1. The question before us is whether a creditor, whose rights depend upon an attachment before judgment, is entitled to execute a decree subsequently obtained, in spite of a vesting order in favour of the Official Assignee of the insolvent debtor's estate passed after the attachment, but before the decree.
2. I am of opinion that, having regard to the terms of the present Code, he cannot execute such a decree. An attachment before judgment is obtained when a Court is satisfied that the defendant intends to obstruct or delay the execution of any decree that may be passed against him, by disposing of or removing his property from the jurisdiction of the Court, or quitting such jurisdiction and is unable to furnish proper security. The attachment is to be removed if at any time the security is furnished or the suit is dismissed. It does not affect the rights of third parties already existing, nor does it prevent any decree-holder from applying for the sale of the property in satisfaction of his decree. It is further provided that on a decree subsequently obtained, the attaching creditor may proceed in execution without any re-attachment. The rights so conferred are clearly to prevent any alienation by the debtor, such as I may say amount to any fraudulent preference, if he were about to become insolvent. As I understand the argument, the only persons who can intervene are persons having rights prior to the attachment, or any decree-holder who may apply for execution, whether that decree may have been obtained before or after the attachment. If such decree-holder obtains a sale and that sale is confirmed before the creditor who has an attachment before judgment gets a decree, he can obtain the whole sale proceeds, and the attachment before judgment affords no security. No doubt, this is an extreme case, but still it is a case that may happen. Then, again, what is the effect if in execution of such a decree, or if in execution of a decree obtained by the attaching plaintiff, the judgment-debtor applies under Section 344 to become an insolvent? Execution is suspended until determination of that application. If he is declared an insolvent under Section 351, a Receiver is appointed, the entire property of the insolvent is vested in that Receiver, and the attaching creditor gets merely the costs incurred in the execution proceedings, mortgagees are next paid, and then the assets are distributed among all other creditors. These are the rules prescribed by the present Code, and in my opinion they apply with equal force to all Courts, whether the debtor has been made an insolvent on the Original Side of this Court under the English Insolvency Statute or under Chapter XX of the Code. That chapter has been extended to proceedings on the Original Side of this Court. A vesting order under the statute is, as I understand its effect, of the same nature and force as the appointment of a Receiver under Section 351.
3. Then, again, if we consider the object of an attachment before judgment, and the position of the attaching plaintiff with respect to the Official Assignee or Receiver appointed under Section 351 of the Code, it seems clear that the former can have obtained no absolute right over the property attached before judgment such as to supersede the effect of a vesting order. The object of an attachment before judgment is to prevent any alienation or removal by a dishonest debtor (see Section 483), but when by the action of a Court, by means of the appointment of a Receiver under Section 351, or the passing of a vesting order in favour of the Official Assignee, that object is attained, there can be no possible reason why one who obtains an attachment before judgment, should, merely by force of that attachment, acquire a more favourable position than any other creditor. The attachment must be removed on security being given, and so far as the payment of the debt, which on decree subsequently passed maybe found to be due, that security is given by the appointment of a Receiver under Section 351, or a vesting order under the Insolvency Statute. The security thus given may, no doubt, sometimes not be to the full amount-that would depend on the state of the insolvent's estate, but it would be a sufficient security having due regard to the claims of other creditors. This would be the result of proceedings taken under the Code of Civil Procedure, and I cannot suppose that it was ever intended by the Legislature that, under precisely similar circumstances, there should be any difference when a vesting order is passed under the Insolvency Statute by this Court in its Original Jurisdiction, especially when Chapter XX of the Code applies to that jurisdiction.
4. I would answer this reference accordingly.
5. I would answer the question submitted to the Full Bench in the affirmative.
6. I consider that the provisions of Chapter XXXIV of the Code can have no operation in favour of a single creditor to the exclusion of others, when the debtor has, during the pendency of the suit, been declared an insolvent, and a vesting order has been passed by the High Court in favour of the Official Assignee.
