Jugalkishore Saraf vs Raw Cotton Co. Ltd

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

Court: Supreme Court of India

Case Number: Civil Appeal No. 212 of 1954

Decision Date: 7 March 1955

Coram: Natwarlal H. Bhagwati, Syed Jaffer Imam, Das

In this matter the Supreme Court of India considered an appeal filed by Jugalkishore Saraf against Raw Cotton Co. Ltd, the judgment being delivered on 7 March 1955. The case was heard by a bench that included Justices Natwarlal H. Bhagwati, Syed Jaffer Imam, and Justice Das, Sudhi Ranjan. The official citation of the decision is 1955 AIR 376 and 1955 SCR (1) 1369. The dispute turned on provisions of the Code of Civil Procedure, 1908, specifically section 146 and Order XXI, rule 16, as well as on equitable principles derived from the Transfer of Property Act, 1882, sections 3, 5, 8 and 130.

The factual backdrop was that the plaintiffs, identified in the record as H & S, instituted a suit against the respondent corporation for recovery of a sum of money. While the suit was pending, on 7 February 1949 the plaintiffs executed a written instrument whereby they transferred to the respondents all book debts and other debts owed to them, together with the securities securing those debts and any other property to which they were entitled in connection with their Bombay-based business. One of those book debts formed the subject matter of the original suit, yet the transfer document made no reference to the pending suit or to any decree that might later be issued in that suit.

The respondents, after receiving the transferred assets, did not invoke Order XXII, rule 10 of the Code of Civil Procedure to have themselves substituted as plaintiffs in place of H & S. Instead, they permitted the litigation to proceed under the names of the original plaintiffs. Consequently, on 15 December 1949 the court rendered a decree in favour of H & S against the appellant Raw Cotton Co. Ltd.

Subsequently, on 25 April 1951 the respondents filed an application before the City Civil Court in Bombay seeking execution of the decree. Their application was made under Order XXI, rule 11 of the Code, and the court issued a notice pursuant to Order XXI, rule 16 directing both H & S and the appellant to show cause why the decree should not be executed by the respondents, who claimed to be the transferees of the debt.

The appellant contended, inter alia, that the respondents were merely assignees of the debt that formed the subject of the suit and not of the decree itself. On that basis, the appellant argued that the respondents had no right to enforce the decree. The Court, however, held that the respondents, as transferees of the debt that was the subject-matter of the suit, were entitled to apply for execution of the decree under section 146 of the Code of Civil Procedure in the capacity of persons claiming under the decree-holder.

The Court explained that the phrase “save as otherwise provided in this Code” appearing in section 146 operates to preclude a person from making an application under that section when other specific provisions of the Code are applicable to the situation. The judgment noted that Justices Das and Imam were of the majority view, while Justice Bhagwati dissented. Additionally, the Court observed that Order XXI, rule 16, in its first alternative, envisions the actual transfer by a written assignment of a decree after such decree has been passed.

The Court explained that a transfer of, or an agreement to transfer, a decree that has not yet been passed may, in equity, give the transferee a right to claim the beneficial interest in the decree once it is finally passed; however, such an equitable transfer does not make the transferee a “transferee of the decree by assignment in writing” as contemplated by Order XXI, rule 16. According to Justice Das, the written transfer of a piece of property that is the subject-matter of a suit, without simultaneously transferring the decree that has been passed or will be passed in that suit, does not give the transferee the standing to seek execution of the decree under Order XXI, rule 16 as a decree-holder by way of a written assignment. The Court noted that when any statutory or other legal provision causes an interest in property to pass from one person to another, the transfer of that property occurs by operation of law, and there is no justification for limiting such “operation of law” transfers only to the three situations of death, devolution or succession, or to transfers effected solely by statutory enactments. Consequently, if the document in question could be interpreted as a transfer or an agreement to transfer a future decree, then, upon the decree being passed, equity would treat the respondents as transferees of the decree by operation of law within the meaning of Order XXI, rule 16. Justice Bhagwati turned to Section 5 of the Transfer of Property Act, which defines a “transfer of property” as an act whereby the transferor conveys property to the transferee either presently or in the future; the terms “in present or in future” qualify the verb “conveys” rather than the noun “property.” A transfer of property that does not yet exist functions as a contract to be performed later and may be specifically enforced as soon as the property comes into existence. By virtue of this equitable principle, when the property subsequently exists and can be identified, equity treats the contract as completed, thereby converting the agreement into a full equitable assignment. The Court observed that no provision of the Code of Civil Procedure or any other law bars the operation of this equitable principle, and that a written assignment of a future decree becomes a complete equitable assignment once the decree is passed, thereby falling within the “assignment in writing” contemplated by Order XXI, rule 16. The Court cautioned that a mere transfer of property, by itself, does not automatically effect a transfer of a decree that has been or may be passed in respect of that property; an explicit assignment of the decree is required to give effect to such a transfer. However, when the property in question is an actionable claim as defined in Section 3 of the Transfer of Property Act and is transferred by a written instrument, the transferee may, under Section 130 of that Act, step into the shoes of the transferor, claim to be the transferee of the decree, and apply for its execution under Order XXI, rule 16.

In the situation where property is transferred under the Transfer of Property Act by a written instrument, the transferee may, by virtue of section 130 of that Act, step into the position of the transferor, claim to be the holder of the decree, and seek execution of the decree pursuant to Order XXI, rule 16 of the Code of Civil Procedure. The learned judge observed that a decree must already exist and be transferred before the transferee can invoke the benefits provided by rule 16; the ordinary and natural meaning of rule 16 admits no alternative construction, and no strict or narrow interpretation of its provisions is permissible. After reviewing the relevant case law, the Court proceeded to record the judgment in the Civil Appellate Jurisdiction concerning Civil Appeal No. 212 of 1954. The appeal arose from the judgment and decree dated 10 November 1953 issued by the High Court of Judicature at Bombay in Appeal No. 8 of 1953 under the Letters Patent, which challenged the decree dated 23 September 1952 rendered by the same High Court in Appeal No. 67 of 1952. That decree itself originated from an original decree issued on the basis of an order dated 20 November 1951 of the City Civil Court, Bombay, in Summary Suit No. 233 of 1948. Counsel for the appellant consisted of legal representatives, while counsel for the respondent also appeared, and the judgment was delivered on 7 March 1955.

The factual background of the appeal was straightforward. Two individuals, Mahomedali Habib and Sakerkhanoo Mahomedali Habib, conducted business in Bombay as merchants and pucca adatias dealing in bullion and cotton under the firm name Habib & Sons. In 1948 the firm instituted a summary suit, identified as Summary Suit No. 233 of 1948, in the Bombay City Civil Court against the present appellant, Jugalkishore Saraf, a Hindu businessman residing in Bombay. The suit sought recovery of Rs 7,113-7-0 together with interest at the rate of six per cent per annum, allegedly owed by the appellant for certain gold and silver transactions carried out by the firm in its capacity as pucca adatias. While the suit was still pending, on 7 February 1949 the parties executed a document under which the two partners agreed to transfer, and Messrs Raw Cotton Company Limited (referred to as the respondent company) agreed to accept, inter alia, all book debts and other dues owed to them in connection with their Bombay business, along with the full benefit of all securities relating to those debts and any other property to which they were entitled. The respondent company, however, did not invoke Order XXII, rule 10 of the Code of Civil Procedure to have itself substituted as plaintiff in place of Habib & Sons, the parties named on the pleadings, and consequently allowed the suit to proceed under the original plaintiffs’ names. It later emerged that the two partners had migrated from India to Pakistan, and that their properties had become vested in the Custodian of Evacuee Property.

In the summary suit, a decree was entered on 15 December 1949 granting Habib & Sons, who were the plaintiffs on record, a sum of Rs 8,018-7-0 representing the principal debt and interest, together with Rs 410 for the costs of suit, thereby aggregating to Rs 8,428-7-0. The decree also ordered that interest at the rate of four per cent per annum be payable from the date of the decree until the full amount was satisfied. Subsequently, on 11 December 1950, the Custodian of Evacuee Property in Bombay communicated to the respondent company that an order dated 2 August 1950 had been issued by the Additional Custodian confirming the “transaction of transfer” of the business of Habib & Sons to the respondent company. Around 25 April 1951, the respondent company filed before the Bombay City Civil Court a tabular statement that was presented as an application for execution under Order XXI, rule 11 of the Code of Civil Procedure. In the final column of that statement, under the heading “The mode in which the assistance of the Court is required”, the respondent company prayed that the court “be pleased to declare the Applicants the assignees of the decree as the decrement debt along with other debts … transferred by the plaintiffs to the Applicants by a deed of assignment dated 7 February 1949 which was confirmed by the Custodian of Evacuee Property, Bombay, and order them to be substituted for the plaintiffs”. The statement, however, failed to specify any of the modes of assistance required by clause (j) of Order XXI, rule 11, as mandated by the Code. On 10 May 1951, a notice was issued by the Bombay City Civil Court under Order XXI, rule 16 to both Habib & Sons, as the decree-holders on record, and to the defendant judgement-debtor, Jugalkishore Saraf. The notice required them to show cause why the decree, which had been passed in favour of the plaintiffs on 15 December 1949 and subsequently transferred to the respondent company, should not be executed by the transferees against the defendant judgement-debtor.

The defendant judgement-debtor responded by filing an affidavit sworn on 15 June 1951, in which he denied that the deed in question had been executed and also denied that the deed transferred the decree to the respondent company. The matter proceeded to trial on the basis of evidence. During the trial, the execution of the deed was proved by the testimony of an attesting witness, and the executing Court accepted that evidence. While the court rejected the defendant’s second contention, it rendered the notice absolute, awarded costs, and granted the respondent company leave to execute the decree against the judgement-debtor. Consequently, the judgement-debtor appealed to the High Court, where the appeal was heard by Justice Dixit. Before that judge, the execution of the deed was not contested, and therefore no further discussion was required on that point. The appeal turned solely on the question of whether the respondent company could be regarded as the transferee of the decree within the meaning of Order XXI, rule 16.

In this appeal the Court was asked to consider a substantial question as to whether the respondent company could be said to be the transferee of the decree within the meaning of Order XXI, rule sixteen of the Code of Civil Procedure. The learned judge had previously answered this question affirmatively, relying upon two decisions of the Bombay High Court, namely Purmananddas Jivandas v. Vallabdas Wallji (1) and Chimanlal Hargovinddas v. Ghulamnabi (2), and had affirmed the order of the executing court, thereby dismissing the appeal. The judgment-debtor subsequently raised a Letters Patent Appeal before the High Court, which was dismissed by Chief Justice Chagla and Justice Shah, who applied the two earlier Bombay High Court decisions. The High Court, however, granted a certificate of fitness for appeal to this Court under article 133 (1) (c) of the Constitution. The principal issue now urged before the Supreme Court is whether the respondent company may correctly claim to be a transferee of the decree under Order XXI, rule sixteen. Order XXI, rule sixteen, ignoring local amendments that are not material to the present point, provides: “16. Where a decree or, if a decree has been passed jointly in favour of two or more persons, the interest of any decree-holder in the decree is transferred by assignment in writing or by operation of law, the transferee may apply for execution of the decree to the Court which passed it; and the decree may be executed in the same manner and subject to the same conditions as if the application were made by such. Provided that, where the decree or such interest as aforesaid has been transferred by assignment, notice of such application shall be given to the transferor and the judgment-debtor, and the decree shall not be executed until the Court has heard their objections, if any, to its execution. Provided also that, where a decree for the payment of money against two or more persons has been transferred to one of them, it shall not be executed against the others.” The first observation that the rule invites is the sequence of events it contemplates. It assumes first that a decree has been passed and subsequently that the decree, or the interest of a decree-holder, is transferred either by a written assignment or by operation of law. The fundamental principle of statutory construction requires that a statute be read literally, giving the words their ordinary, natural and grammatical meaning. Only where such a literal reading produces an absurd result, or where the words are capable of an alternative meaning, may the Court depart from the literal meaning. In the present case a literal reading of Order XXI, rule sixteen produces no absurdity, and consequently there is no compelling reason to abandon the plain meaning. It follows, therefore, that if Order XXI, rule sixteen is interpreted in this straightforward manner, the respondent company

The Court observed that the respondents could not realistically argue that the decree which they now sought to enforce had, after being passed, been transferred to them by means of a written assignment that satisfied the meaning of Order XXI, rule 16. The reason for this conclusion was that the document alleged to constitute such an assignment had been executed on 7 February 1949, whereas the decree in question was not actually passed until 15 December 1949, a date that follows the execution of the purported assignment. The Court noted that whether the respondents might later claim to have become transferees of the decree by operation of law, as contemplated by the same rule, or to have acquired any other entitlement to its benefits, was a separate issue that would be examined at a later stage. For the present purpose, however, the Court found it sufficient to state that no transfer of the decree to the respondent company had occurred by any written assignment executed after the decree had been passed, as expressly required by Order XXI, rule 16. In support of this finding, the Court quoted the observations of a learned judge who had previously conceded that, if the language of Order XXI, rule 16 were interpreted strictly, the respondents possessed no viable case. A senior judge likewise affirmed that a strict construction of rule 16 left no room for an assignment of the decree in favour of the first respondent. Nevertheless, the learned Chief Justice, aligning with the earlier judge, chose to move away from a purely literal interpretation. He explained that the Bombay High Court had consistently held that an equitable assignment of a decree could satisfy the requirements of rule 16, and that the Court needed to consider not only legal assignments but also those that operated in equity. The equitable principle relied upon by the Bombay High Court traced its origin to Lord Westbury’s decision in Holroyd v Marshall, wherein it was held that a deed attempting to convey property not yet existing is void at law but may be effective in equity once the property comes into existence. The Court reiterated that, in equity, a contract to transfer future property could be enforced by specific performance, thereby transferring the beneficial interest as soon as the property materialised. This doctrinal position was later reaffirmed by Justice Jessel in Collyer v Isaacs, emphasizing that an agreement to assign future-coming property becomes a complete assignment once the property comes into existence.

