(1) The petitioner in this writ petition, the andhra bank limited, prays for a writ of mandamus or any other appropriate writ, order or direction directing respondent, nos. 1 to 3 to remove their seals from godowns 1 and 3 and to enable the petitioner to deal with the entire stock of 51,654 bags of sugar in exercise of its rights as the pledgee. Respondents nos. 1 to 3 are the state of andhra pradesh revenue divisional officer, masulipatnam and the tahsildar, divi taluk, avanigadda respectively, while the fourth respondent is the pledger m/s. Challapalli sugars limited.

(2) Under the andhra pradesh sugarcane (regulation of supply and purchase) act, 1961, the government may by notification levy a tax at such rate not exceeding five rupees per metrictonne as may be prescribed on the purchase of cane required for use, consumption or sale in a factory. The government had created such a levy (contemplated by section 21 of the said act) and in that behalf the fourth respondent was due in a sum of rs. 7,74,450 - 18 ps. , by the 15th of march, 1975. The arrears pertain tc the months of december, 1974, and january and february, 1975 - under rule 45 of the rules framed under the said act, the said purchase tax has to be paid into the local government treasury before the 15th day of each month by the occupier of the factory in respect of the sugarcane purchased for use, consumption or sale in the factory during the month immediately preceding. Admittedly, the said tax was not remitted as required by the rule and hence it became an arrear recoverable as the arrears of land revenue by virtue of section 21 (6) of the said act along with an interest at the rate of 9 percent. Per annum prescribed by sub - section (5) of section 21 of the said act.

(3) According to the petitioner, the fourth respondent pledged 51,654. Bags of sugar stocked in godown 1 and 3 in favour of the petitioner and the documents evidencing the said pledge were executed on 22nd march, 1975. The loan advanced on the pledge of the said sugar was in the nature of and called "the key cash credit loan". The andhra bank agreed to advance a loan to the extent of seventy lakhs of rupees on the pledge of the said 51,654 bags io enable the fourth respondent to pay the amounts due to the cane growers which payments were made by the bank itself directly to such growers at the instance of and in accordance with the documents furnished by the fourth respondent, while so, it is stated that on soth may, 1975 the revenue divisional officer came to the said godown and attached and sealed the same contending that only 42,000 bags of sugar were pledged in favour of the petitioner and therefore, the remaining 9,664 bags of sugar are liable to be proceeded against for recovery of the said purchase tax and therefore he called upon the bank to surrender the 9,654 bags. On the same day, the petitioner issued a registered notice to the revenue divisional officer asserting that the quantum of sugar pledged with the bank was not 42,000 bags only as contended by the revenue divisional officer, but the entire quantity of 51,654 bags of sugar was pledged to it. The revenue divisional officer replied on 18th june, 1875 stating that according to his information and record, only 42,000 bags of sugar were pledged to the bank and that excess number of bags were not pledged and have been validly attached and he proposed to open the lock put on the godown no. 1 to facilitate the lifting of the above stock. He requested the bank to put its lock again after he effects the removal of the said 9,654 bags. To this, the bank replied on 18th june, 1975 reiterating its case and further stating 'please also note, if any excess quantity of stock is there, it is to cover the rest from variations in the market prices of free sugar. ' on 20th may, 1975 a notice was also issued to the district collector and magistrate, krishna by an advocate on behalf of the petitioner - bank reasserting its case and calling upon him to remove the seals placed by the revenue divisional officer on godowns 1 and 3 immediately under advice to the bank and further intimating that in default thereof, the government of andhra pradesh and its officers will be liable for loss and damages if any incurred by the bank by the illegal and unjustified action of the revenue divisional officer. It is then stated by the petitioner that the revenue divisional officer called upon the bank to place the true copies of the statements and other material in support of its assertion and accordingly it placed the said material before him on 21st june, 1975 under a covering letter of the same date. The said covering letter dated 21st june, 1975 from the bank addressed to the revenue divisional officer is supplied by way of material papers by the bank and the said letter refers to a letter from the revenue divisional officer, dated 19th june, 1975. However, the said letter of revenue divisional officer has not been placed before me. Meanwhile the petitioner had approached this court and had obtained interim orders and the said orders were also intimated to the revenue divisional officer under the very same letter dated 21st june, 1975 -

