LexUNION OF INDIA versus JARDINE HENDERSON AND ORS.
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UNION OF INDIA
v.
JARDINE HENDERSON Al'<D ORS.
(AND VICE VERSA)
March 16,' 1979
[N. L. UNTWALIA AND R. S. PATHAK, JJ.]
Bengal Public Demands Recovery Act, 1913, Sections 7 to 10 rea4 with
Rule 46{2) under the Act, Scope of-Locus standi of the Purchaser of the
propc1ty of certificate debtor to prefer a claim objecting to the sale of property
under the Act.
Taxation Laws (Continuation and Validation of Recovery Proceedings)
Act, 1964, Section 3(l)(a) & (b) read with sub.section (4) section 35 of the
Income Tax Act, 1962-When a fresh notice of demand is necessary, explainied.
In Income Tax Officer, Kolar Circle and Anr. v. Seghu Buchiah Setty.
52
I.T.R. 538, this Court held that the recovery proceedings initiated against the
assessee-respondent' on the basis of the original demand notice were bad as it
was of ·tbc view that the amount of tax assessed when reduced as a result of
the appellate orders a fresh demand notice had to be served on the respon-
dent before he could be treated as a defaulter. To get over the difficulties in
the collection of income tax and other direct taxes created by the decision in
Seghu Chctty's case, the Taxation Laws (Continuation and Validation of Re-
covery Proceedings) Act, 1964 was passed with retrospective effect by an express
provision in. section 5.
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The property belonging to two brothers, the certificate debtors in . C.A.
1575(NT) 71 and C.A. 1965 (NT) of 1963 respectively were purchased by
M/s Jerdine Henderson (Ltd.) on September 20, 1954, i.e. after service of
notices under section 7 of $e Bengal Public Demands Recovery Act, 1913.
The objections raised by the certificate debtors were rejected and the property
came to be sold. In both cases the Company received a notice on August 6,
1956 fixing a date for settling the terms of the sale proclamation in respect of
the respective one half share of each of the two Certificate-debtors. Imme ..
diately thereafter the respondent-company made an application in each of the
two cases that it had purchased the property being unaware of the pendency
of any Ceritficate case against any of its vendors for realization of income-
tmc dues and that the Company was the owner of the property and it was
not liable to be sold as that of the Certificate-dei>tor. The Certificate Officer
rejected the objection holding that the purchase having been' made after ser-
vice of notice under· section 7 of the Bengal Act on the Certificate-debtor,
was void as against any claim enforceable in execution of the Certificate and
hence the Company had no right to object to the sale. The Company went
up in appeal before the Commissioner and succeeded in both the cases. Two
revisions were filed before the Board of Revenue which were
allowed. The
respondent-company then moved the High Court under Article 227
of the
Constitution. The petition giving rise to Civil Appeal No. 1575 was allowed .
The other petition giving rise to C.A. 1965 of 1971 was dismissed by the oame
Bench.
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556
SUPREME COURT REPORTS
[1979] 3 s.c.R.
A
Two questions, namely (a) the locus standi of the purchaser-Company to
prefer a claim objecting to the sale of the property and
(b) the effect o!
section 3(1 )(a) and (b) of the Validation Act, 1964 read with Section :l5(4)
of the Income Tax Act, 1962 arose for decision in these &ppeals.
Allowing C.A. 1575/71 and dismissing C.A. 1965/71 (both by certificates)
the Court.
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HELD : I. The Company as a purchaser of the properly of the certificate
debtors had locus standi to prefer the claim. The company preferred a claim
objecting to the sale of property on the ground that it was not liable to be
sold as it had purchased the property from the two certificate debtors. In the
Bengal Public Demands Recovery Act, 1913, there is no
express provision
enabling a person other than the Certificate debtor claiming an interest in the
property to he sold to file any objection. He, of course,
under section 22
can take recourse to the said provision by filing an application to set aside
the sale of immovable property on deposit of the amounts provided therein.
But the rules in Schedule II under secion 38 have the effect as if enacted in
the body of the Act. In Schedule II is to be found rule 39 which is very
much like rule 58 of Order 21 of the Code of Civil Procedure, 1908. [561 F--G]
(a) It was open to it to show under rule 40 that at the date of the service
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