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Civil Appeal No. 5-D of 1959, decided on 19th January 1960.
(On appeal from the judgment and decree of the High Court of East Pakistan, Dacca, dated the 7th March 1958, in appeal from Appellate Decree No. 149 of 1955).
(a) Transfer of Property (Pakistan) Ordinance (IV of 1947), S. 4-Does not make transferee liable for public dues but only treats property transferred as still vesting in transferor for purpose of recovering public demand.
The effect of section 4, Transfer of Property (Pakistan) Ordinance (IV of 1947) is no more than this, viz. that certain specified properties which have been the subject of a transaction of transfer may be treated by the Certificate Officer as if they still vested in the transferor, for the purpose of recovering a public demand due from such transferor. It clearly does not have the effect of making the transferee a person "liable for the dues" of the transferor.
(b) Public Demands Recovery Act, 1913, S. 13---Whether distress warrant can be issued in respect of immovable property-- Certificate Officer not competent to issue such warrant in respect of property vested in person other than Certificate-debtor.
(c) Transfer of Property (Pakistan) Ordinance (IV of 1947), S. 4-Transferee of property not a "Certificate-debtor" within meaning of S. 3 (1), Public Demands Recovery Act, 1913.
H. S. Suhrawardy, Senior Advocate Supreme Court, (Abu Muhammad Abdullah, Advocate Supreme Court with him) instructed by Naimuddin Ahmad, Attorney for Appellant.
A. F. M. Mesbahuddin, Advocate, Supreme Court, instructed by Abdul Matin Khan Choudhury, Attorney for Respondents Nos. 1 and 3.
Syed A. B. Mahmud Hussain, Senior Advocate Supreme Court, (Jani Alam, Advocate Supreme Court with him) instructed by K. Shamsul Huda, Attorney for Respondents Nos. 2 and 4.
Dates of hearing : 15th, 18th and 19th January 1960.
This is a certificated appeal brought by the Kumudini Welfare Trust of Bengal Limited to call in question an appellate judgment delivered by a Division Bench of the Dacca High Court, whereby the appeal of the Trust against the dismissal with costs of its suit before the Subordinate Judge, 4th Court, Dacca, was dismissed with costs.
Briefly, the suit was brought to save certain properties, alleged by the Trust to be vested in the Trust, from being taken in execution for the satisfaction of a large claim for arrears of income-tax outstanding against the creator of the Trust, namely, Rai R. P. Saha Bahadur. It is unnecessary for the purposes of this judgment to say more concerning the income-tax assessment than that on the 6th April 1951, upon motion by the Income-tax authorities allegedly commenced on the 30th March 1951, the Certificate Officer of Dacca acting under section 4 of the Public Demands Recovery Act, 1913, issued a certificate in which the following details were shown. The certificate-holder was described as "Collector for special I. T. O.-cum-I. A. C. of I. T. Dacca C. H.", and the certificate-debtor was the aforesaid Rai Bahadur. The amount of the debt made up of charges for income-tax, surtax and sur-charge for the years 1944-45, 1945-46 and 1946-47 was shown at the very high figure of Rs. 92,00,863-2-0 which amount was certified by the Certificate Officer of Dacca as being "justly recoverable" and further that "its recovery by suit is not barred by law". The assessee appealed before the Appellate Assistant Commissioner and from the dismissal of this appeal on the 30th July 1951, he appealed further before the Income-tax Appellate Tribunal which appeal was dismissed on the 24th May 1952. In the meantime, however, the Income-tax authorities had become aware as a result of representations made by the assessee that certain properties which they were attempting to take in satisfaction of the claim were alleged to vest in the Trust. Thereupon, action was commenced under section 4 of the Transfer of Property (Pakistan) Ordinance, 1947. By this Ordinance of which section 3 refers, it was laid down that registering officers acting under the Registration Act, 1908, should not register any document which purported to transfer rights in any property other than agricultural land unless it was certified by an Inspecting Assistant Commissioner of Income-tax of the area in which the property is situate in respect of the person whose right or interest in the property is to be so transferred that he was either not liable to assessment, or that he had paid or bad made satisfactory provision for payment of all his dues by way of income-tax, excess profits tax and business profits tax. By section 4 upon which the taxation authorities rely in the present case, it is provided that where any property as aforesaid has been transferred after the 14th August 1947, an Income-tax Officer may at any time require by notice that all or any of the parties to the transaction should produce within a month the certificate prescribed by section 3. If no such certificate be produced, the Income-tax Officer is empowered to forward a statement to the Collector showing the tax liabilities of each or any of the parties to the transaction, and thereupon the Collector is required to proceed to recover the amount shown as if it were an arrear of land revenue, and is empowered for this purpose to "treat the said property as if it belonged to all or any of the persons" being parties to the said transaction.
