E.M. Visvanadhan Chetty and Others vs Arunachelam Chetti

John Wallis, C.J.—The answer to the reference appears to depend on the construction of Order XXI, Rule 52, of the Code of Civil

Procedure, which was first enacted as Section 237 of the Code of 1859, under which the first attaching decree-holder was entitled, as the first

judgment-creditor suing out a writ of fi-fa in England, to have his claim satisfied in fall out of the proceeds of execution, the surplus only being liable

under the Code to rateable distribution among subsequent attaching creditors. It was however retained as Section 272 of the later Codes under

which by virtue of Section 295, now 73, the attaching judgment-creditors were obliged to submit to rateable distribution with, but only with, other

decree-holders who had applied to the attaching Court for execution before the date specified in the section. Now, it does not seem likely that the

legislature would have retained, and even extended, the old Section 217 by substituting the word ""property"" for ""money or any security"" if it had

considered that it would interfere with the due working of the procedure for rateable distribution introduced by Section 295, and would authorize

the admission to rateable distribution of decree-holders who had not entitled themselves to rateable distribution u/s 295 by applying for execution

to the Court in which the first attaching decree-holder''s decree was being executed, but had themselves subsequently to the first attachment

attached the property in. the Court which had the custody of it, hereinafter called the custody Court The procedure for rateable distribution u/s

295, now 73, applies to attached property in the custody of a Court just as much as to any other kind of attached property, and, in my opinion,

precludes any rateable distribution on equitable grounds, of property attached under Rule 52 among any other class of decree holders.

The section which is now Rule 52 prescribes a form of attachment for property which is ""in the custody of a Court or any public officer"" and

under the attachment is to be held subject to the further orders"" of the attaching Court. Where the property attached is in the custody of a public

officer, it is clearly the duty of the attaching Court to provide, if necessary, for the realization of the property and to divide the proceeds of the

realization rateably between the attaching decree-holder and the other decree-holders who have applied to it for execution before it received such

proceeds in satisfaction of their decrees. If the attached property is money, it is now, in my opinion, the duty of the attaching Court, having regard

to the provisions of Section 295, to call on the public officer to pay it into Court and to deal with it in the same manner. When the property

attached is in ""the custody of a Court,"" it is equally to be held by the custody Court subject to the further orders of the attaching Court, and subject

also to the proviso which has next to be examined which does not in my opinion either relieve the attaching Court of the duty of getting in and

distributing the money or proceeds of realization if available and distributing them among the decree-holders entitled u/s 295, now 73, or authorize

the custody Court to embark on another sort of rateable distribution among another class of decree-holders. The proviso only says that ""any

question of title or priority arising between the decree-holder"" (meaning the decree-holder who had made the attachment) ""and any other person

not being the judgment-debtor claiming to be interested in such property by., virtue of any assignment, attachment, or otherwise shall be

determined by such Court,"" the custody Court. This will include claims questioning the title of the judgment-debtor and other cases, but taking the

present case of the property in the custody Court being made the subject of several attachments in execution of several decrees, the custody Court

is then in my opinion required by the proviso to determine which of these attachments is entitled to priority, and in the absence of any legislative

provision (section 63, which has given rise to difficulties which need not now be considered, does not apply to the present case) to award such

priority to the first attachment in date because that attachment became complete on the service of the notice on the custody Court and subsequent

attachments cannot, in the absence of express legislative provision, affect the right of the first attaching creditor to have the attached property

realized in execution of his decree and distributed rateably among the decree-holders entitled u/s 295, now 73, in satisfaction of their decrees. If

the other decree-holders want to share in the rateable distribution, their proper coarse is to apply in time, if they can, to the attaching or executing

Court; and if, instead of doing so, they choose to attach the property in the custody Court, the result will be that the attaching decree-holder who is

second in point of time will be entitled to proceed in execution against any balance that may be left in the hands of the custody Court after the full

satisfaction of the decree of the first attaching decree-holder and of the other decree-holders who have entitled themselves to rateable distribution

u/s 295, now 73, in executing his decree. For these reasons, I am of opinion, with great respect, that Katum Sahiba v. Hajee Badsha Sahib I.L.R.,

(1915) Mad., 221 and in Thakurdas Motilal V. Joseph Iskendar I.L.R.,(1917); Calc., 1072 , allowing rateable distribution among decree-holders

attaching the property in the custody Court, should not be followed.

