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Mackinnon Mackenzie and Company Pvt. Ltd. Vs. Anil Kumar Sen and anr. - Court Judgment

LegalCrystal Citation
SubjectCivil
CourtKolkata High Court
Decided On
Case NumberAppeal No. 73 of 1974 and Suit No. 3 of 1973
Judge
Reported inAIR1975Cal150,78CWN860
ActsCalcutta High Court (Original Side) Rules - Rules 2 and 3; ;Code of Civil Procedure (CPC) , 1908 - Order 8, Rule 6 - Order 12, Rule 6 - Order 21, Rule 46C
AppellantMackinnon Mackenzie and Company Pvt. Ltd.
RespondentAnil Kumar Sen and anr.
Appellant AdvocateB.K. Bachawat, Adv.
Respondent AdvocateDipankar Ghose, Adv.
Cases ReferredIn Santosh Kr. v. Mool Singh
Excerpt:
- b.c. mitra, j.1. this appeal is directed against an order dated february 20, 1974, whereby the appellant was directed to pay to the sheriff of calcutta a sum of rs. 1,40,873.15 attached in its hands by an order previously made on may 22, 1973. the order was made in garnishee proceeding, the appellant being the garnishee was served with a notice dated june 25. 1973, whereby it was required to pay to the sheriff the said sum on or before july 26, 1973. or to appear before the court on the appointed date and show cause to the contrary.2. on january 5, 1973, the first respondent instituted a suit in this court for a decree for rs. 2,16,000/- as money lent and advanced together with interest and costs. in this suit an application was made by the first respondent for an injunction restraining.....
Judgment:

B.C. Mitra, J.

1. This appeal is directed against an order dated February 20, 1974, whereby the appellant was directed to pay to the Sheriff of Calcutta a sum of Rs. 1,40,873.15 attached in its hands by an order previously made on May 22, 1973. The order was made in garnishee proceeding, the appellant being the garnishee was served with a notice dated June 25. 1973, whereby it was required to pay to the Sheriff the said sum on or before July 26, 1973. or to appear before the court on the appointed date and show cause to the contrary.

2. On January 5, 1973, the first respondent instituted a suit in this court for a decree for Rs. 2,16,000/- as money lent and advanced together with interest and costs. In this suit an application was made by the first respondent for an injunction restraining the appellant at garnishee from paying to the second respondent, who was the defendant in the suit, any sum without leaving Rs. 2,16,000/- in its hands and on this application an ex parte ad interim order was made on January 8, 1973, This ad interim order was modified and the appellant as the garnishee was directed to pay Rs. 80,000/-to the second respondent's solicitor to be held by him as receiver. On March 6, 1973, a consent decree was passed in the suit for a sum of Rs. 1,90,000/- and the decretal amount together with interest was payable by specified instalments by the second respondent to the first respondent. There was a default clause in the decree to the effect that in default of payment of the second or the third or the fourth instalment, within the prescribed time or in default of payment of any two monthly instalments, or any two monthly instalments of interest within the prescribed time, the whole of the decretal amount then remaining due would become at once payable and be executable. The second respondent (judgment-debtor) paid the first and the second instalment and a part payment of Rs. 10,000/- for the third instalment, but failed to pay the fourth instalment and also interest subsequently due. Thereupon the first respondent (decree-holder) filed a tabular statement with a supporting affidavit affirmed by him on May 22, 1973. asking for attachment of a sum of Rs. 1,40,873.15 out of a sum of Rs. 1,60,000/- alleged to be due from the appellant garnishee. An order for attachment was made under Order 21, Rule 46 of the Civil Procedure Code by the Master on May 22, 1973. On May 24. 1973. an order was made in the suit restraining the appellant garnishee from making any payment to the second respondent without leaving a sum of Rs. 1,00,000/- in its hands.

3. On behalf of the garnishee an affidavit has been affirmed by Nirode Kumar Sen in which it is stated that the garnishee is the agent of a Shipping Company known as Bank Line Ltd., at the Port of Calcutta, and the second respondent acted as the Stevedore of Ships owned and chartered by the said Shipping Company. Accounts between the second respondent and the shipping line prior to May 5, 1972, are claimed to have been settled and nothing remained due to the parties from each other. The terms and conditions of the second respondent acting as Stevedore were revised on May 5. 1972, and it acted as the Stevedore on the terms and conditions contained in a letter dated May 5, 1972. It is also claimed that In respect of several ships mentioned in paragraph 8 of the affidavit the Shipping Company advanced large sums of money to the Second respondent for working the vessels. The second respondent submitted its bills for working the vessels, and according to the appellant a sum of Rs. 31,500/- became due and payable by the Shipping Company to the second respondent.

4. On May 14, 1973, the second respondent claimed a sum of Rupees 1,69,746.39 on account of re-imbursement for monthly delivery of Chief Clerk/Assistant Chief Clerk. On May 21, 1973, the appellant answered this demand, and stated that the claim for re-imbursement was unjustified, and invalid, but the matter was being referred to the appellant's principals and on hearing from the latter the question would be taken, up again. This was followed by another letter from the appellant to the second respondent dated July 1.0, 1973, in which the appellant stated that its principals had advised it that the claim for re-imbursement was not valid and was denied. On May 8, 1973. the appellant terminated the second respondent's services as Stevedore of the Shipping Company with immediate effect. This termination was confirmed by the Shipping Company by its letter dated May 15, 1973. According to the appellant the second respondent failed to perform its obligations and to discharge the duties as Stevedore. Particulars of negligence and/or breach of duty are set out under paragraph 11 of the petition. The appellant claims that it has suffered loss and damages by reason of negligence, and breach of duty by the second respondent and such loss and damages according to the appellant ran into a very large sum of money, which had not yet been determined, but is due and payable by the second respondent. It is claimed on behalf of the appellant that the Shipping Company is entitled to adjust the sum of Rs. 31,500/- due to the second respondent against the losses and damages suffered by the Shipping Company. It is also claimed that after such adjustment nothing will be due and payable to the judgment-debtor by the Shipping Company. According to the appellant nothing is due and payable by it to the second-respondent.

