N.V.E. Nachiappa Chettiar vs N.A.K. Subbier and Others

Walter Salis Schwabe, K.C., C.J.—Early in 1917 the 1st respondent Subbiar brought a suit, O.S. No. 566 of 1917, in the Court of the

District Munsif of Periyakulam against Kumaraswami Mudali. In March, 1917 he attached before judgment certain piece-goods, the property of

the defendant. They were sold and the proceeds deposited to the credit of this suit on April 11, 1917. The present appellant Nachiappa Chettiar

brought a suit in the same Court against the same defendant, O.S. No. 678 of 1917, and on April 14, 1917 attached before judgment the money

in deposit in Sub-bier''s suit. He got a decree on April 19, 1917 and on June 7, 1917 he applied in Subbier''s suit for payment out to him of the

money in Court. While this application was pending Subbier got a decree on July 2, 1917 and on July 3rd applied for payment out to him, or, as it

is called, applied for cheque. The present 2nd and 3rd respondents, Rangaswami Aiyar and Sundara Rao, brought suits in the same Court against

the same defendant, O.S. Nos. 617 1917 and 785 1917, and obtained decrees and applied for payment out to them, one on June 29, that is,

before Subbier''s application, and the other on July 10th, that is, after Subbier''s application. Subbier first got an attachment before judgment and

the money was deposited to the credit of his suit, but Nachiappa Chettiar and Rangaswami Aiyar got decrees and applied for payment out of the

money to them before Subbier got his decree, while Sundara Rao got his decree and applied for payment out after Subbier got his decree and

applied for payment.

The question for determination is which of these four plaintiffs is entitled to be paid. The question depends upon the interpretation of Section 73,

C.P.C. which is in the following terms: ""Where assets are held by a Court and more persons than one have, before the receipt of such assets,

made application to the Court for the execution of decrees for the payment of money passed against the same judgment-debtor and have not

obtained satisfaction thereof, the assets, after deducting the costs of realisation, shall be rateably distributed among all such persons."" The District

Munsif held that as none of the other three had applied before the receipt of the assets into the Court in Subbier''s suit, that they had no right to

rateable distribution u/s 73 and refused their application, and ordered that Subbier should draw the whole amount, but stated that his order did not

preclude the rival decree-holders from setting up their rights, which would have to be determined in a suit. The matter then came up on Civil

Revision Petition before Bakewell, J. and he held following Umma Venkatarat-nam and Co v. Adamp Usman and Co I.L.R.(1919) M. 692, that

NachiappaChettiar being the first decree-holder to apply for payment was entitled to the money. On the Letters Patent Appeal from that order

Sadasiva Aiyar, J., held following Visvanathan Chetti v. Arunachalam Chetti ILR (1921) M. 100 , that Section 73 applied to the first three decree-

holders and awarded rateable distribution amongst them. Coutts Trotter, J., differed and proposed to follow Bakewell, J. and held that the

petitioner Nachiappa Chettiar ought to be given preference. Owing to this difference of opinion the matter now comes before us u/s 15 of the

Letters Patent. In Umma Venkataratnam and Co. v. Adamji Usman and Co. ILR (1919) M. 692 and in Bisheshar Das v. Ambika Prasad ILR

(1915) All. 575 it was decided in similar circumstances that the person entitled is the first decree-holder who applied to the Court in which the

money is deposited, on the same principle as is applied in the case of an ordinary judgment-debtor''s property in his own possession, namely, the

first in order of time has the preference.

The whole matter was however re-considered in Visvanathan Chetti v. Arunachalam Chetti ILR (1921) M. 100 by a Full Bench of this Court

and the proper interpretation of Section 73 was laid down. The Court was unanimous. It was held that ""assets held by a Court"" did not include all

money lying in Court to the credit of the judgment-debtor but only the assets levied in execution or paid into Court in satisfaction of the decree

under execution, and that there is no receipt of assets within the meaning of Section 73 until the Court holding the money comes to the conclusion

that no objection exists, and orders the money to be transferred to the credit of the first attaching creditor''s suit, the decree in which it is engaged

in executing. This is the effect of the judgment of Wallis, C.J., with which Ayling, J., and Napier, J. agreed. Sadasiva Aiyar, J. held that the words

before receipt of such assets"" must be qualified by an implication of the 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.

Krishnan, J. put it that only when the money is transferred to the credit of the suit in which attachment takes place can the attaching Court be said

to have received the assets'' and hold them within the meaning of Section 73, and that the decree-holders who have attached prior to that are

entitled to rateable distribution. In view of this decision in my judgment Umma Venkataratnam and Co. v. Adamji Usman and Co. ILR (1919) M.

