(1) 'Whether an order for set-off passed under Order XXI, Rule 72, can be called upon to pay in Court the amount of set off so as to make it available for rateable distribution amogst all holders of decrees against the same judgment debtor under the provisions of S. 73 of the Code . In consultation with the learned Advocate for all the parties, we have, therefore, reformulated the question for our decision as under:
'Whether by reason of sub-sec, (2) of S. 63 of the Code of Civil Procedure, a set-off allowed by a Court under order XXI, Rule 72 dto a decreeholder who has purchased the property of his judgment -debtor, can affect the right under S. 73 ti rateable distribution of the purchase money of another decree-holder, who had applied for execution of his decree to another Court and had got the same property attached before the date of its sale?'
(2) The provisions with regard to rateable ditribution are contained in S. 73. Sub Section (1) of this section provides that, where assets are held by a Court and more persons than one have, before the recdeipt of such assets. made applications 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 deduecting the costs of realization, shall be rateably distributed amongst all such persons. There is a proviso to this Section with which we are not concerned in this case. Sub-section (2) of tghis Section states that, where all or any of the assets liable to be rateably distributed amongst all such persons. There is a proviso to this Section with which we are not concerned in this case. Sub-Section (2) of this Section states that, where all or any of the assets liablew to be rateably distributed amongst all such persons. There is a proviso to this Section with which we are not concerned in this case. Subsection (20 of this section states that, where all or any of the assets lioable to be rateably distributed under this section are paid to a person not entitled to receive the same, any person so entitled may suesuch personto compel him to refund the assets. This secton provides for rateable distribution of the assets realised by a Court amongst decree-holders, who have made applications to the same cour for execution of their decrees. Where,in execution of decree, the Court sells a property belonging to the judgment-debtor the assets become available to the court and can, thereofre, be said to be held by the court as soon as the property is sold. Navaj Bhavdu V. Totaram Govind, 33 Bom LR 503 : AIR 1931 Bom 252. If therefore, the property, bel;onging to a jugment-debtor, is sold in execution of a decree passed against him, another creditor will not be entitled to rateable distribution of the sale proceeds, unless he has also applied for execution of his decree before the date of sale.
(3) Order 21, Rule 72, which is one of the rulesd beginning with rule 64 relating to sale, provides that no holder of a decree in execution of which property is sold shall, without the exp[ress permission of the Court, bid for or purchase the property. Sub-rule(2) of this rule states that,. where a decree holder purchases with such permission, the purchase-money and the amount due on the decree may, subject to the provisions of S. 73, be set-off against one another and the Court executing the decree shall enter up satisfaction of the decree in whole or in part accordingly. This sub-rule which allow a decree-holder to set-off against the purchase price the amount due to him on his decree. Instead of his having to deposit the entire amount of purchase money, he may then deposit only the excess if anmuy of the purchase money over the decretal amount. The effect of this sub-rule to use the words of Vivian Bose J., - in Kesheorao v. Mulchand , is that, instead of the Court actually taking the money in cash from the decree-holkder and handing it back to him again, it treats this as having been done and its order amounts to what would be a credit and debit entry in a book of account. There are what have been called in some cases a notional receipt of the purchase amount by thre Court and a notional payment of the decretal amount to the decree-holder. This connection, which is given to a decree-holdercannot, however affect the rights of other parfties in respect of execution of their decrees. This is specifically provided in the sub-rule, which states that the set-off is subject ot the provisions of section 73. If , therefore, a decree-holder has been allowed a set off, e ven though the applications for the execution of decrees made by the pother decreeholders were pending at the same time the former will have to make available the amount, which he has set-off, soi that it might be rateabkly distributied. He takes the amount by way of set-oiff subject to he rights of other decree-holdersunder s. 73. There ius, therefore, an obligation upon him to refund the amount if the other decree-gholders who are entitled to rateable distribution,. under S. 73, have mnade appications for execution of their decrees before the date of sale.
(4) This is the legal position, when applications for execution of decrees by different decreeholders have been made to the same court. Where, however, applications have been made to different courts by persdons, who have obtained decrees against the same judgment-debtor, the provisions of law, which are applicable, are those contained in S. 63. This section is in the following terms:
'63(1) where property not in the custody of any Court ius under attachment in exec ution of decrees of more courts than one, the Court which shall receive or realize such property and shall determine any claim thereto and any objection to the attachment thereof shall be the Court of highest grade, or, where there is no difference in grade between such Courts, the Court undr whose dec ree the property was first attached.
2. Nothing in this section shall be deemed to invalidate any proceeding taken by a Court executing one of such decrees.'
This section does not lay down the principle according to which or the mode in which rateable distribiution is to be made. It only provides for the court, which has to make rateable distribution, where applications for exec ution of decrees have been madce to more than one court. In such cases, the duty is cast upon the court of highest grade or where there is no difference in grade between the Courts, on the court under whose decree te propertuy was first attached, to receive and realize the assetsw of the judgmen-debtor. In effect, therefore, the durty of executing all decrees and distributing the assets rateably amongst different credtors is cast upon the court of the highest grade or the court under whose decree the property was first attached, in order to enable it to perform this duty. Such court may, if the property was first attached, in order to enable it to perform this duty. Such court may. If thre property has been already sold by another court, call upon that court to send to it the sale proceeds of the property see Deekappa v. Chanbasappa, 27 bom LR 917 : AIR 1925 Bom 420 and Sidappa v. Gurusangaya, 33 Bom LR 537 : AIR 1931 Bom 350. The manner in which the assets of a judgment-debtor are to be distributed between rival decree-holders is laid down in s. 73. Consequently afte receiving the sale proceeds from another Court, wuch court will adjudicate iupon th claims of the various decree-holders and distribute the amount between them in accordance with the p[rovisions of S. 73.
