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Nanak Chand Vs. Chheda Lal - Court Judgment

LegalCrystal Citation
SubjectCivil;Property
CourtAllahabad
Decided On
Reported inAIR1927All41; 97Ind.Cas.467
AppellantNanak Chand
RespondentChheda Lal
Excerpt:
- - it further held that there were circumstances indicating a strong presumption against the bona fides of nanak chand, who got the policy sold for a low price in collusion with certain bidders, who were bidding alternately, to put up a show and that narotam saran and chheda lal were entitled to their shares of the money due on the policy, irrespective of the amount realized by the sale. the insurance company was ready to pay what might be left in its hand, after its debt was satisfied into court......owed certain other debts to nanak chand, chheda lal, narotam saran and mangal sen. he assigned his life policy to the alliance bank, ltd., as security for the payments of its debt. on the death of amanul haq, nanak chand, narotam saran, chheda lal and mangal sen obtained decrees against his estate. in execution of his decree nanak chand got the life policy then held by the alliance bank, ltd., attached, and got prohibitory orders issued to the alliance bank ltd. not to receive, and to the standard insurance co. not to pay, the amount due on that policy. narotam saran, chheda lal and mangal sen applied at the same time for a rateable distribution of the money due on that policy which may be realized in execution of the decree of nanak chand.2. the standard insurance company, ltd., offered.....
Judgment:

1. One Amanul Haq was insured with the Standard Life Insurance Co., of Calcutta for a sum of Rs. 4,000. He owed a certain debt to the Alliance Bank of Simla, Ltd., and he owed certain other debts to Nanak Chand, Chheda Lal, Narotam Saran and Mangal Sen. He assigned his life policy to the Alliance Bank, Ltd., as security for the payments of its debt. On the death of Amanul Haq, Nanak Chand, Narotam Saran, Chheda Lal and Mangal Sen obtained decrees against his estate. In execution of his decree Nanak Chand got the life policy then held by the Alliance Bank, Ltd., attached, and got prohibitory orders issued to the Alliance Bank Ltd. not to receive, and to the Standard Insurance Co. not to pay, the amount due on that policy. Narotam Saran, Chheda Lal and Mangal Sen applied at the same time for a rateable distribution of the money due on that policy which may be realized in execution of the decree of Nanak Chand.

2. The Standard Insurance Company, Ltd., offered to pay the money due on the policy to the Alliance Bank, Ltd., and the Bank offered to pay into Court the balance clue on the policy after satisfaction of its own claim. Notwithstanding that offer the Court before which the execution proceedings were pending, directed on the application of Nanak Chand that the life policy should be sent for from the Alliance Bank, Ltd., and sold by auction. The sale was subsequently effected on the 29th July 1920, and the life policy was purchased by Nanak Chand himself for a small sum of Rs. 1,000, although the amount admittedly due on that policy including the profits, was Rs. 4,365. The amount claimed by the four decree-holders was Rs. 6,061-12-6 exclusive of the money due to the Bank. The Bank was paid Rs. 962-2-0 found due to it out of the sale-proceeds and the balance of the money, after deducting the expenses of the sale, was rateably distributed between the four decree-holders.

3. The complaint, of Narotam Saran and Chheda Lal, two of the decree-holders, who had applied for rateable distribution of the money due on the life policy, is that in order to purchase the property at a very low price Nanak Chand deceived the Court executing the above decrees and obtained from it an order for the sale of the said policy without any information having been given to the other decree-holders. It is further urged that the sale was effected in spite of the offer of the Alliance Bank, Ltd., to remit the balance due on that policy after realizing it from the Insurance Company and satisfying what was due to the Bank itself, to the Court, and that Nanak Chand and Mangal Sen, who were close friends, had colluded to defraud the other decree-holders of their right to a fair share in the money due on that policy. The trial Court found that the sale was irregular, inasmuch as it was held before the expiry of 15 days from the date on which the proclamation for sale was notified. It further held that there were circumstances indicating a strong presumption against the bona fides of Nanak Chand, who got the policy sold for a low price in collusion with certain bidders, who were bidding alternately, to put up a show and that Narotam Saran and Chheda Lal were entitled to their shares of the money due on the policy, irrespective of the amount realized by the sale. The lower appellate Court upheld that decree. It pointed out that the auction-sale was a very mechanical affair and that Nanak Chand had deliberately kept the other creditors in the dark as to the proceedings which he had, taken for the sale of that policy. It further observed that equity demanded that there should be a rateable distribution as if the Bank itself had paid over the money, and that Narotam Saran and Chedda Lal were entitled to get their share of the money due on the life policy irrespective of the price fetched at the sale.

