BUILDERS SUPPLY CORPORATION versus THE UNION OF INDIA REPRESENTED BY THE COMMISSIONER OF INCOME-TAX, WEST BENGAL AND OTHERS

Citation: [1965] 2 S.C.R. 289 · Decided: 30-11-1964 · Supreme Court of India · Bench: P.B. GAJENDRAGADKAR · Disposal: Dismissed

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Judgment (excerpt)

B 
c 
D 
G 
H 
BUILDERS SUPPLY CORPORATION 
v. 
TIIE UNION OF INDIA REPRESENTED BY IBE COMMIS· 
SIONER OF INCOME-TAX, WEST BENGAL AND OTHERS. 
November 30, 1964 
[P. B. GAJENDRAGADKAR, C.J., M. HIDAYATULLAH, 
J. C. SHAH, S. M. SIKRI AND R. S. BACHAWAT, JJ.] 
DOC(rine of priority of Crown Debts under Common Law-WheJher 
applicable to India. 
Income-tax arrears due to Union Government-Recovery thereof-Whet-
her has priority above claims of unsecured creditors of common debtors-
Doctrine of priority af Crown Debts in relation to tax dues-Whether a 
'law in force' in India at cotnn1encen1ent of Constitution--Constitution of 
India Art. 372(1). 
Indian Income Tax Act 1922, s. 46, and provision of Public Demand.< 
Recove~y Act whether displace doctrine of priority of Government Debts. 
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 contract. The Executing Court at 
the instance of the appellant attached a sum equivalent to the decretal 
amount from the aboYe 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 inoome tax arrears of more than Rs. 5,000 were due from the Judg-
ment-debtor for which a certificate under s. 46(2) of the Income-tax Act, 
1922 had 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 bad 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 Executing Court accepted this plea. 
'!be 
appellant filed a revision before the High Court but failed to get relief. 
Thereupon he appealed to the Supreme Court with a certificate of fit-
ness. 
It was contended on behalf of the appellant : 
(I) The High Court had wrongly held that the Common Law doctrine 
of the priority of 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 Consti· 
tution within the terms of Art. 3 72 ( 1), and there was no scope for conti-
nuing its Operation after the Constitution came into force : (3) The doctrine 
of the pnonty of Crown debts could not also be enforced because it was 
specifically provided for and covered· by the provisions of s. i6 of the 
Indian Income-tax Act, 1922, and by the relevant provisions of the Reco-
very Act. 
HELD : (i) The Common Law doctrine of the priority o[ Crown debts 
had a wide sweep but the question in the present appeal was the narrow 
ooe whether the Union of India was entitled to claim that the reco\ery 
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 bis other private 
290 
SUPREME COURT REPORTS 
1965] 2 S.C. R. 
creditors. 'fhe weight of authority in- India was strongly in support ot \he 
priority o.f tax dues. [300 DJ 
· · 
· 
The Secrt:tary c>/ Stat~ in Council for India v. 1'he Bon:bay Landing & 
Shipping Co. (Limited), (1868-69) 5 Born. H.Oi>R. p. 23; Man.ickam Chettiar. 
r. Income-tax Officer. J\IJdura, (1938), 6 I.T.R. 180, Raoiacharuira v. 
Pitchaikam1i, ( 1884) 1.L.R. 7 Mad. 434; Bank of India v. John Bowman 
and Ors., A.LR. 1955 Born. 305, Beil v. The Municipal Com1nissioners for 
the City of Ma:lra.r, (1902) l.L.R. 25 Mad. 457 .... discussed. 
Kaka fl(uhan11nad Ghouse Sahib & Co. v. United Co1nn2ercial Syudicat(.' 
Md Others, ( 1963) 49 l.T.R. 824, disapproved. 
(ii) The Common Law doctrine on which the Union of India based it& 
·claim in the present proceedings had been applied and upheh.J in lhat par11 
·of India \\''hich v1as know·n as '.British lndia' prior to the Con1ti'tut.ion. 
1·nc 
rules of Common Law relating to suhstantive rights \Vhich had been :idopt1..~l 
by this country and enforced by judicial decisions, amount to "!n;,:v in 
force' in the territory of India at the relevant time \Vithin the meaning of 
Art. 372( I). 
In that viev..' of the 1natter, the contention of the aprcilaiit. 
1hat :ifter the ('onslitution \Vas adopted the position 

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