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PETITIONER: KOTAK & CO.

       Vs.

RESPONDENT: STATE OF U.P.

DATE OF JUDGMENT08/01/1987

BENCH: THAKKAR, M.P. (J) BENCH: THAKKAR, M.P. (J) RAY, B.C. (J)

CITATION:  1987 AIR  738            1987 SCR  (1) 926  1987 SCC  (1) 455        JT 1987 (1)   124  1987 SCALE  (1)12

ACT:     Civil  Procedure  Code,  1908--s.73--Rateable  distribu- tion--Order passed by Court--Rights of parties are  crystal- ized--State cannot claim statutory priority after Court  has made its order.

HEADNOTE:     On the question whether from the point of time an  order for  rateable distribution is passed by the executing  Court the  monies  in  question cease to be the  property  of  the judgment-debtor and become the property of the  decree-hold- er, regardless of whether or not actual payment pursuant  to the said order is made: Allowing the Appeal,     HELD:  1. As soon as the question of rateable  distribu- tion between the decree-holders and the State having  statu- tory  priority is determined, and the Court passes an  order as to how to appropriate the assets of the  judgment-debtor, the rights of the parties become crystalized and the  monies in question cease to be the property of the  judgment-debtor and becomes the property of the decree-holder, regardless of whether or not actual payment pursuant to the said order  is made. [930A-B]     Official  Receiver of Tanjore v. M.R. Venkatarama  lyer, AIR  1922 Madras p. 31, Murli Tahilram v. T. Asoomal &  Co., AIR  1955  Calcutta p. 423, Basanta Kumar  Bhattacharjee  v. Panchu  Gopal  Dutta  & Ors., AIR 1956 Calcutta  p.  23  and Income-tax  Officer,  Ward C. SangIi &  Anr.  v.  Chandanbai Balaram Doshi & Ors., AIR 1957 Bombay p. 91, approved.     2.1  The  rights  of the  respective  decree-holders  or claimants  are governed by the order for rateable  distribu- tion passed by the Court as a result of the adjudication and determination made by the Court. Nothing further remains  to be done by the Court, in the judicial sphere thereafter. The order  partakes  of the character of a judgment  and  decree passed by the Court. [930B-C] 927     2.2  Thereafter the officials of the Accounts  and  Cash department are only required to carry out the command of the Court by implementing or giving effect to the order.  [930C- D]

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   2.3 The test which is to be applied is whether the  said officials  can refuse to implement the order by refusing  to make payment once the Court has passed the order.  Obviously and  undoubtedly  they cannot. Therefore, nothing  turns  on whether  or not actual payment pursuant to the order of  the Court  is  made.  The Court officials make  payment  to  the decree-holder  because the property in the said  monies  has vested  unto  them by virtue of the  order  of  distribution passed by the Court. What is being paid by the officials  of Accounts  and  Cash  Sections will  be  the  decree-holder’s money, it having ceased to belong to the judgmentdebtor  the moment  the  order for distribution was  made,  even  though actual disbursement was made later. [930D-F]     3.  If  the  State lays its claim after  the  order  for distribution  is made by the Court, it will be of no  avail, as  the  property would have gone beyond the  reach  of  the State,  it  having ceased to be the property of  the  debtor against whom the State had a claim. No question of  priority can  arise  in that situation--the state having  missed  the bus. [930F-G]     4.  In the present case, the High Court was in error  in reversing the order passed by the executing Court. The order of  the  High Court is set aside and that of  the  executing Court  restored  in so far as the  appellant  is  concerned. [930H]

JUDGMENT:     CIVIL  APPELLATE JURISDICTION: Civil Appeal No. 1295  of 1973     From  the  Judgment and Order dated 14.12. 1972  of  the Allahabad  High  Court in Civil Revn. Petition No.  1572  of 1969. P.H. Parekh and Suhail Dutt for the Appellant.     Prithvi Raj, Mrs. Shobha Dikshit and Sudhir  Kulshreshta for the Respondent. The Judgment of the Court was delivered by     THAKKAR, J. The proposition canvassed by the  appellant, namely, that from the point of time that an order for  rate- able  distribution  is  passed by the  executing  court  the monies in question cease to be 928 the property of the judgment-debtor and ’become the property of  the decree-holder, regardless of whether or  not  actual payment pursuant to the said order is made, is supported  by the decisions of three High Courts namely, Madras,  Calcutta and  Bombay.  As early as in 1922 the Madras High  Court  in Official Receiver of Tanjore v. M.R. Venkatararna lyer,  AIR 1922 Madras p. 31 has taken the view canvassed by the appel- lant as is evident from the passage quoted hereunder:-       "It  seems  to me that from the time of the  order  of rateable  distribution the money must be treated as  belong- ing,  not to the judgment-debtor, Nataraja lyer, but to  the decreeholder  in  whose  favour the order  was  passed.  Mr. Devadoss for appellant contended that the effect of a  rate- able  distribution order is merely to allocate the money  to the  different  suits without affecting its  ownership.  The latter,  he says, still rests in the judgment-debtor by  the sate of whose property it was allocated. I do not think this is so. The section does not speak of distribution among  the decree-holders.  The latter are entitled to draw it  out  at will; and the judgment-debtor most certainly is not. I think the  money in this case must be treated as the  property  of the  decree-holder,  the  present respondent  and  that  the

