Union of India vs Hira Devi and Another

Rewritten Version Notice: This is a rewritten version of the original judgment.

Court: Supreme Court of India

Case Number: Not extracted

Decision Date: 21 May 1952

Coram: Meher Chand Mahajan, Chandrasekhara Aiyar

In this case the Court recorded that the Union of India versus Hira Devi and another was decided on 21 May 1952, and that the judgment was authored by Justice Chandrasekhara Aiyar, who sat on a bench comprising Justice Meher Chand Mahajan and Justice Chandrasekhara Aiyar. The Court first noted that it had granted special leave to appeal and that the Government had agreed to bear the respondents’ costs in connection with the appeal irrespective of any other consideration. The decree holder identified in the proceedings was a woman named Hira Devi, while the judgment debtor was a former Head Clerk of the Dead Letter Office in Calcutta, Kam Grahit Singh, who retired on 31 January 1947. A monetary decree against Singh was entered on 30 July 1948, and on 1 February 1949 a receiver was appointed to collect the monies standing to the credit of the judgment debtor in a Provident Fund administered by the postal authorities. The Union of India intervened by filing an application dated 20 September 1949 seeking to set aside the order appointing the receiver. The Court then recounted that Mr Justice Banerjee had dismissed the Union’s application, holding that a receiver could lawfully be appointed for the purpose of collecting the fund, a view that was subsequently affirmed on appeal by Chief Justice Trevor Harries and Justice Sinha. From the material presented in the petition filed by the Union before the High Court, the Court observed that the sum of Rs 1,394-13-1 represented arrears of pay and allowances owed to the judgment debtor, whereas the amount of Rs 1,563 constituted a compulsory deposit in his Provident Fund account. The Court emphasized that different legal treatment would apply to these two components, even though the lower court had proceeded on the basis that the entire amount constituted a “compulsory deposit” within the meaning of the Provident Funds Act of 1925. The principal issue for determination, the Court explained, was whether a receiver could be appointed in execution of a decree with respect to Provident Fund money that was due to the judgment debtor. The Court pointed out that compulsory deposits and other sums in or derived from any fund governed by the Provident Funds Act of 1925 are exempt from attachment or sale under section 60(k) of the Civil Procedure Code. The Act defines “compulsory deposit” in section 2(a) as a subscription or deposit in a Provident Fund that, under the fund’s rules, cannot be repaid on demand until the occurrence of a specified contingency, except for purposes such as payment of life-insurance premiums or family-pension contributions, and that the definition also includes any accrued interest, increment, or any remaining balance after the contingency occurs. The Court noted that such a deposit cannot be assigned or charged and is not liable to any attachment, and it cited section 3(1) of the Act which reiterates this prohibition.

In the present matter the Court observed that a compulsory deposit made to any Government or Railway Provident Fund is absolutely exempt from being assigned, charged, or attached under any decree or order of a Civil, Revenue, or Criminal Court in respect of any debt or liability incurred by the subscriber or depositor. The statutory provision further states that neither the Official Assignee nor any receiver appointed under the Provincial Insolvency Act, 1920, shall be entitled to claim any portion of such compulsory deposit. The Court declared that this prohibition is founded on public-policy considerations. It explained that an absolute bar on assignment or attachment is intended to prevent a judgment creditor from obtaining the fund indirectly through the appointment of a receiver, which would defeat the purpose of the legislation. The Court referred to the early decision of the Court of Appeals in Lucas v. Harris (18 Q.B.D. 127) where a similar question arose concerning a pension payable to two officers of Her Majesty’s Indian Army. Section 141 of the Army Act, 1881 provided that any assignment, charge, or agreement to assign or charge any pension payable to an officer or soldier of Her Majesty’s forces shall be void unless made in pursuance of a royal warrant for the benefit of the family or authorized by a then-existing Act. In that case the appointment of a receiver to collect the pension was challenged. Lord Justice Lindley observed that both the language and the object of section 141 must be considered, and that appointing a receiver would defeat the object of the section. Lord Justice Lopes reiterated this view, stating that the legislature’s objective was to secure for officers who had served their country a provision that would keep them from want and preserve a respectable social position. He emphasized that this objective could be achieved only if pensions were made absolutely inalienable, preventing not only the holder from assigning his interest but also preventing seizure or attachment by any garnishee order, execution, or other legal process. The Court concluded that without such protection the legislative purpose would be frustrated, creating a “strange anomaly” whereby a creditor could deprive a pensioner of his pension immediately after obtaining a judgment, even though the pension holder could not use the pension to pay the debt beforehand.

