STATE OF U.P. AND OTHERS versus SRI NARAIN

Citation: [1965] 3 S.C.R. 130 · Decided: 22-02-1965 · Supreme Court of India · Bench: K. SUBBA RAO · Disposal: Appeal(s) allowed
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Judgment (excerpt)

130 
STATE OF U.P. AND OTHERS 
v. 
SRI NARAIN 
February 22, 1965 
' 
[K. SUBBA 
RAO, 
RAGHUBAR DAYAL, 
J. R. MUDHOLKAR, R. S. 
A. 
BACHAWAT AND V. RAMASWAMI, JJ.J 
B 
U.P. Zamindari Abolition & Land Reforms Act, 1950 (U.P. Act of 
1951)~U.P. Zamindari Abolition & Land Reforms Rules-Compen-
sation Bonds-Acceptance in payment of tax dues-Delivery to inter-
mediary-Ceases to be payable-Ss. 6(d), BB. r. B-A. 
1,he respondent 
who was assessed to agricultural income-tax 
made an application to the Assessing Officer depositing compensa-
tion Bonds and prayed that the Bonds be accepted in payment of tax 
C 
dues. This was rejected stating that there was no rule for accept-
ance of these bonds. Another attempt by the respondent was also 
turned down by the Collector. Thereafter the respondent presented 
a writ petition in the High Court for directing them to accept the 
Bonds in lieu of the tax dues. The High Court was of the opinion 
that the two officers completely ignored the provisions of s. 6(dJ of 
the Act and r. BA, and directed the Collector to decide the respon-
D 
dent's application in accordance with law. In appeal by special 
leave: 
HELD: (i) Neither s. 6(d) nor r. BA provide that the Bonds must 
or can be accepted in payment of tax on agriculture income 
fl33 El 
Collector of Sultanpur v. Raja Jagdish Prasad Sahi, [1965] 2 
S.C.R. 2B, referred to. 
E 
(ii) When the compensation payable to an intermediary has been 
paid in the form of cash or Bonds. that compensation ceased to be 
payable. 
The fact that the Bonds are negotiable does not make them legal 
tender and does not make it obligatory on anyone including Govern-
ment to accept them in payment of any dues. The only result of their 
being treated as negotiable instruments is that the owner of the 
Bonds can transfer them to any person who is agreeable to pur-
F 
chase them. fl34 D-Fl 
Ctv1L 
APPELLATE 
JURISDICTION: Civil Appeal No. 424 of 
1963. 
Appeal by special leave from the judgment and order dated 
April 8, 1960 of the Allahabad High Court in Civil Misc. Writ 
No. 2650 of 1956. 
G 
C. B. Agarwala and 0. P. Rana, for the appellant. 
Yogeslnvar Prasad, Hardev Singh and M. V. Goswami, for 
the respondents. 
The Judgment of the Court was delivered by 
Raghubar Dayal, J. This appeal. by special leave', raises the 
question whether Zamindari Abolition Compensation Bonds (shortly H 
termed Bonds) issued by the U.P. Government to intermediaries 
in payment of compensation payable on the basis of their rights 
under the Uttar Pradesh Zamindari Abolition and Land Reforms 
Act, 1950 (U.P. Act I of 1951), hereinafter referred to as the Act. 
· have to be acc;epted by the appropriate authorities in payment of 
the agricultural income-tax due from them. 
STATE v. NARAIN (Dayal, J.) 
131 
A 
The tacts leading to the appeal, in brief, are that the res-
pondent, an ex-Zamindar, was assessed to agricultural income-tax 
in the assessment year 1360 F corre3ponding to 1952-53, on the 
basis of the agricultural income accruing in the previous year 1359 F 
corresponding to 1951-52. He did not pay the assessed tax and 
was further assessed to a penalty. In the result, Rs. 868 /- were to 
B be paid by him for tax plus penalty. 
The respondent's writ petition contending that he was not liable 
to pay tax was dismissed by the High Court. Thereafter, the agri-
cultural income-tax authorities took out proceedings for the reali-
sation of the amount due from him. On July 24, 1956, the res-
0 
pondent presented an application to the Agricultural Income-tax 
Assessing Officer, Allahabad, stating that he had no ready cash to 
pay the dues aiid that he was therefore depositing Bonds of the 
value of Rs. 850/- and Rs. 18/- in cash and praying that the Bonds 
be accepted in payment of tax dues. This application was rejected 
by an order stating that there was no rule for the acceptance of 
D those bonds and that they be ret\Jrned to the applicant. 
On August 1, 1956, the respondent made a similar application 
to the Collector complaining that the Assessing Officer had no 
valid reason to refuse to take the Bonds when the Bonds were 
negotiable instruments. This application was also rejected on a 
B report of the Assessing Officer that the Bonds were not accepted 
in the settlement of agricultural income-tax dues, that they were 
not negotiable and that there was no provision in the Act for their 
acceptance. 
Thereafter, thP respondent presented a writ petition to the High 
Court of A
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