High Court of KeralaSingle Judge2007-01-01Dismissed

T.K. Mohammed Shafi v. The District Collector, Kasaragode and The Special Deputy Tahasildar (R.R.) - Sales Tax and Agriculture Income Tax

Case / Petition Number:WP(C).No.7411 of 2005

Case Details & Bench

Court: High Court of Kerala
Hon'ble Judges: P.R.RAMAN, J.
Judgment Date: 2007-01-01
Court Decision / Holding: Writ petition (and IA 12305/2006) dismissed. The court held that, in the absence of material showing inclusion of the property in IP.6/87, no relief could be granted, but left open the possibility for the petitioner to seek appropriate relief if the property is included before the Receiver.
Final Disposition: Dismissed

Parties to the Case

Appellants / Petitioners

T.K. Mohammed Shafi

Respondents

The District Collector, Kasaragode
The Special Deputy Tahasildar (R.R.) – Sales Tax and Agriculture Income Tax, represented by the District Collector

Case Synopsis & Summary

Petitioner T.K. Mohammed Shafi, a partner in the firm Asian Trading Company, filed WP(C) No.7411 of 2005 challenging a plan by the State to realise sales tax arrears by sale of his property under the Revenue Recovery Act. He had earlier filed Insolvency Petition No.6/1987 before the Subordinate Judge's Court, Kochi, which led to an adjudication order dated 28 February 2000 in which both he and A.T.M. Shafi were declared insolvents. The State contends that the property proposed to be sold is outside the insolvency schedule and can be realised for arrears, while the petitioner argues that sales actions should occur only with leave of the Insolvency Court and that the asset in question may not have been included in IP No.6/87. The Government pleader relies on Ext.P5 (order of the Commissioner of Land Revenue) to show non-inclusion in the insolvency estate; Exts.P1 and P4 reflect insolvency proceedings and an ongoing discharge petition. The District Collector reports none of the attached properties were included in the schedule IP.6/87, though the petitioner asserts a 16/97 share over 17.65 acres inherited from his late father. The court cites State of Kerala v. R.V.S.Mani to emphasize that upon adjudication, the insolvent estate vest(s) in the court or receiver, and creditors cannot proceed against included property without leave. In the absence of materials showing inclusion, relief is refused and the petition is dismissed, albeit with liberty for the petitioner to seek appropriate relief if he includes the property before the Receiver.

Provisions of Law Cited

Insolvency Act, Section 28(2)Insolvency Act, Section 42Revenue Recovery Act

Legal Doctrines & Maxims

Upon adjudication, the insolvent's estate vests in the court or a receiver; the estate is available for distribution among creditors.
Creditors cannot proceed against property included in insolvency proceedings without the leave of the insolvency court.

Submissions & Arguments

Contentions of Appellants / Petitioners

The petitioner contends that the land/assets in question were not included in the insolvency petition (IP 6/87) and thus should not be amenable to sale for sales tax arrears without leave of the insolvency court. He relies on the principle that adjudication vests the insolvent’s estate in the court/receiver and that creditors cannot proceed against such property without leave, requesting the court to consider inclusion of the property only upon proper disclosure and leave.

Contentions of Respondents

The respondents argue that the property intended for sale is not part of IP 6/87’s schedule, citing Ext.P5 (order of the Commissioner of Land Revenue). They maintain that the State is entitled to realise arrears and that any sale should proceed subject to leave from the Insolvency Court if necessary. The District Collector notes that none of the attached properties were included in IP.6/87 and suggests the sale falls within permissible recovery mechanisms, again depending on proper inclusion in the insolvency estate.

Cited Precedents (1)

Case Name	Citation	Treatment	Explanation
State of Kerala v. R.V.S.Mani & others	1995 (2) KLJ 110	Positive	Cited to establish the principle that on adjudication, the insolvent's estate vests in the court/receiver and that creditors cannot proceed against such property without leave from the insolvency court.

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Extracted Judgment Text

Exact text extracted from official judgment records.

