Annamalai Chettiar vs Palamalai Pillai and Others

John Wallis, Kt., C.J.—The question is as to the effect of the explanation added to Section 64 (formerly Section 276) of the CPC of 1908

that for the purposes of the section ""claims enforceable under an attachment include claims for the rateable distribution of assets.""It had been held

by the Courts in India that decree-holders other than the attaching decree-holder acquired no right to rateable distribution u/s 295 (now 73) of the

Code until assets had been realized in execution, and Sir Lawrence Jenkins delivering the judgment of the Judicial Committee has observed in the

recent case of Mina Kumari Bibi v. Bijoy Singh Dudhuria (1917) ILR 44 Calc 662 (P.C.):

To bring Section 295 into play certain conditions are necessary, and one of them is that there should be assets held by the Court

Applying this principle the Indian Courts held u/s 276 that, if the judgment-debtor has satisfied the claim of the attaching decree-holder even by

alienating the attached property, that does not give the other decree-holders who have applied for execution any right to question the alienation;

and in the case referred which was decided with reference to the old Code, the Judicial Committee seem to have gone, if anything, further, and

have held that the attaching decree-holder himself cannot object to a private alienation by the judgment-debtor subsequent to the attachment unless

the attached property has been brought to sale in execution of the decree in respect of which the proper by was attached. In that case a decree-

holder, who had attached and brought to sale and purchased the suit property subsequently to a private alienation by the judgment debtor, was

held not to be entitled to defend his title as against the alienee from the judgment-debtor u/s 276 by relying on the fact that before the date of the

alienation he had attached the suit property in execution of another decree without bringing the property to sale in execution of that decree. In these

circumstances, it was held that Section 276 did not protect him.

Section 64 of the present Code affords no greater protection to the attaching decree-holder than Section 276 of the old Code and if he cannot

protect himself against an alienation after attachment unless the attached property is brought to sale in execution of the decree in respect of which

the attachment was made, it necessarily follows that other decree-holders who have applied for execution cannot be in any better position. It may

even be said that, as regards other decree-holders, the language used in the body of Section 64 is, if anything, less favourable than the language of

Section 276, because it only renders void as against the claimants specified alienations which are ""contrary to such attachment,"" and an alienation

by means of which the decree in execution of which the attachment was made is satisfied can scarcely be regarded as an alienation contrary to the

attachment.

As pointed out by Seshagiri Ayyar, J., full effect is given to the explanation to Section 64 by regarding it as intended settle the difference

between Sorabji Edulji Warden v. Govind Ramji, F.N. Wadia and another I.L.R.(1892) 16 Bom., 91 and Manohar Das v. Ram Autar Pande ILR

(1903) All 431 in favour of the Bombay decision. Further, if it had been intended to prevent all alienations of the attached property after

attachment unless made in execution of the decree and for the benefit of the decree-holders entitled to rateable distribution u/s 73 (formerly 295),

the legislature would have said so plainly. On the contrary, not only is the language of the body of Section 64, if anything, more restrictive than the

language of Section 276, but the legislature has strengthened the provisions of the former Section 275 by providing in Order XXI, Rule 59, that on

satisfaction of the decree, whether made through the Court or certified to the Court, the attachment shall be deemed to be withdrawn, whereas

Section 275 only provided for its being withdrawn in such event on the application of any person interested. There are other alterations pointing the

same way which are fully dealt with in the Opinion of Kumaraswami Sastri, J.--The fact that, when the attached property has been sold in

execution, the other decree-holders are now expressly empowered to apply to set aside the sale under Order XXI, Rule 90, a point on which

there was a conflict of opinion under the former Section 313, does not appear to me to affect the present ""question. A decree-holder who is

entitled to share in the sale-proceeds should obviously be regarded as interested in the sale.

For the reasons given, I would answer the question in the negative.

Ayling, J.

I agree.

Kumaraswami Sastriyar, J.

