The Union Of India vs Hira Devi And Another

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

Court: Supreme Court of India

Case Number: Civil Appeal No. 132 of 1951

Decision Date: 21 May 1952

Coram: N. Chandrasekhara Aiyar, Mehr Chand Mahajan, Vivian Bose

In this case the Court recorded that the appeal was filed under special leave against a decree dated 17 May 1950 issued by the Calcutta High Court in Appeal No 41 of 1950, which itself arose from an order dated 19 December 1949 in Suit No 132 of 1948. The appellant was the Union of India and the respondents were Hira Devi and another individual. The judgment was delivered on 21 May 1952 by Justice Chandrasekhara Aiyar. The Union of India had obtained special leave to appeal, and the Government had agreed to bear the respondents’ costs in the appeal regardless of the outcome. The decree-holder, Hira Devi, was a lady who had obtained a money decree against the judgment-debtor, Ram Grahit Singh, who had retired as Head Clerk of the Dead Letter Office in Calcutta on 31 January 1947. The decree for the payment of money was entered on 30 July 1948. Subsequently, on 1 February 1949, a receiver was appointed to collect the amounts that were credited to the judgment-debtor’s Provident Fund with the postal authorities. The Union of India filed an application on 20 September 1949 seeking to set aside the order appointing the receiver. Justice Banerjee dismissed the Union’s application, holding that a receiver could be appointed for the collection of the Fund. This decision was affirmed by Chief Justice Trevor Harries and Justice Sinha on appeal. The petition before the High Court indicated that out of the total sum, Rs 1,394-13-1 constituted arrears of pay and allowances due to the judgment-debtor, while Rs 1,563 represented the compulsory deposit in his Provident Fund account.

The Court noted that the two sums—arrears of salary and the compulsory deposit—were of different legal character. Although the lower court had treated the entire amount as a “compulsory deposit” within the meaning of the Provident Funds Act of 1925, the Court recognized that distinct considerations applied to each portion. The principal issue before the Court was whether a receiver could be appointed in execution of a decree to attach money that formed a compulsory deposit in a Provident Fund belonging to the judgment-debtor. The Court referred to the exemption provided by section 60(k) of the Civil Procedure Code, which protects compulsory deposits and other sums related to any fund governed by the Provident Funds Act, XIX of 1925, from attachment and sale. The definition of “compulsory deposit” was extracted from section 2(a) of the Provident Funds Act, stating that it means a subscription to, or deposit in, a Provident Fund which, under the Fund’s rules, is not repayable on demand until a specified contingency occurs, except where the deposit is for the payment of premiums or subscriptions in respect of a life-insurance policy. The Court’s analysis therefore focused on distinguishing arrears of pay, which are not exempt, from the compulsory deposit, which is protected from attachment.

