Ronak vs The State of Haryana and Others

V.K. Bali, J.—Whether a defaulter of sales tax for non-payment of the same can be detained in the civil prison repeatedly or that after he has been so detained for a period of 40 days, the Government cannot once again detain him with a view of recover the amount due from him, is the question that has been posed by Ronak Ram through present petition filed by him under Article 226 of the Constitution of India.

Petitioner was sole proprietor of M/s Deep Chand Lal Chand, Anaj Mandi, Jind and partner in M/s Jain Brothers, Jind. Both the firms were registered with the Sales Tax Department. There were numerous proceedings against M/s Deep Chand Lal Chand and Jain Brothers under the Haryana General Sales Tax Act, 1973. (herein-after referred to as the Act). It is pleaded that they all were decided ex-parte and the demands were created without any service on him. However, when he came to know about the same, he filed appeals against some of the orders which are stated to be still pending. Since the demands created through ex-parte orders aforesaid were of huge amount, he could not meet the same and also could not seek his remedy in various appeals filed by him as he was financially as also physically weak. It is pleaded that he had been sick for a long time and was not in a position to arrange money in order to pursue his remedies. In consequence of the default in payment made by him, he was arrested and detained in civil prison for 40 days. This coercive method adopted by the respondent-department, obviously with a view to recover the amount of tax from him, however, yielded no results. Petitioners is stated to be having no assets so as to meet the heavy demands. He is an old man of 65 years and is stated to be heart patient. Recently his one of the veins in nose got burst and the doctors opined that he would not survive but on account of some electric treatment, there was some improvement. On this count, it is stated, that he is physically weak and is not doing any work for the last many years. He is staying on charity and is fed by charity of relations and others. It is on the basis of facts, as made out above, that it is pleaded and so argued by learned counsel appearing for him that the exercise of the respondents in arresting and re-arresting the petitioner time and again would be of no meaning and consequence and this being the last resort to recover the dues, if fails, as there are no resources with the person concerned, the action being an exercise in futility, would also be violative of Articles 14 and 21 of the Constitution of India.

The cause of petitioner has been opposed and in the written statement that has been filed on behalf of respondent Nos. 2 and 3, it has been pleaded that both the firms, M/s Deep Chand Lal Chand, Anaj Mandi, Jind and M/s Jain Brothers, Jind were two separate legal entities. Petitioner was, however, sole proprietor of M/s Deep Chand Lal Chand and he was also partner of M/s Jain Brothers. The assessment was not framed in the name of petitioner but in the names of firms and the outstanding amounts against the said firms are as follows:-

M/s Deep'' Chand Lal Chand: Year of Date of Date of Amount outstanding as Assess- Assessment Communication arrears. of order. HGST CST 1980-81 31.12.1985 13.3.1986 2,32,854/- 11,36,378/- 1981-82 31.3.1986 10.7.1986 2,19,653/- 32,11,170/- 4,52,507/- 43,47,548/- Grand Total : 48,00,055/- 2. M/s Jain Brothers: 1974-75 31.1.1985 22.7.1986 1,40,970/- 1,53,915/- (Remand Case) 19-75-76 29.8.1985 10.10.1985 - 1,62,517/- (Remand Case) Penalty 31.7.1985 06.08.1985 - 2,22,000/- Case 1976-77 16.4.1984 16.05.1984 - 6,04,000/- (Remand Case) 1978-79 18.3.1982 - 6,742/- 1980-81 24.12.1985 27.12.1985 10,453/- - 1981-82 29.1.1986 25.4.1986 - 2,15,153/- 1982-83 30.3.1987 27.4.1987 - 4,00,000/- Total 1,58,165/- 17,55,585/-

Notices were duly issued to petitioner for the respective year of assessment but he intentionally did not appear despite service. Therefore, ex-parte assessments for the years 1974-75,1975 76,1976-77,1978-79,) 1980-81,1981-82 and 1982-83 were made. It is admitted that he filed appeals against some of the assessment orders and that he was arrested and detained in civil prison for 40 days in respect of the outstanding amount of Rs. 13,69,232/- towards M/s Deep Chand Lal Chand. The assessment orders alongwith demand notices were duly served upon the firms. He intentionally did not appear before the assessing authority. The registration certificates in respect of both the firms have since already been cancelled. It is pleaded that one Balbahaddar Jain, another partner of M/s Jain Brothers is residing at Devan Giri in the State of Karnatka and certificate for recovery of government dues amounting to Rs. 67, 13,805/- has been sent to the Collector, Bangalore vide letter dated December 2,1988 but no recovery has been effected so far from him. It is in these circumstances that proceedings under the Punjab Land Revenue Act 1887 were taken against the petitioner, insofar as assertion of petitioner that he is physically very weak, is concerned, the same has been denied for want of knowledge. It is also stated that petitioner has not attached any proof about his age or that he resides on the charity of his relati6ns. The department, it is further stated, is fully competent to arrest the petitioner if he fails to pay arrears of tax in respect of the firm M/s Jain Brothers. The assessment orders and the recovery proceedings initiated are perfectly in accordance with law. It is admitted that the arrest and detention of petitioner did not yield any results but his arrest in future could yield some result as enquiries are being made with regard to his assets and the process of enquiry in this regard is continuing. That being so, there is no bar that petitioner cannot be arrested again for recovery of the arrears of other years and firms. Efforts are being made to find out concealed assets that he might have.

