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PETITIONER: BUILDERS SUPPLY CORPORATION

       Vs.

RESPONDENT: THE  UNION  OF  INDIA REPRESENTED  BY  THE  COMMISSIONER  OF

DATE OF JUDGMENT: 30/11/1964

BENCH: GAJENDRAGADKAR, P.B. (CJ) BENCH: GAJENDRAGADKAR, P.B. (CJ) HIDAYATULLAH, M. SHAH, J.C. SIKRI, S.M. BACHAWAT, R.S.

CITATION:  1965 AIR 1061            1965 SCR  (1) 289  CITATOR INFO :  MV         1967 SC 997  (33,34,48)  R          1967 SC1581  (19)  R          1967 SC1831  (7)  RF         1973 SC 569  (43)  RF         1974 SC2009  (3)

ACT: Doctrine   of   priority  of  Crown   Debts   under   Common Law--Whether applicable to India. Income-tax   arrears   due  to   Union   Government-Recovery thereof--Whether  has  priority above  claims  of  unsecured creditors  of common debtors-Doctrine of priority  of  Crown Debts in relation to the tax dues--Whether a ’law in force ’ in  India at commencement of Constitution --Constitution  of India Art. 372(1). Indian  Income Tax Act 1922, s. 46, and provision of  Public Demands  Recovery Act whether displace doctrine of  priority of Government Debts.

HEADNOTE: The  appellant  filed a suit against Respondent  No.  2  and secured  a  decree  against him  for  Rs.  12,275-9-0.   The Judgment-debtor had a sum of Rs. 50,000 in deposit with  the Superintending  Engineer, Calcutta, by way of  security  for the due execution of a contact.  The Executing Court at  the instance  of the appellant attached a sum equivalent to  the decretal  amount  from the above security deposit,  and  the Superintending  Engineer transmitted the attached amount  to the  court.   At this stage the Union of India  through  the Commissioner  of  Income-tax represented to the  court  that income tax arrears of more than Rs. 5,000 were due from  the Judgment-debtor  for which a certificate under s.  46(2)  of the  Income-tax Act, 1922 bad been issued to  the  Collector and  proceedings under the Public Demands Recovery  Act  had been  commenced.   The Union of India claimed that  the  tax amount due to it from the Judgment-debtor had priority  over the judgment-debt due to the appellant from the same  debtor and so it was entitled to the whole amount under  attachment in  partial  satisfaction  of  the  Income-tax  dues.    The

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Executing  Court accepted this plea.  The appellant filed  a revision  before  the High Court but failed to  get  relief. Thereupon   he  appealed  to  the  Supreme  Court   with   a certificate of fitness. It was contended on behalf of the appellant (1)  The  High Court had wrongly held that  the  Common  Law doctrine  of the priority Crown debts on which the  case  of the Union of India was based, applied in the present case  : (2) Even if the doctrine was applicable it was not a ’law in force’  at the commencement of the Constitution  within  the terms of Art. 372(1), and there was no scope for  continuing its  operation after the Constitution came into force :  (3) The  doctrine of the priority of Crown debts could not  also be  enforced because it was  specifically Provided  for  and covered by the provisions of s. 44 of the Indian  Income-tax Act,  1922, and  by the relevant provisions of the  Recovery Act. HELD : (i) The Common Law doctrine of the priority of  Crown debts  had  a  wide sweep but the question  in  the  present appeal  was the narrow file  one whether the Union of  India was  entitled to claim that the recovery of the   amount  of tax  due  to  it from a citizen  must  take  precedence  and priority  over unsecured debts due from the said citizen  to his other private 290 creditors.  The weight of authority in India was strongly in support of the priority of tax dues. [300 D] The  Secretary of State in Council for India v.  The  Bombay Landing  & Shipping Co. (Limited), (1868-69) 5 Bom.   H.C.R. p.  23;  Manickam Chettiar v.  Income-tax  Officer,  Madura, (1938),  6 I.T.R. 180, Ramachandra v.  Pitchaikanni,  (1884) I.L.R.  7 Mad. 434; Bank of India v. John Bowman  and  Ors., A.I.R.  1955 Bom. 305, Beil v. The  Municipal  Commissioners for  the  City  of Madras, (1902)  I.L.R.  25  Mad.  457.... discussed. Kaka  Mohammad  Ghouse  Sahib &  Co.  v.  United  Commercial Syndicate and Others, (1963) 49 I.T.R. 824, disapproved. (ii) The  Common  Law doctrine on which the Union  of  India based its claim in  the present proceedings had been applied and upheld in that part of India   which   was   known    as ’British  India’  prior to the Constitution.  The  rules  of Common  Law relating to substantive rights which  had  been) adopted by this country and enforced by judicial  decisions, amount  to  law in force’ in the territory of India  at  the relevant  time within the meaning of Art. 372(1).   In  that view  of  the matter, the contention of the  appellant  that after the Constitution was adopted the position of the Union of India in regard to its claim for priority in the  present proceedings had been alerted could not be upheld. [302 B-C] Director of Rationing and Distribution v. The Corporation of Calcutta & Ors., [1961] 1 S.C.R. 156 relied on. Quaere : Whether Art. 372(1) would assist the enforcement of the said doctrine in the States where it was not accepted as part  of the law before the Constitution ? If this  doctrine is  supposed  to be an essential  attribute  of  sovereignty where does sovereignty reside after the Constitution ?  Does it reside in the Union as well as in the constituent States? If yes, what would be the position if competing claims  were made by the States inter se, or by one of the States against the Union ? [302 E-H] (iii)     The basic justification for the claim for priority of  Government debts rests on the well-recognised  principle that  the  State  is entitled to raise  money  by  taxation, otherwise  it  will not be able to function as  a  sovereign government  at  all.   This  consideration  emphasizes   the

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necessity and wisdom of conceding to the State the right  to claim priority in respect of its tax dues. [303 A-B] Quaere : Whether the doctrine will be equally applicable  in respect of debts due to the State if they are contracted  by citizens  in relation to commercial activities of the  modem State ? [303 C-D] (iv) In  making a provision for the recovery of  arrears  of tax, it cannot be said that s. 46 deals with or provides for the principle of priority of tax dues at all. [306 H] The Recovery Act also is intended mainly to provide for  the procedure to recover public debts.  This act is not directly concerned with the right to recover arrears or with priority of  tax  dues.  Rule 22 can no doubt be invoked  to  recover arrears of tax, but that is because the procedure prescribed by  the said rule applies to the recovery of  public  debts, and  tax arrears can be treated as public debts inasmuch  as by  virtue  of s. 46(2) Of the Income-tax  Act  they  become recoverable as arrears of land revenue. [308 F, H] Neither  the provisions of s. 46 of the Income-tax  Act  nor those of the Recovery Act can thus be said to have displaced the  doctrine  of priority of arrears of  tax  over  private debts. Governor-General  in Council v. Shiromani Sugar  Mills  Ltd. (In liquidation), [1946] F.C.R. 40 distinguished. 291 Province  of Bombay v. Municipal Corporation of the City  of Bombay,  (1946)  L.R. 73 I.A. 271,  Attorney-General  v.  De Keyser’s  Royal  Hotel,  Ltd.,  [1920]  A.C.  508  at   526, Purshottam  Govindji Halai v. Shree B. M. Desai,  Additional Collector  of Bombay & Others, [1955] 2 S.C.R. 887  referred to.

