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N.A.R. Subbiah Chettiar Vs. S.M. Viswanathan Chettiar (Dead) and ors. - Court Judgment

LegalCrystal Citation
SubjectCivil
CourtChennai High Court
Decided On
Case NumberA.A.O. No. 87 of 1957
Judge
Reported inAIR1964Mad120
ActsCode of Civil Procedure (CPC) , 1908 - Sections 73 - Order 21, Rules 72 and 94
AppellantN.A.R. Subbiah Chettiar
RespondentS.M. Viswanathan Chettiar (Dead) and ors.
Appellant AdvocateA.V. Narayanaswami Iyer, Adv.
Respondent AdvocateC.S. Rama Rao Saheb, ;S. Ranganathan and ;S.M. Amjad Nainar, Advs.
DispositionAppeal allowed
Cases ReferredIn Collector of Tiruthirapalli v. Trinity Bank Ltd.
Excerpt:
.....confirmed by court - union of india (uoi) claim preferential payments - whether court can order decree holder to deposit sale proceeds in court to satisfy claim of uoi - once sale complete court have to issue certificate of sale - court cannot pass order to deposit sale proceeds into court - claim of uoi cannot be satisfied. - - muktiram marwari, air1931pat405 that, if the court permits a decree-holder to bio at the sale and allows him to set of the purchase money towards the decree, it is open to the court afterwards, or a good case being made out, to withdraw that order and call upon the decree-holder to deposit the purchase money in cash for rateable distribution, the principle reiterated being that the purchase money is an asset in the power and at the disposal of the court..........on the file of the subordinate judge of devakottai, the appellant subbian chettiar obtained 'a money decree against the first respondent viswanatnan chettiar, since deceased. in execution of the said decree, he attached and brought to sale certain immoveable properties of the first respondent and purchased them himself after obtaining court's permission to bid and set off, this sale was on 20-6-1955.the first respondent was in arrears of income-tax to the extent of over rs. 21000 and the revenue authorities had taken steps against him under the revenue recovery act to realise the said arrears. but as his property had been attached and sold in court auction, the union 05 india represented by the income-tax officer, karaikuar, filed e. a. 497 of 1955 in e. a. 427 of 1955 - the.....
Judgment:

Kunhamed Kutti, J.

1. The point for determination in this civil miscellaneous appeal is whether the direction of the learned Subordinate Judge to deposit the sale price into Court after having confirmed the sale is legally sustainable.

2. The facts leading to this order can shortly be stated :

In O.S. No. 5 of 1954 on the file of the Subordinate Judge of Devakottai, the appellant Subbian Chettiar obtained 'a money decree against the first respondent Viswanatnan Chettiar, since deceased. In execution of the said decree, he attached and brought to sale certain immoveable properties of the first respondent and purchased them himself after obtaining court's permission to bid and set off, this sale was on 20-6-1955.

The first respondent was in arrears of income-tax to the extent of over Rs. 21000 and the revenue authorities had taken steps against him under the Revenue Recovery Act to realise the said arrears. But as his property had been attached and sold in court auction, the Union 05 India represented by the Income-tax officer, Karaikuar, filed E. A. 497 of 1955 in E. A. 427 of 1955 - the application filed by the first respondent to set aside the sale to implead therein the Union of India, as the second respondent. This application was dismissed by the learned Subordinate Judge by his order dated 5-7-1956 for the reason, among others that it was barred by time. He also appears to have dismissed E. A. 42/ of 1955 on 31-7-1956 and passed the order, now under appeal in t. P. No. 233 of 1954. This order is a brief one and reads;

'E. A. No. 427 of 1955 is dismissed today. (4) Sale confirmed. Plaintiff to deposit the sale price into court, after which sale certificate will be issued, sale amount to be paid into court on or before 10-8-1950

3. Satisfaction will be recorded later on. execution petition terminated'.

It is the propriety of this order that is challenged by the appellant and his contention is1 that, once the sale is confirmed and becomes absolute, a sale certificate has necessarily to be issued as required under Order XXI rule 94 C. P. C. and the court has no jurisdiction to postpone me matter within a direction to deposit the entire sale price into court, permission to bid and set off having been grantees under Or. XXI rule 72 C. P. C.

It has been held by this court in Murugappa Chettiar v. Ramaswami Chettiar ILR 59 Mad 342 : AIR 1935 Mao 893 that where an application Under Section 73 C. P. C. intervenes, when the purchase price is either equal to or less than the decree amount the right of the decree-holder (purchasing with permission) to set off is controlled only to this extent, namely, that he is bound to bring into court such sums alone as are due to those decree-holders whose applications for execution are pending on the date of the sale in order that the same might be rateably distributed to them Under Section 73 of the code, and that the persons who filed their applications after the date of sale are not entitled to rateable distribution.

In Bindeswari Narain Singh v. Kirtyanand Singh, : AIR1931Pat359 the Patna High Court held that since an order for set off under Or. XX rule 72 (2) of the Code in favour of the decree-holder is subject to the provisions for rateable distribution contained. In Section 73, the amount bid by a decree-holder at an execution sale forms assets held by the court within the meaning of Section 73, C. P. C.