There was produced, in evidence, in the case, a document dated the 22nd April 1948, which purports to be a transfer by Mr. Saha to the Trust of the properties which are the subject-matter of the present suit. One of the contentions of the Trust was that this document was a mere memorandum of a transfer which had taken place much earlier, but with that aspect of the case, it is not necessary for us to deal. Upon the objection being raised by Mr. Saha that these properties vested in the Trust and not in himself, the Income-tax authorities took action under section 4 of the aforesaid Ordinance. They alleged in their written statement what was not denied on behalf of the plaintiffs, that notices as required by that section were duly served upon the Trust as well as upon Mr. Saha, but neither of them produced the certificate required under section 3 of the Ordinance, nor was any part of the tax paid. Thereupon, by a letter dated the 30th of January 1952, the Income-tax authorities intimated to the Collector of Dacca the amount of the assessment upon Mr. Saha and asked that it should be recovered from the properties in question as if these properties were vested in Mr. Saha.
On the 28th April 1952, the Certificate Officer made an order which reads as follows :---
"Seen letters dated 30-1-52 and 12-4-52 from the R. O. (Requisition Officer) and also heard the R. O. seen copy of the Ordinance IV of 1947. Messrs Kumudini Welfare Trust of Bengal Ltd. are also liable for the dues in accordance with the said Ordinance. Issue S-7 notice against the said firm and issue S. N. (Sale Notice) for sale of the properties supplied in the list forwarded by the R. O. Request the Sadar Nazir to please have the notices served by special peon from his Nazarat by to-day. The R. O. verbally and personally reports that the C. Ds. (Certificate Debtors) may dispose of their pro perties immediately. I also apprehend that if the C. Ds. transfer or dispose of their properties then the dues may not be recovered and it will be a huge loss to Government. I therefore think, it wise to issue the D/W (Distress Warrant) in advance against Kumudini Welfare Trust and it may be executed by the N. D. C. (Nazarat Deputy Collector) Narayanganj himself. Send the record to Additional Collector for favour of his approval".
The plaintiffs have very serious objections to the making of this order, as appears from the appropriate paragraphs in their plaint, which will be considered presently. This order was followed on the 30th April 1952, by an order of attachment issued by the Nazarat Deputy Collector which it is necessary to reproduce here in full :----
"Whereas you, the Messrs Kumudini Welfare Trust of Bengal Ltd. at Narayanganj in the District Dacca, have got a certificate debt amounting to Rs. 95,36,314-8-0 in Case No. 23 I. T. 1951-52 of the Certificate Officer, Dacca and whereas you have failed to pay up the same and as such I have been directed by the Collector, Dacca, to execute the D/W against you, I hereby attach all the immovable and moveable properties belonging to you Trust as per list below.
You are hereby ordered not to transfer or dispose of the said immovable properties or any part or portion thereof or any way use or try to use the movables as long as the attachment order remains in force."
