The Collector Of Malabar vs Erimal Ebrahim Hajee

Rewritten Version Notice: This is a rewritten version of the original judgment.

Court: supreme-court

Case Number: Criminal Appeal No. 145-A of 1954

Decision Date: 11 April 1957

Coram: Syed Jaffer Imam, S.K. Das, P. Govinda Menon, A.K. Sarkar

In the matter of The Collector of Malabar versus Erimal Ebrahim Hajee, the decision was rendered by the Supreme Court of India on 11 April 1957. The judgment was authored by Justice Syed Jaffer Imam, who was joined on the bench by Justice S. K. Das, Justice P. Govinda Menon and Justice A. K. Sarkar. The parties were identified as the Collector of Malabar acting as petitioner and Erimal Ebrahim Hajee as the respondent. The citation of the case appears as 1957 AIR 688 and 1957 SCR 970. The dispute concerned provisions of the Indian Income Tax Act, specifically section 46(2), and of the Madras Revenue Recovery Act of 1864, specifically section 48, together with considerations of the constitutional guarantees under Articles 14, 19, 21 and 22 of the Constitution of India.

The factual backdrop involved an Income Tax Officer who issued a certificate under section 46(2) of the Income Tax Act, directing that the arrears of income tax attributable to the respondent be treated in the same manner as arrears of land revenue. Acting upon this certificate, the Collector of Malabar invoked section 48 of the Madras Revenue Recovery Act and had the respondent arrested and detained in prison. The respondent subsequently filed a petition for a writ of habeas corpus before the Madras High Court, which ordered his release on the ground that both section 48 of the Madras Revenue Recovery Act and section 46(2) of the Income Tax Act were beyond the authority of the legislature (ultra vires). The Collector appealed this order to the Supreme Court.

The Supreme Court held that neither section 48 of the Madras Revenue Recovery Act nor section 46(2) of the Income Tax Act was ultra vires, and that neither provision violated the constitutional guarantees contained in Articles 14, 19, 21 and 22. The Court explained that where a person’s personal liberty is lawfully removed in accordance with a procedure established by a valid law, as provided under Article 21, the exercise of the freedoms guaranteed by Article 19(1)(a) to (e) and (g) cannot be invoked to challenge that deprivation. The Court relied upon the decision in A. K. Gopalan v. State of Madras (1950 SCR 88) in reaching this conclusion. It further observed that an arrest made for the recovery of a civil debt, when conducted in the manner prescribed by law for the recovery of arrears of land revenue, does not attract the protection of Article 22, as affirmed in State of Punjab v. Ajaib Singh (1953 SCR 254).

The Court then examined the substantive content of section 46(2) of the Income Tax Act, finding that it did not offend the equality principle of Article 14. Moreover, the Court concluded that there was no violation of Article 21 where a person was arrested under section 48 of the Madras Revenue Recovery Act based on a warrant issued for the recovery of a demand certified under section 46(2) of the Income Tax Act. The reasoning was supported by reference to Purshottam Govindji Halai v. Shri B. M. Desai, Additional Collector of Bombay (1955 2 SCR 887). The Court clarified that section 46(2) empowers the Collector to recover tax arrears as if they were arrears of land revenue, and that section 48, read together with section 5 of the Madras Revenue Recovery Act, expressly makes arrest one of the permissible modes for recovering such arrears, especially when the arrears cannot be satisfied by the sale of the defaulter’s property.

Section 48 of the Madras Revenue Recovery Act allows the Collector to arrest a defaulter when the arrears cannot be recovered by selling the defaulter’s property. The arrest is not intended as punishment for any criminal offence nor as a penalty for failing to pay. The statute does not obligate the Collector to give the defaulter an opportunity to be heard before the arrest is made. However, the Collector must have a reasonable belief that the defaulter is deliberately refusing to pay or is engaging in fraud to evade payment. Such belief must be supported by material evidence, and a Court may examine that material in suitable cases to determine whether the conditions prescribed in the section have been satisfied. The Collector also retains the authority to release the arrested person if the outstanding amount is subsequently paid.