The question referred to us for decision is:

whether non-attaching decree-holders who have applied for rateable distribution under a subsisting attachment which has since been raised by the

satisfaction of the decree or otherwise, are entitled to question a private alienation made during the continuance of such attachment

and the answer turns on the scope and effect of the explanation added to Section 64 of the CPC of 1908 which runs as follows:

For the purpose of this section claims enforceable under an Attachment include claim for the rateable distribution of assets.

The section otherwise reproduces Section 276 of the CPC of 1882, which rendered private alienations of property after attachment void against

all claims enforceable under it.

Under the CPC of 1859, Section 240, which is practically the same as Section 276 of the Acts of 1877 and 1882 rendered private alienation

subsequent to the attachment void. This section was construed by their Lordships of the Privy Council in Anund Loll Doss v. Jullodhur Shaw

(1972) 14 M.L.A. 543 to mean that the private alienation was only void in so far as it was necessary to secure the execution of the decree to the

creditor who obtained the attachment and that the protection cannot. be extended to all persons who at any future time might possibly obtain

execution of their decrees. Section 276 of the Act X of 1877 which introduced the words"" as against all claims enforceable under the attachment

was, in recognition of the limitation imposed by Courts in India and the Privy Council on the general language used in Section 240 of the Act of

1859. Sections 270 and 271 of the Act of 1859 gave priority to the first attaching creditor and provided for rateable distribution between other

decree-holders who had taken out execution and not obtained satisfaction in so far as any surplus remained out of the sale-proceeds.

The Acts of 1877 and 1882 took away the priority of the first attaching creditor and in place of Sections 270 and 271 of the old Code

enacted Section 295 which provided for rateable distribution between all decree-holders who prior to the realization of assets had applied to the

Court for execution and had not obtained satisfaction.

Though the position of decree-holders who were entitled to rateable distribution in case the attachment culminated in a sale was fairly clear,

questions arose as to what was to happen if there was a private alienation during the existence of an attachment which was put an end to either by

satisfaction of the decree or was raised owing to other reasons. In Ganga Din v. Khushali I.L.R.(1885) All 702, the judgment-debtor sold attached

property and paid off the decree-holder who attached it. Decree-holders who would have been entitled to rateable distribution if the attachment

had not been put an end to objected to the removal of the attachment but their objection was overruled on the ground that their claims were not

protected by Section 276 they having no right to anything till there was an actual sale and realization of assets, and applications for execution,

though entitling the decree-holder to rateable distribution u/s 295, were not equivalent to an attachment u/s 276. The same view was taken in

Manohar Das v. Ram Autar Pande ILR (1903) All 431. In Umesh Chunder Roy v. Raj Bullabh Sen ILR (1832) Calc 279, where an alienation

was made pending an attachment, it was held that the attachment ceased on the decree being paid off and that the assignment was good against a

subsequent attachment by the same party in execution of another decree.

In Durga Churn Rai Chowdhry v. Monmohini Das ILR (1888) Calc. 771, it was held following Ganga Din v. Khushali ILR (1885) All. 702,

that a claim u/s 295 is not enforceable as an attachment against which an assignment is rendered void by the provisions of Section 276. Piggott and

Rampini, JJ., after pointing out that the legislature had not provided that a petition u/s 295 shall have the same effect as an attachment observed as

follows:

To hold that claims u/s 295 are claims enforceable by attachment against which assignments made u/s 276 are void, would perhaps be carrying out

the intention of the legislature when Section 295 was introduced. Unfortunately, the sections of the Code relating to execution were not recast so

as to be fully adapted to the new state of things. Section 276 has not been successfully framed with the object of protecting rateable distribution

amongst claimants u/s 295.

In Kunhi Moossa v. MakkiI.L.R. (1900) Mad. 478 a kanom was executed pending, an attachment and the decree in execution of which the

property demised under the kanom was attached was paid off. It was held that the kanom was valid as against decree-holders who had applied

for execution and who would in the ordinary course have been entitled to rateable distribution if the property had been sold. Subrahmanya Ayyar,

J., was of opinion that the attachment ceased to be operative in so far as the attaching creditor was concerned on the decree amount due to him

being paid off and that:

on principle it follows that with reference to the other judgment-creditors also, who, had the attachment resulted in the realization of assets, would

have been entitled to a rateable distribution, the attachment became inoperative.

