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1953 DIGILAW 154 (KER)

State v. Bank of Cochin Ltd.

1953-10-21

K.S.GOVINDA PILLAI, K.SANKARAN, P.K.SUBRAMONIA IYER

body1953
ORDER : K. Sankaran, J. The order passed by the District Judge of Anjikaimal on 11.2.1125/27.9.1949 in the course of the execution proceedings in O.S. No. 122/1123 on the file of that Court, has given rise to this revision petition. The decree in that case is in favour of the Bank of Cochin Ltd. On the strength of the execution petition No. 258/1123 filed by the decree-holder, a sum of Rs. 3900 out of a total amount of Rs. 36,250 stated to be available with the Excise Commissioner of the former State of Cochin as belonging to the 2nd defendant judgment-debtor was attached. The attachment was made on 1.11.1123. Subsequently on 14.2.1124 the decree-holder filed another petition M.P. 251/1124 praying that the attached amount may be brought to the Court for disbursement in satisfaction of the claim under the decree. The Court accordingly sent a communication to the Excise Commissioner directing that the amount may be sent to the Court. The Excise Commissioner, representing the State, entered appearance by the Government Pleader and filed an objection petition contending that no amount was available with the State as belonging to the 2nd defendant V.T. Thomas and that the State is therefore not in a position to produce before Court any amount on the strength of the attachment order issued at the instance of the decree-holder. These objections were overruled by the lower Court by its order dated 11.2.1125 and the State was directed to remit the attached amount into Court. The State, whose position in these proceedings is only that of a garnishee, has challenged the legality of that order on the ground that the lower Court has acted in excess of its jurisdiction in passing it. 2. In order to understand the real nature of the dispute between the decree-holder and the garnishee, it is necessary to state the relevant facts. In respect of certain arrack shops the 2nd defendant V.T. Thomas was the licensee for the year 1123 and the amounts due from him in that connection had to be remitted by him into the State Treasury in specified instalments. In respect of certain arrack shops the 2nd defendant V.T. Thomas was the licensee for the year 1123 and the amounts due from him in that connection had to be remitted by him into the State Treasury in specified instalments. Before the expiry of the period of this license, the auction of the arrack shops for the year 1124 was conducted by the State towards the close of the year 1123 and the aforesaid licensee participated in the auction and became the highest bidder in respect of 57 arrack shops. By way of advance payment, he deposited a total amount of Rs. 36,250 with the State in two instalments of Rs. 22,270 on 8.9.1123 and Rs. 13,980 on 10.11.1123. But it happened that the auction was not confirmed by the State. On the other hand, a re-auction was ordered and in the re-auction that was thus conducted on 17.11.1123 this licensee could get only a lesser number of shops than before. The ten percent of the auction amount that he had to deposit in respect of these shops confirmed in his name came to Rs. 12,690 and the same was available out of the sum of Rs. 36,250 which was already standing to his credit. After appropriating the sum of Rs.12,690 towards the initial deposit due from him, the balance was repayable to him. But by that time a large amount had accrued due to the State from him by way of arrears of kist as well as tree tax in connection with the other shops which he was running as the licensee for the year 1123 ie., Rs. 31,664-2-8 by way of arrears of kist and Rs. 5304 by way of arrears of tree tax, the total coming to Rs. 36,968-2-8. These details have been furnished by the answers to the interrogatories served by the decree holder on the State. According to the State the balance available out of the sum of Rs. 36250 which the aforesaid licensee had deposited with the State was also adjusted towards the amount due from him by way of arrears already mentioned and on the date of the attachment the position was that a fairly large amount was still due from him to the State. 36250 which the aforesaid licensee had deposited with the State was also adjusted towards the amount due from him by way of arrears already mentioned and on the date of the attachment the position was that a fairly large amount was still due from him to the State. On behalf of the State an alternative contention was also put forward viz., that the amount due to the State comes under the category of Crown debts and that the same is therefore entitled to have priority over other ordinary debts like the decree debt in O.S. 122/1123 due to a citizen from the same debtor. 