Holding

A person who has undertaken to discharge a joint family debt is a "defaulter" under Section 5, making the auction sale of the hypothecated property valid.

Summary

The Supreme Court examined whether a member of a joint family who, by partition, undertook to discharge a government loan taken by another family member, qualifies as a "defaulter" under Section 5 of the Andhra Pradesh Revenue Recovery Act, 1894. The joint family property had been hypothecated to secure the loan, and the respondent, Radhakrishnaniah, failed to fulfill his undertaking, leading to an auction sale of his share. The appellant, the auction purchaser, sought confirmation of the sale's validity. The Court held that the term "defaulter" includes any person liable to discharge the debt, and since Radhakrishnaniah had assumed that liability, he was a defaulter. Consequently, the auction sale complied with the Act and the sale certificate was binding. The appeal was allowed, setting aside the High Court judgment and dismissing the suit challenging the sale.

Issues considered

Whether the respondent, who undertook to discharge a government loan on behalf of the joint family, is a "defaulter" within the meaning of Section 5 of the A.P. Revenue Recovery Act, 1894.
Whether the auction sale of the respondent's share of joint family property, hypothecated to secure the loan, is valid under the Act.

Subjects

joint family propertydefaulterrevenue recoveryauction salemortgagepartitionhypothecationgovernment debtSection 5AP Revenue Recovery Act

Judgment

-,
•

VEMULA SIVIAH NAIDU A
v.
STATE OF AP. AND ANR.

NOVEMBER 28, 1996

[K. RAMASWAMY AND G.T. NANAVATI, JJ.]
B

A.P. Revenue Recovery Act, 1894 :

Section 5-'Defaulter'-Wlzo is-Joint family property-Sale of land for
realisation of debt due to govemmellt-Validity of-S and R members of joint C
family-Debt contracted by S from Govemment .under a mortgage-Ai parti-
tion R was granfed a greater share as he undertook to discharge all liabilities
on the joint family properties including debt contracted by S-Default in
payment of Government loan-Auction sale of land for recovery of debt-Ap-
pellant purchased the land in auction sale-Suit instituted by R for setting D
aside of sale-Dismissal by Trial Cowt and affinnation by first Appellate
Court-On appeal suit decreed by High Court-Appeal by auction pur-
chaser-Held, R is a defaulter for the purpose of Section 5-The word
'defaulter' connotes the person who ·is· liable to discharge the debt as the joint
family property was hypothecated to the Government for recovery of the debt
taken by S and R had undertaken to redeem the debt taken by S and the E
partition was subject to the above undertaking, the property was liable to be.
proceeded for recovery of the debt contracted upon it--The auction-sale was
in accordance with law-171e sale certificate binds R.

Chatrati Sarama Murthi & Ors. v. Official Receiver Krishna & Ors.,
(1957) 1 AWR 216, referred to. F

C. Dhanalakshmi Ammal v. lncome-Tax Officer, Madras, 31 ITR 460,
distinguished.
/'
CIVIL APPELLATE JURISDICTION : Civil Appeal No. 721 of G
1981.

From the Judgment and Order dated 28.2.79 of the Andhra Pradesh
High Court in S.A. No. 632 of 1977.

A.V. Rangam and A. Ranganadhan for the Appellant: H
341
342 SUPREME COURT REPORTS [1996] SUPP. 9 S.C.R.

A K. Ram Kumar and A. Subba Rao for the Respondents.

The following Order of the Court was delivered :

The appellant is the auction-purchaser of 5.86 acres in Ped-
dayyasamudram village in Nellore District. The said land was brought to
I
B sale on November 2, 1967 to realise the debt due to the Govt. from one K.
Sankaraiah, the brother of K Radhakrishaniah, the respondent-plaintiff.
The appellant had purchased the same in the said auction. He was granted
the sale certificate on April 30, 1969 under Ex. B-1. Later, the second
respondent, Radhakrishaniah filed the suit for setting aside the sale. The
C trial Court dismissed the suit. On appeal, the District Judge confirmed the
same. Jn Second Appeal No. 632177 by judgment and decree dated
February 28, 1979, the learned single Judge of the High Court of Andhra
Pradesh decreed the suit. Thus, this appeal by special leave.