JUDGMENT: CIVIL APPELLATE JURISDICTION : Civil Appeal No. 824 of 1963. Appeal  from the judgment and order dated June 21,  1955  of the  Calcutta High Court in Civil Revision Case No.  231  of 1954. S.   C. Das Gupta and Sukumar Ghose, for the appellant. S.   V. Gupte, Solicitor-General, N. D. Karkhanis and R. N. Sachthey, for respondent No. 1. The Judgment of the Court was delivered by Gajendragadkar, C.J. The short question of law which  arises in  this  appeal is whether respondent No. 1, the  Union  of India,  is  entitled to claim that the tax due  to  it  from respondent  No. 2, M/s.  R. K. Das & Co., on account of  the assessment  years  1946-47  and  1947-48  has  priority  and precedence  over the decretal amount due to  the  appellant, M/s.   Builders Supply Corporation, from respondent  No.  2. This question has been answered against the appellant by the Calcutta  High Court, and by its present appeal  brought  to this Court with a certificate issued by the said High Court, the  appellant  contends that the decision of  the  Calcutta High Court is erroneous in law. It appears that respondent No. 2 secured a building contract from  the Government in connection with the construction  of the Mint and in that behalf it had to make a deposit of  Rs. 50,000  as security for the due execution of  the  contract. In  connection  with the execution of  the  said,  contract, respondent  No.  2 obtained a supply of  building  materials from  the  appellant.  The appellant was  unable  to  secure payment for the goods thus supplied by it, and so, it had to sue  respondent  No. 2 for recovery of the  dues.   In  that suit,  on  the 18th April, 1949, the appellant  obtained  an

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order for attachment before judgment of Rs. 5,000 out of the aforesaid security deposit of Rs. 50,000.  This deposit  was lying  with  the Superintending Engineer,  Calcutta  Central Circle  No.  1. Subsequently, on the 16th  June,  1950,  the appellant’s   suit  was  decreed  by  the   5th   Additional Subordinate Judge, 24 Parganas, for a sum of Rs. 12,275-9-0. This  decree  was put in execution by the appellant  on  the 14th  February, 1952, in the court of the 7th Sub-Judge  and in  consequence,  Money  Execution Case No. 9  of  1952  was started.  Four days thereafter, the Subordinate Judge issued 292 an order for the attachment of a further sum of Rs. 7,275-9- 0  out  of  the  aforesaid  security  amount  deposited   by respondent  No.  2  Whilst  writing  to  the  Superintending Engineer in that behalf, the Subordinate Judge asked him  to remit  to the court the sum of Rs. 5,000 which  had  already been   attached   before  judgment.    On   receiving   this communication, the Superintending Engineer placed a  further sum  of Rs. 7,275-9-0 under attachment, but did  not  comply with the requisition of the court to remit Rs. 5,000 to  it. On  the 30th April, 1952, the Executing Court wrote  to  the Superintending Engineer and asked him to transmit the  whole of  the amount of Rs. 12,275-9-0 which was under  attachment as  a  result  of the two previous  orders  passed  in  that behalf, but this requisition also was not complied with till March 9, 1953. Meanwhile,  the  Certificate  Officer  of  24  Parganas  bad addressed  a  letter to the Subordinate Judge  on  the  23rd July,  1952,  and requested him that if  the  Superintending Engineer had transmitted any money to his court, its payment to the appellant should be withheld in order to enable a  cl aim  under  0.21  r. 52 of the Civil Procedure  Code  to  be preferred  on  behalf of the Government.   Along  with  that letter,  the  Certificate  Officer sent a  copy  of  another letter which had been addressed by him to the Superintending Engineer  asking  him  not to make any payment  out  of  the amount deposited by respondent No. 2, but to retain it after deducting   the  departmental  dues.    The   Superintending Engineer was informed by this letter that arrears of income- tax  due from respondent No. 2 exceeded Rs. 50,000 with  the result  that  the  whole  of  the  security  deposit,   less departmental   dues,  was  liable  to  be  applied  to   the satisfaction of the tax debt in respect of which  Government had priority over all unsecured creditors. In  spite  of  this  letter,  however,  the   Superintending Engineer  sent  the  whole of the  amount  attached  at  the instance of the appellant to the Executing Court and it  was received in the Executing Court on the 9th March, 1953.   On the 21st March, 1953, the Executing Court addressed a letter to  the  Certificate Officer in reply to  the  communication received  by  it from him, requiring him to  state  why  the amount  in question should not be paid to the appellant  and adding that in case no effective step was taken on or before the  10th April, 1953, the said amount would be paid to  the appellant.   At this stage, the Commissioner of  Income-tax, representing  respondent  No. 1, intervened  and  moved  the Executing  Court for adjournment on several  occasions.   On every  such  occasion,  the Commissioner  intimated  to  the Executing  Court that respondent No. 1 would show cause  why the amount in question 293 should  not be paid to the appellant.  During the course  of these  proceedings, on the 17th June, 1953, the  Certificate Officer addressed a letter to the Executing Court under Rule 22  of  Schedule  11  to the  Public  Demands  Recovery  Act