In this case the Court observed that the two amounts held in the judgment-debtor’s Provident Fund account required different legal treatment, although the lower court had treated the entire balance as a “compulsory deposit” within the meaning of the Provident Funds Act of 1925. The principal issue for determination was whether a receiver could be appointed in execution to take control of Provident Fund money that was due to the judgment-debtor. Section 60(k) of the Civil Procedure Code provides that compulsory deposits and other sums belonging to any fund to which the Provident Funds Act of 1925 applies are exempt from attachment and sale. For this purpose the Act defines “compulsory deposit” in section 2(a) as a subscription or deposit in a Provident Fund that, according to the Fund’s rules, is not repayable on demand until a specified contingency occurs, except where the deposit is meant for the payment of premiums on a life-insurance policy or a family-pension fund. The definition further includes any contribution, interest or increment that has accrued on such subscription or deposit, and any portion of that amount that remains in the subscriber’s credit after the contingency has occurred. Because such deposits are expressly barred from assignment or charge, they are not subject to any attachment. Section 3(1) of the Act reinforces this protection by stating that a compulsory deposit in any Government or Railway Provident Fund cannot be assigned, charged, or attached under any civil, revenue or criminal decree or order arising from a debt or liability of the subscriber, and that neither the Official Assignee nor any receiver appointed under the Provincial Insolvency Act of 1920 may lay claim to such compulsory deposits. The Court noted that this prohibition is grounded in public-policy considerations; allowing a judgment creditor to reach the fund indirectly by appointing a receiver would defeat the statutory ban and thereby frustrate the purpose of the legislation. The Court further referred to the early authority of the Court of Appeal in Lucas v Harris (1886), which dealt with a similar question concerning a pension payable to two officers of Her Majesty’s Indian Army. In that case Section 141 of the Army Act of 1881 prohibited any assignment, charge or agreement to assign or charge a pension, except where authorized by a royal warrant for the benefit of the family or by a prevailing statute. The appellate decision concluded that appointing a receiver to collect the pension would contravene the object of the statutory provision, a view later echoed by Lord Justice Lindley and Lord Justice Lopes, who emphasized that the legislative intent was to safeguard officers from want and to preserve their respectable social standing, a purpose that would be undermined by allowing a receiver to intervene.

In this case, the Court explained that a provision in the Army Act of 1881 declares any assignment or charge on a pension payable to any person in respect of any military service to be void, except where the assignment is made pursuant to a royal warrant for the benefit of the family of the person entitled to the pension, or where it is authorized by any statute then in force. The question before the Court was whether a receiver could be appointed to collect such a pension. Lindley, L.J., observed that when deciding whether a receiver of a retired officer’s pension should be appointed, it is necessary to consider not only the literal wording of section 141 of the Army Act, 1881 but also the purpose of that section. He warned that allowing a receiver would defeat the purpose of the provision rather than further it. Lord Justice Lopes echoed this reasoning, stating that it is undisputed that the legislature intended to provide officers who had served the nation with a secure income that would keep them from poverty and preserve their respectable social standing. He argued that this objective could be achieved only if pensions were made absolutely inalienable, preventing the officer himself from assigning his interest in the pension and also preventing the pension from being seized or attached through a garnishee order, execution, or any other legal process. Without such protection, the legislative intent would be frustrated, creating a “strange anomaly” whereby a creditor who obtained a judgment could deprive the pensioner of his pension despite the pension’s intended purpose.

Section 51 of the Civil Procedure Code recognizes five modes of execution of a decree, one of which is the appointment of a receiver. The Court may order a receiver in place of executing the decree by attachment and sale, but only when a receiver can lawfully be appointed. Funds held in a Provident Fund are exempt from attachment and are inalienable; ordinarily, no execution can be levied against such sums. The learned Judges below relied on the Privy Council decision in Rajendra Narain Singh v. Sundara Bibi (1). That decision has generated difficulty and fostered a line of thought that, although the property itself may be exempt from attachment, a receiver may still be appointed to take possession of the property and to apply its income or proceeds in a specified way, including the payment of the judgment-debtor’s debts. Consequently, the Court held that it was essential to examine the facts of the present case carefully and to determine whether the principle derived from that earlier decision could be applied generally, apart from the specific circumstances of the case.

In the present matter, the Court considered the particular circumstances surrounding an earlier decision of the Allahabad High Court, which had been appealed to the Judicial Committee and reported in Sundar Bibi v. Raj Indranarain Singh(2). The original suit involved two brothers, and the parties had entered into a compromise whereby the judgment-debtor was permitted to possess and enjoy certain immovable properties listed in the agreement, properties that were estimated to generate a net profit of eight thousand rupees per year. The compromise expressly prohibited any transfer of those properties during the lifetime of his brother, Lal Bahadur Singh, and required the judgment-debtor to pay various public exactions and other dues as specified in the judgment, namely a total sum of seven thousand eight hundred seventy rupees, eleven annas and six paise, payable in four equal annual instalments each due a month before the government revenue fell due. The arrangement was described in the compromise as being “in lieu of his maintenance.”

