the abkari dues alleged to be due from one Mohankumar. According to the plaintiff, Mohankumar, the owner of the plaint schedule property entered into an agreement for sale of the property to one Asok Kumar on 16.3.1987 for a total consideration of Rs. 15,000/- and an advance amount of Rs. 10,000/- was received by Mohankumar on the same day. As Mohankumar committed breach of the agreement, Asok Kumar filed O.S. 208/88 before the Munsiff's Court, Neyyattinkara for specific performance of the agreement and in execution of the decree passed by the court against Mohankumar, registered assignment deed was executed through court conveying the plaint schedule property in favour of Asok Kumar. Asok Kumar did not take delivery of the property through court Subsequently Asok Kumar and Mohankumar jointly assigned the property in favour of the plaintiff for valid consideration as per registered assignment deed No. 17/92 of Kanjiramkulam Sub Registry and as such the plaintiff is the exclusive owner in possession of the property. The plaintiff - appellant has contended that the defendants - respondents are not entitled to proceed against the plaint schedule property for the abkari dues, if any, due from Mohankumar under the Revenue Recovery Act.
3. The defendants pleaded that the alleged agreement for sale is not true or genuine and the plaint schedule property was attached as early as on 23.2.1988 for realisation of the abkari arrears due from Mohankumar. O.S. 208/88 was a collusive suit to defeat the revenue recovery proceedings against Mchankumar. The decree in O.S. 208/88 is not binding upon the defendants who are not parties to that suit. The sale deed relied upon by the plaintiff is not valid. The plaintiff has no title to, right in or possession of the property and the property is not conveyed in favour of the plaintiff as per the assignment deed. The plaintiff is not a bona fide purchaser for value of the plaint schedule property. Therefore, she is not entitled to any relief in the suit.
4. After trial the trial court decreed the suit in favour of the plaintiff for permanent prohibitory injunction. The State went up in appeal in A.S. 25/96 before the Subordinate Judge's Court, Neyyattinkara. The lower appellate court allowed the appeal, reversed the decree and judgment passed by the trial court and dismissed the suit with costs. Hence the plaintiff preferred the Second Appeal before this Court. When the Second Appeal came up for hearing the learned single Judge referred the matter to Division Bench.
5. Section 3 of the Revenue Recovery Act lays down that the public revenue due on any land shall be the first charge on the land, the buildings upon it and on the produce thereof. Therefore, the authorities can proceed against the property of the defaulter normally in the hands of the transferee also.
6. Chapter III of the Revenue Recovery Act deals with the procedure for attachment and sale of immovable property. Section 34 in Chapter III stipulates that a demand notice has to be served prior to attachment of the land. Section 34 reads as follows:
"34. Demand to be served prior to attachment of land:-(1) Before the Collector or the authorised officer proceeds to attach the immovable property of the defaulter, he shall cause a written demand to be served upon the defaulter specifying the name of the defaulter, the amount of the arrear of public revenue due on land for which the attachment is being made, the date on which such arrear fell due, the interest on the arrear and the amount of the batta due to the persons who serve the demand and such other particulars as may be prescribed, and the time allowed for the payment which shall not be less than seven days from the date of service of the demand.
(2) If within the time prescribed under Sub-section (1), the defaulter objects to the claim of arrears wholly or in part, the Collector or the authorised officer, as the case may be, shall enquire into the objection and record a decision before proceeding to attach the immovable property of the defaulter."
7. Section 44 of the Revenue Recovery Act deals with the effect of engagements and transfer by the defaulter. Section 44(1) stipulates that any engagement entered into by the defaulter with anyone in respect of any immovable property after the service of the written demand on him shall not be binding upon the Government. Section 44(2) of the Act lays down that any transfer of immovable property made by a defaulter after public revenue due on any land from him has fallen in arrear, with intent to defeat or delay the recovery of such arrear, shall not be binding upon the Government. Section 44(3) provides that if the defaulter transfers the immovable property to a near relative or for grossly inadequate consideration after public revenue due on any land from him has fallen in arrear, it shall be presumed until the contrary is proved, that such transfer is made with intent to defeat or delay the recovery of such arrear. The proviso to Sub-section (3) of Section 44 lays down that before proceeding to attach such property the Collector or the authorised officer shall give the defaulter an opportunity of being heard and record his reasons therefor in writing. The explanation to the sub-section enumerates the near relatives of the transferor.