3. The contentions put forward by the garnishee were sought to be met by the decree-holder by maintaining that the claim of the State against the judgment-debtor was only an outstanding claim even on the date of the attachment in question and that therefore the State could, if at all, have that claim satisfied only by way of set off in appropriate legal proceedings. The argument is that a set off could be effected only in the manner contemplated by R. 6 of O.8, Civil P.C. That rule only prescribes the conditions under which the defendant in a suit could claim a set off of a debt due to him from the plaintiff against the debt claimed from him by the plaintiff. There is nothing in that rule to indicate that there could be no set off independent of the conditions laid down and the procedure prescribed by that rule. That this rule is not intended to cover all categories of set off is clear from another provision in the same Code. R. 19 of O. 20 deals with the nature of the decree in suits where a set-off is claimed or pleaded. Clause (3) of this rule states that "the provisions of this Rule shall apply where the set off is admissible under R. 6 of O. 8 or otherwise." In view of this provision there can be no doubt that a plea of set-off could be entertained and given effect to even independent of R. 6 of O. 8. This position is also well-settled by judicial decisions. In Bhagat Panda v. Bamdeb Panda ((1885) ILR 11 Cal. This position is also well-settled by judicial decisions. In Bhagat Panda v. Bamdeb Panda ((1885) ILR 11 Cal. 557) it was ruled that the provisions of the Code of Civil Procedure do not take away from the parties any right of set-off, whether legal or equitable, which they would have had independently of the Code. It was further pointed out that, "such right exists not only in case of material debts and credits but also 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 should be driven to a cross-suit". In Tyabali Ghulam Husain v. Atmaram Sakharam Vani ((1914) 25 Ind. Cases 375 at 376) it was held by the Bombay High Court that if a cross debt is due to the garnishee on the date of the attachment, he has a right of set-off in his favour and the equity arising from the cross debt can be successfully pleaded by him. The view taken by the Patna High Court on the question of set-off is expressed in the decision in Raja Sri Shiva Prasad v. Lalit Kishore Mitra (AIR 1943 Pat. 152). There it was ruled that the provisions of R. 6 of O. 8, Civil P.C., are not exhaustive because apart from a legal set-off which is expressly provided in the Code in regard to an ascertained sum of money legally recoverable by the defendant from the plaintiff, an equitable set off may also be pleaded by the defendant under certain circumstances. Any question of set off can arise only in respect of dues which are outstanding and which have not already been adjusted. A plea of satisfaction by adjustment is essentially different from a plea or claim of set off. 4. In the present case the garnishee's plea was that the amount that was due to the 2nd defendant judgment debtor had already been adjusted towards a debt due from him to the garnishee and as such there was no amount available with the garnishee to be produced before Court in obedience to the order issued on the strength of the attachment placed at the instance of the decree-holder. Such being the nature of the garnishee's plea, the larger question of priority in respect of Crown debts does not really arise for decision in these proceedings. The lower Court appears to have misconstrued the garnishee's plea as a plea of set off and has proceeded to consider the matter on the assumption that the amount due to the judgment debtor is still available with the garnishee. The answer furnished by the Excise Commissioner to interrogatory No. 12 served on him is relied on as the basis for such a wrong assumption. Interrogatory No. 12 was as follows: "If there has been an adjustment, at whose request was it made?" The answer given was that the adjustment has not been effected because the Government order regarding the same has not been received. To understand the true purport of this answer it has to be read and construed in the light of the answers given to the other interrogatories and also of the specific contentions put forward in the objection petition filed on behalf of the garnishee. 5. By way of answer to interrogatory No. 9 it is expressly stated that on the date of the adjustment the amount that was due to the garnishee from the judgment debtor was Rupees 36,968-9-8. The same idea is contained in the answer to interrogatory No. 6. In para 4 of the objection petition filed on behalf of the garnishee there is a definite averment that the amount due to the State from this particular judgment debtor was larger than the amount which stood to his credit by way of deposit made by him in connection with the auction of the arrack shops for the year 1124, that this latter amount was adjusted towards the amount due to the State and that the balance is still due from him to the State. Thus, there is no scope for construing the contentions put forward by the garnishee as amounting to an admission that the amount attached by the decree holder is still available with the garnishee as standing to the credit of the judgment-debtor. All that is meant by the answer to interrogatory No. 12 is that the necessary entries relating to the adjust have not been made in the Government records on account of the non-receipt of formal orders of Government. All that is meant by the answer to interrogatory No. 12 is that the necessary entries relating to the adjust have not been made in the Government records on account of the non-receipt of formal orders of Government. The delay in the issue of such formal orders cannot