Union of India Vs. Radha Kissen
Agarwalla & ANR  INSC 311 (6 December 1968)
06/12/1968 SHAH, J.C.
CITATION: 1969 AIR 762 1969 SCR (3) 28 1969
SCC (1) 225
F 1976 SC1163 (11)
Provident Funds Act,1925, s. 3(1)-Foreign
Railway employee electing to have his provident fund in sterling--instructing
Railway administration to remit money to his bank in U.K.- Railway forwarding
amount to Reserve Bank for conversion and remittance-Whether amount exempt from
attachment before remittance and while with the Reserve Bank.
B was an employee of the East India Railway
and a subscriber to the State Railway Provident Fund. He elected to be governed
by the Provident Fund Sterling Account Rules, according to which payment of his
provident fund on retirement was to be made in sterling. B 'addressed letters
to the Railway Accounts Officer in August 1947 and again after his retirement
in February 1956 requesting that the amounts standing to his credit in the
provident fund account be remitted to his bank in the United Kingdom. The
Railway administration drew cheques in respect of B's provident fund in favour
of the Reserve Bank of India and instructed that bank to convert the amount
into sterling and to transmit it to B's Bank in the United Kingdom.
The respondent had obtained a money decree
against B and upon applying for execution of that decree obtained an order for
attachment of the cheques lying with the Reserve Bank.
The cheques were encashed and the amount
realised was deposited in the executing court. The appellant claimed immunity
from attachment of the cheques under s. 3 of the Provident Funds Act, 1925 and
the respondent's execution application was thereupon struck off. On filing a
second execution application, the respondent obtained an order for attachment
of the money lying in the executing court. A further application by the
applicant claiming immunity from attachment was rejected by the executing court
on the ground that the monies attached by the court lost their character as
Provident fund monies long before they were attached and were not therefore
immune from attachment. The High Court in revision confirmed the order of the
On appeal to this Court,
HELD : Allowing the appeal The order of
attachment passed by the executing court was contrary to s. 3 of the Provident
Funds Act, 1925.
The Railway administration was in respect of
the provident fund money in the position of a trustee for B and it had
undertaken to discharge its obligation by arranging to have the amount
converted into sterling and to remit it to B. The Reserve Bank was the agent of
the Railway administration for converting and remitting the amount on its
behalf. Until the money was converted and transmitted by the Reserve Bank to B,
it remained at the disposal of the Railway administration. So long as the money
remained under the control of the Railway administration as provident fund
money, it was exempt from attachment under s. 60(1)(k) (PC read with s. 3 of
the Provident Funds Act, 1925.[131 B--F] 29 The High Court was in error in
relying on illustration (d) of s. 50 of the Contract Act. B had not authorised
the Reserve Bank to receive payment of the money on his behalf, nor had he
sanctioned payment to the Reserve Bank in discharge of the liability of the
CIVIL APPELLATE JURISDICTION: Civil Appeal
No. 105 of 1966.
Appeal from the judgment and order dated
February 3, 1961 of the Calcutta High Court in Civil Revision No. 2755 of 1957.
D. Narsaraju, R. M. Mehta and S. P. Nayar,
for the appellant.
Ganpat Rai, for respondent No. 1.
The Judgment of the Court was delivered by
SHAH, J. G. W. Browne was an employee of the East India Railway and was a
subscriber to the State Railway Provident Fund. He elected to be governed by
the Provident Fund Sterling Accounts Rules, whereunder payment of the provident
fund credited in his account in rupees was on retirement to be made in
sterling. On August 26, 1947, Browne addressed a letter to the Financial
Adviser and Chief Accounts Officer, East India Railway, requesting that the
provident fund payable to him on retirement may be remitted to him by Bank
Draft on the District Bank, Water Street, Liverpool. After Browne retired from
service, the Deputy General Manager, Eastern Railway, wrote a letter on July
27, 1955, to the Chief Accounts Officer, communicating the sanction of the
General Manager for payment of the special contribution to provident fund to
Browne in sterling in terms of r. 1410(1) of the Railway Establishment Code.
Another communication was received from Browne (who had apparently by then
migrated to the United Kingdom) on February 22, 1956, by which he requested
that the amount standing to his credit in-the Provident Fund Account be
remitted to the Westminster Bank, Birmingham. The Railway Administration then
drew two cheques-one for Rs. 14,428-8-9 and another for Rs. 23,018- 11-10 in
favour of the Reserve Bank of India with instructions to the Reserve Bank to
convert amounts covered by the cheques into sterling and to transmit the fund
in sterling to the bankers of Browne in England.