The plaintiff-Trust on the 21st May 1952, filed an objection, which is presumably relateable to section 9 of the Public Demands Recovery Act, in view of the notice to the Trust having been directed to issue under section 7 of that Act. The record does not show what action was taken on this objection, but without waiting for its disposal, the plaintiff-Trust on the 15th September 1952, filed the suit out of which this appeal arises. The following contentions raised in the plaint may be reproduced with advantage :-
"12. . . the defendant No. 4 (Certificate Officer) by his order dated 28-4-1952 wrongly and illegally held that the plaintiff-Trust was also liable for the certificate dues in accordance with the Ordinance (Ordinance No. IV of 1947) and ordered arbitrarily, mala fide and illegally issue of notice under section 7 of the Public Demands Recovery Act upon the plaintiff-Trust . . . . . "
14. That on 21-5-1952 the plaintiff Trust filed an objection against the said certificate and denied all liabilities thereunder and prayed for its cancellation against it.
15. That . .. no notice of any demand was served upon the plaintiff -Trust nor has the plaintiff-Trust yet been made a certificate debtor nor has any certificate been filed against the plaintiff-Trust----
16. That neither the plaintiff-Trust nor any of its properties are liable for any income-tax assessable upon or legally realisable from the said Rai Bahadur.
21. . . . Besides, as the name of plaintiff-Trust does not appear either in the Requisition or in the Certificate, no notice under section 7 of the Public Demands Recovery Act nor any process or attachment or warrant could legally issue upon it . . . . .
23. That the certificate in question and all proceedings thereunder are absolutely illegal, ultra vires and void and the plaintiff-Trust cannot be made liable for the money covered by the Certificate or any part thereof."
The principal relief claimed was "a declaration that all orders dated 28-4-1952 are void, inoperative and illegal", and consequentially, "that the purported attachments of the properties" under the order of 28th April 1952; "are illegal, void, inoperative and without jurisdiction". A further declaration which was sought was that recovery of "any amount in respect of the alleged tax liabilities of Rai R. P. Saha Bahadur out of any of the properties mentioned in Schedule A' or any property of the plaintiff-Trust" was not competent, and further that "the said Certificate Case No. 23 I. T. of 1951-52 is illegal, ultra vires and without jurisdiction and void and the plaintiff-Trust is not liable for any money claimed under the said certificate or any certificate for realisation of the said amount". As a further line of defence against the sequestration of the properties in question, the plea was taken that the Ordinance in question was itself ultra vires and void.
It is evident from what has been said above that the plaintiff Trust was appreciably embarrassed in presentation of its case by the circumstance that under the order of the 28th April 1952, the Certificate Officer had not only purported to take action under the Public Demands Recovery Act such as could only be taken against a certificate-debtor, in respect of properties which ex facio were rested in the Trust, but had also without drawing up a separate certificate against the Trust, worded his order so as to give the clear impression that as from the making of that order, there were in respect of the demand in question, more than one certificate-debtors, namely, Mr. Saha and the plaintiff-Trust.
It is desirable at this point to reproduce certain provisions in the Public Demands Recovery Act, 1913, which will serve to make this point clear. By section 3 (1) of the Act, the expression "certificate-debtor" means "the person named as debtor in a certificate filed under this Act, and includes any person whose name is substituted or added as -debtor by the Certificate Officer". It is clear in the present case that there was only one certificate before the Certificate-Officer, namely, that dated the 6th of April 1951, in which the single certificate-debtor was Mr. Saba. By saying that Messrs Kumudini Welfare Trust of Bengal Ltd. are also liable for the dues "in accordance with the said Ordinance" the Certificate Officer purported to make the Trust as a person liable for the dues, and he did so upon the strength of his belief that the Trust as a person was liable by virtue of the provisions of section 4 of Ordinance IV of 1947. This was clearly an erroneous conception of the position for the effect of section 4 of the said Ordinance when correctly applied is no more than this, viz. that certain specified properties which have been the subject of a transaction of transfer may be treated by the Certificate Officer as if they still vested in the transferor, for the purpose of recovering a public demand due from such transferor. It clearly does not have the effect of making the transferee a person "liable for the dues" of the transferor. The Certificate Officer next proceeded to direct the issue of a notice under section 7 to the Trust. Section 7 reads as follows :----
"When a certificate has been filed in the office of a Certificate-officer under section 4 or section 6, he shall cause to be served upon the certificate-debtor, in the prescribed manner, a notice in the prescribed form and a copy of the certificate."
