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Secretary Of State v. Sait Jodaraj Dhupajee
Structured Summary of the Opinion
Factual and Procedural Background
The second appeal concerns whether a sale conducted to recover a penal assessment under the Madras Land Encroachment Act, III of 1905, takes effect free of prior encumbrances on the property. The Government imposed an assessment and penalty of Rs. 1,182 (approx.) on Venkata Satteyya for encroachments on Government land. The plaintiff had earlier obtained two mortgages from Satteyya on his properties and had secured a final decree on those mortgages. When the Government proceeded to sell the property under the provisions of Madras Act III of 1905 read with Madras Act II of 1864, the plaintiff protested that the sale should be subject to his mortgages. The Government, however, ordered the sale to be held free of all prior encumbrances. To preserve the property from sale, the plaintiff paid the amount under protest and then sued for recovery of that sum. The litigation reached this Court on second appeal. The judgment reverses the lower appellate court, restores the decision of the District Munsif (with costs), dismisses a related civil revision petition as not arising, and notes that leave is refused.
Legal Issues Presented
- Whether a sale held to recover a penal assessment and penalty imposed under the Madras Land Encroachment Act, III of 1905, prevails over prior encumbrances on the property (i.e., whether such a sale passes the property free of prior encumbrances).
- Whether Section 9 of Madras Act III of 1905 — which provides that the amount of assessment and penalty "shall be deemed to be land-revenue" and "may be recovered as arrears of land-revenue under the provisions of the Madras Revenue Recovery Act" — has the effect of bringing into operation the consequences of a revenue-recovery sale (including the application of Section 42 of the Madras Revenue Recovery Act) so that such sales discharge prior encumbrances.
Arguments of the Parties
Plaintiff's Position
- The plaintiff protested that the Government's proposed sale should be subject to the two mortgages he had obtained from Venkata Satteyya.
- After the Government ordered the sale to be free of prior encumbrances, the plaintiff paid the assessment under protest to prevent sale and then sued to recover that sum, asserting entitlement to recovery if the sale does not prevail over prior encumbrances.
Arguments Advanced by Mr. Raghava Rao (as recorded in the opinion)
- Relied upon several precedents concerning sales under the Abkari Act and the Income-tax Act to argue that sales for recovery of statutory dues of the kind then before the Court do not pass property free of prior encumbrances, but are only subject to existing encumbrances.
- Contended that earlier cases proceeded on the principle that only where arrears are of land revenue accruing on that very land does the sale pass property free of encumbrances; where the arrear does not accrue on that land, the sale should not have that effect.
- Argued (later in the hearing) that if the expression "shall be deemed to be land revenue" already makes the amount land revenue, then the additional words "may be recovered as land revenue" are superfluous; implication being that the legislative language should not be read to widen consequences beyond what is strictly necessary.
Government's Position (as reflected in the record)
- The Government ordered the sale to be held free of all prior encumbrances under the procedure followed pursuant to Madras Act III of 1905 read with Madras Act II of 1864. The opinion records this stance but does not detail further argumentation by Government counsel.
Table of Precedents Cited
| Precedent | Rule or Principle Cited For | Application by the Court |
|---|---|---|
| Commissioner of Income-tax, Bombay Presidency v. Bombay Trust Corporation, Ltd. (Judicial Committee) | The meaning of statutory deeming: when a person or thing is "deemed to be" something, the Act requires treating it as if it were that thing even though it is not in reality so. | Used to support the conclusion that when Section 9 declares penal assessment "shall be deemed to be land revenue" the assessment must be treated as land revenue for purposes of the statute. |
| Ramachandra v. Pitchaikanni (1884) I.L.R. 7 Mad. 434 | Sale under the Abkari Act (stating recovery "in like manner as for the recovery of arrears of land revenue") did not pass the property free of prior encumbrances; the phrase "in like manner" was construed as referring to procedure only, not to the substantive consequences of Section 42 of the Revenue Recovery Act. | Cited as a principle that where statutory language only imports procedural parity ("in like manner") a sale will not necessarily carry the operation of Section 42 (discharging prior encumbrances). |
| Ibrahim Khan Sahib v. Rangasami Naicken (1905) I.L.R. 28 Mad. 420 | Followed Ramachandra; purchase at a sale for arrears due by an Abkari renter did not pass the land free of encumbrances. | Reinforces the line of authority holding that procedural wording does not convert the character of the arrear into land revenue for purposes of discharging encumbrances. |
