P L D 1970 Karachi 481 (PLP)

Where assets are held by a Court and more persons than one have, before the receipt of such assets, made application to the Court for the execution of decrees for the payment of money passed against the same judgment‑debtor and have not obtained satisfaction thereof, the assets, after deducting the costs, of realisation, shall be rateably distributed among all such persons. As the funds of the deceased attached by all the decree -holders before me were deposited in this Court in another suit, namely Suit No. 19 of 1968, which is pending; it is clear that section 13 in terms is not applicable to the instant case. But this does not necessarily mean that the principles of this section are not applicable. Mr. Usman Ghani admitted that apart from Order ‑ XXI, rule 52, C. P. C. there was no provision governing the claims of the decree‑holders before me. I shall presently f consider Order XXI, rule 52, C. P. C., but in the absence of express provisions in this respect, the rights of the parties have to be determined by the principles of equity, justice and good conscience. The principle of rateable distribution is contained in the insolvency laws and as equity is equality it seems to me that the principle of rateable distribution contained in section 73 is a principle of equity which should be applied provided there are no express provisions to the contrary. As pointed out by Farran, J. in J. Khan and another v. Ali Muhammad Haji Umer (I L R 16 Bom. 577) It cannot be that . . . . . a Court of equity will allow one out of the whole body of creditors to gain priority over the remainder by the simple expedient of attaching the moneys in the Court's hands. This has been the view of the Bombay High Court and it is also the view of the Calcutta High Court Thakurdas v. Joseph Iskender (A I R 1917 Cal. 13). The Commerce Bank is therefore entitled to succeed in its claim for rateable distribution unless the provisions of this section are excluded by Order XXI, rule 52, C. P. C. as claimed by Mr. Usman Ghani or unless there is some equity in favour of the other decree‑holders.

4. Order XXI, rule 52 reads as follows:‑ "Where the property to be attached is in the custody of any Court or public Officer, the attachment shall be made by a notice to such Court or officer, requesting that such property, and any interest or dividend becoming payable thereon, may be held subject to the further orders of the Court from which the notice is issued Provided that, where such property is in the custody of a Court, any question of title or priority arising between the decree‑holder and any other, person, not being a judgment -debtors, claiming to be interested in such property by virtue of any assignment, attachment or otherwise shall be determined by such Court." As this rule does not create any interest in the attached property in favour of the attaching decree‑holder, and as it merely prevents a judgment‑debtor from transferring the attached property. I do not see how an order under this rule would exclude the equitable principle of rateable distribution. However, Mr. Usman Ghani submitted that his case was supported by authorities and I shall now consider the judgments cited by him.

5. In Khazan Chand v. Moti Singh (A I R 1935 Lah. 914), a learned Single Judge of the Lahore held that when "money in the custody Court is subject to more attachments than one, the Court must award priority to the first in point of time and if the other decree -holders want to share in the rateable distribution, they must apply in time to the first attaching Court". However the facts of the judgment cited were that the applicant before the High Court, Khazan Chand, had obtained a decree against his brother, one Gurdial Singh, in Sialkot and obtained an order in his favour from the Sialkot Court under Order XXI, rule 52, C. P. C. for the attachment of money belonging to Gurdial Singh which was lying in a Court in Amritsar. Although the Amritsar Court received the precept of the Sialkot Court, it did not remit the funds of Gurdial Singh to the Sialkot Court and the consequ ences of its failure so to do was that meanwhile another plaintiff, namely, one Moti Singh, obtained a decree against the said Gurdial Singh in a Court in Amritsar, then the said Mod Singh also obtained an order under Order XXI, rule 52, C. N. C. attaching Gurdial Singh's fund in his favour, after the Amritsar Court ordered rateable distribution of Gurdial Singh's fund between the applicant Khazan Chand and Moti Singh therefore the applicant filed a revision in the High Court, and in allowing the revision, Backett, J., made the observations which I have quoted. As the effect of the Amritsar's Court's wilful delay in complying with the Sialkot's Court precept was to enable another decree‑holder, namely, Mod Singh to obtain a decree against Gurdial Singh it is clear that the applicant had a strong equity in his favour. In the instant case, however, it was the Commerce Bank which was the first to obtain a decree against the legal heirs of the deceased and even the attachment of the funds of the ‑deceased in Suit No. 19 of 1968 in this Court was effected at its instance. Therefore, unlike the judgment cited, in the instant case, there are no equities in favour of the other decree -holders. However as the Lahore Judgment has followed a Full Bench Judgment of the Madras High Court in E. M. Visvanadhan Chetty v. Arunachelam Chetti (I L R 44 Mad. 100). I shall now consider this judgment. In this judgment a Full Bench of the Madras High Court, in reversing its earlier view, held that when property is attached in execution of several decrees the custody Court must give priority to the first attachment in point of time and if other decree‑holders seek rateable distribution they must apply in time to the attaching Court. Mr. Usman Ghani referred me to the observations of Wallis, C. J., on the interpretation of Order XXI, rule

