Union of India (Uoi) (income-tax Officer, Eluru) Vs. Official Liquidator E.M.T. Ltd., Eluru (Official Receiver, West Godavari, Eluru) and ors. - Court Judgment

Excerpt:
company - recovery of decree amount - section 73 of transfer of property act, 1882 - motor transport company to pay certain amount to x - in pursuance to order of court official liquidator wound up motor transport company and sold all busses owned by company - held, x entitled to receive decree amount from the proceeds of selling of buses. - all india services act, 1951.sections 8 & 11 & a.p. buildings (lease, rent and eviction) control rules, 1961, rule 5: [v.v.s. rao, g. yethirajulu & g. bhavani prasad, jj] refusal by landlord to receive rent - deposit of rent in court - held, a tenant has the option to take recourse to section 8 in case of refusal or evasion by landlord to receive rent and if landlord were to not name a bank or refuse even the money order of rent, the tenant can deposit the rent in accordance with sub-rules (1) to (3) of rule 5. the notice to person entitled to rent and proper maintenance of accounts of such deposits under sub-rules (4) and (5) of rule 5 are solely dependent on compliance with sub-rule (3) by the tenant. the payment or deposit of rent under section 11 read with sub-rule (6) of rule 5 arises only in respect of a tenant who did not take recourse to section 8 or section 9 before an application for eviction has been made against him in respect of any rent in arrears by date of that application, whereas in respect of rent that becomes subsequently due since date of application for eviction, the tenant is bound to pay or deposit regularly until termination of proceedings in order to enable him to contest the application. any violation of section 11(1) to (3) and sub-rule (6) of rule 5 makes the tenant liable for the adverse consequences under sub-section (4) of section 11. thus, the provisions of section 11 and sub-rule (6) of rule 5 are intended only to ensure the payment and deposit of rent including arrears during pendency and till termination of proceedings for eviction. the forfeiture of right of tenant to contest in case of default is to protect the rights and interests of landlord pending such an application for eviction, but not to confer any right on tenant to plead that all defaults committed by him prior to application for eviction can never be considered wilful, if he were to deposit all arrears of rent due within fifteen days under rule 5(6) read with sub-section (1) of section 11. the object and effect of section 11 and sub-rules (1) to (5) to rule 5, the former being for protection of landlord during pendency of eviction proceedings and the later being for protection of tenant to avoid any liability for eviction on ground of wilful default. consequently, while taking recourse to section 8 by tenant is optional, once that option is exercised, compliance with sub-rules (1) to (5) of rule 5 becomes mandatory in the sense that any non-compliance with prescribed procedure will positively indicate the wilful nature of default committed in paying or tendering rent as prescribed. while deposit of rent in terms of provisions of act and the rules amounts to valid tender of rent to landlord, the failure to comply with rule 5 (3) requiring delivery of a copy of the challan for deposit of rent in office of controller or appellate authority, as the case may be, so as to enable controller or appellate authority to cause maintenance of proper accounts under sub-rule (5) and give notice of deposit to person amounts to wilful default in making valid payment or lawful tender of the rent by the tenant to the landlord. thus, where a tenant obtains an order to deposit rent, same shall be deposited at least by the last day of the month following that for which rent is payable and rent challan shall be delivered in the office of controller within a reasonable time so that rent controller can take necessary action for service of notice of deposit under sub-rule (4) of rule 5 of the rules within seven days of such delivery. in the absence of compliance in so depositing rent and delivering challan in the office of controller, tenant shall be deemed to have committed wilful default.satyanarayana raju, j.1. these two appeals arise out of a common order passed by the district court, west godavari in i. a. nos. 52 and 53 of 1956 in o. p. no. 67; of 1954.2. the facts, which have given rise to these appeals, may be briefly stated :2a. one garapati china kanakayya obtained a compromise decree in o. s. no. 83 of 1952 against the eluru motor transport limited. the decree provided, inter alia, that the. company should pay the decree amount on or before the 1st december, 1953 and that in the event of the amount not being paid before the due date, the decree-holder should recover the entire decree amount by sale of the 13 buses belonging to the company.on the 17th april, 1953 the managing director of the company executed a registered security bond in favour of the district judge, at west godavari whereunder the thirteen buses, register numbers whereof were mentioned in the bond, were furnished as security for the satisfaction of the decree. under the security bond, it was also provided that in the event of the company making default in the payment of the amount, the decree holder should realise his decree amount by sale of the buses. this bond was registered under section 109 of the indian companies act and attached to the decree as part and parcel of it.3. default having been made by the company in the payment of the decree amount, the decree-holder filed e. p. no. 51 of 1953 for enforcing the terms of the compromise decree and for realisation of the amount of the decree by the sale of the buses. while so, on the 25th december, 1953 proceedings were initiated in o. p. no. 442 of 1953on the file of the high court of madras for winding up the company and on the 16th february, 1954, the company was directed to be wound up.the official liquidator, madras took possession of the entire assets of the company and pursuant to an order made by the court, he sold 4 of the buses and realised a sum of rs. 20,000. subsequently, the proceedings pending on the file of the madras high court were transferred to the andhra high court and eventually to the district court, elura, and along with the transfer of the proceedings, the sum of rs. 20,000 realised by the official liquidator, madras was sent to the official receiver, eluru. the decree-holder attached a sum of rs. 14,000 out of the total amount of rs. 20,000 in the hands of the official receiver.4 in and by the above petitions, the union of india represented by the income-tax officer, eluru sought an order from the court directing the payment of the amount in the hands of the official receiver to him, in discharge of the arrears of income-tax due by the company in liquidation. these applications were opposed by the decree-holder and were dismissed by the lower court on the ground that the decree-holder had a charge both on the buses and on the sale proceeds of those buses and that the attachment, obtained by the decree-holder, of the sale proceeds in the hands of the official receiver, could not be questioned.5 it is contended by mr. c. kondaiah learned counsel for the appellant, that the conclusion reached by the lower court proceeded upon an erroneous view of the law. he relied upon the decisions in chithambara chetti v. mulhaya chetti, ilr 5 mad 330 and kandaswami chetti v. adimoola chetti, 47 mad lj 704: (air 1925 mad 275). in c. m. a. no. 1 of 1956, a rcnch of this court, of which one of us was a member (satyanarayana raju, j.) dealt with an identical contention arising out of the same proceeding. it was there held that the doctrine of substituted security applied. that theory rests on the facts that where the mortgagee loses his right on the hypotheca by reason of its sale he can proceed against the proceeds of the sale which are substituted for the properly sold.this doctrine applies where the property has been sold free of the mortgage, and when, as in this case, a charge has been created in respect of the buses for the due payment of the decree amount in favour of the decree-holder and those buses have been sold subsequently, the charge or security must necessarily be enforced against the sale proceeds of the buses. the doctrine of substituted security has been affirmed in a decision of the madras high court in penumeta subba raju v. veegesena seetha-rama raju, ilr 39 mad 283: (air 1916 mnd 323), as also in a decision of the patna high court in mukhram marwari v. bateswar mahton, air 1937 pat 307. this disposes of the first of the contentions.6 it is then argued by mr. kondaiah, that the debts due to the government, have a priority and that, therefore, the government is entitled to collect its income-tax arrears, in preference to the other creditors. this was not the ground on which the application for attachment made in the courtbelow was rested. admittedly, this point was not taken before the lower court, even at the time of the arguments. this point was not taken again in the memorandum of grounds filed in this court. the respondent had no opportunity of meeting this ground. we do not think that the appellant should be allowed to raise this ground at this belated stage.7 these appeals are, therefore, dismissed with, costs, one set.