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(hereinafter called the ’Recovery Act’) and asked the  court to  hold the amount subject to further intimation from  him. This letter was received by the Executing Court on the  24th June,  1953, and in consequence, the Executing Court  passed an order withholding payment to the appellant until  further orders.   Finally, on the 15th July, 1953, respondent No.  1 made  an  application  to the Executing Court  in  which  it claimed that the tax amount due to it from respondent No.  2 had  a priority over the judgment debt due to the  appellant from the same debtor, and so, the whole of the amount  under attachment ought to be paid to it towards partial  satisfac- tion of the said income-tax dues.  A similar application was made on the 11th September, 1953, and this application  gave material details in respect of the income-tax demand against respondent No. 2. In both these applications, it was alleged that  a certificate tinder s. 46(2) of the  Income-tax  Act, 1922  (No.  11  of  1922) bad been  duly  forwarded  to  the Collector,  24  Parganas.  and thus  proceedings  under  the recovery Act had already been commenced in that behalf. The Executing Court set down these applications for  hearing and  elaborate  arguments  were  urged  before  it  by   the appellant   and  respondent  No.  1  in  support  of   their respective contentions.  In the result, the Executive  Court upheld respondent No. 1’s plea that the tax amount due to it from  respondent  No.  2 had a priority  over  the  decretal amount  due  to the appellant from the same  debtor  and  in consequence,  it issued a direction that the amount  of  Rs. 12,275-9-0  lying in its custody under attachment should  be paid to respondent No. 1. This  order  was  challenged by  the  appellant  before  the Calcutta  High Court by a revision application under S.  115 of  the  Code.  The proceedings taken before  the  Executing Court  were  initiated  by  the  two  applications  made  by respondent No. 1 under s. 151 of the Code.  Apparently,  the Executing Court passed its order in favour of respondent No. 1,  purporting to exercise its jurisdiction under  the  said section.    It  was  urged  before  the  High  Court  as   a prelimaniry  point that the Executing Court was in error  in allowing  its  jurisdiction under s. 151 of the Code  to  be invoked in the present proceedings.  The High Court has held that  it  was  unnecessary to consider whether  s.  151  was properly  invoked or not, because in its opinion, the  claim made by respondent No. 1 294 could  be  sustained under Rule 22 of  the  Statutory  Rules framed  under  the Recovery Act.  This rule  corresponds  to 0.21  r. 52 of the Code and the High Court thought that  the Executing  Court had jurisdiction to deal with the claim  of respondent  No.  1 under r. 22 read with 0.21 r. 52  of  the Code.   It  is  unnecessary to deal with this  part  of  the controversy between the parties, because the finding of  the High Court on this point has not been challenged before us. The High Court then examined the merits of the dispute.   It held  that  it had been accepted by all the High  Courts  in India that the tax amount due from an assessee to respondent No.  1  has  priority "vis-a-vis and over  claims  of  other creditors, though only unsecured creditors".  The High Court rejected  the  appellant’s  contention  that  the   relevant provisions  of  the  Recovery  Act  prevented  a  claim  for priority made by respondent No. 1 in the present case.   The appellant  had  also urged before the High  Court  that  the claim for priority made by respondent No. 1 could no  longer be  sustained,  having  regard  to  the  fact  that  it  was inconsistent  with  the provisions of  the  Constitution  of India.   This claim, it was urged, was based on  the  common

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law  doctrine of the Crown prerogative and it could  not  be claimed  by  respondent No. 1 inasmuch as it  did  not  fall within  the scope of Art. 372(1) of the Constitution.   This contention has been rejected by the High Court, and the High Court has also held that the said claim cannot be said to be covered by any of the provisions of the Recovery Act and  as such can be legitimately enforced by respondent No. 1. As  a result  of the findings, the High Court has  discharged  the rule  which was issued at the instance of the  appellant  in the  revision  application preferred by it before  the  High Court under S. 115 of the Code.  The appellant then  applied for and obtained a certificate from the High Court and it is with  this  certificate  that the matter  has  been  brought before us in appeal. The first point which falls for our decision in the  present appeal  is whether the High Court was right in holding  that the common law doctrine about the priority of Crown debts on which  the claim of respondent No. 1 was based,  applied  in the  present  case.  This common law doctrine has  no  doubt been  evolved by the special attributes associated with  the Crown in England in early days.  It is the part of the Crown prerogative.    AS   Halsbury  has   observed   "the   royal prerogative may be defined as being that pre-eminence  which the  Sovereign enjoys over, and above all other  persons  by virtue of the common law, but out of its ordinary course, in right of her regal dignity, and comprehends all the  special dignities, 295 liberties,  privileges, powers and royalties allowed by  the common  law to the Crown of England"(1).  This  doctrine  as originally evolved by common law in England, had a very wide sweep  and  it  purported  to take  within  its  scope  many privileges and powers.  Considered in the light of its  wide sweep,  some  of  these privileges  may  sound  archaic  and feudal,  but it is not necessary for our purpose to  examine the said doctrine in all its width; in the present appeal we are  concerned  with  the  narrow  question  as  to  whether respondent  No. 1 is entitled to claim that the recovery  of the  amount  of  tax  due to it from  a  citizen  must  take precedence  and priority over unsecured debts due  from  the said   citizen   to  his  other  private   creditors.    The competition  in the present case is between  respondent  No. 1’s claim to recover its tax dues and the appellant’s  claim to   recover  its  decretal  dues  from  the  same   debtor, respondent  No. 2. The appellant is an  unsecured  creditor, though  undoubtedly at its instance, the amount in  question has  been  attached  partly before judgment  and  partly  in execution proceedings after the judgment was pronounced. The  question  about the applicability of this part  of  the Crown prerogative in India was considered by the Bombay High Court  as  early  as 1868.  In The  Secretary  of  State  in Council  for  India  v. The Bombay Landing  &  Shipping  Co. (Limited),(2)  Westropp,  J. has elaborately  examined  this problem.  The learned Judge held that a judgment debt due to the  Crown was in Bombay entitled to the same precedence  in execution as a like judgment debt in England, if there be no special  legislative provision affecting that right  in  the particular  case.   Similarly, it was held that  a  judgment debt due to the Secretary of State in Council for India  was in  Bombay  entitled to the like precedence for  the  reason that  such debt is vested in the Crown, and  when  realised, falls  into the State Treasury.  Tracing the origin of  this doctrine,  the learned Judge referred to the  Commentary  of Lord  Coke on Littleton, where Lord Coke has put the  matter in these words; "The King, by his prerogative, regularly  is