8. In the decision reported in 1977 KLT 657 (Roman Kannan v. State of Kerala) a single Judge of this Court has held that Section 44(3) of the Revenue Recovery Act does not lay down that a presumption can be drawn in all cases when the defaulter transfers his property, that it was with intent to defeat or delay the recovery of such arrears of public revenue. It is also held by the single Judge that in cases falling under Section 44(2) of the Act it is for the Government to establish the fraudulent nature of the transfer by independent proceedings in a civil court, that either the document is a sham one brought into existence to defeat the rightful claim of the Government or that the consideration is grossly inadequate to enrich someone and to defeat the Government.
9. In the decision in John and Anr. v. Tahsildar, Manjeri and Anr. (1980 KLN 11) a single Judge of this Court has held that under Sub-section (2) of Section 44 of the Revenue Recovery Act the burden to show that the transfer was made with intent to defeat or delay the recovery of arrears of tax is upon the Government. It is further held that under Sub-section (3) of Section 44 of the Act the initial presumption that the transfer was made with intent to defeat or delay the recovery of arrears of tax can be drawn in favour of the Government, if the transfer is to a near relative as defined under the explanation to that sub-section and if the transfer is to any other person Sub-section (3) will apply only if the consideration for the transaction is grossly inadequate and the burden is upon the Government to establish that the consideration was grossly inadequate in such cases. It is also held that the applicability of Sub-section (3) will arise only when the initial onus is discharged by the Government viz. that the transfer was to a near relative as defined in the explanation to that sub-section or to any other person for a consideration which is grossly inadequate.
10. The counsel for the appellant submitted that the above decisions though by single Judges of this Court are completely in consonance with the provisions of Section 44 of the Revenue Recovery Act and the legislative intent behind the enactment. He also submitted that Sub-section (3) of Section 44 of the Revenue Recovery Act mandates notice before attachment to the defaulter giving him opportunity of being heard and the reasons recorded by the authorised officer in writing before ordering attachment. Therefore, according to him, unless and until these two conditions of issuance of notice to the defaulter to show cause and recording the reasons for the attachment by the authorised officer the provision under Sub-section (3) of Section 44 of the Act cannot be invoked.
11. But in the decision in State of Kerala v. Radhamany ((1996) 6 SCC 287) the Supreme Court has held that Sub-sections (1) to (3) of Section 44 of the Revenue Recovery Act are independent by themselves. It is also held that any transfer of immovable property made by the defaulter after public revenue due on any land from him has fallen in arrears, the sale is made with intent to defeat or delay the recovery of such arrears, the sale shall not be binding upon the Government under Sub-section (2) of Section 44 of the Revenue Recovery Act. The Supreme Court has further held that Sub-section (3) of Section 44 contemplates another situation whether the defaulter transfers immovable property to a near relative or for grossly inadequate consideration after public revenue due on any land from him has fallen in arrears, it shall be presumed that such transfer was made with intent to defeat or delay the recovery of such arrears. The Supreme Court has observed as follows:
"The crucial question of application of Sub-section (2) is as to the date when the arrears have fallen due and when sale has been effected of the land over which the recovery could be fastened. In view of the admitted fact that arrears had become due as on 1.4.1969 and the lands came to be sold subsequent to the said date, Sub-section (2) stands attracted and, therefore, transfer of immovable property was made by the defaulter with an intention to delay or defer the recovery of such arrears. Therefore, such a sale does not bind the Government.