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Official Receiver could no more recover it from the respond- ent  if it had actually been paid out to him by  court.  Mr. Devadoss  eventually admitted that he could not recover  the money  in  the circumstances of the present case if  it  had passed  into  respondent’s possession. I would  dismiss  the appeal with costs."     A  learned Single Judge of the Calcutta High  Court  has expressed  the same view in Murli Tahilram v. T. Asoornal  & Co., AIR 1955 Calcutta p. 423, wherein it is observed:- "But  where a private citizen has sued another  to  judgment and has in fact got by an order of Court a Receiver appoint- ed of his goods and such goods have been sold by the Receiv- er  under  orders of the Court and where there  has  been  a prior  direction in the Court’s order to pay the  sale  pro- ceeds  to the private judgment-creditor, a subsequent  claim by  the  State for arrears of sales-tax  cannot  defeat  the judgment-creditor or deprive him of the fruits of his decree which is regarded as property." 929 And the same view has been reiterated by a Division Bench of the  Calcutta High Court in Basanta Kumar  Bhattacharjee  v. Panchu Gopal Dutta & Ors., AIR 1956 Calcutta p. 23 where  in the  Court has made recourse to the following  reasoning  to support the proposition:      "This  contention, we think, should prevail. The  order allowing the application for rateable distribution that  was passed on 2-12-1953 should, we think, be reasonably read  as deciding  that  the decree-holders had title to  the  money. What remained to be done was the ascertainment of the  exact amount which each decree-holder was entitled to and  payment of the same. The decision as regards title had already  been made  and with the decision that ’the money was the  decree- holder’s  money, the position, in our opinion, was  that  it could  no  longer be considered in law to be  the  judgment- debtor’s  money.  The question of priority  of  the  State’s claim  does not, therefore, fail to be decided. On the  date the  letter  of attachment of the  Certificate  Officer  was received,  there  was no money belonging  to  the  judgment- debtors in the hands of the Court." The  High  Court of Allahabad which has  differed  from  the aforesaid  High  Courts  by the judgment  under  appeal  has proceeded  on the assumption that the High Court  of  Bombay has  taken  a contrary view in Income-tax Officer,  Ward  C, Sangli  & Ant. v. Chandanbai Balaram Doshi & Ors., AIR  1957 Bombay p. 91. We are afraid, by the High Court of Bombay  in the  said case the principle enunciated has  been  misunder- stood. No order for rateable distribution had been passed by the  executing court in the said case. Even, so, while  dis- cussing the law on the subject in the context of the  scheme of the C.P.C., the High Court of Bombay has articulated  the principle thus:- "The  scheme clearly indicates that,   until the  Court  has directed  appropriation of the amount to the claim  made  by the  decree-holder  or  of creditors  entitled  to  rateable distribution,  the  amount received in  Court  continues  to remain as of the judgment-debtor."                                         (Emphasis added) By  necessary implication it means that as soon as an  order for rateable distribution is made, the amount ordered to  be distributed will cease to 930 be  the property of the judgment-debtor. We are of the  same opinion  as that of the High Courts of Madras, Calcutta  and Bombay.  As  soon as the question of  rateable  distribution between  the decree-holders and the State  having  statutory

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priority is determined, and the Court passes an order as  to how  to appropriate the assets of the  judgment-debtor,  the rights of the parties become crystalized. What then  remains is to give effect to the determination made by the court  by officials  in charge of concerned departments  dealing  with Accounts and Cash which is a ministerial act. The rights  of the  respective decree-holders or claimants are governed  by the order for rateable distribution passed by the Court as a result  of  the adjudication and determination made  by  the Court.  Nothing further remains to be done by the  Court  in the  judicial sphere thereafter. The order partakes  of  the character of a judgment and decree passed by the Court. What the  officials of the Accounts and Cash department  are  re- quired  to do thereafter is to carry out the command of  the Court  by  implementing or giving effect to the  order.  The test  which can be usefully applied is to pose the  question whether the said officials can refuse to implement the order by  refusing to make payment once the Court has  passed  the order.  Obviously and undoubtedly they cannot. Therefore  it is  evident  that  nothing turns on whether  or  not  actual payment pursuant to the order of the Court is made. And when the Court officials make payment to ’the decree-holder, they make  payment  because the property in the said  monies  has vested  unto  them by virtue of the  order  of  distribution passed by the Court. What is being paid by the officials  of Accounts  and  Cash  Sections will  be  the  decree-holder’s money, it having ceased to belong to the judgment-debtor the moment  the  order  for distribution  was  made,  eventhough actual  disbursement was made later. If the State  lays  its claim after the order for distribution is made by the Court, it  will  be  of no avail as the property  Would  have  gone beyond  the reach of the State, it having ceased to  be  the property  of the debtor against whom the State had a  claim. No  question  of priority can arise in  that  situation--the State having missed the bus. In the present case, the amount had  ceased to be the property of the  judgment-debtor  from the point of time that the order forateable distribution was passed by the executing court. There was no question  there- fore  of the State being entitled to claim priority  in  re- spect of the claims lodged by it subsequent to the order for rateable  distribution. The High Court was thus in error  in reversing the order passed by the executing court.     We, therefore, allow the appeal, set aside the order  of the High Court in so far as the appellant is concerned,  and restore the order of  931 the executing court in so far as the appellant is concerned.     The appeal is disposed of accordingly. There will be  no order as to costs. A.P.J.                                         Appeal   dis- posed of. 932