692 and Bisheshar v. Ambika Prasad ILR Q(1921) M. 100 cannot here be considered as good law. In this case the money in Court has never

been levied in execution or transferred to the credit of any other suit than Subbier''s and did not become available as assets held by the Court

under Section- 73 until an order was made on the application by Subbier for execution of his decree. Under Order 38, Rule 11 he, having

attached before judgment, was excused firm applying for re-attachment in execution, and there being already other applications to the Court for

attachment of this money in execution of decrees against the same judgment-debtor, the amount in Court should have been rateably distributed

between these applicants. In this case the persons entitled to rateable distribution are Subbier, Nachiappa Chettiar and Rangaswami yler. The 4th

decree-holder Sundara Row has not appealed, and it is not necessary to consider his claim, and he must be excluded.

That is enough to determine this appeal; but speaking for myself I desire to say that I am not at present satisfied that the position of a person

attaching property before judgment as against a subsequent decree-holder against the same defendant does not require further consideration. It has

apparently been accepted as concluded that because the property attached, or the proceeds thereof being in Court, is not the property of the

attaching creditor it is available for any subsequent decree-holder against the same defendant. tinder Section 60, C.P. Code, any property can be

attached which belongs to the judgment-debtor, or over which, or the pro6ts of which, he has a disposing power which he may exercise for his

own benefit. Under Order 21, Rule 52, C.P. Code, where the property to be attached is in the custody of any Court a request must be made to

that Court that the property may be held subject to the orders of the executing Court, but the Court having custody shall determine all questions of

priority and the claim of any person having an interest in such property by virtue inter alia of any attachment. There is no doubt the money in Court

is available for the decree of another Court subject to the consent of the former and to its decision as to priorities. In the case of money simply

lying to the credit of the judgment-debtor no difficulty arises, as by this form of equitable execution is can be reached by a decree-holder: but there

is no doubt that the judgment-debtor has no power of disposing of property attached before judgment for his own benefit, and I very much doubt

whether such property can be said to belong to him within the meaning of Section 60, C.P. Code, or whether it can be taken in execution so long

as the custody Court holds it pending the decision of the suit before it. If the prevalent view referred to above is correct, the result is that a plaintiff,

who gets an order to attach before judgment because he satisfies the Court that there is a danger of the property being made away with, and that

enough ought to be preserved pending his suit to satisfy any decree he may get, may find that the property he has preserved is taken away from

him pending his suit by a decree holder who is lucky enough to get a decree more quickly. Indeed it would be easy for a defendant, who wishes to

take his property out of the reach of the attaching creditor, after attachment to get, or even create, a friendly creditor for an amount large enough

and allow him to take judgment and get the property attached in execution, while he delayed the suit of the original attaching creditor. It seems to

me that it is possible that the Court with custody of the property under attachment before judgment might properly refuse to allow it to be attached

in execution until after the decision of the suit in which it was originally attached. In Bisheshar Das v. Ambika Prasad ILR (1919) M. 692 Order

38, Rule 10, C.P.C., was considered to be conclusive in favour of the decree-holder, but it is possible that the interpretation of that rule requires

further consideration. I have referred to this matter here as the point was discussed before us. It may be that the solution is to be found in the

exercise of discretion of the custody Court. It is however unnecessary to give a decision upon it in this case.

This appeal must be dismissed and the case sent back to the District Munsif directing him to make rateable distribution between the present

appellant and the present respondents 1 and 2. The parties will bear their respective costs throughout except of this appeal. None of the

respondents appeared in this appeal and there will be no order as to their costs.

Krishnan, J.

I agree with the learned Chief Justice in the order proposed by him. As pointed out in his judgment the present case is really governed by the

recent Full Bench ruling Visvanathan Chetty v. Arunachalam Chetty ILR (1919) M. 692 . In that case the money attached was lying in Court to the

credit of the judgment debtor, the custody Court and the attaching Court being the same Court. In the present case the attachment before

judgment was no doubt in the first instance of some piece-goods belonging to the judgment-debtor; but as the price was falling in the market and

delay might cause loss, the goods had been sold by order of Court under Order 39, Rule 6, C.P.C. and the money obtained had been paid into

Court in Subbier''s suit in which that attachment had been made. The conversion of the piece-goods into money by sale was not however a

realization of assets"" within the meaning of Section 73 C.P.C. as the District Munsif held, for the sale was not in execution of any decree. The

result of the sale proceedings was only to substitute the money paid into Court for the goods and subject it to the same attachment before judgment

as was levied on the goods. We have thus here also a case of money in Court being attached by the same Court as in the Full Bench case.

According to the ruling in the Full Bench case that money became assets held by the Court and available for payment out in execution only after the

District Munsif passed the order for payment. Till then it remained in Court as money under attachment, the attachment before judgment having

become in effect an attachment after decree (under Order 38 R. it ) when the decree was passed. Prior to the order of the Munsif the other

decree-holders before us had obtained decrees and had applied for execution and had attached the money in question. The case seems therefore

to be clearly one to which Section 73 C.P. Code, applies.

