ivil Appeal No 424 of 1963
Appeal by special leave from the judgment and order dated April 8 1960 of the Allahabad High Court in Civil Misc
Writ No 2650 of 1956
CB Agarwala and OP Rana for the appellant
Yogeshwar Prasad Harder Singh and MV Goswami for the respondents
The Judgment of the Court was delivered by Raghubar Dayal J
This appeal by special leave raises the question whether Zamindari Abolition Compensation Bonds shortly termed Bonds issued by the UP Government to intermediaries in payment of compensation payable on the basis of their rights under the Uttar Pradesh Zamindari Abolition and Land Reforms Act 1950 UP Act I of 1951 hereinafter referred to as the Act have to be accepted by the appropriate authorities in payment of the agricultural income tax due from them
131 The facts leading to the appeal in brief are that the respondent an ex Zamindar was assessed to agricultural income tax in the assessment year 1360 F corresponding to 1952 53 on the basis of the agricultural income accruing in the previous year 1359 F corresponding to 1951 52
He did not pay the assessed tax and was further assessed to a penalty
In the result Rs 868 were to be paid by him for tax plus penalty
The respondent s writ petition contending that he was not liable to pay tax was dismissed by the High Court
Thereafter the agricultural income tax authorities took out proceedings for the realisation of the amount due from him
On July 24 1956 the respondent presented an application to the Agricultural Income tax Assessing Officer Allahabad stating that he had no ready cash to pay the dues and that he was therefore depositing Bonds of the value of Rs 850 and Rs 18 in cash and praying that the Bonds be accepted in payment of tax dues
This application was rejected by an order stating that there was no rule for the acceptance of those bonds and that they be returned to the applicant
On August 1 1956 the respondent made a similar application to the Collector complaining that the Assessing Officer had no valid reason to refuse to take the Bonds when the Bonds were negotiable instruments
This application was also rejected on a report of the Assessing Officer that the Bonds were not accepted in the settlement of agricultural income tax dues that they were not negotiable and that there was no provision in the Act for their acceptance
Thereafter the respondent presented a writ petition to the High Court of Allahabad praying for the issue of a writ of certiorari quashing the orders of the Assessing Officer and the Collector Allahabad for the issue of a writ of mandamus directing them to accept the Bonds in lieu of the tax dues and in any case to deduct the amount from the rehabilitation grant due to the petitioner and for the issue of a writ of prohibition directing the opposite parties from adopting coercive measures for the realisation of the tax due from the petitioner
The grounds mentioned in support of the prayers were that the Bonds were negotiable instruments and therefore refusal to accept them in payment of agricultural income tax was illegal that they having been issued by Government could not be subsequently refused they being perfectly valid legal tender and that in view or r 8A of the Rules made under the Act the amount due for tax should have been deducted from the interim compensation
The counter affidavit filed by the Naib Tehsildar Agriculture Income tax Officer Allahabad on behalf of the State stated that the respondent was assessed to agricultural income tax in the assessment year commencing from July 1 1952 on the income derived in the previous year commencing from July 1 1951 that the tax 132 had to be paid in four instalments and in default of payment a penality of Rs 43 was imposed for each default in payment of the four instalments and that the Bonds could not be accepted towards the tax due under section 6d of the Act read with r 48 of the Rules as the tax had fallen due in 1360 F corresponding to July 1 1952 to June 30 1953
The High Court held that the orders of the Agricultural Income tax Assessing Officer and the Collector were wrong as the ground for refusing to accept the Bonds in payment of the tax on the ground that there was no rule or statutory provision for their acceptance was incorrect and appeared to have been given in complete ignorance of the provision of law
Reference was made to the provisions of section 6d of the Act and r 8A
The High Court was of the opinion that these have been completely ignored by the two officers
It therefore thought that the orders were liable to be quashed and that adequate relief would be available to the respondent if a direction was given to the Collector to decide his application dated August I 1956 in accordance with law
The High Court therefore quashed the order of the Collector dated August 24 1956 and directed him to decide the respondent s application afresh in accordance with law as indicated above
The appellant thereafter obtained special leave from this Court and appealed against the order of the High Court dated April 8 1960
The main contention for the appellant before us is that neither section 6d of the Act nor r 8A provides that Bonds can be accepted in payment of agricultural incometax and that therefore the order of the Collector dated August 24 1956 was correct
For the respondent it is urged that r 8A makes it mandatory for the Agricultural Income tax Officer to realise the agricultural income tax due from the compensation payable and that compensation continues to be payable till the Bonds are actually encashed Section 6d of the Act as originally enacted did not provide among the consequences of the vesting of the estate in the State that arrears on account of agricultural income tax might be realised by deducting the amount from the compensation money payable to the intermediary under Chapter III
An amendment was made in this clause d by section 3 of UP Act XVI of 1953 with retrospective effect from July 1 1952
