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Krishnasawmy Mudaliar Vs. the Official Assignee to the Estate of S. Raghavalu Naidu - Court Judgment

LegalCrystal Citation
SubjectCivil
CourtChennai
Decided On
Reported in(1903)13MLJ278
AppellantKrishnasawmy Mudaliar
RespondentThe Official Assignee to the Estate of S. Raghavalu Naidu
Cases ReferredFrederick Peacock v. Madan Gopal I.L.R.
Excerpt:
- - in the sense in which, for the purposes of the present english bankruptcy law, an attachment is deemed to be complete so as to give the attaching creditor a good title as against a trustee in bankruptcy, the attachment is not complete. 4. the amendments of the law of procedure in this country, as well as of the law of bankruptcy in england, have been based upon the principle that so far as possible the creditors should be treated pari passu and that nothing short of actual realization of the debt due should give rights of priority......this country, as well as of the law of bankruptcy in england, have been based upon the principle that so far as possible the creditors should be treated pari passu and that nothing short of actual realization of the debt due should give rights of priority.5. if under the provisions of the present code an attaching creditor does not obtain a charge or lien on the attached property, no question, as it seems to us, of the property vesting subject to any equity in favour of the attaching creditor really arises.6. we think the decision of boddam, j., was right and we dismiss the appeal with costs.
Judgment:

1. This is an appeal from an order of Boddam, J., allowing the claim of the Official Assignee of the estate of one Raghavalu Naidu, an insolvent, as against an attaching creditor of the insolvent. The material dates are these: On February 6th, 1900, the creditor obtained an order under Section 483 of the Code of Civil Procedure attaching before judgment, a sum of Rs. 40,000 which had been deposited with Messrs. Parry & Co. by the insolvent as security for the performance of his duties as a dubash, and a further order under Section 268 of the Code of Civil Procedure restraining the insolvent from receiving this sum of Rs. 40,000 from Messrs. Parry & Co., and restraining Messrs. Parry & Co. from paying it to the insolvent. On July 25th, 1900, the creditor obtained a decree against the insolvent for Rs. 12.000 odd. On February 18th, 1901, an order of adjudication in insolvency was made on the petition of the insolvent, and an order was subsequently made under Section 7 of the Insolvency Act, vesting his estate in the Official Assignee. Section 490 of the Code of C.P.C. provides that where property is attached before judgment, and a decree is given in favour of the plaintiff, it is not necessary to re-attach the property in execution of the decree. The case therefore stands upon the same footing as if the creditor had obtained his decree and had afterwards obtained an order of attachment before the adjudication. The question for determination is-does the order of attachment operate so as to give the attaching creditor priority over the other creditors in the insolvency? In one sense, no doubt, the process of attachment is complete-that is, the creditor has done all that the Code requires him to do to give him the rights of an attaching creditor. In the sense in which, for the purposes of the present English Bankruptcy Law, an attachment is deemed to be complete so as to give the attaching creditor a good title as against a trustee in bankruptcy, the attachment is not complete. Under Section 45 of the* Bankruptcy Act, 1883, the attachment of a debt is only completed by the receipt of the debt. On behalf of the attaching creditor, reliance was placed upon the II decision of the Court of Appeal in Ex-parte Joselyne, In re Watt 8 Ch. D. 327 where it was held that a judgment-creditor had obtained a garnishee order nisi attaching debts due to the judgment-debtor, before the filing of a liquidation petition was a secured creditor within Section 16(3) of the Act of 1869,land his title to the attached debts prevailed over that of the truste.e The law as laid down in the case referred to was altered by the Act of 1883, and it may be observed that the English Act of 1849 and most of the bankruptcy statutes prior to that of 1869 contained alprovision which deprived execution creditors of the benefit of their execution if they had not realized by seizure and sale before the adjudication. See Williams on Bankruptoy. Edition 6, page 45. The English decisions, however, are only useful by way of analogy. The question really has to be decided with reference to the provisions of the Code of Civil Procedure and of the Insolvency Act which is in force in this country (11 and 12 Vict. Ch, 21). First, it is to be observed that there is nothing in any of the provisions of the Code, which, in terms, makes the attaching creditor a secured creditor, or any charge or lien in his favour over the property attached. The order of attachment merely restrains the debtor's creditor from paying to the debtor, the money attached, and restrains the debtor from receiving the same. See form 139 of Schedule IV of the Code of Civil Procedure.

