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Lal Mehar Chand Vs. Lala Joti Prasad - Court Judgment

LegalCrystal Citation
SubjectProperty
CourtAllahabad
Decided On
Reported inAIR1934All1057
AppellantLal Mehar Chand
RespondentLala Joti Prasad
Cases ReferredBhupal v. Kundan Lal
Excerpt:
.....contrary to that attachment. i am clearly of opinion that they cannot. if persons who apply for rateable distribution wish to safe-guard their interests then they should ask the court that the property which has already been attached in execution of the decree of the attaching decree-holder should also be attached in execution of their decrees. the reason is that because of the realisation of the assets, which are held by the court, the claim of the person entitled to rateable) distribution has become one which is enforceable and therefore they can successfully plead that as against them also the alienation was contrary to attachment and that claim cannot be defeated by a private alienation as it is contrary to that attachment. section 64 of the present code affords no greater..........is now in suit. on 8th june 1927, joti prasad also applied for the execution of his decree and for rateable distribution. the court, on 8th july 1927, directed that there should be a rateable distribution of assets. in execution, of the decree which roop chand held against the judgment-debtor the property was auctioned on 21st january 1928, and 21st february 1928 was fixed for the confirmation of the sale. on 10th february 1928 joti prasad made an. application to the court asking that roop chand, decree, holder who had purchased the property at an auction sale, should be ordered to deposit the sale price in court. on the 21st february 1928 bishambar das, the judgment-debtor, sold the property privately to mehar chand, plaintiff, and with the sale proceeds paid off the decree of roop.....
Judgment:

Rachhpal Singh, J.

1. This is a plaintiff's second appeal arising out of a suit for a declaration. In order to understand the case it is necessary to bear in mind the following facts:

Roop Chand obtained a decree against. Bishambar Das, judgment-debtor, in 1926, Joti Prasad also obtained a decree against the same judgment-debtor in 1927. In. March 1927, Roop Chand applied for the execution of his decree and attached the property which is now in suit. On 8th June 1927, Joti Prasad also applied for the execution of his decree and for rateable distribution. The Court, on 8th July 1927, directed that there should be a rateable distribution of assets. In execution, of the decree which Roop Chand held against the judgment-debtor the property was auctioned on 21st January 1928, and 21st February 1928 was fixed for the confirmation of the sale. On 10th February 1928 Joti Prasad made an. application to the Court asking that Roop Chand, decree, holder who had purchased the property at an auction sale, should be ordered to deposit the sale price in Court. On the 21st February 1928 Bishambar Das, the judgment-debtor, sold the property privately to Mehar Chand, plaintiff, and with the sale proceeds paid off the decree of Roop Chand, On the same date Roop Chand appeared in Court and stated that his decree had been satisfied. The Court certified that the decree of Roop Chand was discharged as satisfied and the sale was set aside. In respect of the application which had been made for rateable distribution by Joti Prasad, the Court passed an order that as the sale had been set aside and no assets had been received, the application should be deposited. Later on, Joti Prasad applied for the sale of the same property on 28th February 1928 in execution of his own decree. The property was resold and the sale was confirmed on 31st July 1928. Joti Prasad had not asked, after the termination of the execution proceedings in connection with the decree of Roop Chand, for a fresh attachment. Before the sale in favour of Joti Prasad, the plaintiff. Mehar Chand filed objections under Rule 58, Order 21 objecting to the sale. These objections were dismissed and thereupon Mehar Chand instituted the present suit. The principal plea taken by Joti Prasad was that under the provisions of Section 64 read with Order 21, Rule 55, Civil P.C., the sale in favour of Mehar Chand was void. The first Court decreed the suit of Lal Mehar Chand. Against that decree there was an appeal to the lower appellate Court, The learned Additional Subordinate Judge came to the conclusion that Section 64, Civil P.C., was applicable and that the sale which had been made by the judgment debtor in favour of L. Mehar Chand was void. He therefore allowed the appeal and dismissed the plaintiff's suit. Against that decree the plaintiff has come up in second appeal before this Court.

2. The principal question for the determination of this case is as to whether or no, the sale in favour of Mehar Chand made by the judgment-debtor was void having regard to the provisions of Section 64, Civil P.C.