| Kadir Mohideen Marakkayar v. Muthukrishna Aiyar (1902) 12 M.L.J. 368 : I.L.R. 26 Mad. 230 | Section 30 of the Income-tax Act (allowing recovery "as if they were arrears of land revenue") does not convert income-tax into an arrear of land revenue; it extends the procedure but not the substantive consequences. | Applied the Ramachandra principle to Income-tax Act wording and was relied upon in contrasting those cases with the present case under Section 9 of Madras Act III of 1905. |
| Sankaran Nambudripad v. Ramaswami Aiyar (1918) 34 M.L.J. 446 : I.L.R. 41 Mad. 691 | A sale under Section 7(c) of the Land Improvement Loans Act (XIX of 1883) passed the property free of encumbrances (a decision on the opposite side of the line from the Abkari/Income-tax cases). | Evidence of a contrasting line of authority where the statutory scheme produced the operation of revenue-recovery consequences (i.e., sale free of encumbrances). |
| Secretary of State for India in Council v. Pisipati Sunkarayya (1910) 20 M.L.J. 794 : I.L.R. 34 Mad. 493 | Held that for arrears of land revenue due on land in one patta, land in another patta (another village) may be sold free of encumbrances; relied on the Revenue Recovery Act's provisions that all lands and buildings of the defaulter are a charge. | Used to support the proposition that Section 42 may operate to discharge pre-existing encumbrances on any property brought to sale for arrears of revenue due from the defaulter. |
| Gunnam Dorayya v. Ayyama Charrulu (1914) 27 M.L.J. 295 | (Cited in the opinion without detailed exposition) — listed among authorities considering sale consequences under revenue-recovery type provisions. | Referred to as part of the body of decisions relevant to the question of whether sales under statutory recovery provisions discharge prior encumbrances. |
| Madathapu Ramayya v. The Secretary of State for India in Council (1903) 14 M.L.J. 37 : I.L.R. 27 Mad. 386 (Full Bench) | Held that the provisions of Madras Act II of 1864 could not be applied to recovery of penalties and similar imposts from persons who were not landholders (trespassers); the impost was not land revenue and the trespasser was not a landholder within the Revenue Recovery Act. | Referred to explain the legislative history: Madras Act III of 1905 was enacted in response to this Full Bench decision to provide that certain penal assessments should be treated as land revenue for recovery purposes. |
Court's Reasoning and Analysis
The Court's analysis proceeds from the text of Section 9 of the Madras Land Encroachment Act III of 1905, which states that the amount of assessment and penalty "shall be deemed to be land-revenue and may be recovered from him as arrears of land-revenue under the provisions of the Madras Revenue Recovery Act, 1864, or the Madras City Land Revenue (Amendment) Act, 1867, as the case may be."
The Court reasons in these steps, as set out in the opinion:
- Statutory Deeming: The phrase "shall be deemed to be land revenue" requires treating the penal assessment and penalty as land revenue for the purposes of the statute. The Court cites the Judicial Committee's reasoning in Commissioner of Income-tax v. Bombay Trust Corporation to explain the ordinary meaning and consequence of deeming language: a thing not in fact that thing is required by statute to be treated as if it were.
- Recovery as Arrears under Revenue Act: Section 9 further specifies that the amount "may be recovered as arrears of land revenue" under the provisions of the Madras Revenue Recovery Act. The Court interprets this as bringing the penal assessment within the scheme of recovery and attendant consequences laid down by the Revenue Recovery Act.
- Consequences of Revenue-Recovery Sales: Because the statute makes the assessment to be land revenue and expressly provides for recovery as arrears under the Revenue Recovery Act, the Court concludes that "all the consequences" which result from a sale under the Revenue Recovery Act for arrears of land revenue also apply to a sale for recovery of penal assessment and penalty under Madras Act III of 1905. In particular, Section 42 of Madras Act II of 1864, which declares that lands brought to sale for arrears of revenue shall be sold free of all encumbrances, is thereby engaged.
- Distinction from Prior Cases: The Court examines prior decisions under the Abkari Act and the Income-tax Act that held such statutory recoveries did not pass property free of prior encumbrances. Those cases were decided on statutory text that used language such as "in like manner as for the recovery of arrears of land revenue" or recovery "as if they were arrears of land revenue." The Court reads those formulations as importing procedural parity only and not converting the character of the dues into land revenue with all attendant consequences.
- Textual Strength of Section 9: The Court emphasises that Section 9's language is stronger and clearer — "shall be deemed to be land revenue" and "may be recovered as land revenue" — rather than merely extending procedure. Therefore Section 42 applies in the present context.