2. The order does not purport to deal with any question of title as between the debtor and the party in whose hands the debt alleged to be due to the debtor is attached, or as between the debtor and any party in whom his estate may afterwards become vested by operation of law. In other words, attachment prevents alienation; it does not confer title. See the Judgment of the Privy Council in the case of Moti Lal v. Karrab-ul-din I.L.R. 25 C. 179. Prima facie on the making of a vesting order under Section 7 of the Insolvency Act the right to recover a debt due to the debtor vests in the Official Assignee as part of the insolvent's estate It is for the attaching creditor to show that, under the provisions of the Code of Civil Procedure the order of attachment operates so as to prevent this right from vesting. In our judgment the making of an order of attachment in favour of a judgment-creditor obtained under Section 268 of the Code of Civil Procedure only operates so as to give the judgment-creditor certain rights in execution, It does not operate, when these rights are not exercised before the presentation of a petition in insolvency, so as to create in favour of the judgment-creditor a title which prevails against that of the Official Assignee under a vesting order in insolvency made after the order of attachment. As regards the authorities the precise point does not appear to have been decided by this Court. In the case Sadayappa v. Ponnama I.L.R. 8 M. 554 where the vesting order was after attachment, but before decree, it was held that the title of the Official Assignee prevailed, In that case the Judges observe that there is a material difference between an order of attachment under the Code of Civil Procedure and a writ of fi-fa in that the latter is an order for sale while the former is a step which may or may not be accompanied by an order for sale. On principle it seems difficult to draw any distinction between the case of Sadayappa v. Ponnamma I.L.R. 8 M. 554 and the present case, since it cannot be contended that the decree in the present case, qua decree, constituted the judgment-creditor a secured creditor or gave him any charge or lien over the property of the judgment-debtor. In the case of Veeraraghava v. Parasurama I.L.R. 15 M. 372 a judgment-creditor had obtained an order for the sale of the attached property before the vesting order was made, and the question involved was the right of another judgment-creditor to rateable distribution of the proceeds of the sale to be held in execution of the attachment already made. It was held that rateable distribution could be ordered upon the ground that the Official Assignee having applied to the District Court to stay the sale and not having appealed against an order dismissing his application, there was no further question between the Official Assignee and the judgment-creditors, and the pendency of the proceeding in insolvency was no reason for refusing rateable distribution as between the judgment-creditors. The case turned upon the rights of the judgment-creditors inter se and not upon the rights of a judgment-creditor who had obtained an order of attachment as against the Official Assignee, The case is also distinguishable from the 'present case on the ground that the attaching creditor had obtained an order for sale before the adjudication in insolvency.

3. The point was considered in an elaborate judgment of the Allahabad High Court, in which it was held that the Official Assignee was entitled under a vesting order to possession of an insolvent's estate, even when the estate had been attached in execution of a decree and an order for sale had been made, Sarkies, Agent of the Official Assignce of the Insolvent Court of Calcutta, v. Mussumat Bandho Baee 1 N.W.P. 81. In the case Anand Chandra Pal v. Panchilal Sarma 5 Beng. L.R. 691, a Full Bench of the Calcutta High Court held that when a creditor had obtained a decree and an order of attachment before the vesting order was made, the vesting order passed the property to the Official Assignee subject to being divested by a sale of the attached property in execution of the decree. In three subsequent cases, Shib Kristo Shaha Chowdhry v. Miller I.L.R. 10 C. 150, Soobul Chunder Sen v. Russick Lal Mitter I.L.R. 15 C. 202 and Frederick Peacock v. Madan Gopal I.L.R. 29 C. 428 and others, the Calcutta High Court have declined to follow this decision. In the case Shib Kristo Shaha Chowdhry Miller I.L.R. 10 C. 150, the point was only decided by a majority of 3 to 2, but in the cases of Soobul Chunder Sen v. Russick Lal Mitter I.L.R. 15 C. 202 and Frederick Peacock v. Madan Gopal I.L.R. 29 C. 428 , the Court was unanimous. The case in Miller v. Lukhimani Debi I.L.R. 28 C. 419 has now been overruled by, the decision of the Full Bench in Frederick Peacock v. Madan Gopal I.L.R., 29 C. 428 As pointed out by the Chief Justice in his judgment in the latter case, (here is a marked distinction between the language of Section 270 of the Act of 1859, the enactment in force when the case of Ananda Chandra Pal 5 Beng. L.R. 691 was decided, and Section 295 of the present Code of Civil Procedure. Under Section 270 of the Code of 1859 a creditor obtaining an attachment was entitled to be first paid out of the proceeds of the sale notwithstanding a subsequent attachment. Section 295 of the present Code provides for rateable distribution amongst creditors when more persons than one have, prior to realization in execution of a decree applied for execution of decrees against the same judgment debtor.

4. The amendments of the law of procedure in this country, as well as of the law of bankruptcy in England, have been based upon the principle that so far as possible the creditors should be treated pari passu and that nothing short of actual realization of the debt due should give rights of priority.

5. If under the provisions of the present Code an attaching creditor does not obtain a charge or lien on the attached property, no question, as it seems to us, of the property vesting subject to any equity in favour of the attaching creditor really arises.

6. We think the decision of Boddam, j., was right and we dismiss the appeal with costs.


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