K.A Swami, J.:— This civil revision petition is directed against the order dated 28th May, 1976 passed by the learned First Additional Munsiff, Hubli, in Misc. Case No. 70 of 1975. By the said order, the learned Munsiff has partly allowed the application filed by the petitioner under Order 21 Rule 46 read with Section 73 of the Code of Civil Procedure and has held that the petitioner is entitled to the amount of the judment debtor deposited in the Court at C. No. 75, dated 7th April, 1975 excluding the amount due to be paid to the decree holder in Execution 18 of 1974 and the claim of the petitioner for payment of the money which is ordered to be paid to the decree holder in Execution 18 of 1974 has been rejected.

2. The brief facts of the case for the purpose of deciding the contentions: raised in this civil revision petition are as follows: The vehicle in question bearing registration No. MYK 4443 belonged to the 2nd respondent, who was an assessee to the Income Tax Department and was in arrears of income-tax to be paid for the assessment years 1966–1967 to 1970–1971 and 1971–1972 to 1972–1973 to the tune of Rs. 18,851 including the penalty. The first respondent obtained a decree against the 2nd respondent in O. No. 228 of 1972 on the file of the Munsiff Hubli, for recovery of certain sum. This decree was executed in Execution Case No. 18 of 1974 on the file of the 1st Additional Munsiff, Hubli. In that execution, the aforesaid vehicle in question belonging to the 2nd respondent was sold in the Court auction on 4th April, 1975 for Rs. 16,000. One Mr. Ganisab Bellary was the auction-purchaser.

3. There was also another suit filed by one P.P Mane being Original Suit No. 9 of 1972 in the Court of the Munsiff at Hubli against the 2nd respondent. That suit also ended in a decree for recovery of certain sum. The execution of that decree also was taken out in Execution No. 330 of 1972 on the file of the Principal Munsiff, Hubli.

4. During the pendency of Execution 330 of 1972, on the file of the Principal Munsiff, Hubli, the Tax Recovery Officer, Dharwad, had served a notice on the 2nd respondent under Rule 2 of Schedule II to the Income-tax Act. It is also relevant to notice at this stage that in O.S No. 9 of 1972, the vehicle in question along with another vehicle bearing registration No. MYD 4919 was got attached by the plaintiff therein. Pursuant to the order of attachment, the vehicle in question was attached and was kept under the custody of the court and the keys of the vehicle were also produced in the Court along with the report of the Bailiff. This fact is clear from the Mahazar dated 29th May, 1972 found at page 19 of the records relating to O.S No. 9 of 1972. After issuing notice under Rule 2 of the II Schedule to the Income-tax Act, the Tax Recovery Officer has also intimated the Principal Munsiff, Hubli, under Rule 31 of the II Schedule to the Income-tax Act, in Form No. ITCP 10 requesting the Court to hold the vehicle subject to the further orders by the Tax Recovery Officer. The said form is marked as Exhibit-P 1. This form, was sent to the Principal Munsiff on 10th August, 1972. As already pointed out, the vehicle in question was in the custody of the Court on 10th August, 1972. Exhibit P-1(a) is the acknowledgment issued by the Head Munshi of the Munsiff Court, Hubli, for having received Form ITCP 10, on 10th August, 1972. Exhibit P-2 is the notice dated 21st March, 1972 issued to the 2nd respondent by the Tax Recovery Officer for payment of arrears of income tax. Exhibit P-2(a) is the acknowledgment for having served the notice on 24th March, 1972 under Rule 2 of Schedule II to the Income Tax Act on the 2nd respondent. Exhibit P-3 is another Form No. ITCP 10, dated 19th September, 1972 sent to the Principal Munsiff, Hubli, and Exhibit P-3(a) is the acknowledgment for having received the same by the Head Munshi. Exhibit P-4 is another form No. ITCP 10 sent to the First Additional Munsiff, Hubli, regarding the amount to be recovered out of the sale proceeds of bus No. MYK 4448 in Execution 18 of 1974. In spite of the fact that the Form ITCP 10 was sent to the Principal Munsiff, Hubli, on 10th August, 1972, the vehicle in question was sold on 4th April, 1975 in the Court auction for recovery of the amount due under the decree passed in O.S No. 228 of 1972 in Execution Case No. 18 of 1974 pending on the file of the 1st Additional Munsiff, Hubli.