In Vibudhapriya Tirthaswami v. Yusuf Sahib ILR (1905) Mad. 380 a similar view was taken. It was held by Sir Arnold White, C.J., and

Davies, J., that the rights of decree-holders who had applied for execution of their decrees depended upon Section 295 and that unless the events

upon the happening of which Section 295 would have come into operation, namely, the realization of assets by the Court, happened, they had no

claims enforceable under the attachment so as to attract the provisions of Section 276 to the alienations questioned. The further question as to

whether the words ""claims enforceable under the attachment"" would include claims of judgment-creditors other than the attaching creditor as was

held in Sorabji Edulji Warden v. Govind Ramji, F.N. Wadia and another ILR (1892) 16 Bom. 91 or only the claims of the attaching creditor as

was held in Manohar Das v. Ram Autar Pande ILR (1903) All. 431 was left undecided.

The decisions in Bombay have placed a more liberal interpretation on Section 276. In Sorabji Edulji Warden v. Govind Ramji, F.N. Wadia

and another ILR (1892) 16 Bom. 91 a more liberal interpretation was placed on the words"" claims enforceable under the attachment"" than was

placed by the Allahabad and Calcutta High Courts. It was held that when a sum of money due to the judgment-debtor was attached and he

assigned his rights after attachment and other decree-holders subsequently attached the same sum they were entitled to rateable distribution of the

sum paid into Court by the garnishee as against the transferee from the judgment-creditor prior to their attachment on the ground that their claims

were claims enforceable under the attachment. Mr. Justice Telang in an elaborate judgment after a review of all the authorities on the point held that

while realization of assets u/s 295 would protect decree-holders who had applied for execution even subsequent to the alienation their rights were

dependent on realization and consequently would not prevail over tie purchaser after attachment if the attachment ceased to have effect owing to

the satisfaction of the decree or other causes--the purchaser being perfectly safe in the latter case.

It was in this state of the authorities that the legislature enacted Section 64 of the present Code (Act V of 1908). An explanation was added to

Section 64 to the effect that for the purposes of that section claims enforceable under the attachment included claims for rateable distribution. As

pointed out in Jetha Bhima & Co. v. Lady Janbai ILR (1913) 87 Bom. 138, the effect of the explanation is to give legislative approval to the

extended meaning given to the words ""claims enforceable under the attachment"" in Sorabji Edulji Warden v. Govind Ramji, F.N. Wadia and

another ILR (1892) 16 Bom. 91. In this view a reference to the authorities as they stood prior to the passing of the new Act would be relevant. It

will be useful to consider in this connexion the other relevant provisions of the Code. In Section 73 which corresponds to Section 295 of the Act of

1882 the words used are ""where assets are held by a Court and more persons than one have, before the receipt of assets, made application

instead of ""whenever assets are realized by sale or otherwise in execution of a decree, and more persons than one have, prior to the realization,

applied to the Court"" in Section 295 of the old Code. In Order XXI, Rule 55, which corresponds to Section 275, a clause is added providing that

the attachment shall be deemed to be withdrawn and for notification of such withdrawal by proclamation at the place where the property is situate.

The only amount to be paid in order to get the attachment withdrawn is the amount decreed with costs and all charges and expenses resulting from

the attachment and Clauses (b) and (c) only refer to satisfaction and reversal of the decree in execution of which the property is attached. Order