5. Mr. B. K. Bachawat, Counsel for the appellant contended that his client had totally denied the claim of the second respondent for Rs. 1,69,746.39 and this claim being disputed bona fide the garnishee order ought not to have been made by the trial Court. He further argued that with regard to the sum of Rs. 31,500/- due to the second respondent, it was entitled to set-off the same against losses and damages which had been suffered by the appellant's principals for the negligence and breach of duty of the second respondent He further argued that the judgment-debtor's claim being disputed by the garnishee, the question of the garnishee's liability should have been tried on evidence and the trial Court should not have proceeded to hold the appellant liable for the amount claimed by the judgment-debtor in a summary proceeding without taking evidence. It was also argued that no payment order could be made, unless the judgment-debtor established its claim to the money.

6. Counsel for the appellant next attacked the judgment under appeal on the ground that the trial Court proceeded on the footing that there was no dispute with regard to the claim made by the second respondent in its bill submitted on May 14, 1973. He argued that the trial Court was entirely in error in coming to the conclusion that there was an admission in correspondence regarding the claim of the second respondent. He referred to the letters dated May 21 1973, and July 10, 1973, in both of which the claim made by the second respondent by its letter of May 14, 1973, was denied and disputed. It was argued that having regard to the denial of the second respondent's claim, the trial Court should not have come to the conclusion that there was no dispute with regard to the claim and also that there was admission of the second respondent's claim in the correspondence between the parties.

7. Mr. Dipankar Ghose appearing for the respondents on the other hand contended that it was not necessary for the decree-holder creditor to affirm 'positively that a certain sum of money was due from the garnishee to the judgment-debtor. It was enough, he argued, if the decree-holder stated that according to his information and knowledge certain sums of money were due from the garnishee to the judgment-debtor. It was for the garnishee, he further argued, to satisfy the court that the claim of the judgment-debtor was bona fide disputed. It was not enough, according to Mr. Ghose, merely to make vague and bare denial of the claim of the judgment-debtor against the garnishee. In our view there is good deal of force in this contention of counsel for the respondents It is not necessary in our view for the decree-holder to positively specify and state on oath that certain sum of money is due from the garnishee to the judgment-debtor. But the question is if the garnishee denies that any sum of money is due to the judgment-debtor, is it open to the court to hold the garnishee liable for the claim made by the judgment-debtor without raising and trying an issue on the question of such liability?

8. This question has been answered in the affirmative by the trial Court and its conclusion appears to be based on admission of the garnishee regarding submission of statement of the bill of the judgment-debtor on May 14, 1973. and also on the assumption that there is no dispute to the claim made in the said bills. We do not think that on the materials on record it was open to the court to conclude that there was any admission of the claim made by the judgment-debtor in the bill for Rs. 1,64.746.39 nor was there any justification for concluding that there was no dispute regarding the claim made in the bills. In the two letters written by the garnishee on May 21, 1973 and July 10, 1973, there was unequivocal denial of the judgment-debtor's claim-Furthermore, in paragraph 15 of the affidavit-in-opposition there is an equally unequivocal statement that no money is due or payable by the garnishee to the judgment-debtor and further that the garnishee disputes liability to pay any amount to the judgment-debtor. On these statements in the letters and the affidavit it ought not to be held that there is no dispute with regard to such claim. As we read it. the letters and the affidavit make it amply clear that the judgment-debtor's entire claim is denied by the garnishee and this denial is re-affirmed in the affidavit-in-opposition filed on behalf of the garnishee. The trial Court appears to have taken into consideration the fact that the garnishee did not object to the judgment-debtor's claim when an order was made in the suit on January 8, 1973, for depositing Rs. 80,000/- with the receiver. This question, in our view, is not relevant for deciding whether an issue should have been raised in order to determine the liability of the garnishee and such issue should have been tried on evidence.

9. What is the provision in the Original Side Rules of this Court on this question and the Code of Civil Procedure Rule 3 of Chapter XVIII is as follows:

'Where the garnishee disputes his liability the judge, instead of making such order, may order that any issue or question necessary for determining his liability be tried as though it were an issue in a suit; and upon the determination of such issue shall pass such order upon the notice as shall be just'.

10. Order 21, Rule 46-C of the Civil Procedure Code (Calcutta Amendment) is almost identical in terms with the Original Side Rule quoted above. Counsel for the respondents said that the Judge has a discretion under the Rule to, make an order summarily or to settle an issue and try the same on evidence. No doubt the order contemplated by the Rule is a discretionary one, but such discretion must be judicially exercised. Where a Judge finds that a claim is bona fide disputed and the dispute is not frivolous, he should not rush to a conclusion on the affidavit evidence having regard to the requirement of the Rule. A garnishee order which enables a judgment-creditor to obtain satisfaction of his claim in a summary proceeding is a matter of procedure, similar in scope as in the case of a judgment on admission under Order XII, Rule 6 of the Civil Procedure Code or the summary procedure in suits to recover debts or liquidated demands as prescribed in Chapter XIII-A of the Original Side Rules. This procedure can be availed of by a decree-holder where either the debt is not disputed or the dispute appears to the Court to be frivolous and without any substance. It is of no avail in a case where there is a subtantial bona fide dispute with regard to the debts sought to be attached.

11. Let us see what would be the result if the matter is allowed to be decided summarily on affidavits. A judgment-creditor makes a claim against the garnishee, who disputes the same. If a garnishee order is made in such a case, the garnishee without getting an opportunity of contesting and refuting the claim of the judgment-creditor is required to pay the money to the Sheriff. The result would be that in one single summary proceeding there would not only be adjudication of a disputed claim but there would be a levy of execution, attachment and entering up of satisfaction. That is not permissible in law. No doubt where a claim is admitted, or no dispute is raised with regard to the claim by the judgment-debtor it is the duty of the court to make an order directing the garnishee to make over the amount claimed by the judgment-debtor for satisfaction of the dues of the decree-holder. But this is not permissible where the claim is denied and disputed.

