Case: Lakshman Swarup Om Prakash Vs. Union of India

1. This appeal by ther is directed against the judgment of the Allahabad High Court dated1 in Civil Revision No. 835 of 1974 filed by the Union of India against the order dated4 passed by the Civil and Sessions Judge, Agra in execution proceedings pending before him. The facts, in brief, are as followsVarious persons held decrees against M/s. John Mills and Company. In proceedings for execution of those decrees, the, sought to attach various sums of money which were lying to the credit of the saids in the Court of Civil Judge, Agra in Suit No. 76 of 1979. Thes moved an application for rateable distribution under Section 73 of the Code of Civil Procedure. In the present case we are concerned with such application moved by the appellant. On3 the Civil Judge, Agra had sent cheques to the executing court, viz., the Civil and Sessions Judge, Agra, for payment to the, including the appellant, after taking security from them. On3 Respondent 1, Union of India, moved an application under Section 226(4) of the Income Tax Act, 1961 (hereinafter referred to as "the Act") stating that large sums of money were due as tax against thes and the Union of India has a priority over the claims of other creditors. In the said application it was asserted that the Union of India had a right to attach and realize the amounts which are lying in the Court to the credit of the. The said application was contested by the, including the appellant, and the Civil and Sessions Judge, Agra, by order dated4 dismissed the said application on the view that the money which was brought to the executing court for the satisfaction of the decree held by thes had ceased to belong to thes and that being so the provisions of Section 226(4) of the Act could not have any application. Feeling aggrieved by the said order of the executing court, the Union of India filed revision petition before the High Court which has been allowed by the impugned judgment dated. The High Court has held that until the money was disbursed and appropriated by thes on (sic or) the creditors of thes in accordance with law the money held by the Court continued to be liable to be proceeded against under Section 226(4) of the Act. It was submitted on behalf of the appellant before the High Court that the income tax liabilities of thes were ther of a number of writ petitions and in those writ petitions by order dated, the demand giving rise to such liabilities has been quashed. On behalf of Respondent 1 it was pointed out that the demand in respect of which the application under Section 226(4) had been filed consisted of not only the liabilities of income tax but also those under the Excess Profit Tax Act. The High Court did not consider it necessary to deal with the said question and left the appellant to have the controversy determined by the executing court. The High Court has allowed the revision petition and has set aside the order dated4 passed by the executing court and has remanded the matter to the executing court with the direction to dispose of the application filed by the Union of India under Section 226(4) of the Act and the objections filed by the appellant thereto according to the law. Hence this appeal

Court's reasoning:
7. These observations do not lend support in the case of the appellant because in the present case it cannot be said that the Union of India had allowed the amount to be taken away by the. Before the amount could be distributed among thes the application had been filed by Respondent 1 under Section 226(4) of the Act8. Shri Markandeya has urged that after the passing of the order dated4 by the executing court the Union of India did not take any steps to obtain stay of the payment of the amount to the appellant and the appellant had obtained the cheque from the executing court and had encashed the same on4 and that the bank guarantee furnished by the appellant has also been discharged on. That in our opinion has no effect on the maintainability of the application under Section 226(4) which was submitted on3 prior to such payment. The payment of money to the appellant after the filing of the application would not render the said application infructuous.