(4) In the above circumstances, it is contended by the learned counsel fcr the petitioner that according tc the documents produced by it before this court, 51,654 bags of sugar were pledged to the bank and not merely 42,000 bags as alleged by the revenue divisional officer and that therefore the revenue divisional officer has no authority in law to proceed against the said bags for the realisation of the said cane purchase tax. Three contentions are raised by mi. C. V. Narasimha rao on behalf cf the petitioner - bank (1) that no notice was given to the bank before effecting the attachment and this is alleged to be a violation of the principles of natural justice ; (2) that when the bank placed its material before the revenue divisional officer to show that 51,654 bags of sugar were pledged to it, the revenue divisional officer ought to have passed orders one way or the other on the said question and ought not to have proceed ed to open the godown and remove the bags of sugar without passing any orders on the said disputed question, and (3) that the government dues have no preference over the pledgee and therefore, the government dues in this case are not entitled to any preferential claim of recovery over the amount secured to the bank. The learned counsel for the fourth respondent supported the contentions of the petitioner and in particular the third submission referred to above. The only contesting parties are therefore respondents 1 to 3 represented by the government pleader who submitted that the arrears of purchase tax had become due and had become an arrear even before the pledging took place. He further submitted that the quantity of sugar pledged to the bank is only 42,000 bags and for that purpose he referred to the facts and material referred to in the counter affidavit in support of such a contention and also submitted that for satisfying the loan of 70 lakhs of rupees advanced by the bank, 42,000 bags only are sufficient and that the plea of the bank that the excess sugar bags are meant "to cover the rest from variations in the market prices of free sugar " is untenable.

(5) The first contention of the learned counsel for the petitioner that a notice ought to have been given before effecting the attachment of the sugar bags in the said godowns is not suppoited by reference to any statutory rules or privision. The learned counsel says that such a requirement must be inferred from the principles of natural justice. I cannot agree. The arrears of cane purchase tax are recoverable as arrears of land revenue in accordance with the procedure prescribed by the madras revenue recovery act. Under the said act no notice is required to be given before affecting the attachment. It should be noted that under rule 45 of the rules framed under the 1961 act, the liability to pay each month's purchase tax before the 15th day of the succeeding month is statutorily imposed and on the failure to do so, it becomes an arrear. It is not a princip'e of natural justice that before effecting the attachment a notice ought to be given. Very often such a notice may defeat the very object of attachment. I therefore reject the first contention of the learned counsel for the petitioner.

(6) The next submission of mr. C. V. Narasimha rao, is that when the revenue divisional officer himself has called upon the bank to produce documents in support of its assertion and when the bank has produced the same before him he ought to have passed orders thereon before proceeding with the sale of the sugar. In this connection i have already pointed out that the alleged letter of the revenue divisional officer dated 19th june, 1975 wherein he is said to have called upon the learned counsel to produce material in support of its assertion is not placed before me. However, the bank's letter dated 21st june, 1975 refers to such a letter of the revenue divisional officer. The bank produced true copies of the statement signed by the managing director of the fourth respondent in respent of the said pledge on 21st june, 1975. By that date, however, the bank had filed the present writ petition on 19th june, 1975 and it was admitted on 20th june, 1975 and in w. P. M p. No. 4908 of 1975 interim orders were passed directing the respondent not to remove any part of the stock of sugar in god - owns 1 and 3 pending further orders. In fact, the letter of the petitioner's counsel intimating the said orders was also enclosed to the said letter dated 21st june, 1975 submitted before the revenue divisional officer. Once this court was seized of the matter, it is obvious that the revenue divisional officer did not think it appropriate to proceed further in the matter or to pass any further orders which would give further room for complaint to the petitioner. In the above circumstances, i am of the opinion that the second submission of the petitioner is also not justified. However, now that the writ petition is being disposed of, i direct the revenue divisional officer to peruse the material produced before him by the bank and decide whether only 42,000 bags of sugar were pledged to the bank of 51,654 bags were pledged to the bank, an contended by it, in march, 1975. Since the bank has already placed the material before the revenue divisional officer in that behalf he shall pass the orders as early as possible and take further proceedings in accordance with the decision he arrives at. The counsel for the petitioner as well as the government pleader conceded that where an attachment is made of any property under the provisions of the madras revenue recovery act, the autrority has power to entertain such objections and decide upon the same against which further remedies to superior authority are also provided by the said act. Accordingly, the above direction is being given.