12. There is one other matter of which we cannot but take notice. The decree-holder was an employee of the judgment-debtor. In the affidavit-in-reply affirmed by him on, September 10, 1973. he says that for some time he acted as the Chief Executive Officer of the judgment-debtor. It appears from the plaint in the Suit that the decree-holder was appointed Chief Executive Officer of the judgment-debtor on April 12, 1971. The claim against the judgment-debtor arises out of moneys lent and advanced by him to his employer. He obtained a decree against the judgment-debtor for Rs. 1,90,000/- by consent on March 6, 1973. The decree was signed on May 14, 1973. On the same day the bill for Rs. 1,69,746.39 was sent by the judgment-debtor to the garnishee. The decree was filed on May 15, 1973 and the garnishee notice was issued on June 25, 1973. On May 8, 1973, the garnishes terminated its contract with the judgment-debtor. The sequence of events appears to be singularly significant. The judgment-debtor submits to a consent decree in favour of an ex-employee. The decree is signed on May 14, 1973. On the same day a bill for a large sum is sent to the garnishee. The decree is filed on the next day and this is promptly followed by a garnishee notice on June 25, 1973. The Executing Court cannot go behind the decree. The terms of the decree must be taken as they are in dealing with an application for execution. But a garnishee order is a discretionary order and in making such an order the Court is to take into consideration all the relevant facts. The sequence of events in this case is such that it calls for a deeper probe and a closer look into the events that led upto the claim of the judgment-debtor and the events that happened subsequently.

13. Before proceeding to deal with cases on which counsel for the parties relied I shall briefly refer to the correspondence that passed between the parties. On May 8, 1973, the garnishee as the agent of the Shipping Company terminated the services of the judgment-debtor as Stevedore and in that letter it is alleged that the judgment-debtor's failure to load cargo in time resulted in loss to the Shipping Company by way of both delay and shutting out of cargo. In the letter of May 15, 1973. from the Shipping Company, the latter in confirming the termination of the judgment-debtor's engagement, reserved to itself its right to claim loss and damages caused by stoppages which the ships suffered at Calcutta as a result of negligence on the part of the judgment-debtor. In a letter dated April 28, 197.3, written by the garnishee to the Master Stevedore Association it is alleged that there was non-payment by the judgment-debtor of the dues of the Dock Labour Board, which directly affected the working of the vessel Tweed Bank and this was a very grave offence. On April 11, 1973, the garnishee wrote to the judgment-debtor that 314 tonnes of cargo meant for the vessel Tweed Bank was shut out and of this 267 tonnes were ready and that this shutting out could have been avoided if the judgment-debtor worked two shifts on Sunday April 8, 1973, and one shift on the following Monday. The letter concluded by saying that the judgment-debtor would be held responsible for all consequences including demurrage arising out of shutting out of cargo.

14. It is clear from the above correspondence that the garnishee as the agent of the Shipping Company, repeatedly protested against the conduct of the judgment-debtor in not working the vessels within the time specified, in consequence of which the vessels were held up at the port and also cargos meant for the vessels were sometimes not loaded. In the affidavit-in-opposition filed on behalf of the garnishee it is alleged that the judgment-debtor wrongfully claimed a sum of Rs. 1,69,746.39 on account of alleged reimbursement for monthly delivery Chief Clerk/Assistant Chief Clerk and that this amount was not payable either under the agreement existing prior to May 5, 1972. or under the agreement of May 5, 1972. In paragraph 11 of this affidavit it is alleged that the judgment-debtor failed to perform its obligations and to discharge its duties and acted negligently. Particulars of the alleged negligence and failure are set out under paragraph 11 of this affidavit In these particulars it is stated that the judgment-debtor failed to work three vessels, which were in consequence detained at the port, and also failed to carry out instructions of the garnishee in the matter of loading of cargos in the three vessels. It is also stated that the judgment-debtor took unreasonably long time to load cargo and failed to procure sufficient labour for loading cargo. The garnishee reserved the right to furnish further particulars at the time of hearing of the application. In paragraph 13 of this affidavit it is alleged that the garnishee and its principal are entitled to adjust a sum of Rs. 31,500/-against the losses and damages suffered by the Shipping Company and that after such adjustment no money will be due or payable to the judgment-debtor by the Shipping Company.