3. Before we proceed to deal with the main question involved in this appeal, it is necessary to consider the question of the applicability of Rule 55, Order 21 as amended by this Court. In execution of the decree of Roop Chand, the property attached had been sold on 21st January 1928. Joti Prasad had made an application for the rateable distribution of assets before the date of the sale, but it would appear that somehow this order was not communicated to the sale officer. It further appears from a perusal of the record that after the sale Joti Prasad somehow came to know that notice of his claim for rateable distribution had not been sent to the sale officer in accordance with Rule 55, Order 21, Civil P.C., as amended by this Court. So on the data on which the sale had taken place he made an application to the Court executing the decree asking that the sale officer should be given notice of the application for rateable distribution The Court passed an order that the matter should be immediately communicated to the sale officer, but it appears from the record that the sale officer received that not too two days after the date on which the sale had taken place.

4. The amended Section 55, Order 21, Civil P.C. enjoins that notice shall be sent to the sale officer executing a decree of all applications for rateable distribution of assets made under Section 73(1) in respect of the property of the same judgment-debtor by persons other than the holder of the decree for the execution of which the written order was passed. Then Clause 2, Sub-clause (a) of the amended Rule 55 says that where the amount decreed (which shall include the amount of any decree passed against the same judgment-debtor, notice of which has been sent to the sale officer under Sub-clause (1), with costs and all charges and expenses resulting from attachment of any property are paid into Court, then the attachment shall be deemed to be withdrawn. Sub-clause (b), Clause 2 says that where satisfaction of the decree (including any decree passed against the same judgment-debtor, notice of which has been sent to the sale officer under Sub-section (1) is otherwise made through the Court or certified to the Court then the attachment shall be deemed to be withdrawn. The Subordinate Judge says that

the effect of the new Rule 55 which has been substituted by the High Court is that a private alienation under Section 64 is not only void as against the decree-holder in whose decree execution actually takes place, but also against all those decree-holders who have duly applied for rateable distribution of assets under Section 78. Civil P.C.

5. I find myself unable to agree with this interpretation. There are other ways in which an attachment may be withdrawn. A decree-holder at whose instance an attachment has been made may make a default in appearance on the date fixed and the Court may find that it is unable to proceed further with the application for execution in that case. The Court is competent to dismiss the application and upon that dismissal the attachment shall cease in accordance with the provisions of Rule 57, Order 21, Civil P.C. In the case before us it appears that Roop Chand in execution of whose decree the property had been sold appeared in Court and stated that his decree had been discharged and was fully satisfied. The Court certified the payment of the decree and ordered the attachment to be withdrawn. It cannot be argued that the provisions of the amended Rule 55, Order 21, Civil P.C., in any manner improves the possession of a person who had applied for the rateable distribution of assets. The question whether the respondent, who had applied for the rateable distribution of assets, can claim any benefit of the attachment made at the instance of the attaching creditor has to be decided with reference to Section 64, Civil P.C.

6. Section 64, Civil P.C. enacts that where an attachment has been made any private transfer or delivery of the property attached or of any interest therein and any payment to the judgment-debtor, of any debt, any dividend or any moneys 'Contrary to such attachment,' shall be void as against all claims enforceable under the attachment. The explanation attached to the section runs as follows:

For the purpose of this section claims enforceable under an attachment include claims for rateable distribution of assets.

7. The contention raised on behalf of Lala Joti Prasad is that as he had applied for the rateable distribution of assets so an alienation made by the judgment-debtor in favour of Lal Mehar Chand is void, though in execution of his own decree there had been no attachment.

8. The effect of Section 64, Civil P.C. is to declare private alienations of property of attachment void as against claims enforceable under that attachment. We will first consider the case of a creditor at whoso instance the attachment has been made. Now if the judgment-debtor makes an alienation of the attached property then it will be void as against him, because the alienation is contrary to such attachment.' It is however perfectly open to a decree-holder to enter into a compromise with the judgment-debtor and accept an alienation which had been made by the latter as the alienation may have been made in order to gat money with a view to pay the amount due to the attaching creditor. One of the objects of Section 64, Civil P.C. is to prevent an alienation which might defeat the claim of the attaching creditor. Where therefore an alienation has been made after the attachment and the judgment-debtor satisfies the debt of the attaching creditor out of the sale proceeds then such an alienation cannot; be said to ho 'contrary to such attachment.' The alienation was in fact the means by which the decree in execution of which attachment was made was satisfied, and such alienation is good against the attaching creditor. An alienation made after the attachment is not void against the whole world, bat is voidable at the option of the attaching creditor or of persons whose claims are enforceable under that attachment. The attaching creditor is interested in realising the money. If he is paid the amount due to him, then there is [nothing in law to prevent him from asking the Court to enter satisfaction of his claim and to raise the attachment. It becomes a matter of indifference to him whether the alienation made after the attachment was good or bad.