The Certificate Officer had not expressly added the Trust as a certificate-debtor in the original certificate dated the 6th April 1951, nor did he draw up a fresh certificate against the Trust. Yet he took action under section 7 which could only be taken against a certificate-debtor, and thereupon an objection was filed by the Trust under section 9 of the Act which provides that .---
"the certificate-debtor may, within thirty days, from the service of the notice required by section 7, or, where the notice has not been duly served, then within 30 days from the execution of any process for enforcing the certificate, present to the Certificate-officer . . . . . a petition, in the prescribed form, signed and verified in the prescribed manner, denying his liability, in whole or in part."
In other words, the plaintiff-Trust thought it appropriate to proceed, for the defence of its properties, as if it had been made a certificate-debtor in the case by the order of the Certificate Officer dated the 28th April 1952. That order included a direction for the issue of a peremptory distress warrant in advance against the plaintiff-Trust, which was justified on the grounds that the Requisition Officer had personally reported that the certificate-debtors "may dispose of their properties immediately", and that the Certificate Officer also apprehended that if the certificate-debtors "transfer or dispose of their properties then the dues may not be recovered and it will be a huge loss to Government". Action of this kind can be taken in relation to movable property under section 13 of the Act in question which contains a proviso to the effect that:-
"If the Certificate-officer . . . is satisfied that the certificate- debtor is likely to conceal, remove or dispose of the whole of any part of such of his movable property as would be liable to attachment in execution of a decree of a Civil Court, and that the realization of the amount of the certificate would in consequence be delayed or obstructed he may at any time direct, for reasons to be recorded in writing, an attachment of the whole or any part of such movable property".
It is not clear whether the attachment was effected in respect of immovable properties as well, and if so, what was the warrant in law for such attachment. It is difficult, however, to conceive of such action by the Certificate Officer being competent in respect of properties vested in a person other than one who is a certificate-debtor under the Act, and here the Certificate Officer expressly issued the peremptory warrant in order, as he believed, to prevent two certificate-debtors i.e. Mr. Saha and the plaintiff Trust from disposing of the properties.
On the pleadings of the parties, some ten issues were framed. The first two issues were of a formal nature, i.e. whether three of the defendants were necessary parties and whether the suit had been properly valued and stamped. The third issue related to the jurisdiction of the Court; the trial Court found on interpretation of a provision in Ordinance No. IV of 1947 that it had no jurisdiction to try the suit, but this finding was reversed in appeal by the High Court and the point was not raised before us. With respect to the Ordinance, two issues were framed, namely, whether it was illegal, ultra vires and inoperative, and whether it had any retrospective effect, which do not properly arise for determination in this appeal, on the view which we take of the case. As regards the certificate case, the following question were raised in three issues, namely, was the certificate case in question illegal, ultra vires and void, were the dues of Mr. Saha for income-tax recoverable from the plaintiff-Trust, and was the attachment of the properties in suit legal and valid The conclusion reached by the trial Court on these three issues is stated in the following words :-----
"In the present case, I have already shown above that the Rai Bahadur and the plaintiff-Trust failed to produce the certificate required under section 3 in spite of the notices served upon them. The Income-tax Officer i.e. defendant No. 3 was therefore perfectly justified to forward a statement of the existing and anticipated income liabilities of the Rai Bahadur under the provisions of section 4 of the said Ordinance, to the Collector of Dacca for recovery of the amount and the Certificate Officer, defendant No. 4 was also perfectly justified to attach the properties described in Schedule A' to the plaint treating the said property belonging to the Rai Bahadur in Certificate Case No. 23 I. T. of 1951-52. In the result, I hold that the certificate case in question is not illegal, ultra vires and void. I further hold that the attachment of the properties in suit is legal and valid and the defendants are entitled to recover the income-tax dues payable by the Rai Bahadur from the attached properties i.e. from the properties entered in the deed Exh. 3".