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7. The question in this case is whether without a prior notice of demand a notice of attachment having been issued under Sub-section (3) has any application? In our view the High Court has committed grave error of law. Sub-section (3) does not contemplate of prior service of such a notice. It contemplates that arrears should become due before such a sale was made and the sale must be in favour of a near relation or for grossly inadequate consideration. If the consideration was grossly inadequate or the sale was to a near relation, the statutory presumption raised is that the transfer was made with intention to defeat or delay recovery of arrears. Such a sale, therefore, does not bind the Government. The recovery official is entitled to proceed against that property as if such transfer has not taken place. The burden to prove contrary is on the defaulter and the transferee. What is grossly inadequate consideration to a stranger would always be a question of fact in each case."
12. By the above judgment the Supreme Court has laid down that if the sale is effected after the arrears have fallen due of the land over which the recovery could be effected, the provisions of Sub-section (2) of Section 44 of the Revenue Recovery Act is attracted and therefore such a sale will not bind the Government as the transfer of immovable property was made by the defaulter with the intention to delay or defeat the recovery of such arrears due from him. It is also held that prior service of notice of demand of arrears or attachment before sale is not a pre-condition to deny the statutory presumption available under Sub-section (3) of Section 44 of the Revenue Recovery Act.
13. The counsel for the appellant has submitted that the above proposition of law laid down by the Supreme Court is against the very specific provisions of Sub-section (3) of Section 44 of the Revenue Recovery Act without adverting to the proviso to that sub-section.
14. It is seen that the entire Section 44 of the Act is extracted by the Supreme Court in para 4 of the above judgment and the Supreme Court has held that if after the arrears fell due the sale of the land over which recovery is due is effected, Sub-section (2) of Section 44 of the Revenue Recovery Act is attracted and therefore, the sale will not be binding on the Government being a transfer of the immovable property made by the defaulter with intention to delay or defeat the recovery of the arrears and that prior service of notice of demand of arrears or attachment before sale is not a pre-condition to deny the statutory presumption available under Sub-section (3) of Section 44 of the Revenue Recovery Act.
15. It is submitted by the counsel for the appellant that Sub-section (3) of Section 44 of the Revenue Recovery Act stipulates that where the defaulter transfers immovable property to a near relative or for grossly inadequate consideration after public revenue due on any land from him has fallen in arrears, it shall be presumed until the contrary is proved that such transfer is made with intent to defeat or delay the recovery of such arrears and the Collector or the authorised officer may subject to the orders of a competent court proceed to recover such arrears of public revenue by attachment and sale of the property so transferred, as if such transfer had not taken place. But the proviso to Sub-section (3) lays down that before proceeding to attach such property, the Collector or the authorised officer shall give the defaulter an opportunity of being heard, and record his reasons therefor in writing. Therefore, the counsel submitted that unless and until the authorised officer complied with the above two mandatory requirements under the proviso, he can neither attach the property nor proceed against the property under Sub-section (3) of Section 44 of the R.R. Act. According to him since the above judgment of the Supreme Court reported in (1996) 6 SCC 287 is directly in conflict with the provisions of Sub-section (3) and the proviso thereto of Section 44 of the R.R. Act, the same cannot be followed.
16. The counsel for the appellant submitted that all judgments rendered by the Supreme Court cannot be considered as the law declared by the Supreme Court binding on other courts in India as contemplated under Article 141 of the Constitution. He also submitted that any conclusion without any reference to the relevant provision of law or conclusions arrived at without application of mind cannot be a declaration of law or authority or a binding precedent. In support of this argument the counsel for the appellant relied upon the decision of the Supreme Court in United India Insurance Co. Ltd. v. Alavi (1998 (1) KLT 951 FB).
17. In the decision in State Financial Corporation. v. Jagadamba Oil Mills (AIR 2002 SC 834) the Supreme Court has observed as follows:
"19. Courts should not place reliance on decisions without discussing as to how the factual situation fits in with the fact situation of the decision on which reliance is placed. Observations of Courts are not to be read as Euclid's theorems nor as provisions of the statute. These observations must be read in the context in which they appear. Judgments of Courts are not to be construed as statutes. To interpret words, phrases and provisions of a statute, it may become necessary for Judges to embark into lengthy discussions but the discussion is meant to explain and not to define. Judges interpret statutes, they do not interpret judgments. They interpret words of statutes, their words are not to be interpreted as statutes.