9. So far I have dealt with the case of attaching creditor at whose instance the attachment was made and who has been paid the full amount due to him out of the sale proceeds realised by the judgment-debtor by making a private alienation. Now I proceed to consider the question as to the rights of other decree-holders who have not applied for attachment of the property. Section 64 enacts that after an attachment had been made a private alienation 'contrary to such attachment,' shall be void as against all claims enforceable under the attachment. The question for consideration is who are the persons having claims enforceable under the attachment in addition to the attaching creditor himself.

10. The explanation to Section 64 is that

For the purpose of this section, claims enforceable under an attachment include claims for the rateable distribution of assets.

11. Mulla in his Civil Procedure Code, p. 233 (1934 edition), says:

A decree-holder though entitled to rateable distribution as contemplated by the explanation to this section is not entitled to question a private alienation under this section unless his claim be one 'enforceable under the attachment' within the meaning of this section. The attachment referred to in this section is the attachment under which the execution sale is made. Therefore a claim 'enforceable under the attachment' means a claim enforceable under the attachment under which the execution sale is made.

12. This opinion is based on the view taken by a Pull Bench case decided by the Madras High Court and which is reported in Annamalai Chettiar v. Palamalai Pillai 1918 Mad. 127. The chief question which has to be decided in the case is whether a person who has applied for rateable distribution can say that he is a person who has 'a claim enforceable under the attachment' which had been made at the instance of another decree-holder. The explanation to Section 64 says that the claims enforceable under the attachment include claims for rateable distribution. Now, what we have to see is when does a claim for rateable distribution come into play. The claim for rateable distribution can come into existence under the provisions of Section 73, Civil P.C. A claim for rateable distribution can only arise when assets are held by the Court and more persons than one have applied, before the receipt of assets, for rateable distribution. Mulla in his Civil Procedure Code (1934 edition), p. 235 says:

But the explanation does not apply unless the claim o the subsequent decree-holder can be said to be a claim for rateable distribution within the meaning of Section 73. Now the essential condition of enforcement of claims for rateable distribution under Section 73 is that there should be assets held by the Court.

13. I think that this is the correct view of law on the point. As soon as the decree of the attaching decree-holder is satisfied the attachment ceases to have any effect, and therefore it cannot be said that the alienation made by the judgment-debtor was contrary to that attachment. Take the following instance : A decree-holder attaches some property. During the continuance of the attachment the judgment-debtor makes an alienation of the attached property. Other decree-holders against the same judgment-debtor also apply for execution and claim rateable distribution. While the execution proceedings are going on and before the sale takes place the attaching decree-holder makes a default by non-appearance and his application for execution is dismissed. The result would be that the attachment ceases. Can the parsons who have applied for rateable distribution claim any relief against the judgment-debtor? I am clearly of opinion that they cannot. At that stage of the case they have no right for any relief. Their claim for rateable distribution can arise only when the assets come into the hands of the Court. If there are no assets then there can be no claim for rateable distribution.

14. A person who has obtained a decree against a judgment-debtor has two remedies : one is to attach the property of the judgment-debtor and have it sold in execution of the decree; the other is to make an application for rateable distribution. Where one of the several decree-holders has already applied for execution and has further obtained an attachment of the property of the judgment-debtor, then the law gives the other decree-holders the right to ask for rateable distribution. But his claim can only arise when assets are held by the Court and it can never come into play before the realisation of the assets. If a decree-holder applies for rateable distribution then he must take his chance; if assets are realised then he succeeds in getting rateable distribution; if nothing is realised then he loses. If persons who apply for rateable distribution wish to safe-guard their interests then they should ask the Court that the property which has already been attached in execution of the decree of the attaching decree-holder should also be attached in execution of their decrees. If then alienation is made during the continuance of the attachment, it will be void against them.

15. The learned Counsel appearing for the respondent has contended that if the view taken by me is adopted, then a, person claiming a rateable distribution can never have a claim which can be enforced as against a private alienation made at the instance of an attaching creditor. This is not so. I will cite one instance. A decree holder applies for execution of his decree and attaches some property. Later on, other decree-holders apply for rateable distribution. The judgment-debtor, before the property is put to sale makes a private transfer of his property. The property is put to sale and is purchased by an auction purchaser who pays the sale money immediately. The man in whose favour the alienation was made objects to the sale. The attaching creditor remains inactive and makes no protest against the objections of the alienee. It is open to the persons who have applied for rateable distribution to contend that as the alienation was made 'contrary to the attachment' the alienee's objections should be thrown out. The reason is that because of the realisation of the assets, which are held by the Court, the claim of the person entitled to rateable) distribution has become one which is enforceable and therefore they can successfully plead that as against them also the alienation was contrary to attachment and that claim cannot be defeated by a private alienation as it is contrary to that attachment.