52. At page 107 in reference to the provisions of section 73 and Order XXI, rule 52, Wallis, C. J., has observed as follows When the property attached is in the custody of a Court, it is equally to be held by the custody Court subject to the further orders of the attaching Court, and subject also to the proviso which has next to be examined which does not in my opinion either relieve the attaching Court of the duty of getting in and distributing the money or proceeds of realisation if available and distributing them among the decree‑holders entitled under section 295 (now section 73), or authorise the custody Court to embark on another sort of rateable distri bution among another class of decree‑holder. The proviso only says that "any question of title or priority arising between the decree‑holder" (meaning the decree‑holder who had made the attachment) and any other person not being the judgment- debtor claiming to be interested in such property by virtue of any assignment, attachment, or otherwise shall be determined by such Court, the custody Court. This will include claims questioning the title of the judgment‑debtor and other cases, but taking the present case of the property in the custody Court being made the subject of several attachments in execution of several decrees, the custody Court is then in my opinion required by the proviso (to section 73) to determine which of these attachments is entitled to priority, and in the absence of any legislative provision (section 63, which has given rise to difficulties which need not now be considered, does not apply to the present case) to award such priority to the first attachment in date because that attachment became complete on the service of the notice on the custody Court and subsequent attachments cannot, in the absence of express legislative provision, affect the right of the first attaching creditor to have the attached property released in execution of his decree and distributed rateably among the decree‑holders entitled under section 295, (now section 73), in satisfaction of their decrees. If the other decree‑holders want to share in the rateable distribution, their proper course is to apply in time, if they can, to the attaching or executing Court. The observations quoted lend support to Mr. Usman Ghani's argument. However, merely because a decree‑holder does not file an execution application immediately after obtaining his decree it does not mean that his conduct is reprehensible in any way, and as an attachment does not create any charge or interest in the property attached. I do not see why a later decree‑holder C should be preferred to an earlier decree‑holder merely because the later decree‑holder was the first in point of time to file an execution application. With great respect, the observations of the learned Chief Justice are, in my humble opinion, not sup ported by reason or equity.

6. I now turn to the judgments of the Bombay High Court on which Mr. Usman Ghani relied: Kesserbai v. Kaku Vallabhdas Ravji (A I R 1927 Born. 394) and Bar Rukhiabai v. Vadilal Purshottamdas & Co. (A I R 1930 Bom. 451). The first of these judgments fully supports learned counsel's argument, but I do not think the second judgment supports his case. Both these judgments relate to suits on the original side of the Bombay High Court, and. in considering them it is necessary to bear in mind that the Bombay High Court, on its original side, has inherited the jurisdiction of the Court of Chancery. Therefore in execution proceedings, in addition to the remedies prescribed in Order XXI, C. P. C., it is free to follow the practice of the Court of Chancery, and whenever execution was sought against assets in the hands of a receiver appointed by the Court it used to grant a charging order in favour of the decree holder, as had been done by the Court of Chancery, but this charging order did not confer any priority in favour of the decree‑holder obtaining the charge. This practice had the approval of a judgment of the Division Bench of the Bombay High Court in Shidlingappa v. Shankarappa (I L R 29 Bom. 176). But Mirza, J., considered this practice in Kesserbai v. Kaku Mirza and observed that a charging order should, on principle, confer priority on the decree‑holder who obtained it. But as Order XXI, C. P. C. did not contain any provision for a charging order he considered this practice to be illegal, and in recalling a charging order granted by him he observed that the decree‑holder should have obtained an order of attachment under Order XXI, rule 52, C. P. C. He also approved of the view of the Full Bench of the Madras High Court in Visvanadhan Chetty v. Arunachelam Chetti of the effect of an order under this rule. Then, as in his view of the matter, the plaintiff had been misguided by the practice of the Court he observed that his claim should be satisfied before any further distribution of the assets took place amongst those who were not attaching creditors. This judgment of Mirza, J., was considered three years later by a Division Bench of the Bombay High Court in Bai Rukhiabai v. Vadilal Purshottamdas & Co. The learned Judges overruled the view of Mirza, J., that the Bombay High Court was not competent to pass a charging order on the original side, but they also held that such an order would confer priority on the decree‑holder who obtained it. However it is significant that Marten, C. J,., observed at page 455 as follows I think then that under their charging order the applicants were entitled to priority over the ordinary creditors and that accordingly the actual order which the learned Judge made giving them this priority was correct. I should add that this need not result in every creditor at once proceeding to bring separate suits and separate applications for fear of being ousted by some charging order. It will lie in the discretion of the Judge having regard to the facts of the case whether in any particular case a charging order of this nature which gives priority should be granted. And it may be that the other creditors should first be given the chance of being heard on the point. But according to the practice of the original side of the Bombay High Court a charging order, was only an alternative remedy to an order under Order XXI, rule 52, C. P. C., therefore, as in view of these observations, a decree‑holder is not automatically entitled to a charging order, it seems to me that a decree‑holder who obtains an attachment under Order XXI, rule 52 should also not automatically be able to obtain priority over other decree‑holders D merely because he is the first amongst them to obtain an attachment. This Division Bench Judgment is therefore, in my humble opinion, inconsistent with the view taken by Mirza, J. and in this connection it is very significant that, although Marten, C. J., referred to the Full Bench Judgment of the Madras High Court in Visvandhan Chetty v. Arunachelam Chetti, which Mirza, J., had followed, he expressly distinguished that judgment and did not follow it.