by itself mean that there has been no adjustment in effect as pleaded by the garnishee. If the conditions justifying an appropriation and adjustment as pleaded by the garnishee were satisfied in respect of the amount which was due to the garnishee from the debtor and in respect of the amount which was subsequently available to the credit of the same debtor, it was certainly open to the garnishee to effect the adjustment. The attachment placed at the instance of the decree-holder in this case on the amount standing to the credit of the judgment-debtor could not stand in the way of such adjustment being made. The view taken by the lower Court that by virtue of such attachment the decree-holder acquired a right or title in the amount attached is clearly unsustainable in law. 6. It is well settled that an attachment does not create any charge on the attached property and that it does not confer any title in the attaching creditor. The attachment merely prevents a private alienation of the attached property. This is obvious from the provisions in R. 46 of O. 21, Civil P.C., which prescribes the mode of attaching a debt. Sub-clause (1) of Cl. (c) of that rule states that in the case of a debt the attachment shall be made by a written order prohibiting the creditor from recovering the debt and the debtor from making payment thereof, until the further order of the Court. On the strength of such attachment the attaching decree-holder is entitled to sell the attached debt in execution of his decree. The purchaser of the debt thus sold takes it subject to the same liabilities and equities to which the judgment debtor was subject in respect of that debt on the date of the sale. Merely by virtue of the attachment the attaching creditor cannot acquire a better or larger right than that the judgment debtor himself had in respect of the attached debt. Merely by virtue of the attachment the attaching creditor cannot acquire a better or larger right than that the judgment debtor himself had in respect of the attached debt. What is attached is an actionable claim and in respect of such a claim the debtor may have certain legal and equitable rights as against the creditor and such rights will be available even as against the purchaser or transferee of such actionable claim. This principle has received statutory recognition in S. 132 of the Transfer of Property Act. So far as the application of this principle is concerned it cannot be said that the transferee of an actionable claim under a Court sale stands on any better footing than a private transferee. In Ram Bhaj Datta Chaudhuri v. Ram Das ((1922) 69 Ind. Cases 720) it was ruled by the Lahore High Court that where in execution of a decree a debt due to the judgment-debtor is sold, the purchaser takes it subject to the same liabilities and equities to which the judgment-debtor was subject on the date of the sale. The question of the garnishee's rights in respect of a debt attached by the holder of a decree against the person to whom the debt was due, was considered by the Calcutta High Court in Amrendra Nath Laha v. S. Bannerje and Co. ((1924) 40 Cal. L.J. 228) and there the garnishee's claim to have all accounts settled with the judgment-debtor was upheld and the balance available after such adjustment was alone held to be recoverable by the attaching decree-holder on his becoming the purchaser of the debt attached. In that case it was pointed out that the attaching decree-holder can only obtain what the judgment-debtor could honestly give him and cannot by means of the attachment stand in a better position as regards the garnishee than does the judgment-debtor. The same principle has been upheld by the Patna High Court in Maharajadhiraj Sir Kameshwar Singh v. Kuleswar Singh ((1942) ILR 21 Pat. 287). Thus it is clear that the garnishee is entitled to have all his contentions relating to the adjustment and satisfaction of the debt attached, heard and decided before the claims arising out of the attachment are allowed to be enforced against him. 7. 287). Thus it is clear that the garnishee is entitled to have all his contentions relating to the adjustment and satisfaction of the debt attached, heard and decided before the claims arising out of the attachment are allowed to be enforced against him. 7. The next and the more important question to be considered in this case is whether it is within the province of the execution Court to embark upon an investigation into the question whether there has really been a proper and valid appropriation, adjustment and satisfaction of the debt as pleaded by the garnishee, or whether the garnishee is entitled to have a set-off of all his claims as against the debt attached, in preference to the claims arising out of the attachment order issued at the instance of the decree holder. These are really questions relating to the rights and liabilities as between the judgment debtor on the one hand and the garnishee on the other hand in respect of the debt attached by the decree holder who is undoubtedly a third party so far as these questions are concerned. Hence it cannot be said that the determination of these questions is a matter directly coming within the scope of the execution of the decree. Such questions can be properly investigated and decided only on the original