The admitted facts are that K. Sankaraiah, the debtor and the second
D respondent are members of the joint family. At a partition dated July 28,
1954 under Ex. B-13, Radhakrishnaiah was granted a greater share since
he had undertaken to discharge all the liabilities on the joint family
properties including the debt contracted by Sankaraiah from the Govern-
ment under a mortgage. The contention raised by the second re8l'onden~
which was found acceptable by the High Court, was that since he was not
E a defaulter within the meaning of Section 5 of the A.P. Revenue Recovery
Act, 1894 (for short, the 'Act'), the property belonging to the respondent
could not be brought to sale. In support thereof, the learned Judge has
relied upon another judgment of that Court in Chatrati Srirama Murthi &
Ors. v. Official Receiver Krishna & Ors., (1957) 1 AWR 216. The question
is: whether the view taken by the High Court is correct in law? The
F Learned District Judge recorded a finding, which was also accepted by the
High Court, that the properties are joint family properties hypothecated to
the Government for securing the loan by Sankaraiah. The second
responded under Ex. B-13 had taken bulk of the properties including the
suit schedule property allotted to him in the partition with an undertaking
G "to discharge all the liabilities of the erstwhile joint family including the
loan obtained from the Government". Thus, the question arises : whether
the second respondent is a defaulter within the meaning of Section 5 of the
Act? Section 5 reads as under :

"Whenever revenue may be in arrear it shall be lawful for the
H Collector or other officer empowered by the Collector in that
V.S.NAIDUv. STATE 343

behalf, to proceed to recover the arrear, together within interest A
and costs of process by the sale of defaulter's movable and immov-
able property, or by execution against the person of the defaulter
in manner hereinafter provided. 11 •

It is to remember that the word 'defaulter' connotes the person who
is liable to discharge the debt. In view of the fact that the joint family B
property was hypothecated to the Government for recovery of the debt
taken by K. Sankaraiah and the second respondent had undertaken to
redeem the debt taken by Sankaraiah and the partition was subject to the
above undertaking, the property is liable to be proceeded for recovery of
the debt contracted upon it. As a consequence, the second respondent is
a defaulter for the purpose of Section 5 of the Act.
c
Shri A. Subba Rao, learned counsel appearing for the second respon-
dent, contended that the word 'defaulter' would be understood to be the
person who has incurred the liability. Though Radhakrishniah, had under-
taken the liability under Ex. B-13, for the purpose of Section 5, he cannot D
be considered to be a defaulter, but R. Sankaraiah was the defaulter;
therefore, the prop.erty had by the respondent at a partition is not liable to
sell. In support thereof, learned counsel placed reliance on the judgment
of Madras High Court in C. Dhana/akshmi Ammal v. Income-Tax Office1;
Madras, 31 !TR 460. The facts therein are that the husband of the
petitioner therein was the defaulter of arrears of income-tax. The property E
belonged to his wife who was sought to be proceeded against for recovery
of arrears of income-tax due by the assessee, on the premise that the wife
is only a benamidar and the real owner of the property was the husband,
the defaulter. The Madras High Court had held that since the husband is
the defaulter, the property cannot be straightaway proceeded with since
they stand in the name of the wife, unless appropriate steps are taken to
F
ensure first that the wife is only a benamidar and the real owner of the
property is the husband. We need not consider the correctness of the view
taken by the Madras High Court for the reason that the facts therein are
entirely different from the facts in this case.
G
It is seen that the property which is proceeded with for recovery of
the debt due to the Government is the joint family property charged to the
. debt due by Sankaraiah. The respondent-Radhakrishanaiah had under-
taken to discharge the liability under Ex. B-13. Therefore, he assumeq the
responsibility as a defaulter under Section 5. In consequence, the property
is liable to be proceeded with since he had not discharged that liability. H
344 SUPREME COURT REPORTS (1996) SUPP. 9 S.C.R.
A The sale conducted on November 2, 1967, therefore, is in accordance with
the provisions of the Act. The sale certificate was legal and valid. Accord-
ingly, Ex. B-1, the sale certificate dated April 30, 1961 binds, the second
respondent.

The appeal is accordingly allowed. The judgments and decree of the
B · High Court stand set aside. The suit stands dismissed. No costs.
T.N.A. Appeal allowed.