15. Counsel for the respondents drew our attention to paragraphs 5 and 7 of the affidavit-in-opposition in which it is alleged that the accounts between the parties for the period prior to May 5, 1972, were adjusted and nothing remained due and that the accounts subsequent to May 5, 1972, were also adjusted and nothing remained due and payable except as referred to in the affidavit. He argued that two of the vessels, namely, Carron Bank and Imver Bank called at the Calcutta Port in April 1971, and April 1972, respectively but all accounts regarding the working of these vessels according to the garnishee were settled and nothing remained due. So far as the vessel Tweed Bank is concerned, which called at the Calcutta Port in May, 1973. the accounts between the parties were also settled and adjusted and nothing remained due from either party to the other. It was argued that this being the allegation in the affidavit-in-opposition there would be no question of set-off of the judgment-debtor's dues against the alleged claim for loss and damages of the Shipping Company. It was contended that in any event the alleged loss and damage not having been quantified there could be no set-off with regard to the admitted claim of Rs. 31,500/-. It was further argued that equitable set-off could be claimed in respect of the same transaction or same series of transactions, but in this case each contract for working a particular vessel was a separate contract and it could not be said that the claim for damages arose out of the same transaction or the same series of transactions. The arrangement between the parties prior to May 5, 1972, and also the agreement dated May 5, 1972, were not contracts between the parties, but merely an offer to work each vessel as and when it arrived and the acceptance of the offer contained in the letter of May 5, 1972, resulted in a contract between the parties. This argument was repelled by counsel for the appellant by referring to paragraph 7 of the affidavit-in-reply filed by the decree-holder in which it is stated that the claim of the judgment-debtor represents sum payable on account of reimbursement of monthly delivery Chief Clerk and Assistant Chief Clerk in terms of the agreement dated May 5, 1972. He also referred to the contract of May 5, 1972. in which the subject was stated to be 'consolidated Stevedoring rates' and paragraph 3 of the affidavit-in-reply in which the amount was stated to be a running and continuous account. In my view the contention of counsel for the respondents that there was no contract between the parties cannot be accepted having, regard to the case made put by the decree-holder in the affidavit. Failure to quantify a claim for loss and damages, by itself could not disentitle a party from claiming a set-off with regard to such unquantified claim for loss and damages. Our attention was drawn by counsel for the appellant to a decision of the English Court of Appeal --Hale v. Victoria Plumbing Co. Ltd. end En-Tout-Cas Co. Ltd., (1966) 2 All ER 672. In that case a judgment-creditor obtained a garnishee order against a company which was indebted to the judgment-debtor. In the affidavit filed on behalf of the garnishes it was stated that the garnishee was not indebted to the judgment-debtor in any sum of money and it was also alleged that by reason of the judgment-debtor's breaches of contract made between the garnishee and the judgment-debtor the garnishee had claims against the judgment-debtor in excess of the amount claimed by the judgment-debtor. It was held that if these alienations were true that nothing would be due from the garnishee to the judgment-debtor on which a garnishee order could operate. The Court of Appeal distinguished the earlier decision of the same court in Stumore v. Compbell and Co., (1892) 1 QB 314 on which reliance was placed by Counsel for the respondents and to which I will presently refer, on the ground that the facts in that case were of a special nature as in that case money had been deposited by a client with the solicitor for a special purpose so that the solicitor had no lien on the money and as the special purpose failed, a trust arose immediately for repayment of the money to the client. The solicitor claimed that he was entitled to certain costs from his client and it was held that these costs could not be set-off against the claim under the trust for repayment of the deposit. It was observed that the claim arose out of building contracts in which the plumbing company, the judgment-debtor had been employed as sub-contractors and had not done the work well, the claim against the garnishee arose in respect of the work alleged to have been done by the judgment-debtor. It was further observed that it was contrary to justice to order that a garnishee should pay out money which it appeared probably would not be due from him at all as no proceeding had been taken by the judgment-debtor against the garnishee and no order ought, to be made for payment of money which on the face of it appeared not likely to be due. Relying on this decision Mr. Bachawat argued that in this case there was a total denial of the claim made by the judgment-debtor and it was clearly stated in the affidavit filed on behalf of the garnishee that nothing was payable by the garnishee to the judgment-debtor. It. was also stated that after adjustment of Rs. 31,500/-which was due by the garnishee to the judgment-debtor against the losses end damages suffered by the Shipping Company nothing will be payable to the judgment-debtor by the garnishee. It was argued that the mere fact that the loss and damage has not been quantified did not defeat a claim for set-off in a garnishee proceeding. It seems to us that there is good deal of force in this contention of counsel for the appellant. Apart from the denial of the judgment-debtor's claim on the basis of the bills submitted by it, the appellant contends that a large sura of money will be due to it for loss and damage and after setting off the admitted claim of Rs. 31,500/- against such loss and damage nothing will be due by the garnishee to the judgment-debtor.

16. On this question counsel for the respondents relied upon Stumore v. Campbell and Co., (1892) 1 QB 314. In that case a sum of money had been deposited by the judgment-debtor with his solicitor for a special purpose. The solicitor was to hold the money free from lien. The special purpose failed. A judgment-creditor applied to attach the money in the hands of the solicitor. It was held that on failure of the special purpose for which the money was deposited, it, remained in the hands of the solicitor subject to a trust to repay it to the judgment-debtor and as the solicitor could not set up a claim for his costs in answer to demand for return of money, the money was debt due from them to judgment-debtor which could be attached. This decision is clearly of no assistance to the respondents firstly because admittedly money remained in the hands of the solicitor and there was therefore, no dispute on this question. Secondly the money was held by the solicitor as a trustee and the solicitor was bound to return the money to the judgment-debtor. On the question of obligation of a garnishee to deny existence of debt, counsel for the respondents drew our attention to Halsbury's 3 Ed. Vol. XVI page 88. Article 131 for the proposition that if a judgment-creditor desired it, the garnishee is required to make an affidavit which should not be confined to denying existence of the debt, but should state specifically whether he was indebted to the judgment-debtor at all, and if so to what amount. On this question reliance was placed on a decision of the House of Lords, Frederick John Vinall v. Ernest Depass, 1892 AC 90. In that case an application for garnishee order was made under Order 45. Rule 1 of B. S. C. The garnishee in his affidavit denied that he owed the particular debt sought to be attached but he declined to deny that he owed any debt. It was in these facts that it was held that the garnishee order was rightly made but in making that order Lord Halsbury observed that the garnishee proceeding is a procedure for giving the judge the power to determine the question whether a garnishee order could be made and that it was a fallacy to hold that the judge was called upon to make an order for payment and that if there was a denial that there was any other debt due from the garnishee and this denial was duly verified an issue ought to be directed. This decision again is of no assistance to the respondents in this case as it is denied on affidavit by the appellant that any sum is payable by the garnishee to the judgment-debtor. This is not a case where a particular debt sought to be attached has been disputed and there is refusal to deny or dispute other debts. In this case there is a total and comprehensive denial of any amount being payable by the garnishee to the judgment-debtor. On the question of what should be stated by the judgment-creditor in his affidavit in support of an application for garnishee order reliance was placed by counsel for the respondents on Coren v. Barne, (1889) 22 QBD 249, in which it was held that it is sufficient to state in the affidavit that the deponent was informed and believed that, the garnishee was indebted to the judgment-debtor. As I have said earlier this contention of counsel for the respondents is well founded. It is not necessary for a judgment-creditor seeking a garnishee order to state on oath the exact amount due by the garnishee to the judgment-debtor or set out particulars of such debts. It is enough if he says on affidavit that he believes and is informed that certain, debts are due by the garnishee to the judgment-debtor. Our attention was drawn by counsel for the respondents to another English Decision --Newman v. Rook, (1858) 140 ER 1153. Reliance was placed on the observation of Willes, J., that there must be a substantial dispute in order to defeat a garnishee order. The facts in that case, however, must be noticed in order to appreciate the force of that observation. A Judgment was obtained against a defendant. An application for attachment for a debt in the hand of a third party was made. The garnishee disputed the liability on the ground that the debt had been attached by the process of another court and contended that this ground was sufficient to induce the judge to direct a writ to issue. It was held that the only reason advanced for not paying the money was that the debt had been attached by another court and that this attachment by the other court was altogether void as not being authorised by the custom of London as certified by the Recorder. It is to be noticed, therefore, that there was no dispute with regard to the debt due but what was disputed was that the garnishee order could not be made as the debt had been attached by another court, That clearly was purely a question of law and the court found that the attachment was void and therefore, there remained no substance in the dispute raised by the garnishee. This decision again is of no assistance to the respondents as the dispute raised in this case is not a question of law at all but a question of fact which is to be proved, namely, whether any amount is due by the garnishee to the judgment-debtor.