The Court further noted that Section 51 of the Civil Procedure Code enumerates five modes of execution of a decree, one of which is the appointment of a receiver. While a court may appoint a receiver instead of executing a decree by attachment and sale, such appointment is permissible only where a receiver can lawfully be appointed. Because money held in a Provident Fund is exempt from attachment and is inalienable, the Court held that normally no execution can lie against such sums. The learned Judges of the court below had relied upon the decision of the Privy Council in Rajindra Narain Singh v. Sundara Bibi ((1925) 52 I.A. 262). That decision has generated the view that, although the property itself may not be liable to attachment, a receiver might nonetheless be appointed to manage it. The Court expressed that this line of reasoning creates difficulty and a current of thought that contradicts the clear statutory protection afforded to compulsory deposits in Provident Funds.

In this case the Court observed that allowing a creditor who had obtained a decree to attach a pension would defeat the purpose of the legislation, because the pension is intended to protect the officer from want and to enable him to retain a respectable social position; it would be an anomaly if, after obtaining a judgment, the creditor could deprive the pensioner of his pension by attachment, execution or any other legal process. Section 51 of the Civil Procedure Code enumerates five modes of execution of a decree, one of which is the appointment of a receiver. The Court explained that a receiver may be appointed instead of executing the decree by attachment and sale, but only where the law permits the appointment of a receiver. The money standing in the Provident Fund is exempt from attachment and is inalienable, and therefore normally no execution can be made against such sums. The learned judges below relied upon the Privy Council decision in Rajindra Narain Singh v. Sundara Bibi ((1925) 52 I.A. 262). That decision has created difficulty and has given rise to a line of thought that, although the property itself may not be liable to attachment, a receiver may still be appointed to take possession of the property and to apply the income or proceeds in a prescribed manner, including payment of the judgment debtor’s debts. Consequently the Court said that the facts must be examined carefully to determine whether the proposition drawn from that decision can be treated as a general principle beyond the particular circumstances of that case. The original Allahabad High Court decision that was appealed to the Judicial Committee is reported in Sundar Bibi v. Raj Indranarain Singh ((1921) 43 All. 617). In that suit involving two brothers the parties compromised that the judgment debtor would possess and enjoy certain immovable properties listed in the compromise, which were estimated to generate a net profit of Rs. 8,000 per year, without the power of transfer during the lifetime of his brother Lal Bahadur Singh. The judgment debtor undertook to pay his brother certain public exactions and other dues totaling Rs. 7,870-11-6, in four equal instalments each year, each instalment to be paid a month before the Government revenue fell due. The arrangement was described as “in lieu of his maintenance”. When the judgment creditor sought to attach and sell the judgment debtor’s interest in the properties, the debtor objected invoking clause (n) of Section 60 of the Code, which refers to a “right to future maintenance”. The High Court held that the language of sub-clause (n) contemplated only a bare right of maintenance enforceable by law and payable in the future, and that because the properties had been assigned to the judgment debtor in lieu of his maintenance, this was not merely such a right, which alone is exempt from attachment and sale. The Court therefore concluded that the case was appropriate for the appointment of a receiver and remitted the execution petition to the subordinate judge for such appointment after determining the amount payable to the judgment debtor for his maintenance.

In the matter, the Court ordered that a receiver be appointed and sent the execution petition to the subordinate judge for that purpose after first determining the amount of allowance that the judgment-debtor was entitled to receive for his maintenance. The Judicial Committee, having considered the decision of the High Court, agreed with the conclusion that the court had reached. However, the Committee also expressed that it differed with the High Court on the precise legal character of the maintenance right granted to the judgment-debtor. Assuming that the judgment-creditor’s prayer was to have the maintenance right subjected to execution, the Law Lords observed that, as a matter of law, such a right could not be attached nor sold. They added that where the maintenance right arose from an assignment of property for which the amount was not fixed, the judgment-creditor could still seek the appointment of a receiver, provided that any surplus after satisfying the maintenance obligation be applied to the satisfaction of the decree debt. The Committee reiterated that the maintenance right itself remained immune from attachment or alienation. Accordingly, when the decree holder attempted to attach the maintenance right and thus deprive the judgment-debtor of his support, such an attempt was not permitted. Conversely, if the decree holder’s application for a receiver was broader and aimed at any residual income after the maintenance claim had been met, the appointment of a receiver for that limited purpose was justified. The Privy Council’s decision, according to the Committee, did not articulate any principle beyond this specific observation. In the Committee’s view, the decision should not be treated as establishing a general rule that a statutory bar on attachment and alienation of a particular class of property can be circumvented by a different mode of execution such as the appointment of a receiver. By contrast, the Committee cited the case of Nawab Bahadur of Murshidabad v. Karnani Industrial Bank Limited (1931) 58 I.A. 215, where it was noted that the Nawab possessed the power to dispose of rents and profits assigned to him for the maintenance of his title and dignity, but he lacked any power to alienate the underlying property. Because no public-policy issue arose, a receiver was properly appointed to take control of those rents and profits. This reasoning clearly indicates that where there is no power of disposal and the statute imposes an absolute prohibition on alienation or attachment on public-policy grounds, execution should not be imposed. The Committee further observed that, understood in the manner described above, the earlier decision in Rajindra Narain Singh’s case presented no difficulty. The discussion then proceeds to subsequent decisions that either followed or distinguished that ruling.