In equity, when a contract is made to assign property that does not yet exist, the agreement is treated as completed at the moment the property comes into existence. Equity regards the act that ought to be performed as having been done, and it then attaches to the newly existing property, thereby converting the original contract into a full assignment. Applying this principle to the present case, the High Court determined that the document dated 7 February 1949, when properly interpreted, constituted an assignment of the decree that was pending in the suit. The Court’s reasoning was that, on a true construction, the document effected a transfer of the decree that was expected to be issued in the pending action. Because the decree did not exist at the time the document was executed, the document operated as an agreement to transfer the decree once it would be passed. Such an agreement, the Court held, could be enforced by a suit for specific performance, as indicated in L.R. 19 Ch. D. 312, 351 and the Privy Council decision in Raja Sahib Perhlad v. Budhoo. The moment the decree was finally passed, equity treated the required act as already performed, attached to the decree, and the agreement for transfer became the actual transfer of the decree. Consequently, the party receiving the decree became a transferee within the meaning of Order XXI, rule 16. The Court emphasized that the equitable principle applies only when there is an agreement to transfer a future decree; equity does not create a new agreement or fill any gaps in the parties’ arrangement.

The Court noted that, once the decree is issued, equity assumes that the transferor has executed a deed conveying the decree to the transferee, and therefore regards the transferee as the beneficial owner of the after-acquired decree. This equitable doctrine merely gives effect to the parties’ existing agreement and does not impose any new obligations or fill any lacunae. If no agreement existed to transfer the future decree, the doctrine could not be invoked. Accordingly, the Court had to examine whether the parties had indeed agreed to transfer the decree that was to be passed in the pending suit. This required a careful scrutiny of the terms of the document to ascertain its true meaning and import. No argument was presented that the document of 7 February 1949 was merely an executory agreement and not a deed of transfer. In fact, the submissions before the Court, as well as those before the lower Court, contended that the document was a completed deed of transfer. This conclusion relieved the Court of the need to examine the formal nature of the document and limited the inquiry to the properties covered by it.

In this case the Court observed that, because the document at issue was not required to be examined for its formal character, the inquiry could be limited to the question of which property interests were intended to be transferred by the deed. The Court noted that the High Court had held that the decree which was later passed in the pending suit was also encompassed within the deed. The High Court’s reasoning was based on the wording of Clause 1 of the deed, which listed six separate items of property, each described as pertaining to “the said Indian business.” The fourth item was expressed as “All the book and other debts due to the vendors in connection with the said Indian business and the full benefits of all securities for the debts,” while the sixth and residuary item was phrased as “All other property to which the vendors are entitled in connection with the said Indian business.” The Court pointed out that one of the book debts mentioned in the fourth item was the subject of the suit that was then pending, and that any decree that the plaintiff might obtain from that suit would therefore constitute a right or property “in connection with the said Indian business.” The High Court concluded that, because the parties were transferring all property connected with their business, they must have intended to transfer the future decree as well, and consequently the decree should be regarded as covered by the deed. The Court, however, could not accept this line of reasoning. It emphasized that the deed made no reference whatsoever to any suit or to any decree that might be passed in such suit, a reference that would have been expected if the parties had truly intended to transfer a future decree. Moreover, the residuary clause spoke of “All properties to which the vendors are entitled,” not of all properties to which they might become entitled in the future.

The Court then turned to the provisions of the Transfer of Property Act, specifically section 8, which provides that a transfer of property conveys to the transferee all the interest that the transferor is capable of passing at the time of the transfer, together with any legal incidents of that interest, and, where the transferred property is a debt or an actionable claim, also the securities attached to it. It was argued on behalf of the respondent that, read in the light of section 8, the deed made the respondent company entitled to all rights and remedies, including the right to prosecute the pending suit and to obtain a decree, and that the decree, once passed, was automatically transferred by virtue of the deed. The Court rejected this argument as circular. It observed that the transfer could only convey the interest that existed at the moment of transfer; at that time no decree existed, and therefore the transferors could not have conveyed any interest in a non-existent decree. Consequently, the Court held that section 8 of the Transfer of Property Act did not aid the respondent’s claim that the future decree was part of the transferred property. The Court further noted that, although the assignment of the debt gave the respondent company the right to seek substitution in the pending suit, that right did not extend to a transfer of a decree that had not yet been created.

The Court noted that, under Order XXII, rule 10, the parties who were plaintiffs in the pending suit had the option to invoke that rule and become plaintiffs themselves, but they elected not to do so; consequently the transferors were permitted to continue prosecuting the suit and to obtain a decree in their favour. Accordingly, the Court held that at the moment when the debt was transferred to the respondent company, the transferors could not have transferred a decree because no decree had yet been passed. On a proper construction of the deed, the transferors agreed to convey, in addition to the five specifically described properties, “all other properties to which the vendors are entitled,” meaning all properties to which they were entitled at the date of the deed. At that date the vendors possessed the right to prosecute the suit and to obtain whatever relief the Court might grant by decree, but because the decree had not yet been rendered, the property to which they were then entitled could not include any future decree. The Court emphasized that the deed contained no clause that attempted to transfer a decree that might be passed at a later time. Section 8 of the Transfer of Property Act, the Court explained, does not operate to transfer any future property; it only transfers the entire interest that the transferor is capable of passing at the date of transfer. Hence there was no agreement to transfer, let alone a transfer of, a future decree under the deed.

The Court observed that the deed only transferred the items enumerated in clause 1 together with all attendant legal incidents and remedies. Among the transferred properties were book debts. A book debt that formed the subject-matter of the pending suit remained a book debt after transfer; consequently it was transferred, but no decree concerning that book debt was transferred. In such circumstances, the Court found that there was no scope for invoking the equitable principle. The Court further held that the mere written transfer of a property that is the subject-matter of a suit, without expressly transferring the decree—whether already passed or to be passed—does not give the transferee the right to seek execution of the decree as a transferee under an assignment in writing within the meaning of Order XXI, rule 16. The Court cited the authorities Hansraj Pal v. Mukhraj Kunwar and Vithal v. Mahadeva to support this position. In the Court’s judgment, the decree was neither transferred nor agreed to be transferred to the respondent company by the deed, and therefore the respondent could not claim to be a transferee of the decree under the assignment provision contemplated by Order XXI, rule 16. The Court also noted that the parties had vigorously argued that the deed effected a transfer of the decree, thereby invoking the equitable principle, but the Court found no basis for such a claim.

In this case the Court observed that, once the decree was finally rendered, the respondent company acquired the status of a transferee of that decree by means of an assignment in writing as contemplated by Order XXI, rule 16. The Court noted that extensive legal scholarship had examined how the equitable principle might affect the earlier written agreement, and that the various decisions of the High Courts on this point were not easily reconciled. Consequently, the Court deemed it appropriate to set out its own view on the matter. For the purpose of that discussion the Court assumed, without endorsing it as a fact, that the document dated 7 February 1949 constituted a completed deed of transfer that purportedly covered a decree that was to be passed in the pending suit. The Court then referred to the Transfer of Property Act, which provides that property which does not exist at the date of the transfer cannot be transferred. Accordingly, the alleged transfer of a future decree could only be characterized as a contract to transfer the decree that would become enforceable after the decree was finally passed. The Court raised the question of what effect the equitable principle would have on the decree once it was issued. It explained that where a contract is made for the transfer of property that does not yet exist, the intended transferee may, when the property comes into existence, enforce the contract by specific performance, provided that the contract is of a kind that is specifically enforceable in equity. The Court further observed that legal title in the property passes from the transferor to the transferee only when the transferor actually executes a deed of transfer, either voluntarily as a matter of conscience or because a court orders specific performance. This execution of a deed normally entails delay, difficulty and expense. To avoid these inconveniences, equity may intervene and treat the transaction as if the deed had been executed immediately after the property came into existence, thereby vesting the beneficial interest in the intended transferee. The Court then asked whether that equitable step was brought about by the earlier document that spoke of a transfer or an agreement to transfer a property that was to be acquired in the future. In other words, the Court queried whether the after-acquired property could be said to have been transferred, with full effect, by the earlier document and whether that document could be regarded as an assignment in writing within the meaning of Order XXI, rule 16. Counsel for the respondent company argued that the answer to these questions must be affirmative and supported that position by referring to several authorities.

The Court observed that numerous earlier decisions could be referred to for guidance on the point under discussion. It then turned to the facts of the judgment titled Purmananddas Jivandas v. Vallabdas Wallji. In May 1859 the testator died and left his entire estate to executors who were to hold it in trust for the appellant. In August 1868 those executors instituted a suit in the Original Side of the Bombay High Court against Luckmidas Khimji for the recovery of money that had been advanced to him in his capacity as manager of Mahajan Wadi. While that suit was still pending, on 11 May 1870 the executors executed a very wide and general assignment that transferred every interest in the testator’s property to the appellant; the assignment expressly covered “all movable property, debts, claims and things in action whatsoever vested in them as such executors.” The appellant’s name was not entered on the court record, yet the proceedings continued in the name of the executors. On 23 January 1873 the court passed a decree in favour of the plaintiffs on the record, that is, the executors, for the sum of Rs. 31,272-13-5 and that decree was constituted as a first charge on the Wadi properties. Following the decree, the appellant applied for its execution under section 232 of the Code of 1882, which corresponds to Order XXI, rule 16, asserting his status as a transferee of the decree. The Chamber Judge rejected the application, but on appeal the Judges Sargent, C. J., and Bayley, J., held that the appellant possessed the competence to maintain the execution application. After noting that the assignment was couched in the most general terms, Sargent, C. J., observed: “........................ and the effect of this assignment was, in equity, to vest in Purmananddas the whole interest in the decree which was afterwards obtained. But it has been suggested that Purmananddas is not a transferee of the decree under section 232 of the Civil Procedure Code, because the decree has not been transferred to him ‘by assignment in writing or by operation of law’, and that, therefore, he is not entitled to apply for execution.” He went on to state that there is no doubt that, in an English court of equity, the decree would be regarded as assigned to Purmananddas and he would be permitted to proceed in execution in the name of the assignors. He further explained that no distinction exists between law and equity in this jurisdiction, and that the phrase ‘by operation of law’ must be understood to mean the operation of law as administered by these courts. Consequently, the Court concluded that, under the circumstances, the decree had been transferred to Purmananddas “by operation of law.” The passage quoted in isolation makes clear that the learned Chief Justice believed that the benefit of the decree became available to the appellant through an equitable principle, and therefore the decree should be deemed transferred to the appellant “by operation of law” rather than by a written assignment, as interpreted by the reporter who prepared the head-note. However, the learned Chief Justice immediately added after that statement: “In the present case the decree has been transferred by an assignment in writing as construed in”.

