Kerala High Court
Agricultural Income-Tax Officer And ... vs Thankamma Parameswaran And Vasudevan ... on 22 January, 1986
Equivalent citations: [1987]164ITR719(KER)
JUDGMENT K. Sukumaran, J.
1. The two writ appeals are at the instance of the State Government and its officials. They question the correctness of the judgment in the two writ petitions--O.P. Nos. 2925 and 2929 of 1979--whereunder the learned judge quashed the revenue sale of the property of the two petitioners. The reason as given by the learned judge for nullifying the revenue sale is that the writ petitioners had become the owners of the property at the time when the revenue sale was actually conducted, that the properties did not, therefore, belong to the defaulter at the time of the sale and that the revenue sale without reckoning the earlier private sale in favour of the petitioners was void.
2. The correctness of the reason so given has to be adjudged in the light of the facts and the provisions of the Kerala Revenue Recovery Act, 1969 (hereinafter referred to as "the Act"), particularly Section 44 thereof.
3. We shall, at the outset, set out the relevant brief facts. The properties originally belonged to one A. P. Ramaswamy Gounder. He was an assessee to agricultural income-tax. Demands made for payment of the tax to the extent of Rs. 30,563.29 remained unresponded to and the dues thus remained unpaid. The machinery for recovery under the Revenue Recovery Act was thereupon set in motion. A notice under Section 34 of the Revenue Recovery Act dated October 18, 1971, was served on the defaulter on November 8, 1971. There was no reaction from the defaulter even to that notice. A notice under Section 36 attaching the property was issued on June 22, 1972. The property was notified for sale under Section 49, the notification having been published in the Gazette dated June 26, 1973. The sale was initially posted on August 7, 1973, but was adjourned to August 27, 1973, due to want of bidders. It was again postponed for the same reason and on September 24, 1973, the Government purchased the property under Section 50 of the Act. The petitioner in O.P. No. 2929 of 1979, who is the husband of the petitioner in the connected case, O.P. No. 2925 of 1979, had participated in the auctions held on August 27, 1973 and September 24, 1973. That sale was confirmed under Section 54 on January 17, 1974. The land had been taken possession of by the village officer on October 18, 1974. On July 6, 1979, the village officer notified that the ripe cardamom in the property would be sold in auction on August 21, 1979. That auction was confirmed in favour of the highest bidder.
4. It was at this time that the two petitioners approached the court praying, inter alia, for quashing the revenue sale. A writ of mandamus to dispose of the representations filed by them to the Collector and the Minister under exhibits P-1 dated March 29, 1976, and P-2 dated June 1, 1976, was also sought, for according to them, these representations had remained undisposed of. The petitioners pleaded that they purchased the property under a private sale from the defaulter on July 16, 1973, and that they had not been notified about the recovery proceedings taken thereafter.
5. The facts of the case clearly established that the private sales in favour of the petitioners were effected after the service of notice of demand under the Act on the defaulter as referred to in Section 44. According to the Revenue, the private sales so effected after service of the demand notice came within the mischief of the section and consequently were denuded of any efficacy whatever. The contention of the petitioners has been pointedly dealt with and answered in the counter-affidavit filed on behalf of the respondents. The relevant passage can be usefully extracted:
"It is submitted that as per Section 44 of the Act, any engagement entered into by the defaulter with anyone in respect of any immovable property after the service of the written demand notice on him, shall not be binding upon the Government. In this case, the demand notice was served on the defaulter on November 8, 1971. Therefore, any transaction after November 8, 1971, is not valid and not binding on the Government. The contention of the petitioner is that she purchased the property from Sri A.P. Ramaswamy as per sale deed No. 1412 dated July 16, 1973. Even if she has made such transaction with the defaulter with the land in question, it is not valid and binding on the Government as per Section 44 of the Revenue Recovery Act."