XXI, Rule 57, which is new, provides for the determination of the attachment if the execution application is dismissed owing to the decree-holder''s

default. Order XXI, Rule 69, which corresponds to Section 291 of the Act of 1882, provides that the sale shall be stopped if before the lot is

knocked down the debt and costs including the costs of sale are tendered to the officer conducting the sale or proof given that the amount has

been paid into Court. Order XXI, Rule 89, corresponding to Section 310A, requires that only the amount specified in the proclamation of sale less

any payment subsequently made should be paid into Court with 5 per cent of the purchase money. Form 8 of Appendix E to the Code specifies

the sum due and authorizes attachment and direct the officer to hold the same until further order of the Court unless the amount specified is paid

and similarly the prohibitory order specifies the amount for which the decree has been passed. Form 24 which relates to attachment of Immovable

property under Order XXI, Rule 54, also gives the amount of the decree in execution of which the attachment is made. It is clear from the rules

and forms above referred to that the attachment ceases to have any force as soon as the decree in execution of which the property has been

attached is satisfied or the execution application is dismissed owing to the decree-holder''s default. It is significant that the last clause of Order XXI,

Rule 55, and the whole of Rule 57 are new and that no reference is made to the claims of persons who would be entitled to rateable distribution. In

contrast with this Order XXI, Rule 90, which relates to the setting aside of sales for irregularity which corresponds to Section 311 of the old Code

contains the words ""entitled to share in a rateable distribution of assets"" not found in Section 311. Reference was made in the course of argument

to Lakshmi v. Kuttunni ILR (1887) Mad. 57, Athappa Chetti v. Ramakrishna Nayakan ILR (1898) Mad. 51, Chakrapani Chettiar v. Dhanji Settu

ILR (1901) Mad. 311 and Ayodhya v. Nani ILR (1893) All 318, which decided that the term ""decree-holder"" included a person entitled to

rateable distribution for the purpose of Section 311 and Rule 90 has incorporated the result of the decisions. If the legislature intended the

attachment to enure for the benefit of all persons entitled to rateable distribution it would similarly have declared that the attachment should cease

only on all their claims being satisfied or that the cesser of the attachment should be without prejudice to their rights. That the difficulty created by

Rules 55 and 57 of Order XXI is real will be clear from the fact that the existence of a valid attachment is necessary in order to bring the property

to sale and if the attachment ceases when the decree-holder who attaches is paid off a re-attachment will be necessary which will be of no avail if it

is subsequent to the alienation, see Gobind Singh v. Zalim Singh ILR (1884) All 33 and Mina Kumari Bibi v. Bijoy Singh Dudhuria I.L.R.(1917)

Calc. 662. In order to get over this difficulty we shall have to read into all the rules in Order XXI relating to the raising of the attachment and in

Rule 89 the words ""the amount due to decree-holders who would be entitled to rateable distribution prior to the private alienation."" It is difficult to

see under what rules of construction such a wholesale addition to the rules can be made.

It is contended for the appellant with some force that Section 64 enacts that the alienation pending attachment shall be void as against all claims

for rateable distribution of assets, that claims for rateable distribution are not dependent on the attachment but on Section 73 that the claim for

rateable distribution would have been enforceable if the properties had been allowed to be sold, that the legislature in enacting the explanation to

Section 64 intended to make an attachment by one decree-holder to enure for the benefit of all persons entitled to rateable distribution (the policy

of the law being to prevent multiplicity of attachments) that the decree-holder who actually attaches and who under the law would have no priority

in case the assets were realized by sale ought not to be allowed to defeat the rights of the other decree-holders and that by sanctioning the

alienations of property behind their back and paying off the attaching creditor he will virtually get priority. It is also contended that though under

Rules 55 and 57 the attachment ceases on payment of the decree-debt of the attaching creditor yet a fresh attachment by those entitled to rateable

distribution should be treated as a continuation of the original attachment and that in any event Section 64 should be read as making the alienation

void as against subsequent attachment by those who would if the execution have been allowed to proceed would have been entitled to rateable

distribution.

It has been argued for the respondent that the explanation added to Section 64 only protects ""claims for rateable distribution"" that such claims

can only arise when assets are held by a Court u/s 73, that the explanation was merely the legislative recognition of the principle enunciated by the

Bombay High Court in Sorabji Edulji Warden v. Govind Ramji, F.N. Wadia and another ILR (1892) 16 Bom.91 and that the decision of their

Lordships of the Privy Council in Mina Kumari Bibi v. Bijoy Singh Dudhuria (1917) ILR 44 Calc. 662 (P.C.) is conclusive on the matter.