The Court observed that the sentence “these Courts” appeared, at first glance, to be somewhat inconsistent with the immediately preceding sentence, and that inconsistency had attracted considerable commentary in later cases. The learned Chief Justice did not cite any decision of the Bombay High Court that had embraced such a construction. In the case of Ananda Mohon Roy v. Promotha Nath Ganguli (1), the Court followed the Bombay High Court’s decision in Purmananddas Jivandas v. Vatllabdas Wallji (supra). It was noted, however, that in the Calcutta case the decree was obtained and the transfer effected on the same day, and the Court held that although the decree was not expressly assigned, the property together with all arrears of rent had been assigned to the mortgagee at the moment the decree was passed, and that the assignment thereby conveyed the decree as well. The Court also gave strong reliance to the decision in Chimanlal Hargovinddas v. Ghulamnabi (supra). In that case a shop was held by A and B as tenants-in-common. In May 1936 A agreed to sell his one-half share to C. Pursuant to that arrangement A instituted a partition suit on 16 January 1937 to recover his share. The disputes in the suit were referred to arbitration by order of the Court, and the umpire rendered his award on 16 January 1939, declaring that A was entitled to a one-half share. Subsequently, on 7 March 1939, A transferred all of his rights under the award—referred to in the judgment as a decree—to C by a registered deed. C did not seek substitution of his name on the suit record. The Court passed a decree based on the award on 1 September 1939, and on 24 November 1939 C applied for execution of that decree. The Court held that C was entitled to execute the decree under Order XXI, Rule 16, because what had been transferred to him was not merely A’s one-half share in the property but all of A’s rights under the award, including the right to obtain a decree. In the present case, having regard to the terms of the prior agreement and the parties’ treatment of the award as a decree, the intention was clear that the subsequent sale deed transferred both the award and the decree that subsequently issued upon it. The Full Bench expressly recognised that if the sale deed had transferred only A’s one-half share in the property or only his right to a decree, C could not have invoked Order XXI, Rule 16. When the Court read the three authorities cited by counsel for the respondent company, it concluded that those authorities were premised on the notion that the equitable title relating back to the earlier written agreement transformed the agreement to transfer the future decree into an assignment in writing of that decree as soon as it was passed.

The counsel for the party relied on the doctrine of relation back and sought to draw support from the observations of Lord Westbury in Holroyd v. Marshall, where he stated that “the contract would, in equity, transfer the beneficial interest,” and from the remarks of Jessel, M.R., in Collyer v. Isaacs, which described that “the contract to assign thus becomes a complete assignment.” The Court expressed considerable difficulty in accepting that line of argument as sound. First, the Court observed that the Lord Chancellor and the Master of the Rolls were not addressing the question of relation back in the manner it is presented before this Court. Second, the Court emphasized that the equitable principle invoked is not a mere rule for construing documents; rather, it is a substantive rule that confers on the promised transferee the benefit of property acquired after the agreement, provided the transferor had promised to convey such property. By treating as done what ought to be done, equity attaches itself to the after-acquired property and effectually brings about its transfer. The implication, as the Court saw it, is that the agreement alone, by its own force, does not convey property that is later acquired. Instead of requiring the intended transferee to incur the difficulty and expense of obtaining a decree for specific performance and compelling the promisor to execute a deed of transfer that would then convey the after-acquired asset, equity steps in and places the parties in the position that the prior agreement intended, as if a deed of transfer had already been executed. The Court further explained that, in its view, it is the operation of equity upon the subsequent event—the actual acquisition of the property—that transfers the beneficial interest to the promisee. This transfer, according to the Court, arises from equity itself, which operates beyond the terms of the prior agreement. While the agreement may make the equitable principle applicable and perhaps set the equity in motion, it is equity alone that divests the transferor of any interest in the after-acquired property and vests that interest in the intended transferee. Consequently, the Court concluded that, on logical and principled grounds, the after-acquired property cannot be said to have been transferred to the intended transferee merely by the written agreement. No principle was found that would allow such a transfer to relate back to the earlier agreement. The Court’s view was reinforced by the observations of Lord Cave in Performing Right Society v. London Theatre of Varieties, wherein a 1916 assignment by a firm of music publishers to a society, covering the performing rights of every song, was examined for its effect on later-acquired rights.

In the case of Performing Right Society v. London Theatre of Varieties, the court described how, in 1916, a firm of music publishers that were members of the plaintiff society executed an indenture assigning to the society the performing right of every song that the firm then possessed or might later acquire, the assignment being intended to last for the period of the assignor’s membership. After that, a song was written and its copyright together with the right of performance was assigned by the author to the same firm, but the firm did not execute a fresh written assignment to the plaintiff society as required by section 5(2) of the Copyright Act, 1911. The defendants, who owned a music hall, allowed the song to be performed publicly in their hall without obtaining the society’s consent. The plaintiff society sued the defendants for infringement of its performing rights and sought a perpetual injunction. The defence argued that because there was no written assignment of the subsequently acquired copyright from the firm to the society, the society was not the legal owner and therefore could not obtain a perpetual injunction.

While analysing the nature of the right that the plaintiff society claimed under the 1916 indenture and its claim to the later-acquired copyright secured by the firm, Viscount Cave, L.C., referred to section 5, sub-section (2) of the Copyright Act, 1911 and observed at page 13 that “There was on the respective dates of the instruments under which the appellants claim no existing copyright in the songs in question, and therefore no owner of any such right; and this being so, neither of those instruments can be held to have been an assignment ‘signed by the owner of the right’ within the meaning of the section.” He further explained that although a person may execute a document purporting to assign property that will be acquired later, equity causes the property, when acquired, to pass to the assignee, citing Holroyd v. Marshall and Tailby v. Official Receiver. However, he stated that it was unclear how such a later acquisition could be said to “relate back” so that an instrument which on its date was not an assignment under the Act could become one. He concluded that the appellants possessed an equitable right to have the performing rights assigned to them and were therefore equitable owners, but they were not assignees within the statutory meaning, and thus “this contention fails.” The Court held that these observations fully applied to the present dispute.

Applying the same reasoning, the respondent company might, by operation of equity, have become entitled to the benefit of the decree as soon as it was passed, but that does not mean that the decree was transferred by the document dated 7 February 1949. The Court noted that several decisions support this view. In Basroovittil Bhandari v. Ramchandra Kamthi, the plaintiff assigned a decree that was pending in a suit. The assignee was not entered as a party under section 372 of the 1882 Code, yet the suit proceeded in the name of the original plaintiff and a decree was issued in his favour. The assignee later sought execution of that decree as a transferee decree-holder under section 232 of the 1882 Code, and the application was dismissed. This precedent demonstrates that equity alone does not transform a document into a statutory assignment of a decree.

In the case of Basroovittil Bhandari v. Ramchandra Kamthi, the plaintiff assigned a decree that was to be passed in a suit that was still pending. Although the assignment was recorded, the suit continued in the name of the original plaintiff and the court ultimately granted a decree in his favour. After the decree was issued, the assignee sought to enforce the decree by claiming the status of a transferee decree-holder under section 232 of the Code of 1882. That application was dismissed. Justice White, Chief Justice, observed that the question before the court was whether the appellant could be treated as a transferee of a decree for the purposes of section 332, even though at the time of the assignment there was no decree and consequently no decree-holder. He explained that the court could not rely on the equitable doctrine invoked by the appellant, which was derived from Palaniappa v. Lakshmanan, I.L.R. 16 Mad. 429, to interpret section 232. According to White, C.J., the expression “decree-holder” must be understood to mean a holder of an actual decree, not a person who, in equity, might later become entitled to the rights of a decree-holder. Moreover, the language of the section concerning the transfer of a decree cannot be stretched to cover a situation in which no decree existed at the time the agreement was executed.

The judgment also noted that although the case of Purmananddas Jivandas v. Vallabdas Wallji was not cited in the earlier decision, the principle articulated in Palaniappa v. Lakshmanan, which incorporated the equitable rule set out by Mr. Justice Jessel in Collyer v. Isaacs, was brought before the court. In Dost Muhammad v. Altaf Hussain Khan, the plaintiff instituted a suit for recovery of immovable property and, during the pendency of the suit, transferred his interest to the respondent. The respondent did not seek to be entered as a party, and the suit proceeded in the plaintiff’s name. A compromise decree subsequently awarded a portion of the property to the plaintiff. After the decree was passed, the respondent applied to enforce the decree as a transferee. The Munsiff rejected the application, but the District Judge reversed that decision. On second appeal, Justice Chamier held that it was impossible to treat the respondent as a transferee because the document relied upon had been executed before the decree was passed. The decision in Peer Mahomed Rowthen v. Raruthan Ambalam may also be mentioned; in that case the Madras High Court followed its earlier ruling in Basroovittil Bhandari v. Ramchandra Kamthi. The case of Thakuri Gope v. Mokhtar Ahmad did not add new authority, as it merely reiterated the three earlier decisions. Finally, Mathurapore Zamindary Co. Ltd. v. Bhasaram Mandal represented the position adopted by the Calcutta High Court, reinforcing the view that a party cannot be treated as a decree-holder when the transfer occurred before any decree existed.

The Court observed that in the matter concerning Hennessey and his brothers, who were Zamindars, the plaintiffs had instituted rent suits against their tenants. While those suits were pending, Hennessey and his brothers transferred their Zamindari interests to the appellant company. The appellant company did not seek to be substituted as the plaintiff in the suits; instead, it allowed the suits to continue in the names of the original plaintiffs, namely the transferors. After the suits proceeded, decrees were finally passed in favour of Hennessey and his brothers. Following the issuance of those decrees, the appellant company applied for execution of the decrees. Both the executing Court and the lower appellate Court held that the appellant company was not a transferee of the decree, citing the authorities (1) [1912] 17 I.C. 512, (2) [1915] 30 I.C. 831, (3) [1922] C.W.N. (Patna) 256; A.I.R. 1922 Pat. 563, and (4) [1924] I.L.R. 51 Cal. 703. The appellant company then preferred a second appeal to the High Court. The High Court held that the appellant company could not invoke Order XXI, Rule 16, because that rule could not properly apply where no decree existed at the date of the property’s assignment. The Court further explained that the expression “decree holder” could not be extended to a party who might, in equity, later acquire the rights of the actual decree holder. The Court examined the case of Ananda Mohon Roy v. Promotha Nath Ganguli and explained that the construction relied upon in that case was based on the conveyance covering a decree that had been passed “simultaneously with, if not before, the execution of the conveyance.” The Court also noted that in Purmananddas Jivandas v. Vallabdas Wallji the transferor and transferee stood in the positions of trustee and cestui-que-trust, a circumstance that might attract equitable principles. Nevertheless, the Court could not accept the broad proposition suggested in that case that an equitable transferee becomes a transferee of the decree by a prior agreement and therefore falls within Order XXI, Rule 16. Consequently, the Court preferred to follow the decision of the Madras High Court in Basroovittil Bhandari v. Ramchandra Kamthi and the other authorities previously mentioned.

In a separate matter, the Court considered the case of Pandu Joti Kadam v. Savla Piraji Kate. In that case, one Tuljaram obtained a decree on a mortgage against the appellant Pandu Joti. Later, the respondent Savla instituted a suit against both the appellant Pandu and Tuljaram. The suit resulted in a decree directing Tuljaram to transfer the mortgage decree to Savla. Without having obtained, either by amicable arrangement or by execution of his own decree, an actual written assignment of the mortgage decree, the respondent Savla proceeded to seek execution of that decree. The Court held that although Savla possessed a legal right, by virtue of his own decree, to compel his judgment-debtor Tuljaram to assign the mortgage decree to him, that right alone, without a written assignment, did not render him a transferee of the mortgage decree for the purpose of executing the decree. The judgment therefore affirmed that a mere legal right to compel assignment, absent a formal written assignment, is insufficient to qualify a party as a transferee entitled to enforce the decree, citing the authority (1) [1925] 27 Bom. L.R. 1109. The Court further observed that even the Bombay High Court (Fawcett and Madgavkar

In the case of Genaram Kapurchand Marwadi v. Hanmantram Surajmal, the court adopted the reasoning of the Madras High Court in Basroovittil Bhandari v. Ramchandra Kamthi. The matter arose on a plea of limitation. In February 1914 the appellant obtained an assignment of the plaintiff’s rights in a suit that was then pending, and the original plaintiff continued to prosecute that suit. In November 1914 a decree was entered in favour of the original plaintiff. After the decree, the appellant applied for its execution in the years 1916, 1917, 1920 and 1921, but each of those applications was dismissed. In November 1923 the appellant secured a fresh written assignment from the plaintiff and then filed a new application for execution. The judgment-debtor contended that the earlier applications were not made in accordance with law and that they therefore failed to keep the decree alive. The court held that, although the appellant had an equitable right to the benefit of the decree, he did not become a lawful transferee of the decree until he obtained a written assignment in 1923, as required by Order XXI, rule 16. Consequently, the applications made before 1923 were not compliant with law, and the 1923 application was barred by limitation. The decision rested on the view that Order XXI, rule 16 permits the transfer of a decree only after the decree has been passed.