- Legislative Purpose and History: The Court notes Madras Act III of 1905 was enacted in response to the Full Bench decision in Madathapu Ramayya, which had held that the provisions of Madras Act II of 1864 could not be applied to recover penalties from persons who were not landholders. The 1905 Act was intended to supply the statutory basis for treating such imposts as land revenue; to accept the contrary argument would defeat a principal legislative purpose.
- Rejection of the Redundancy Argument: The Court addresses Mr. Raghava Rao's contention that the words "may be recovered as land revenue" are superfluous if the Penal assessment is already "deemed" to be land revenue. The Court treats the additional phrase as clarification and not as a limitation of the effect of the deeming provision. Accordingly, the Court rejects that argument.
The Court's analytical conclusion: because Section 9 equates penal assessment to land revenue and provides recovery under the Revenue Recovery Act, a sale of the defaulter's property for such an amount passes the property free of all encumbrances.
Holding and Implications
Holding: Section 9 of the Madras Land Encroachment Act III of 1905 equates the penal assessment and penalty to land revenue and permits recovery as arrears of land revenue, and accordingly a sale of the defaulter's property for such an amount passes the property free of all prior encumbrances.
Direct Consequences in this Case:
- The Court reversed the decision of the lower appellate court and restored the judgment of the District Munsif, awarding costs in this Court and in the lower appellate Court.
- The related civil revision petition was held not to arise and was dismissed without costs.
- Leave was refused.
Broader Implications:
- As explained in the opinion, the effect of Section 9 is to engage the consequences of the Madras Revenue Recovery Act (including Section 42), so that sales under Madras Act III of 1905 for penal assessments will operate to discharge prior encumbrances on properties brought to sale.
- The opinion grounds this conclusion in statutory text and legislative purpose; it does not purport to overrule the prior line of Abkari/Income-tax cases where different statutory language was held to limit the effect to procedural parity. The judgment applies the existing statutory scheme rather than announcing an unrelated new doctrine.
This summary is confined to the matters expressly addressed in the provided opinion and does not add information beyond that opinion's text.
1. The question involved in this second appeal is whether a sale held for recovery of penal assessment imposed under the Madras Land Encroachment Act III of 1905 prevails over prior encumbrances.
2. A sum of Rs. 1,182 and odd was the assessment and penalty imposed by the Government for the encroachments on certain lands belonging to the Government by one Venkata Satteyya. The plaintiff in the suit had obtained two mortgages from Satteyya on his properties and had filed a suit and obtained a final decree on foot of those mortgages. As the Government was bringing the property to sale under the provisions of Madras Act III of 1905 read with Madras Act II of 1864 the plaintiff protested that the land should be sold subject to his mortgages. But the Government ordered the sale to be held free of all prior encumbrances. The plaintiff then paid the amount under protest and filed the present suit for recovery of the sum. If a sale for penal assessment and penalty imposed under Madras Act III of 1905 does not prevail over prior encumbrances of the defaulter's properties, then the plaintiff is entitled to recover the sum which he paid under protest in order to save the property from being sold for such penal assessment and penalty. Section 9 of Madras Land Encroachment Act III of 1905 lays down:
The amount of assessment and penalty imposed under this Act on any person unauthorisedly occupying any land shall be deemed to be land-revenue and may be recovered from him as arrears of land-revenue under the provisions of the Madras Revenue Recovery Act, 1864, or the Madras City Land Revenue (Amendment) Act, 1867, as the case may be.
This section provides that the amount of assessment and penalty imposed under this Act should be deemed to be land revenue and it provides further that such amount may be recovered as arrears of land revenue under the provisions of the Madras Revenue Recovery Act. Where the Legislature says that the amount of penalty and penal assessment shall be deemed to be land revenue, though it is not in reality land revenue, we must take it that it is land revenue for the purposes of the Act. The Judicial Committee had to consider a similar case under the Indian Income-tax Act. By Section 43 of the Act:
Any person employed by or on behalf of a person residing out of British India, or having any business connection with such person, or through whom such person is in the receipt of any income, profits or gains upon whom the Income-lax Officer has caused a notice to be served of his intention of treating him as the agent of the non-resident person shall, for all the purposes of this Act, be deemed to be such agent.
The Judicial Committee say this in Commissioner of Income-tax, Bombay Presidency v. Bombay Trust Corporation, Ltd.:
Now when a person is 'deemed to be' something, the only meaning possible is that whereas he is not in reality that something the Act of Parliament requires him to be treated as if he were.
Therefore though the penal assessment and penalty are not in fact land revenue, we must take them to be land revenue. The next portion of Section 9 makes the matter further clear by providing that the amount may be recovered as arrears of land revenue under the provisions of the Madras Revenue Recovery Act. Thus, the amount is to be and revenue and may be recovered as arrears of land revenue.