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to be preferred, in payment of his duty or debt, before  any subject although the King’s debt or duty be the latter"  (p. 48).   The  learned  Judge then  referred  to  some  English decisions  bearing  on  this point and  concluded  that  "in England the right of the Crown to precedence does not  arise out  of  any peculiar quality in the writ  of  extent.   The reasoning  of  Lord Coke and Chief Baron Parker rests  on  a broader  foundation,  namely, that the  destination  of  the debt, when recovered, is the State Treasury" (p. 50). (1)  Halsbury’s  Laws of England, 3rd Edn.  Vol. 7, p.  221, para 463. (2)  [1868-69] 5 Bom.  H.C.R. p. 23. up.165-3 296 It is significant that Westropp, J. considered the  question from -a larger juristic point of view and observed that  the common  law  ,doctrine  was "no novelty  in  India"  and  he referred  to  the  rule enunciated by  Yajnavalkya  in  that behalf.  Says Yajnavalkya, "A debtor shall be forced to  pay his  creditors  in  the  order  in  which  the  debts   were contracted, after first discharging those of a priest or the King". (1) On this topic, Katyayana says, "if there be  many ,debts  at  once, that which was first contracted  shall  be first paid, ,after those of a King or of a priest learned in the Veda".(2) The reference to the priority of a debt due to priests learned in Vedas is obviously obsolete and can  have no  relevance  at  the present time.   But  the  point  that Westropp, J. has made is that the common law doctrine cannot be said to be a novelty to Hindu Jurisprudence.  He has also added that "Muhammadan sovereigns were not prone to waive or abandon  such royal prerogative as they found  existing  ,in India"  (p.  49).  We have referred to this  aspect  of  the matter, because if the larger question about the validity of the  Crown prerogative in respect of claims other  than  tax claims  falls  to  be considered in future,  it  may  become necessary  to  enquire  whether  a  .similar  doctrine   was recognised by Hindu Jurisprudence or not.  That enquiry  is, however,  foreign  to the scope of the  controversy  in  the present  appeal.  So far as respondent No. 1’s claim in  the present  appeal  is concerned, there is no doubt  that  this claim  has  been consistently recognised by all  the  Indian High Courts. Before  referring  to these decisions, however, it  will  be convenient  to  read the relevant provisions of  the  Indian Income-tax Act as it stood at the relevant time (Act No. 1 1 of  1922).   Section 46 (2) of this Act  provides  that  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 a certificate, shall proceed to recover from such an assessee  the  amount  specified therein as if  it  were  an arrear  of  land revenue.  There is a proviso to  this  sub- section which lays down that without prejudice to any  other powers  of the Collector in this behalf, he shall,  for  the purposes  of  recovering the said amount,  have  the  powers which  under  the Code of Civil Procedure,  1908  a  ,-Civil Court  has for the purpose of the recovery of an amount  due under  a decree.  Section 46(3) lays down that in  any  area with respect to which the Commissioner has directed that any arrears may be recovered by any process enforceable for  the recovery  of .an arrear of any Municipal tax or  local  rate imposed under any (1)  Yaj. 11, 41. (2) Kat. 514. (Vide also Kane, History  of Dharamsastra, p. 441) 297

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enactment  for the time being in force in any part  of  the, State,  the  Income-tax Officer may proceed to  recover  the amount  due by such process.  This provision  prescribes  an alternative  procedure  for  the recovery of  the  debts  in regard  to cases filling under it.  Section  46(5)  provides yet  another  alternative remedy; it lays down that  if  any arrear is in respect of any income chargeable under the head "  salaries" the Income-tax Officer may require  any  person paying the same to deduct from any payment subsequent to the date  of  such  requisition any arrears  due  from  such  an assessee;  and  it requires that such requisition  shall  be complied  with.  The Explanation to s. 46 provides  that  it shall  be  lawful  for the Income-tax Officer,  if  for  any special  reasons  to be recorded he so thinks fit,  to  have recourse  to any such mode of recovery notwithstanding  that the tax due is being recovered from an assessee by any other mode.   These provisions indicate the several remedies  open to  the  Incometax  Officer to adopt  in  order  to  recover arrears of income-tax due from any assessee. In  construing  the relevant provisions of S. 46,  the  High Courts  in  India have had frequent  occasions  to  consider whether  the  Government  of  India  is  entitled  to  claim priority for arrears of income-tax due to it from  assessees over the private debts due from them to their creditors, and this  claim  has  been  consistently  upheld.  In   Manickam Chettiar  v. Income-tax Officer Madura, (1) a Full Bench  of the Madras High Court has held that the income-tax debt  has priority over private debts and that the Court had  inherent power  to  make an order on the application for  payment  of moneys due to the Crown.  In that connection, the Court held that  S. 46 of the Income-tax Act is not exhaustive  of  the remedies  of  the Crown to cover arrears of  income-tax  and does not preclude an application of this nature.  The  Court further held that it was also not necessary for the Crown to obtain  a  decree  against  the assessee  or  to  effect  an attachment   before   making  such  an   application.    The application  in question had been made under S. 151  of  the Code.  Leach, C.J., who delivered the-principal judgment  of the Full Bench, referred to the fact that the argument which had  been urged before the Court was that there was  nothing in  the Code which placed the Crown in a different  position from that of a private person, and so, no application  could be made by the Crown to recover its tax dues unless a decree had  been  obtained in that behalf; and  observed  that  the argument  ignored  the special position of  the  Crown,  the special circumstances and the Court’s inherent powers.   The learned Chief Justice stated that it could not be (1)  [1938] 6 I.T.R. 180. 298 denied  that the Crown had the right of priority in  payment of  debts due to it; it is a right which has always  existed and  has been repeatedly recognised in India.  In  the  case before  the  Court, the debt represented money  due  to  the Crown  under the Indian Incometax Act and the demand of  the Income-tax  Officer was not open to questions.  We ought  to add  that Varadachariar, J. who had referred this matter  to the Full Bench, apparently entertained some doubt about  the correctness  of  the  procedure adopted  by  the  Income-tax Department  in seeking to recover the arrears  in  question. With  that aspect of the matter we are not concerned in  the present   appeal.    It   is,   however,   noteworthy   that Varadachariar,  J.  recognised  the  fact  that  there   was overwhelming   weight   of  authority  in  favour   of   the recognition  of  the priority of the Crown  debts  over  the private  debts due from the same debtor.  His attention  was