4. The finding of the Courts below in effect is that the sale was brought about by a conspiracy between Nanak Chand and Mangal Sen and that the bids made at the auction were not bona fide bids for the property, which was of far greater value than the price realized at the auction and that the plaintiffs-respondents, namely, Narotam Saran and Chheda Lal were entitled to avoid the sale.

5. The life policy really belonged to the Alliance Bank, Ltd., after it was assigned to the Bank by the original-holder. The Bank could have protested against the attachment of the policy and it could only have been made liable for the money which might have been left in its hand after the policy was realized and the amount due to the Bank was re-paid. The Insurance Company was ready to pay what might be left in its hand, after its debt was satisfied into Court. Order 2(sic), Rule 46, lays down that where a debt or other moveable property not in the possession of the judgment-debtor has been attached, the debtor or the person holding such property can pay the amount of the debt or deliver such property into Court making the attachment, and such payment or delivery shall discharge him as effectually as a payment or delivery to the party entitled to receive the same. As pointed out in Toolsa Goolal v. John Antone [1887] 11 Bom. 448 where a debt alleged to be due by a third party to a judgment-debtor has been attached by the judgment-creditor, the Court may make an order upon the garnishee for the payment of such debt to the judgment-creditor in case the former admits it to be due, or for so much as he admits to be due to the judgment-debtor. Where, however, the garnishee denies the debt, there is no other course open to the judgment-debtor than to have it sold or to have a Receiver appointed for its realization. There was no such denial in this case. Both the Insurance Company, and the Alliance Bank, Ltd., were ready to pay the money to the party entitled, or, in other words, to pay what might be left after satisfying the debt due to the Bank into Court making the attachment. There was no justification, therefore, for selling the life policy by auction. In fact the original application made by Nanak Chand merely was for the recovery of the money due to him under the decree by the realization of the life policy. When the Bank made an offer to pay the money due on the policy after taking what was due to it into Court, he insisted that the life policy should be sent for and sold by auction, and not that its money should be realized, and his object in insisting on the sale could have been no other than to secure an undue advantage for himself to the prejudice of the other decree-holders, who had applied for a rateable distribution of the proceeds of the execution, in collusion with Mangal Sen, who is said to have been one of his friends. If the sale was a bona fide sale, and the bidding not a mere collusive or mechanical affair, it is extremely unlikely that the policy could have been sold, after it had matured, for less than one-fourth of the amount actually due on it.

6. Under Order 21, Rule 78, a sale of immovable property, however irregular, cannot be set aside; but any person sustaining an injury by reason of the same at the hand of any other person is entitled to sue the latter for compensation or if such person is the purchaser, for the recovery of the specific property and for compensation in default of such recovery. The plaintiffs are not entitled to the recovery of the life policy, but they are entitled to compensation for the loss which they have suffered by the fraudulent act of Nanak Chand in getting the policy sold, in spite of the offer of the Alliance Bank, Ltd. and the Insurance Company, to pay the money due on it, to secure for himself an undue advantage to the prejudice of the other decree-holders who had applied for a rateable distribution of the money due on that policy. There is no reason, there fore, for disturbing the decree passed by the Courts below. The appeal is dismissed with costs including fees in this Court on the higher scale.

Ashworth, J.

7. I concur in the order proposed. There was a finding of fact by both the lower Courts that the policy was knocked down at the auction sale to Nanak Chand for an insufficient price owing to his fraudulent conduct, and I consider that the events at the auction itself justified this finding. Nanak Chand, however, could not be made responsible for the ill-advised action of the execution Court in putting the policy up for sale on the principle actus curiae neminem gravabit.


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