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Mallappa Karabasappa Annigeri Vs. Irappa Shidlingappa Danappanavar - Court Judgment

LegalCrystal Citation
SubjectProperty;Civil
CourtMumbai
Decided On
Case NumberSecond Appeal No. 225 of 1940
Judge
Reported inAIR1943Bom261; (1943)45BOMLR449
AppellantMallappa Karabasappa Annigeri
Respondentirappa Shidlingappa Danappanavar
DispositionAppeal dismissed
Excerpt:
.....73-attachment of property by one decree.-holder-application for rateable distribution by another decree-holder against same judgment-debtor-sale of property by judgment-debtor privately tot attaching decree-holder-whether claim for rateable distribution sustainable--court not in possession of assets from which rateable distribution could be allowed under section 73-applicability of exploitation to section 64.;the explanation to section 64 of the civil' procedure code, 1908, does not apply where the court is not in possession of assets from which rateable distribution could be allowed under section 73 of the code.;annamalai chettiar v. palamalai (1917) i.l.r. 41 mad. 265, f.b. and nana rao v. arunachalam chettiar [1940] mad. 526, f.b. followed.;a decree-holder applying for rateable..........is whether a decree-holder applying for rateable distribution can assert his claim against another decree-holder who had attached the property in his darkhast and had thereafter purchased it privately from the judgment-debtor in satisfaction of his decree after the application for rateable distribution.2. defendant no. 1 obtained a money decree against one huchappa and applied to execute it by attachment and sale of the suit property. thereafter the plaintiff obtained three money decrees against huchappa on june 18, 1935, and applied in execution for rateable distribution in the sale proceeds to be realised in the previous decree-holder's application for sale. the property was not, however, sold through court but the judgment-debtor privately sold it on october 22, 1935, to the previous.....
Judgment:

Divatia, J.

1. The question arising in this appeal is whether a decree-holder applying for rateable distribution can assert his claim against another decree-holder who had attached the property in his darkhast and had thereafter purchased it privately from the judgment-debtor in satisfaction of his decree after the application for rateable distribution.

2. Defendant No. 1 obtained a money decree against one Huchappa and applied to execute it by attachment and sale of the suit property. Thereafter the plaintiff obtained three money decrees against Huchappa on June 18, 1935, and applied in execution for rateable distribution in the sale proceeds to be realised in the previous decree-holder's application for sale. The property was not, however, sold through Court but the judgment-debtor privately sold it on October 22, 1935, to the previous decree-holder, defendant No. 1, who thereafter certified to the Court satisfaction of his darkhast in full. On October 24, 1935, the' plaintiff attached the property in his darkhasts and proceeded to have it sold through Court. Defendant No. 1 intervened and objected that the property was not liable to be sold as he had purchased it from the judgment-debtor privately in satisfaction of his darkhast. The execution Court allowed the objection and hence the present suit by the plaintiff-appellant to set aside the order and for a declaration that the property was liable to be sold in his darkhasts.

3. The plaintiff's contention was that although he had not previously applied for attachment of the property in his darkhasts, its attachment in defendant No. l's darkhast enured for his benefit and that therefore the private alienation in favour of defendant No. 1 was void against that attachment under the explanation to Section 64, Civil Procedure Code, according to which claims; enforceable under an attachment include claims for the rateable distribution of assets. .

4. The lower Courts have rejected that contention and held, relying on two full bench decisions of the Madras High Court in Annamalai Chettiar v. Palamalai I.L.R. (1917) Mad. 265 and Nana Rao v. Arunachalam Chettiar [1940] Mad. 526. that the explanation to Section 64 does not apply where the Court is not in possession of assets from which rateable distribution could be allowed under Section 73, Civil Procedure Code. The plaintiff has filed this appeal against the dismissal of his suit on that ground.

5. The appellant's contention is that the explanation to Section 64 was added in the new Code to include all claims for rateable distribution of assets in the general class of claims which could be enforced when the property which the assets would represent had been attached. In other words, whenever a private transfer is made of property attached at the instance of any decree-holder even though it is made in favour of that creditor, it shall be void against the possible claims by a non-attaching creditor for rateable distribution of assets which might have been realised if the property had been sold in execution of the decree of the attaching creditor. The alleged object of this provision is that an attachment by one creditor enures for the benefit of all creditors so that the attaching creditor should not by collusion with the debtor defeat the claims of the other creditors by a preferential private sale in favour of himself.

6. For the examination of this argument, it is necessary to see what is meant by the expression 'claims for the rateable distribution of assets' in the explanation to Section 64. Section 73. of the Civil Procedure Code describes the conditions for making a claim for rateable distribution. The important conditions for a valid claim are that assets must be in possession of the Court and more than one person must have applied for execution of their decrees against the same judgment-debtor before the receipt of the assets. No claim can, therefore, be made unless there are assets before the Court. Where the attached property is privately sold to the attaching creditor in satisfaction of his decree, ex hypothesi there are no assets before the Court, and therefore no claim for rateable distribution can be entertained by it.