5. On coming to know of the aforesaid sale, the Tax Recovery Officer has filed Misc. 70 of 1975 under Order 21 Rule 46 read with Section 73 of the Code of Civil Procedure, praying that the amount of Rs. 16,000 deposited under C. No. 75, dated 7th April, 1975, in the Court be ordered to be paid to the petitioner-applicant in preference to all other individual creditors or decree-holders. The learned Munsiff was of the opinion that Exhibit P. 1 was sent to the Court of the Principal Munsiff, wherein Execution 18 of 1974 was not pending, therefore, it was of no consequence; that an intimation sent to the Principal Munsiff Court did not amount to an intimation to the 1st additional Munsiff Court. Regarding the intimation sent as per Exhibit P. 4, it was held that the said intimation was received by the 1st Additional Munsiff after the order was passed on 4th April, 1975 entering satisfaction of the decree and as such, even though the amount had not been with-drawn by the decree-holder on the date of receipt of Form ITCP 10, such an amount could not be said to be the amount in the custody of the Court because the Court had already directed the payment of the amount to the decree-holder. Therefore, the learned Munsiff has directed that the remaining amount only be paid to the Tax Recovery Officer.

6. In this civil revision petition, it was contended on behalf of the petitioner that when once a notice under Rule 2 of Schedule II of the Income Tax Act, was served on a defaulter, he was not competent to mortgage, charge, lease or otherwise deal with any property belonging to him except with the permission of the Tax Recovery Officer and a Civil Court was also not competent to issue any process against such property in execution of a decree for payment of money. It was also further contended that the vehicle in question was in the custody of the Principal Munsiff, Hubli, and as such, the intimation as required by Rule 31 of the II Schedule to the Income Tax Act, was sent to the said court and it was received by the Court on 10th August, 1972. It was also further contended that an intimation to the Court of the Principal Munsiff was an intimation to the Additional Munsiff inasmuch as the Court was only one. It was contended that because more than one Munsiff was appointed to the Munsiff's Court at Hubli, one was called the Principal Munsiff and the other was called the Additional Munsiff for the purpose of distribution of work, but that did not mean that the Additional Munsiff constituted a different court; therefore, the notice sent to the Court of the Principal Munsiff did amount to notice to the 1st Additional Munsiff also. As such, it was contended that the 1st Additional Munsiff was not entitled to dispose of the property by auction in view of the bar contained in Rules 16 and 31 of the II Schedule to Income Tax Act.

On the contrary, it was contended by Sri Tarakram, learned Counsel for the first respondent, that the petitioner had not challenged the auction sale held on 4th April, 1975, that Rule 31 of the II Schedule to the Income Tax Act, was applicable only to the property in the suctody of the Court and as such, the petitioner was not entitled for the relief prayed for in the application, as the vehicle in question was not in the custody of the Court.

7. In view of the aforesaid contention, the points that arise for consideration, in his civil revision petition are:

(i) Whether the intimation; in form ITCP 10 sent as per Exhibit P. 1 on 10th August, 1972 to the Principal Munciff Court amounted to notice to the 1st Additional Munsiff?

(ii) Whether the property in question bearing No. MYK 4448 was in the custody of the Court?

8. It is convenient to dispose of the 2nd point first. As Pointed out in para-4 of this order, the vehicle in question was attached and was kept under the custody of the court. As such, it was in the custody of the Court when the notice as required by Rule 31 of Schedule-II to the Income-tax Act, was received by the Court of the Principal Munsiff, Hubli, on 10th August, 1972; therefore, as required by the said Rule, the Court was required to hold the vehicle subject to further orders of the Tax Recovery Officer.

9. The reasoning of the learned Munsiff, that the intimation sent to the Court of the Principal Munsiff, on 10th August, 1972, as per Form ITCP 10 did not amount to an intimation to the 1st Additional Munsiff, is not correct. The Court of the Munsiff at Hubli was only one. There was more than one Munsiff appointed to that Court under Section 8 of the Karnataka Civil Courts Act, 1964. Where more than one Munsiff is appointed to a Munsiffs Court, one of them is appointed as the Principal Munsiff and the others as additional Munsiffs for the purpose of distribution of work as provided by Section 9 of the aforesaid Act. But, all of them are the Munsiffs of the same Court to which they are appointed and exercise all or any of the powers conferred on such Court (See Section 9(2) of the Karnataka Civil Courts Act, 1964). Merely because they sit in different Court Halls and conduct proceedings, each Munsiff does not constitute a different Court by himself. Therefore, the intimation sent to the Principal Munsiff did amount to an intimation sent to the First Additional Munsiff for the purpose of complying with Rule 31 of Schedule II to the Income-tax Act.