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drawn  to  a note of dissent on this point  which  had  been struck down by an earlier decision of the Madras High  Court in Ramachandra v. Pitchaikanni,(1) but he did not attach any importance  to the opinion there expressed, because  in  his opinion,   "the  weight  of  authority  in  favour  of   the recognition of the priority in question even in this country is  so strong that this expression of doubt cannot help  the petitioner to any material degree". In the Bank of India v. John Bowman and Ors., (2) the Bombay High  Court  had occasion to consider the  same  point.   In dealing  with the question, Chagla, C.J., observed that  the priority given to the Crown is not on the basis of its  debt being a judgment debt or a debt arising out of statute,  but the  principle is that if the debts are of equal degree  and the Crown and the subject are equal, the Crown’s right  will prevail  over that of the subject.  It was urged before  the High Court that the democratic set-up which had been ushered in  this country by the Constitution was  inconsistent  with the  doctrine  of  Crown priority,  but  the  learned  Chief Justice  rejected this argument and observed  that  whatever may  have been the historical origin of the principle  which gives  priority  to  the debts due to the  Crown,  when  the English Courts came to consider this question, the principle had  become a part of the Common law of England.  It is  not so  much  because the Crown has any  special  privileges  in England  that  this  principle has been upheld,  but  it  is because  the  State in England has taken the  place  of  the Crown  and the English Courts have continued  the  privilege which  was once the privilege of the King and have  afforded the  same privilege to the State because they have  realised that  the  State  has certain rights  and  privileges  which cannot be overlooked. (1) [1886]  I.L.R. 7 Mad. 434.                   (2)  A.I.R. 1955 Bom. 305. 299 In  Kaka  Mohamed Ghouse Sahib & Co.  v.  United  Commercial Syndicate and Others,(1) the Madras High Court has held that it  is  a settled principle of constitutional  law  that  as between  creditors  of  the  same  rank  the  Government  is entitled  to priority, and the Republican character  of  the Constitution  of  India  has  not  abrogated  this   general doctrine  of priority of State debts.  In dealing with  this question,  Ramamurti,  J.  has  referred  to  the   relevant decisions  in relation to the arrears of income-tax  due  to the Government and has pointed out that there is a consensus of judicial opinion on the question that the arrears of  tax due  to  the State can claim priority  over  private  debts. This position has not been seriously disputed before us, and so, it is unnecessary to refer to other decisions which deal with this problem. As we have already indicated, there is one decision in which a  note of dissent was struck by the Madras High Court,  and that is the decision in the case of Ramachandra(2).  In that case, certain land had been sold under the provisions of  s. 10  of  the Madras Abkari Act, 1864, for arrears due  by  an abkari  renter.  It was held that the purchaser at the  sale did  not  take the land free of all encumbrances as  in  the case  of  a  sale  for arrears of  land  revenue  under  the provisions  of  the Revenue Recovery Act (Madras Act  II  of 1864).   With  the actual decision in the case, we  are  not concerned  in  the present appeal; but it appears  that  the learned Judges in that case made a reference to the question as to whether Crown debts have priority, and they  expressed the opinion that the said doctrine would not be  universally applicable  and three reasons were cited in support of  this

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view.  The first reason was that the East India Company  was only  a  corporation  with  limited  powers  of  sovereignty delegated  to  it,  and in the Courts it was  treated  as  a subject; the second reason was that the right of  Government to priority to a mortgage was not recognised in the mufassil which  was evident by the express language of the Act  which declared the land revenue to be a first charge on the  land; and according to the Court, such a provision would have been unnecessary,  if by Common law every debt due to  the  Crown was  a first charge on the land.  The third reason given  by the Court was that the Court hesitated to import into places outside the Presidency towns the doctrine of the Common  law of  England which would cause inconveniences to  purchasers. Having  set out these reasons, the Court, however, took  the precaution  of  adding  that it was not  necessary  for  the purpose  of  the  appeal  before it  whether  debts  due  to Government in this country have the same preference over (1) [1963] 49 I.T.R. 824. (2) [1884] I.L.R. 7 mad. 434. 300 private  debts as Crown debts in England.  This  observation was  made,  because  in the case with which  the  Court  was concerned,  the  hypothecation was in 1874, and  the  abkari revenue  fell into arrear in a subsequent year, and  it  was held  that  even in England the lien of the  Crown  attached only  from  the  time when the owner of the  land  became  a debtor to the Crown, and since 1839 the common law has  been greatly modified in England by statute for the protection of purchasers.  It would thus be seen that the observations  in question are obiter observations and it does not appear that the  matter  was elaborately argued before  the  Court;  and considerations  relevant  for the purpose  of  deciding  the point  as  to  priority  of tax dues  have  not  been  fully examined.   Besides,  this view has been dissented  from  by Bhashyam  Ayyangar, J. of the Madras High Court in  Bell  v. The  Municipal Commissioner v. for the City  of  Madras,(’-) and   as  we  have  already  indicated,  in  the  words   of Varadachariar,  J.  in Manickam Chettiar(2), the  weight  of authority in support of the applicability of the common  law doctrine in regard to tax dues in this country is so  strong that  no  significance  can  be  attached  to  these  obiter observations. That takes us to the second argument urged before us by  Mr. Das  Gupta for the appellant.  He contends that though  this doctrine  of  the  priority  of tax  dues  might  have  been recognised  by  judicial decisions in India prior  to  1950, there  is  no scope for continuing its operation  after  the Constitution  came  into  force.   This  argument  naturally proceeds on the assumption that the judicial recognition  of the relevant Common law doctrine cannot claim the protection of  Art.  372(1).   It will be  recalled  that  Art.  372(1) provides,  inter  alia,  for the  continuance  in  force  of existing laws.  It lays down that notwithstanding the repeal by  this Constitution of the enactments referred to in  Art. 395   but   subject  to  the  other   provisions   of   this Constitution,  all  the laws in force in  the  territory  of India   immediately   before  the   commencement   of   this Constitution  shall continue in force therein until  altered or  repealed or amended by a competent Legislature or  other competent  authority.  The question which arises is  whether this  doctrine of priority which is based on common law  and which  was recognised by our High Courts prior to 1950,  can be  said  to constitute "law in force" in the  territory  of India  at  the  relevant  time.  In  other  words,  is  this doctrine of common law which was introduced in this  country