When the judgment-debtor’s interest in the properties was later sought to be attached and sold, he objected on the ground that the properties were exempt from attachment and sale pursuant to clause (n) of Section 60 of the Code, which refers to “a right to future maintenance.” The High Court examined the language of sub-clause (n) and held that it contemplated a bare right of maintenance only—a right enforceable by law and payable in the future—and that, in the present case, the properties had been assigned to the judgment-debtor in lieu of his maintenance. Consequently, the Court concluded that the exemption applied only to the bare right of maintenance, not to the assigned properties, and therefore the properties were not protected from attachment. The High Court further found that the case was suitable for the appointment of a receiver; it therefore remitted the execution petition to a subordinate judge, directing that a receiver be appointed after determining the allowance payable to the judgment-debtor for his maintenance.

The Judicial Committee agreed with the High Court’s conclusion that a receiver should be appointed. However, the Committee expressed disagreement with the High Court regarding the precise legal status of the maintenance right conferred upon the judgment-debtor. On the basis of the judgment-creditor’s prayer that the maintenance right be proceeded against, the Committee observed that, as a matter of law, the right of maintenance could not be attached nor sold. The Committee noted that if the arrangement amounted to an assignment of properties for maintenance without a fixed amount, the judgment-creditor could seek the appointment of a receiver, subject to the condition that any surplus remaining after providing for the judgment-debtor’s maintenance be applied to satisfy the decree debt. Accordingly, the right to maintenance remained unattainable by attachment or sale. The Committee affirmed that the decree-holder could not lawfully attach the maintenance right or deprive the judgment-debtor of his maintenance, but that a more comprehensive application for a receiver, aiming to capture any residual income after the maintenance claim was satisfied, justified the appointment of a receiver for that purpose.

The Court observed that the appointment of a receiver in this situation was justified. It further noted that the decision of the Privy Council did not establish any principle beyond that observation. In the Court’s view, that Privy Council decision could not be taken as authority for the broad proposition that, despite a statutory prohibition on attachment and alienation of a particular class of property, such property might nevertheless be reached by another mode of execution, namely the appointment of a receiver. Conversely, the Court referred to the earlier case of Nawab Bahadur of Murshidabad v. Karnani Industrial Bank Limited, where it was pointed out that the Nawab possessed a disposing power over the rents and profits assigned to him for the maintenance of his title and dignity, but he did not have any power to alienate the properties. Because no power of alienation existed, no public-policy objection arose, and the appointment of a receiver to take the rents and profits was held to be proper. That line of reasoning, the Court explained, makes clear that where the statute imposes an absolute bar on alienation or attachment because of public-policy considerations and the person concerned has no disposing power, execution of any kind must not be allowed. Applying that principle, the Court found that the case of Rajindra Narain Singh presented no difficulty. The discussion then turned to authorities that either followed or distinguished that case. In The Secretary of State for India in Council v. Bai Somi and Another, a compromise decree created a charge of maintenance of rupees ninety-six per annum on a house that was to belong to the defendant. The Government sought to recover the court-fee due by attaching that house. The Court denied the right of attachment, holding that the house could not be attached because it belonged to the defendant, and that the plaintiff’s right to maintenance could not be attached under section 60, clause (1). When the Government, for the first time in that High Court, prayed for an order appointing a receiver of the plaintiff’s maintenance, the Chief Justice and another learned Judge held that even that remedy could not be granted. The Chief Justice warned that allowing exempted payments to be reached by appointing a receiver as an equitable execution would substantially erode the protection granted by the statute. They therefore avoided reliance on Rajindra Narain Singh’s case, noting that the Board’s judgment did not contain a clear opinion and that there was doubt whether the allowance in question was, in fact, maintenance. The Madras High Court, in The Secretary of State for India in Council v. Sarvepalli Venkata Lakshmamma, considered a question similar to that in Bai Somi but merely referred to the ruling in Rajindra Narain Singh without analysing the facts or reasoning, thus providing no additional guidance. Likewise, the single-judge decision in Janakinath v. Pramatha Nath was on the same footing as the Madras decision and offered no further illumination.

