Appeal No 130 of 1966
Appeal from the judgment and decree dated December 13 1961 of the Allahabad High Court in Special Appeal No 217 of 1958
C K Daphtary B Sen J P Goyal and A Banerjee for the appellants
C B Agarwala and O P Rana for respondents Nos 1 2 3 and 8
T A Ramachandran and R N Sachthey for respondent No 4
M C Chagla G D Srivastava B Datta and J B Pada chanji for respondents Nos 5 and 6
The Judgment of the Court was delivered by Shah J
The Padrauna Rajkrishna Sugar Works Ltdhereinafter called the Company carried on the business of manufacture and sale of sugar and supply of electricity
The Company was in financial difficulties in 1954 and was unable to meet its obligations
The principal liabilities of the Company in July 1955 were Rs 81821 2 0 due as income tax provisionally assessed for the assessment year 1952 53 in respect of which an order for recovery was made under section 462 of the Income tax Act 1922 Rs 564301 14 9 due as sugarcane cess under section 29 of the Sugar Factories Control Act 1938 for the years 1952 53 to 1954 55 and Rs 192053 12 3 due by the Company to the Co operative Development Union Ltd as arrears of cane price for the year 1954 55 470 By order dated July 14 1954 issued under the Essential Supplies Temporary Powers Act the Government of UP appointed the Collector Deoria as the Authorised Controller of the Company
On August 8 1955 the Land Reforms Commis sioner sanctioned the proposal submitted by the Collector Deoria to sell the holdings and the property of the Company for realizing Rs 838176 13 0
Sardar Jagjit Singh Chief Engineer Indian Institute of Sugar Technology Kanpur valued the movables belonging to the Company ie tools and workshop plant mill stores spare parts and furniture at Rs 7  64817 and the lands and the factory at Rs 2375000 
Thereafter a sale proclamation was issued on October 4 1955 for recovery of the total amount of Rs 838176 13 0
The sale was fixed for November 8 1955
In the first instance only the movables were put up for sale by the Collector Deoria but the highest bid offered was Rs 275000 
The Collector then put up for sale the immov able property for which a bid of Rs 1350000 was made and accepted
The movables were then put up for sale and the highest bid for Rs 275000 was accepted
The purchasers of both the lots were the Cawnpore Sugar Works Ltd through their managing agent Tulsidas Mundra respondent No 7 in this appeal
On December 6 1955 the Company moved an application before the Commissioner Gorakhpur Division under r 285 1 of the UP Zamindari Abolition and Land Reforms Rules praying that the sale be set aside
The Commissioner rejected the peti tion observing that an application under r 285 1 of the UP Zamindari Abolition and Land Reforms Rules 1952 to set aside a sale on the ground of material irregularity or mistake in publishing or conducting a sale may be granted only if the applicant proves to the satisfaction of the Commissioner that he has sustained substantial injury by reason of such irregularity or mistake and that no material irregularity or mistake was proved to be committed in publishing or conducting the sale far less a mistake or irregularity which could have caused substantial injury to the applicant
The sale was confirmed by order dated July 2 1956 by the Land Reforms Commissioner
On July 30 a petition was moved by the Company in the High Court of Allahabad for a writ in the nature of certiorari quashing the order dated June 25 1956 of the Commissioner Gorakhpur Division
The petition was dismissed by Oak J
In appeal under the Letters Patent the order was confirmed by the High Court
Mukherji J was of the view that section 286 of the UP Zamindari Abolition and Land Reforms Act did not oblige the Collector to exhaust the processes prescribed by cls
a to e in section 279 of that Act before resorting to the sale of immovable property of the Company and that it was not proved that 471 there was any material irregularity or mistake_ in publishing or conducting the sale or that any substantial injury had resulted to the Company Jagadish Sahai J was of the view that section 28612 of the UP Zamindari Abolition and Land Reforms Act provides that where an amount is recoverable as arrears of land revenue the Collector has first to attempt under cls
a to e of s279 to recover the amount due and if he is unable to recover the amount he may proceed to sell the immovable property of the defaulter
But the learned Judge was of the opinion that the provision was merely directory and not
mandatory
He observed   the provision relating to the exhaustion of the processes contemplated by clauses a to e of section 279 of the Act is merely directory
In view of the provisions of the various Acts which make the realization of sums becoming due under those Acts as arrears of land revenue and in view of the provisions of the Act the Collector has got a duty and a statutory obligation to realise those sums
He has no discretion in the matter
Consequently I read the words may realise the same from the interest of the defaulter in any immovable property in sub section 1 or may be recovered from any immovable property of the defaulter in sub section 2 as meaning that if the Collector does not succeed in recovering the amount by having recourse to the processes mentioned in clauses a to e of section 279 of the Act he shall sell immovable property of the defaulter
