Skip to content


In Re: Miss Phyllis Weber (insolvent), Ex. Parte Miss Phyllis Weber - Court Judgment

LegalCrystal Citation
SubjectLabour and Industrial
CourtKolkata High Court
Decided On
Judge
Reported in(1971)IILLJ162Cal
AppellantIn Re: Miss Phyllis Weber (insolvent), Ex. Parte Miss Phyllis Weber
Cases ReferredBombay v. Commissioner of Income
Excerpt:
- .....by the employer as bonus to an employee who happens to be an undischarged insolvent, vests in the official assignee or not.2. miss phyllis weber, the applicant herein, works as a steno-typist under indian oxygen limited of no. 5, mayurbhanj road, calcutta. on her own application presented on the 17th of march, 1967, she was adjudicated as an insolvent by an order made by this court on the 21st of march, 1967. at all material times she was and she still continues to be an undischarged insolvent. after her adjudication as insolvent the applicant has been paying to the official assignee a sum of rs. 100 per month voluntarily and without any order of court for payment to the creditors of the insolvent. the liability of the insolvent is well over rs. 20,000/-, a good part whereof has already.....
Judgment:
ORDER

A.N. Sen, J.

1. In the Matter of Miss Phyllis Weber (Insolvent), Ex. Parte Miss Phyllis Weber. The principal question that falls for determination in the present application is whether any amount payable by the employer as bonus to an employee who happens to be an undischarged insolvent, vests in the Official Assignee or not.

2. Miss Phyllis Weber, the applicant herein, works as a Steno-Typist under Indian Oxygen Limited of No. 5, Mayurbhanj Road, Calcutta. On her own application presented on the 17th of March, 1967, she was adjudicated as an insolvent by an order made by this Court on the 21st of March, 1967. At all material times she was and she still continues to be an undischarged insolvent. After her adjudication as insolvent the applicant has been paying to the Official Assignee a sum of Rs. 100 per month voluntarily and without any order of Court for payment to the creditors of the insolvent. The liability of the insolvent is well over Rs. 20,000/-, a good part whereof has already been proved and some claims remain yet to be proved before the Official Assignee. Indoxco Employees' Credit-cum-Stores Society Limited, which happens to be a Co-operative Society formed of the employees of the company where the insolvent works is one of the creditors of the insolvent. On the 17th of April, 1970 the Secretary of the said Co-operative Society addressed a letter to the Official Assignee, informing the Official Assignee that Miss 'Weber, the insolvent applicant herein, would get a total sum of Rs. 1,427.31 paise towards payment of bonus, an ad hoc lump sum from the company, and this would be disbursed to her on 20-4-70 and by the said letter the Secretary requested the Official Assignee to issue suitable instructions to her to deposit the said entire amount for distribution among the creditors. Acting on the basis of the said letter the Official Assignee entered into correspondence with the insolvent and Indian Oxygen Limited, the company where the insolvent is employed, and ultimately collected from the company the said entire amount of Rs. 1,427.31 paise in spite of objections and protests of the insolvent. The insolvent has now moved this Court for an order directing the Official Assignee to pay to her the said sum of Rs. 1,427.31 paise received and withdrawn by him from Indian Oxygen Limited.

3. It is contended on behalf of the applicant that the amount of bonus earned by the applicant is not property which vests in the Official Assignee under Section 17 of the Presidency Towns Insolvency Act (hereinafter referred to as the said Act). The contention is that bonus payable to an employee is salary or income of the employee and in view of the provisions contained in Section 60(2) of the Presidency Towns Insolvency Act, the Official Assignee has no power or jurisdiction to take any steps against the same without any order of Court. It is, therefore, submitted on behalf of the applicant that the act of the Official Assignee in realising the money from the company is unauthorised and illegal and the Official Assignee should pay the said amount back to the applicant. On behalf of the applicant reference has been made to the decision of the Supreme Court, in the case of Raghuvanshi Mills Ltd., Bombay v. Commissioner of Income-tax, Bombay City reported in 0043/1952 : [1952]22ITR484(SC) , and to a decision of this Court in the case of In Re: Ignatius Rohdirick reported in (1939) 43 Cal. W.N. 1194, and also to a decision of the Madras High Court in the case of Official Assignee v. Secretary, M. & S.M. Railway Employees' Co-operative Urban Bank Ltd. reported in : AIR1941Mad297 .