(5) We must next consider what the position is when the other cour has allowed a decreeholder to set-off the decretal amount against the purchase money in satisfaction of his decree. If all the applications for exectuion of different dec rees are made to the same court and if that court has, through mistake, oversight or otherwise,. permitte one of the decree-holders to set-off the purchasde money against the amount due to him on his decree,. the court is competent to direct him to deposit in court the amount which he has abeen allowed to set-off, so that the other competing decree-holders may share it along with him. For under sub-rule (2) of rule 72 of order 21-A set-off can only be allowed subject to the provisions of S. 73. This clearly means that the set-off is allowed on the condition that the decree-holder will pauy back the amount, which he is allowed to set-off, if it is required for rateable distribution. The position will not in any way be different, when the applications for execution of different decrees have been made to different courts and not to the same court. Order 21 Rule 72 will apply in both the cases. The liability of the decree-holder to refund the amount arises under the condition on which he was allowed to set it off. It is not dependent on whether the applications for execution of various different dec rees were made to the same court or to different courts. Consequently even when applications for execution of decrees have been made to different courts, the decree-hgolder, who has been allowed a set off, can be called upon to pay or deposit in court the amount, it if is required for reteable distribution amonst various decree-holders under S. 73.
(6) It has however, been urged by Mr. Gupte that this cannot be done, because sub-s. (2) of s. 63 makes valid any proceedings taken by a court executing any one of the various decrees against the same judgment-debtor. It is, however, not necessary to set aside or modify the order allowing a set off has been allowed to him. He was allowed to set-off the purchase amount subject to the condition mentioned in sub rule (2) of Rule 72, that is subject to the rights of other decree-holders to share the same amount under S. 73. The order permitting the set-off having been passed subject to the condition that the decree-holder would have to pay back the amount, if it is liable for rateable distribution under section 73, in paying the amount he will only be complyng with the order itself and the condition, subject to which by the order the set-off was allowed to him. The question of the order allowing the set-off being invalidated, therefore, does not arise.
(7) This is also the view, which has been taken by the Madras High Court in Megraj Iswardas v. corporation of Madras ILR 59 Mad 1028 : AIR 1936 Mad 797 (of ILR Mad):(at p 799 of AIR) Venkatasubba Rao J. has observed as follows:
'The fact that execution may be pending in more than one court under S. 63 can make no difference and the principle of that decision holds good. Now, turning to S. 63(2), if the decreeholder purchaser is called upon to bring back the proceeds (as in our opinion he should be), what is the 'proceeding' that can be said to be thereby invalidated? As already stated the purchase by the decree-holder does not confer upon him an unqualified right, but is subject to the terms of S. 73. In other words,.....the very order of the Court, tht is the 'proceeding', did cast upon the decreeholder the duty to bring back any part of the proceeds when so required'.
(8) Mr. Gupte has relied on the decision of Patkar and Broomfield JJ. in 33 Bom LR 537: AIR 1931 Bom 350. In that case, it was held that if a decree-holder has been allowed a set off and his decree is treated as satisfied, he cannot subsequenly be called upon by another court to refund the amount alloed to him as a set-off. It was observed that the word 'proceeding' used in sub-s. (2) of S. 63 is wide enough to include not only the sale but also the order allowing the decree holder to set-off the decretal amount against the purchase price. Both Patkar J. and BroomfeldJ., delivered separate but concurring judgments. The learned Judges gave two reasons for the view that a court could not direct a decree-holder to pay back the amount which another court had allowed him to set-off. The first reason was that there is no provision in the Code, which entitles the other court to order the decree-holder 'to pay the amount of the set-off in Court in order that it might become assets held by the court and available for rateable distribution.' With respect, it seems that the learned Judges lost sight of the provisions contained in sub-rule (2) of Rule 72, which specifically provide that every set-off, which is allowed under this Rule, is subject to the provisions of S. 73. The other reason given was that the words 'any proceedings' in sub-s (2) of S. 63 mean not only the sale but also include the orders passed by the court in connection with the sale. In regard to this second reason, a contrary view has been taken by another DivisionBench of this Court in Dhirendrarao Krishnarao v. Viurbhadrappa ILR 59 Bom 310 : AIR 1935 Bom 176. In that case, Beaumont C. J. observed as follows at p. 313 (of ILR Bom): (at p.177 of AIR):
'A preliminary point was taken by the applicant that no rateable distribution could be orderedc because of the direction that he be allowed to set-off the amount of his decree aganst the purchase money, such order being said to be 'proceeding' within S. 63(2) of the Civil Procedure Code, and the order is, in my opinion, mere machinery, which does not affect the rights of third partires. Apart from the order allowin g set-off, the decree-holder, who purchase, would have to bring the purchase money into court and then he would be p[aid, as far the moneys went, the amount due to him on his decree. To aod this procedure, the Ciourt can allow set-off, but all that the order allowing such set-off means us thgat the decree holder can exercise his right by setting ovff the amount of his decree against that portion of the proceeds of sale to which he is entilted'.
In the view, which we take it is not necessary to decide whether the order made under sub-rule (2) of Rule 72 allowing a set-off is 'a proceeding' within the meaning of sub-s. (2) of s. 63. In our judgment, sub-s. (2) of S. 63 does not in any way affect the liability cast upon the decree-holder who is allowed a set -off under sub-rule (2) of Rule 72, to refund or pay back the amount, if it is reequired for rateable distribution under s. 73 of the code. The object of S. 63 clearly is to avoid multiplicity of proceedings and to ensure equitable, distribution of the assets of a judgment-debtor which have been realised, amongst all his creditors. It does not lay down any principle of exclusion.
(9) The reply to the question, which we have formulated for our decision, will, therefore, be in the negative.
(10) Question answered accordingly.