Case Note & Summary
The dispute arose from recovery proceedings under the Kerala Revenue Recovery Act, 1968 against one Vasudevan, an Abkari contractor for the year 1968-69, who fell into arrears of Abkari dues amounting to Rs.35,497 as on April 1, 1969. Recovery proceedings were initiated on May 31, 1969, and a demand notice Ex.P-1 was issued on June 30, 1969 in respect of 3 acres 97 1/2 cents of agricultural land standing in favour of the defaulter's wife. The Tehsildar served a notice of attachment of the schedule property on February 22, 1969. The respondent challenged the attachment by filing Suit O.S. No.94 of 1977. The trial court decreed the suit, but on appeal the first appellate court dismissed it. In Second Appeal No.77/83, the High Court of Kerala by judgment dated February 14, 1989 allowed the appeal, holding that service of a written demand notice under Section 7 on the defaulter was a condition precedent for recovery and that without such notice the presumption under Section 44 was inapplicable. The State of Kerala appealed to the Supreme Court. The Supreme Court examined Section 44 of the Kerala Revenue Recovery Act, 1968, which deals with effect of engagements and transfers by a defaulter. The Court observed that sub-sections (1), (2) and (3) are independent of each other. Under sub-section (2), any transfer after public revenue due on any land has fallen in arrears and made with intent to defeat or delay recovery is not binding on the Government; the crucial question is the date when arrears fell due. Sub-section (3) provides a statutory presumption where a defaulter transfers immovable property to a near relative or for grossly inadequate consideration after public revenue dues have fallen in arrears; in such a case it is presumed that the transfer was made with intent to defeat or delay recovery, unless the contrary is proved. The Court held that sub-section (3) does not contemplate any prior service of a demand notice; it only requires that arrears became due before the sale and that the sale was to a near relative or for grossly inadequate consideration. The burden to rebut the presumption lies on the defaulter and the transferee. The Collector may proceed to recover arrears by attachment and sale of the transferred property as if the transfer had not taken place. The question whether consideration to a stranger is grossly inadequate is always a question of fact. The Court concluded that prior service of notice of demand of arrears or attachment before sale is not a precondition to deny the statutory presumption available under sub-section (3). Accordingly, the appeal was allowed, the judgment and order of the High Court were reversed, and the decree of the appellate court dismissing the suit was restored. No costs were awarded.
Headnote
A) Revenue Recovery - Transfer by Defaulter - Section 44(2) Kerala Revenue Recovery Act, 1968 - Post-arrear transfer with intent to defeat or delay recovery not binding on Government - The Court noted that under sub-section (2), any transfer of immovable property by a defaulter after public revenue due on any land has fallen in arrears, if made with intent to defeat or delay recovery, shall not be binding on Government; the crucial question is the date when arrears fell due; in the admitted facts, arrears became due on April 1, 1969 and transfer was subsequent, hence sub-section (2) attracted. Held that such sale does not bind Government (Paras not mentioned). B) Revenue Recovery - Statutory Presumption for Near Relative Transfer - Section 44(3) Kerala Revenue Recovery Act, 1968 - No prior demand notice required for invoking presumption - The Court held that sub-section (3) does not contemplate prior service of demand notice; it requires only that arrears became due before sale and sale was to near relative or for grossly inadequate consideration; statutory presumption of intent to defeat or delay arises; burden to prove contrary on defaulter and transferee; Collector may proceed as if transfer had not taken place. Held that High Court erred in treating prior notice as precondition; appeal allowed, High Court judgment reversed, appellate Court decree dismissing suit restored (Paras not mentioned).
Issue of Consideration
Whether service of a written demand notice under Section 7 of the Kerala Revenue Recovery Act, 1968 is a condition precedent for invoking the statutory presumption under Section 44(3) against a defaulter who transfers immovable property to a near relative or for grossly inadequate consideration after public revenue dues have fallen in arrears.
Final Decision
The Supreme Court allowed the appeal, set aside the High Court's judgment dated February 14, 1989, and restored the decree of the first appellate court dismissing the suit. No costs.
Law Points
- Section 44(3) of Kerala Revenue Recovery Act
- 1968 does not require prior service of demand notice
- statutory presumption of intent to defeat or delay recovery arises when transfer of immovable property is made to near relative or for grossly inadequate consideration after public revenue arrears have fallen due
- burden to rebut presumption lies on defaulter and transferee
- State may proceed against transferred property as if transfer had not taken place
- sub-sections (1)
- (2)
- (3) of Section 44 are independent
- grossly inadequate consideration to a stranger is a question of fact.
