Case: The Padrauna Rajkrishna Sugar Works Limited &amp; Others Vs. The Land Reforms Commissioner, U.P. &amp; Others

1. The Padrauna Raj Krishna Sugar Works Ltd.- hereinafter 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. 81,821-2-0 due as income-tax provisionally assessed for the assessment year 1952-53 in respect of which an order for recovery was made under Section 46 (2) of the Income-tax Act, 1922; Rs. 5,64,301-14-9 due as sugarcane cess under Section 20 of the Sugar Factories control Act, 1938 for the years 1952-53 to 1954-55; and Rs. 1,92,053-12-3 due by the Company to the Co-operative Development Union Ltd., as arrears of cane price for the year 1954-55.2. By order dated July 14, 1954, issued under the Essential Supplies (Temporary Powers) Act, the Government of U. P. appointed the Collector, Deoria as the Authorised Controller of the Company. On August 8, 1955 the Land Reforms Commissioner sanctioned the proposal submitted by the Collector, Deoria, to sell the holdings and the property of the Company for realizing Rs. 8,38,176-13-0. Sardar Jagjit Singh, Chief Engineer, Indian Institute of Sugar Technology, Kanpur, valued the movables belonging to the Company i.e., tools and workshop plant, mill stores, spare parts and furniture at Rs. 7,64,817 and the lands and the factory at Rs. 23,75,000. Thereafter a sale proclamation was issued on October 4, 1955 for recovery of the total amount of Rs. 8,38,176-13-0. 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 Rupees 2,75,000. The Collector then put up for sale the immovable property for which a bid of Rs. 23,50,000 was made and accepted. The movables were then put up for sale and the highest bid for Rupees 2,75,000 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.3. On December 6, 1955, the Company moved an application before the Commissioner, Gorakhpur Division, under Rule 285-I of the U. P. Zamindari Abolition and Land Reforms Rules praying that the sale be set aside. The Commissioner rejected the petition, observing that an application under Rule 285-I of the U. P. 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.4. On July 30, 1956, 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 HighJ., was of the view that Section 286 of the U. P. Zamindari Abolition and Land Reforms Act did not oblige the Collector to exhaust the processes prescribed by Clauses (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 there was any material irregularity or mistake in publishing or conducting the sale or that any substantial injury had resulted to the Company. Jagdish Sahai, J., was of the view that Section 286 (2) of the U. P. 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 Clauses (a) to (e) of Section 279 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 realisation 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 in violation of the statutory provision contained in Section 286 (2) 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.

Reasoning: 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 Rupees 81,821-2-0 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 sugar-cane 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. "14.It was finally contended that the Company was prevented from exercising its right under Rule 285-H of the rules framed under U. P. Act 1 of 1951, because the purchaser at the sale was appointed, by order of the Central Government, Authorised Controller of the factory of the Company, and all the properties of the Company were put in the possession of the purchaser, and that the Company was unable to raise the requisite amount to be deposited under R. 285-H.We are, therefore, unable to agree with the opinion expressed by Jagdish Sahai, J., that the use of the words "under this section" points to the applicability of the whole section i.e.(1) in the recovery dues recoverable under(2) of section 286, and "that the twohave got to be read together and the effect of(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 ine 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 or land revenue. It is unnecessary in the circumstances to consider whether the provisions of Section 286 (1) are mandatory orargument that the movables were of no use to any person other than the purchaser of immovable property is without substance. The moveables sold were 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. 7,64,817 were put up for sale and sold when it was not necessary to sell them to realise theon that account the sale is not illegal or irregular. An amount exceeding Rs. 7 lakhs was recoverable for thecess 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.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 Collectors office