7. Finally, the provisions of Order XXI, rule 52, C. P. C. were construed by the Bombay High Court in Venilal Rangildas v. Gandabai Bhagwandas (A I R 1952 Born. 222). There, as in the instant case, the decree‑holder who had first obtained an attachment of the funds of the judgment‑debtor in another Court had contended that he was entitled to priority in payment over another decree‑holder because his attachment was obtained of time before that of the other decree‑holder: In repelling this contention Chagla, C. J., observed in para. 2 Now, the effect of levying an attachment under Order XXI, rule 52, is to inform the Court or Officer that the property attached must be held by the Court or officer subject to the further orders of the Court. The property attached continues to remain with the officer or the Court, and the property is not at the disposal of the executing Court. Further orders have to be made by the Court before the property is at the disposal of the executing Court and before the executing Court can make any orders with regard to the disposal of that property. Therefore, the only effect of the attachment under Order XXI, rule 52, is to prevent the Court or officer who holds the property of the judgment‑debtor from dealing with that property. Thus it is clear that the Bombay High Court has not adopted the view of the Madras High Court.

8. I now turn to the judgment of the Calcutta High Court in Thakurdas Mod Lal v. Joseph Iskendar and others on which Mr. Veliani relied. There the funds of the judgment‑debtor were attached by three decree‑holders, namely, the appellant Mod Lai, and the respondents Iskendar and Chuni Lai. The Court held that the attachments of Mod Lai and of Iskendar were not according to law, therefore the only valid attachment was that obtained by Chuni Lai. But the Court permitted both Mod Lai and Iskendar to file attachment applications before it pronounced judgment. The result was that Chuni Lai's attachment was obtain ed long before that of Moti Lai and Iskendar and he argued that he was entitled to priority in payment because he was the first decree‑holder to attach the funds of the judgment‑debtor. The Court rejected his contention and ordered rateable distribution between the three decree‑holders. Sanderson, C. J. observed at page 16 as follows: The conclusion depends upon what is the effect and meaning of such an attachment as has occurred in this case. Does it on the one hand give to the creditor, who has attached the money, any interest in the fund or is it merely an order restraining alienation of the fund until further order of the Court? In my judgment it means the latter; and, I think that has been decided not only by authority of this Court but also by authority of the Privy Council. I desire only to refer to three cases, the first of which is the case of In re : Soobul Chunder Law, Soobul Chander Law v. Russick Law Mitter (1888) 15 Cal.

202. Mookerjee, who wrote a separate judgment also held that as the attachment did not create any interest in the property attached it did not confer any priority on the attaching decree‑holder. He then observed at page 18: "Consequently we must apply the principle that where a fund in Court has been attached by several creditors of the judgment -debtor none of the attaching creditors is entitled to preferential treatment by reason of the priority of his attachment; as the attachments create no charge or lien upon the fund, it is obvious that so long as the fund is in the custody of the Court, the Court is bound to apply the rules of justice, equity and good conscience in the determination of the relative rights of creditors who wish to proceed against the fund in custodia legis for the satisfaction of their dues. In such circumstances, the fund, if insufficient to meet in full the claims of the creditors, should be rateably distributed amongst them. On these grounds I hold that the order now under appeal cannot be supported and must be set aside."

9. Thus it will be seen that the Bombay and Calcutta High Courts have not followed the Madras High Court's interpretation of Order XXI, rule 52, C. P. C. The view of the Madras High Court would convert an attaching creditor into a secured creditor and with great respect I am not able to agree with this view. Further, the principle of rateable distribution between decree‑holders is also in accordance with the principle of justice, equity and good conscience. I therefore follow with respect the view of Chagla, C. J. in Venilal v. Gandabhai and of Sanderson, C. J. and Mookerjee, J. in Thakurdas v. Joseph Iskendar and as the decree‑holders in all the four suits had attached the funds of the deceased in Suit No. 19 of 1968 before they had been remitted to the Court of the learned Civil Judge, prima facie all the decree -holders are entitled to rateable distribution.

10. Finally, as I have observed, the deceased was a building contractor and the sum of Rs. 28,651.35 was due to him on account of construction work done by him for the garnishee. According to Mr. Usman Ghani, the other decree‑holders were labourers who had been employed in the construction contract carried out by the deceased for the garnishee, therefore, learned counsel thought that the rules of the garnishee might enable them to claim an equity in their favour and obtain priority in payment. Accordingly, learned counsel requested me not to pronounce judgment, so as to enable him to obtain the rules of the garnishee and verify whether they could support his argument that the other decree‑holders had an equity in their favour. As learned counsel has now informed .me that the rules do not support his submission I hold that the decree‑holders in all the four suits before me are entitled to rateable distribution of the funds of the deceased, aggregating Rs. 32,151.35, which have been attached in Suit No. 19 of 1968 of this Court. In the circumstances of the case I leave the parties to bear their own costs. A. E. Order accordingly.