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and followed, law in force within the meaning of Art. 372(1) ?  If it is, then by virtue of Art. 372(1) itself, the  same law  would  continue  to be in force  until  it  is  validly altered, repealed or amended. (1) [1902] I.L.R. 25 Mad. 457. (2) [1938] 6 I.T.R. 180. 301 This  question  can  no longer be in doubt  because  of  the decision  of  this Court in the Director  of  Rationing  and Distribution  v. The Corporation of Calcutta &  Ors.(1).  In that  case,  this  Court was called  upon  to  consider  the question as to whether the decision of the Privy Council  in Province  of Bombay v. Municipal Corporation of the City  of Bombay(2)   which   had  laid  down  a   certain   rule   of interpretation could be said to be ’law in force’ within the meaning  of  Art. 372(1).  The majority  judgment  indicates that  the rule of interpretation of statutes  enunciated  by the  Privy Council amounted to law in force and as such,  it continued  to  be in force even after the  Constitution  was adopted,  with  the result that according  to  the  majority opinion,  the  rule of interpretation of statutes  that  the State is not bound by a statute unless it is so provided  in express  terms  or by necessary implication, is  still  good law. On  this part of the decision, there was some difference  of opinion.   Sarkar, J. held that the rule that the  Crown  is not  bound  by the provisions of any statute  unless  it  is directly or by necessary implication referred to, is  really a  rule of construction of statutes and is not dependent  on royal  prerogatives.   There  was,  therefore,  no   reason, according to the learned Judge, why it should not be applied to the interpretation of statutes after the Constitution. Wanchoo,  J., however, took a different view.  He held  that the  rule in question was based on the royal prerogative  as known  to  the  common law of England and it  could  not  be applied  to India when there was no Crown in India and  when the Common law of England was not applicable.  According  to him, the proper rule of construction which should be applied now  is  that the State is bound by a statute unless  it  is exempted expressly or by -necessary implication. It  is,  however,  clear that there  was  no  difference  of opinion on the question that Common law was included  within the  expression  "law in force" used by  Art.  372(1).   The majority   judgment  expressly  states  that  the   relevant expression  "law in force" includes not only statutory  law, but  also  custom or usage having the force of  law  and  as such, it must be interpreted as including the Common law  of England which was adopted as the law of this country  before the Constitution came into force (p. 173).  Wanchoo, J.  has also  agreed  with  this  view,  because  he  has  expressly observed  that  "the royal prerogative where it  deals  with substantive rights of the Crown as against its subjects, as, for  example, the priority of Crown debts over debts of  the same  nature  owing to the subject, stands  on  a  different footing from the royal prerogative put forward (1) [1961]1  S.C.R. 158. (2) [1946] L.R. 73 I.A. 271. 302 in the present case, which is really no more than a rule  of construction  of statutes passed by Parliament.  Where,  for example,  a  royal prerogative dealing  with  a  substantive right has been accepted by the Courts in India as applicable here also, it becomes a law in force which will continue  in force  under  Art.  372(1) of the  Constitution"  (p.  188). Therefore,  this  decision clearly shows that the  rules  of

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Common  Law  relating to substantive rights which  had  been adopted by this country and enforced by judicial  decisions, amount  to ’law in force’ in the territory of India  at  the relevant time within the meaning of Art. 3 72 ( 1 ). In that view  of  the matter, the contention of Mr. Das  Gupta  that after  the  Constitution  was adopted,  respondent  No.  1’s position in regard to its claim for priority in the  present proceedings has been altered, cannot be upheld. At this stage, we ought to make it clear that in the present appeal  we  are dealing with a very narrow point,  and  that relates to respondent No. 1’s claim that arrears of tax  due to it have precedence or priority over money debts due to  a private  creditor  from  the  same  debtor.   We  think   it necessary  to emphasise this aspect of the  matter,  because the basic doctrine of Crown privileges as originally evolved by Common law in England may lead to different categories of claims  made  in different circumstances  and  by  different States  in  India;  and we want to make it  clear  that  our present decision should be confined only to the narrow point with  which we are directly concerned.  Questions may  arise as to whether the relevant Common law doctrine was  accepted in  some Indian States.  If it is shown that it was not,  it may  have to be considered whether Art. 372(1) would  assist the  enforcement of the said doctrine in such  States.   One thing  is clear that if the said doctrine was accepted as  a part  of  the law in any part of the country,  it  will  not cease  to  be  operative,  because it  is  included  in  the expression  "law  in  force"  under  Art.  372(1);  but  the position would be different in respect of such parts of  the territory   of  India  where  the  said  doctrine  was   not recognised  or applied prior to 1950.  Then again,  if  this doctrine  is  supposed  to  be  an  essential  attribute  of sovereignty,   where  does  sovereignty  reside  after   the Constitution’.?  Does it reside in the Union as well as  all the constituent States ?  If yes, what would be the position if competing claims were made by the States inter se, or  by one  of  the  States against the Union ?   That  is  another aspect  of the matter which may need careful examination  in future. Similarly,  the  basic  justification  for  the  claim   for priority made by respondent No. 1 in the present case  rests on the well-recognised 303 principle  that  the  State is entitled to  raise  money  by taxation, because unless adequate revenue is received by the State,  it  would  not be able to function  as  a  sovereign Government at all.  It is essential that as a Sovereign, the State  should be able to discharge its primary  governmental functions  and  in  order  to  be  able  to  discharge  such functions efficiently, it must be in possession of necessary funds,  and this consideration emphasises the necessity  and the  wisdom  of conceding to the State the  right  to  claim priority in respect of its tax dues. But  the  same principle may not equally  be  applicable  in respect of debts due to the State if they are contracted  by citizens  in  relation to commercial  activities  which,  no doubt,  may  be  undertaken  by  the  State  for   achieving socioeconomic good.  It is well-known that a Welfare St  ate often  enters commercial fields which cannot be regarded  as an  essential  and integral part of the  basic  governmental functions  of the State, and-if the State seeks  to  recover debts  from  its  debtors arising  out  of  such  commercial activities, it may become necessary to consider whether  the doctrine  of priority can be extended to such  transactions. We are referring to some of the difficult problems which may

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arise  in  future  in  regard to  the  application  of  this doctrine, because we want to make it clear that our decision in  the present appeal should not be taken to deal with  any of  them.  Our conclusion, therefore, is that the claim  for priority made by respondent No. 1 in the present proceedings has  to  be sustained, because it is based on a  Common  law doctrine  which had been applied and upheld in that part  of India   which  was  known  ’British  India’  prior  to   the Constitution. The  next contention which Mr. Das Gupta has raised is  that the  doctrine  of  the priority of  Crown  debts  cannot  be enforced because it is specifically provided for and covered by the provisions of s. 46 of the Income-tax Act and by  the relevant provisions of the Recovery Act.  He argues that  if it  is  shown that the particular doctrine  has  become  the subject-matter   of   legislative  provision,  it   is   the legislative  provision  which will prevail, and  during  the operation  of the said legislative provision,  the  doctrine will remain in abeyance and cannot be enforced.  In  support of  this  argument, lie has relied on the  decision  of  the House  of  Lords in Attorney General v.  De  Keyser’s  Royal Hotel, Ltd.(). In that case, it was held that the Crown  was not   entitled  as  of  right,  either  by  virtue  of   its prerogative or under any statute, to take possession of  the land  or buildings of a subject for administrative  purposes in  connection with the defence of the realm without  paying compensation (1)  [1920] A.C. 508, 526. 304 for their use and occupation.  One of the points which arose for  decision  in  that case was, what  was  the  effect  of Regulation 2 of the Defence of the Realm Regulations  issued under the Defence of the Realm Consolidation Act, 1914, when read with sub-s. 2 of s. 1 of the Act, on the prerogative of the  Crown to take possession of the property of  a  subject for  administrative purposes in connection with the  defence of  the  realm ? In that connection, the provisions  of  the Defence  Act , 1842 (5 & 6 Vict. c. 94)  authorising  taking possession  of land also had to be considered.   In  dealing with   this  question,  Lord  Dunedin  observed   that   the prerogative as defined by learned constitutional writers was "the  residue of discretionary or arbitrary authority  which at  any  given  time is legally left in  the  hands  of  the Crown",  and he added that inasmuch as the Crown is a  party to every Act of Parliament, it is logical enough to consider that when the Act deals with something which before the  Act could be effected by the prerogative, and specially empowers the  Crown to do the same thing, but subject to  conditions, the  Crown  assents  to  that,  and  by  that  Act,  to  the prerogative  being  curtailed.  It is in the light  of  this principle  that the provisions of the Regulation  read  with the  relevant section of the Act were examined, and  it  was held  that the Crown could not claim to take  possession  of the  property  of  a subject without  being  liable  to  pay compensation in the manner provided for by the Defence  Act, 1842. In  that case, Lord Atkinson dealt with this matter  thus  : "It was suggested", said Lord Atkinson, "that when a statute is  passed empowering the Crown to do a certain thing  which it might theretofore have done by virtue of its prerogative, the  prerogative is merged in the statute.  I confess  I  do not  think  the word "merged" is happily chosen.   I  should prefer to say that when such a statute, expressing the  will and  intention of the King and of the three estates  of  the realm, is passed, it abridges the Royal Prerogative while it