17. On the question as to what the decree-holder should prove in order to get a garnishee order counsel for the appellant relied upon Spence v. Coleman, (1901) 2 KB 199 in which it was held that the first thing which the judgment-creditor had to establish was that there was a debt due from the garnishee to the judgment-debtor. In that case the surplus assets of a company in liquidation belonging to a share-holder who could not be traced, was in compliance with statutory provision, paid by the liquidator into a particular account with the Bank of England. A decree-holder who had obtained a decree against the share-holder sought to attach this fund in the Bank of England. It was held that the sum paid into the bank was not a debt due to the share-holder and it could not be attached by the judgment-creditor by a garnishee order under the Rules of the Supreme Court. This decision is of no assistance to the appellant because the question was whether surplus due to a share-holder could be treated as a debt liable to be attached in a garnishee proceeding. There was no dispute in that case that there was a surplus available but the question was whether the surplus which was deposited in the Bank of England could be treated as a debt. Our attention was drawn by counsel for the respondents on an English Decision Re: The Imperial Hidropathic Hotel Co., Blackpool Ltd., (1882) 49 LT 147 in support of his contention that debt must be duly and properly disputed. In that case different statements were made in different letters regarding the debt and it was in that context that it was observed that the debt was not properly disputed. This decision again in our opinion is of no assistance to the respondents. Counsel for the appellant relied on a decision of the House of Lords -- Employer's Liability Assurance Corporation Ltd. v. Sedgwick Collins Co. Ltd., (1926) All ER (Reprint) 388 for the proposition that making of a garnishee order was discretionary and in an ordinary case the Court of Appeal should not interfere with this discretionary Power. There can be no doubt that the order made by the trial Court is a discretionary order but the discretion has to be judicially exercised. If it appears to the appellate court that the discretion has not been exercised judicially or that it has been exercised arbitrarily so as to interfere with well established principles of law and procedure the judgment of the trial Court ought to be interfered with for the ends of justice.

18. Keeping in mind the decisions discussed above, we have no hesitation in holding that where there is a real dispute with regard to the debts sought to be attached the Court instead of making an order for attachment and payment in a summary proceeding ought to raise an issue on the question of liability of the garnishee to the judgment debtor. Where on the other hand a debt is admitted or there is no dispute with regard to the debt except on questions of law or where a dispute appears to be frivolous or has no substance, the Court is entitled to direct payment of the debt by the gernishee. This seems to me to be the result of various judicial pronouncements to which I have referred earlier. The question is whether in this case the dispute raised by the garnishee and its denial of the claim is such that an issue should have been raised and tried on evidence.

19. The appellant has denied the judgment-debtor's claim based on the bill submitted by the judgment-debtor. It has disputed the validity of the claim and the judgment-debtor's right to recover the same. It has further said that owing to the default and negligence of the judgment-debtor in discharging his duties as the Stevedore it has suffered loss and damages in a very large sum of money. It has claimed to set-off a sum of Rs. 31,500/- which according to it is due to the judgment-debtor against such claim and it has said that after such set-off nothing will be due and payable to the judgment-debtor by the garnishee. The dispute raised by the garnishee with regard to the claim made by the judgment-debtor cannot in our view be said to be frivolous and without substance. Some of the particulars of negligence and default on the part of the judgment-debtor have been set out in the letters addressed by the appellant to the second respondent. It is true that a charge of negligence and default is a matter of proof. But the garnishee ought not to be deprived of the opportunity to substantiate its claim by producing evidence in support of its claim.

20. It is to be borne in mind that if a claimant seeks to recover a sum of money for any reason whatsoever in an action, he would be required to prove each single item of claim even if no written statement is filed, unless he can rely upon the admission made by the party against whom the claim is made, or unless the defence set up by him is of no substance and altogether devoid of any merit. The procedural advantage of a garnishee proceeding ought not to be made available to a decree-holder so as to deny to the garnishee the opportunity of contesting the claim, unless the court is satisfied that there is no substance in the dispute or objection raised by the garnishee. But such is not the case here. The garnishee has raised objection to the claim, which has been denied and disputed, and we cannot hold that the dispute is without any substance.

21. For the reasons mentioned above this appeal ought to succeed. We accordingly allow the appeal and set aside the judgment and order of the trial Court. The matter is remanded to the trial Court to be determined upon trial on evidence. The trial Court should proceed to deal with the matter after framing appropriate issues for determination of the liability of the appellant, if any, to the second respondent and the quantum of such liability. Directions should also be given by the trial Court for discovery and inspection of documents by the parties. Costs of the appeal and the costs of the trial Court to abide by the result of the application to be disposed of on remand under this order.

Ghose, J.