7. Upon the occurrence of this event, it seems to me that the property of the insolvent, in whosesoever custody it may be, becomes available for rateable distribution amongst the whole body of his creditors; and that the attachment before judgment obtained by one of them, but which has not yet been followed up by a decree, does not entitle him to any preference over the others. Section 7 of the Insolvent Debtor's Act provides that the vesting order 'shall instantly, and without any conveyance or assignment, vest all the real and personal estate, effects and debts as aforesaid in the said Official Assignee, who shall have full powers for the recovery thereof, and shall hold and stand possessed of the same for the purposes and in the manner hereinafter mentioned.'
8. It is true that the Official Assignee's right or possession is subject to any lien held by any other person in respect of any of the property; and that the Official Assignee acquires no right beyond what the insolvent himself had; but in my view the creditor, who has procured an attachment before judgment, does not thereby acquire any lien entitling him to have his demand satisfied to the prejudice of other creditors. It is perhaps a different thing if the attaching creditor has obtained his decree and has applied for execution by the sale of the property attached before the insolvency has been declared, for in that case he has a complete lien upon the attached property for the satisfaction of his decree.
9. I cannot concur in the view that the alteration from the terms of Section 89 of Act VIII of 1859, by the addition of the words 'existing prior to the attachment' in Section 489 of the new Code, must have been intended to alter the law laid down in the Bombay case of Gamble v. Bholagir or to defeat the Official Assignee's right on behalf of the whole body of creditors in cases where the attaching creditor has obtained no decree at the time when the vesting order is made. For, if by so doing, the Legislature would correct one apparent inconsistency, it would create one still more glaring, by placing the creditor, who obtained an attachment before judgment, in a position of advantage over all the other creditors, which a creditor who has obtained a decree could not have either under the Insolvent Debtor's Act or under the insolvency provisions of the Code of Civil Procedure.
10. I am, therefore, disposed to concur with Mr. Justice Prinsep in holding that the vesting order prevents the attaching creditor from executing his decree against the property attached.
11. As to its being incumbent on the Court to proceed to execution upon application, it seems to me that the fact of the vesting order having been passed prior to the decree, would authorise the Court under Section 250 to withhold its warrant for execution of the decree subsequently obtained.
12. I would answer the question submitted to the Full Court in the affirmative, and generally for the reasons given by Prinsep and Tottenham, JJ. It is certainly difficult to say why the words 'existing prior to the attachment' have been inserted in Section 489 of the present Code, unless, as suggested by Field, J., when this very case came before him on a hearing under Section 622, they were put in merely to make it clear that alienations after an attachment before judgment and pendente lite are void, and that really there was no intention to interfere with, or alter the law relating to, the priority of the Official Assignee as settled by a number of decisions upon the old Code. The policy of the new Code of Civil Procedure, as shown in Chapter XX, and elsewhere, is that all creditors should share, and that no particular creditor should have a preference when there is a deficiency of assets, merely because he happened to obtain a decree first, and it would certainly be opposed to this policy to take away the priority given to the Official Assignee by the law as settled before the passing of the present Code.
13. I would answer the question referred to us in the negative. It seems to me that if the Official Assignee, after the vesting order was made in his favour, was not entitled to have the attachment of the insolvent's property, made before judgment, removed, he cannot resist the right of the plaintiff, who has obtained a decree after the vesting order, to have his decree satisfied by the sale of the attached property. The first question that demands consideration is, therefore, whether the attachment before judgment in this case, under the 34th Chapter of the Code of Civil Procedure, was liable to be removed on the application of the Official Assignee, the defendant in the suit having been adjudged an insolvent before the decree was passed against him.
14. Under Act VIII of 1859 a similar question came under consideration in several cases, and, under the provisions of that Code, it was uniformly decided in favour of the Official Assignee. Of these cases, the question was exhaustively discussed in Sava Ramji v. Jadavji Nathu 2 Bom. H.C. 165 and Gamble v. Bholagir 2 Bom. H.C. 150. If we examine the reasons given in these two decisions in support of the conclusion to which the learned Judges came, and compare the provisions of Act VIII of 1859 regarding attachment before judgment with those of the present Code on the same subject, it would appear that the Legislature has altered the law as laid down in these cases with reference to the construction to be put upon the sections of the Code bearing upon this subject.
15. The main ground upon which these decisions rest is, that the provisions regarding attachment before judgment, laid down in Act VIII of 1859, left it entirely at the discretion of the Court to remove the attachment whenever it appeared equitable and just to do so. And as in these cases it appeared to the Court more equitable that a debtor's property should be available equally to all his creditors, than that it should be applied solely for the advantage of one, the attachment was ordered to be removed at the instance of the Official Assignee.