 The learned Judge also observed that the Collector acted inviolation of the statutory provision contained in section 2862 of the Act in selling the immovable property before selling the movable property but the sale could not be set aside because substantial injury was not shown to have been caused
The Company has appealed to this Court against the order passed by the High Court confirming the order passed by Oak J
In this appeal it is urged in the first instance that the Company possessed stocks of sugar of value exceeding the liability for payment of Rs 838000 odd
But the stocks of sugar were not mentioned in the Collector s report to the Land Reforms Commissioner  they were not included in the sale proclamation as property put up for sale nor were they valued in the report of Sardar Jagjit Singh
The Company asserted in the petition before the High Court that it possessed stocks of sugar worth Rs 9 lakhs
which had not been attached earlier but no such
contention was advanced in support of the application for setting
472 aside the sale before the Commissioner nor was any argument advanced before the High Court
It appears that the stocks of sugar were mortgaged separately and the amount for which they were mortgaged was not included in the claim made for which the property of the Company was to be put up for sale
It was then urged that under section 2862 of Act 1 of 1951 the Collector was bound in the first instance to exhaust the processes for recovery of arrears prescribed by cls
a to e of section 279 of the Act and he could not attach and sell immovable property of the Company until those processes were exhausted
It was urged that section 2862 of the Act was mandatory and the Collector not having sold the movables in the first instance the sale must be declared void
The amount for the recovery of which the sale of the assets of the Company was held included income tax dues sugarcane cess and the amount due for cane supplied to the Company
This amount was recoverable as arrears of land revenue because of the provisions of the Indian Income tax Act 1922 the UP Sugar Factories Control Act 1938 and the 
Section 2862 of the UP Zamindari Abolition and Land Reforms Act provides Sums of money recoverable as arrears of land revenue but not due in respect of any specific land may be recovered by process under this section from any immovable property of the defaulter Though the amount for which the property was put up for sale was recoverable as arrears of land revenue no part of it was due in respect of any specific land
The amount could prima facie be recovered from the immovable property of the defaulter
But relying upon the expression under this section in section 2862 of Act 1 of 1951 it was contended that the immovable property of the Company could be attached and sold only after the processes prescribed in section 279 cls
a to e were resorted to and the Collector was unable to recover the dues
It was urged that this is the true effect of section 2861 and section 279 of Act 1 of 1951
Section 2861 provides  It any arrears of land revenue cannot be recovered by any of the processes mentioned in clauses a to e of Section 279 the Collector may realize the same by attachment and sale of the interest of the defaulter in any other immovable property of the defaulter Section 279 of the Act set  out the procedure for recovery of land revenue
The section as it stood at the
date of We provided 473 An arrear of land revenue may be recovered by any one or more of the following processes  a by serving a writ of demand or a citation to appear on any defaulter b by arrest and detention of his person
c by attachment and sale of his movable property including produce d by attachment of the holding in respect of which the arrear is due e by sale of the holding in respect of which the arrear is due
f by attachment and sale of other immovable property of the defaulter
 Section 280 deals with the mode of recovery prescribed by cl
a of section 279 section 281 with the mode prescribed by cl
b ie by arrest and detention and section 282 with the mode prescribed by cl
c ie by attachment and sale of the movable property including produce
Section 284 sets out the procedure for sale of the holding in respect of which the arrear was due and section 2861 deals with the power to proceed
against the interest of the defaulter in other immovable property
For recovery of arrears of land revenue the Collector is bound to resort to one or more of the processes mentioned in section 279 read with sections 280 282 284  285 of the Act before he attaches and sells the immovable property of the defaulter other than the holding in respect of which the land revenue is due
That clearly follows from the terms of sub section
1 of section 286
Subsection 2 of section 286 makes the same process applicable for recovery of sums of money which are recoverable as arrears of land revenue
But the liability to pay the amount so recoverable arises by virtue of the provisions of other Acts and is not due in respect of any holding of the defaulter