The appeal arose under Article 132(1) of the Constitution of India and was recorded as Criminal Appeal No. 145‑A of 1954. The appeal challenged the judgment and order dated 23 July 1954 of the Madras High Court in Criminal Miscellaneous Petition No. 922 of 1954. Counsel for the appellants and for the respondent were instructed, and the judgment was delivered on 11 April 1957. The appellant had obtained a certificate from the Madras High Court stating that the case raised a substantial question of law concerning the interpretation of the Constitution under Article 132(1), which placed the matter before this Court. The respondent had filed a petition under section 491 of the Code of Criminal Procedure, seeking habeas‑corpus directions for his production before the High Court and his release from imprisonment. He had been arrested on 1 June 1954 pursuant to a warrant dated 10 March 1954 issued by the Collector of Malabar under section 48 of the Madras Revenue Recovery Act (Madras Act 11 of 1864). Affidavits filed by the Collector and the Income‑Tax Officer of Kozhikode set out the facts that led to the arrest. The respondent had been assessed for income tax for several assessment years, with a total outstanding tax liability of approximately Rs 70,000. A portion of this liability had been recovered by the Collector under a certificate issued by the Income‑Tax Officer under section 46(2) of the Indian Income‑Tax Act, and further amounts were collected by the Income‑Tax Officer himself under section 46(5)A of the same Act. After accounting for the sums already realised, the remaining arrears of income tax amounted to about Rs 61,668 for the assessment years 1943‑44, 1945‑46, 1946‑47, 1947‑48 and 1948‑49. During its inquiry, the Income‑Tax Officer discovered that the respondent had sold certain properties between 18 November 1947 and 25 March 1948, a fact that formed part of the material considered in the issuance of the arrest warrant.

In the investigation, a demand notice had been served on the respondent on 6 November 1947, and the series of property sales began on 18 November 1947, amounting in total to about Rs 23,100. Of this amount, the respondent paid only Rs 10,500 toward the outstanding tax arrears. Further enquiries disclosed that the respondent had closed his business at Cannanore in August 1947, but in 1948 he had established a new firm at Tellichery conducting the same type of business under the name V.P. Abdul Azeez & Bros., which was run by his eldest son together with four younger sons. The respondent claimed that the capital of this new firm was mainly derived from the sale of jewels belonging to his wife, who was also the mother of Abdul Azeez, and he denied that the firm was his own. During the assessment proceedings before the Income Tax Officer concerning V.P. Abdul Azeez & Bros., the source of the jewels was examined, but the allegation could not be proved; consequently, the officer concluded that the business belonged to the respondent. All these findings were communicated to the Collector, who also conducted his own independent enquiries and formed the view that the respondent was willfully withholding payment of tax arrears and was guilty of fraudulent conduct in evading tax. Because a certificate had already been issued to the respondent by the Income Tax Officer under section 46(2) of the Indian Income Tax Act, the Collector proceeded, relying on section 48 of the Madras Revenue Recovery Act, to issue a warrant of arrest. The warrant was executed, the respondent was taken into custody, and he was lodged in Central Jail, Cannanore.

The petition filed in the High Court under section 491 of the Criminal Procedure Code was heard by Judges Mack and Krishnaswami Nayudu. The Court allowed the petition and ordered that the respondent be released, holding that his arrest had been illegal. Judge Mack expressed the opinion that section 48 of the Revenue Recovery Act was ultra vires the Constitution because it infringed article 22. He did not elaborate on the argument that the same provision might also offend article 21, reasoning that if the section were unconstitutional, the arrest could not have been carried out in accordance with lawful procedure and therefore was unlawful; conversely, if the section were constitutional, the respondent would have been lawfully deprived of his personal liberty. Judge Mack further regarded section 46(2) of the Income Tax Act as ultra vires the Constitution because it violated article 14. Judge Krishnaswami Nayudu held that the combination of section 46(2) of the Income Tax Act with section 48 of the Revenue Recovery Act infringed article 14. He also opined that section 48 offended article 21 to the extent that it gave the arrested person no opportunity to appear before the Collector either personally or through counsel of his choice and to present any defence that might be available to him, and that it failed to provide for the production of the arrested person before a magistrate within twenty‑four hours as required by article 22(2). Relying on the decision in A.K. Gopalan v. State of Madras, he concluded that the contention of a violation of article 21 did not merit serious consideration because a law on the statute book existed on which the Collector had acted, and that was sufficient to support the legality of the Collector’s action.