16. But that under the present Code, this unfettered discretion has been taken away, will appear clear if we compare Sections 83, 84 and 89 of Act VIII of 1859 with the corresponding sections of the new Code, viz., 484, 485 and 489.
17. Both under Sections 83 and 84, the Court would direct the attachment of the debtor's property 'until further order.' The words 'until further order' left to the Court ample discretion to deal with the question of the removal of the attachment on equitable grounds.
18. But in Section 485 of the new Code, which corresponds with Section 84 of the old Code, the words 'until further order' have been omitted; and in the second paragraph of Section 484 of the new Code, instead of the words of the corresponding Section 83 of the old Code, the word 'conditional' has been substituted. The condition referred to is evidently the success or non-success of the defendant to show satisfactory cause under Section 485, i.e., if the case falls under paragraph 1 of 485, the attachment is to be confirmed, but if it falls under the second paragraph, the attachment is to be withdrawn.
19. The language of Section 89 of the old Code was quite in unison with the provisions of Sections 83 and 84, which, as already shown, conferred ample latitude to the Court for exercising its discretion on equitable grounds. In Section 489 of the new Code, which corresponds with Section 89 of the old Code, between the phrases 'attachment before judgment shall not affect the rights' and 'of persons not parties to the suit,' the words existing prior to the attachment 'have been introduced. The introduction of these words shows that the discretionary power of the Court has been curtailed. It seems to me that the ample discretion which the Court, under the old Code, had for directing the removal of an attachment before judgment upon equitable grounds, is now cut down to cases falling under Sections 488 and 489 of the new Code. The present case does not fall under either of those sections. Section 488 has evidently nothing to do with it, and Section 489 is not applicable, because the right of the Official Assignee came into existence after the attachment.
20. Therefore, under the 34th Chapter of the Code, the Execution Court had no power in this case to direct the removal of the attachment at the instance of the Official Assignee. Then, with the exception of Section 250 I do not find any other provision in the Code under which the Court, in the exercise of its discretionary power, could refuse to allow the defendant to proceed with the execution of his decree. But before the Official Assignee appeared in the Execution Court, it had directed the warrant for the execution of the decree to issue. The attachment before judgment in this case was made in accordance with the order, dated the 2nd March 1880. On the 22nd March following, the defendant in the suit was declared insolvent and the vesting order was passed. The suit was decreed on the 9th of April 1880, and the application for execution was made on the 10th of May 1880, and on the 22nd May 1880 the order for the sale of the attached property was made. Then on the 4th of June 1880 the Official Assignee made his application to stay the sale. These dates clearly show that the Official Assignee, in support of his application, could not rely upon the provisions of Section 250, because the warrant for the execution of the decree had been then already issued.
21. That being so under the provisions of the new Code the Execution Court had no power in this case to direct the removal of the attachment or stay the sale upon the application of the Official Assignee. In coming to this conclusion I have not at all taken into consideration the provisions of the chapter on Insolvency of the Code itself, because the present case does not fall under them.
22. Therefore there is no provision of the Civil Procedure Code, under which the Execution Court could grant the application of the Official Assignee. Nor do I find any provision in the Indian Insolvent Act under which he could succeed in his application. The only section under which the execution proceedings could be stayed is Section 49. But it only applies after the insolvent's schedule has been filed, and in respect of a debt or demand admitted in the schedule.
23. In this case it is admitted that the insolvent's schedule has not yet been tiled. It being thus clear that in this case the Execution Court in the exercise of its discretion had no power, at the instance of the Official Assignee, either to remove the attachment or to stay the sale, it seems to me that the reasons upon which the Full Bench decision in Anand Chandra Pal v. Panchi Lal Sarma 5 B.L.R. 691 is based, would warrant us in holding that the defendant in this case has the right to have the attached property sold and the money realized by sale paid to him. Sir Richard Couch, C.J., in delivering the judgment of the majority of the Judges of the Full Bench, holding upon the authority of decided cases of English Courts, that an Official Assignee 'has not a greater interest in the property than the insolvent had,' says: 'But, as I have said the question must be answered by a reference to the Code of Civil Procedure.'