7. But then it is contended that under Section 64 the private transfer is void against all claims enforceable under the attachment and ate a claim for rateable distribution is, under the explanation to that section, included in a claim enforceable under the attachment, the private transfer is void against the applicants for rateable distribution with the result that the Court must set aside the transfer and sell the attached property in execution and rateably distribute the sale proceeds among all the creditors who satisfy the conditions of Section 73. Assuming there are no other creditors entitled to ask for rateable distribution, the private transfer to the attaching decree-holder to satisfy his decree is not invalid because it is void only against all claims enforceable under the attachment, i.e. the attaching decree-holder alone can challenge it and no question therefore can arise where such decree-holder himself purchases it. Such private satisfaction is authorized by Order XXI, Rule 55. Where there are other creditors, the question is whether they can challenge it simply because they have made a claim for rateable distribution or whether they can do so only if they become entitled to rateable distribution under Section 73. In the latter case rateable distribution can be granted only in the case of monies or moveables in possession of the Court representing the attached property and not in the case of a private transfer of immoveable property because in that case there are no assets in the hands of the Court. while in the former case, it is enough if a claim for rateable distribution is made for any attached property which need not be in possession of the Court. But can there be a claim for rateable distribution at all unless it comes under Section 73, and did the Legislature use that expression in the added explanation to Section 64 as a mere claim which may not fructify as an enforceable claim The explanation was added in the new Code of 1908 to give effect to the decision in Sorabji Edulji Warden v. Govind Ramji I.L.R. (1891) 16 Bom. 91 that Section 276 of the Civil Procedure Code of 1882 corresponding to Section 64 of the present Code would also apply in favour of claimants for rateable distribution of a sum of money which was attached and lying in Court. Such a claim was undoubtedly under Section 295 corresponding to the present Section 73 and it would therefore be reasonable to infer that the Legislature meant to include only enforceable claims in the explanation. Order XXI, Rule 55, of the Civil Procedure Code provides that the attachment shall be deemed to be withdrawn if the decree of the attaching creditor is privately satisfied and certified to the Court. The rule does not say that the attachment shall not be deemed to be withdrawn if other non-attaching decree-holders had applied for rateable distribution, so that it should enure for their benefit in spite of the sale. One would have expected the Legislature to say so in the rule if its object in the newly added explanation was to enable such decree-holder to ignore the private sale in favour of the attaching creditor. But the private sale is good and if the other decree-holders wish to proceed against the property sold on the ground that the sale is not binding on them, they must ask for a fresh attachment in their darkhasts. The alienation would not be bad against them as it was prior to their attachment. Under Section 64 it would be' void only against all claims enforceable under the attachment, i.e. the attachment subject to which the sale takes place, and any subsequent attachment would not affect that sale. This view has the support of the decision of the Privy Council in Mina Kumari Bibi v. Bijoy Singh Dudhuria. In that case there were two decrees against a judgment-debtor, one of 1896 and the other of 1901, and the respondent was a transferee of both the decrees. The execution of the first decree commenced in 1902 and that of the second decree in 1907. On July 15, 1907, the judgment-debtor privately sold certain property at one time attached in the execution proceedings of 1902 to the appellant who was a creditor of the judgment-debtor. On the next day, i.e. on July 16, the respondent attached the same property in execution of the second decree of 1901 and thereafter purchased the same himself in the sale which followed on August 23. The appellant contended that the respondent had not acquired any title under the execution sale because the property had passed to the ownership of the appellant by the private alienation of July 15 at which date there was no attachment under the decree in execution of which the respondent purchased the property. The argument was that the private alienation would be void only if it was made during the continuance of the attachment under which the execution sale took place. That argument was upheld by the Privy Council and it was held that the respondent could not invoke the attachment in the execution proceedings of 1902 to defeat the alienation to the appellant in a proceeding which was different from the one in which the respondent claimed to have acquired title. It was further held that the respondent cannot rely on the provisions of Section 295 of the Civil Procedure Code, corresponding to Section 73 of the present Code, for getting rateable distribution as entitling him to the benefit of Section 276, corresponding to Section 64 of the present Code, because there were no assets in Court, which condition was essential if Section 295 was to be invoked, and the only attachment within the meaning of Section 276 was that in the execution proceedings of 1907 which he could not employ against the appellant. The material passage in the judgment of their Lordships is (p. 78) :-

He (respondent) relies on Section 295 of the Code of Civil Procedure as entitling him: to the benefit of s 276, and for this purpose he calls in aid his application for attachment in execution case No. 8 of 1902. To bring Section 295 into play certain conditions are necessary, and one of them is that there should be assets held by the Court. It has not been shown that there were such assets, and the indications in the record point the other way.

But apart from this Section 295 cannot help the decree-holder. Though the word attachment occurs three times in Section 276, the reference is to one, and only one, attachment that one in this case is the attachment in execution case No. 16 of 1907. All that can be done is to employ that attachment for the purpose of impugning the private alienation, for it is on that alone that the decree-holder's title to the property in suit at present rests. So that even if it be assumed, for the sake of argument, that the view which prevailed in Sorabji Edulji Warden v. Govind Ramji I.L.R. (1891) 16 Bom. 91 is correct, and that the conditions of Section 295 have been satisfied, it cannot advance the decree-holder's case.