It is only recoverable as arrears of land revenue by virtue of the provisions of the Act under which the liability has arisen
Since UP Act 1 of 1951 provides by section 2862 that sums of money recoverable as arrears of land revenue may be recovered from any immovable property of the defaulter the procedure prescribed by the Act applies to such recovery
Because of the use  of the expression under this section in sub section
2 of section 286 it is not intended that the Collector must resort in the first instance to the processes prescribed by cls
a to e before he resorts to cl
f of section 279
d  e of section 279 have no application where income tax dues and sugarcane cess or cane price are recoverable from the defaulter  and cl
b is inapplicable where the defaulter is an artificial person like a Company
Power to recover arrears of land reve 414 nue from a defaulter is governed by the processes mentioned in section 279 cls
a to e and section 2861 places certain restrictions upon the power of the Collector to recover land revenue by attachment and sale of lands other than the holding in respect of which the land revenue is due
But the restrictions on the power of the Collector operate only when land revenue is in arrears
Restrictions if any upon the power of the Collector to recover dues under other statutes as arrears of land revenue arise from the statute which is the source of the liability and not from Act 1 of 1951 which merely sets out the processes for recovery of the dues
To hold that sub section
2 of section 286 requires the Collector in the first instance to recover out of the movable property or by arrest and detention of the defaulter before immovable property of the defaulter is attached and sold is to amend the substantive provisions of the Acts under which the liability for money due is recoverable as land revenue
For instance  under section 46 2 of the Indian Income tax Act 1922 it is provided The Income tax Officer may forward to the Collector a certificate  under his signature specifying the amount of arrears due from an assessee and the Collector on receipt of such certificate shall proceed to recover from such assessee the amount specified therein as if it were an arrear of land revenue
 Provided that without prejudice to any other powers of the Collector in this behalf he shall for the purpose of recovering the said amount have the powers which under the Code of Civil Procedure 1908 V of 1908 a Civil Court has for the purpose of the recovery of aim amount due under a decree
The power exercisable by the Collector in recovering arrears of income tax which are recoverable as arrears of land revenue are it is clear not restricted to the Land Revenue Code the Collector is entitled to exercise all the powers of a Civil Court for the purpose of recovery of an amount due under a decree under the Code of Civil Procedure and the Code of Civil Procedure imposes no obligation to recover the dues by sale of movables or by arrest and detention of the defaulter before immovable property may be attached
Section 51 of the Code of Civil Procedure provides Subject to such conditions and limitations as may be prescribed the Court may on the application of the decree holder order execution of the decree a by delivery of any property specifically decreed b by attachment and sale or by sale without attachment of any property 475 c by arrest and detention in prison d in such other manner as the nature of the relief granted may require Provided   
By virtue of 0 2 1 r 30e of the Code of Civil Procedure simultaneous execution both against the property and person of the judgment debtor is allowed
To hold therefore that in seeking to recover income tax dues the Collector is in the first instance by virtue of sub section
2 of section 286 restricted to the recovery of arrears by attachment and sale of movables or by arrest and detention in prison of the defaulter and it he cannot recover the amount then and then only to have recourse to the immovable property of the judgment debtor is to seek to amend both the Income tax Act 1922 as well as the Code of Civil Procedure
The U 
P Legislature is competent to alter the provisions of the Income tax Act
We are therefore unable to agree with the opinion expressed by jagadish Sahai section that the use of the words under this section points to the applicability of the whole section ie subsection 1 in the recovery dues recoverable under sub section 2 of section 286 and that the two sub sections have got to be read together and the effect of sub section 2 is that even in connection with the recovery of miscellaneous dues as arrears of land revenue it is permissible to sell immovable property of the defaulter but subject to what is provided for in sub section 1
We are also unable to agree with the observations made by the learned Judge that   if sub section 2 of section 286 of the Act were to be read in isolation and detached from subsection 1 it would become impossible to administer the same