No exception can be taken to the view of the trial Court that the action of the Income-tax authorities by their letter of the 30th March 1951, requesting the Collector of Dacca to recover the income-tax dues of Mr. Saha from the properties in question as if they vested in Mr. Saha was supported by law and by due satisfaction of the necessary procedural requirements. The learned Subordinate Judge was right in his conclusion that the Certificate Officer was "therefore perfectly justified to attach the properties described in Schedule A' to the plaint treating the said property belonging to the Rai Bahadur in Certificate Case No. 23 I. T. of 1951-52". The further conclusion that the actual attachment of the properties was legal and valid is however open to question, as well as the conclusion that "the certificate case in question is not illegal, ultra vires and void". Indeed, it would appear that part of the confusion from which the final conclusion of the learned Subordinate Judge suffers was due to his having drawn the issue as to the whole certificate case being illegal, etc. when the contest raised was as to the legality or otherwise of the order of the Certificate Officer dated the 28th April 1952. What was expressly challenged by the plaintiff-- Trust was the validity of the action of the Certificate Officer whereby it, i.e. the Trust, was drawn into the proceedings taken under the certificate, and, there being no order making the Trust a certificate-debtor in the case, proceedings were commenced against it as if it were a certificate-debtor. The Trust had sought cancellation of the certificate, not as a whole, but only as against itself.
The last two issues in the case related to consequential matters of no importance. The suit having been dismissed, the plaintiff-Trust appealed in the High Court where the learned Judges of the Division Bench formulated the findings of the trial Court as follows, in so far as they considered the findings relevant to the disposal of the appeal before them :---
"(1) The properties described in the Schedule A' to the plaint did not vest in the Trust before 22-4-48.
(2) On 22-4-48 Rai Bahadur R. P. Saha by a registered deed sold and transferred the above properties to the plaintiff Trust.
(3) Ordinance IV of 1947 is retrospective in operation.
(4) The Rai Bahadur and the plaintiff-Trust failed to produce the certificate required under section 3 of the Ordinance and therefore the attached properties are liable for the income-tax dues of Rai Bahadur R. P. Saha and the attachment was legal.
(5) The Civil Court has no jurisdiction to try the suit in view of the reliefs claimed in the same".
Of these findings, it appears to us that the first two were unnecessary for the disposal of the suit. The third finding is on a matter in issue before the trial Court, but on the view which we regard as the correct view in the present case, its decision has been premature. It has already been mentioned that on the point of jurisdiction the High Court overruled the view of the trial Court and held that there was jurisdiction. As regards the finding with respect to the legality of the attachment, it does not appear to have been correctly or comprehensively summarised. As we have seen, the trial Court had dealt with three cognate issues, touching this point, in a single paragraph. On these issues, the views of the learned Judges in the High Court are contained in the following paragraphs :----
"Here the proceeding has been started against the properties of the plaintiff under section 4 of the Ordinance which lays down that if any property has been transferred, assigned, limited or extinguished after the 14th day of August 1947', an Income-tax Officer may require any of the parties to produce a certificate and on failure thereof may forward a statement to the Collector showing the liabilities of each or any of the said parties. The Collector shall then proceed to recover the amount shown in the statement and for the purpose of the recovery proceedings treat the said property as if it belonged to all or any of the persons named in the statement. No case of non-compliance of these provisions has been made out before us. This is not a case of the plaintiff being a legal representative of the original debtor. It is a case of non-recognition, of the transfer in favour of the plaintiff, by the Income-tax authorities for the purpose of their dues against the transferor.
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It was next contended by the learned Advocate for the appellant that the issue of notice (Exh. 9) on the plaintiff-Trust is illegal. A notice under section 7 of the P. D. R. Act can only be issued on the certificate-debtor and as the plaintiff has not been substituted in place of the original debtor the issue of notice and all other proceedings taken against the plaintiff are illegal. We have already dealt with the legal basis on which the certificate proceedings were started against the properties which now belong to the plaintiff Trust and which formerly belonged to Rai Badadur. We do not think, therefore, that there was any illegality is the issue pf the, notice .Exh. 9 of all other actions taken against the properties of the Trust which formerly belonged to Rai Bahadur".