16. The question involved in this case came up for consideration before this Court in Bhupal v. Kundan Lal 1921 All. 45. A Bench of two Judges in this Court hold that on a consideration of an explanation to Section 64, Civil P.C., a person claiming rateable distribution of assets could not get the benefit of it, unless he has himself got an attachment on the assets from which he seeks benefit and that the mere fact that he had filed a petition asking for a share in the distribution was not sufficient. In that case the learned Judges relied on a ruling of their Lordships of the Privy Council in Mina Kumari Bibi v. Bijoy Singh Dudhuria 1916 P.C. 238 and on the Full Bench ruling of the Madras High Court in Annamalai Chettiar v. Palamalai Pillai 1918 Mad. 127. The contention which has been raised before us in the present appeal was also raised in that Full Bench case and there was a very elaborate discussion of the authorities on the subject. I quote here the observations made by Wallis, C.J., which are to be found at p. 275 of the above mentioned ruling:

Section 64 of the present Code affords no greater protection to the attaching decree-holder than Rule 276 of the old Code, and if he cannot protect himself against an alienation after attachment unless the attached property is brought to sale in execution of the decree in respect of which attachment was made, it necessarily follows that other decree-holders who have applied for execution cannot be in a better position. It may even be said that, as regards other decree-holders, the language used in the body of Section 64 is, if anything, less favourable than the language of Section 276, because it only renders void as against the claimants specified alienations which are 'contrary to such attachment' and an alienation by means of which the decree in execution of which the attachment is made is satisfied can scarcely be regarded as an alienation contrary to that attachment.

17. For the reasons given above, I am of opinion that the defendant, respondent was not entitled to claim any benefit under the provisions of Section 64, Civil P.C. The sale made by the judgment-debtor in favour of the plaintiff-appellant was perfectly valid. The sale in execution of the decree of Lala Joti Prasad, respondent, under which he himself purchased the property in suit, was made after the transfer in favour of the appellant. At that time the judgment-debtor had no saleable interest left in the property in suit. Therefore the subsequent sale in favour of the respondent does not affect that sale in favour of Lal Mehar Chand, appellant. I would therefore allow this appeal, set aside the decree passed by the learned Subordinate Judge and decree the suit of the plaintiff-appellant with costs In all the Courts.

Sulaiman, C.J.

18. I agree, and would like to add a few words only because the questions involved in this case are of some importance. Under the old Civil P.C. there was a conflict of opinion as to whether a person, who had made a separate application for execution of his decree but had not got the property attached a second time, could take any benefit under the attachment of another decree-holder. In the case of Mina Kumari Bibi v. Bijoy Singh Dudhuria 1916 P.C. 238 their Lordships of the Privy Council pointed out that Section 276 of the old Code (corresponding to Section 64 of the new Code) merely provided that when an attachment had been made as described therein any private alienation of the property attached during the continuance of the attachment would be void against all claims enforceable under the attachment; and that ex hypothesi a private alienation not being during the continuance of such an attachment could not be avoided by that attachment. But their Lordships further pointed out that, evan if a contrary view be assumed for the sake of argument, a person who had merely asked for a rateable share in the assets could not invoke the aid of Section 295 (now Section 73) so long as there are no assets by the Court. The legislature has now amended Section 64 and also added an explanation thereto. The amendment emphasises that the private alienation or delivery of property, which has to be void, must be 'contrary to such attachment.' Now obviously if the private alienation is to satisfy the very decree and is in no way intended to override the attachment, it would be difficult to hold that it is contrary to such attachment. On the other hand, the explanation added to the section now, makes claims for the rateable distribution of the assets included within the meaning of the expression 'claims enforceable under an attachment.' The result is that where a private alienation is contrary to an attachment, in such a case claimants for rateable distribution of the assets are equally protected. It would follow therefore that where the attachment has not fallen to the ground but subsists and property has been sold in pursuance of it, the assets which are realised are liable to be distributed among the decree-holder as well as all claimants for rateable distribution in spite of the fact that a private alienation has previously taken place. On the other hand, if the attachment falls to the ground, and is either withdrawn or ceases to exist, then neither the attaching creditor nor, for the matter of that, any other claimant for rateable distribution, can get any benefit out of it. If this case were allowed the result would be that while the attaching creditor himself got the application for attachment struck off, and the attachment ceased to exist, the claimants for rateable distribution, although no assets are yet in existence, would be entitled to pursue the matter.