It is true that the appellant before us, Nachiappa Chetty, had obtained his decree before Subbier and the other creditors had obtained theirs and

his attachment before judgment of the money had thus taken effect as an attachment in execution before that of any of the others. But in applying

for execution by issue of a cheque to him he applied to the Court in Subbier''s suit O.S. No. 566 of 1917. So far as he was concerned, the Court

acting in that suit was the custody Court, the attaching Court being the Court acting in his own suit No. 678 of 1917. The custody Court could not

pay out the money to him without an order of the attaching Court to that effect as it has to hold the money subject to the orders of the attaching

Court under Rule 52, Order 21, C.P.C. If he wanted payment out he should have applied in his own suit and obtained an order from the Court as

attaching Court for payment in execution before asking the custody Court to pay or he should have applied in his own suit for transferring the

amount to the credit of his suit and then get that Court to pay the money to him. His application to the custody Court for payment was not a proper

application and was rightly disregarded by the District Munsif. In these circumstances it is not necessary to decide the question whether, if he had

made a proper application according to law to have his decree amount paid out, the fact that Subbier had a prior attachment before judgment, on

that money would have in any way justified his application being refused. I do not propose therefore to discuss the question raised by the learned

Chief Justice in the latter part of his judgment regarding the effect of an attachment before judgment; ,1 desire to reserve my opinion on it for the

present. In my view Nachiappa Chetty got no right for the payment of the whole of his decree amount as claimed before us and as was held by

Bakewell, J.; nor did Subbier get such a right as held by the Munsif. An order for rateable distribution is, in my view, the proper order to make in

the case. The 4th decree-holder Sundara Row not having applied in revision is not entitled to the benefit of our order; he must be excluded.

Wallace, J.

I agree.

Appellant urges strongly that the attachment before judgment by Subbier in March 1917 of the funds of the common debtor in the custody of

the Court cannot confer on Subbier any sort of lien or charge on these funds, and could not be used to defeat the right of himself as first applicant

for execution to have his decree satisfied in full, when he applied for cheque on 7th June, 1917, at a time when no other creditor had obtained his

decree or was entitled to apply in execution. ""It is well recognised law that an attachment confers no sort of lien or charge on the attached property

and is not effective to create any sort of legal right in the attaching creditor to have the property earmarked for the satisfaction of any decree he has

obtained or may obtain and it is in no sense to be regarded as the inception of execution on behalf of the attacher. Much less does it enuc to create

any such right for the benefit of other creditors seeking for decree or for execution of decrees or for rateable distribution u/s 73. And it then can be

used for one purpose only viz., to defeat and render void any private alienation made during its continuance see Annamalai Chettiar v. Palamalai

Pillai ILR (1919) M. 692 and Mina Kumari Bibi v. Bijoy Singh Dudhuria ILR (1921) M. 100. There is in the present case no such private

alienation in question, and hence for the purposes of this case, the attachment before judgment by Subbier created or maintained for him no legal

right to the fund in the custody of the Court.

So that, on 6th July, 1917, when appellant applied for his cheque, he was in a strong position, with no legal bar to his having his decree

satisfied out of this fund, provided his execution application was in order and the Court chose to grant it. But his application was not in order. It

was an application in his own suit, the only suit in which he had then any locus staridi, to operate on a fund in another suit. That he could not do

until he had the fund transferred to the credit of his own suit. His application did not include any request to the Court to transfer to the credit of his

suit the amount at credit of Subbier''s suit Possibly the omission was intentional, as such a request would have at once raised in the custody Court

the question of the priority of the first attaching creditor Subbier. In any case the appellant''s application was thus not in form, and the Court, either

for this reason or some other, did not choose to act on it then. Had it then ordered payment one might infer that it had, as custody court, settled the

question of priority, and had itself, as attaching court, transferred the money at credit of Subbier''s suit to the credit of appellant''s suit. But it

refrained, and the money remained where it was, held as before, money in the Court as custody Court held subject to the disposal of the Court as

attaching Court, in suspense as it were, until the attaching Court had before it a proper execution application, i.e., an execution application in the

suit in which the first attachment took place, or an execution application in another suit praying for transfer to that suit of the money from the suit in

which it was; When that occurred it was then for the attaching and executing Court to decide to work out the attachment and call up the attached

money for satisfying the various applicants. There was no such application until Subbier put in his application on 2nd July, 1917 for cheque. In my

opinion the Court ought to have then proceeded to execute Subbier''s decree with due regard to the claims of persons entitled u/s 73 to rateable

distribution. There was no reason then for delaying matters further. However the Court still refrained from moving, and, so far as one can see, the

fund remained in the custody court in the same state as it had been from the beginning, until on 31st August, 1917, the Court deckled to distribute

and determined that the whole of it should go to Subbier. Only then can it be said that the attaching court called up the fund in the custody court for

use in execution of the pending unsatisfied decrees, and only then can it be said that the assets were received within the meaning of S. 73.