The court then considered the relevance of other authorities. It observed that the decision in Abdul Kader v. Daw Yin does not assist the respondent company, because in that case the court concluded that the deed in question transferred a decree that had already been passed. In Prabashinee Debi v. Rasiklal Banerji, Chief Justice Rankin examined the earlier cases and chose to follow the reasoning in Mathurapore Zamindary Co. Ltd. v. Bhasaram Mandal. The court further held that the case of Purna Chandra Bhowmik v. Barna Kumari Debi, when properly understood, offers no support to the respondent company’s contention. In that case, Defendant No. 1 had executed a mortgage bond in favour of the plaintiff, pledging the decree that would be issued in a pending suit that Defendant No. 1 had brought against a third party for unpaid work. After the mortgage, a decree was entered in that suit in favour of Defendant No. 1, who then continued the suit as the plaintiff. The new plaintiff, claiming to be the mortgagee-assignee of that decree, sued two defendants. Defendant No. 1 was the original plaintiff in the earlier suit and had mortgaged the future decree to the plaintiff, while Defendant No. 2 claimed to be a transferee of the same decree under a later conveyance. The court concluded that these facts did not establish a valid transfer of the decree under the statutory provisions governing assignments.

The decree issued in the first suit had been assigned in favour of the plaintiff by the first defendant. The person who was the judgment-debtor under that decree was not joined as a defendant in the present proceedings. The first defendant chose not to oppose the suit, and only the second defendant raised opposition. The second defendant argued that the present suit, which sought merely a declaration of title, could not be maintained under section 42 of the Specific Relief Act because the plaintiff had failed to pray for any consequential relief, such as a permanent injunction that would prevent the defendant from executing the decree. In rejecting that contention as untenable, Mukherjea, J., who then sat as a judge, observed: “All that the plaintiff could want possibly at the present stage was a declaration that she was an assignee of the decree and if she gets a declaration it would be open to her to apply for execution of the decree under Order XXI, rule 16, of the Code of Civil Procedure. No other consequential relief by way of injunction or otherwise could or should have been prayed for by the plaintiff in the present suit.” The Court noted that the meaning of Order XXI, rule 16, was not the point in dispute. The dispute did not involve the relationship between the alleged transferee of the decree and the judgment-debtor, especially since the judgment-debtor was not a party to this suit at all. The real issue was whether the suit was maintainable under section 42 because it lacked a prayer for consequential relief. In the Court’s view, the passage quoted from Mukherjea, J. was a passing comment that was not essential to the decision of the question before it and did not represent a settled view on the scope or effect of Order XXI, rule 16. The Court observed that, apart from the three authorities relied upon by counsel for the respondent company, the remaining authorities clearly held—and the Court agreed—that the first alternative of Order XXI, rule 16, requires an actual written assignment of the decree executed after the decree has been passed. While an agreement to transfer a decree that may be passed in the future can, in equity, give the intended transferee a beneficial interest after the decree is finally issued, such an equitable transfer does not operate retrospectively to create a written assignment within the meaning of Order XXI, rule 16. Counsel for the respondent company then argued that even if, by virtue of the prior written agreement read in the light of the equitable principle mentioned above or the provisions of the Transfer of Property Act, the respondent company became a transferee of the decree by a written assignment, …

They nevertheless became the transferees of the decree “by operation of law” as defined in Order XXI, rule 16. The expression “by operation of law” has been examined by many High Courts in a large number of decisions, yet the meanings ascribed to it differ widely and it is difficult to reconcile the various interpretations. In the present case the trial court expressed the view that the phrase could only refer to a transfer of rights that occurs “on account of devolution of interest on death, etc.” When the Letters Patent Appeal was decided, Chief Justice Chagla observed that the operation of law contemplated by Order XXI, rule 16 does not involve any equitable principle but rather a devolution such as that which arises on death or insolvency. The Chief Justice did not provide a reason for this view but simply assumed it to be the correct law. That assumption appears to derive from the observations of Sir Robert P. Collier in the Privy Council judgment in Abedoonissa Khatoon v. Ameeroonissa Khatoon. In that case the factual situation arose as follows: a plaintiff named Wahed sued his father Abdool for possession of certain properties. The trial court dismissed Wahed’s suit and Wahed appealed to the High Court. While the appeal was pending, Wahed died and his widow Abedoonissa was substituted for him as the appellant. The High Court allowed the appeal and, by its decree, declared that Wahed, during his lifetime, and the persons who became his heirs were entitled to recover the disputed properties. After the decree, Abedoonissa applied for execution of the decree both for herself and for a child named Wajed, who was alleged to be a post-mortem son of Wahed born to her. An objection was raised, inter alia, that Wajed was not the legitimate son of Wahed. The objection was overruled and the court held that Abedoonissa was entitled to execute the decree for herself and as guardian of Wajed. Subsequently, the judgment-debtor Abdool died. Abdool’s widow, Ameeroonissa, then instituted a suit seeking a declaration that Wajed was not the legitimate son of Wahed and asking that the earlier order be set aside. Abedoonissa argued that the matter had already been finally decided on the doctrine of res judicata. Ameeroonissa counter-claimed that the proceeding in which Wajed’s legitimacy had been determined was wholly incompetent for the purpose of deciding Wajed’s status because, under section 208 of Act VIII of 1859 – the provision that corresponds to Order XXI, rule 16 of the present Code – Wajed, being the post-mortem child, was not a transferee of the decree and therefore could not file for execution. Consequently, any determination of his status in that proceeding could not bind the parties. The key issue for determination in the suit filed by Ameeroonissa was whether Wajed qualified as a transferee of the decree within the meaning of section 208 of the Code of 1859. It

In that context, Sir Robert P. Collier, while delivering the Privy Council’s judgment and after quoting the relevant statutory provision, observed that, assuming Wajed possessed the interest he claimed, the decree was not transferred to him under the terms of the section either by assignment—an assignment that was not alleged—or by operation of law from the original decree-holder. He noted that no incident had occurred on which the law could operate to transfer any estate from Wajed’s mother to him. Specifically, there had been no death, no devolution, and no succession. The mother continued to retain whatever right she possessed, and that right was not transferred to her son; if Wajed possessed any right, it would be derived from his father. Consequently, Sir Robert P. Collier concluded that Wajed was not a transferee of a decree within the meaning of the statutory provision. The observations above attach to the phrase “by operation of law” an interpretation that, in the words of Chakravartti, J., in the judgment of Sailendra Kumar v. Bank of Calcutta, suggests the phrase should apply only where certain events occur that are not connected with any act by any person to effect a transfer, and where the law, operating on those events, brings about the transfer. Some of the High Court decisions currently cited appear to assume that the Privy Council intended to give an exhaustive list of situations in which property could be transferred by operation of law, but I agree with Chakravartti, J. that there is no justification for treating those observations as if they were the text of a statute. In Dinendranath Sannyal v. Ramcoomar Ghose, Sir Barnes Peacock highlighted a fundamental distinction between a private sale in satisfaction of a decree and a sale in execution of a decree. He explained that, in a private sale, the purchaser derives title through the vendor and cannot acquire a better title than that of the vendor, whereas, in a sale in execution, the purchaser acquires the right, title, and interest of the judgment-debtor by operation of law, adverse to the judgment-debtor, and free from any subsequent alienations or encumbrances imposed by the debtor after the attachment of the property sold in execution. Accordingly, the act of the decree-holder in seeking execution through attachment and sale, together with the Court’s order directing such attachment and sale, cannot be described as an event unconnected with a transfer such as death, devolution, or succession, as referred to in the earlier case. By applying for execution, the decree-holder clearly intends that the judgment-debtor be stripped of all right, title, and interest in the attached and sold property, and the Court’s order effectuates that transfer.

In this passage the Court observed that the effect of attaching and selling the judgment-debtor’s property is to strip the judgment-debtor of his right, title and interest and to pass those rights to the purchaser at the court-ordered sale. The Court stressed that this passage of ownership is not the result of a written assignment executed by the former owner in favour of the buyer. Rather, the transfer occurs because of the operation of the statutory provisions that govern the execution of decrees. The Privy Council decision cited by the Court demonstrates that transfers described as occurring “by operation of law” were not meant to be limited to the three classical situations of death, devolution or succession. More commonly, transfers by operation of law arise from the operation of statutory law. For example, when a person dies testate, his property devolves to his legal representatives by operation of the law of testamentary succession, which today is largely statutory. When a person is adjudged insolvent, his property vests in the official assignee, and that vesting is effected by the operation of the codified insolvency statutes. Similarly, a court sale of property in execution of a decree transfers the judgment-debtor’s right, title and interest in that property to the auction purchaser, the transfer being effected by the provisions of the Code of Civil Procedure. The Court also noted that certain statutes provide for forfeiture of property, such as property connected with offences involving illicit liquor or opium, and those statutes effect a transfer of the property from the delinquent owner to the State. The Court said that it is neither necessary nor useful to list every possible instance of transfer by operation of law. It is sufficient to recognise that there is no justification for restricting the concept to transfers that arise only from statutory provisions. When a Hindu or a Muslim dies intestate, the heirs acquire the estate not by any statute but by operation of the respective personal law. Consequently, for a transfer to qualify as a transfer “by operation of law,” it is enough that a law—whether statutory or otherwise—causes the rights in property of one person to pass to another. The Court then referred to the earlier case of Purmananddas Jivandas v. Vallabdas Wallji, where the Chief Justice, applying an equitable principle, upheld the appellant’s right to seek execution. The Chief Justice initially based his decision on the proposition that the appellant had become the transferee of the decree “by operation of law.” The Court found this reasoning logical because the equitable principle operated on the decree as soon as it was passed, thereby converting the transferor’s right, title and interest in the after-acquired decree into the appellant’s property.

In this case the Court explained that the interest of the decree holder passed to the appellant. The transmission of that interest resulted in the property being transferred from the decree holder to the appellant, and that transfer occurred by the operation of the equitable principle previously discussed, which the Court regarded as equivalent to any rule of law. The Court noted that the decision in Purmananddas Jivandas v. Vallabdas Wallji (supra) can be supported as an example of a transfer by operation of law, and that Chief Justice Sargent himself described the transfer in that case as being one by operation of law. The Court observed that the same reasoning applies to the two other authorities cited by counsel for the respondent company, namely Ananda Mohon Roy v. Promotha Nath Ganguli (supra) and Chimanlal Hargovinddas v. Ghulamnabi (supra). The Court then turned to the facts of Abdul Kader v. Daw Yin (supra). In July 1928 the plaintiff obtained a decree directing that a particular sale deed be set aside upon payment of a specified sum and that possession of the property together with mesne profits be granted. In August 1928, after the decree had been passed, the plaintiff executed a deed selling the property to the appellant. Under the terms of that deed the appellant was to obtain possession of the property through the Court upon payment of the amount stipulated in the deed. The plaintiff deposited the required sum and applied for execution of the decree, but she died shortly thereafter. Consequently the appellant applied for execution of the decree. Upon construing the terms of the sale deed, the Court concluded that the deed encompassed the decree, and therefore the appellant became the transferee of the decree by virtue of a written assignment. That finding was sufficient to resolve the dispute, but the learned Judges also attempted to reconcile earlier authorities by formulating two propositions.

The first proposition was that the phrase “by operation of law” cannot be invoked to render an assignment effective in transferring a decree and the right under it, where a true construction of the assignment’s terms would otherwise make it ineffective. The second proposition was that, although equitable principles may be relied upon in certain situations such as transfers by trustees to beneficiaries, those principles do not make a transfer valid “by operation of law”. The Court expressed difficulty in grasping the meaning of the first proposition. It observed that when a proper construction of a deed shows that it actually transfers an existing decree, no equitable principle need be invoked, because the transfer is effected by the deed itself as a written assignment. Equity becomes relevant only when the deed does not effectively transfer the decree because, for example, the decree does not yet exist at the time of the deed and the deed merely contemplates a future transfer. In such circumstances the equitable principle is invoked to attach to the decree when it later passes and to effect the transfer.