This being so, it is difficult to escape the conclusion that all the consequences which result in the case of a sale under the Revenue Recovery Act for arrears of land revenue strictly so called also result in the case of a sale for recovery of penal assessment and penalty levied under Madras Act III of 1905.
3. Reliance is placed by Mr. Raghava Rao upon various decisions of this Court which have considered the effect of sales under the Abkari Act or the Income-tax Act--whether they pass the property free of prior encumbrances or only subject to the encumbrances then existing. The earliest of these cases is the case of Ramachandra v. Pitchaikanni (1884) I.L.R. 7 Mad. 434. The sale was held under the provisions of Section 10 of the Madras Abkari Act which provided that the Collectors may proceed against abkari renters or other persons licensed under the Act for the recovery of arrears due by them "in like manner as for the recovery of arrears of land revenue". Turner, C.J., and Muttuswami Aiyar, J., held that such a sale did not pass the property free of prior encumbrances. They held that it was only the procedure laid down in Madras Act II of 1864 that was to be followed for recovering arrears due by an abkari renter and that a sale under the Abkari Act did not carry the consequences provided by Section 42 of the Madras Revenue Recovery Act, II of 1864. Emphasis was laid on the expression "in like manner as for the recovery of arrears of land revenue". After referring to the various sections of Madras Act II of 1864 the Judges said this:
Section 42 declares that all lands brought to sale on account of arrears of revenue shall be sold free of all encumbrances. Taking these sections together, the intention is clear that the purchase is free of prior encumbrances only when the arrear is of public revenue of which the land is the first security by statutory declaration....The question is--Has Section 42 been extended by Section 52 to sales for arrears of Abkari revenue? We must certainly answer it in the negative. The expression, "In like manner as for the recovery of arrears of land revenue", indicates only that the same procedure is to be followed, and the language used in Section 52 is to the same effect.
In Ibrahim Khan Sahib v. Rangasami Naicken (1905) I.L.R. 28 Mad. 420, Benson and Boddam, JJ., followed the decision just cited and held that a purchase at a sale for arrears due by an Abkari renter did not pass the land free of encumbrances as in the case of a sale for arrears of land revenue. In the old Abkari Act of 1864 the provision was that the arrears may be recovered in like manner as for recovery of arrears of land revenue. In the Abkari Act I of 1886 the provision was that abkari arrears may be recovered as if they were arrears of land revenue--see Section 28 of Madras Act I of 1886. It was held that this change did not affect the applicability of the decision in Ramachandra v. Pitchaikanni (1884) I.L.R. 7 Mad. 434.
4. Cases of sales under the provisions of the Income-tax Act came up for decision more than once. In Kadir Mohideen Marakkayar v. Muthukrishna Aiyar (1902) 12 M.L.J. 368 : I.L.R. 26 Mad. 230, this Court, had to deal with the provisions of the Income-tax Act then in force (Act II of 1886). Under section 30 of that act:
The Collector may in default of payment of the tax recover the amounts as if they were arrears of land revenue or by any process applicable to the recovery of a municipal or local tax or may pass an order for recovery of the amount from the defaulter, and such order may be executed as a decree for payment of money passed under the Civil Procedure Code.
Act II of 1886 is an Imperial Act and the question was whether a sale under section 30 of that act which provided that the tax may be collected by the Collector as if it was arrear of land revenue passed the property free of encumbrances. The Judges applied the principle of the decision in Ramachandra v, Pitchaikanni1, and pointed out that the difference in the wording between the provisions of the Income-tax Act and the Abkari Act was merely verbal. They say this at page 233:
We are clearly of opinion that Section 30 of the Income-tax Act has not the effect of converting income-tax into an arrear of land revenue due in respect of the land which may be brought to sale for realisation of the income-tax, but that its effect simply is to extend the procedure prescribed by (Madras) Act II of 1864 and (India) Act I of 1890, to the recovery of arrears of income-tax.
5. Section 46(2) of the Indian Income-tax Act of 1922 provides:
The Income-tax Officer may forward to the Collector, a certificate under his signature specifying the amount of arrears due from an assessee, and the Collector, on receipt of such certificate, shall proceed to recover from such assessee the amount specified therein as if it were an arrear of land revenue, and the same result would follow even in respect of sales held under the present Income-tax Act.
6. The question has next been considered with reference to loans granted under the Land Improvement Loans Act (XIX of 1883). Section 7 of that Act provides for the recovery of the loan. It was held by this Court in Sankaran Nambudripad v. Ramaswami Aiyar (1918) 34 M.L.J. 446 : I.L.R. 41 Mad. 691, that a sale held under Section 7 (c) of that Act passed the property free of encumbrances. This is a decision on the other side of the line.