side of the Court in a proper suit brought for the enforcement of the debt in question. The attaching decree holder can become a party to such a suit only after he has brought the attached property viz., the debt in question, to sale in pursuance of the attachment and has himself become the Court auction-purchaser of that debt. Up to that stage the proceedings will be before the execution Court having jurisdiction to execute the decree. The provisions contained in Part II of the Code of Civil Procedure supplemented by O. 21, define the limits of the jurisdiction of the execution court. There is nothing in these provisions to indicate that the execution Court has been empowered to function as a trial court for the purpose of investigating into and deciding the question whether and to what extent the debt attached in the course of the execution of the decree is really in existence so as to be recovered from the third party garnishee, except where special rules have been promulgated under O. 21 to regulate garnishee proceedings. Such are the special rules contained in Cls. (a) to (i) of R. 46 of O. 21. R. 46(a) empowers the execution Court to issue a notice to the garnishee directing him to produce before Court the amount of the debt attached or so much of it as may be sufficient to satisfy the claims under the decree that is being executed. R. 46(b) states that where the garnishee fails to comply with the notice and does not appear to show cause why the notice should not be enforced against him, the Court may pass an order against the garnishee to comply with the directions of the notice. It is further stated that such an order may be enforced against the garnishee as if it were a decree passed against him. R. 46(c) prescribes the procedure to be followed where the garnishee enters appearance and disputes his liability to comply with the terms of the notice issued to him. In such cases the Court has to raise an issue on the question relating to the liability of the garnishee and then proceed to try and decide that issue. R. 46(i) states that an order made under Rr. 46(b) and 46(c) shall have the same force and be subject to the same conditions as to appeal or otherwise as if it were a decree. From these provisions it is clear that for the limited purpose of determining the liability of the garnishee in respect of a debt attached in the course of the execution of a decree a special jurisdiction is conferred on the execution Court by virtue of these rules to function as a trial court and to try and decide that question. The addition of these special provisions is a sure indication that but for these special provisions the execution court will not normally have jurisdiction to try and decide that question in the course of the execution of the decree. It is also significant to note that these special provisions are worded in such a manner as to indicate that they are only enabling provisions. In R. 46(a) the expression used is that the Court may order the garnishee to comply with the terms of the notice and that the Court may order that an issue or question necessary for the determination of the liability of the garnishee be raised, tried and determined. In R. 46(a) the expression used is that the Court may order the garnishee to comply with the terms of the notice and that the Court may order that an issue or question necessary for the determination of the liability of the garnishee be raised, tried and determined. The idea underlying these enabling provisions appears to be that where the liability of the garnishee could be tried and determined quickly and in a simple manner, the execution Court itself can exercise the powers conferred by these provisions and determine such liability. But there may be cases where the determination of the question of such liability involves consideration of complicated questions of law and fact and also necessitates an elaborate enquiry. The proper course to be adopted in such cases would be to follow the normal course of execution and to sell the attached debt so that the Court auction-purchaser may institute a separate suit for the recovery of the amount of the debt wherein the enforceability of the debt could be properly and fully investigated and decided. 8. The lower Court's order attacked by the garnishee in this case was passed at the time when the jurisdiction of that Court was controlled by the provisions of the Cochin Code of Civil Procedure. That Code did not contain any rules corresponding to R. 46(a) to 46(i) of the Code that is now in force in this State and obviously therefore the special jurisdiction conferred by such rules could not be invoked by the lower Court for the purpose of determining the question whether the garnishee had a subsisting liability in respect of the debt attached by the decree-holder. It is not a question arising between the parties to the decree or their representatives and relating to the execution, discharge and satisfaction of the decree so as to attract the jurisdiction of the execution Court under S. 47 Civil P.C. The garnishee's denial of the debt cannot also be treated as a claim or objection to the attachment so as to attract the provisions of Rr. 58 to 63 of O. 21, relating to investigation of claims and objections. This is the view taken in Butchayya v. Krishnamachari ((1936) ILR 59 Mad 966) and also in Augustine v. Narasinga Vadhiar (15 Cochin L.R. 116). 