In this passage the Court considered whether, on a correct interpretation of a deed, the deed might fail to encompass a decree and consequently render the equitable principle inapplicable. The Court observed that if the deed, when truly construed, does not cover the decree, then the equitable principle would not arise at all, and under those circumstances the doctrine of transfer by operation of law could not be invoked. The Court further stated that no special exception would be required in such a situation. Turning to the second proposition, which was drawn from the observations of Mukherji, J., in the case of Mathurapore Zamindary Co., the Court expressed doubt that the equitable principle should be limited solely to transfers made by trustees to a cestui-que-trust. The Court pointed out that the principle had been applied in earlier English decisions involving a mortgagor and mortgagee, and also in the case of Performing Right Society v. London Theatre of Varieties, where it was used in relation to an indenture of assignment of copyright that was to take effect in the future, even though the parties involved did not stand in a trustee-beneficiary relationship. Moreover, the Court rejected the view that, whenever the equitable principle is applicable, the resulting transfer should be excluded from classification as a transfer by operation of law. In the judgment of Mahadeo Baburao Halbe v. Anandrao Shankarrao Deshmukh, the Court noted that the decision restricted transfers by operation of law to cases of death, devolution or succession, a limitation that the Court found without justification. (1) [1933] I.L.R. 57 Bom. 513.

The Court then examined the decision in Periakatha Nadar v. Mahalingam, a case it described as somewhat obscure. In that case a receiver, appointed in a partnership litigation, sued a debtor of the firm and obtained a decree. Subsequently, the assets of the firm, including the decree, were ordered to be sold by auction among the partners, despite objections from the partners themselves. One of the partners, identified as defendant No. 2, purchased the decree and later sought to enforce it. Justice Pandrang Rao, speaking at page 544, observed that the phrase “operation of law” could not be applied to a situation where a person becomes the owner of a decree through a transaction inter vivos. According to the judgment, the phrase applied only to transfers that occurred by succession, bankruptcy or any similar legal event that effected the transfer in law. The Court noted that when a purchaser acquires a property in an execution sale, that purchaser is deemed a transferee by operation of law. Accordingly, the Court could not understand why a purchaser who acquires a property at an auction held in a partnership proceeding, ordered by the Court in contravention of the parties’ objections, should not also be regarded as a transferee by operation of law. The Court argued that if an involuntary execution sale is not considered an inter- vivos transaction, then an auction sale conducted under a partnership action, even against the parties’ opposition, should not be treated as an inter- vivos transaction either. The learned Judges concluded that, because no specific form of assignment was mandated for the transfer, the Court’s order could be treated as an assignment in writing of the decree. The Court found it simpler to view the transaction as a transfer by operation of law rather than to hold that the Court acted as an agent of the partners and that its order constituted a written assignment.

The Court observed that it was more straightforward to regard the transaction in question as a transfer by operation of law rather than to characterize the Court as merely acting as an agent of the partners and the order as a written assignment of the decree. It noted that the law permits a Court, when dealing with a partnership dispute, to direct the sale of partnership assets, and that such a sale conveys the interest of every partner, except the partner who is itself the purchaser, to the purchaser through the decree. Consequently, the Court saw no reason why a transfer effected in this manner should not be treated in the same way as a transfer that results from a Court-ordered execution sale, that is, as a transfer by operation of law. The Court further reiterated that there is no substantive justification for limiting transfers by operation of law solely to instances of succession, bankruptcy or similar situations.

In the case of G. N. Asundi v. Virappa Andaneppa Manvi, a father sued his sons to obtain a declaration that he alone held title to a decree that the sons had previously secured against a third party on promissory notes. The parties reached a compromise and filed a joint petition, signed by both father and sons, stating that the sons would surrender all their rights in the decree to the father. The Court issued a decree in accordance with this compromise. When the father later applied for execution of the decree concerning the promissory notes, the Court held that the compromise petition, properly construed, amounted to an assignment of the decree within the meaning of Order XXI, Rule 16. The Court found no difficulty with this conclusion.

However, the learned Judges in that case, without sufficient justification, asserted that transfers by operation of law were intended to be confined to testamentary and intestate succession, forfeiture, insolvency and similar categories. The Court indicated that this restrictive view arose only because the judges felt compelled to follow the decision in Abedoonisa’s case, which had imposed such a limitation. The Court also correctly pointed out that a decree which merely declares the title of the decree-holder in respect of another decree previously passed in a different suit does not effect a transfer of the earlier decree by operation of law. Accordingly, the decree-holder under the later decree does not become a transferee of the earlier decree within the meaning of Order XXI, Rule 16. This principle has been affirmed in several authorities, including Mahadeo Baburao Halbe’s case and Firm Kushaldas Lekhraj v. Firm Jhamandas Maherchandani.

The Court reasoned that this follows from the inherent nature of a declaratory decree. Such a decree does not create or confer a new right; instead, it declares an existing right. Therefore, when a declaratory decree (as cited in I.L.R. [1939] Bom. 271 and A.I.R. 1944 Sind 230) declares that the decree-holder possesses a right under an earlier decree, there is no divestment of interest from one person and subsequent vesting in another. The earlier decree remains unaffected, and no transfer by operation of law occurs.

In the present situation there is no transfer of any right at all, and consequently the person in whose favour the declaratory decree is issued does not fall within the ambit of Order XXI, rule 16 of the Code of Civil Procedure. The Court then considered the case of Maya Debi v. Rajlakshmi Debi (1). In that case a Darpatnidar deposited, under section 13(4) of the Bengal Patni Taluqa Regulation (VIII of 1819), the arrears of revenue so as to avoid a putni sale and thereafter entered into possession of the putni because the statute entitled him to do so. He subsequently instituted a suit and obtained a decree for rent arrears due to the Patnidar from another Darpatnidar. After obtaining the decree he gave notice to the Patnidar and relinquished possession in the Patnidar’s favour. The issue that arose was whether, once possession of the putni was restored to the Patnidar, that Patnidar could be treated as the assignee of the decree which the former Darpatnidar had obtained against the other Darpatnidar. The Court held that, in view of the provisions of section 13(4), the Patnidar, on regaining possession of the putni, became the transferee of the decree by operation of law. The Court also held that the notice given by the Darpatnidar could be interpreted as an assignment in writing. From these authorities the Court concluded that whenever a statutory or other legal provision causes an interest in property to pass from one person to another, a transfer of that interest occurs by operation of law. The Court saw no reason to limit such transfers by operation of law to the three cases cited by the Privy Council in Abedoonissa’s case.

The Court then examined whether the document dated 7 February 1949 could be construed as a transfer or an agreement to transfer the decree that was to be passed in the future. Had the Court been able to treat that document as effecting such a transfer, it would have found, by operation of equity, that the beneficial interest in the decree (1) A.I.R. 1950 Cal. 1. 1402 was immediately after its issuance taken out of the transferors and vested in the respondent company, thereby making the respondent company the transferee of the decree for purposes of execution by operation of law. However, having held that the 7 February 1949 document did not relate to the decree, the Court found that the equitable principle could not be applied. Consequently, the respondent company could not claim to be a transferee within Order XXI, rule 16, and therefore could not maintain an application for execution of the decree. The Court noted that another ground had been advanced in support of the respondent’s right to seek execution, a ground that had not been raised before the High Court and for which the opinion of the learned High Court judges was unavailable. This new argument was premised upon Section 146 of the Code of Civil Procedure.

Section 146 of the Code of Civil Procedure stated that, except where the Code or any other law provided otherwise, a proceeding could be taken or an application could be made by or against any person who claimed under the party who originally held the decree. The Court identified two issues that had to be resolved before the provision could be invoked. First, it was necessary to determine whether the Code itself contained a different rule that governed the matter. Second, it had to be ascertained whether the respondent company could be described as a person claiming under the holder of the decree. Regarding the first issue, the Court observed that Order XXI, rule 16 expressly dealt with applications for execution by a transferee of a decree. Consequently, a party who was a transferee of the decree could not rely on section 146; such a party had to proceed under Order XXI, rule 16. The Court noted that this reasoning was circular: either the respondent company was a transferee of the decree, either by a written assignment or by operation of law, in which case it fell within the scope of Order XXI, rule 16, or it was not a transferee, in which case it might invoke section 146 provided the second condition was satisfied. The Court further examined the language of Order XXI, rule 16 and found that the rule did not expressly or implicitly forbid a person who claimed the benefit of a decree under the decree-holder, yet did not fit the description of a transferee by assignment or by operation of law, from making an application that the original decree-holder could have made. The phrase “save as otherwise provided by this Code” was therefore not meaningless; it operated in situations where the Code supplied a specific alternative. As an illustration, the Court referred to the second proviso of Order XXI, rule 16, which stipulated that when a decree for the payment of money against several persons was transferred to one of them, the decree could not be executed against the others. This proviso barred the particular judgment-debtor, to whom the decree alone had been transferred, from filing an execution application, and consequently he could not invoke section 146 as a person claiming under the decree-holder. Since the document in the present case did not encompass a future decree, the respondent company did not fall within the ambit of Order XXI, rule 16. Accordingly, that rule could not impede the respondent company from filing an execution application under section 146, provided it satisfied the remaining requirement—that it could be regarded as a person claiming under the decree-holder. The Court concluded that a person could become entitled to the benefits of a decree without being a formal transferee by assignment or by operation of law, and in such circumstances the person could indeed be treated as a claimant under the decree-holder.

The Court observed that a person who claims under the decree-holder may be treated as such, as held in Sitaramaswami v. Lakshmi Narasimha (1), although the earlier decision in Dost Muhammad v. Altaf Husain reached the opposite result. The Court further noted that in Kangati Mahanandi Reddi v. Panikalapati Venkatappa (2) the provisions of Order XXI, rule 16 were held not to bar execution of a decree under section 146. In that case it was specifically held that the applicant could not execute the decree under Order XXI, rule 16, but could do so under section 146. The principal question therefore was whether the respondent company possessed any right, title or interest in the decree and whether it could be characterised as a person claiming under the decree-holder. The Court had already determined that the document under consideration did not transfer a future decree; consequently the equitable principle did not apply and the respondent company did not become a transferee of the decree within the meaning of Order XXI, rule 16. The next issue was to ascertain the legal position of the respondent company. By virtue of a document dated 7 February 1949, the respondent company unequivocally obtained a transfer of the debt that formed the subject-matter of the suit then pending. That transfer, made under the Transfer of Property Act, conveyed all the legal incidents and remedies attached to the debt. As a result, the original transferors no longer possessed any right, title or interest in the subject-matter of the suit. After the transfer, the respondent company acquired the right to continue the suit and, if the debt proved to be outstanding, to obtain a decree. However, the respondent company did not replace the transferors as plaintiffs on the pleadings; instead, it permitted the transferors to remain as the parties before the court. Accordingly, the transferors proceeded with the suit despite having no longer any interest in the debt that had been transferred to the respondent company. In the eyes of the law, the relationship of the transferors to the respondent company was that of benamidars, that is, agents or trustees, for the respondent company. When a decree was eventually passed for the recovery of the debt, the respondent company emerged as the true owner of that decree. Between the respondent company and the transferors, the former could accordingly claim a declaration of title to the decree. There was no transfer of the decree itself from the transferors to the respondent company by way of a written assignment or by operation of law; consequently, the respondent company could not invoke Order XXI, rule 16 to seek execution of the decree. Nevertheless, the respondent company was nevertheless the real owner of the decree because the decree was passed in relation to, and for the recovery of, the debt that it had undeniably acquired by transfer of the document dated 7 February 1949,

The Court observed that, after the transfer, the respondent company became the owner of the debt that formed the subject matter of the suit together with all the legal consequences attached to that debt, and consequently it became the true owner of the decree. The title to the debt, according to the Court, was acquired by the respondent company through a transfer from the original transferors, and the company asserted its right to the debt on the same basis as the transferors. The Court further held that, at the moment the decree was passed, the respondent company, as the new owner of the decree, must also be regarded as a party claiming under the transferors. It was emphasised that the respondent company could not have become the owner of the decree unless it first owned the underlying debt; therefore, if the company claimed the debt by virtue of the transfer, it must also claim the related decree as an accretion to the original right that it obtained as a transferee of the debt.