IN THE HIGH COURT OF KERALA AT ERNAKULAM THE HONOURABLE MR. JUSTICE P.R.RAMAN MONDAY, THE 1ST JANUARY 2007 / 11TH POUSHA, 1928 WP(C).No. 7411 of 2005(G) ------------------------- T.K. MOHAMMED SHAFI, AGED 59 YEARS, 1. THE DISTRICT COLLECTOR, KASARAGODE 2. THE SPECIAL DEPUTY TAHASILDAR (R.R.) - SALES TAX AND AGRICULTURE INCOME TAX, - REPRESENTED BY THE DISTRICT COLLECTOR, THIS WRIT PETITION (CIVIL) HAVING BEEN FINALLY HEARD ON 01/01/2007, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING: ORDER ON I.A.NO.12305/2006 IN W.P.(C).NO.7411/2005 --------DISMISSED 1/1/2007 Sd/- P.R.RAMAN, JUDGE. ## APPENDIX ## PETITIONER'S EXTS: EXT.P1 TRUE COPY OF THE ORDER IN IP.NO.6/87 DTD. 28/2/2000 OF THE L SUBORDINATE JUDGE'S COURT, KOCHI. EXT.P1B TRUE COPY OF THE DISCHARGE PETITION FILED BY THE PETITIONER ALONG WITH THE OTHER PETITIONER DTD. 27/8/2000. EXT.P2 TRUE COPY OF THE PUBLIC NOTICE PUBLISHED IN THE KERALA GAZETTE DTD. 18/7/2000 PART IV AT PAGE 526, AS PUBLIC NOTICE DTD. 22/5/2000. EXT.P3 TRUE COPY OF THE KERLAA GAZETTE DTD. 29/4/2003 IN PART IV AT PAGE 28. EXT.P4 TRUE COPY OF THE PETITION IA.NO.775/2001 DTD. 7/6/2001 FILED IN IP.NO.6/87 DTDE. 28/2/2000 OF THE SUB COURT, KOCHI. EXT.P5 TRUE COPY OF THE ORDER OF THE COMMISSIONER OF LAND REVENUE DTD. 2/8/2002. EXT.P6 TRUE COPY OF NOTICE DTD. NIL ISSUED BY THE 2ND RESPONDENT TO THE PETITIONER FOR SALE OF SHARE IN THE PROPERTY. EXT.P7 TRUE COPY OF THE NOTICE DTD. 31/7/2006 ISSUED BY 2ND RESPONDENT TO THE PETITIONER FOR SALE OF SHARE IN THE PROPERTY. RESPONDENTS' EXTS: ANNEXURE-R3A TRUE COPY OF THE CHART OF THE ACTION TAKENL FOR THE ASSESSMENT YEAR 1985-86. ANNEXURE-R3B TRUE COPY OF THE CHART OF THE ACTION TAKEN FOR THE ASSESSMENT YEAR 1986-87. ANNEXURE-R3C TRUE COPY OF THE CHART OF THE ACTION TAKEN FOR THE ASSESSMENT YEAR 1987-88. |**P.R.RAMAN, J.**| |---| |**--------------------------------**| |**W.P.(C).NO.7411 OF 2005**| |**---------------------------------**| |**Dated this the 1st day of January, 2007**| |**JUDGMENT**| |Petitioner has filed an Insolvency| |Petition No.6/1987 before the Subordinate| |Judge's Court, Kochi for a declaration that he| |is an insolvent. He is one of the partners of| |the firm "Asian Trading Company". The other| |partner is one A.T.M.Shafi. In the insolvency| |proceedings,<br>Ext.P1(a)<br>dated<br>28/2/2000| |adjudication order was passed by the| |Insolvency Court as per which A.T.M. Shafi as| |well as T.K.M. Shafi were adjudged as| |insolvents. T.K.M.Shafi is the petitioner| |herein. The order also reveals that the State| |was already made as one of the respondents in| |the said proceedings. 23rd respondent was a| |Tahsildar, Cochin Taluk, who raised the| |contention that the petitioners are defaulters| ## -:2:- W.P.(C).NO.7411/2005 of sales tax and the total amount defaulted is Rs.67,57,829/- and with a view to escape from the liability, the insolvency petition was filed. It was after hearing all the parties that the Insolvency Court passed the order adjudging the petitioners as insolvents. Subsequently, the petitioner has filed a petition also for discharge under Section 42 of the Insolvency Act, which is pending consideration before the Insolvency Court. In the above circumstances, the only question that arises for consideration in this original petition is as to whether the property belonging to the petitioner could be proceeded to be sold by the State for realisation of the sales tax arrears due under the Revenue Recovery Act. A Division Bench of Court in **State of Kerala v. R.V.S.Mani & others (1995 (2) KLJ 110)** held that on the making of an ## -:3:- W.P.(C).NO.7411/2005 order of adjudication, the insolvent loses title to the property which vests in the court or in the Receiver. The intendment and purpose of Section 28(2) is to make the entire estate of the insolvent vest in the court or in a receiver the moment an order of adjudication is made and to make it available for distribution among the body of creditors and to prohibit any creditor of the insolvent from proceeding against his property in respect of his debt or commence any suit or other legal proceeding, without the leave of the insolvency court during the pendency of the insolvency proceedings. In view of the declaration of the law by this Court as aforesaid, it has to be held that no creditor can proceed against the property included in the insolvency proceedings for realisation of any amount due to that creditor without ## -:4:- ## W.P.(C).NO.7411/2005 obtaining sanction from the Insolvency Court. Therefore, the crucial question is whether the property now proceeded against by the State is included in the schedule of property in the I.P. 2. The learned Government Pleader appearing on behalf of the State would contend based on Ext.P5 order passed by the Commissioner of Land Revenue, Thiruvananthapuram that the property in question put for sale is not one included in the insolvency petition. It was contended on behalf of the petitioner that the land should be considered for sale and proceedings should be initiated only after obtaining leave of the court. 16/97 share over an extent of 17.65 acres held by his late father alone was reported to be attached. The District Collector reported that none of the properties -:5:- W.P.(C).NO.7411/2005 attached were included in the schedule of plaint IP.6/87. 3. Therefore, in the absence of any details furnished to this Court by the petitioner as to whether subsequent to the death of father this property is also included in the assets owned by the petitioner for distribution in the insolvency proceedings, I am unable to hold that the property is not liable to be sold. As the matter stands and in the absence of such materials placed on record showing that the property is also included in the assets for distribution, no relief can be granted to the petitioner. In case the petitioner prefers to include this property also before the Receiver concerned, it will be open to the petitioner to seek for appropriate relief based on the dictum laid down by the Division Bench. -:6:- W.P.(C).NO.7411/2005 In the result, this writ petition is dismissed without prejudice to such right of the petitioner. **P.R.RAMAN, JUDGE.** kcv.