1979 (1) TMI 16 - HC - Income Tax

Court Decree: Plaintiff Entitled to Enforce Charge under Public Demands Recovery Act

Union Of India Versus Ratanlal Bhawalka And Others

The court found that the plaintiff's suit disclosed a cause of action, defendant No. 3 was not a bona fide purchaser for value without notice, and the ... Certificate Proceedings Issues Involved:1. Does the plaint disclose any cause of actionRs.2. Was the defendant No. 3 a bona fide purchaser for value without noticeRs.3. To what relief, if any, is the plaintiff entitledRs.Detailed Analysis:Issue 1: Does the plaint disclose any cause of actionRs.The plaintiff, Union of India, filed a suit for a declaration that premises No. 41, Radha Madhab Saha Lane, Calcutta, stands charged for the payment of Rs. 11,443.43 and sought a decree under Order 34, Rule 4 of the CPC along with other consequential reliefs. The plaintiff's case is that defendant No. 1 was assessed for the assessment year 1947-48 and a notice of demand was duly served. A certificate under Section 46(2) of the Indian Income-tax Act, 1922, was issued for the balance amount, and a notice under Section 7 of the Bengal Public Demands Recovery Act was served on May 23, 1951. Subsequent assessments for the years 1949-50 and 1950-51 also led to the issuance of similar notices and certificate proceedings. Defendants Nos. 1 and 2 transferred the property to defendant No. 3, who then transferred it to defendant No. 4. The plaintiff contended that a charge was created on the property upon the service of the notice, and subsequent transfers were subject to this charge. The court found that the plaint disclosed a cause of action, answering Issue No. 1 in the affirmative.Issue 2: Was the defendant No. 3 bona fide purchaser for value without noticeRs.Defendants Nos. 3 and 4 argued that defendant No. 3 was a bona fide purchaser for value without notice of the certificate proceedings. They contended that the certificate proceedings were initially filed in Howrah and later transferred to Alipur, and they had no notice of the same. They also challenged the validity and mode of service of the notice under Section 7. However, the court observed that defendants Nos. 3 and 4 did not provide evidence to support their claim of being bona fide purchasers for value. The court noted that the Public Demands Recovery Act does not provide protection to bona fide purchasers for value without notice. The court concluded that the charge created under Section 8(b) of the Act was valid and enforceable, irrespective of the purchaser's knowledge. The court answered Issue No. 2 in the negative.Issue 3: To what relief, if any, is the plaintiff entitledRs.The plaintiff sought to enforce the charge created under Section 8(b) of the Public Demands Recovery Act. The court held that the service of notice under Section 7 binds the immovable property and prevents alienation against the claim of the certificate creditor. The certificate proceedings were found to be valid, and the charge created by operation of law was enforceable. The court noted that the plaintiff had proven the service of the certificate notice, and the subsequent transfers by defendants Nos. 1 and 2 were void against the plaintiff's claim. The court passed a decree in favor of the plaintiff in terms of prayers (c), (d), and (h), effectively enforcing the charge on the property for the payment of Rs. 11,443.43. The court granted a stay of the operation of the order for a week.Conclusion:The court concluded that the plaint disclosed a cause of action, defendant No. 3 was not a bona fide purchaser for value without notice, and the plaintiff was entitled to enforce the charge on the property. The court passed a decree in favor of the plaintiff, enforcing the charge created under Section 8(b) of the Public Demands Recovery Act.