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is in force to this extent : that the Crown can only do  the particular thing under and in accordance with the  statutory provisions, and that its prerogative power to do that  thing is in abeyance" (p. 559-40). In  support of the same contention, Mr. Das Gupta  has  also relied  on a decision of the Federal Court in the  Governor- General  in  Council  v.  Shromani  Sugar  Mills  Ltd.   (In Liquidation)  (1).   In  that case, the  Federal  Court  was examining  the provisions of s. 230 of the Indian  Companies Act (No.  VII of 1913).  Section 230 prescribes the order in which  preferential  payments should be made in  winding  up proceedings.  Clauses (a) to (f) of S. 230(1) lay down (1)  [1946] F.C.R. 40. 305 the  order  of preference in which the  payments  should  be made;  cl. (a) gives the highest priority in that  order  to all  revenues, taxes, cesses and rates, whether  payable  to the Government or to a local authority, due from the company at the date hereinafter mentioned and having become due  and payable  within  the twelve months next  before  that  date. Reading  this  section along with s. 232(2)  which  provides that  nothing  in  S.  232 applies  to  proceedings  by  the Government, the Federal Court held that it was difficult  to think  of any reason for qualifying the priority in  respect of  the  Crown debts specified in s. 230(1) (a), if  it  was intended  that  other debts due to the  Crown  should  enjoy unqualified priority.  Spens, C.J., who spoke for the Court, contrasted the provision contained in s. 230(1) (a) with the provisions  of s. 49 of the Presidency Towns Insolvency  Act (No.   III of 1909), and s. 61 of the Provincial  Insolvency Act  (No.   V  of 1920), and held  that  priority  could  be claimed  by  the  Crown in winding up  proceedings  only  as prescribed by s. 230(1) (a) and within the limits  specified therein.    It  would  be  noticed  that   this   conclusion postulates the applicability of the doctrine of priority  of the debts due to the Crown and holds that as a result of the specific  provision  contained in s. 230 ( 1 )(a)  the  said doctrine must be worked in the manner prescribed by the said section  and  not outside it.  Basing himself on  these  two decisions, Mr. Das Gupta contends that s. 46 of the  Income- tax  Act  and the relevant provisions of  the  Recovery  Act displace  the application of the doctrine of Crown  priority on which respondent No. 1 relies in the present case. Let us first consider this argument in relation to s. 46  of the  Income-tax Act.  In dealing with this section,  we  may incidentally  refer  to  the  decision  of  this  Court   in Purshottam  Govindji Halai v. Shree B. M. Desai,  Additional Collector of Bombay & Others(1).  In that case, the validity of s. 46(2) was impeached, inter alia, on the ground that it contravened Art. 14 of the Constitution.  One of the grounds on which the validity of s. 46(2) was challenged, was  based on  the fact that the recovery of arrears of  income-tax  is authorised  to  be made by S. 46(2) in different  modes  and manners  in  the  different States of India.   It  would  be recalled  that  s. 46(2) enables the Income-tax  Officer  to forward to the Collector a certificate specifying the amount of arrears due from an assessee, and requires the Collector, on  receipt of such certificate, to proceed to recover  from the assessee in question the amount specified as if it  were an arrear of land revenue.  Now, the procedure prescribed (1)  [1955] 2 S.C.R. 887. 306 for recovering arrears of land revenue differs in  different States.   In the City of Bombay it is recovered under s.  13 of the Bombay City Land Revenue Act (Bombay Act 2 of  1876).