58 to 63 of O. 21, relating to investigation of claims and objections. This is the view taken in Butchayya v. Krishnamachari ((1936) ILR 59 Mad 966) and also in Augustine v. Narasinga Vadhiar (15 Cochin L.R. 116). The contrary view taken in Narayana Kammathi v. C.P. Lewis (12 Cochin L.R. 2) and in Vathu v. Varki (18 Cochin L.R. 340) cannot be accepted as correct. There can be a claim or an objection to the attachment only if the existence of the property attached viz., the debt, is admitted. There may be cases where, after admitting the existence of the debt attached, the garnishee prefers a claim to the property attached or an objection to the attachment and in such cases it will be competent for the execution Court to investigate into and decide on the sustainability or otherwise of the claim or objection. Even where such investigation results in an order disallowing the claim or the objection, all that the execution Court can do is to proceed to sell the debt as the property attached and not to direct the garnishee straight way to pay the amount of the debt to the decree-holder. This is clear from Cl. (2) of R. 58 of O. 21 which states that pending investigation of the claim or the objection, the execution Court may postpone the sale in pursuance of the attachment. No doubt if the garnishee concedes that he is in possession of the amount of the debt covered by the attachment and offers to pay it into Court, such payment could be accepted by the Court. The result of such payment will be to absolve the garnishee from further liability in respect of that amount and also to obviate the necessity of selling the debt in Court auction, because the debt has ceased to be a debt and has become converted into money held by the execution Court on behalf of the judgment-debtor. In such a situation the money could be ordered to be paid to the decree-holder towards satisfaction of the claim under the decree. But the position is entirely different where the garnishee's answer to the attachment notice issued to him is one of complete denial of the existence of the debt. Such a denial will not amount to a claim or objection to the attachment. But the position is entirely different where the garnishee's answer to the attachment notice issued to him is one of complete denial of the existence of the debt. Such a denial will not amount to a claim or objection to the attachment. In such a situation, the execution Court is not competent, except in cases where there are provisions similar to Rr. 46(a) to 46(i) of O. 21 conferring special jurisdiction on the court, to embark upon an investigation to decide whether the judgment-debtor has a subsisting claim against the garnishee in respect of the debt attached. On the other hand, the proper course to be adopted will be to proceed to sell the alleged debt in case the decree-holder desires to pursue execution in that direction and to leave the parties to work out their rights arising out of such a sale. Judicial precedents also are decidedly in support of this position. In Toolsa Goolal v. John Antone (1887) ILR 11 Bom. 448), it was ruled that where the garnishee denies the debt, there is no other course open to the judgment creditor than to have it sold or to have a receiver appointed to collect the amount of the debt by resorting to other independent proceedings. To the same effect are the decisions in Ma Saw Yin v. Hackto ((1926) ILR 4 Rang. 100), Maharaja of Benares v. Patraj Kunwar ((1905) ILR 28 All. 262) and in Alwar Aiyangar v. Subramonia Dikshithar ( (1931) 61 MLJ 863 ). In Butchayya v. Krishnamachari ((1936) ILR 59 Mad. 966) it was ruled that when a garnishee merely denies the existence of a debt sought to be attached in execution of a decree, it is not within the province of the executing Court to decide whether the debt attached is really due or not. The same view was taken in a still later case ie., in Maharajadhiraj Sir Kameshwar Singh v. Kuleshwara Singh ((1942) ILR 21 Pat. 287) where it was pointed out that there is nothing in R. 46 of O. 21 authorising the execution Court to pass an order by which the judgment-debtor's debtor could be compelled to deposit the amount of his debt in Court. 9. 287) where it was pointed out that there is nothing in R. 46 of O. 21 authorising the execution Court to pass an order by which the judgment-debtor's debtor could be compelled to deposit the amount of his debt in Court. 9. From the foregoing discussion it is clear that the lower Court was acting in excess of its jurisdiction as an execution Court in negativing the plea of the garnishee that the debt attached having been already adjusted and satisfied was non-existent and was therefore not available to answer the claim under the attachment and in directing the garnishee to remit into court the amount of the alleged debt. Accordingly, this revision-petition is allowed with costs and the order of the lower court is set aside. If, in spite of the garnishee's plea that the debt is non-existent, the decree-holder wants to proceed against the alleged debt, the executing Court has only to permit him to carry on execution proceedings in that direction and to have the alleged debt sold in Court auction at his own risk. Allowed.