19. The learned advocate for the respondent contends before us that claims for rateable distribution should include not only the right to get a rateable distribution after the assets have been received by a Court, but also claims put forward by other decree-holders to get a share whenever such assets are received. It must however be borne in mind that Section 73 of the Code does not make it necessary for a decree-holder to make any formal application for a rateable share in the assets. All that is necessary is that he, should have made an application to that Court for the execution of his decree for payment of money. There may therefore be cases where no formal application for rateable distribution has in fact been made. It would be impossible therefore to hold that there are claimants for rateable distribution of assets before any assets have been received. Indeed, all that Section 73 does is to direct that the Court which received the assets must distribute them rateably among the persons. It does not expressly confer any specific right on decree-holders to claim a right to such assets before even such assets are in the hands of the Court.

20. The learned advocate for the respondent strongly urges before us that this interpretation o these two sections would make the explanation to Section 64 entirely superfluous and futile. He points out that if assets are actually held by the Court, then it is the duty of the Court to distribute them rateably under Section 73 of the Act without even the help of the explanation to Section 64. But this argument has not much force. In the first place the explanation is after all a mere explanation which remove a doubt which once prevailed as regards Section 64 and is not necessarily a fresh addition to the previous enactment. In the second place, it makes it possible for claimants for rateable distribution of assets to have priority over private alienees who can no longer contend that after the satisfaction of the decree in execution of which the property had been attached and sold, they must be given the balance of the sale proceeds. It has been suggested on behalf of the plaintiff that if a decree-holder cannot get any benefit of his attachment which is not pursued, persons entitled to rateable distribution also should not get any benefit. That argument by itself may not have much force, because in this case the claimants for the rateable distribution want to abide by the same attachment and in fact wish to get the property sold in pursuance of the same attachment. Their claim is not sustained, because they have no right to proceed with the attachment and sale when the attachment itself, which was made in execution of the decree-holders decree, has ceased to exist. The result is that claimants for rateable distribution have a right only when assets are held by the Court. So long as no assets are held by the Court, they have only at the most a mere inchoate right, and such a right does not continue after the attachment ceases to exist. The attachment therefore enures for the benefit of the claimants for rateable distribution in cases where the attachment is fructuous and the property is actually sold and sale proceeds are realised. Where this does not happen, the claimants cannot have any better rights than the attachment creditor whose attachment has ceased to exist.

21. This is the view expressed by a Division Bench of this Court in the case of Bhupal v. Kundan Lal 1921 All. 45 with which I also agree. It is not necessary to consider in this case whether assets would be deemed to be held by the Court where the decree-holder is allowed to file a receipt for the decretal amount instead of depositing the purchase money when he has himself purchased the property. The lower applate Court has held that the benefit of Order 21, Rule 55, Civil P.C. as amended by this Court, should go to the defendant, because no notice of the claim had been sent before the sale took place. It may be conceded that all that is necessary is that notice should be sent or issued by the Court to the sale officer and perhaps need not necessarily have been received by the latter before the sale. But notice must be 'issued' to the sale officer executing the decree before it becomes functus officio. All that Rule 55 provides is that when the amount decreed, including the amounts of other decrees of which notices; have been sent to the sale officer, is either paid or the satisfaction thereof is made through the Court or the decree is set aside or reversed, the attachment shall be deemed to be withdrawn and may at the desire of the judgment-debtor the withdrawal also be proclaimed. The provision is obviously for the benefit of the judgment-debtor so that the attachment must be deemed to be withdrawn when all the conditions are fulfilled, and he is free to dual with the property and can also have the fact advertised so as to remove all misapprehensions. The rule does not in so many words lay down that if only part of the decree is satisfied the attachment can never be withdrawn under any circumstances. It would certainly not be doomed to be withdrawn, but there is nothing to prevent the Court from order-ling that the attachment should cease and releasing the property. Such a contingency may happen when under Rule 57 the decree-holder, owing to his default, fails to proceed further with the application which is dismissed. Upon the dismissal of such application the attachment has to cease. It would follow that the attachment can cease to exist apart from the contingency mentioned in Rule 55. Where therefore the attachment has ceased to exist, even in cases other than those mentioned in Rule 55, the result would be the same, and the claimants for rateable distribution would not be able to continue the old proceeding and get the property sold. To interpret Rule 55 in any other way would be to make it conflict with the 'provisions of Section 64 and Section 73 of the Act, which a High Court has no power to amend.

22. The contention that the present suit does not lie, because the second auction sale was not sought to be set aside under Order 21, Rule 90, has no force whatsoever. The private alienee was no party to that proceeding and is not bound by the sale which took place behind his back. I therefore agree that the appeal should be allowed and the suit decreed.


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