The Court expressed the opinion that the respondent company was entitled, under section 146 of the Code of Civil Procedure, to make an application for execution in the same manner that the original decree-holders could have done. In referring to the earlier decision in Mathurapore Zamindary Co. Ltd. v. Bhasaram Mandal, the Court noted that Justice Mukherji had been reluctant to accept the broad proposition that courts of execution must consider equity when determining whether a decree had been assigned by operation of law. The Court rejected that reluctance, stating that if, after the amendment of Order XXI, rule 16 – which removed the words “if that Court thinks fit” – required the executing court to deal with complex questions concerning statutory transfer of a decree, there was no reason why the same court could not apply the simple equitable principle that transfers the beneficial interest in an after-acquired decree or address questions arising under section 146. The Court further explained that section 47 of the Code of Civil Procedure obliges the executing court alone to resolve all questions that arise between the parties or their representatives concerning execution, discharge or satisfaction of the decree, and even authorises the court to treat the proceedings as a suit. Because the respondent company stood in the position of an assignee of the plaintiff’s debt – the entire subject matter of the suit – it was entitled, under Order XXII, rule 10, to be entered on the record and therefore should be considered a representative of the plaintiff within the meaning of section 47. Counsel for the appellant argued that the execution application was defective because, although it was presented as an application under Order XXI, rule 11, it failed to specify any of the modes in which the Court’s assistance was sought. The Court agreed that the application was indeed defective, citing the decisions in Radha Nath Das v. Produmna Kumar Sarkar and Krishna Govind Patil v. Moolchand Keshavchand Gujar as authority, but noted that this objection had not been raised before the executing Court.

Because the lower court could have returned the execution application for deficiency, and because the appellant never raised any objection at any later stage of the proceedings, the defect was not rectified by the trial court. In addition, the respondent company subsequently filed another tabular statement for execution that specifically identified the mode in which the Court’s assistance was required. Under these circumstances the appellant could not maintain that the execution application was non-maintainable. Consequently, the appellate Court concluded that the appeal should be dismissed and ordered that costs be awarded against the appellant. Justice Bhagwati, after agreeing that the appeal must be dismissed with costs, indicated that he wished to record his own reasons for reaching that conclusion.

Habib and Sons, a partnership firm that conducted business as merchants and Pukka Adatias dealing in bullion and cotton in Bombay, instituted a suit against the appellant in the City Civil Court, Bombay. The suit, identified as Suit No. 233 of 1948, sought recovery of a sum of Rs 7,113-7-0 together with interest and costs. While the suit was pending, the parties reached an agreement on 7 February 1949 under which Habib and Sons transferred to the respondents, inter alia, a number of assets and obligations arising out of their Indian business. The agreement set out, among other things, that (i) “Forty:-All the book and other debts due to the Vendors in connection with the said Indian business and the full benefit of all securities for the debts,” and (ii) “Sixthly:-All other property to which the Vendors are entitled in connection with the said Indian business.” In consideration for this transfer, the respondents undertook to pay, satisfy, discharge and fulfill all the debts, liabilities, contracts and engagements of the vendors relating to the Indian business, and also to indemnify the vendors against any proceedings, claims or demands that might arise in respect thereof.

The respondents, however, did not comply with Order XXII, rule 10 of the Code of Civil Procedure to bring themselves on the record of the suit as plaintiffs in place of Habib and Sons. Nevertheless, a decree was entered in favour of Habib and Sons against the appellant on 15 December 1949 for a sum of Rs 8,428-7/- inclusive of interest and costs, with interest on the judgment fixed at four per cent per annum until payment. Both partners of Habib and Sons were subsequently declared evacuees. By an order dated 2 August 1950, the Custodian of Evacuee Property, Bombay, confirmed the transaction that transferred the business of Habib and Sons to the respondents, as evidenced by the agreement of 7 February 1949. The Custodian sent a communication to a director of the respondents on 11 December 1950 confirming this confirmation. On 25 April 1951, the respondents filed in the City Civil Court, Bombay an application for execution under Order XXI, rule 11 of the Code of Civil Procedure to enforce the decree obtained by Habib and Sons against the appellant. This application was made by the respondents in their capacity as assignees of the decree, and they specified that the assistance required from the Court was that the Court should declare the respondents as the assignees of the decree and permit them to enforce the decretal debt, together with the other debts transferred by Habib and Sons pursuant to the deed of assignment dated 7 February 1949, which had been confirmed by the Custodian of Evacuee Property, Bombay.

In the application filed by the Respondents, the City Civil Court was requested to hold that the Respondents were the assignees of the decree, that the decree debt together with other debts had been transferred from Habib & Sons to the Respondents by a deed of assignment dated 7 February 1949, that this deed had been confirmed by the Custodian of Evacuee Property, Bombay, and that the Respondents should therefore be substituted for the plaintiffs in the execution of the decree. Accordingly, the Court issued a notice under Order XXI, rule 16 of the Code of Civil Procedure on 10 May 1951, calling upon Habib & Sons and the Appellant to show cause why the decree passed in favour of Habib & Sons and subsequently transferred to the Respondents, who were the assignees of the decree, should not be executed by the transferees against the Appellant. The Appellant filed a show-cause response and advanced two principal submissions: first, that the deed of assignment in favour of the Respondents had not been executed by the partners of Habib & Sons; and second, that the party who had been assigned the subject-matter of the suit, and not the decree itself, was not entitled to seek leave for execution under Order XXI, rule 16. The Chamber Summons was adjourned so that evidence could be taken to determine whether the deed in question had been duly executed by Habib & Sons. After evidence was led, the Court held that the deed had indeed been executed by the two partners of Habib & Sons and that the execution of the deed was proved. On the question of law, the Court relied upon the authorities in Purmananddas Jiwandas v. Vallabdas Wallji¹ and Chimanlal Hargovinddas v. Gulamnabi², and concluded that the Respondents were entitled to invoke Order XXI, rule 16 to obtain execution of the decree. The Appellant appealed this finding to the High Court, where the matter was heard before Justice Dixit. The appeal did not challenge the finding that the deed of assignment had been proved; however, the Appellant reiterated the contention that, because only the property and not the decree itself had been transferred, the Respondents could not seek execution of the decree. Justice Dixit rejected this contention, observing that a strict literal construction of Order XXI, rule 16 would appear to leave the Respondents without a case, but that the precedent set by Purmananddas Jiwandas v. Vallabdas Wallji¹ and Chimanlal Hargovinddas v. Gulamnabi² warranted a contrary conclusion, and consequently dismissed the appeal. The Appellant then filed a Letters Patent Appeal against Justice Dixit’s decision, and the appeal was heard before a Division Bench of the High Court consisting of Chief Justice Chagla and Justice Shah. The Division Bench likewise noted that a strict construction of Order XXI, rule 16 would suggest that there was no assignment of the decree in favour of the Respondents. Nonetheless, the Bench observed that the High Court had consistently accepted the view that an equitable assignment of a decree could create a right to apply for execution under Order XXI, rule 16, and that the assessment should not be confined to a purely legal assignment but should also consider an equitable assignment. Applying this principle to the two Bombay decisions relied upon by the lower courts, the Division Bench concluded that the deed of assignment fell within the equitable assignment doctrine articulated in those cases, that it therefore constituted an equitable assignment of the decree originally granted to Habib & Sons, and that the Respondents’ application for execution was maintainable under Order XXI, rule 16. Accordingly, the Division Bench dismissed the appeal.

In the judgment the Court expressed the view that a decree could be transferred by an equitable assignment, and that such an equitable assignment would make the person receiving the decree an assignee for the purposes of Order Twenty-One, Rule Sixteen. The Court stressed that the issue to be examined was not only whether a legal assignment had occurred but also whether an assignment operating in equity could satisfy the provisions of that rule. Accordingly, the Court examined the two Bombay decisions that had been relied upon by the City Civil Court and by the learned Judge Dixit. After analysing those authorities, the Court concluded that the deed of assignment in the present case fell within the principle laid down in the two Bombay decisions. It held that the deed effected an equitable assignment of the decree that had ultimately been passed in favour of Habib & Sons. Consequently, the Court found that an application for execution of the decree by the assignee was maintainable under Order Twenty-One, Rule Sixteen, and it dismissed the appeal. The appellant subsequently applied for and obtained the certificate required under article one hundred thirty-three, clause one, sub-clause c of the Constitution. Order Twenty-One, Rule Sixteen provides that when a decree is transferred by assignment in writing or by operation of law, the transferee may apply to the court that passed the decree for its execution, and the decree may be executed in the same manner as if the original decree-holder had made the application. The rule also requires that notice of such an application be given to both the transferor and the judgment-debtor, and that execution be stayed until the court has heard any objections raised by them. The rule expressly limits the contemplated transfer to either an assignment in writing or a transfer by operation of law.

The appellant did not, at any stage of the proceedings, contend that the transfer in the present case was by operation of law, nor did it dispute that the agreement dated the seventh of February, nineteen forty-nine was an assignment of all the rights that Habib & Sons possessed in connection with the Indian business. The essential question, therefore, was whether the deed of assignment dated the seventh of February, nineteen forty-nine constituted a transfer of the decree by assignment in writing within the meaning of Order Twenty-One, Rule Sixteen of the Code of Civil Procedure. The Court noted that a strict and narrow construction of the expression “where a decree is transferred by assignment in writing” has been adopted by the High Court of Madras in Basroovittil Bhandari v. Ramchandra Kamthi and by subsequent decisions, particularly Kangati Mahanandi Reddi v. Panikalapati Venkatappa & Another. Similar reasoning has been applied by the High Court of Calcutta in Mathurapore Zamindary Co. Ltd. v. Bhasaram Mandal, a principle that is followed in Prabashinee Debi v. Rasiklal Banerji. Those decisions hold that the term “decree-holder” must be interpreted to mean the actual holder of the decree and not a party who may later acquire the rights of the decree-holder in equity. The Court further observed that the language of Order Twenty-One, Rule Sixteen, as originally drafted, cannot be expanded to cover a situation where the decree did not exist at the time of the purported assignment.

In the judgment, the Court observed that the language of Order XXI, rule sixteen, previously interpreted in the Madras High Court decisions such as Basroovittil Bhandari v. Ramchandra Kamthi (1907) 17 Madras Law Journal 391, Kangati Mahanandi Reddi v. Panikalapati Venkatappa & Another (1942) A.I.R. 21 Madras, and the Calcutta High Court decision Mathurapore Zamindary Co. Ltd. v. Bhasaram Mandal (1924) I.L.R. 51 Calcutta 703, required that a decree must actually exist at the time of the assignment for the assignment to be regarded as a transfer of the decree. The Court noted that this strict construction was effectively acknowledged by Justice Dixit and by the Division Bench, which remarked that, when Order XXI, rule 16 was read narrowly, there was no assignment of any decree in favour of the respondents.

Conversely, the Court recorded that the Bombay High Court, in the cases Purmananddas Jiwandas v. Vallabdas Wallji (1877) I.L.R. 11 Bombay 506 and Chimanlal Hargovinddas v. Gulamnabi (1946) I.L.R. 276 Bombay, adopted an equitable principle articulated by Sir George Jessel in the English case Collyer v. Isaacs. That principle held that a creditor who possessed a mortgage on existing chattels and also obtained an assignment of chattels that did not yet exist could, in equity, treat the later-acquired chattels as already assigned once they came into existence, thereby completing the assignment. The Court explained that equity does not permit a party to assign property that does not exist, but it does allow a contract to assign future property, and when the property materialises, equity treats the assignment as complete.

The Calcutta High Court applied the same reasoning in Purna Chandra Bhowmik v. Barna Kumari Debi (1939) I.L.R. 2 Calcutta 341, and the Madras High Court echoed the view in Kangati Mahanandi Reddi v. Panikalapati Venkatappa & Another (1942) A.I.R. 21 Madras, suggesting that if the matter were considered afresh, the assignee might be able to execute the decree under Order XXI, rule 16. The Court further noted that the Bombay High Court decisions and the equitable principle they embraced had been brought to the attention of the judges in the Mathurapore Zamindary Co. Ltd. v. Bhasaram Mandal case, but those judges rejected the principle. Instead, they relied on the Privy Council’s observations in the case concerning a similar provision in Section 208 of Act VIII of 1859, namely Abedoonissa Khatoon v. Ameeroonissa Khatoon (1876) L.R. 4 IA 66, where the Privy Council held that the provision was not intended to apply where there was a serious dispute over an equitable interest in a decree.

Chief Justice Rankin, in Prabhashinee Debi v. Rasiklal Banerji (1931) I.L.R. 59 Calcutta 297, emphasized this point, stating that the Privy Council’s view aligned with the Chief Justice’s observation that the rule was not meant to cover cases involving contested equitable interests in a decree. The Court concluded that the strict interpretation requiring the existence of a decree at the time of assignment remained the prevailing view, despite the alternative equitable approach advocated in the Bombay decisions.