22. This appeal arises out of a judgment and order dated Februrary 20, 1974, directing the appellant to pay to the Sheriff of Calcutta a sum of Rs. 1,40,873.15 P. lying attached in its hands by an order made on May 22, 1973. The plaintiff decree-holder obtained a decree by consent in the suit on March 6, 1973, against the judgment-debtors Santosh Chandra Baneriee and Sons Pvt. Ltd., inter alia for Rs. 1,90,000/- together with interest. The decretal amount was payable by instalments as mentioned in the said decree. Judgment-debtors paid two instalments under the decree and failed and neglected to pay thereafter. Thereupon the decree became executable and on May 22, 1973, the plaintiff decree-holder applied for execution of the decree by attachment of a sum of Rs. 1,40,873.15 P. out of a sum of Rs. 1,60,000/- lying in the hands of the garnishee who is appellant before us. Writ of attachment was issued on the said date prohibiting the garnishee from making any payment to the judgment-debtors. On June 25, 1973, a notice was issued upon the garnishee to pay to the Sheriff the said sum of Rs. 1,40,873.15 P. or to appear in Court and show cause to the contrary. The respondent Garnishor in column 10 of the Tabular Statement filed by him prayed for attachment of the sum of Rs. 1,40,873.15 P. out of the sum of Rs. 1,60,000/- stated to be lying with the appellant and payable to and receivable by the judgment-debtor from the appellant. Thereupon the above mentioned notice was issued upon the garnishee and notice of prohibition mentioned above was served upon it.

23. In answer to the above mentioned notice the garnishee showed cause by an affidavit of Nirode Kumar Sen affirmed in August 1973. In paragraph 8 of the said affidavit the garnishee admitted that a sum of Rs. 31,500/- became due and payable by the Garnishee's Principal Bank Line Ltd., to the judgment-debtor but the said sum was not nor is payable by the garnishee, inasmuch as the judgment-debtor was liable to pay damages to the Garnishee's Principal for having acted negligently as stevedores of the said Bank Line Ltd. Particulars of such negligence have been set out in paragraph 11 of the said affidavit of Nirode Kumar Sen. The Garnishee further stated in the said affidavit that the judgment-debtor wrongfully claimed from the garnishee a sum of Rs. 1,69,746.39 P. on account of reimbursement for monthly delivery Chief Clerk/Assistant Chief Clerk etc., but the said amount was not payable by the garnishee to the judgment-debtor. The garnishee stated that the said claim for reimbursement was unjustified, invalid and was advised by their Principals Bank Line Ltd.. London that the said claim for reimbursement was not valid and as such was denied.

24. In the letter dated May 21, 1973, the garnishee acknowledged the receipt of the letter of the judgment-debtor dated May 14, 1973, enclosing a statement of employment of delivery clerks, assistant clerks, checking clerks etc.. and the claim for reimbursement of the aforesaid sum of Rs. 1,69,746.39 P. Be it noted that the said garnishee except denying the claim of the judgment-debtor for the said sum of Rs. 1,69,746.39 P. has not said anything in regard to the statement of employment of delivery clerks, assistant clerks, checking clerks enclosed to the letter dated May 14, 1973 written by the judgment-debtor to the garnishee. The judgment-debtor according to the garnishee had been acting since May 5, 1972, as stevedores of the Bank Line Ltd., on the terms and conditions contained in a letter dated May 5, 1972. A copy of the said letter has been annexed in the said affidavit and marked as Ext. A. The said letter appears at page 13 of the Paper Book. The garnishee said that the accounts between the judgment-debtor and the said Bank Line Ltd., prior to May 5, 1972, were all adjusted and nothing remained due and payable to them. It has to be noted here that the claim for the sum of Rs. 1,69,746.39 had or has no connection with the sum of Rs. 31,500/- mentioned in paragraph 8 of the said affidavit of Nirode Kumar Sen. The particular of claim of loss and damages as set out in paragraph 11 of the said affidavit was inter alia the failure and negligence of the judgment-debtor to load diligently in proper time the cargo of the garnishee's principals on board M. V. Carron Bank. M. V. Inver Bank and M. V. Tweed Bank. The said negligence consisted also in carrying out instructions of the garnishee as the agent of the said Bank Lines their principals in the matter of loading of cargo to the said motor vessel and in taking unreasonably long time to load cargo on board the said vessels and/or to procure sufficient labour for doing the same. The acts of negligence resulted in shutting out of the cargo of the garnishee's principals and resulted in loss and damage to the principals in the shape of demurrage charges on account of detention of the said vessels in the port of Calcutta and damages for failure to load cargo.

25. The garnishee claims a set-off in respect of the losses and damages suffered by the Bank Line Ltd., mentioned above as against the said sum of Rupees 31,500/- and states that no sum after such set-off would be payable to the judgment-debtor.

26. From the affidavit evidence on record and specially the terms and conditions contained in the abovementioned letter dated May 5, 1972, appearing at page 12 of the paper book, it appears to me that the judgment-debtor had been acting as the stevedore under a single contract in respect of vessels belonging to or chartered by the Bank Line Ltd., calling at the port of Calcutta. The right to set-off has been granted by Rule 6 of Order 8 of the Code of Civil Procedure. Parties to a proceeding have a right to set-off their claims against each other in a proceeding independently of the provisions of Order 8, Rule 6, where cross demands arise out of the same transaction or are so connected in their nature and circumstances as to make it inequitable that the plaintiff should recover and the defendant driven to a cross-suit. Courts in this country as well as in England have allowed a plea of set-off in such circumstances in respect of unascertained sums. The principle is well recognised see AIR 1914 PC 153 at p. 155.

27. In the instant case it appears to me that the claim of the garnishee to set-off as against the dues of Rs. 31,500/-arose out of a series of transactions under a single contract. The said contract is the contract dated May 5. 1972, employing the judgment-debtor to act as the stevedore of the garnishee's principals in respect of their vessels calling at the port of Calcutta. Negligence or breach of duty in the performance of acts as such stevedore albeit in respect of different vessels arise out of a series of a transactions under one contract and thus in my opinion is a subject-matter of equitable set-off if the principal has suffered any loss or damage on account of such negligence. Thus it appears that the sum of Rs. 31,500.00 is not payable by the garnishee.

