Official Receiver vs N. Subbamma

Horwill, J.—In O.S. No. 539 of 1934, a suit for money, a certain quantity of indigo belonging to the defendant was attached before

judgment; and as this was liable to deterioration it was sold, which meant that the attachment fastened itself to the money. A decree was passed on

14th September 1935. On the same day, a cheque petition was filed, E.A. No. 600 of 1935, praying that a cheque might be issued for the sum

attached. Within a fortnight or so, on 2nd October 1935, the judgment-debtor filed an insolvency application, which was admitted two days later.

On 10th October, the Official Receiver wrote a letter to the Court, drawing its attention to the fact that the property had become vested in him and

asking the Court not to proceed any further. It seems that the defeated claimants had moved the High Court to pass an injunction restraining the

decree-holder from drawing the money. In consequence of an endorsement on the cheque petition that it was not pressed for the present, the

petition was dismissed on 31st October 1935. On 4th March 1936, the judgment-debtor was adjudicated an insolvent. The money realised by

sale of the indigo is claimed by the Official Receiver as a sum of money still belonging to the judgment-debtor, although it was attached. The

decree-holder claims the same money by virtue of the exception to Section 51 (1), Provincial Insolvency Act, as being assets realised in the course

of execution, which are exempt from the general rule that no decree can be executed against the property of the debtor. Both the Courts below

held in favour of the decree-holder and dismissed the application of the Official Receiver for the issue of a cheque. I have perused the few

endorsements on the back of E.A. No. 600 of 1935; and it does not appear that anything was done at all on the petition, except to adjourn it from

time to time arid finally to dismiss it. It is therefore difficult to understand how the sum of money in question can possibly be said to have been

realised in execution, when nothing was done in execution beyond the filing of a petition. It would also seem that Section 51 will not apply; because

execution of the decree had not issued against the property, for execution cannot issue unless there is an order to execute, or on an execution

application some order has been passed from which such an order can be inferred. The trial Court seemed to think that the mere filing of a petition

was enough to convert the amount lying to the credit of the suit into assets realised in execution; but there can be no doubt at all that the filing of an

execution petition cannot convert a sum into assets realised in execution or effect a transfer of the money from the credit of a suit to that of an

execution petition. Such a conversion or transfer can only be by an order of Court. The lower appellate Court seems to base its decision merely on

equitable considerations, saying that if there had not been an order of the High Court granting an injunction against the drawing of the money, the

decree-holder would have drawn the money and that he ought not to suffer because of this injunction order.

As it seems so clear that nothing was done in execution at all and that money was not realised in execution, there seems to be little more to say;

but as the matter has been discussed at length and various decisions quoted, it is perhaps desirable that a few words be said about the cases cited.

One very much in point is Nachiappa v. Subbier A.I.R 1923 Mad. 505. In that case, as in this, some property was first attached before judgment

which was subsequently converted into cash; and three other decree-holders sought to attach it. The question was whether they could divide the

assets before the person who had attached it before judgment. The meaning of the words ""assets held by a Court"" and ""before receipt of such

assets"" came up for consideration; and the learned Judges had to decide at what moment a sum of money under attachment in the suit itself became

assets held and received by the executing Court. All three Judges agreed that that point was when an order for rateable distribution was passed.

Wallace J. says: ""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) execution is taken out against them either by a judgment-creditor entitled by decree 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 decree against him.''. . ."" In other words, some act or order of the

Court is necessary before assets to the credit of suit become assets realised in execution. Official Receiver, Tanjore v. Vehkatarama A.I.R 1922

Mad. 31 is a case in which the question arose whether, upon an order for rateable distribution having been passed, only the amount credited to the

attaching decree-holder was affected by Section 51 (1), Provincial Insolvency Act, or the whole of the amount rateably distributed. These learned

Judges also found it necessary to consider the point at which the conversion to assets in execution could be treated as assets realised in execution;

and they held that from the time of the order of rateable distribution, the money ceased to belong to the judgment-debtor and became assets of the

decree-holder.

The lower appellate Court quoted a decision of Patanjali Sastri J. in Guruvayya v. Official Receiver, Guntur AIR 1941 Mad. 575 but that was

an obvious case of realisation of assets in execution, because the property had been attached and sold in execution and the money brought into

Court. I do not think Subramaniam v. Sankara AIR 1922 Mad. 236 has any bearing on the case, as the point now under consideration was not

there discussed at all. It is argued by Mr. Raghava Rao that Nachiappa v. Subbier A.I.R 1923 Mad. 505 which is based on the wording of

Section 73, cannot be a very safe guide for the interpretation of the words of Section 51, and that it would be safer to refer to decisions based on

the old Civil Procedure Code. He has referred to Manilal v. Nanabhai (1904) 28 Bom. 264 which deals with the interpretation of Section 295 of

the old Civil P. C, in which the words used are ""assets realised by sale or otherwise in execution of a decree,"" which are very similar to the

wording of Section 51, Provincial Insolvency Act. I do not however find that Manilal v. Nanabhai (1904) 28 Bom. 264 lays down any principle at

variance with the Full Bench decision in Nachiappa v. Subbier A.I.R 1923 Mad. 505. There is a discussion in that case of the meaning of

realised"" but the learned Judges make it clear that the assets must be realised in the course of execution. I do not find any remarks in that judgment

which suggest that money attached before judgment can be deemed to be money realised in execution by the mere passing of the decree or by the

filing of an execution petition. Moreover, Nachiappa v. Subbier A.I.R 1923 Mad. 505 following Viswanathan v. Arunachalam AIR 1921 Mad.

218 another Full Bench decision of this Court, held that the words ""assets held by a Court"" meant only the assets ""levied in execution;"" and the

learned Judges thereupon considered whether in the case before them money had been ""levied in execution."" So the difference between the

meaning of the words used in Section 73, Civil P. C, and those in Section 51, Provincial Insolvency Act, is only that between ""levied in execution

and ""realised in execution,"" a difference not easily recognized. The appeal is allowed with costs throughout, and the petition of the Official Receiver

granted.