It was observed that the statutory provision did not give the arrested individual any right either to appear before the Collector in person or through a legal practitioner of his choosing, nor did it enable him to present any defence that might be available to him. Moreover, the provision failed to contain a requirement that the arrested person be produced before a magistrate within twenty‑four hours, a step that is mandated by Article 22 (2) of the Constitution. The Court referred to its earlier decision in A. K. Gopalan v. The State of Madras, noting that the contention that Article 21 had been infringed did not merit serious consideration because, in the Court’s view, the existence of a law on the statute book under which the Collector had acted was sufficient to sustain the legality of the Collector’s action. On behalf of the appellant, it was contended that neither Section 48 of the Act nor Section 46 (2) of the Indian Income Tax Act contravened Articles 14, 19, 21 or 22 of the Constitution. The appellant’s counsel argued that Section 46 (2) of the Indian Income Tax Act was a valid piece of legislation and that, under its terms, the Collector was empowered to recover arrears of income tax as land revenue upon receipt of a certificate issued by the Income Tax Officer.

Conversely, the respondent’s counsel maintained that the two statutory provisions did offend Articles 14, 19, 21 and 22 of the Constitution. It was further submitted that a proper construction of Section 46 (2) of the Indian Income Tax Act showed that the authority conferred on the Collector, upon obtaining the certificate from the Income Tax Officer, was limited to the recovery of the amount of arrears of income tax and did not extend to the power to arrest the defaulting assessee. Even assuming that the section could be read to grant a power of arrest, such an arrest could be effected only under Section 48 of the Act. A correct reading of Section 48, according to the respondent, required that the tax defaulter be afforded an opportunity to be heard in his defence before a warrant of arrest could be issued, because a warrant could be issued only when the Collector had reason to believe that the defaulter was wilfully withholding the tax arrears or was guilty of fraudulent conduct intended to evade payment. The Collector could not entertain such a belief without first providing the defaulter an opportunity to be heard. Accordingly, the warrant of arrest issued against the respondent without a prior hearing was held to be invalid, rendering the arrest unlawful. The learned counsel for the respondent also drew the Court’s attention to the fact that Section 48 contained no provision for the release of the defaulter upon payment of the arrears of revenue. The matters that the Court had to consider at the outset of the appeal were whether either Section 48 of the Act or Section 46 (2) of the Indian Income Tax Act, or both, offended Articles 14, 19, 21 and 22 of the Constitution.

Both the provisions under challenge were held to offend Articles 14, 19, 21 and 22 of the Constitution. The Court indicated that the earlier decisions in Gopalan’s case, in The State of Punjab v Ajaib Singh (1) and in Purshottam Govindji Halai v Shree B. B. Desai, Additional Collector of Bombay (2) must be kept in mind while deciding the present question.

In Gopalan’s case the majority of the learned judges explained that the right “to move freely throughout the territory of India” mentioned in Article 19(1)(d) is only one of the many attributes that make up the broader concept of the right to “personal liberty”. They held that when a person is lawfully deprived of his personal liberty without violating Article 21, he cannot claim to exercise any of the rights guaranteed by sub‑clauses (a) to (e) and (g) of Article 19(1), because those rights can be exercised only by a free person. Accordingly, Article 19(1)(d) must be read as being subject to the provisions of Article 21, and the view that Article 19 provides a substantive right while Article 21 merely supplies procedural protection was rejected. (1) [1953] S.C.R. 254. (2) [1955] 2 S.C.R. 887.

The Court further observed that the reasoning in Gopalan’s case has been followed in a series of subsequent decisions and is now settled law. It held that the personal rights guaranteed by sub‑clauses (a) to (e) and (g) of Article 19(1) are dependent on the provisions of Article 21 in the same way that the right guaranteed by sub‑clause (f) of Article 19(1) is subject to Article 31. If property is taken lawfully under Article 31, the right to hold or dispose of that property disappears and Article 19(1)(f) cannot be invoked. Similarly, if life or personal liberty is taken away lawfully under Article 21, no question of exercising the fundamental rights in Article 19(1)(a) to (e) and (g) can arise.