The same principles must be applied in the present case, in which the attaching Court and the custody Court are the same. The fact that money

was lying in Court to the credit of the judgment-debtor in a suit other than that in which the attachments wore made does not make it assets ""held

by a Court"" within the meaning of Section 73, which clearly refers to assets levied in execution or paid into Court in satisfaction of the decree under

execution, and not to assets lying in the same Court to the credit of the judgment-debtor in another suit. Such assets may of course be attached by

the Court in execution of another decree of the same Court. The Code does not say how such attachment is to be made. The order ""attach

appears to be sufficient, though of course some record of the attachment must be placed among the records of the suits to the credit of which the

money is lying. On the other hand the order of attachment does not of itself effect a transfer to the credit of the suit in which the attachment is made

so as to constitute a receipt of assets within the meaning of Section 73. The money may not be available as being already subject to another

attachment, possibly in another Court, and it is only when the Court comes to the conclusion that there is no objection and orders the money, or so

much as it thinks necessary to satisfy the decree-holders who have applied to it for execution, to be transferred to the credit of the first attaching

creditor''s suit which it is engaged in executing, that there can be said to be receipt of assets within the meaning of Section 73 and that a rateable

distribution can be made. Judged by this test, the respondents in. this appeal were entitled to rateable distribution, not on the grounds assigned in

the lower Courts and referred to in the reference, but u/s 73, Civil Procedure Code, because they applied for execution of their decrees to the

Court executing the first attaching creditor''s decree before the receipt of assets by that Court. The appeal therefore fails and is dismissed with

costs.

Ayling, J.

I agree.

Napier, J.

I agree.

Sadasiva Ayyar, J.

I agree with my Lord in his reasoning and in his conclusion. I shall however say a few words of my own, principally on the question what ""before

the further receipt of asset''s"" means. In our Referring Order Spencer, J., and myself held that Section 73 of the CPC did not in terms apply to the

present case. Spencer, J.''S reasons were two, namely (1) because ""the money deposited"" was not ""assets held"" within the meaning of those words

in that Section, and (2) because execution was not applied for ""before the receipt of"" such assets, within the meaning of these words, in that same

section. My sole reason was the reason No. (2) of Mr. Justice Spencer, as I was doubtful about his reason No. (1). On the further consideration

which I have been able to give to this case, I am satisfied that the second reason also is not valid as the words ""before receipt of such assets"" in

Section 73, though much more clear than the words ""prior to the realization"" in the old Section 295 (realization having been a word of controverted

meaning), must themselves be qualified by the understood words ""levied in the course of execution and paid into Court in satisfaction of any of the

decrees under execution, or transferred for purposes of execution, to the credit of one or more of the decrees under execution.

In the present case, the assets seem not to have been ""received"" in this sense till long after the dates of the two attachments, in question and in

fact, till the money was impliedly so transferred to the credit of one or both of the decrees just before the order was passed for rateable

distribution. Hence Section 73 clearly applies.

As regards Order XXI, Rule 52, the proviso in the second paragraph is an exception to the first paragraph and the words ""question of priority

by attachments"" in the second paragraph, in my opinion, were intended to include questions of priority arising by reason of attachments made by

several executing Courts but not questions of priority arising out of attachments made by decree-holders executing through the same Court where

the latter Court is not the custody Court.

I think that portions of Rules 179 and 180 of the Civil Rules of Practice, which require that the Court should proceed in certain cases mentioned

in Rule 179 as if the decree-holder was an assignee of the judgment-debtor and require in certain cases mentioned in Rule 180 that ""the execution

petition shall ask that the decree may be transmitted to the custody Court are ultra vires, as being inconsistent with the rights and privileges given to

decree-holders and their assignees in the old Civil Procedure Code, and as not having been framed in the V"" manner and by the authority

prescribed by the new Code for the making of valid new rules and for altering existing rules.