4. On behalf of the Official Assignee it has been submitted that the amount of Rs. 100 which the insolvent is paying to the Official Assignee every month for payment to the creditors is very small, particularly in view of the heavy liability of the insolvent and the Official Assignee has taken the steps in the interest of the creditors and at the specific request of one of the creditors, namely, the said Co-operative Society which had furnished the necessary information to the Official Assignee. It is argued that the amount of money paid to the insolvent as bonus does not come within the provisions of Section 60(2) of the said Act, as the said amount is not salary or income within the meaning thereof. Reference has been made to Section 2(21) of the Payment of Bonus Act, 1965, to show that salary or wage does not include bonus. The said Section 2(21) of the Payment of Bonus Act, 1965 reads as follows:--

'Salary or Wage' means all remuneration (other than remuneration in respect of overtime work) capable of being expressed in terms of money, which would, if the terms of employment, express or implied, were fulfilled, be payable to an employee in respect of his employment, or of work done in such employment and includes dearness allowance (that is to say, all cash payments, by whatever name called, paid to an employee on account of a rise in the cost of living), but does not include--

(i) any other allowance which the employee is for the time being entitled to;

(ii) The value of any house accommodation or of supply of land, water, medical assistance or other amenity or of any service or of any concessional supply of foodgrains or other articles;

(iii) Any travelling concession;

(iv) Any bonus (including incentive, production and attendance bonus);

(v) Any contribution paid or payable by the employer to any pension fund or provident fund or for the benefit of the employee under any law for the time being in force;

(vi) Any retrenchment compensation or any gratuity or other retirement benefit payable to the employee or any ex-gratia payment made to him;

(vii) Any commission payable to the employee;

Explanation.--Where an employee is given in lieu of the whole or part of the salary or wage payable to him, free food allowance or free food by his employer, such food allowance or the value of such food shall, for the purpose of this clause, be deemed to form part of the salary or wage of such employee.

5. Relying on this definition of salary in the Payment of Bonus Act, 1965, it is contended that bonus payable by the company to the insolvent is not her salary within the meaning of Section 60(2) of the Presidency Towns Insolvency Act. It is further argued that the expression 'salary' or 'income' used in Section 60(2) is really synonymous and means the same thing and, in any event, bonus cannot be construed to mean 'income' within the meaning of the said provision. It is argued that on the making of an order of adjudication the property of the insolvent wherever situate vests in the Official Assignee in accordance with the provisions contained in Section 17 of the said Act. Relying on the provisions contained in Section 52 of the said Act, it is contended that such property may be property at the time of commencement of the insolvency or may be property subsequently acquired by the insolvent before discharge. It is, therefore, submitted on behalf of the Official Assignee that as the bonus amount in question does not come within the purview of Section 60(2) of the said Act and is property of the insolvent acquired before discharge, the said sum vests in the Official Assignee and the Official Assignee is competent to realise the said sum from the employer in the interest of the creditors for distribution of the said sum amongst them.

6. On an anxious and careful consideration of the respective contentions, I am of the opinion that the act of the Official Assignee, though in the interest of the creditors and otherwise bona fide, is not justified. Section 17 of the Act provides:

On the making of an order of adjudication, the property of the insolvent wherever situate shall vest in the Official Assignee and shall become divisible among his creditors, and thereafter, except as directed by this Act, no creditors to whom the insolvent is indebted in respect of any debt provable in insolvency shall, during the pendency of the insolvency proceedings, have any remedy against the property of the insolvent in respect of the debt or shall commence any suit or other legal proceedings except with the leave of the Court and on such terms as the Court may impose Provided that this section shall not affect the power of any secured creditor to realise or otherwise deal with his security in the same manner, as he would have been entitled to realise or deal with it if this section had not been passed.

The relevant provisions contained in Section 52 of the Act may also be quoted--

Section 52(1)--The property of the insolvent divisible among his creditors, and in this Act referred to as the property of the insolvent, shall not comprise the following particulars, namely:--

(a) Property held by the insolvent on trust for any other person;

(b) the tools (if any) of his trade and the necessary wearing apparel, bedding, cooking vessels, and furniture of himself, his wife and children, to a value, inclusive of tools and apparel and other necessaries as aforesaid, not exceeding 300 rupees in the whole.