6. The same idea is reiterated in other paragraphs in the counter-affidavit. In paragraph 12, it was stated :
" Any engagement entered into by the defaulter in respect of a property in question, after the service of demand notice is not binding on the Government under Section 44 of the Revenue Recovery Act."
7. The petitioners have not challenged the correctness of the factual details referred to in the counter-affidavit.
8. Confronted with such a contention, counsel for the writ petitioners urged an extreme--and in a sense a novel---contention that the term "engagement" occurring in Section 44(1) will not take in a regular contract of sale and that the term is intended to cover transactions other than transfers as they are ordinarily known. Novelty of an argument is no reason to condemn it outright as observed by Lord Roskill in Home Office v. Harman [1982] 1 All ER 532, 550 (HL). This pointed contention has not been dealt with as such by the learned judge. In the appeal, it has been complained that the learned judge had not adverted to the statements in the counter-affidavit and arguments advanced in that behalf. We find force in those submissions. The question about invalidity of the private sale in the light of Section 44 of the Act, clearly pleaded in the counter-affidavit of the State, thus arises for consideration and a final decision by this court.
9. The answer to the question is dependent upon the scope and ambit of the term ''engagement" referred to in that section. While the bill leading to the enactment was being discussed on the floor of the Kerala Legislative Assembly, an Hon'ble Member sought and got an answer. This is reflected in the passage reading :
10. (Matter in vernacular omitted--Ed.).
"(Sri E. Chandrasekharan Nair : What is meant by 'engagement'?
Sri K.M. Mani: Transaction. That is how it is mentioned about in our parts of the country.)"
11. See proceedings of the Kerala Legislative Assembly [1968] Vol. XXII-No. 12, p. 1835.
12. We shall now endeavour to deal with the question. It is advantageous to read the section itself at the outset.
13. Section 44 reads :
"44. Effect of engagements and transfers by the defaulter.--(1) 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.
(2) 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.
(3) Where a 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 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, and the Collector or the authorised officer may subject to the orders of a competent court, proceed to recover such arrear of public revenue by attachment and sale of the property so transferred, as if such transfer had not taken place :
Provided that, before proceeding to attach such property, the Collector or the authorised officer shall-
(i) give the defaulter an opportunity of being heard ; and
(ii) record his reasons therefor in writing."
14. The Explanation to Section 44(3) is omitted as unnecessary for the purpose of this case.
15. A prefatory note on revenue recovery legislation may be useful in the context. Recovery of public revenue is an important function of the State. On the effective and timely recovery of such public dues depends the timely implementation of the projects and policies of the Government, including the welfare measures and benevolent activities undertaken by a welfare State. The snail-slow process of realisation of overdue payments by resort to conventional litigation with its notorious tardy pace is doomed to failure, having regard to the objective of immediate realisation of public dues. It, therefore, stands to reason that the State Government is armed with an extraordinary remedy which would expedite realisation of public revenue. This is based on public policies and is conceived in larger public interest.
16. Certain public revenues are charged on land. Some others are not. Quite often, substantial amounts due by way of public revenue partake of the character of dues in respect of which there is no charge on the property of the defaulter. He who defaults in payment of public revenue is ordinarily likely to be aware of the aftermath and the unsavoury consequences of the States attempt at realisation of such dues. It is understandable human nature that such a defaulter may attempt to salvage for himself, properties which may otherwise be proceeded against, and if need be, sold in public auction. It is not unknown that in such situations, means, fair or foul, are taken by such defaulters for secreting their properties. The State has to provide against such contingencies also, while not attempting to obstruct ordinary and honest transactions by those with whom Government have to deal.