8. Mr. Parulekar for the appellant has sought to distinguish this decision from, the present case on the ground that in that case there was no pending attachment at the time when the private alienation took place while here the attachment was in force at the time of alienation to defendants Nos. 1 and 2. There the property was first attached on July 12, 1902, in the execution proceedings of 1902. It is true that those proceedings were dismissed on March 29, 1905, and when another darkhast was brought on July 26, 1907, and the decree-holder applied for the issue of a sale proclamation on the basis that the attachment was still subsisting on the ground that the sale was indefinitely postponed, the judgment-debtor objected that the attachment had come to an end when the darkhast was dismissed on Match 29, 1907. The District Judge, however, disallowed that contention and held that the second darkhast must be regarded as a continuation, of the first and the attachment was therefore subsisting. The High Court affirmed that order. In the arguments before the Privy Council the plaintiff impugned that part of the decision and contended that the attachment was no longer alive, but their Lordships were of opinion that it was not necessary to deal with that point, because the appeal could be disposed of on the ground that the decree-holder's application for rateable distribution under Section 295 in the second execution proceedings would not be maintainable because of the attachment in, the first execution proceedings, as the Court was not in possession of he assets and that the attachment which can be availed of by the decree-holder is that in the second execution proceedings only. Then it is further observed that even on the basis that the view taken in Sorabji Edulji Warden v. Gavind Ramji I.L.R. (1891) 16 Bom. 91 is correct, i.e. a claim for rateable distribution is a claim enforceable under an attachment, and that the conditions of Section 295 had been satisfied, it would not advance the decree-holder's case. This decision, therefore, establishes (1) that a claimant for rateable distribution cannot challenge a private alienation by the judgment-debtor if it is not unlawful because he can only claim a share in the assets if they come to be held by the Court, and this proposition would be good even under the explanation to Section 64 which gives effect to the view taken in Sorabji Edulji Warden v. Govind Ramp, (2) that the attachment by one decree-holder does not enure for the benefit, of another decree-holder with the result that a private alienation in favour of the attaching decree-holder can be challenged only if the claimant had made his own separate attachment which was subsisting when the alienation took place. We think, therefore, that the decision in Mina Kumari Bibi v. Bijoy Singh Dudhuria supports the view that the words 'claim for rateable distribution' in this explanation mean claims to be made if and when assets are held by the Court, and the question whether such a claim is enforceable under the attachment is to be considered not when the application for rateable distribution is made but at the time when it becomes a claim before the Court in possession of the assets. It also follows that the appellant cannot take advantage of the respondent's attachment to impugn the alienation. The circumstance that the claim for rateable distribution was made before the private alienation took place would not enable the appellant to challenge it in absence of his own attachment

9. We think, therefore, that the view taken in the full bench case of Annamalai Chettiar v. Palamalai is correct. Although that decision was sought to be re-opened again, a subsequent full bench in Nana Rao v. Arunachalam Chettiar adhered to that view by majority.

10. There are several reported cases in which the decisions in Mina Kumari Bibi v. Bijoy Singh Dudhuria and' Annamalai Chettiar v. Palamalai have been followed : vide Chindha v. Chhaganlal (1928) 30 Bom. L.R. 1438 Radha Mohan v. Musammat Wahidan I.L.R. (1934) Pat. 446 and Mehar Chand v. Joti Prasad. : AIR1934All1057 It is true that in none of those cases the claim for rateable distribution was made before the date of the private alienation to the attaching decree-holder, i.e. before the attachment came to an end, while in the' present case it was made before that date but in our opinion that circumstance does not affect the principles which are deducible from the Privy Council decision.

11. It is contended that this construction of Section 64 would limit the claimant's right to those cases only where immoveable property is sold through Court or where a garnishee pays the monies in Court and that it would have a tendency to encourage fraudulent preference to one creditor at the expense of others. That the right, would be confined to properly represented by assets is quite clear, but it would not be quite correct to say that it would encourage fraudulent preference. To prefer a creditor who has attached the property to one who has not attached is not fraud. It is open to every decree-holder to attach the judgment-debtor's property in his own darkhast or to bring a suit under s 53 of the Transfer of Property Act, 1882, to avoid the alleged fraudulent transfer. In any case, the Legislature could not have intended merely by adding the explanation to Section 64 to include unenforceable claims for rateable distribution in the class of claims enforceable under an attachment. If that had been the intention, the provisions of Order XXI, Rules 55 and 57, would not have been what they are. These provisions are opposed to the contention that an attachment must be deemed to continue for the benefit of the claimant for rateable distribution even after the darkhast in which the attachment was made is satisfied by the private transfer of the attached property or is dismissed on account of the default of the attaching decree-holder who may not care to continue the darkhast after the private sale to him.

12. For these reasons, we think the decree of the lower Court is correct. The appeal is dismissed with costs in two different sets, one for defendants Nos. 1 and 2 and the other for heir of defendant No. 3.


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