and the relevant portion of the provision after amendment reads thus All arrears of revenue  or an arrear on account of tax on agricultural income assessed under the UP Agricultural Income tax Act 1948 for any period prior to the date of vesting shall continue to be recoverable from such intermediary and may without prejudice to any other mode of recovery be realised by deducting the amount from the compensation money payable to such intermediary under Chapter III 133 Rule 8A was added to the rules by Notification No 3266I A 1056 1954 dated August 17 1954 and its relevant portions read 8 A Without prejudice to the right of the State Government to recover the dues mentioned below by such other means as may be open to it under law 1 all arrears of land revenue in respect of the estates which have vested in the State Government as a result of the notification under Section 4 of the Uttar Pradesh Zamindari Abolition and Land Reforms Act 1950 Act 1 of 1951 and of tax on agricultural income assessed under the UP Agricultural Income tax Act 1948 UP Act III of 1949 due from an intermediary for any period prior to the date of vesting shall be realised a in the case of an intermediary who was assessed to land revenue of Rs 10000 or more from the amount of interim compensation due to him and b in the case of an intermediary who was assessed to a land revenue of less than Rs 10000 per annum by deduction from the amount of compensation payable to It is clear from the above provisions that neither section 6d nor r 8A provide that Bonds must or can be accepted in payment of tax on agricultural income
It has been held by this Court in Collector of Sultanpur v Raja Jagdish Prasad Sahi1 that the provisions of section 6d of the Act would apply to arrears on account of agricultural income tax assessed in 1360F on the basis of agricultural income during the year 1359F and that the provisions of r 8A are mandatory
It is not urged for the appellant that r 8A is inconsistent with the provisions of section 6d which provides that arrears of tax may be realised from the compensation payable and therefore appears to give a discretion to
the authorities to realise the arrears of tax from the compensation payable
We do not agree with the contention for the respondent that the compensation payable to the intermediary continues to remain payable even after the compensation Bond s had been delivered to him
Section 68 of the Act provides that the compensation under the Act shall be payable in cash or in bonds or partly in cash and partly in bonds as may be prescribed
It is clear therefore that the delivery of Bonds to the intermediary is in payment of the compensation
The claim for compensation is thus satisfied when the compensation has been paid in accordance with the provisions of section 68
This is also clear from the relevant rules for the payment of compensation
1 134 Rule 62 as it stood prior to November 29 1956 provided that the compensation would be paid in negotiable bonds which would be described as Zamindari Abolition Compensation Bonds
Rule 63 as it then stood provided that the Bonds would be issued in specified denominations and would bear interest at the specified rate on the principal that had become payable calculated from the date of vesting
Rule 64 provided that interest together with the principal of a Bond would be paid in equated annual installments except for the last as described in Appendix IV during the period of 40 years beginning from the date of vesting provided that any Bond might be redeemed at an earlier date at the option of the Government
Rule 65 provided that the instalments due on a Bond from the date of its effacement would be payable on presentation from and after July 1st next after the delivery of the Bond to the intermediary
These rules show that the compensation does not remain payable alter the delivery of the Bonds and that the Bonds could not be cashed before the due date for their encashment
The fact that the Bonds are negotiable does not make them legal tender and does not make it obligatory on anyone including Government to accept them in payment of any dues
The only result of their being treated as negotiable instruments is that the owner of the Bends can transfer them to any person who is agreeable to purchase them
When the compensation payable to an intermediary has been paid in the form of cash or Bonds that compensation ceases to be payable
Section 6d of the Act and r 8A of the rules do not
as already stated provide for the receipt of agricultural income tax in the form of Bonds
We are therefore of opinion that the Collector cannot be said be in error in not accepting the Bonds which had been delivered and which were not even cashable at the time in payment of the arrears of agricultural income tax payable under the Agricultural Income tax Act
We accordingly allow the appeal set aside the order of the High Court and restore that of the Collector dated August 24 1956 The respondent will pay the costs of the appeal to the appellants Appeal allowed


Summary:
The respondent who was assessed to agricultural income tax made an application to the Assessing Officer depositing compensation Bonds and prayed that the Bonds be accepted in payment of tax dues
This was rejected stating that there was no rule for acceptance of these bonds
Another attempt by the respondent was also turned down by the Collector
Thereafter the respondent presented a writ petition in the High Court for directing them to accept the Bonds in lieu off the tax dues
The High Court was of the opinion that the two officers completely ignored the provisions of section 6d of the Act and r 8A and directed the Collector to decide the respondent s application in accordance with law
In appeal by special leave HELD i Neither section 6d nor r 8A provide that the Bonds must or can be accepted in payment of tax on agriculture income
133 E Collector of Sultanpur vs Raja Jagdish Prasad Sahi  referred to
ii When the compensation payable to an intermediary has been paid in the form of cash or Bonds
that compensation ceased to be payable
The fact that the Bonds are negotiable does not make them legal tender and does not make it obligatory on anyone including Government to accept them in payment of any dues
The only result of their being treated as negotiable instruments is that the owner of the Bonds can transfer them to any person who is agreeable to purchase them
134 D F