Article 21 uses the expression “procedure established by law”, which the Court explained means a procedure enacted by a law made by the State, that is, by the Union Parliament or by a State Legislature. Consequently, the principal issue in the present appeal was whether the respondent was deprived of his personal liberty in accordance with a procedure established by a valid law. If the law under which the deprivation occurred is valid, then the deprivation is lawful and the respondent cannot complain of a breach of any of the fundamental rights mentioned in Article 19(1)(a) to (e) or (g). The Court then referred to Ajaib Singh’s case, where a person was taken into custody by the police and sent to the officer‑in‑charge of the nearest camp under section 4 of the Abducted Persons (Recovery and Restoration) Act (Act LXV of 1949). It was submitted that this Act contravened, among other provisions, Article 22 of the Constitution. None

The Court observed that the earlier submissions had been partly upheld, and it held, with respect to Article 22, that the act of taking a person into custody did not constitute an arrest or detention as defined by that article. Judge Krishnaswami Nayudu, in a separate judgment, sought to distinguish the earlier decision, but the Court found that the principle emerging from the Ajaib Singh case was sufficiently clear. That decision, the Court noted, did not attempt to delineate exhaustively the scope of the fundamental rights guaranteed by Article 22, nor did it provide an exhaustive list of situations falling within its protection. Instead, the decision plainly stated that the physical restraint imposed on a person who had been abducted for the purpose of recovery, without any formal allegation, suspicion, or apprehension of having committed a criminal or quasi‑criminal offence, or without any act deemed prejudicial to the State or public interest, could not be classified as an arrest or detention within the meaning of Article 22. Applying this principle to the present matter, the Court observed that the arrest in question was not predicated on any accusation of a criminal or quasi‑criminal nature; rather, it was an arrest undertaken to enforce a civil debt, following the statutory mode prescribed for the recovery of arrears of land revenue. The Court then referred to the earlier judgment in the case of Purshottam Govindji Halai, where it had held that there was no violation of Article 21 when a person was arrested under section 13 of the Bombay Land Revenue Act 1876 pursuant to a warrant issued for the recovery of a demand certified under section 46(2) of the Indian Income Tax Act. That earlier judgment emphasized that such an arrest did not offend Article 14 because it was carried out under a procedure established by law, namely the provisions of section 13 of the Bombay Act. Although counsel Pocker attempted to distinguish that case on the ground that it concerned section 13 of the Bombay Act, the Court found no material principle that allowed such a distinction, noting that the reasons for holding section 46(2) of the Indian Income Tax Act to be constitutionally valid—namely, that it did not contravene Article 14—were equally applicable here. Consequently, after considering the preceding authorities, the Court concluded that neither section 48 of the present Act nor section 46(2) of the Indian Income Tax Act infringes Articles 14, 19, 21, or 22 of the Constitution. The Court then turned to the interpretation proposed by counsel Pocker concerning sections 46(2) of the Income Tax Act and section 48 of the present Act, wherein the counsel argued that section 46(2) merely authorized the Collector to recover the amount of arrears of tax, without granting any power to effect an arrest.

In this matter, the parties argued that the provision allowing the Collector to recover income‑tax arrears did not give the Collector power to arrest the respondent. The petitioner claimed that arrest was not a method of recovering tax arrears but rather a punitive measure for failure to pay. The Court found this interpretation untenable. It held that the authority conferred on the Collector by the relevant section was expressly intended to enable recovery of tax arrears in the same manner as arrears of land revenue. The Court noted that the preamble of the Act declared that laws dealing with the collection of public revenue were to be consolidated and simplified, and that subsection 5 prescribed the manner in which revenue arrears could be recovered. Subsection 5 states that whenever revenue is in arrear, it is lawful for the Collector or any officer empowered by the Collector to recover the arrear, together with interest and costs, either by selling the defaulter’s movable and immovable property or by executing against the defaulter’s person in the manner subsequently provided. The Court emphasized that this provision clearly outlines two modes of recovery: sale of the defaulter’s assets or execution against the person, both sanctioned by the Act.