Sub section 2 only provides that the arrears of miscellaneous dues may be recovered from any immovable property of the defaulter without specifying the manner in which they are to be recovered that is to say without indicating whether it would be recovered from the usufruct of the property or by its sale or by mortgage or lease
 The provisions of the Act which authorise recovery of sums of money as arrears of land revenue do not require the Collector to follow any sequence of the processes for recovery it is competent to the Collector to resort to any process prescribed by section 279 in aid of recovery of the dues which are recoverable as arrears of land revenue
It is unnecessary in the circumstances to 476 consider whether the provisions of section 2861 are mandatory or directory
It was urged in the alternative that after selling the immovable property which realized more than Rs 2350000 the Collector should not have sold the movable property for the claim for which the properties of the Company were put up for sale was only Rs 838176 13 0
At first blush there is force in this argument
Why the Collector thought it necessary to sell the movables after the immovable property was knocked down to the Cawnpore Sugar Works Ltd for Rs 2350000 was never explained
After the immovable property belonging to the Company was knocked down to the purchasers for an amount of Rs 2350000 it was apparently not necessary to hold the auction for sale of movables valued at Rs 764817 and to accept a bid of only Rs 275000 
The argument that the movables were of no use to any person other than the purchaser of immovable property is without substance
The movables sold we re the tools and workshop plant mill stores spare parts and furniture and it is difficult to accept the contention that these movables were of no value except to the purchaser
But the Company raised no contention in this behalf before the Commissioner nor in the petition before the High Court
The question was also not argued before the High Court in that form
We cannot at this stage investigate the reasons why movables valued at Rs 764817 were put up for sale and sold when it was not necessary to sell them to realise the dues
It was then urged that the Income tax Officer had by intimation dated December 11 1954 asked the Collector to stay the sale proceeding for recovery of income tax dues amounting to Rs 81821 2 0
For some reason which is not clear from the record the Collector ignored the intimation given by the Income tax Officer and proceeded to put the property to sale
He included the amount in the sale proclamation overruling the protests of the Company and sold the properties for recovery of a consolidated amount which included Rs 81821 2 0 due as income tax
But on that account the sale is not illegal or irregular
An amount exceeding Rs 7 lakhs was recoverable for the sugarcane cess and the cane price and the immovable property of the Company could have been put up for sale for recovery of those dues
The sale is not proved to be vitiated on the ground of any material irregularity or mistake in publishing or conducting it and it is therefore not liable to be set aside
It was finally con that the Company was prevented from exercising its right under r 285 H of the rules framed under UP Act 1 of 1951 because the purchaser at the sale was appointed by order of the Central Government Authoriged Con 477 troller of the factory of the Company and all the properties of the Company were put in he possession of the purchaser and that the Company was unable to raise the requisite amount to be deposited under r 285 H Under r 285 H any person whose holding or other immovable property has been sold under the Act may at any time within thirty days from the date of sale apply to have the sale set aside on his depositing in the Collector s office a for payment to the purchaser a sum equal to 5 per cent
of the purchase money and b for payment on account of the arrear the amount specified in the proclamation in ZA Form 74 as that for the recovery of which the sale was ordered less any amount which may since the date of such proclamation of sale have been paid on that account and c the cost of the sale
If the deposit is made the Collector shall pass an order setting aside the sale
It was open to the Company under r 285 H even after the bids were accepted to deposit 5 per cent
of the sum realised by sale of the immovable property and to pay the amount due for the recovery of which the sale was ordered and the cost of the sale
But no attempt was made to deposit the amounts mentioned in cls
a b  c of r 285 H
The contention that the Company was unable to make the deposit under Rule 285 H because the purchaser was appointed Authorised Controller was also not raised before the Commissioner and the High Court
The argument that if the movable property had not been sold the Company may have raised the amount liable to be deposited under cls
a b  c but by sale of those properties and purchase of the same by a person who was shortly after the purchase appointed the Authorised Controller prevented the Company from exercising the right under r 285 H is hypothetical
Again even that argument was not raised before the Commis sioner nor in the petition nor in the arguments before the High Court