In this passage the Court explained that there are two conceivable ways of interpreting the rule governing execution of a decree by a transferee. The first approach requires that a decree already exist and that the decree be transferred by a written instrument; this strict approach is the one that Indian courts have traditionally followed. The second approach would permit the rule to be applied only when the case is clear and straightforward, while allowing the court discretion to decline application where the facts are complex or the legal questions are difficult and unsuitable for resolution in a simple execution application. The Court observed that if the rule were understood to give the court unfettered discretion to decide whether to apply it, the rule might become workable; however, the Court rejected the notion that such discretion was intended to be part of the rule. To support this conclusion the Court pointed to the deletion, at the time the Civil Procedure Code of 1908 was enacted, of the words “if that Court thinks fit the decree may be executed.” The Court then turned to Order XXI, Rule 16 of the Code of Civil Procedure, which authorises execution by a transferee of a decree. The Court stated that a person seeking execution must first establish his title as the decree’s transferee; until such title is proven, the person cannot invoke the provision. Title can be established either by showing a written assignment of the decree or by demonstrating that the transfer occurred by operation of law. Section 5 of the Transfer of Property Act defines a “transfer of property” as an act by which the transferor conveys property, either presently or in the future, to the transferee. Accordingly, a decree may be transferred by written assignment either now or at a later date, but even when the transfer is intended to take effect in the future, the decree that is the subject of the transfer must already exist on the date of the transfer. The wording “in present or in future” qualifies the verb “conveys” and not the noun “property,” and courts have held that a transfer of property that does not yet exist operates as a contract to be performed later, which may be specifically enforced as soon as the property comes into existence. The Court cited the Privy Council’s observation in Rajah Sahib Perhlad v. Budhoo, noting that a sale of property which the vendor does not possess and may never be able to establish title over can only be evidence of a future contract, enforceable upon the occurrence of the contingent event.

In this case, the Court explained that a purchaser may claim specific performance if he appears before the Court showing that he has performed all obligations that were his under the contract. The Court observed that by the operation of an equitable principle, once the property comes into existence and can be identified, equity treats as done that which ought to be done, and the contract to assign then becomes a complete equitable assignment. Accordingly, where a decree is to be passed in the future, no assignment of that decree can occur until the decree actually exists; only then does the agreement to assign attach to the decree and become a complete equitable assignment. Because the decree did not exist at the date of the transfer, the written assignment cannot be said to have transferred the decree; it remains a contract to be performed in the future, which may be specifically enforced when the decree is finally passed. Consequently, there is no automatic legal transfer in favour of the assignee when the decree is passed. A further act by the assignor is required to fully effect the transfer, and if the assignor fails to act, the assignee’s only remedy is to sue for specific performance of the transfer contract. Thus, there is no legal transfer or assignment of a future decree merely by a written assignment executed before the decree exists; the assignee could claim the decree was transferred only through the equitable principle described, whereby the assignment contract becomes a complete equitable assignment once the decree is passed. The Court then considered whether this equitable principle could be imported while construing the statutory provision enacted in Order XXI, rule 16 of the Code of Civil Procedure. The Code of Civil Procedure does not prescribe any particular mode for executing a written assignment to effect a decree transfer. The only other statutory provision concerning written assignments appears in Chapter VIII of the Transfer of Property Act, which deals with transfers of actionable claims. Section 3 of that Act defines an actionable claim as a claim to any debt or to any beneficial interest in movable property not in the possession of the claimant, which the civil courts recognise as giving grounds for relief. A judgment debt or decree is not an actionable claim because no further action is required to realise it; it has already been the subject of a suit and is secured by the decree. Likewise, a decree that is to be passed in the future does not fall within the definition of an actionable claim, and an assignment or transfer of such a future decree need not follow the mode prescribed by section 130 of the Transfer of Property Act.

In this case, the Court observed that a future decree need not be transferred in the mode prescribed by section 130 of the Transfer of Property Act. Consequently, if the assignment or transfer of a decree that has not yet been passed does not have to follow the statutory mode, there is no barrier to applying the equitable principle previously set out. Under that principle, the written assignment contract becomes a complete equitable assignment at the moment the decree is finally passed. Accordingly, a written assignment of a future decree creates a contract to assign; that contract transforms into a full equitable assignment when the decree is rendered, thereby satisfying the conditions of Order XXI, rule 16, because the transfer of the decree is effected by a written assignment that attains the status of an equitable assignment upon the decree’s issuance. The Court further noted that no provision of the Civil Procedure Code or any other enactment prevents the operation of this equitable principle. In determining the rights and liabilities of the transferee of a decree on one side and those of the decree-holder and the judgment debtor on the other, there is no justification for interpreting the words “where a decree … is transferred by assignment in writing” in a narrow and literal sense. Such a restrictive reading had been adopted by the High Court of Madras in Basroovittil Bhandari v. Ramchandra Kamthi and by the High Court of Calcutta in Mathurapore Zamindary Co. Ltd. v. Bhasaram Mandal and Prabashinee Debi v. Rasiklal Banerji. It was significant that the High Court of Calcutta, in Purna Chandra Bhowmik v. Barna Kumari Debi, applied the same equitable principle. The Court there held that a plaintiff, whose defendant had executed a mortgage bond assigning, as security, the decree that would be passed in a suit against a third party for unpaid bills, was entitled to be declared the assignee of the decree once it was passed. As a declared assignee, the plaintiff could either amicably realise the decretal debt or proceed by execution. Consequently, the plaintiff could apply for execution of the decree and rely upon the provisions of Order XXI, rule 16, as the assignee, even though the decree was passed after the date of the written assignment. The Court concluded that there could be no objection to the adjudication of complex factual issues or difficult questions of law in execution proceedings, as permitted by section 47 of the Code of Civil Procedure.

The procedure empowers the court that is executing a decree to resolve every issue that arises in connection with the execution of that decree. Subsection (2) further empowers the executing court to treat a proceeding under the relevant provision as a suit, thereby eliminating the need to institute a separate suit for determination of the same matter. The series of decisions of the High Court of Bombay, commencing with Purmananddas Jivandas v. Vallabdas Wallji (1) and concluding with Chimanlal Hargovinddas v. Gulamnabi (2), adopt the equitable principle previously articulated. These decisions, in my view, align more closely with law and equity than the narrow construction applied by the High Courts of Madras and Calcutta to the words “where a decree … is transferred by assignment in writing” as observed in the cited cases. Even if an equitable assignment were regarded as fitting within an “assignment in writing” contemplated by Order XXI, rule 16 of the Code of Civil Procedure, such construction would nevertheless require that the assigned decree be one that was to be passed in the future in favour of the assignor. In the present matter, the deed of assignment dated 7 February 1949 cannot be interpreted, either expressly or by necessary implication, as assigning to the respondent the decree that the City Civil Court was to pass in favour of Habib & Sons. Another aspect of the dispute, which was not raised before the lower courts and which is not addressed in most of the judgments previously referred to, also requires consideration. Authorities agree that a mere transfer of property does not, by itself, effect a transfer of a decree that has been passed or may be passed in relation to that property, and that such a transfer would require a separate assignment of the decree, as held in Hansraj Pal v. Mukhraji Kunuvar & others (1), Mathurapore Zamindary Co. Ltd. v. Bhasaram Mandal (2), and Kangati Mahanandi Reddi v. Panikalapati Venkatappa & another (3). However, when the transferred property is an actionable claim as defined in section 3 of the Transfer of Property Act, the consequences differ. An actionable claim includes any claim to a debt or to a beneficial interest in movable property not in the claimant’s actual or constructive possession, which civil courts recognise as giving rise to a cause of action. A transfer of such an actionable claim, effected by a written instrument signed by the transferor, is complete and effective under section 130 of the Act upon execution of that instrument, and at that moment all rights and remedies of the transferor vest in the transferee, irrespective of whether notice of the transfer has been given to the debtor. Thus, the transferee acquires not only the principal claim but also every ancillary right attached to that claim.

In the case where a book debt or any property that qualifies as an actionable claim is transferred through a written assignment, every right and remedy that the transferor possessed in respect of that claim passes immediately to the transferee at the moment the assignment is executed. This transfer includes the transferor’s entitlement to prosecute the claim to judgment, whether the claim is being pursued in an existing suit or a new suit is instituted for its recovery. The Court further explained that the actionable claim is not transferred in isolation; all the necessary adjuncts and appurtenances that belong to the claim also move to the transferee. Section 8 of the Transfer of Property Act states that, unless the parties expressly or necessarily intend otherwise, a transfer of property instantly conveys to the transferee the entire interest that the transferor is capable of passing, together with the legal incidents attached to that interest. The legal incidents encompass, for example, a debt or any other actionable claim and the securities that secure such claim, as illustrated in the authorities cited as [1908] I.L.R. 30 All. 28, [1924] I.L.R. 51 Cal. 703 and A.I.R. 1942 Mlad. 21, but they do not include arrears of interest that accrued before the transfer took place.

The Court observed that where book debts or other property falling within the definition of an actionable claim are transferred, the transfer inevitably includes the transferor’s right to a decree that may be granted in his favour in pending litigation. Consequently, the moment a court passes such a decree in favour of the transferor, that decree automatically passes to the transferee by virtue of the previously executed written assignment. The debt that forms the substance of the claim becomes merged in the decree, and the transferee, by virtue of the same assignment, acquires not only the book debt but also the decree into which the debt has merged. The merger does not alter the character of the book debt; it remains a debt, and the transferee is entitled to the benefits of the decree without any additional requirement. The Court noted that the transferee could, after executing the deed of assignment, invoke Order XXXII, Rule 10 of the Code of Civil Procedure to have himself substituted as plaintiff in place of the transferor and continue the suit to judgment. However, even if the transferee does not take that step, he is not deprived of the decree’s benefits that ultimately favour the transferor. The only limitation affecting the transferee is provided by Section 132 of the Act, which stipulates that the transferee takes the actionable claim subject to all liabilities and equities that the transferor was subject to as of the date of transfer. The transferee of the actionable claim therefore steps into the shoes of the transferor with respect to the decree, subject to the equities and liabilities existing at the time of the assignment.

In this case, the Court observed that an actionable claim could step into the position of the original transferor and could treat itself as the transferee of the decree because the assignment was made in writing by the transferor in favour of the claimant. Accordingly, the claimant could seek to execute the decree as a transferee under Order XXI, rule 16 of the Code of Civil Procedure. The Court noted that the Bombay High Court in the case of Purmananddas Jivandas v. Vallabdas Wallji had not examined this point, since the assignment in that case was executed on 11 May 1870, which was prior to the commencement of the Transfer of Property Act of 1882. Because of that temporal circumstance, the Bombay High Court relied on equitable principles and held that an equitable assignment completed at the moment the decree was passed fell within the scope of the former section 232 of the Code of Civil Procedure. The Court further pointed out that the Full Bench of the Bombay High Court in Chimanlal Hargovinddas v. Gulamnabi, as well as Justice Dixit and the Division Bench hearing the present matter, had also failed to consider this issue. The Patna High Court, in the judgment of Thakuri Gope and Others v. Mokhtar Ahmad & Another, approached the question closely. That court observed that the subject matter transferred was indeed an actionable claim, but it did not analyse the legal consequences of that transfer. Instead, the Patna court’s reasoning was diverted by reference to equitable principles and their applicability when interpreting Order XXI, rule 16 of the Code of Civil Procedure. Later, the Calcutta High Court, in Purna Chandra Bhowmik v. Barna Kumari Debi, adopted a clear stance on the issue. The judgment, recorded at page 344, contained the following observation: “In my opinion, what was transferred was the claim to a debt and as such would come within the definition of actionable claim as given in section 3 of the Transfer of Property Act. The mere fact that the claim was reduced by the Court did not make, in my opinion, any difference.” The Calcutta court also applied the equitable principle that the mortgage must be deemed to attach to the decree as soon as the decree was passed, because the decree specified a definite amount. Furthermore, the court held that the plaintiff was entitled to a declaration establishing her status as an assignee of the decree. Once such a declaration was obtained, the plaintiff could, in the plaintiff’s view, move for execution of the decree under Order XXI, rule 16 of the Code of Civil Procedure.