10. Income Tax Act, 1961 and the Rules contained in the II Schedule to that Act and Schedule II, will hereafter be referred to as ‘the Act’, ‘the Rules’ and ‘the Schedule’ respectively.

Rule 2 of the Rules, provides for serving notice on the defaulter by the Tax Recovery Officer on receipt of a certificate received by him from the Income Tax Officer for the recovery of arrears under the Schedule requiring the defaulter to pay the amount specified in the certificate within 15 days from the date of service of the notice and intimate the same and in default, steps would be taken to realise the amount under the Schedule.

Rule 4 provides for four modes of recovery to realise the amount mentioned in the notice served under Rule 2 of the Rules, if the amount is not paid within the specified time. The said rule further provides for adopting one or more of the following modes:

(a) by attachment and sale of the defaulter's movable property;

(b) by attachment and sale of the defaulter's immovable property;

(c) by arrest of the defaulter and his detention in prison;

(d) by appointing a receiver for the management of the defaulter's movable and immovable properties.

Rule 8 of the Rules provides for the manner of disposal of the proceeds of execution. Rules 16 and 31 with which we are concerned, are as follows:

“16(1) Where a notice has been served on a defaulter under rule 2, the defaulter or his representative in interest shall not be competent to mortgage, charge, lease or, otherwise deal with any property belonging to him except with the permission of the Tax Recovery Officer, nor shall any Civil court issue any process against such property in execution of a decree for the payment of money.

(2) Where an attachment has been made under this Schedule, any private transfer or delivery of the property attached or of any interest therein and any payment to the defaulter or any debt, dividend or other moneys contrary to such attachment, shall be void as against all claims enforceable under the attachment.

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31. Where the property to be attached is in custody of any court or public officer the attachment shall be made by 9, notice to such court or officer, requesting that such property, and any interest or dividend becoming payable thereon, may be held subject to the further orders of the Tax Recovery Officer by whom the notice is issued:

Provided that, where such property is in the custody of a court, any question of title or priority arising between the Income-tax Officer and any other person, not being the defaulter, claiming to be interested in such property by virtue of any assignment, attachment or otherwise, shall be determined by such court.”

From Rule 16, it is clear that when once a defaulter is served with the notice under Rule 2 of the Rules, (a) neither the defaulter nor his representative in interest is competent to mortgage, charge, lease or otherwise deal with all or any of the properties belonging to the defaulter except with the permission of the Tax Recovery Officer; (b) Civil Court also is prevented from issuing any process against the property of the defaulter in execution of a decree for the payment of money; (c) in case, the tax recovery officer effects attachment under the Schedule, any private transfer of delivery of the property attached or of any interest therein and any payment to the defaulter or any debt, dividend or other moneys contrary to such attachment, shall be void as against all claims enforceable under the attachment.

Rule 31 of Rule deals with the attachment of the property of the defaulter in custody of court or public officer. As per this Rule, the attachment of the property of the defaulter which is in the custody of a court or public officer is effected by issuing a notice to such Court or public officer requesting that such property and any interest or dividend becoming payable thereof, may be held subject to the further orders of the Tax recovery officer by whom the notice is issued. According to this Rule, when once the notice is sent to the Court, the attachment of the property of the defaulter is the custody of the Court takes effect and the Court is required to hold the property subject to the further orders from the Tax recovery officer. Thus, the Court is disabled from proceeding against the property of the defaulter in its custody. The proviso to Rule 31 provides that if any question of title or priority arises in respect of the property of a defaulter in the custody of a Court arises between the Income Tax Officer or any other person not being the defaulter claiming to be interested in such property by virtue of any assignment, attachment or otherwise, the same shall have to be determined by the court having the custody of the property.

