Joseph George vs Cochin Sanitary Wares and Others

Balanarayana Marar, J.—Appeal arises from an order in execution. First Respondent obtained a decree against the 2nd Respondent in O.S. 199/1976 before Sub Court, Ernakulam. In execution of the decree amount due to 2nd Respondent from the Government as per contract work was attached. Appellant filed E.A. 811/1978 under Rule 58 of Order 21 alleging that the amount due from Government belongs to him under the power-of-attomey executed by the 2nd Respondent. By that power Defendant had authorised Appellant to act in his name and on his behalf and to receive payment due under the contract. The power is irrevocable till the whole of the work is completed in accordance with the agreement and until the settlement and disbursement of all claims in connection with the work is completed. It is alleged that on the date of attachment the amount was due to Appellant even though the contract stood in the name of the Defendant. He wanted the attachment to be raised.

The executing court rejected the claim; petition finding that the power-of-attorney only authorises the claimant to do the work for and on behalf of the contractor and that he has no independent right over the amount due from the Government. It was also noticed that the power-of-attorney had been revoked by the Defendant. Aggrieved by that order the claimant has come up in appeal.

Heard Counsel on both sides. It is urged by learned Counsel for the Appellant that the court below has not considered the effect of the various provisions contained in the, power-of-attorney and the question of law on that aspect. Learned Counsel appearing for the 1st Respondent questions the maintainability of the claim petition on account of the dismissal of a claim petition during the pendency of the suit. On the contentions raised by the Counsel the following points arise for consideration:

Whether the amount due from Government can be claimed by Appellant on the strength of the power-of-attorney?

Whether the claim petition is maintainable in view of the dismissal of the petition filed during the pendency of the suit?

Point No. 1.

Second Respondent has undertaken to execute a contract work and an agreement was entered into by him with the Government. The power-of-attorney was necessitated since 2nd Respondent was not possessed of sufficient funds to execute the work and Appellant, agreed to render help and financial assistance. Appellant was authorised to, sue for and recover any amount due to the 2nd Respondent in connection with the agreement with the Government and to conduct or defend proceedings in connection therewith. In particular it is declared that the power-of-attorney and all powers granted thereby will not be revoked till the whole of the said work is completed in accordance with the terms of the agreement and until the complete settlement and disbursement of all claims in connection therewith. It was also stipulated that the security amount under the agreement for, the fulfilment of the execution of the work will be releasea to the 2nd Respondent and the retention amount to the attorney-holder when it becomes due for payment. The amount attached is the retention amount due to the contraction and claim is made to that amount on the strength of the power-of-attorney. Since the power is irrevocable, the claim of the power-of-attorney-holder is sustainable according to Counsel for Appellant. He has drawn attention to some judicial pronouncements on this aspect. The earliest in point of time is the one reported in Seth Loon Karan Sethiya Vs. Ivan E. John and Others, In that case a customer of a bank who was heavily indebted to the bank appointed the bank by-power-of-attorney to execute a decree in his favour and to credit the amounts realised to his account. The Supreme Court held that the power given to the bank is one coupled with interest and therefore is irrevocable and that it amounted to an equitable assignment of the decree in favour of the bank to the extent necessary to discharge the customer''s dues. This decision was followed by the Supreme Court in Bharat Nidhi Ltd. Vs. Takhatmal (Decd. by his Legal Representatives) and Another, . Therein the power-of-attorney authorised the Appellant to receive all monies due or to become due to one Malhotra in respect of pending or future contracts with the Government authorities. The Supreme Court held that on a proper construction of the document the conclusion is irresistible that there was an agreement between the lender and the borrower that the debt owing to the lender would be paid out of a specific fund of the borrower in the hands of the Government authorities. It was observed that there was a sufficient equitable assignment of a specific fund in favour of the Appellant.

I am also referred to the decision in M. John Kotaiah Vs. A. Divakar and Others, . Under the impugned power-of-attorney in that case the attorney holder was to manage, control, supervise and develop the property of the principal, to let out any part of that property, realise rent, prevent encroachments and to do various other acts. It was observed that if the interest created in the agent is in the result of the proceeds arising after the exercise of the power, then the agency is revocable and cannot be said to be an irrevocable agency. But it was held that if the interest in the subject matter, say a debt payable to the principal, is assigned to the agent as security simultaneously with the creation of the power and thereafter the agent exercises the power to collect the debt for discharge of an obligation owned by the principal in favour of the agent or owed by the principal in favour of a third party, then the agency becomes irrevocable.

The power-of-attorney itself mentions that it is irrevocable. The agent was authorised to do nil acts in connection with the execution of the contract and to receive the amounts payable by the Government except the security amount which was payable to the 2nd Respondent. There is specific mention about the retention amount which was agreed to fee paid to the power-of-attorney-holder. The right conferred under the power-of-attorney therefore amounts to an equitable assignment of the amounts due to the 2nd Respondent. On the strength of the power the entire right in respect of the-contract work had vested in the claimant and what was reserved with the 2nd Respondent is only the right to claim the security amount. The amount retained by the department and known as retention amount is therefore not due to the 2nd Respondent and hence not liable to be attached in execution of the decree against 2nd Respondent. The order of the court-below that the claimant has no independent right over the amount is therefore erroneous and is hereby set aside.

Point No. 2.