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21. Circumstantial flexibility, one additional or different fact may make a world of difference between conclusions in two cases. Disposal of cases by blindly placing reliance on a decision is not proper."
18. In the decision in Padmasundara Rao v. State of T.N. (AIR 2002 SC 1334) a five Judges Bench of the Supreme Court has observed as follows:
"8 A. Courts should not place reliance on decisions without discussing as to how the factual situation fits in with the fact situation of the decision on which reliance is placed. There is always peril in treating the words of a speech or judgment as though they are words in a legislative enactment, and it is to be remembered that judicial utterances are made in the setting of the facts of a particular case, and said Lord Morris in Herrington v. British Railways Board (1972) 2 WLR 537. Circumstantial flexibility, one additional or different fact may make a world of difference between conclusions in two cases."
19. Relying upon the above decisions the counsel for the appellant vehemently argued that since the two Judges Bench of the Supreme Court in the decision reported in (1996) 6 SCC 287 (State of Kerala v. Radhamany) held that Sub-section (3) of Section 44 of the Revenue Recovery Act does not contemplate a prior service of notice and it only contemplates that arrears should become due before such a sale was made and the sale must be in favour of a near relation or for grossly inadequate consideration, without considering or adverting to the proviso to that sub-section which mandates that before proceeding to attach such property the Collector or the authorised officer should give the defaulter an opportunity of being heard and record his reasons therefor in writing, it is patently opposed to the provisions of law and therefore, the same cannot be followed as a binding law. Even though the entire Section 44 including the proviso to Sub-section (3) is incorporated in para 4 of the judgment, no reference to Section 44(2) or to the proviso to Section 44(3) is made in the judgment while holding that the transfer of land after the arrears fell due by the defaulter is not binding on the Government since the transfer by the defaulter is with intention to delay to defeat the recovery of the amount and that Sub-section (3) of Section 44 of the Revenue Recovery Act does not contemplate prior service of notice.
20. The contention of the appellant and the vehement submission made by the counsel for the appellant that the judgment of the Supreme Court cannot be followed by this Court as a binding precedent or as the binding law declared by the Supreme Court under Section 141 of the Constitution, is not sustainable. A decision of the Supreme Court cannot be assailed on the ground that certain aspects of the case were not considered by the Supreme Court or certain provisions of law were riot brought to the notice of the Supreme Court.
21. In the decision in Director of Settlements, A.P.v. M.R. Apparao (AIR 2002 SC 1598) a three Judges' Bench of the Supreme Court has observed as follows:
"7. So far as the first question is concerned, Article 141 of the Constitution unequivocally indicates that the law declared by the Supreme Court shall be binding on all Courts within the territory of India. The aforesaid Article empowers the Supreme Court to declare the law. It is, therefore, an essential function of the Court to interpret a legislation. The statements of the Court on matters other than law like facts may have no binding force as the facts of two cases may not be similar. But what is binding is the ratio of the decision and not any finding of facts. It is the principle found out upon a reading of a judgment as a whole, in the light of the questions before the Court that forms the ratio and not any particular word or sentence. To determine whether a decision has 'declared law' it cannot be said to be a law when a point is disposed of on concession and what is binding is the principle underlying a decision. A judgment of the Court has to be read in the context of questions which arose for consideration in the case in which the judgment was delivered. An 'obiter dictum' as distinguished from a ratio decidendi is an observation by Court on a legal question suggested in a case before it but not arising in such manner as to require a decision. Such an obiter may not have a binding precedent as the observation was unnecessary for the decision pronounced, but even though an obiter may not have a bind effect as a precedent, but it cannot be denied that it is of considerable weight. The law which will be binding under Article 141 would, therefore, extend to all observations of points raised and decided by the Court in a given case. So far as constitutional matters are concerned, it is a practice of the Court not to make any pronouncement on points not directly raised for its decision. The decision in a judgment of the Supreme Court cannot be assailed on the ground that certain aspects were not considered or the relevant provisions were not brought to the notice of the Court (See AIR 1970 SC 1002 and AIR 1973 SC 794). When Supreme Court decides a principle it would be the duty of the High Court or a subordinate Court to follow the decision of the Supreme Court."