Evidently the Company was required to comply with the provisions of r 285 H for having the sale set aside to deposit an amount of Rs 950000 besides the cost of the sale
Even if the movables had not been sold and assuming that they were of the value of Rs 764817 the movables were not sufficient to enable the Company to raise the amount required for deposit under r 285 H The contentions raised by the Company fail and the appeal is dismissed
We are however of the view especially because of the action of the Collector in putting the movables to sale even Sup CI69 12 478 after the immovable property realised an amount very much in excess of the dues and ignoring the intimation sent by the Income tax Officer to stay the sale proceeding which has involved the Company in loss of property of substantial value that the parties should bear their own costs throughout
YP Appeal dismissed


Summary:
The amount of dues under the Indian Income tax Act 1922 the UP Sugar Factories Control Act
1938 and the were recoverable as arrears of land revenue
Section 2861 of the UP Zamindari Abolition  Land Reforms Act provides that if any arrears of land revenue could not be recovered by any of the processes mentioned in cls
a to e of section 279 the Collector may realise the same by attachment and sale of the interests of the defaulter in any other immovable property of the defaulter and section 2862 provided that money recoverable as arrears of I revenue may be recovered by process under this section from any immovable property of the defaulter
As the appellant company was unable to meet its liabilities in respect of income tax dues sugar cess and the amount due for cane supplied to it the immovable property of the company were sold to meet the dues
The appelant challenged the sale contending that i the immovable prop of the company would be attached and sold only after the processes prescribed in cls
a to a of a 279 ie
by the age of movable properties were resorted to ii the sale was illegal or irregular as the Collector ignored the intimation of the Income tax Officer staying the sale for recovery of income tax and iii the appellant was prevented from raising funds for making the deposit as provided by r 285H of the rules framed under the Act for setting aside the sale as the purchaser was appointed as the Authorised Controller and put in possession of all the properties of the appellant
Dismissing the appeal this Court HELD  i Power to recover arrears of land revenue from a defaulter is governed by the processes mentioned in cls
a to e of section 279 of the Act and section 2861 places certain restrictions upon the power of the Collector to recover land revenue by attachment and sale of lands other than the holding in respect of which the land revenue is due
But the restrictions on the power of the Collector operated only when land revenue is in arrears
Restrictions if any upon the p ower of the Collector to recover dues under statutes as arrears of land revenue arise from the statute which is the source of the liability and not from the UP Zamindari Abolition  Land Reforms Act which merely sets out the processes for recovery of the dues
To hold that sub section
2 of section 286 requires the Collector in the first instance to recover out of the movable property or by arrest and detention of the defaulter before immovable property of the defaulter is attached and sold is to amend the substantive provisions of the Acts under which the liability for money due is recoverable as land revenue
For instance under a 46 of the Income tax Act 1922 the powers exercisable by the Collector in recovering arrears of income tax which are recoverable as arrears of land revenue are not restricted to the Land Revenue Code the Collector is entitled to exercise all the powers of  a Civil Court for the purpose of recovery of an amount due under a decree under the Code of Civil Procedure an the Code of Civil procedure im 469 poses no obligations to recover the dues by sale of movables or by arrest and detention of the defaulter before immovable property may be attached
The provisions of the Act which authorise recovery of sums of money as arrears of land revenue do not require the Collector to follow any sequence of the processes for recovery it is competent to the Collector to resort to any process prescribed by section 279 in aid of recovery of the dues which are recoverable as arrears of land revenue 473 H 474 D 475 H ii The sale was not illegal or irregular for the reason that the Collector ignored the intimation of the Income tax Officer staying the sale for recovery of income tax dues
The immovable property could have been put up for sale for recovery of sugar cane cess and the cane price which were many times more than the income tax dues
476 G iii There was no force in the contention that the appellant was unable to raise funds and make the deposit under r 285H because the purchaser was appointed the Authorised Controller who took possession of all the properties of the Company
The appellant could not comply with the provision of r 285H for having the sale set aside as the movables were not sufficient to enable the appellant to raise the amount required for deposit under r 285H 476 H