- (1.) This appeal by the decree-holder is directed against the judgment of the Allahabad High court dated 22/9/1981 in Civil Revision No. 835 of 1974 filed by the Union of India against the order dated 4/3/1974 passed by the Civil and Sessions Judge, Agra in execution proceedings pending before him. The facts, in brief, are as follows: Various persons held decrees against M/s John Mills and Company. In proceedings for execution of those decrees, the decree-holders, sought to attach various sums of money which were lying to the credit of the said judgment-debtors in the court of Civil Judge, Agra in Suit No. 76 of 1979. The decree-holders 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. On 28/5/1973 the civil Judge, Agra had sent cheques to the executing court, viz. , the Civil and sessions Judge, Agra, for payment to the decree-holders, including the appellant, after taking security from them. On 31/8/1973 Respondent 1, union of India, moved an application under Section 226 (4 of the Income tax Act, 1961 (hereinafter referred to as "the Act") staling that large sums of money were due as tax against the judgment-debtors 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 judgment-debtors. The said application was contested by the decree-holders, including the appellant, and the Civil and Sessions Judge, Agra, by order dated 4/3/1974 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 the decree-holders had ceased to belong to the judgment-debtors 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 20/9/1989. The High court has held that until the money was disbursed and appropriated by the decree-holders on (sic or) the creditors of the judgment-debtors 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 the judgment-debtors were the subject-matter of a number of writ petitions and in those writ petitions by order dated 8/4/1980, 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 beer 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 dated 4/3/1974 passed by the executing 247 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.
(2.) Section 226 (4 of the Act provides as under: "226.(4 The Assessing Officer or Tax Recovery Officer may apply to the court in whose custody there is money belonging to the assessee for payment to him of the entire amount of such money, or, if it is more than the tax due, an amount sufficient to discharge the tax. "
(3.) Under Section 226 (4 of the Act the Assessing Officer or Tax recovery Officer can move the court having custody of money belonging to the assessee for payment to him of such money for discharging the tax liability of the assessee. What is necessary is that on the date when the application is made the court should have custody of money belonging to the assessee. The question, therefore, is whether on 31/8/1973 when the application under Section 226 (4 was moved by Respondent 1 any money belonging to the judgment-debtors was in custody of the executing court. For that purpose it is necessary to consider Section 73 Civil Procedure Code which provides as under: "73.Proceeds of execution sale to be rateably distributed among decree-holders.- (1 Where assets are held by a court and more persons than one have, before the receipt of such assets, made application to the court for the execution of decrees for the payment of money passed against the same judgment-debtor and have not obtained satisfaction thereof, the assets, after deducting the costs of realisation, shall be rateably distributed among all such persons: Provided as follows: {omitted) ";