Palladugula Suryanarayana vs Samayamanthula Nageswara Rao

Alfred Henry Lionel Leach, C.J.—The question of the appeal is whether the appellant possesses a right of set-off by virtue of Section 49 of

the Code of Civil Procedure. The section says that a transferee of a decree shall hold it subject to the ewities which the judgment-debtor might

have enforced against the original decree-holder.

In O. S No. 556 of 1920 on the file of the Court of the District Munsiff of Razole, the plaintiff, one Mylavarapu Venkataratnam, obtained a

money decree against the appellant. In excution of it the decree-holder attached certain immovable purchased the properties. Thereupon the

appellant applied to the Court under Order 21, Rule 90 for an order setting aside the sale. His application was dismissed; but on appeal the sale

was set aside. This was on the 30th January, 1930. The 15th September, 1933. It was then manifest that the appellant was entitled to be placed in

possession of the properties with mesne profits from the date on which he had been dispossessed by the decree-holder. The decree-holder died

and on the 4th Febrary, 1934, hislegal representatives transferred the decree to the respondent. On the 9th January, 1936, the appellant filed a

petition asking for restitution of the decree for mesne frofits. On the 11th September, 1937, the Court ordered the properties to be deliverred to

him and on the 25th March, 1938, it passed a decree for mesne profits, the amount being fixed at Rs. 721-6-0.

In proceedings instituted by the respondent for the excution of the decree obtained in O.S. No. 556 of 1920, the appellant sought to set off the

amount of the decree which he obtained for mesne profits. The District Munsiff disallowed the claim on the ground that the decree for mesne

profits had been obtained after the assignment to the respondent. On appeal his decisiion was concurred in by the Subordinate Judge. This appeal

is from the decree passed by the Subordinate Judge. The appellant maintains that the fact that the amount of mesne profits had not been

ascertained at the date of the assignment matters not and that Section 49 operates irrespective of notice. We consider that these contentions are

well founded.

The same question arose in Daw Aye V. Maung AIR 1937 Rang. 316, which was decided by a Dovison Bench of the Rangoon High Court of

which I was a member. It was held that notice was immaterial and that a right of set-off existed. The Court accepted as correctly stating the law in

the following passage from the judgment of Mookerjee, J., in Monmohan Karmokar v. Dwarkanath Karmokar 1:

In substance, the assignee stands in no better position that the assignor, as regards equities existing between the original parties to the judgment,

and takes it subject to all the equities and defences, subsisting at the time of the assignment, which the judgment-debtor could have asserted against

it in the hands of the judgment-creditor, notwithstanding the assignee may have had no notice thereof.

In an earlier Calcutta case, Kristo Ramani Dassee v. Kedarnath Chakravarti I.L.R.(1889) Cal. 619, it was said that in whatever mode the

equitable right could be made to operate as against the holder of the decree, it must be allowed to operate against his assignee with notice of the

existence of the pending suit. There the assignee admittedly had notice. We do not read the judgment as deciding that notice is essential as that

question was not discussed. The Division Bench which decided Monmohan Karmokar v. Dwarkanath Karmokar1 was certainly of the opinion

that notice was immaterial.

For the respondent reliance has been placed on the latest Calcutta case, Nagendra nath v. Haranchandra3 on which the Subordinate Judge

relied. The facts there were these. One Sham Ranjini obtained a money decree against the sons of her brother-in-law and in execution of it

withdrew from Court a sum of Rs. 2,070. On the 5th March, 1930, the decree was reversed. On the 15th December, 1930, the nephews applied

for an order directing the refund of the amount. Sham Ranjini had also obtained against her nephews a decree for maintenance. On the 23rd

December, 1930, she assigned this decree to one Haranchandra Adhikari, who continued an application for execution which Sham Ranjini herself

had filed. The nephews sought to set off against the decree for maintenance the amount which was due to themaas the result of the money-decree

having been set aside. The Court held that there was no right of set-off, because the Court had not by the date of the assignment ordered

restitution to be made. We are unable to accept this judgment as embodying a correct statement of the law. Section 49 states in the plainest

language that the transferee shall take the decree subject to the equities which the judgment-debtor might have enforced against the assignor. When

the assignment was made in that case a right to restitution had arisen and in our opinion the fact that a formal order for restitution had not been

passed made no difference.

The Bombay High Court had had occasion to consider the question on facts analogous to those in Nagendra Nath Roy and Others Vs. Haran

Chandra Adhikary, . The Bombay case is Guru shantappa v. Mqgappa ILR (1938) Bom. 263. That suit was one for partition in which G was

allotted certain property subject to a payment of Rs. 30,000 to his brothers R and S. The decree was passed in December, 1925. R and S failed

to deliver the property to G who sued them for rent and mesne profits and he obtained a decree for Rs. 15,000. While that suit was pending, R

and S assigned their rights to the Rs. 30,000 to N who sought to enforce payment of the amount in execution proceedings. G had not by that time

obtained a decree for the Rs. 15,000, but he claimed to be entitled to set-off the amount when it had been ascertained. A Division Bench of the

High Court held that he was entitled to set-off. The assignee took the decree subject to G''s equitable right to have the execution stayed and it was

incumbent upon him to inquire whether G''s claims has been satisfied, as both the decrees arose out of one transaction. This judgment is directly

opposed to that of the Calcutta High Court in Nagendra Nath Roy and Others Vs. Haran Chandra Adhikary, .

The question whether notice is a factor was considered by Anantakrishna Ayyar, J., sitting alone in M.R. Srinivasa Ayyangar Vs. Venkatarama

Ayyar, . Relying on the judgment in Monmohan Karmokar v. Dwarkanath Karmokar (1910) 12 C.L.J. 312, the learned Judge held that for the

purpose of Section 49, the equities had to be ascertained, though the assignee might in fact have been an assignee without notice. He observed that

otherwise the very object of Section 49 would in effect be frustrated and its provisions rendered nugatory.

Section 132 of the Transfer of Property Act makes no reference to notice, but the illustrations to the section make it quite clear that notice is not

a factor. Therefore, the transferee of an actionable claim takes it subject to all liabilities and equities to which the transferor was subject, whether

the transferee had any knowledge of them or not. As was pointed out in Daw Aye v. U Aye Maung AIR 1937 Rang. 316, there is no difference in

principle between Section 49 of the CPC and Section 132 of the Transfer of Property Act.

In the present case, there was an equity in the appellant when the decree was transferred to the respondent, and we hold that the respondent

took the decree subject to the appellant''s rights to set-off the amount of mesne profits when they had been ascertained.

The appeal is allowed with costs here and below.