(2) Subject as aforesaid, the property of the insolvent shall comprise the following particulars, namely--(a) All such property as may belong to or be vested in the insolvent at the commencement of the insolvency or may be acquired by or devolve on him before his discharge.

Section 2(e) of the Act defines property and reads--

'Property' includes any property over which or the profits of which any person has a disposing power which he may exercise for his own benefit.

7. Section 60 of the Act may also be conveniently set out in its entirety--

60(1) Where an insolvent is an Officer of (The Indian Army or Navy) or an Officer or Clerk or otherwise employed or engaged in the Civil Service of the Government, the Official Assignee shall receive for distribution amongst the creditors so much of the insolvent's pay or salary liable to attachment in execution of a decree as the Court may direct.

(2) Where an insolvent is in receipt of a salary or income other than as aforesaid, the Court may, at any time after adjudication and from time to time, make such order as it thinks just for the payment to the Official Assignee for distribution among the creditors of so much of such salary or income as may be liable to attachment in execution of a decree or of any portion thereof.

8. The provisions of the said Act, to my mind, clearly establish that salary or income of an insolvent which is specifically dealt with in Section 60(2) of the said Act, cannot be considered or treated to be such property of the insolvent which vests in the Official Assignee, on an adjudication order being made. Salary or income of an insolvent which comes within the purview of Section 60(2) does not at all vest in the Official Assignee on any order of adjudication being made. In respect of such salary or income payable to the insolvent, the Court, as provided in Section 60(2) of the Act, may, however, make orders from time to time, if the ends of justice so require, for payment to the Official Assignee for distribution among the creditors of so much of such salary or income as may be liable to attachment in execution of a decree, or of any portion thereof. The sum to be ordered to be paid out of the salary or income of the insolvent must be within the attachable limit and only so much of the salary or income as is ordered by the Court under Section 60(2) to be paid to the Official Assignee vests in him. In respect of such salary or income nothing vests in the Official Assignee, unless the Court has made an order under Section 60(2) and consequently, the Official Assignee is not entitled or competent to realise such salary or income of the insolvent or any portion thereof without the order of Court. Apart from the clear provisions contained in Section 60(2) of the said Act, the decision of the Madras High Court in Official Assignee v. Secretary, M. & S.M. Rly. Employees' Co operative Urban Bank Ltd. : AIR1941Mad297 , relied on by the applicant also supports this view.

9. The contention of the Official Assignee that the words 'salary' and 'income' used in Section 60(2) of the Act are synonymous and they mean only 'salary' and nothing else, to my mind, is clearly unsound. No such construction is possible without doing wanton violence to the language used. The Legislature in its wisdom has chosen to use both the expressions in the said section. If the Legislature had only salary of the employee in mind, the Legislature would have only used the word 'salary' and there would be no need to use the other word 'income' which becomes completely redundant. The words 'salary' and 'income' in plain English language do not convey the same sense and meaning. In the Shorter Oxford English Dictionary (Third Edition) 'salary' is stated to mean, '(1) 'fixed payment made periodically to a person as compensation for regular work; now usu., for non-manual or non-mechanical work as (opp. to wages). (2) Remuneration for services rendered; fee and honorarium.' 'Income' according to the same Dictionary, means--'that which comes in as the periodical produce of one's work, business, lands or investments (annually expressed in terms of money); annual or periodical receipts accruing to a person or corporation; revenue.' The word 'income' is undoubtedly of wider import and has a broader connotation and significance. In the case of In re: Ignatius Rohdirick reported in (1939) 43 Cal. W.N. 1194, Panckridge, J., was of the opinion that an insolvent's pension could properly be described as income within the meaning of Sub-section (2) of Section 60. Pension is not salary and cannot be considered to be so, but the same can properly be described as income within the meaning of Sub-section (2) of Section 60. I see no reason why the said two words 'salary' and 'income' used in Section 60(2) of the said Act should be construed to have the same meaning and to convey the same sense, when in plain English language the said words do not so mean and the Legislature had undoubtedly not chosen to give the said words the same meaning as 'salary' only and had in its wisdom considered it necessary to use both the said words.