Rules 179 and 180 of the Civil Rules of Practice are however very convenient rules, and, if followed, would markedly diminish the number of

conflicts among orders passed by different Courts, as the directions in these rules when, followed have the effect of converting the custody Court

into the executing Court. I would, therefore, suggest to the Rule Committee to take up this question and frame new rules on the lines of Rules 179

and 180, of the Civil Rules of Practice, to avoid as far as possible nice, intricate and difficult questions as regards the conflict of jurisdiction and

powers among Courts being litigated in execution proceedings.

Krishnan, J.

As I agree with the judgment of the learned Chief Justice who has dealt with the case very fully, I shall only briefly state my reasons.

It seems to me that Order XXI, Rule 52, Civil Procedure Code, is the provision for the attachment of money or property in the custody of any

Court, whether that Court be the same Court as the attaching Court or a different Court. There is no limitation in the point in the wording of the

rule and there is no other provision for attachment when the attaching Court and the ""custody Court"" are one and the same. When the two are the

same, it seems to me that, as attaching Court, it will act in the suit in which the attachment order was made and as custody Court, in the suit in

which the money or property attached was brought into Court. This is the only distinction that I can see.

When the Court acts as the custody Court, it will decide in the latter suit the questions arising under the proviso to Rule 52, such as questions

of title arising in claim petitions under Rule 58, and if there are attachments on the property by more Courts than one, questions as to which

attachment has priority. After deciding these, it will hold the property, as the rule directs, subject to the further orders of the Court whose

attachment it has held to have priority, whether it is the same Court or another Court. The position is just the same whether the custody Court is

the same Court as the attaching Court or a different Court.

The custody Court has, in my view, nothing to do with the distribution of assets under the Code, as it has to hold the property subject to the

further orders of the attaching Court; and Section 73 of the CPC has no application to the custody Court. If the property attached has to be sold

to convert it into money, the attaching Court will take the necessary steps under the rules for sale in the Code as in the case of any other property

attached, But if it is money in the hands of the custody Court, the attaching Court may direct the money to be paid over to itself. It is only when the

attaching Court gets the money into its hands, so as to be available for distribution, that Section 73, Civil Procedure Code, comes into play;

rateable distribution will then have to be given to all decree-holders who have brought themselves under the terms of the section by having applied

for execution prior to the receipt of such assets. When the attaching Court and the custody Court are the same, it seems to me that an order should

be made by the Court as attaching Court for transferring the money from the suit in which it came into Court to the suit in which the attachment

took place. It is only when this is done, the Court, as attaching Court, can properly be said to have received the assets and to hold it within the

meaning of Section 73; and decree-holders who have attached prior to that are entitled to rateable distribution.

This view, it seems to me, is in complete accord with the provisions of the Code and applies the statutory rule of rateable distribution to all

cases, including property in the custody of a Court. There is no necessity to treat the case of such property as different from the case of other

properties as regards reteable distribution and as an exception to the general rule and to rely on equitable principles as was done in Thakurdas

Motilal v. Joseph Iskender I.L.R., (1917) Calc., 1072 and Katum Sahiba v. Hajee Badsha Sahib I.L.R., (1915) Mad., 221. In fact when there is

a statutory rule governing the case, there is no room, in my view, for the application of equitable principles and with all respect to the learned

Judges in the Calcutta and Madras cases, I agree that they should not be followed. The Code makes no difference between property in the

custody of the attaching Court itself, property in the custody of other Courts or in the custody of public officers, and property in the possession of

other persons, as regards the method of distribution; the difference under the Code is in the method of attachment and in the mode of decision as

to its effect and validity. After the assets have been realized by the executing Court, Section 73 of the CPC applies to all of them equally. If the

other decree-holders cannot bring themselves within the section, the decree-holder under whose attachment the assets were realized must be paid

in full, for Section 73 is the only provision which enables other decree-holders to share with him. [See Umma Venkataratnam & Co. v. Adamji

Usman & Co. I.L.R., (1919) Mad., 692 .]

Applying this view to the present case, the Second Appeal before us tails and I agree to its being dismissed with costs.