In the judgment there was nothing more on this issue than the brief remark that “the Provident Funds Act does not in my opinion prohibit the appointment of a receiver of the sum lying to the credit of the deceased in the Provident Fund.” The Court inferred that when an employee dies and no dependent or nominee is entitled to the fund under the rules, the money may be treated as payable to the heirs and therefore ceases to be a compulsory deposit. The case of Dominion of India, representing the E. I. Railway Administration and Another v. Ashutosh Das and Others (4) certainly referred to Rajindra Narain Singh’s case, but it did not examine it in any detail. Justice Roxburgh merely observed that “surely it is an improper use of that equitable remedy to employ it to avoid a very definite bar created by statute law to achieving the very object for which the receiver is appointed.” The decision in Ramprasad v. Motiram (5) concerned the attachment and sale in execution of a money decree involving the interest of a khoposhdar in a heritable and transferable khorposh grant; that decision offered no assistance to the present question. Counsel for the respondents relied on three Privy Council decisions for support. The first was the Nawab Bahadur of Murshidabad’s case (1) already mentioned. The other two were Vibhudapriya Thirtha Swamiar v. Lakshmindra Thirtha Swamiar (2) and Niladri Sahu v. Mahant Chaturbhuj Das and Others (3); both dealt with mortgages of endowed properties by the respective mahants for the alleged necessities of their institutions and therefore do not analogize to the present case. In those matters the mahants retained a beneficial interest in the properties after receiving maintenance, and a receiver could be appointed to satisfy the decrees against that beneficial interest. With due respect to the lower courts, the present Court is of the view that execution cannot be pursued against Provident Fund monies by appointing a receiver. This view, however, does not extend to arrears of salary and allowance owed to the judgment-debtor, which rest on a different legal basis. Salary is protected from attachment under Section 60, clause (1) of the Civil Procedure Code, but no similar exemption applies to arrears of salary. The learned Attorney-General admitted that the arrears portion may be pursued in execution. Although the Provident Fund amount remained unpaid to the subscriber after his retirement in January 1947, that fact does not alter its character as a compulsory deposit within the meaning of the Act. Any uncertainty that may have existed under the earlier 1897 Act has been resolved by the cited decisions.

In this appeal the Court observed that the respondent had relied on several earlier decisions, namely Miller v. B.B. & C.I. Railway (4), Raj (1) (1931) 58 I.A. 215, the case reported in (3) (1926) 53 I.A. 253, the decision reported in (2) (1927) 54 I.A. 228, the judgment in (4) (1903) 5 Bom. L.R. 454, and Kumar Mukharjee v. W.G. Godfrey (1), all of which were decided under the earlier enactment. The Court explained that the present Act now provides a clear definition in section 2, which states that any deposit that remains in the credit of the subscriber or depositor after the occurrence of a contingency is to be treated as a compulsory deposit, and that the contingency can include retirement from service. Applying this interpretation, the Court concluded that the Provident Fund amount of Rs. 1,563 held in the credit of the judgment-debtor is a compulsory deposit and therefore cannot be subjected to the appointment of a receiver. Consequently, the Court allowed the appeal and set aside the order of the lower court dated 1 February 1949 that had appointed a receiver in respect of the Provident Fund sum. The Court also directed, subject to the granting of special leave, that the Government shall pay the costs incurred by the first respondent in this appeal. The appeal was therefore allowed. Counsel for the appellant was identified as the representative, while counsel for the first respondent and counsel for the second respondent were respectively noted. The judgment also cited the authority (1) A.I.R. 1922 Cal. 196.