7. Mr. Raghava Rao urges that the decision in Ramachandra v. Pitchaikanni (1884) I.L.R. 7 Mad. 434, and the cases following it, proceed upon the principle that it is only where a land is sold for arrears of land revenue accruing on that very land, that the sale passes the property free of encumbrances and not where the sale is for recovery of an amount due on another land of the landholder. In Secretary of State for India in Council v. Pisipati Sunkarayya (1910) 20 M.L.J 794 : I.L.R. 34 Mad. 493, Miller and Munro, JJ., decided that for the arrears of land revenue due on the land included in one patta, the land in another patta in another village may be sold free of encumbrances. They pointed out that under Section 5 of the Revenue Recovery Act all the lands and buildings of the defaulter are a charge. This view of Miller and Munro, JJ., was followed by this Court in Sankaran Nambudripad v. Ramaswami Aiyar (1910) 20 M.L.J 794 : I.L.R. 34 Mad. 493. Seshagiri Aiyar, J., says at page 700:
During the course of the argument I felt some little doubt as to whether the decision of Justices Miller and Munro in The Secretary of State for India in Council v. Pisipati Sunkarayya (1918) 34 M.L.J. 446 : I.L.R. 41 Mad. 691, was right. But on closely examining the sections of the Revenue Recovery Act, I feel that the effect of Section 42 is not only to discharge pre-existing incumbrances upon the property on which the arrear is due but also pre-existing incumbrances upon every property which is brought to sale for arrears of revenue due from the defaulter.
See also Gunnam Dorayya v. Ayyama Charrulu (1914) 27 M.L.J. 295.
8. Therefore, though the amount which is sought to be recovered did not accrue in respect of the land which is now sought to be proceeded against, the Government has the right to proceed against that property and to enforce all the rights given to them under the Madras Revenue Recovery Act. No doubt in the case of arrears under the Abkari Act or the Income-tax Act, they do not accrue on any land of the defaulter. So, likewise in the case of penal assessment and penalty, they do not accrue on the lands which are now sought to be proceeded against.
9. Once the amount levied as penal assessment and penalty is to be deemed to be land revenue and is to be recovered as such, it is impossible to come to any other conclusion than that a sale of the defaulter's property for such an amount passes the property free of all encumbrances.
10. Mr. Raghava Rao then argued that if it is so, the Legislature need not provide that the amount may be recovered as arrears of land revenue. He says that these words will be superfluous if under the expression "shall be deemed to be land revenue", the amount in question became land revenue. I think the Legislature used the expression "and may be recovered as land revenue" only for the purposes of further clarification and that the addition of this expression does not cut down the effect to be given to the expression "shall be deemed to be land revenue." All the decisions referred to by Mr. Raghava Rao proceed upon the wording of the provisions of the particular Acts all of which have this common feature that the arrears due under these Acts were to be recovered as if they were land revenue or in the like manner as land revenue. But here the provision is "that the amount shall be deemed to be land revenue" and "may be recovered as land revenue" and not "in the manner provided for the recovery of land revenue." Therefore the Legislature has expressed in the clearest terms possible that for the purpose of recovery, penal assessment is land revenue and if this is so, Section 42 of Madras Act II of 1864 applies.
11. Before closing the judgment, it is only necessary to say that Madras Act III of 1905 was necessitated by the decision of the Full Bench of this Court in Madathapu Ramayya v. The Secretary of State for India in Council (1903) 14 M.L.J. 37 : I.L.R. 27 Mad. 386 (F.B.), which held that the provisions of Madras Act II of 1864 could not be applied to recovery of penalties and other amounts of like nature from persons who were not landholders and who were treated by the Government as trespassers. It was said that the impost was not land revenue, that the trespasser was not a landholder within the meaning of the Revenue Recovery Act, that he was only in improper possession of Government property and that his act was a wrongful act and a trespass. It is because the Full Bench held that the impost in such cases was not land revenue that Madras Act III of 1905 was passed and the acceptance of Mr. Raghava Rao's argument will be to defeat one of the main purposes of the Legislature in enacting Madras Act III of 1905.
12. I hold that Section 9 equates the penal assessment to land revenue and also provides that it may be recovered as land revenue. This being so, the view of the lower appellate Court is wrong. I reverse the decision of the lower appellate Court and restore that of the District Munsif with costs here and in the lower appellate Court.
C.R.P. No. 204 of 1941.
13. In view of my decision in the second appeal, the civil revision petition does not arise. It is dismissed without costs.
14. Leave refused.
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