22. In the decision in Chandra Prakash v. State of U.P. (AIR 2002 SC 1652) a five Judges' Bench of the Supreme Court has observed as follows:
"23. A careful perusal of the above judgments shows that this Court took note of the hierarchical character of the judicial system in India. It also held that it is of paramount importance that the law declared by this Court should be certain, clear and consistent. As stated in the above judgments, it is of common knowledge that most of the decisions of this Court are of significance not merely because they constitute an adjudication on the rights of the parties and resolve the disputes between them but also because in doing so they embody a declaration of law operating as a binding principle in future cases. The doctrine of binding precedent is of utmost importance in the administration of our judicial system. It promotes certainty and consistency in judicial decisions. Judicial consistency promotes confidence in the system, therefore, there is this need for consistency in the enunciation of legal principles in the decisions of this Court. It is in the above context, this Court in the case of Rabhubir Singh held that a pronouncement of law by a Division Bench of this Court is binding on a Division Bench of the same or similar number of Judges."
23. In view of the above dictum laid down by the Constitution Bench of the Supreme Court the arguments advanced by the counsel for the appellant that the decision of the Supreme Court reported in (1996) 6 SCC 287 (State of Kerala v. Radhamany) cannot be followed since in that judgment the Supreme Court has not noticed or adverted to or considered the mandatory provisions of law laid down in the proviso to Sub-section (3) of Section 44 of the Revenue Recovery Act, is not sustainable. Therefore, so long as the above judgment pronounced by the Supreme Court is not reversed or modified by Larger Bench of the Supreme Court, it continues to be the law of land under Article 141 of the Constitution binding upon this Court and the other courts. Therefore, the decision of the single Judge of this Court reported in 1977 KLT 657 (Raman Kannan v. State of Kerala) and the decisions supporting that view holding against the judgment of the Supreme Court cannot be considered as good law.
24. The Govt. Pleader submitted that in this case all the three sub-sections of Section 44 and not Sub-section (3) of Section 44 alone applies. He submitted that the plaint schedule property was attached as early as on 23.2.1988 for realisation of the abkari arrears due from Mohankumar much before the institution of the suit in O.S. 208/88 and obtaining the collusive decree for specific performance. Therefore, the finding arrived at by the lower appellate court that the sale of the property in favour of the appellant is hit by Sub-section (3) of Section 44 of the Revenue Recovery Act is perfectly justified. He also submitted that Sub-section (2) of Section 44 is also attracted and the judgment passed by the lower appellate court can be sustained on that ground alone.
25. All these submissions made by the Govt. Pleader are in respect of the merits of the case which need not be considered in the above reference made by the single Judge as to whether the observations made by the single Judge in Raman Kannan v. State of Kerala (1977 KLT 657) that it is for the Government to establish the fraudulent nature by independent proceedings in a civil court, is good law or not. With respect we find that in view of the ruling of the Supreme Court reported in (1996) 6 SCC 287 (State of Kerala v. Radhamany) referred to above that if the transfer of immovable property over which the recovery of arrears can be fastened is effected by the defaulter after the date when the arrears fell due, Sub-section (2) of Section 44 of the Revenue Recovery Act stands attracted and therefore, the sale will not bind the Government, being executed by the defaulter with intention to delay or defeat the recovery of the arrears and prior notice of demand on the defaulter under Sub-section (3) of Section 44 of the Act is unnecessary to make the sale in favour of a near relation or for grossly inadequate consideration invalid, the observations made by the learned single Judges in the decisions reported in 1977 KLT 657 (Raman Kannan v. State of Kerala) and 1980 KLN 11 (John and Anr. v. Tahsildar, Manjeri and Anr.) that in such cases it is for the Government to establish the fraudulent nature by independent proceedings in a civil court, does not reflect the correct law on the point.
The reference is answered accordingly. The appeal may be disposed of by the single Judge on merits in accordance with law.