10. The other contention of the Official Assignee that the word 'salary' as used in Section 60(2) of the said Act should be given the same meaning and definition as used in Section 2(21) of the Payment of Bonus Act, 1965 is, in my opinion, not tenable. The definition of the words 'salary' or 'wage' as given in Section 2(21) of the Payment of Bonus Act is, in my opinion, essentially and only for the purpose of the said Act. It may be noted that in the Payment of Bonus Act 'salary' or 'wage' is considered to mean one and the same thing. It is also to be noted that for the purposes of the Payment of Bonus Act, 1965 allowances and other emoluments which are mentioned in Sub-sections (i) to (vii) of Section 2(21) of the Payment of Bonus Act are not to be considered and construed as 'salary' although the employee may be otherwise legally entitled to receive the same. Can it be said that house allowance or travelling allowance or any other allowance or emolument which is regularly paid to an employee and is legally payable to the employee, is not to be considered as a part of the employee's salary? In common parlance salary payable and paid to an employee includes such allowances and other emoluments and does not mean only the basic salary together with dearness allowance of the employee. The definition of 'salary' in the Bonus Act is only for the purpose of indicating and laying down the basis for computing and calculating the amount of bonus which may be payable to an employee. The definition given in Section 2(21) of the Payment of Bonus Act, 1965 is no guide and is of no avail in construing the said word in Section 60(2) of the Presidency Towns Insolvency Act. It may also be noted that the Presidency Towns Insolvency Act came to be enacted long before the enactment of the Payment of Bonus Act, 1965.

11. The only question which, therefore, requires consideration is whether the bonus payable or paid to the employee who is an undischarged insolvent, is property of the employee within the meaning of the Presidency Towns Insolvency Act which vests in the Official Assignee or is salary or income of the employee within the meaning of Section 60(2) of the said Act. I have already quoted Section 2(e) of the said Act, where the word 'property' for the purpose of the insolvency law has been defined and described. In view of the nature of property contemplated in Section 2(e) of the said Act, any bonus payable to the employee cannot be considered to be such property as vests in the Official Assignee, as the employee does not have an interest in praesenti to dispose of the same. On this basis it was so conceded before Pankridge, J. in the case of In Re. Ignatius Rohdirick reported in (1939) 43 Cal. W.N. 1194, and the learned Judge observes at page 1196:

Now, it is conceded that a pension payable by Government is not 'property' of the insolvent within the meaning of Section 17 of the Presidency Towns Insolvency Act, which vests in the Official Assignee on the making of the order of adjudication. This is, in accordance with Section 2(e) of the Act, by which 'property' includes any property over which or the profits of which any person has a disposing power which he may exercise for his own benefit.

12. Judged from another point of view, bonus must also be considered not to be such 'property' within the meaning of Section 17 of the Presidency Towns Insolvency Act, as vests in the Official Assignee on the making of the order of adjudication of the employee.

13. By virtue of the provisions contained in the Payment of Bonus Act, 1965, bonus is legally payable by the employer in question to the applicant. This is a periodic payment to which the applicant is legally entitled in course of her employment. Bonus, therefore, must be considered to be 'income' of the employee within the meaning of Section 60(2) of the Act, even if it be not treated to be a part of the salary and be not included therein. The applicant earns her bonus every year and the bonus is legally payable to her by virtue of her employment. There is some dispute in the instant case with regard to the amount to be paid as such bonus, because of difference between the employer and the employee pending final settlement. The amount has been paid on the basis that if ultimately it is settled that the entire amount will not be payable to the applicant, the applicant may be called upon by the company to refund the excess amount, if any, paid. This dispute is really of no material consequence and does not alter the nature or character of the payment made to the employee and does not, therefore, affect the legal position. I am, therefore, of the opinion that the sum of Rs. 1,427.31 paise realised by the Official Assignee from the company in respect of the bonus paid or payable to the applicant, is her income within the meaning of Section 60(2) of the said Act. The applicant has earned the said amount in course of her employment with the company.