The same High Court held in Firm Ganga Ram Gulraj Ram v. Muktiram Marwari, : AIR1931Pat405 that, if the court permits a decree-holder to bio at the sale and allows him to set of the purchase money towards the decree, it is open to the court afterwards, or a good case being made out, to withdraw that order and call upon the decree-holder to deposit the purchase money in cash for rateable distribution, the principle reiterated being that the purchase money is an asset in the power and at the disposal of the court within the meaning of Section 73 of the Code.

3. Where more than one decree-holder against the same judgment-debtor apply for execution and the application is a proper one Under Section 73 C. P. C, they are entitled to rateable distribution of the proceeds of the sale even in cases where the decree-holder who brought the property to sale has been allowed to bid and set oft. Under such circumstances, as pointed out in Bijoy Kumar v. Kamanath Barman, 43 Ind Cas 715 : AIR 1918 Cal 450 it is open to the executing court to direct the purchasing decree holder to pay money into court and in that view, the amount is in the power and at the disposal of the court and it is held by the Calcutta High Court within the meaning of Section 73.

4. But, in Charanjit Singh v. Sardar Mohammad, AIR 1935 Lah 690 a case under the Insolvency Act, the Lahore High Court held that decretal amount is set on against the purchase price automatically by operation of, law and no order of the court is necessary in order that the respective amounts may De set off against each other. The view expressed in this case is that, the court executing the decree has only to enter up satisfaction of the decree in whole or in part after the setting off has taken place. Hence when a decree holder has been given permission to bid and set oft, and when the amount of the successful bid is less than the decree amount, the whole of the set off must be deemed as mane on the date of the sale and the whole of the amount must be deemed to have been received or realised of instant me sale is made.

5. The question before the Lahore High court was whether when a decree-holder bought the property of a judgment-debtor the sale proceeds could not be said to be set off immediately against the decretal amount or whether it was set oft only after the sale was continued. It appears to have been argued that it could not be set on immediately until opportunity had been given to others persons to lodge objections against the sale until the time for lodging objections, had passed. Abdul Rashid J. who decided the case overruled this proposition and relying on a Bench decision of this court reported in Punnamchand Chatraban v. V. Satyanandam, AIR 1933 Mad 804 laid down the rule already set out above, namely, that when a decree-holder has been given permission to bid and set off, and when the amount of the successful bid is less than the decretal amount the whole of the set off must be deemed as made on the date of sale, and that the whole of the amount must be deemed to have .been received or realised instant the sale is made. The learned judge however, had not to consider the question with reference to Section 73 C. P. C. or the claim1 of other parties like the Government who has priority right over unsecured creditors.

6. A Full Bench of this court has held in Manickam Chettiar v. income-tax Officer, ILR (1938) mad 744 : AIR 1938 Mad 360 that the execution court has power to order payment out of the amount due to Government on mere application as the crown is entitled to prior payment over all unsecured creditors.

The law however is well settled that, where the executing court allows a claim for rateable distribution by a decree holder and all that remains to be done is the ascertainment of the exact amount which each decree holder is entitled to and payment of the same, the money in the hands of the court can no longer be considered in law to be the judgment-debtor's money. It was, therefore, held by the Calcutta High Court in Basanta Kumar v. Panchu Gopal, (S) : AIR1956Cal23 , that if subsequent 10 such order a letter of attachment in respect of a 'public demand due from the judgment-debtor is received By the executing court, the latter cannot take any action on such letter on the basis that it is still the judgment-debtor's, money.

This case has further pointed out that the executing court having once declared that it is decree-holders money would be clearly wrong in complying with the letter of request of the certificate officer to remit the safe proceeds to Him. in such a case the question of priority of State's claim does not arise.

7. In Collector of Tiruthirapalli v. Trinity Bank Ltd. : [1962]44ITR189(Mad) (FB) in a suit by a mortgagee against the mortgagor, the mortgagee obtained a preliminary decree and on his application the court appointed a receiver to collect the rents 'and profits from the mortgaged property the Collector to whom a certificate of arrears was forwarded in regard to income-tax assessed on and due from the mortgagor, append to the court for payment of the arrears out of the amounts, collected by the receiver and deposited to the credit of the suit. The assignee of the decree1 opposed the collectors, application. On these facts a Full Bench of this court held that the decree-holder had no preferential right over the amounts collected1 by the receiver and We collector was entitled to be paid the arrears of tax out of the amounts collected by the receiver. The principle of the decision is that, in respect of the rents and proms paid into court, there cannot be a charging order in favour of the mortgagee and that a simple mortgagee or an 'equitable mortgagee or1 a charge-holder has no security over the rents and profits accruing over the property whatever ever disabilities the mortgagor may suffer By the Receiver taking possession of the hypotheca at the hand of the court, no special rights are conferred in favour of the mortgagee by reason only of such appointment.

8. In the present case, permission had been granted to the decree-holder to bid and set off and we records placed before me go to show that, there had been .no application as such by the Union of India for payment our claiming a preferential right in respect of the bid amount Therefore quite apart from the question whether the upon of India is entitled to a preferential claim in respect of the Did amount, this appears to be a case where such claim not having been specifically made need not .be considered and In the absence of such application the appellant need not have been directed to deposit the entire bid amount Actually there was no amount in deposit against which the Union of India could enforce its claim and it is a question whether it could, at all, have made a claim for payment-in the absence of deposit. In the peculiar circumstances, the appellant decree-holder is entitled to succeed.

9. This appeal, is, therefore, allowed and the order of the learned Subordinate judge directing the appellant to deposit the bid amount is set aside, however make no order as to costs.


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