The Court expressed confidence that, had this particular aspect of the question been properly raised before Justice Dixit or the Division Bench in the present proceedings, the result would have been the same as that reached by the earlier authorities. The Court cited the authorities Purmananddas Jivandas v. Vallabdas Wallji (1877) I.L.R. 11 Bom. 506, Thakuri Gope case A.I.R. 1922 Patna 563, Chimanlal Hargovinddas v. Gulamnabi I.L.R. 1946 Bom. 276, and Purna Chandra Bhowmik v. Barna Kumari Debi I.L.R. 1939 2 Cal. 341 to support this view. Counsel for the respondents then advanced an additional argument. The counsel contended that, even if the respondents were not entitled to rely upon Order XXI, rule 16 of the Code of Civil Procedure, they nevertheless were the true owners of the debt and of the decree which. The counsel argued that the ownership of the debt itself conferred a right to enforce the decree, independent of the specific procedural provision. Thus, the respondents claimed that the benefit of execution could be pursued by them notwithstanding any limitation imposed by Order XXI, rule 16.

In this case, the Court observed that the decree which was eventually issued by the City Civil Court in favour of Habib and Sons arose from the deed of assignment dated 7 February 1949. The Court held that, pursuant to section 146 of the Code of Civil Procedure, execution proceedings could be commenced and an application for execution could be filed by those persons who claimed under Habib and Sons. The deed of assignment had transferred the debt that formed the subject of the pending litigation in the City Civil Court between Habib and Sons and the Appellant. Consequently, Habib and Sons were entitled to institute execution proceedings and to apply for execution of the decree against the Appellant. Moreover, the Respondents, who were claiming under Habib and Sons by virtue of the deed of assignment, were likewise vested with the right to commence execution proceedings and to make the application for execution under Order XXI, rule II of the Code of Civil Procedure. The Court further noted that the counsel for the Respondents contended that Order XXI, rule 16 of the Code of Civil Procedure did not bar such execution proceedings initiated by the Respondents. In support of that contention, the counsel relied upon the observations made by the learned Judges of the High Court of Madras in Kangati Mahanandi Reddi v. Panikalapati Venkatappa & another (1) at page 23, wherein it was held that it could not be said that rule 16 applied solely to decrees existing at the time of transfer and that it therefore prohibited a transferee, who obtained a valid transfer of a decree embodied in a written deed as required by rule 16, from applying for execution before the decree was actually passed. The Madras Court further stated that allowing execution by such a transferee would not contravene the principles embodied in rule 16 or in Order XXI generally, and that the transferee, being the true owner of the decree and possessing a written title, satisfied the legal requirements.

The Appellant, on the other hand, argued that section 146 should not be invoked because Order XXI, rule 16 was a specific provision that applied only when a person other than the decree-holder sought to enforce the decree. The Appellant maintained that if the Respondents could not rely on Order XXI, rule 16, they could also not rely on section 146. To substantiate this position, the Appellant cited the decision of the High Court of Patna in Thakuri Gope and others v. Mokhtar Ahmad and another (1) and a decision of the High Court of Allahabad in Shib Charan Das v. Ram Chander & others (2). The Court found this contention to be untenable. It reiterated that Order XXI, rule 16 expressly provides for the execution of a decree at the instance of a transferee by written assignment or by operation of law, and it enables such a transferee to apply to the Court that passed the decree. Hence, a transferee who can establish his title either by written assignment or by operation of law may avail himself of the provision, and if he cannot satisfy the requirements of Order XXI, rule 16, there is nothing in that rule that prevents him from invoking section 146, provided the conditions of section 146 are met. The Court therefore rejected the Appellant’s argument and affirmed the Respondents’ right to proceed under both Order XXI, rule 16 and section 146.

In this case the Court observed that a person who has received a decree by assignment may rely on Order XXI, rule 16 of the Code of Civil Procedure only if he can establish that he is a transferee either by a written assignment or by operation of law. If the individual fails to prove such title, there is nothing in Order XXI, rule 16 that prevents him from invoking section 146 of the Code, provided that the conditions of that section are satisfied. The expression “save as otherwise provided by this Code” was interpreted to mean that when a person does not fall within the limited scope of Order XXI, rule 16, the provision does not apply to him, and consequently the words in section 146 do not bar his reliance on that section. Accordingly, the Court held that the Respondents, who could not make use of Order XXI, rule 16, were nonetheless entitled to commence execution proceedings under section 146 for the decree issued by the City Civil Court in favour of Habib & Sons.

The Appellant, however, raised an objection during the arguments before the Court, contending that the Respondents’ application for execution was defective because it did not conform to the form prescribed by Order XXI, rule 11 of the Code. Rule 11(2)(j) requires that the application specify the particulars concerning the mode in which the Court’s assistance is sought. The Respondents’ application merely requested that the Court declare them to be the assignees of the decree, citing the deed of assignment dated 7 February 1949, which had been confirmed by the Custodian of Evacuee Property, Bombay, and asked for substitution of Habib & Sons. It failed to include the mandatory particulars mandated by Rule 11(2)(j). The Court therefore concluded that the application did not satisfy the procedural requirements of Order XXI, rule 11 and was liable to be dismissed. The Appellant’s submission relied on the Calcutta High Court decision in Radha Nath Das v. Produmna Kumar Sarkar, which supported the view that non-compliance with the specific form renders an execution application invalid.

In this case, the Court observed that under Order XXI, rule 16 of the Code of Civil Procedure an assignee of a decree is permitted to file only a single application for execution, and that the same application must specify the mode in which the assistance of the Court is required. The Court noted that the decisions of the High Court of Calcutta in Radha Nath Das v. Produmna Kumar Sarkar (1) and of the High Court of Bombay in Baijnath Ramchander v. Binjraj Joowarmal Batia & Co. (2) clearly held that an assignee cannot first seek a separate order to record the assignment and subsequently make a second application for execution. The Court explained that the sole application for execution, filed under Order XXI, rule 11, triggers the issuance of a notice under Order XXI, rule 16 to both the transferor and the judgment debtor, and that the decree may not be executed until the Court has considered any objections they may raise. Citing the judgment of Sen, J. at page 327, the Court reiterated that the language of the rule leaves no scope for a notice or a hearing unless an application for execution has been made; consequently, Order XXI, rule 16 does not provide for a separate application to record an assignment, to obtain leave to execute, or to seek substitution. The Court considered the contrary decisions of the Bombay High Court in Baijnath Ramchander v. Binjraj Joowarmal Batia & Co. (1) and Krishna Govind Patil v. Moolchand Keshavchand Gujar (2) to be erroneous. The position was later affirmed by the Bombay High Court in Bhagwant Balajirao and Others v. Rajaram Sajnaji and Others (3), where Judges Rajadhyaksha and Macklin, following Radha Nath Das (1), held that an assignee’s application under Order XXI, rule 16 must be for execution of the decree, not merely for recognition of the assignment or permission to execute. Although counsel for the appellant argued that the Bombay High Court customarily entertained such separate applications, the Court observed that such a practice would be contrary to the clear provisions of Order XXI, rule 16. Accordingly, the Court concluded that the contention that the present application for execution was defective possessed some merit, although the defect did not, in the Court’s view, prevent the respondents from obtaining the relief they sought.

In the case before the Court, the respondents had filed an application in the City Civil Court that was titled “application for execution under Order XXI, rule 11 of the Code of Civil Procedure.” The only flaw in that application lay in the way the respondents described the mode in which they sought the Court’s assistance. The information required to be entered in column J was not prepared in accordance with Order XXI, rule 11(2)(j); instead of selecting one of the prescribed modes, the respondents had merely stated that they were the assignees of the decree and that they wished to be substituted as plaintiffs, a description that did not correspond to any of the modes listed in the rule. The practice prevailing in the High Court of Bombay, as noted in Baijnath Ramchander v. Binjraj Joowarmal Batia & Co and in Bhagwant Balajirao and others v. Rajaram Sajnaji & others, appeared to be the sole justification for the respondents’ manner of filing. However, the same authorities held that the defect was purely technical and could be cured by amending the application. Order XXI, rule 17 expressly set out the procedure to be followed when an application for execution of a decree is received, obliging the Court to verify whether the requirements of rules 11 to 14 applicable to the case have been satisfied. If any of those requirements were lacking, the Court was mandated either to reject the application or to permit the defect to be remedied immediately or within a time fixed by the Court. Accordingly, when the City Civil Court received the respondents’ application, it should have examined the document in accordance with Order XXI, rule 17(1). Had the Court found, as the appellant contended, that the stipulations of rules 11 to 14 were not fulfilled, it was required either to reject the application outright or to allow the respondents an opportunity to correct the deficiency within a prescribed period. The City Civil Court neither undertook such scrutiny nor recorded any objection on behalf of the appellant at any stage before the matter reached this Court. Subsequently, on 27 March 1952, the respondents filed a second application for execution in the same Court, this time correctly completing column J by specifying the mode of assistance sought, namely the attachment and sale of the appellant’s movable property. This later filing complied with the provisions of Order XXI, rule 11(2)(j) and, under the circumstances, was sufficient to remedy any defect that might have existed in the original application filed on 25 April 1951.

The Court held that the further application filed on 27 March 1952 was sufficient to cure any defect in the original application for execution dated 25 April 1951. Consequently, the appellant’s objection was found to be without substance and could not avail him. Accordingly, the appeal was dismissed and costs were awarded. Having considered the judgments of other members of the bench, the judge agreed that the appeal must be dismissed with costs and that, in accordance with the view expressed, the respondent should be allowed under section 146 of the Code of Civil Procedure to execute the decree granted in favour of Habib & Sons, acting as a claimant under that decree. The document relied upon by the respondent to seek execution was treated by the lower courts as a deed of transfer rather than a mere agreement to transfer. By that instrument, all books and other debts owed to Habib & Sons in connection with the Indian business, together with the full benefit of securities for those debts, were transferred. However, the document, either by its terms or by any reasonable interpretation, did not purport to transfer any decree that Habib & Sons might obtain in the future. In view of these observations, the Court found no basis for the appellant’s claim that the later filing remedied any procedural lapse in the earlier application. The judgment therefore reaffirmed that the procedural requirements had been satisfied and that the appellant’s challenge could not succeed.

The judge concluded that the respondent could not claim to be a transferee of the subsequently obtained decree by a written assignment within the meaning of Order XXI, rule 16 of the Code of Civil Procedure. Order XXI governs the execution of decrees and orders. Rule 1 deals with payments under a decree that has been passed. Rules 4 to 9 concern the transfer of an existing decree for execution. The general principle is that only the person in whose name a decree stands may execute it, and rule 10 authorises that person to do so. Rule 16 of Order XXI permits a transferee of a decree to execute it in the same manner and under the same conditions as an application made by the original decree holder. Consequently, a decree must already exist and be transferred before a transferee can rely on rule 16. The ordinary meaning of rule 16 admits no alternative interpretation, and a narrow construction is unnecessary. The position of an assignee before a decree is passed is protected by Order XXII, rule 10, which allows the assignee to seek leave of the Court to continue the suit. Once a decree is finally granted, it would be in the assignee’s name, enabling execution. The judge agreed with the observations of a fellow judge that the provisions of Order XXI, rule 16 contemplate the actual transfer by a written assignment of a decree after it has been passed, and that an equitable agreement to transfer a future decree does not create a statutory transferee under rule 16.

The Court observed that a decree, once it has been passed, may be transferred to another party. It further held that an agreement to transfer a decree that has not yet been passed may, in equity, give the intended transferee a claim to the beneficial interest in the decree after it is finally granted. However, the Court emphasized that such an equitable transfer does not make the intended party a “transferee of the decree by assignment in writing” within the meaning of Order XXI, rule 16. The rule, as the Court explained, requires a written assignment of an already existing decree. Consequently, a future interest, even though recognized in equity, does not satisfy the statutory requirement of a written assignment of a concrete decree. The distinction preserves the procedural safeguards that apply only to a written assignment of a decree that has actually been passed, and prevents the rule from being extended to hypothetical or prospective decrees.

The Court then turned to the authority of the higher courts on this point. It noted that the decisions of the Madras High Court in Basroovittil Bhandari v. Ramchandra Kamthi (1907) 17 M.L.J. 391, and the decisions of the Calcutta High Court in Mathurapore Zamindary Co. Ltd. v. Bhasaram Mandal and Prabashinee Debi v. Rasiklal Banerji are consistent with the view expressed by this Court. According to the Court, these judgments correctly interpret that an equitable transfer of a future decree does not amount to a statutory assignment under Order XXI, rule 16. The Court affirmed that the earlier case law accurately reflects the limitation imposed by the rule and therefore upheld the correctness of those decisions.

Finally, the Court stated that, as advised, it would not express any opinion on whether the expression “by operation of law” can be given the interpretation suggested by the learned brother Das, J. The Court explained that addressing that interpretative issue was unnecessary for the resolution of the present appeal. Accordingly, having decided that the appellant’s contentions did not merit further consideration, the Court dismissed the appeal.