1991 PLP 2301 (MLD)

10. So far as the case of the decree-holder is concerned, Mr. Abdul Ghafoor Mangi has invited my attention to section 73 of the Code of Civil Procedure, which for the sake of convenience is reproduced as follows:

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73. Proceeds of execution sale to be rateably distributed among decree holder.-- (1) 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 decree for the payment of money passed against the same judgment-debtor and have not obtained satisfaction thereof, the assets, after deducting the costs of realization, shall be rateably distributed as follows:-- (a) Where any property is sold subject to a mortgage or charge, the mortgagee or incumbrancer shall not be entitled to share in any surplus arising from such sale; (b) Where any property liable to be sold in execution of a decree is subject to a mortgage or charge, the Court may, with the consent of the mortgagee or incumbrancer, order that the property be sold free from the mortgage or charge, giving to the mortgagee or incumbrancer the same interest in the proceeds of the sale as he had in the property sold; (c) Where any immovable property is sold in execution of a decree ordering its sale for the discharge of an incumbrancer thereon, the proceeds of sale shall be applied:-- first, in defraying the expenses of the sale; secondly, in discharging the amount due under the decree; thirdly, in discharging the interest and principal monies due on a subsequent incumberances (if any); and fourthly, rateably among the holders of decrees for the payment of money against the judgment-debtor, who have prior to the sale of the property, applied to the Court which passed the decree ordering such sale for execution of such decrees, and have not obtained satisfaction thereof. (2) Where all or any the assets liable to be rateably distributed under this section are paid to a person not entitled to receive the same, any person so entitled may sue such person to compel him to refund the assets. (3) Nothing in this section affects any right of (the Government)." Mr. Abdul Ghafoor Mangi has argued that none of the Intervenors has locus standi to claim rateable distribution in respect of the assets of the judgment debtor. As regards Khyber Textile Mills, his contention is that before the Court can pass an order for rateable distribution of the assets, the provisions of subsection (1) of section 73 of the C.P. Code, require that an application for execution of a decree must have been presented before the Court before the receipt of the assets by it. According to Mr. Abdul Ghafoor Mangi, C.MAs. Nos.70/88 and 71/88 have been filed belatedly by the Intervenor No.1 when the assets of the judgment-debtor had already been deposited with the Nazir of this Court and hence the application cannot be considered being outside the purview of section 73 (1). No doubt, besides C.MAs. No.70/88 Execution Application No.39/81 had also been filed by the Intervenor in 1981, but there is nothing to indicate that such application after its transfer was still pending before the Civil Court at Larkana at the time when the sale proceeds of the judgment-debtor's properties were deposited in this Court. It is further contended by Mr. Abdul Ghafoor Mangi that the claim of the decree-holder being a secured one on account of mortgage and the letter of hypothecation must get preference over that of the Intervenors. Reliance has been placed by Mr. Abdul Ghafoor Mangi on (i) AIR 1942 Sindh 12, (ii) P L D 1959 Dacca 939, (iii) P L D 1973 Lah. 682, (iv) AIR 1959 Cal. 461 and (v) AIR 1959 Pat.375.

11. In P L D 1959 Dacca 939, the High Court of Dacca while interpreting subsection (1) of section 73 of the Civil Procedure Code held that the conditions necessary for the application of section 73(1), C.P.C. are: firstly, that the assets must be held by the Court, secondly, the claimants for rateable distribution must apply prior to the receipt of such assets by the Court, and thirdly, the claimants for rateable distribution and the attaching creditor must all be holder of decrees for payment of money.

12. So far as the case of the Khyber Textile Mills Limited is concerned, although Mr. Abrar Hassan has not been able to produce any proof regarding the pendency of the execution proceedings before the Civil Court at Larkana, but reference has been made by him to section 41 of the Civil Procedure Code, which enjoins upon the Court to which a decree has been sent for execution to certify to the Court which passed the same, the fact of its execution or if the former Court has failed to execute the same, the circumstances attending such failure. Consequently, according to Mr. Abrar Hassan, since no such certificate can be found on the file of the case, the presumption would be that the execution application is still pending at Larkana.