28. In regard to the case of the garnishor that a sum of Rs. 1,69,743.15 P. was due and payable by the garnishee to the judgment-debtor the garnishee has merely denied the validity or factum of the said liability. Garnishee has not disclosed any fact either in the letters appearing at pages 15 and 16 of the Paper Book or in the affidavit mentioned above of Nirode Kumar Sen, filed in answer to the notice to show cause served upon the garnishee. The question that calls for consideration is -- has the garnishee disputed its liability in terms of Rule 3 of Chapter XVIII of the Rules of the Original Side of this Court

29. In the instant case the Sum of Rs. 1,40,843.15 paise was attached in the hands of the garnishee under Order 21 of Rule 46 of the Code of Civil Procedure as mentioned hereinbefore. Thereupon notice as mentioned hereinabove to pay the said sum to the Sheriff or to appear before the judge in chamber and show cause why the garnishee should not make such payment was served upon the garnishee. This notice was served under Rule 1 of Chapter XVIII of the Rules of the Original Side of this Court. Rules 2 and 3 of the said chapter are relevant for the purpose of the instant appeal. It should be noted that Rule 46 of Order 21 of the Civil Procedure Code provides for attachment of debt, share and other property not in the possession of the judgment-debtor. Calcutta High Court has added Rules 46-A to 46-H after Rule 46 of Order 21 of the Civil Procedure Code by way of amendment. Rule 46-B and Rule 46-C are in identical terms as Rules 2 and 3 of Chapter XVIII of the Original Side Rules.

30. After the alleged debt in the hands of the garnishee was attached in accordance with the provisions of Rule 46 of Order 21 Chapter XVIII of the Rules of the Original Side became applicable to the instant proceeding. The said rules read as follows, to wit:

'2. Where the garnishee does not forthwith pay or deliver to the Sheriff the amount due from or the property deliverable by him to the judgment-debtor, or so much as may be sufficient to satisfy the decree and the costs of execution, and does not dispute his liability to pay such debt or deliver such moveable property, or where he does not appear in answer to the notice, then the Judge may order the garnishee to pay or deliver in terms of such notice, and on such order execution may issue as though such order were a decree against him.

3. Where the garnishee disputes his liability the Judge, instead of making such order, may order that any issue or question necessary for determining his liability be tried as though it were an issue in a suit; and upon the determination of such issue shall pass such order upon the notice as shall be just.'

31. Order 45 of Rules 1 to 7 of the Rules of the Supreme Court of England deal with attachment of debt due to a judgment-debtor in the hands of the third person or garnishee. Rules 3 and 4 of Order 45 of the Rules of the Supreme Court are substantially in identical terms as Rules 2 and 3 of Chapter XVIII of the Original Side Rules of this Court,

32. The said rules are set out hereunden:'3. If the garnishee does not dispute the debt due or claimed to be due from him to such debtor, or if he does not appear upon summons, then the Court or Judge may order execution to issue, and it may issue accordingly, without any previous writ or process, to levy the amount due from such garnishee, or so much thereof as may be sufficient to satisfy the judgment or order, together with the costs of the garnishee proceeding.

4. If the garnishee disputes his liability, the Court or a Judge, instead of making an order that execution shall issue may order that any issue or question necessary for determining his liability be tried or determined in any manner in which any issue or question in an action may be tried or determined or may refer the matter to a Master.'

33. Section 63 and Section 64 of the Common Law Procedure Act 1854 are substantially in similar terms as Rules 2 and 3 of Chapter XVIII of the Rules of the Original Side of this Court and Rules 3 and 4 of Order 45 of the Rules of the Supreme Court of England. The said rules came to be construed in (1858) 140 ER 1153. It was held in the said case that to entitle the garnishee to a right under Section 64 for trial of the issue as to his liability to the judgment-debtor, he must satisfy the court that he had a real ground for disputing his liability for the debt.

34. In the said case Willes, J., observed that 'mere assertion by the garnishee that he disputes the debt amounts to nothing; there is no substantial dispute until some real answer or defence is set up.' It is true that in the said case the garnishee disputed the liability to pay the debt on the ground that the debt had already been attached by another court. It was found that the said attachment was void and did not have the effect of attaching the debt in the hands of the garnishee and thus the garnishee had really no defence to the writ of attachment in the said case. Be that as it may, the said facts do not in my opinion nullify the effect of the observation of Willes, J., in construing Section 64 of Common Law Procedure Act 1854.

35. In the case of (1901) 2 KB 199 it was held that the judgment-creditor must establish first that there was debt due from the garnishee to the judgment-debtor. In the said case the controversy between the party was as to whether surplus assets of a company in liquidation payable to a share-holder could be said to be a debt due to the said share-holder after the said surplus asset had been paid into a particular account by the liquidator with the Bank of England. It was held that the surplus deposited in the Bank of England could not be said to be a debt due to the share-holder.

36. In (1966) 2 All BR 672, the garnishee in showing cause stated on affidavit that it was not indebted to the judgment-debtor in any sum of money. On the contrary it stated that it was entitled to damages for breaches of contract committed by the judgment-debtor for sums which were in excess of the amount claimed by the judgment-debtor. The garnishee claimed to set-off the said sums against the claims of the judgment-debtor. It was held that the garnishee had disputed its liability and that garnishee order could not operate. It has to be noted from the judgment in the said case as appears at page 673 against the letter B that garnishee's affidavit must have disclosed sufficient materials to dispute its liability. The facts further show that details of its claim were supplied by the garnishee to the judgment-debtor before the date of making the garnishes order and on the facts of the said case as disclosed in affidavits filed by the parties, the Court of Appeal in England came to the conclusion as stated hereinabove.

37. In Mahinder Singh Jaggi v. Data Ram Jagannath, : AIR1972SC1048 it was held that a defence of counterclaim for account arising out of transactions between the defendant and the plaintiff on the basis of an agreement in the plaintiff's suit for recovery of certain monies on the basis of khata, the written statement containing the defence may be treated as a cross-claim in the same action. Thus Mr. Bachawat the counsel for the appellant submitted that the claim for loss and damages by the garnishee may be set-off as against the said sum of Rs. 31,500/-.