24. He then thus refers to these provisions:
By Section 15 of Act XXIII of 1861, substituted for Section 215 of Act VIII of 1859, it is enacted that 'if the application for execution of a decree be admitted, the Court shall order execution of the decree according to the nature of the application.' Section 221 of Act VIII of 1859, says: 'When all necessary preliminary measures have been taken, where any such are required, the Court, unless it sees cause to the contrary, shall issue the proper warrants for the execution of the decree.'
Section 232 is: 'If the decree be for money, and the amount thereof is to be levied from the property of the person against whom the same may have been pronounced, the Court shall cause the property to be attached in the manner following,' and thereafter the different modes of attachment are given. Section 242 says: 'In all cases of attachment under the preceding sections, it shall be competent to the Court, at any time during the attachment, to direct that any part of the property so attached as shall consist of money or bank notes or a sufficient part thereof, shall be paid over to the party applying for execution of the decree, or that any part of the property so attached as may not consist of money or bank notes, so far as may be necessary for the satisfaction of the decree, shall be sold, and that the money which may be realized by such sale, or a sufficient part thereof, shall be paid to such party.'
Now, it is a rule, that when a statute confers an authority to do a judicial act in a certain case it is imperative on those so authorised, to exercise the authority when the case arises, and its exercise is duly applied for by a party interested and having the right to make the application. This has been often decided and it is sufficient to quote the cases of Macdougall v. Paterson 11 C.B. 755; Crake v. Powell 2 E. and B. 210; and Bowes v. Hope Life Insurance Co. 11 H.L.C. 389. In those cases the word used in the statute was 'may.' According to this rule, the words 'it shall be competent to the Court' in Section 242 must not be construed as giving to the Court a power which it may exercise or not as it thinks fit, but is obligatory and conferring on the attaching creditor a right to have the attached property sold, and the money realized by the sale paid to him.
25. Now, if we refer to the corresponding sections of the new Code of Civil Procedure, we find that the same process of reasoning leads us to the conclusion that the defendant in this case has the right to have the attached property sold, and the money, realized by the sale, paid to him.
26. For facility of reference and comparison, the corresponding sections of the new Code are noted below. Section 15 of Act XXIII of 1861, corresponds with paragraph 2 of Section 245 of the new Code; Section 221 of the old Code with Section 250 of the new Code; Section 232* of the old Code; and 273* of the new Code; and Section 242 of the old Code with Section 284 of the new Code.
27. In Section 284, the word 'may' has been substituted in the place of the words 'it shall be competent to the Court.' But as pointed out by Sir Richard Couch, C.J., according to a well-known rule of construction either of those expressions must not be considered as giving to the Court a power which it may exercise or not as it thinks fit, but as obligatory and conferring on the attaching creditor a right to have the attached property sold, and the money, realized by the sale, paid to him.
28. For these reasons, I am of opinion that the question referred to us should be answered in the negative.
Richard Garth, C.J.
29. I think that, having regard to the language of the present Code, my brother Mitter's view of the law is right.
30. Had the wording of Section 489 of the new Code been the same as that of Section 89 of the old Code, I should have agreed with the view of the Bombay Court in the case of Gamble v. Bholagir 2 Bom. H.C. 150.
31. But the language of Section 89, upon which the learned Chief Justice in that case founds his opinion, has been materially altered in Section 489 of the present Code.
32. The words of the old Code were 'attachments before judgment shall not affect the rights of persons not parties to the suit.' The words of the present Code are 'attachments before judgment shall not affect the rights, existing prior to the attachment, of persons not parties to the suit.'
33. It seems to me that the words 'existing prior to the attachment' must surely have been introduced with some object; and I cannot help thinking that they were introduced for the express purpose of altering the law, as laid down in the judgment of the Bombay case.
34. At the same time I am quite of opinion, that the law ought to be as the majority of my learned brothers have held that it is; and I am very glad that they have seen their way to arrive at that conclusion.
35. The result will be that the question referred to us is answered in the affirmative; and the plaintiff will have his costs in this Court.
* These sections need not be considered, as the property has been attached, and under Section 490 of the new Code re-attachment is not necessary. Note per Mitter, J.