Uma Venkataratnam & Co., v. Methewala Adamji Usman & Co., And Others Opposite Party.

Oldfield, J.:— The fund in dispute in this case represents property originally attached by one of the present respondents before judgment. But we have act been shown that this fact in any way improves his claim or that of the others. None of them had even obtained decrees when appellant secured his attachment. They applied in execution only after he did so; and the question is whether his application for payment out being (for whatever reason) still pending, when their applications were made, the whole fund should be distributed rateably. The lower Court quite properly followed Suikeena Katun v. Mahomed Abdul Aziz(1) and passed an order in respondents' favour.

2. But the case was decided by a single Judge and we are therefore not concluded by it. I deal with it and not wish the decisions in Bisheshar Das v. Ambika Pershad(2) and Thakurdas Moti Lal v. Joseph Iskender(3), because in them the discussion proceeded either with reference to the incidents of an attachment before judgment, which are not relied on before us, or on very general grounds.

3. With all due deference, I cannot follow Bakewell, J., in Suikeena Katun v. Mahomed Abdul Aziz, where he lays down that an attachment under O. 21, R. 52 of the CPC, in no circumstances confers priority. In Frederick Peacock v. Madan Gopal & Ors(4), the first case relied on by him, the competition being between an attaching creditor and the Official Assignee, special considerations arose; and in it and in the other case cited. Sankaralinga Reddi v. Kandasami Tevan(5), the attachment was of property, which as the language used in the former suggests and the latter states explicitly was not a fund in a Court, but had to be sold before its value could be realized. This affords a clear ground of distinction from the facts before us and it must be added, those in question before Bakewell, J., for S. 295 of the former Code referred to assets realized in execution and applications made prior to their realization as S. 73 of the Code now in force refers to applications for execution made prior to the Court's receipt of the assets; and accordingly in both the cases relied on by the learned Judge the provision which justified rateable distribution was directly applicable, whilst in the case before him, as in the case before us, it is not. A similarly general statement by the Judicial Committee in Moti Lal v. Karrab-ul-din(6) that attachment only prevents alienation and confers no title, is no doubt relied on in the Calcutta case above referred to and it, no doubt, was made without reference to any provision of the Code corresponding with the present S. 73.

4. But the question arose with reference the effect of an attachment, which apparently was made in execution of a mortgage decree and which clearly differed from that in question here and before Bakewell, J., because a sale, which was to transfer ownership, was to follow. It is, with all respect, unsafe to rely on these authorities as decisive, when the question is of circumstances with which they were not concerned. It is in fact hardly disputed that the one provision of the Code authorizing rateable distribution, S. 73, is inapplicable in terms to the present case, if only because the assets in question were received by the Court, before respondent's applications were or could have been made. The provision attained its present scope by stages at successive revisions of the Code; and as it is to be supposed that it was enacted advisedly, there is no reason for a liberal construction. It is true that S. 270 of the Code of 1859, by which the attaching creditor was entitled to be paid first out of the proceeds of property sold under his attachment, was not re-enacted in 1882 or 1908. But that provision did not in terms affect the attachment of a fund and there is no reason for assuming that its disappearance, whatever its effect in cases to which it was applicable, affected the application of the English rule conferring a priority to which Bakewell, J., has referred. The material point is that a fund, attached under O. 21, R. 52, requires no further realization and that in the absence of creditors entitled to apply under S. 73, there can, from the moment that the attachment is laid on it, be no obstacle to its payment to the attaching creditor. This is recognized by the procedure authorized by the Civil Rules of Practice Nos. 179, 180, under which, after (if necessary) his decree has been transferred to the Court, where the fund is the attaching creditor is entitled to be paid as if he were an assignee of the judgment-debtor.

5. In the present case, as the diary shows the appellant had applied for and was ready to receive payment, when the lower Court's proceedings were suspended by a prohibitory order from the subordinate Court, of what nature and passed at whose instance does not appear. No reliance has been placed on that order before us and the conclusion must be that appellant should not have been frustrated in his effort to obtain money, to which he had established a subsisting right, by respondents, who had none, and that the lower Court in allowing rateable distribution acted without jurisdiction.

6. The lower Court's order must be set aside, the petitions being remanded to it in order that it may deal with them according to law in the light of the foregoing, dismissing the petitions of respondents and ordering payment on that of appellant. Costs to date will follow the result and be provided for in the order to be passed.

Seshagiri Aiyar, J.:— I agree. The question for consideration relates to priority among the various decree-holders of a common judgment-debtor. The undisputed facts are, that the petitioner obtained a decree against the common judgment-debtor on 2nd December 1916. On 4th December he applied for attachment of a fund in Court belonging to the judgment-debtor and on 6th December he applied for the payment out in him of the money in Court. The other judgment-creditors of the common judgment-debtor had not obtained their decrees on this date. The District Munsif, instead of directing the payment to the petitioner, held his hand as there were other claims, though they had not matured into decrees on the date of the application by the petitioner and were still pending decision in various Courts. The conclusion of the District Munsif was that the petitioner was not entitled to priority, and that the money in Court should be distributed proportionately to all persons who may obtain decrees against the judgment-debtor. This civil revision petition has been filed against that order.