The Court then turned to subsection 48, which it explained applies when arrears cannot be recovered by selling the defaulter’s property. Subsection 48 authorises the Collector, provided the Collector has reason to believe the defaulter is willfully withholding payment or has engaged in fraudulent conduct to evade tax, to cause the arrest and imprisonment of the defaulter. Read together with subsection 5, this makes it unmistakably clear that arrest is a permissible mode of recovering revenue, to be used only when sale of property is ineffective. The Court observed that nowhere in the wording of subsection 48 is arrest described as punishment for mere default. Before an arrest can be effected, two conditions must be satisfied: first, the arrears must be unliquidatable by sale of property; second, the Collector must have reason to believe the defaulter is willfully withholding payment or acting fraudulently. The Court further noted that when money dues must be realized by legal process rather than voluntary payment, some degree of coercion is inherent at each stage of recovery. The most severe form of such coercion is arrest, employed to compel the defaulter to satisfy the debt. Consequently, the Court concluded that arrest under subsection 48 is a tool for recovery, not a punitive sanction for default.

In this case the Court observed that the assumption underlying an arrest under section 48 is that the defaulter is capable of making the payment but is either wilfully refusing to do so or is employing fraud to avoid payment. The Court noted that several provisions of the Act, for example sections 16, 18 and 21, expressly prescribe punishments for particular offences and employ language that is unmistakably different from the language used in section 48. Consequently, the Court held that an arrest made pursuant to section 48, after the statutory requirements of that provision have been satisfied, is not intended as a punishment for an offence nor as a sanction for simply defaulting on a payment; rather, it is a mechanism for the recovery of the amount due. The Court further explained that section 48 does not obligate the Collector to provide the defaulter an opportunity to be heard before the arrest is effected. Nevertheless, the Collector must possess a reasonable belief that the defaulter is wilfully withholding payment or is engaged in fraudulent conduct to evade payment. Such belief must be founded on material facts that are rational and, where appropriate, a court may examine that material to determine whether the statutory conditions have been met. The affidavits filed by the Collector and the Income Tax Officer before the High Court demonstrated that there was indeed material on which the Collector could base a belief that the respondent was wilfully withholding the tax arrears and was guilty of fraud to evade payment. Accordingly, the Court concluded that the Collector was justified in arresting the respondent. The Court also referred to the argument that section 48 does not itself provide for the release of the defaulter upon payment of the arrears. It reminded that, in addition to the powers conferred by section 48, the Collector is empowered, under the proviso to section 46(2) of the Indian Income Tax Act, with powers comparable to those of a civil court for the recovery of a decree‑based amount. In the decision of Purshottam Govindji Halai the Court held that this proviso does not constitute an alternative remedy but merely adds to the Collector’s existing powers for a more effective implementation of the sole recovery mode authorized by section 46(2). Moreover, under section 58 of the Code of Civil Procedure a civil court is required to release a judgment debtor when the debt is discharged. Hence, the Collector also has authority to release the defaulter once the amount is paid, rendering the learned advocate’s submission without substance. Finally, the Court emphasized that a prerequisite for invoking section 48 is the existence of a revenue arrear; once the arrear is paid, that condition ceases to exist and the debtor is entitled to release and freedom from arrest.

The Court observed that the condition for proceeding under section 48 of the Act is the existence of revenue arrears, and that condition disappears once the arrears are paid. Consequently, after payment of the arrears, the debtor can no longer be subject to arrest and must be released from any such custody. It was submitted that the respondent was about seventy years old at the time of his arrest and that he suffered from serious ill health, including paralysis. The submission further urged that, because of his age and paralysis, he should not be returned to jail custody. The Court stated that it could not grant such a humanitarian order in the present proceedings at this stage of the appeal. If the respondent is taken into custody again, he may approach the Collector for his release under the powers provided by section 59 of the Code of Civil Procedure. The Collector may order his release in accordance with the proviso to section 46(2) of the Indian Income Tax Act. Accordingly, the appeal was allowed with costs and the judgment of the High Court was set aside in its entirety. The Court further directed that the Income Tax Officer of Kozhikode and the Collector of Malabar may, as the law advises, take any appropriate steps against the respondent. The appeal was therefore allowed and the order was entered accordingly, providing that the respondent would remain subject to any lawful recovery measures.