(7) The third contention of the petitioner namely that the government dues are not entitled to any preference over a pledgee inasmuch as while the pledgee is a secured creditor, the cane purchase tax arrears recoverable as arrears of land revenue are merely in the nature of an unsecured debt may now be considered. The learned counsel for the petitioner relies upon the decisions of the supreme court in bank of bihar v. State of bihar, and builders supply corporation v. Union of india, for the said proposition.

(8) I will deal first with the decision of the supreme court repotted in builders supply corporation v. Union of india. In the said decision, it is only laid dcwn that all things being equal, the tax arrears due to the state are entitled to preference and that the said principles of common law namely the doctrine of priority of ciown debts continues to be in force even after the constitution by virtue of article 372 (i) of the constitution of india. In the said decision, a distinction was drawn between the arrears of taxes which are due to the state and other debts which may become due to the state on account of the commercial activities carried on by it and no definite opinion was exp~essed in the case of latter category of debts. That decision was confined to the former category only. Now coming to the decision reported in bank of bihar v. State of bihar, it was ruled by the supreme court that the said doctrine of priority has no application in the case of secured debts like a pawnee/pledgee. It was held that the pledgee has a special property and a lien which is not of an ordinary nature on the goods and that so long as his claim is not satisfied, no other creditor of the pawner/pledgor has any right to take the goods or its price. It was however held confirming the finding of the trial court in that case that the attachment and seizure effected by the state 'could be effective only in respect of that portion of the price which was not necessary for the liquidation of the dues of the plaintiff (pledgee) from defendant no. 2 (pledgers) '. In other words, it was held that

"the cane commissioner who was an unsecured creditor could not have any higher rights than the pawner and was entitled only to surplus money after the satisfaction of the plaintiff's dues"

(9) From the above decisions, it is clear that the petitioner has a preferential claim for payment of the amount due to to it and secured against the sugar pledged tc it and that the state is entitled only to the surplus money after satisfaction of the plaintiffs dues.

(10) In the circumstances, therefore, the following directions are given: - the revenue divisional officer shall verify whether the quantum of sugar pledged to the petitioner - bank is 42,000 bags only as contended by him or 51,654 bags as contended by the bank. In case, the revenue divisional officer comes to the conclusion that the number of bags pledged to the petitioner are only 42,000, he can proceed to satisfy the arrears of cane purchase tax due from the fourth respondent from out of the sale proceeds of the said excess of 9,654 bags. However, if he comes to the conclusion that the number of the bags pledged to the bank are 51,654 then he must first allow the bank to satisfy the full amount due to it and lent by it on the security of the said sugar and shall appropriate only the surplus money if any remaining after satisfying the said secured claim of the bank, even in case, the quantity of bags pledged to the petitioner is found to be 42,000 bags only, and if in case, the arrears due to the state are not satisfied by proceeding against 9,654 bags, the surplus money, if any, available after satisfying the petitioner's secured debt, will be available for satisfying the arrears due to the state. The attachment shall continue until the entire sugar is disposed of and its price realised for the purpose of working out the above directions. The sale of sugar shall take place under intimation to the revenue divisional officer and he shall have the right to verify the sales and the amounts realised therefrom and to maintain appropriate accounts in that behalf. The petitioner shall hold and pay the amounts due to state in accordance with these directions.

(11) It may be noted that pending the writ petition, two petitions were filed one being w. P. M. P. No. 5260 of 1975 filed by the fourth respondent whereupon a. V. Krishna rao, j. Permitted the parties to dispose of 2,626 bags of d - 29 quality sugar subject to certain directions with respect to the mode of sale and deposit of the sale proceeds thereof. Subsequently, another w. P. M. P. No. 6716 of 1975 was also filed by the fourth respondent for sale of 14,556 bags of sugar on the same conditions as were imposed in the earlier petition - w. P. M p. No. 5260 of 1975 and i ordered the said w. P. M. P. On 20th august, 1975 on the same conditions as were imposed by a. V. Krishna rao, j. The moneys realised on account of the sale of the said 17,182 bags of sugar shall also be dealt with in accordance with the directions given in the preceding para.

(12) The write petition is therefore allowed to the extent and subject to the directions referred to above. There will te no order as to costs. Advocate's fee rs. 100. Writ petition allowed subject to certain directions.