In the matter being considered, the Court observed that the property in question belonged to the defendant and therefore the plaintiff’s entitlement to maintenance could not be seized under section 60, clause (1). The Court then addressed a request made by the Government, which for the first time before the High Court sought an order for the appointment of a receiver to manage the plaintiff’s maintenance. Beaumont C.J. and another learned Judge examined that request and held that even the appointment of a receiver was not permissible. The Chief Justice explained that permitting such an appointment would effectively defeat the protection intended by the statutory provision, stating, “If these exempted payments can be reached in execution by the appointment of a receiver by way of equitable execution, the protection afforded by the section is to a great extent lost.” The judges deliberately avoided relying on Rajindra Narain Singh’s case, noting that the Board’s judgment did not contain a clear expression of opinion and there was uncertainty as to whether the allowance at issue qualified as maintenance. The Madras High Court, in The Secretary of State for India in Council v. Sarvepalli Venkata Lakshmamma ((1926) 49 Bad. 567), considered a question similar to the present one, while The Secretary of State for India in Council v. Bai Somi and Another ((1933) 57 Bom. 507) merely cited the ruling in Rajindra Narain Singh’s case without analysing its facts or reasoning, thereby offering no additional guidance. In Janakinath v. Pramatha Nath ((1940) 44 C.W.N. 266), a single-Judge decision reached the same conclusion as the Madras case; the judgment contained only a brief comment that “the Provident Funds Act does not in my opinion prohibit the appointment of a receiver of the sum lying to the credit of the deceased in the Provident Fund.” The implication appeared to be that, upon the death of an employee and in the absence of a dependent or nominee entitled to the fund under the rules, the money would become payable to the heirs and would no longer retain its character as a compulsory deposit. The case of Dominion of India, representing E.I. Ry. Administration and Another v. Ashutosh Das and Others ((1950) 54 C.W.N. 254) also referenced Rajindra Narain Singh’s case but did not discuss it in detail; Justice Roxburgh merely observed that “surely it is an improper use of that equitable remedy to employ it to avoid a very definite bar created by statute law to achieving the very object for which the receiver is appointed.” The decision in Ramprasad v. Motiram ((1946) 25 Pat. 705) involved the attachment and sale in execution of a money decree relating to the interest of a Khoposhdar in a heritable and transferable khorposh grant, and it provided no assistance to the issue before the Court. Counsel for the respondents then relied on three Privy Council decisions for support: the Nawab Bahadur of Murshidabad’s case ((1931) 58 I.A. 215), which had already been mentioned, Vibhudapriya Thirtha Swamiar v. Lakshmindra Thirtha Swamiar ((1927) 54 I.A. 228), and Niladri Sahu v. Mahant Chaturbhuj Das and others.

In the opinion of the Court, the two authorities cited as ((1926) 53 I.A. 253) concern cases involving the mortgaging of endowed property by the respective mahants for what was claimed to be the necessity of their institutions. Those decisions, which dealt with matters of mathematics and alienations, do not provide any comparable principle for the present dispute. In those earlier cases the mahants possessed a beneficial interest in the properties because they received maintenance for the institutions, and a receiver could be appointed over that beneficial interest to satisfy decrees. The Court, however, respectfully disagrees with the lower court’s view that a receiver may be appointed to enforce a decree against the Provident Fund money in the present matter. The Court holds that execution against the Provident Fund balance cannot be pursued through the appointment of a receiver. This holding, the Court explains, does not extend to the arrears of salary and allowance owed to the judgment debtor, because those amounts rest on a different legal basis. While Section 60, clause (1) of the Civil Procedure Code bars attachment of salary, the same protection does not apply to salary arrears, and the Attorney-General agreed that the arrears may be subjected to execution. The Court further observes that the Provident Fund balance remained unpaid to the subscriber after his retirement in January 1947, but that failure of payment does not alter the character of the amount as a compulsory deposit under the Act. Any uncertainty that might have arisen under the earlier 1897 Act is resolved by the definition in Section 2 of the current Act, which declares that any deposit that remains credit to the subscriber after the occurrence of a contingency—such as retirement—is also a compulsory deposit. The Court noted that the statutory language describes a compulsory deposit as any amount that remains due to the subscriber irrespective of the reason for its retention, and that retirement qualifies as such a reason. Thus the Provident Fund balance, though not disbursed, retains its status as a compulsory deposit. Accordingly, the remedy of appointing a receiver, which is suitable for enforcing rights over a beneficial interest, is not appropriate for the Provident Fund money, which is governed by the statutory deposit regime. Consequently, the appeal is allowed. The order dated 1 February 1949 that appointed a receiver is set aside insofar as it relates to the Provident Fund sum of Rs 1,563 that lies to the credit of the judgment-debtor. The Government is directed, subject to the grant of special leave, to pay the costs of the first respondent in this appeal. The appeal is therefore allowed.