14. Payment of bonus by Indian Oxygen Limited, the employer, to the applicant, the employee, is a legal obligation of the employer and payment of any sum on account of bonus is not a purely voluntary allowance which may be withdrawn at any time. Any sum which an employee earns in course of employment and to which the employee is legally and legitimately entitled by virtue of the employment, cannot be property within the meaning of Section 2(e) of the said Act and must necessarily be considered to be 'salary' or 'income' of the employee within the meaning of Section 60(2) of the said Act, if the employee happens to be an undischarged insolvent. I have earlier observed that the words 'salary' and 'income' used in Section 60(2) of the Act are not synonymous and are not intended to convey the same meaning. I have noted the meaning of the said words, as given in Shorter Oxford Dictionary. 'Salary' in common parlance is understood to mean the total remuneration payable to an employee in course of a particular period, usually every month. The word 'income' is of broader connotation and of wider import, wide enough to include pension payable to an employee, even when the relationship of employer and employee has ceased. Although the words 'salary' and 'income' used in Section 60(2) of the said Act do not have the same meaning and the word 'income' is of wider import and consequence, the word 'income' used therein has to be understood and construed in relation to the earning of the employee by virtue of the employment and not to any and every other kind of income, the insolvent employee may otherwise have. The following passage which occurs in para 540 at pages 525-526 in Mulla's Law of Insolvency (2nd Edn.) may aptly be quoted:--

Nice questions have arisen as to the meaning of 'salary' and 'income'. A salary is none the less so because terminable at a week's notice. Thus, a commercial traveller engaged at an annual salary of Rs. 1,500, payable weekly, is in receipt of 'salary' though his engagement is terminable at a week's notice. A purely voluntary allowance which may be withdrawn at any time is not 'income'. The income must be one to which the insolvent is entitled in law. Again 'income' means income in the nature of a salary; it has reference to a particular period such as a year or some part of a year.

15. The case of Raghuvanshi Mills Ltd., Bombay v. Commissioner of Income-tax, Bombay 0043/1952 : [1952]22ITR484(SC) , relied on by the applicant, is of no material assistance. The case was one under the Income-tax Act and the Supreme Court in considering the word 'income' observed at p. 488 of I.T.R.: at p. 6 of A.I.R.:--

No attempt has been made in the Act to define 'income' except to say in Section 2(6-C) that which includes certain things which would possibly not have been regarded as income but for the said definition. That however does not limit the generality of its natural meaning except as qualified in the section itself. The words which follow, namely, 'from whatever source derived', show how wide the net is spread. So also in Section 6. After setting out the various heads of taxable income it brings in the all embracing phrase 'income from other source.

There is however a distinction between 'income' and 'taxable income'. The Act does not purport to subject all sources of income to tax, for the liability is expressly made subject to the provisions of the Act and among the provisions are a series of exceptions and limitations.

16. The meaning of the word 'income' given in relation to the Income-tax Act will not be of any material assistance in construing the word 'income' used in Section 60(2) of the Insolvency Act, just as the meaning of the word 'salary' given in Section 2(21) of the Payment of Bonus Act, 1965 is not of any assistance in construing the word 'salary' in the said Section 60(2) of the Insolvency Act.

17. The sum of Rs. 1,427.31 paise paid by the company to the applicant subject to final settlement of the dispute between the employer and the employees, was undoubtedly to be her income within the meaning of Section 60(2) of the said Act, even if not salary within the meaning of the said section. By virtue of the provisions contained in Section 60(2) the said sum or any portion thereof did not vest in the Official Assignee in the absence of any order from Court. The Official Assignee was, therefore, not competent to realise from the company the said sum or any portion thereof payable to the applicant, without necessary order of Court. The act of the Official Assignee must, therefore, be held to be incompetent and unauthorised. It will also not be proper for the Court to make any order for payment of any portion of the said sum to the Official Assignee for distribution among the creditors on this application. The Official Assignee must, therefore, be directed to refund the said entire amount realised by him from the company to the applicant. There will, therefore, be an order in terms of prayer (a) of the notice. I, however, wish to observe that this order will not in any way prejudice the right of the Official Assignee to make any application, if he is so advised and he is so entitled for an order for payment of any appropriate sum to the Official Assignee for distribution among the creditors of the insolvent out of any bonus money or other money which may be payable to the applicant in future on proper materials. The applicant will pay and bear her own costs of this application. The Official Assignee will retain his costs of the application out of the sums deposited with him by the applicant. Taking into consideration all the facts and circumstances of the case and the further fact that the applicant who is employed on a modest salary as a Steno-Typist, deposits at the present only a sum of Rs. 100/-for payment to her creditors who have a fairly large claim, I assess the costs of the Official Assignee of his application at Rs. 300 (Three hundred) only.


Save Judgments// Add Notes // Store Search Result sets // Organizer Client Files //