7. There was no contention before us that the application to this Court is not within Section 115 of the CPC. It may safely be said of this petition that there was irregularity in the exercise of jurisdiction. The real question is whether the procedure adopted by the District Munsif is one allowed by law. He is undoubtedly supported by Suikeena Katun v. Mahomed Abdul Aziz and by the observations of Mookerjee, J., in Thakurdas Moti Lal v. Joseph Iskender. As against these decisions there is Tiruvangadial v. Thiruvangadih, in which the present Chief Justice took a different view. Although the learned Chief Justice refers to the decision of a Bench of this Court as supporting him it is clear, on examining the reference, that the point now in question was not decided by the late Chief Justice and Sankaran Nair, J., in the appeal referred to in Tiruvangadial Thiruvangadih(7). The question has now to be examined on principle. Bakewell, J., is apparently of opinion that there is a general principle in the Indian legislature that all creditors of the same debtor should have equal rights in the latter's property. I am not satisfied that there is any such principle in our Code. The first enunciation of the rule on this subject is to be found in Ss. 270 and 271, Act 8 of 1859. S. 270 distinctly declares that a person who first takes out execution of his decree is entitled to be first paid out of the proceeds of the sale. S. 271 introduced the principle of the rateable distribution with regard to the surplus proceeds that may be left after the first attaching creditor had satisfied himself. Apparently under this Code the person who attached the property and brought it to sale was regarded as having a claim to priority over their creditors. In the next two Codes of Civil Procedure, namely, those of 1877 and 1882, a further change was introduced in favour of rateable distribution. The priority of the attaching creditor was abolished and the rule was stated to be that where assets are realized by sale or otherwise in execution of a decree and where more persons than one had prior to the realization applied to the Court by which such assets are held the assets shall be divided rateably amongst all such applicants.

8. In the Act of 1908 another change in favour of rateable distribution was introduced by omitting the words “realized by sale or otherwise” and substituting for them the words “are held by the Court.” But the essential condition was retained, namely, that persons applying for distribution pari passu must have made applications to the Court for the execution of decrees before the receipt of assets. It is thus clear from an examination of these provisions that there is progressive tendency in favour of rateable distribution. I may even say that there is a tendency to restrict the rights of the first applicant. But certain conditions have still to be complied with if the benefit of such a provision is to be availed of. Bakewell, J.'s judgment would lead one to suppose that wherever there are a number of decrees against a common judgment-debtor the principle of rateable distraction should be enforced, whether there have been applications for execution prior to the realization of the assets or not. If that were the object of the legislature, it could have then easily declared that no person having a decree against a judgment-debtor shall be entitled to priority by virtue of the fact that he had applied for execution before others. The Indian law has provided for rateable distribution to all creditors in administrative actions and in insolvency matters. Under O. 20, R. 13, if there is an administrative action and the assets are in the hands of the Court, its distribution is governed by the same principles as obtain with regard to distribution of assets of an insolvent judgment-debtor. No question of applying priority to the realization of assets and no question of execution application arise under this rule. Section 73 of the CPC, is therefore restricted in its operation to other than administrative actions. If we turn to O. 21, R. 52, it seems clear that priority is within the contemplation of the legislature because it says:

“Any question of title or priority arising between the decree-holder and any other person shall be determined by the Court.”

9. In my opinion the general principle is this, that a person who is diligent enough to invoke the aid of the Court in satisfaction of his decree should not be kept out of his rights because others have not been equally diligent in seeking their redress. The only restriction upon his right is that, if before he sets the process of the Court in motion to realize the assets, others have applied for execution he should share the realized assets with these other applicants. There is no warrant for holding that a person who had applied for payment should be put off on the chance of some others having claims on the property coming in at some time to have the property distributed rateably. It is not easy to see how long this process of waiting should be enforced. Is it to be only, as in the present case, in favour of persons who have filed suits or is the Court to embark on an inquiry whether there are other creditors who may at some future time file suits to obtain decrees? In my opinion, as pointed out by the Judicial Committee in Mina Kumari Bibi v. Bijoy Singh(8), S. 73 should be construed as applying only to persons who come within the strict letter of the law. I am unable to agree with Bakewell, J., that there is an underlying principle in our jurisprudence and in our Procedure Code that every creditor should have equal chance of payment from out of the assets of the judgment-debtor, whether be is diligent or not and whether he takes prompt steps to enforce his rights or not. I agree with the conclusion come to by the present Chief Justice in Thiruvangadial v. Thiruvangadih. As regards Thakur Das Moti Lal v. Joseph Iskender on the facts of that case the present question did not arise for decision. There are some observations by way of obiter in the judgment of Mookerjee J., who invokes the aid of justice, equity and good conscience in favour of equal apportionment to all decree-holders. It has been laid down by the Judicial Committee that under Section 53 of the Transfer of Property Act, if one creditor is preferred by a debtor honestly, that would not be a preference which would avoid the transaction. I am referring to this for the purpose of showing that a person who is diligent enough to get from his debtor his rights is not to be asked to give them up because there are others who have similar rights but who have not taken steps to enforce them. If there is any one principle which guides our Courts, it is the principle of enabling persons who are diligent enough to secure their rights to get full satisfaction of their claims without compelling them to share the property of the judgment-debtor along with others who did not move promptly in the matter.

10. I would therefore allow the petition and set aside the order of the District Munsif and direct him to proceed with the matter in the light of the above observations.

S.N/R.K

11. Petition allowed.