17. It is desirable to bear in mind the background of the Act and the particular statutory provision. Different enactments relating to revenue recovery were in force in the component parts of the Kerala State, the Madras Revenue Recovery Act, 1864, the Cochin Revenue Recovery Act, 4 of 1083 M.E., and the Travancore Revenue Recovery Act, 1068 M.E. The latter two enactments were modelled after the Madras Act. Section 29 of the Travancore Act corresponded to Section 32 of the Madras Act, On the formation of the Travancore-Cochin State in 1950, a unified statute, the Travancore-Cochin Revenue Recovery Act, 1951, was enacted for the Travancore-Cochin area of the State. The Kerala Revenue Recovery Act came into force in 1968 and was in effect throughout the entire State of Kerala. The ideas which found expression in a fairly stuffed up statutory provision were given outer forms under Section 44. An invalidation of all private engagements in specified contingencies is common to all these enactments.
18. The word "engagement", even according to accepted dictionaries like the Shorter Oxford, Webster's or Random House, takes in a contract or a promise. Ordinarily, therefore, a contract of sale would also be enveloped within the term "engagement" as referred to in Section 44(1). There is no good ground for excluding contracts such as sale, mortgage or gift from the purview of the term "engagement".
19. In addition to the dictionaries, decided cases also have understood and interpreted that term in that width and plenitude. We have already noted that the term was employed in the Madras Revenue Recovery Act of 1864. Other contemporaneous enactments also employed that term, such as, for example, the Madras Irrigation Cess Act (Act VII of 1865). Under the Irrigation Cess Act, exemption from the cess was granted by a proviso to the section if there was an anterior engagement between the Government and the ryot for the supply of water. The scope and ambit of the term "engagement", in that context, came up for judicial determination in Kandalam Rajagopalacharyulu v. Sec. of State for India in Council [1914] 22 1C 107; AIR 1914 Mad 174. The Division Bench of the Madras High Court consisting of Ayling and Sadasiva Aiyar JJ. ruled that the term "engagement" was more comprehensive than a contract or premise. The view of the court is lucidly expressed in the following words (p. 119 of IC):
"The Legislature has evidently used the comprehensive word 'engagement' instead of the word 'agreement' or 'contract' in order that implied undertakings (based on equitable considerations) made by Government and not merely the ordinary contracts based on regular deeds signed by parties or arising out of formal proposals and acceptances made orally or to be gathered from correspondence might be relied on by landlords, proprietors and Inamdars in support of their claims for exemption from water-cess."
20. We are in respectful agreement with the elucidation of the concept of "engagement" as given by the aforesaid decision.
21. We are further fortified in our conclusion by the legislative description of the term "engagement" as attempted when the Travancore-Cochin State enacted the Revenue Recovery Act of 1951. The latter portion of Section 32 of that enactment reads :
"......and all engagements, such as private alienation of the property attached, whether sale, mortgage or gift or otherwise or creation of any tenancy in respect of the said property made subsequent to the issue of demand notice under Section 24, shall be null and void against the Government and any person who may purchase the property under this Act;........."
22. This provision makes it abundantly clear that that term takes in the well-known and regular deeds of transfer such as sale, mortgage and gift. The legislative attempt has been to rope in not merely such well recognised transfers of sale, etc., but also other transactions and arrangements which may virtually hinder the realisation of the public revenue, even if such transactions may not be of the higher order of transfers with acknowledged status of transfers under the pristine property law. The term "engagement", therefore, cannot be given a restricted or narrower meaning in truth and fact. It has a wider and more comprehensive import and effect.
23. Counsel for the respondent further submitted that the above interpretation would lead to anomalies and redundancies which should be avoided by this court in interpreting statutory provisions. According to him, Section 44(2) (whereunder all transfers with intent to defeat or delay the revenue were to be not binding on the Government) employed the term "transfers" in contradistinction to the term "engagement" in Section 44(1). If the Legislature intended that all transfers after the service of the written notice of demand should be null and void, it could have easily provided so by employing the term "transfer" in Section 44(1) itself. The fact that a different term "engagement" is used, according to him, would suggest that Section 44(1) does not take in ordinary and regular transfers but only other transactions of a lesser category. We are unable to accept the above submission, for, the submission overlooks the basic scheme of the Revenue Recovery Act and the background of amendments which have been introduced into the provisions relating to revenue recovery during the past period of more than one century.