11. In the instant case, as pointed out above, the notice under Rule 2 of the Rules was served on the defaulter on 24th March, 1972. The property in question belonging to the defaulter i.e, vehicle bearing registration No. MYK 4448 was brought under the custody of the Court on 29th May, 1972. The notice for attachment of the same, as required by Rule 31 of the Rules, was sent to the Court of the Principal Munsiff, Hubli, on 10th August, 1972. Consequently, under Rule 16, neither the default was competent to deal with the property in any manner nor it was open for the Additional Munsiff, Hubli, to proceed against the property in execution of the decree for money obtained against the defaulter in O.S No. 228 of 1972. It was the tax recovery officer who alone was competent to proceed against the property by adopting any one or more of the modes of recovery as provided under Rule 4 of the Rules and dispose of the sale proceeds in accordance with Rule 8 thereof. In the instant case, the property of the defaulter has come into the custody of the Court subsequent to the service of notice on the defaulter under Rule. 2 of the Rules. Though the property on the date of service of notice for attachment under Rule 31 of the Rules, i.e, 10th August, 1972, was in the custody of the court, but nevertheless, Rule 16 thereof was applicable, as the notice under Rule 2 of the Rules had been served on the defaulter on 24th March, 1972 itself. Even otherwise, for the operation of Rule 16 of the Rules, it is not relevant whether the property of the defaulter is in the custody of the Court or not.

12. Rule 16 of the Rules:, becomes operative as soon as the notice as per Rule 2 of the Rules is served on the defaulter. In this case, not only the defaulter was served with the notice on 24th March, 1972 under Rule 2, but the notice for attachment was also sent to the Court which was received on 10th August, 1972 under Rule 31 of the Rules. Thus, the Court also became aware of the fact that the judgment debtor, who was the owner of the vehicle in question, was a defaulter and the notice as per Rule 2 of the Rules had been served on him, and the vehicle in question was attached for the recovery of the arrears of income-tax and as such, the court was to hold it subject to the further orders from the Tax Recovery Officer. In spite this, the vehicle in question was sold on 4th April, 1975 by the First Additional Munsiff, Hubli. The sale was clearly without the authority of law because having regard to the provisions contained in Rules 16 and 31 of the Rules, he Court was not competent to proceed against the vehicle in question. Therefore, the sale was a nullity.

13. The legal position is well established that the doctrine of priority of Crown debts over other private debts is applicable in the case of arrears of income-tax. The same principle is embodied in Section 73(3) of the Code of Civil Procedure. The same is also embodied in Rule 8 of the Rules, which provides for disposal of proceeds of execution in the following manner:

(i) First, the costs incurred by the Income-tax Officer to be paid;

(ii) Then the amount due under the certificate issued by the Income-tax Officer to be paid;

(iii) If there remains a balance after the aforesaid sums are paid, the same shall be paid to the Income-tax Officer towards any other amount recoverable by him under the Act;

(iv) Thereafter, if any balance remains, the same shall be paid to the defaulter.

The proviso to Rule 31 of the Rules also empowers the Court to decide the question of title or priority in respect of the property in the custody of a court arising between the income-tax Officer and any other person not being the defaulter claiming to be interested in such property by virtue of any assignment, attachment or otherwise. In the instant case, the property in question was in the custody of the Court when the notice of attachment was issued by the petitioner as per Rule 31 of the Rules. Therefore the Court was competent to decide the priority claimed by the petitioner.

14. In the instant case, as the petitioner does not want the sale to be set aside; he only wants that the sale proceeds be paid over to him as the arrears of income-tax due from the 2nd respondent have got the priority over the private debts incurred by him. Therefore, it is not necessary to set aside the sale or to declare it as null and void. However, it is necessary to hold that the further order passed by the Court on 4th April, 1975 that the sale proceeds be paid over to the decree-holder; as the said direction is also without jurisdiction inasmuch as it is opposed to the doctrine of priority of Crown debts/other private debts which is embodied in Rule 8 of the Rules and Section 73(3) of the Code of Civil Procedure.

15. Accordingly, this civil revision petition is allowed. The order dated 28th May, 1976 passed by the first additional Munsiff, Hubli, in Misc. Case No. 70 of 1975 in so far it directs the payment of the sale proceeds of the vehicle in question deposited in the Court at C. No. 75, dated 7th April, 1975 to the decree-holder, in Execution No. 18 of 1974 is set aside. Consequently, the recording of the satisfaction of the decree concerned in Execution No. 18 of 1974 is also set aside. The lower Court is directed to make available the amount of Rs. 16,000 being the sale proceeds of the vehicle in question to the petitioner. It is also further made clear that it is open for the decree-holder (1st respondent) in O.S No. 228 of 1972 to recover the amount due under the decree from the 2nd respondent by continuing the Execution No. 18/74 as the order passed in Execution 18 of 1974 recording the satisfaction of the said decree is set aside.