The learned Judges were clearly right in thinking that by virtue of the action taken under the Ordinance, the matter became one of "non-recognition of the transfer in favour of the plaintiff, by the Income-tax authorities for the purpose of realisation of their dues against the transferor". They have not interpreted the Certificate Officer's order as being one of addition of a certificate-debtor, and their conclusion that there was no illegality in the issue of a notice under section 7 of the Public Demands Recovery Act, to the Trust is not supported by any reasoning. Mr. Suhrawardy for the plaintiff-Trust has contended strongly that the order of the 28th April 1952 and the resulting warrant of the 30th April 1952 clearly have the effect of making the Trust liable in law as a certificate-debtor, and that upon the basis appearing in the order of the 28th April 1952, no such action could have been taken. The Trust as a person could not conceivably be made liable for the dues of Mr. Saha to the Income-tax authorities, by virtue of anything contained in Ordinance IV of 1947, but that is what the Certificate Officer by his order purports to say. By the warrant it was declared that the Trust has "got a certificate debt" in case No. 23 I. T. of 1951-52, which is a case involving only one certificate-debtor, namely, Mr. Saha. Therefore, there is no legal basis, in the submission of Mr. Suhrawardy, for the Trust being drawn into the certificate-proceedings in the manner appearing from the order of the 28th April 1952, and the consequential warrant dated the 30th April 1952. Since sequestration of property is involved it is essential that the proceedings under the law authorising such sequestration should be held in strict conformity with that law. Therefore, it was urged that the learned Judges are not right in saying that the issue of a notice under section 7 of the Act to the plaintiff-Trust, which was clearly not the certificate-debtor in the case, was not illegal, since under that section a notice can only go to a certificate-debtor. Similarly, the issue of the warrant attaching the property, under whatever law it might have been issued, was an illegal action inasmuch as it purported to declare that the certificate-debt for the satisfaction of which it was being issued pertained to the plaintiff-Trust as certificate-debtor.
Mr. Suhrawardy invited our attention to the fact that by virtue of section 8 of the Public Demands Recovery Act, a certificate-debtor incurs very grave liabilities from and con sequentially upon the receipt of a notice under section 7. All private transfers of immovable properties by a certificate-debtor after such notice are void against the certificate and moreover, the amount of the certificate is a charge upon the entire immovable property of the certificate-debtor wherever it might be situated. Those, in the submission of Mr. Suhrawardy, were liabilities attaching to Mr. Saha under the certificate issued in this case, but by the illegal action of the Certificate Officer, these very serious liabilities, applicable to the satisfaction of a very large tax-claim, would in law apply to all the properties of the Trust, which included extensive properties other than those which were enumerated in the schedule, and which the Nazarat Deputy Collector had purported to attach. In addition, under section 14, a number of liabilities are imposed upon a certificate-debtor from which the plaintiff-Trust could claim to be immune whatever might be found to be the position as to the claim of immunity of the scheduled properties.
These contentions appear to us to be unanswerable, and no answer has in fact been attempted on the opposite side. In our view, the only action which could properly be taken in conse quence of the motion of the Income-tax authorities dated the 30th March 1951, was to take out attachment of the scheduled properties, as if they were properties vesting in the assessee Mr. Saha, and thereupon, it would have been open to the Trust' to make an objection before the Certificate Officer. It would then become possible to obtain a resolution pf the questions arising in this matter in accordance with the jurisdictions provided by the law, and free of the confusion created as to these jurisdictions and otherwise by the erroneous order of the Certificate Officer dated the 28th April 1952, and the equally erroneous warrant of attachment which was issued on the 30th April 1952, as a consequence. We consider that these purposes can be secured by making a declaration in the terms claimed by the plaintiff Trust, as to the validity of the said order and the consequential warrant.
In the result, we allow this appeal with costs throughout, and grant the plaintiff-Trust a decree for a declaration that the order of the Certificate officer dated the 28th April 1952 and the consequential warrant of the Nazarat Deputy Collector dated the 30th April 1952, are illegal and inoperative. It will be open to the proper authorities to continue the proceedings from the point which had been reached immediately before the making of the orders which we have today avoided.
A. H. Appeal allowed.
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