The same conclusion follows also from a strict examination of the terms ""assets held"" and ""receipt of the assets"" in Section 73. In the ordinary

case of assets realised by court sale under a decree, the assets are held when the whole of the sale proceeds in execution are paid into court, and it

is only when the assets are actually realised, that any question of the title of any one to rateable distribution will arise, see Krishnaswami Mudaliar

v. Official Assignee of Madras ILR (1919) M. 692. But when the ""sale proceeds are already in Court prior to the decree it must be that they

cannot become assets before (1) the debtor becomes a judgment-debtor, and (2) excution is taken out against them either by a judgment-creditor

entitled by decree and by his position as the plaintiff in the suit to the credit of which the money lies, to put in a valid execution application; or by a

judgment-creditor entitled, by an order of Court transferring the fund to the credit of his suit, to put in a valid execution application. It is only then at

the earliest that they can become assets held and received in execution, but it does not follow that it is then that they do become so. The point of

time of the conversion is the point of time at which the Court says ""I, as attaching Court, take this property of the judgment-debtor lying in this

Court as custody Court and make it property available for distribution in satisfaction of decrees against him.

In the present case there is nothing to show that the Court made this conversion earlier than the date 31st August, 1917 on which it directed

rateable distribution. It might have done it, as I. have indicated, on 7th June, 1917, when appellant applied for cheque, or on 29th June, 1917

when the decree-holder in 617 of 1917 applied for cheque, or, most reasonably of all, on 3rd July, 1917 when Subbier applied for cheque, or on

29th July, 1917, when the decree holder in 785 of 1917 applied. The fact that on none of these dates did it make any pay order shows that on

none of these dates did it decide to effect the necessary conversion. I am not satisfied that the Court exercised its discretion judicially in with-

holding that conversion beyond 3rd July, 1917 which has had the effect of bringing in a fourth claimant for rateable distribution, who seems, so far

as we have heard, to have had no particular claims to such indulgence. But that matter is not now before us. I do not think we can hold that the

Court had no power so to delay the conversion, or that this Court has power to alter the date of receipt of assets.

In the case like the present then Section 73 leaves a wide discretion to the Court, which is both custody Court and attaching Court, to fix the

date of ""receipt of assets"" within the meaning of Section 73, and I am clear that we are not justified in. holding that the Court exercised its

discretion unjuidicially when it fixes that date so as to enable the creditor who has been the first to attach the property and thus hold it, it may be,

for all creditors as well as himself, to obtain his decree, provided that creditor shows all due diligence in obtaining it and that the delay is due to the

complexity of the suit or the dilato-riness of the trying Court or some other cause over which he has no control, and it would certainly exercise its

discretion wisely in so delaying the conversion, if the alternative was to permit a later attaching creditor, who obtained his decree earlier merely

because his suit was simpler, or because the common debtor did not choose to contest the claim, from going off with the whole fund which had

been secured by the diligence and foresight of another creditor. It might no doubt be contended that, if the debtor''s property had not been

attached, he might have satisfied the less diligent creditor out of Court, and that such preference is not illegal, but I do not see why, when a Court

has custody of the debtor''s property, it should be bound to imitate the debtor''s personal preferences, while it would in all cases be a matter of idle

speculation whether the first holder of a valid application for execution was the one whom the common debtor, if left to himself, would have

preferred to pay. On the other hand, it may well be argued that the object of Order 38, Rule 5 was to put it out of the power of the common

debtor to give such preferential treatment and thus to prepare in advance for some equitable rateable distribution, Such delay in conversion will, no

doubt, at times have the result that other belated and perhaps indifferent and inactive creditors may also be enabled to come in u/s 73, when the

assets are received, but even so, as a rule, I think it preferable that that should happen rather than that the most diligent creditor should be wholly

deprived of a share in the assets which were secured by his forethought and promptitude.

This, I think, is the logical result of the principles laid down in Visvanathan Chetty v. Arunachalam Chetty ILR (1921) M. 100, as applied to a

case like the present, and it will deviate from those laid down in Umma Venkataratnam and Co. v. Adamji Usman and. Co. I.L.R.(1919) M. 692

in allowing the Court to exercise its discretion in favour of a diligent creditor who has attached before judgment the property of his debtor in the

custody of the Court. The insistence in the latter case on the reward of diligence may be carried so much further forward. The Court will then

exercise its discretion in favour of all diligent creditors, diligence being tested either (1) by promptitude in obtaining attachment before judgment,

followed up by diligence in prosecuting the suit and when decree is obtained, in applying for execution, or (2) by promptitude in obtaining a decree

and applying for execution.