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In the rest of the Bombay State it is recovered under s. 157 of  the  Bombay  Land Revenue Code, 1879 (Bombay  Act  5  of 1879).   In Madras, the relevant provision is S. 48  of  the Madras  Revenue Recovery Act, 1864 (Madras Act 2  of  1864). In  West Bengal, the relevant provision has been  prescribed by  the Recovery Act.  In Punjab, it is s. 69 of the  Punjab Land Revenue Act, 1887 (Punjab Act 27 of 1887), and in Uttar Pradesh,  it  is s. 148 of the U.P. Land Revenue  Act,  1901 (U.P. Act III of 1901).  The argument based on the diversity of  the  procedures prescribed by these different  Acts  was repelled,  because  it was held that  though  the  procedure prescribed  by  the different Acts prevailing  in  different States  was not uniform or even similar, the  classification on  which the application of the different  statutes  rested was  justified  inasmuch as the grouping of  the  income-tax defaulters  into separate categories or classes  State  wise was certainly a territorial classification which is based on an  intelligible  differentia and the  subjection,  for  the purposes of the recovery of the certified demand, of each of such  classes  of defaulters to the  same  coercive  process devised  by  their own State, on a  consideration  of  local needs, for the recovery of their own public demands,  cannot be regarded as benefit of a reasonable nexus or  correlation between the basis of classification and the object sought to be  achieved by the Indian Income-tax Act any more  than  it can be so regarded with respect to the respective State laws (p. 900). We  have  referred to this decision, because it  brings  out emphatically the real character of the provisions prescribed by s. 46(2).  Section 46(2) does not deal with the  doctrine of  the priority of Crown debts at all; it  merely  provides for the recovery of the arrears of tax due from an  assessee as  if  it were an arrear of land revenue.   This  provision cannot  be  said to convert arrears of tax into  arrears  of land  revenue  either;  all that it purports  to  do  is  to indicate  that  after  receiving the  certificate  from  the Income-tax Officer, the Collector has to proceed to  recover the arrears in question as if the said arrears were  arrears of   land  revenue.   We  have  already  seen   that   other alternative  remedies  for the recovery of arrears  of  land revenue are prescribed by sub-sections (3) and (5) of s. 46. In making a provision for the recovery of arrears of tax, it cannot  be  said that s. 46 deals with or provides  for  the principle  of  priority of tax dues at all; and  so,  it  is impossible  to  accede to the argument that s. 46  in  terms displaces  the  application  of the  said  doctrine  in  the present proceedings. 307 That takes us to the provisions of the Recovery Act on which the same argument has been based.  The Recovery Act has been passed, because it was thought expedient to consolidate  and amend the law relating to the recovery of public demands  in Bengal.  A public demand is defined by s. 3 (6) of this  Act as  meaning,  inter alia, any arrear or money  mentioned  or referred-to  in Schedule 1; and clause 3 of Sch.   I  deals, inter alia, with any money which is declared by any law  for the  time being in force to be recoverable or realizable  as an  arrear  of  revenue or land revenue. rliat  is  how  the arrears  of tax in respect of which a certificate  has  been issued  by the Income-tax Officer attract the provisions  of the Recovery Act.  A "Certificate Officer" means under s.  3 (3)  a  Collector  and other officers mentioned  in  it.   A "certificate-holder" under s. 3 (2) means the Government  or person  in whose favour a certificate has been  filed  under this  Act, and "certificate-debtor" under s. 3 (1 ) means  a

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person  named  as debtor in a certificate filed  under  this Act.  The effect of the provisions contained in ss. 4 to  10 in  Part II of the Recovery Act, appears to be that  when  a Certificate  Officer  is satisfied that  any  public  demand payable  to  the  Collector is due, he proceeds  to  sign  a certificate  in the prescribed form.  This certificate is  a certificate properly so-called for the purpose of this  Act. The certificate issued under s. 46(2) of the Income-tax  Act is in a sense a public demand, but S. 5 of the Recovery  Act seems  to require that when any requisition is  received  by the  Certificate  Officer,  he has to  examine  whether  the demand  in question is recoverable and whether the  recovery by  suit  is  not  barred  by  law.   On  this  prima  facie examination,  if  he  is satisfied that  further  action  is justified,  he proceeds to sign a certificate  stating  that the demand is due; that is the effect of s. 6. A certificate so issued is then served on the certificate-debtor under  S. 7,  and  S. 8 prohibits private transfer  of  the  immovable property  of  the certificate-debtor after  the  service  of notice of any certificate has been effected on him under  s. 7.  It  is  at that stage  that  the  certificate-debtor  is empowered to file a petition denying his liability under  s. 9;  and  his  objections are heard under s.  10.   That,  in brief, is the scheme of Part 11 with which we are concerned. There is one more provision of the Recovery Act to which  we ought to refer, and that is s. 26.  This section deals  with the disposal of proceeds in execution, and subsection (1) of this  section  provides that where assets are  realized,  by sale or otherwise in execution of a certificate, they  shall be disposed of in the manner indicated by its clauses (a) to (d).   Section 38 provides that statutory rules included  in Sch. 11 shall have effect as if enacted in the body of  this Act, until altered or annulled in accordance 308 with  the provisions of Part V. Statutory Rule 22  which  is relevant  for our purpose deals with cases of attachment  of property  in  custody of Court or public officer;  it  reads thus :-               "Where  the property to be attached is in  the               custody  of any Court or public  officer,  the               attachment  shall be made by a notice to  such               Court   or  officer,  requesting   that   such               property,   and  any  interest   or   dividend               becoming payable thereon, may be held  subject               to  the  further orders  of  the  Certificate-               Officer by whom the notice is issued :               Provided  that, where such property is in  the               custody  a  Court, any question  of  title  or               priority  arising  between  the   certificate-               bolder  and  any other person, not  being  the               certificate-debtor, claiming to be  interested               in such property by virtue of any  assignment,               attachment or 0otherwise, shall be  determined               by such Court". Having  thus considered the broad features of  the  Recovery Act,  the question which we have to decide is whether  these provisions can be said to amount to a statutory provision in respect of the doctrine of priority of arrears of income-tax due to respondent No. 1 over private debts due from the same debtor.  We have already examined the two decisions on which Mr.  Das Gupta’s -contention rests.  Take, for instance,  s. 230  of  the  Indian Companies Act.  Can  we  say  that  any provisions  of  the  Recovery Act can  be  compared  to  the provisions of s. 230 of the Companies Act ? In our  opinion, the  answer  to  this question has to be  in  the  negative.

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Broadly  stated,  the  Recovery Act is  intended  mainly  to provide for the procedure to recover public debts.  This Act is not directly concerned with the right to recover arrears, or  with priority, of tax dues.  Arrears of tax fall  within the  scope  of the proceedings contemplated by  it,  because they  attract the provisions -of clause 3 of Sch. 1. Even  a superficial glance at the fourteen clauses of Sch.  1 to the Recovery Act would indicate that this Act is concerned  with public  demands  of  various  kinds, and  it  would  not  be reasonable  to  suggest  that  any  of  its  provisions  are intended  to  deal  directly or  even  indirectly  with  the principle  of  law  with  which  we  are  concerned.   These provisions  merely  indicate  the manner in  which  and  the procedure   according  to  which  public  debts  should   be recovered.   There is no positive provision in  respect  -of respondent No. 1’s claim to recover arrears of tax.  Rule 22 to which we have referred which corresponds to 0.21 r. 52 of the  -Code  of Civil Procedure, can no doubt be  invoked  to recover ,.arrears of tax; but that is because the  procedure prescribed by the 309 said  Rule applies to the recovery of public debts  and  tax arrears can be treated as public debts inasmuch as by virtue of S. 46(2) of the Income-tax Act they become recoverable as arrears of land revenue.  In our opinion, it is difficult to accept the argument that the application of the doctrine  of priority of arrears of tax over private debts can be said to be  displaced by any of the provisions of the Recovery  Act. That being so, we must hold that the High Court was right in coming to the conclusion that respondent No. 1 was  entitled to  claim priority in the matter of arrears of tax due  from respondent No. 2 over the decretal debt due to the appellant from the same debtor. The result is, the appeal fails and is dismissed with costs. Appeal dismissed. 310