13. The argument of Mr. Abrar Hussan does not advance the intervenor's case much, because the admitted position is that application No.39/81, for execution of the decree was transferred to the Civil Court Larkana at the request of the intervenor itself. There is, therefore, no application pending before this Court for execution of the decree, so far as the decree obtained by the Intervenor is concerned. In Abdul Karim v. Akbar Yousuf Masti Khan (P L D 1963 Azad Jummu and Kashmir 55), an execution application pending before the subordinate Court was not transferred to the High Court before the receipt of assets, it was held that section 73 of the C.P.C., was not applicable. (See observations at page 58 of the report). Consequently, I find myself in agreement with the contention raised by Mr. Abdul Ghafoor Mangi that one of the conditions laid down by subsection (1) of section 73, C.P.C. has not been satisfied.

14. As to the next argument of Mr. Abdul Ghafoor Mangi that, the decree holder has a preferential claim over the Intervenors, Mr. Abrar Hassan has contended that the question would be governed by clause (c) of section 73(1) which allows priority only to the mortgagee of immovable property over other decree-holders, and consequently, although, the decree-holder has a preferential claim over Rs.15,00,000 recovered from the immovable properties of the judgment-debtor by virtue of mortgage executed thereby, but Rs.80,00,000 which were recovered by sale of machinery and other equipment of the judgment debtor\ were still liable to be rateably distributed between the Intervenors and the decree-holder, notwithstanding the said letter of hypothecation execution by the judgment-debtor.

15. No doubt clause (c) of section 73 (1) only refers to sale of immovable property, subject to incumbrance, in execution of a decree, but mortgage of goods is also valid in Pakistan and India. Such transaction is commonly known as hypothecation, where the pledgor retains the possession of the thing pledged. In Mahamaya v. Haridas (42 C.455), it was held that the remedy of foreclosure is equally applicable to mortgages of chattles. A question, therefore, arises: is hypothecation different from a mortgage? in this respect, Mr. Mangi has invited my attention to the case of Malik Muhammad Saeed Muhammad Azam v. Sargodha Central Cooperative Bank (PLD 1973 Lah. 682). In this case a certain sum of money payable to the judgment-debtor by the Rehabilitation Department was attached before judgment. There were other creditors, besides the decree holder who had obtained money decrees against the judgment-debtor. The decree-holder apprehending rateable distribution, filed an application for execution in his favour. It was held that distribution of assets of the judgment debtor among all the decree-holders can be allowed only where the assets are held by the Court for the benefit of the decree-holders but where the Court is merely a custodian of the assets for the benefit of a particular decree-holder, rateable distribution cannot be allowed. In my opinion the ratio of this case is equally applicable to the present case, although the facts of the two cases are slightly distinguishable. However, in the present case since admittedly the judgment-debtor had hypothecated his machinery and other goods to the decree-holder, the decree-holder holds a charge over such goods. Consequently rateable distribution cannot be permitted.

16. Mr. Abdul Ghafoor Mangi has further pointed out that the assets of the judgment-debtor possessed by the Court have already been handed over to the decree-holder against a bank guarantee furnished by it.

17. As far as the claims of Khadim Ali and WAPDA Hyderabad are concerned, admittedly there was no decree passed by the Court in their favour. Mr. M.L. Shahani appearing on behalf of Khadim Ali has contended that the claim of, the workmen is recoverable as arrears of land revenue under the provisions of the Payment of Wages Act. Be that as it may, but the said Act is a special law which provides a special procedure for execution the orders of the Authority under the Payment of Wages Act and resort must be had to that alone. Section 73 of the C.P. Code refers to execution of decrees for payment of money and since admittedly the order passed by the Authority for Payment of Wages Act is not a decree, the provisions of section 73 C.P.C. cannot be invoked by the workmen. The claim of WAPDA is equally not maintainable as there is no decree passed in its favour by any Court. In. any case, even otherwise the claim of the remaining intervenors cannot be allowed for the same reasons given by me above.

18. In the result, the applications filed by the Intervenors Nos.1, 2 and 3 are dismissed and the applications filed by the decree-holder are granted. I am clearly of the view that the decree-holder is entitled to receive the entire amount of Rs.95,00,000 subject to the deduction of expenses. Consequently, the bank guarantee furnished by the decree-holder in pursuance of the interim order passed by this Court, is discharged.

19. All the applications thus stand disposed of in the above terms. H.B.T./P-208/K Order accordingly.