Before the question aforesaid is answered, it shall be useful to see the relevant provisions dealing with the subject. Section 34 of the Act deals with the recovery of tax, interest and penalty as arrears of land revenue. Same runs thus:-

"The amount of any tax, interest and penalty imposed under this Act, which remains unpaid after the due date, shall be recoverable as arrears of land revenue."

Section 59-A of the Act deals with the transfers which are made with a view to defraud revenue and the same are void. Section aforesaid runs thus:-

" Where, during the pendency of any proceedings under this Act, any person liable to pay any tax or other dues creats a charge on, or transfers, any immovable property belonging to him in favour of any other person with the intention of defrauding any such tax or dues, such charge or transfer shall be void as against any claim in respect of any tax, or other dues payable by such person as a result of the completion of the said proceedings;

Provided that nothing in this section shall impair the rights of transferee in good faith and for consideration."

Even though, Sections 34 and 59-A vest power with the authorities to recover the tax as arrears of land revenue, and one of the mode of recovery is, admittedly, by way of arrest and detention of defaulter in civil prison and the department is also competent to treat fraudulent transfers which have been made with a view to evade the tax, as void, yet there is hardly any cue made out from the sections aforesaid which might throw any light on the question mooted out in this case. Learned counsel for the petitioner, however, placed reliance upon two judgments of this Court in Gomti Devi v. Kalka Cooperative House Building Society Ltd., Kalka and Ors. 988 PLJ 416 and M/s. Maruti Ltd. (In Liqn.), Chandigarh and another Vs. M/s. Pan India Plastic Pvt. Ltd., in support of his contention that a person cannot be arrested and detained in civil prison time over again with a view to recover any kind of dues, be it under the provisions of CPC or Haryana General Sales Tax Act. In Gomti Devi''s case (supra) the observation of the Division Bench has not gone beyond saying that recovery of amount as arrears of land revenue by arrest and detention of person should be the last resort and the arrears have to be recovered firstly by other means of recovery under the Punjab Land Revenue Act. In M/s Maruti Ltd.''s case (supra) once again the observations of the learned Single Judge were confined to the provisions of Order 21 Rule 11-A of the CPC and on the basis of provisions of the Order aforesaid, it was observed that if an application is made for the arrest and detention in prison of the judgment-debtor, it shall state, or be accompanied by an affidavit stating, the grounds on which arrest is applied for. These two judgments cited by learned counsel also, thus, do not deal with the pertinent question that is involved in the present case.

Learned counsel has also placed reliance upon Jolly George Varghese and Another Vs. The Bank of Cochin, . The Hon''ble Supreme Court in the case cited above, was dealing with the provisions contained in Section 51 and Order 21 Rule 37 of the Code of Civil Procedure. Section 51 and Order 21 Rule 37 are re-produced as under-

"Section 51:- Powers of the Court to enforce execution:- Subjection to such conditions and limitations as may be prescribed, the Court may, on the application of the decree-holder, order execution of the decree -

(a) by delivery of any property specifically decreed;

(b) by attachment and sale or by sale without attachment of any property;

(c) by arrest and detention in prison (for such period not exceeding the period specified in Section 58, where arrest and detention is permissible under that Section);

(d) by appointing a receiver; or

(e) in such other manner as the nature of the relief granted may require;

Provided that, where the decree is for the payment of money, execution by detention in prison shall not be ordered unless, after giving the judgment-debtor an opportunity of showing cause why he should not be committed to prison, the Court, for reasons recorded in writing, is satisfied -

(a) that the judgment debtor, with the object or effect of obstructing or delaying the execution of the decree -

(i) is likely to abscond or leave the local limits of the jurisdiction of the Court; or

(ii) has, after the institution of the suit in which the decree was passed, dishonestly transferred, concealed or removed any part of his property, or committed any other act of bad faith in relation to his property, or

(b) that the judgment-debtor has, or has had since the date of the decree, the means to pay the amount of the decree or some substantial part thereof and refuses or neglects or has refused or neglected to pay the same, or

(c) that the decree is for a sum for which the judgment-debtor was bound in a fiduciary capacity to account."