24. The submission does not bear closer scrutiny. Section 44(2) deals with a situation anterior to the one covered under Section 44(1); it takes in a period when the arrear of public revenue has become due. An arrear of public dues could be the basic tax which is a principal source of revenue covered by the enactment. It could be other types of revenue deemed as public revenue under this enactment such as the sales tax or the agricultural income-tax. (Under Section 23 of the Kerala General Sales Tax Act, 1963, sales tax remaining unpaid after a demand under that enactment gets transmuted into an arrear of public revenue. That is the position with regard to the agricultural income-tax by virtue of Section 41 of the Act.) The situation which prevails immediately after the public revenue becomes due is covered by Section 44(2). The situation is one in which the liability for payment of public revenue has crystallised itself. If, at that juncture, a transfer of the property of the defaulter is effected, that is nullified by statutory provision ; the process of nullification, however, would be operative only in a limited contingency, namely, when the transaction is effected with an intent to defeat or delay the payment of revenue. This requirement (of establishing an intent to delay or defeat the payment of public revenue) is important and would ordinarily cast a none-too-insignificant burden on the State. The burden, however, is lightened by the leverage obtained under the presumptions provided under Section 44(3) when the transfer is to a near relative or for grossly inadequate consideration.
25. Unrealised revenue under diverse enactments could be realised, inter alia, by recourse to the Revenue Recovery Act. The administrative department or agency which has to collect the public revenue can invoke the machinery under the Act by forwarding to the Revenue Recovery Authorities a certificate as provided under the enabling section of the concerned enactment. One of the important steps under which the machinery of the Revenue Recovery Act is set in motion, is the service of notice under the Revenue Recovery Act. Once such a notice is issued, matters become more serious. It is consistent with the statutory scheme of realisation of public revenue that the defaulter does not have an unmerited advantage by manipulative tactics. After the defaulter is served with a notice under the Act, all his powers of private alienation get attenuated by the provision. It is in that context that Section 44(1) declares that all engagements after the service of such a notice shall be null and void against the Government. The obvious and clear idea is to rope in all kinds of transfers and even other arrangements and implied undertakings. There is, therefore, no inconsistency between the various sub-sections of Section 44. They have their effect and operation at different stages in the process of the realisation of the revenue. We may incidentally note that the different stages in which Sub-sections (1) and (2) of Section 44 operate had been projected in the course of the deliberations in the Assembly when that clause was discussed. Though one Hon'ble Member wanted deletion of Sub-section (1) and an amendment of the wording in Sub-section (2), it was ultimately abandoned. (See Proceedings of the Kerala Legislative Assembly, p. 1715, 1835 and 1884 (1968) Vol. XXII, No. 12).
26. In the light of our above conclusion, the sale deeds in favour of the respondents, writ petitioners, have to be declared as null and void as against the Government. The State is under no obligation to take note of persons who purport to acquire interest in the property when such acquisition is void and ineffective as against the Government. The contention of the State as put forward and based on Section 44(1) has necessarily to be upheld in the above circumstances. We do so. This will necessarily entail the dismissal of the original petitions to the extent they seek invalidation of the revenue sale.
27. In the light of our above conclusion, it has become unnecessary to discuss the further question about the ineffectiveness of the sales in favour of the writ petitioners after the property had been attached in pursuance of the revenue recovery proceedings taken against the defaulter. It has become equally unnecessary in that context to consider the question whether the revenue sales held in 1973 could be assailed by the writ petitioners by moving this court in the year 1979. When the petitioners cannot base their claims to the property on any valid or legal title, it will only be a wasteful and futile exercise for the Government to formally consider and dispose of the highly belated petitions, exhibits Nos. P-1 and P-2 of 1976. We would decline the prayer for a writ of mandamus in the above circumstances.
28. In the light of the above discussion, the writ appeals would stand allowed and the original petitions would stand dismissed. We do not, however, make any order as to costs.