The maintainability of the claim petition is seriously challenged by the 1st Respondent. The amount was attached during the pendency of the suit. It is admitted that a claim petition was filed then which was dismissed. A petition for restoration of that application was also dismissed. It is pointed out that the request for review of that order was also refused. Thereafter the attachment was made absolute and the suit was decreed. The order in the claim petition is therefore a bar in maintaining another application at the execution stage, according to learned Counsel for 1st Respondent. Counsel has cited the decision in Dalmia Cement (Bh) Ltd. v. Kamala Pillai AIR 1982 Mad. 441. The facts of that case are more or less identical. In a suit for recovery of money the house property of the Defendant was attached before judgment on 10th December 1973. A claim petition was filed by the wife of the Defendant claiming the property to be hers. During the pendency of that claim petition the suit was decreed on 5th February 1974. The claim petition was dismissed for default on 3rd October 1974. The attachment was made absolute. The attached property was brought to sale in execution of the decree. After receipt of the sale notice another claim petition was filed by the very same claimant. That petition was resisted by the decree-holder. The claim was upheld by the executing court. The validity of that order was challenged before the High Court in appeal. The Madras High Court allowed the appeal and set aside the order of the executing court. While doing so it was observed thus:

Since Order 38 Rule 8, Code of Civil Procedure, directs that adjudication of claims to property attached before judgment should be done in the same manner as an adjudication against claims against attachment of the property in execution, of a decree, Order 21, Rule 58 and 63, Code of Civil Procedure, will automatically apply to the claims made against an order of attachment before judgment.

The Madras High Court was considering the applicability of Rule 63 of Order 21 of the Code of Civil Procedure, as it stood before the amendment of the CPC in 1976. It was held that an order of dismissal for default falls within the mischief of Order 21 Rule 63 and it would be an order adverse to the claimant and therefore Rule 63 will stand attracted. It was also held that Order 21 Rule 63 applies to claims preferred against the order of attachment before or after judgment. Admittedly no suit was filed to challenge the dismissal of the earlier claim petition filed at the stage of attachment before judgment. It is observed that the order of dismissal has become final and conclusive as per Order 21, Rule 63 which was in force-at the time of attachment effected before judgment. A question arose whether the right has been revived consequent to the deletion of Rule 63 of Order 21 by the Amendment Act 104/1976. The Madras High Court observed that the right to question the order passed in the claim petition by filing a suit has been lost even on 3rd January 1975 i.e., before the deletion of Rule 63 of Order 21 and the said right cannot be said to have been revived after the deletion of the said provision.

The Division Bench has referred to a Full Bench decision of the same High Court in Cannanore Bank Lt. v. Madhavi AIR 1942 Mad 41 wherein it was held that Order 21 Rule 63 applies to all orders which are against the claims preferred under Rule 58 of Order 21 CPC and that the order need not necessarily be one on merits. The test is to see whether the order is against the claimant or the decree-holder. The Full Bench observed that it does not mean that the order must involve an adjudication on the merits after investigation. In that case a claim petition was filed but was dismissed as not pressed. The question arose whether the order will attract the provisions of Rule 63 of Order 21. The Full Bench ruled that such an order of dismissal is an adverse order within the meaning of Rule 63 and an order of dismissal for default will also fall within the mischief of that rule.

I am in respectful agreement with the views expressed by the Division Bench and the Full Bench of the Madras High Court in the decisions referred above. Appellant'' has not filed a suit to challenge the order of dismissal of the earlier claim petition filed at the stage of attachment before judgment. That order has therefore become final and conclusive. It is true that Rule 63 of Order 21 was deleted by the amendment of CPC in 1976. By the amendment introduced in 1956 all questions including questions relating to right, title or interest in the property attached arising between the parties to a proceeding or their representatives are to be determined by the court dealing with the claim and not by a separate suit. Sub-rule (3) of Rule 58 provides that the court shall, in accordance with such determination, (a) allow the claim or objection and release the property from attachment either wholly or to such extent as it thinks fit; or (b) disallow the claim or objection; or (c) continue the attachment subject to any mortgage, charge or other interest in favour of any person; or (d) pass such order as in the circumstances of the case it deems fit. Sub-rule (4) stipulates that the order made on an adjudication shall have the same force and be subject to the same conditions as to appeal or otherwise as if it were a decree. The remedy of a defeated claimant is therefore to file an appeal against the order and not to get the claim adjudicated by a separate suit. It is therefore contended that there has been a radical change in the provisions regarding adjudication of claims and objections by the amendment of 1976 and the dismissal of the earlier claim petition will not operate as a bar. It is true that Rule 63 of Order 21 which provides for filing a suit challenging the order in a claim petition has been deleted by the amendment. But it cannot be said that the order of dismissal is without any force whatsoever. An adjudication of a claim to the property attached before judgment has to be done in the same manner as an adjudication in a claim against an attachment in execution. The earlier claim petition filed during the pendency of the suit was dismissed for default. The request for getting it restored was also refused. The court did not entertain the request of the claimant for a review of that order. It necessarily follows that the order of dismissal has become final. The remedy of the claimant is only to file an appeal against that order as if the order of dismissal is a decree. Appellant having failed to challenge that order by filing an appeal, the order of dismissal has become final. That order is therefore a bar in maintaining a claim petition at the time of execution. The objection raised by learned Counsel for the 1st Respondent is therefore sustained and the claim petition is found to be not maintainable.

In the result in view of my finding on point No. 2 the appeal is dismissed, but in the circumstances without costs.