" Order 21 Rule 37:- Discretionary power to permit judgment-debtor to show cause against detention in prison:- (1) Notwithstanding anything in these rules, where an application is for the execution of a decree for the payment of money by the arrest and detention in the civil prison of a judgment-debtor who is liable to be arrested in pursuance of the application, the Court (shall) instead of issuing a warrant for his arrest, issue a notice calling upon him to appear before the Court on a day to be specified in the notice and show cause why he should not be committed to the civil prison;

(Provided that such notice shall not be necessary if the Court is satisfied, by affidavit, or otherwise, that, with the object or effect of delaying the execution of the decree, the judgment debtor is likely to abscond or leave the local limits of the jurisdiction of the Court.)

(2) Where appearance is not made in obedience to the notice, the Court shall, if the decree-holder so requires, issue a warrant for the arrest of the judgment-debtor."

The facts of the case aforesaid reveal that the litigation giving rise to civil appeal before the Supreme Court, was between an individual and a Bank. Obviously, the decree-holder was executing the decree and demanding the arrest of the debtors under the provisions of the Code as quoted above. The question posed was as to whether, from the perspective of international law, it was right to enforce a contractual liability by imprisoning a debtor in the teeth of Article 11 of the International Covenant on Civil and Political Rights. The answer to the question aforesaid has been given by saying that "it is too obvious to need elaboration that to cast a person in prison because of his poverty and consequent inability to meet his contractual liability is appealling. To be poor, in this land to poverty is no crime and recover debts by the procedure of putting one in prison is too flagrantly violative of Article 21 of the Constitution unless there is some proof of the minimal fairness of his wilful failure to pay inspite of his sufficient means and absence of more terribly pressing claims on his means such as medical bills to treat cancer or other grave illness. Unreasonableness and unfairness in such a procedure is inferrable from Article 11 of the Covenant and lethal blow of Article 21 of Constitution cannot strike down the provisions of Section 51'' C.P.C." It was, however, further held that "the simple default to discharge the decree, is not enough. There must be some element of bad faith beyond mere indifference to pay, some deliberate or recusant disposition in the past or alternatively, current means to pay the decree or a substantial part of it. The provision emphasises the need to establish not mere omission to pay but an attitude of refusal as demand verging on dishonest disowning of the obligations under the decree. Here considerations of the debtors'' other pressing needs and straitened circumstances will play prominently."

It was a case of decree against an individual and it was contractual obligation that was under consideration in view of the provisions contained in Section 51 and Order 21 Rule 37 of the C.P.C. which provisions were tested on the basis of International Covenant on Civil & Political Rights and Article 21 of the Constitution of India. Herein, in the present case, the obligation of the petitioner to pay the arrears is under statute. A huge amount of sales tax is due against him and the same has not been admittedly paid. In my considered view, whereas, a citizen has a right, as granted to him by the Constitution and, in particular, fundamental rights inclusive of right of liberty spelled out in Article 21 of the Constitution of India. He is duty bound to meet all the demands legitimately raised by the department and if he does not discharge the same, he can well be proceeded under the provisions contained in Section 34 of the 1973 Act. The Revenue Authorities shall be well within their rights to declare the transactions made by him as void which have been made with a view to evade the tax. However, the fact that stairs at the respondents is inability of petitioner to pay and assuming it to be correct, the observations made by the Supreme Court in Jolly George''s case (supra), even though made while considering the contractual obligation of a debtor, would apply substantially to the case of a citizen against whom tax under the Statute is due. If a citizen actually is pennyless and has become pauper on account of the circumstances beyond his control and infact is unable to pay the dues, how shall it serve the department to put him in prison time and again. Far from recovering the amount due from him, the department would be only spending something for securing his arrest and detaining him in civil prison. If, however, it is a/case of cheating the department and such cases are not wanting, the department would be well within its rights to re-arrest a person and put him in civil prison again. If this course is not left open to the respondent-department, any one like petitioner, who has to pay almost eighty lacs of rupees to the Government, would happily serve civil prison for a period of 40 days and would get away with all the cheating that he might have done and defraud the department. However, before a step of re-arresting a citizen is taken, the department at its own level must gather some information that the person concerned has either sold his property or properties during or after when the proceedings were initiated against him or even before the proceedings were initiated but there must be some positive information that such course has been adopted by the person concerned with a view to defraud the department.

Mr. Trikha, learned Deputy Advocate General, Haryana appearing for the respondent-State, however, contends that the department has taken active steps and is gathering information in this regard. It is also pleaded in the written statement that enquiries are being made in the matter. If that be so, no meaningful relief can be granted to petitioner as, in my considered view, he can be re-arrested if the department has some information with it that he is either in a position to pay or has transferred his properties in a calendestine manner. Since the department is in a process of collecting information, it is ordered that till such time the department really gathers some information pointing towards the resources of petitioner or the sales made by him or defrauding the department in any manner, he shall not be re-arrested and kept in civil prison. However, the moment the department comes to know on some positive information that petitioner is not pennyless pauper and has means to pay or sold the properties with a view to defraud the department, it shall be well within its right to proceed against him under the provisions of the Punjab Land Revenue Act.

This petition is disposed of in the manner indicated above. There shall, however, be no order as to costs.