The decision of the question which is not free from difficulty is in my opinion really concluded by the observation of their Lordships of the Privy

Council in Mina Kumari Bibi v. Bijoy Singh Dudhuria ILR (1917) Calc 662. Though Section 276 of the old Code did not contain any provision

corresponding to the explanation, the effect of the ruling in Sorabji Edulji Warden v. Govind Ramji, F.N. Wadia and another ILR (1892) 16 Bom.

91 was to read the section in the same way as it would have read if the explanations were there and it is difficult to explain away the clear remark

of their Lordships [who assume for the purposes of the argument that the decision in Sorabji Edulji Warden v. Govind Ramji, F.N. Wadia and

another ILR (1892) 16 Bom. 91 is correct] as having reference only to the wording of the old Code. In that case a decree-holder held two

decrees against the same person and attached certain properties in execution of one of his decrees and would have been entitled to rateable

distribution if the attachment had resulted in a sale. Pending attachment the judgment-debtor sold the property. The attachment subsequently

ceased to be operative and the decree-holder subsequently attached the property and brought it to sale. The purchaser sought to recover the

property from the alienees from the judgment-debtor. A decree was passed in his favour by the High Court but it was reversed on appeal by the

Privy Council on the ground that the sale in execution being under an attachment subsequent to the private alienation was not protected by Section

276; Dealing with the argument that Section 276 rendered the alienation void as against the subsequent attachment their Lordships observe:

That section provides that when an attachment has been made as there described any private alienation of the property attached during the

continuance of the attachment shall he void against all claims enforceable under the attachment. Ex hypothesi the alienation to the plaintiff was not

during the continuance of the attachment in Execution Case No. 16 of 1907 or in other words the attachment under which the execution sale to the

decree-holders was made. Therefore it cannot be avoided by the attachment.

It was also urged before their Lordships that, having regard to the decision of the Bombay High Court in Sorabji Edulji Warden v. Govind

Edulji, F.N. Wadia and another ILR (1892) 16 Bom. 91, the decree-holder was a person who would have been entitled to rateable distribution

and was consequently protected against the private alienation. Their Lordships dispose of the argument witch the following observations:

He relies on Section 295 of the CPC as entitling him to the benefit of Section 276 and for this purpose he calls is aid the application for attachment

in Execution Case No. 8 of 1902. To bring Section 295 into play certain conditions are necessary and one of them is that there should be assets

held by the Court. It has not been shown that there was such assets and the indications in the record point the other way. But apart from this

Section 295 cannot help the decree-holder. Though the word ''attachment'' occurs three times in Section 276 the reference is to one and only one

attachment; and that one in this case is the attachment in Execution Case No. 16 of 1907. All that can be done is to employ that attachment for the

purpose of impugning the private alienation, for it is on that alone that the decree-holder''s title to the property in the suit at present rests. So that

even if it be assumed for the sake of argument that the view which prevailed in Sorabji Edulji Warden v. Govind Ramji, F.N. Wadia and another

ILR (1892) 16 Bom. 91 is correct and that the conditions of Section 295 have been satisfied it cannot advance the decree-holder''s case.

There can be little doubt that Section 64 as it stands at present can protect decree-holders entitled to rateable distribution against private

alienation, only where assets have been realized in which case they will be entitled to share the proceeds in preference to the alienee. This can

happen only in a very limited class of cases, e.g., where the garnishee pays the attached amount into Court. In the numerous and important class of

cases relating to attachment of Immovable property the amendment would be of no use to decree-holders entitled to rateable distribution.

Assuming that the legislature intended the attachment u/s 64 to enure for the benefit of all persons entitled to rateable distribution who had applied

for execution prior to the private alienation it has not gone far enough when it introduced the explanation to Section 64 worded as it is and made no

provision for the continuance of the attachment in Order XXI in cases where the attaching creditor was paid off. The result is not very happy, but

the remedy is in the hands of the legislature.

I agree with the view expressed by Seshagiri Ayyar, J. and would answer this reference in the negative.