- (1.) THIS petition in revision has been filed by the State and arises from an order dated 3-7-1969 passed by the Additional Civil Judge, Aligarh in the following circum stances.
(2.) M /s. Kotak and Co., opposite party No. 1 and M/s. Gannon Dunkerley and Co. Ltd., opposite party No. 2 obtained decrees in the sum of Rs. 16, 812/- and odd and Rs. 8198/- and odd against the firm Ramchand Spinning and Weaving Mills, Hathras, opposite party No. 3. Both the decree-holders put their decrees into execu tion. On 21-9-1962 opposite party No. 2 moved an application which purported to be under Section 73 (1) of the Code of Civil Procedure claiming rateable distribu tion of the assets of the judgment-debtor held by the Court. It may be mentioned here that in execution of their decree M/s. Kotak and Co., got the Mills buildings, machinery and other assets belonging to the judgment-debtor, opposite party No. 3 sold for Rs. 2, 45, 000/-. One-fourth of this sale amount was deposited in Court by the pur chaser and the remaining three-fourths was deposited subsequently i.e. between 24th and 25th September, 1952. On 22-9-1962 the Court allowed the application for rateable distribution by the following order: "Allowed rateable distribution as pray ed." On 15-7-1962 a letter had been received by the Court from the Sub-Divisional Officer, Hathras along with a warrant of attach ment stating that a sum of Rs. 1, 09, 536.35 P. was due to the State from the said judgment-debtor, opposite party No. 3, on ac count of sales tax, income-tax, Employees' State Insurance dues and Employees' Pro vident Fund. It was prayed that this amount may be ordered to be paid out of assets of the judgment-debtor held by the Court. This letter, it may be noted, was received before passing of the order of rateable distribution on 22-9-1962. Some further letters were received from the vari ous officers of the State after 22-9-1962 put ting out certain further claims of dues fas the State against the said judgment-debtor. The total of these claims put out for the State through the various letters received from 15-9-1962 to 29-8-1967 aggregated to a sum of Rs. 2, 58, 272.52 P. against M/s. Ramchand Spinning and Weaving Mills, Hathras, opposite party No. 3. The decree-holders filed lobjections resisting the claim of the State to priority on a number of grounds. The Additional Civfl Judge main-tamed his order of rateable distribution dat ed 22-9-1962 on the ground that by the time of the passing of that order the claim of the State before the Court was only for a sum of Rs. 1, 09, 536/- and odd against opposite party No. 3 which could be satis fied even after the amounts ordered to be distributed to the decree-holders by the said order had been paid. Learned lower Court placed reliance upon a case of the Madras High Court: Official Receiver v. Venkata rama, AIR 1922 Mad 31 and a case of the Calcutta High Court, Basanta Kumar v. Panchu Gopal, AIR 1956 Cal 23 in sup port of its view that the claims over Rupees 1, 09, 536/- and odd having been put forward for the State subsequent to the passing of the order of rateable distribution the assets of the judgment-debtor, opposite party No. 3 could not be deemed to be in the hands of the Court as the decree-holders had be come entitled to receive them under the order of rateable distribution. Therefore, the claim of the State for dues of Rupees 1, 09, 536.55 P. could not be considered and on the view that in any case claim of the State to the tune of Rs. 1, 86, 616.35 P. could be satisfied even after dues to the decree-holders were paid to the tune of about Rupees 30, 000, the full claim of the State for Rs. 2, 58, 277.52 P. could not be allowed.
(3.) I have heard arguments of the Standing Counsel and Sri V. K. Gupta ap pearing for the judgment- debtor opposite party. After hearing arguments of the learned counsel I am of the opinion that this revision is entitled to succeed. Section 73 (1) of the Code of Civil Procedure is in these terms: "Where assets are held by a Court and more persons than one have, before the re ceipt of such assets, made application to the Court for the execution of decree for the payment of money passed against the same judgment-debtor and have not obtained satisfaction thereof, the assets, after deduct ing the costs of realisation, shall be rateably distributed among all such persons." Then there is sub-section (3) of Section 73 in the following terms: "Nothing in this section affects any right of the Government." It is urged by the learned Standing Counsel that dues of Government must in view of sub-section (3) receive priority over the dues of private creditors of the same decree. This contention is well founded on authority. In the case of Collector of Aurangabad v. Cen tral Bank of India, AIR 1967 SC 1831 the Supreme Court considered the question whether the appellants were entitled to claim priority towards payment of sales tax dues according to the Common Law doctrine of "priority of Crown debts" and observed that the Common Law doctrine was evolved in the English Law as part of the Crown pre rogative and cited with approval the view expressed by a Full Bench of the Madras High Court in Manickam Chettiar v. In come-tax Officer, Madura, AIR 1938 Mad 360 in which it was held that the income-tax debt had priority over private debts and the Court had inherent power to make an order for payment of moneys due to the Crown, and referred to then: own decision in the case of Builders Supply Corporation V. Union of India, AIR 1965 SC 1061 in which it was held that the Government of India was entitled to claim priority for arrears of income-tax due to it from a citi zen over debts from him to unsecured credi tors and that the English Common Law doctrine of the priority of Crown debts has been given judicial recognition in the terri tory known as 'British India' prior to 1950 in regard to the recovery of tax dues in priority to other private debts of the tax payer. It was pointed out, therefore, that the English Common Law doctrine having been incorporated into Indian Law, was a law in force in the territory of India and by virtue of Article 372 (1) of the Constitution of India, it continued to be in force in India until it was yalidly altered, repealed or amended. This being the law, in view of sub-section (3) of Section 73, no order of rateable distribution can be passed under sub-section (1) of Section 73 which may affect this right of Government to claim priority in respect of payment of its dues against the judgment-debtor against the competing claims of unsecured decree-hold ers. Sub-section (3) of Section 73 of the Code of Civil Procedure is, therefore, in the nature of a proviso to Section 73 and imposes a limitation on the exercise of power by the Court in the matter of rate able distribution of assets. In view of this limitation on its power the Court will refuse to pass an order of rateable distribution under sub- section (1) of Section 73 if it is brought to its notice that certain State dues are outstanding against the judgment-debtor and the State's right to a priority of pay ment in respect of those dues may be affect ed by an order of rateable distribution. For if in respect of this statutory protection which is given to the right of Government to priority of payment by sub-section (3) an order of rateable distribution is passed in favour of decree-holders under sub-sec tion (1) of Section 73, which has the effect of causing prejudice to this right of Gov ernment, then such an order will not take effect and Courts will refuse to pass an order which cannot be enforced in law.;