38. In (1892) 1 QB 314 the solicitor garnishee's dispute in regard to the liability to pay to the client monies deposited by the client for a specific purpose in defence to a garnishee order was overruled on the ground that the solicitor could not claim any lien on the said moneys inasmuch as on the failure of the specific objects for which the moneys had been deposited with him, the solicitor had been holding the moneys as trustee for the client and could not claim any part of the money on account of his costs.

39. In 1892 AC 90 the garnishor made an application for a garnishee order under Rule 1 of the Order 45 of the R. S. C. and stated in the affidavit in support of the application that a specific debt was due from the garnishee to the judgment-debtor. The garnishee denied that he owed the said debt to the judgment-debtor. But did not however, deny that he owed any other debt to the judgment-debtor. It was held by the House of Lords that the garnishee did not however, deny that he owed any other debt to the judgment-debtor. It was held by the House of Lords that the garnishee did not dispute his liability and accordingly the order for payment to the garnishor was rightly made. At page 95 of the said report Lord Halsbury in his speech observed that 'if he (meaning the garnishee) makes the judge to understand that there is a real dispute upon the subject, the judge will direct an issue and will allow that issue to be tried in due course of law.'

40. Besides (1858) 140 ER 1153 mentioned in the earlier part of the judgment Mr. Dipankar Ghose and after him Mr. Kapoor relied on various authorities to show that the garnishee must disclose facts in his affidavit in showing cause against the order proposed to be made as contained in the notice served upon him to show that he was not indebted to the judgment-debtor. The garnishee in my opinion must make out a prima facie case before an issue as to his liability may be ordered to be tried under Rule 3 of Chapter XVIII of the Original Side Rules.

41. In other words the garnishee must disclose facts from which a reasonable inference may be drawn that there is a valid dispute as to the alleged liability of the garnishee. That is the ratio in my opinion in (1882) 49 LT 147. Similar is the decision in (1926) 42 TLR 749 and 38 Law. Ed, (U. S.) 104.

42. The letter dated May 14, 1973, enclosing the statement of claims by the judgment-debtor to the garnishee has not been disclosed by the garnishee. The statements of claims has also not been disclosed. No ground or reason for disputing the liability has been stated in any of the letters appearing at pages 15 to 17 of the paper book. Nor has any such ground been disclosed in the affidavit of Nirpde Kr. Sen filed in opposition to the notice.

43. In opposition to an application for summary judgment under Chapter XIII-A of the Rules of the Original Side a bare denial of his liability by the defendant does not entitle the defendant any right to defend the suit. Similarly in a suit under Order 37 of the Civil Procedure Code a defendant if he makes a bald denial of receipt of the consideration is not entitled to the leave to defend the action under Rule 3 of the Order 37 of the Civil Procedure Code.

44. In Santosh Kr. v. Mool Singh, : [1958]1SCR1211 , the Supreme Court held that in order to obtain leave under Rule 3 of the Order 37 of the Civil Procedure Code the defendant must raise a real issue in the sense that the facts alleged by the defendant if established there would be a good defence on, those facts. Bare denial of liability is not disputing the liability.

The facts have to be stated, grounds have to be put forth which will lead the court to draw an inference that there is a triable issue and so a trial of the issue should be directed. The garnishee in the instant case has failed to raise any dispute as to his liability.

45. But before the garnishee is called upon to dispute his liability, the garnishor must prove that such liability exists and a debt is due and payable by the garnishee to judgment-debtor.

46. It is true that the existence of the debt may not be proved by the garnishor on the basis of his personal knowledge, but he must base his case of the existence of the debt due by the garnishee to the judgment-debtor on information and belief. That was the submission also of Mr. Dipankar Ghosh on the basis of (1889) 22 QBD 249. That was also the decision of the House of Lords in (1892) AC 90.

47. The existence of the debt alleged to be due to the judgment-debtor by the garnishee has to be proved by an affidavit. In any event on the basis of information and belief of the garnishor In (1889) 22 QBD 249, the application for the garnishee order for the attachment of the debt was made by an affidavit by the solicitor to the judgment-creditor, who had stated that he had been informed and verily believed that the garnishee was indebted to the judgment-debtor,

48. In (1892) AC 90. the affidavit in support of the application for tile garnishee order stated that the debt existed according to the information and belief of the deponent. It was held that the deponent need not swear positively as to the existence of the debt due from the garnishee to the judgment-debtor. It was sufficient if he states on information and believes that the debt existed,

49. In the instant case a tabular statement was filed verified by an affidavit of garnishor Anil Kumar Sen affirmed on May 22, 1973 for attachment of a sum of Rs. 1,40,843.15 P. out of a sum of Rs. 1,60,000/- lying with the appellant and payable to and receivable by the defendant judgment-debtor from the appellant.

50. The said column 10 of the tabular statement appears at page 3 of the paper book. Column 10 has been verified by the affidavit of Anil Kumar Sen affirmed on May 22, 1973 as his submissions. The said affidavit also appears at page 3 of the paper book. It is apparent therefore, that in the tabular statement there is no statement that any debt or any sum is due and payable by the garnishee to the judgment-debtor. The judgment-creditor thus in my opinion failed to prove the existence of any debt due or payable by the garnishee to the judgment-debtor, in view of the fact that the statements contained in column 10 of the tabular statement are mere submissions and not statement of facts.

51. In that view of the matter no writ of attachment could have been directed to be issued on the basis of the said tabular statement, and no notice as appears at page 6 of the paper book likewise could have been issued and served upon the alleged garnishee.

52. In view of the fact that no existence of any debt due and payable by the garnishee to the judgment-debtor has been proved in the instant case, the appellant was not called upon to dispute any liability in terms of Rules 2 and 3 of the Chapter XVIII of the Original Side Rules. The failure to dispute the debt or the liability by the garnishee in terms of Rule 3 of Chapter XVIII of the O. S. Rules thus cannot affect the rights of the appellants in the instant case.

53. The tabular statement for the reasons stated hereinabove should have been dismissed in limine. But inasmuch as parties have filed affidavits in the instant case to avoid multiplicity of proceedings. I concur in the order passed by My Lord.


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