The respondent Radha Kissen Agarwalla had
obtained a money decree against Browne and he applied to the 3rd Court of the
Subordinate Judge at Alipore for execution of that decree, and obtained an
order for attachment of the cheques lying with the Reserve Bank. The cheques
were attached and under orders of the executing court the cheques were encashed
and the amount realized was deposited in the executing court.
30 The Union of India claimed immunity from
attachment of the cheques on the ground that they represented provident fund
money which by s. 3 of the Provident Funds Act, 1925, was immune from
attachment. The execution application filed by Radha Kissen Agarwalla was
struck off on December 7, 1956.
On the next day Radha Kissen Agarwalla
started another execution application and applied for and obtained an order for
attachment of the money lying in the executing court in the execution case
which had been struck off. The Union of India again applied for removal of
attachment on the ground that the money represented provident fund money and
was immune from attachment under the law and that the attachment was
"illegal and without jurisdiction". The executing court overruled the
objection observing "that the attachment issued by the Court on December
8, 1956, was perfectly in order. . . . .. the moneys attached by the Court lost
their character as Provident Fund moneys long before they were attached and
hence they were not immune from attachment, as claimed by the objector".
The Union of India then applied to the High Court of Calcutta in revision. The
High Court confirmed. the order passed by the executing court.
Rule 1413 of the Provident Fund Sterling
Accounts Rules, insofar as it is relevant, provides :
"(1) Where under these Rules any payment
is to be made to the subscriber in sterling- (a) the subscriber, prior to the
date on which payment is to be made, shall send written instructions to the
Accounts Officer intimating the place at which payment is to be made, such
place being in a country where the rupee is not legal tender;
(b) the Accounts Officer, on receipt of the,
written instructions referred to in the preceding clause shall remit the amount
through a bank for payment at the place at which payment is required."
Accounts Officer for payment of the amount standing to his credit in a
Provident Fund Account in sterling if the country in which it is to be paid,
the rupee is not legal tender. Browne had given intimation before he retired of
his intention to receive the provident fund amount due to him at the foot of
the Provident Fund Account in sterling in the United Kingdom. After retirement
of Browne, in order to carry out that obligation, the Accounts Officer of the
Railway made out two cheques in the name of Browne and sent them to the Reserve
Bank for conversion of the amount in sterling. The Reserve Bank was the only
authority which could permit such conversion in view of the 31 currency
restrictions imposed by the Government of India.
For purpose of conversion and transmission of
the amount to Browne, the Reserve Bank of India was the agent of the Railway
Administration. Until the money was converted into sterling and was transmitted
by the Reserve Bank to Browne, the money remained at the disposal of the
The Railway Administration was in respect of
the provident fund money in the position of a trustee for Browne and it had
undertaken to discharge its obligation by arranging to have the amount
converted into sterling and to remit it to Browne. Under s. 60 (1) (k) of the
Code of Civil Procedure, 1908, read with s. 3 of the Provident Funds Act, 1925,
the compulsory deposit in any recognised Provident Fund Account is exempt from
attachment in execution of a decree of a civil court. Section 3 ( 1 ) of the Provident
Funds Act, 1925, provides :
"A compulsory deposit in any Government
or Railway Provident Fund shall not in any way be capable of being assigned or
charged and shall not be liable to attachment under any decree or order of any
Civil, Revenue or Criminal Court in respect of any debt or liability incurred
by the subscriber or depositor, and neither the Official Assignee nor any
receiver appointed under the Provincial insolvency Act, 1920, shall be entitled
to, or have any claim on, any such compulsory deposit." The Reserve Bank
was, as already stated, the agent of the Railway Administration for conversion
of the amount into sterling and was not the agent of Browne to receive the
amount on his behalf. So long as the money remained under the control of the
Railway Administration as provident fund money, it was exempt from attachment.
Clause (b) of r. 1413 (1), which we have already noted, imposed upon the
Accounts Officer an obligation to send the amount through a bank for payment at
the place at which Payment was required, and the payment was required either
under the first intimation at Liverpool by bank draft or under the later
intimation by payment to the bankers of 'Browne at Birmingham.
The High Court relied upon illustration (d)
to s. 50 of the Indian-Contract Act in support of the view that by sending the
two cheques to the Reserve Bank of India in performance of the manner of
Payment prescribed by Browne, the debt was discharged, and the money must be
deemed to have been paid out to the subscriber Browne. Section 50 of the
Contract Act provides "The performance of any promise may be made in any
manner, or at any time which the promise prescribes or sanction 32 It enacts
the elementary rule relating to the performance of a promise under a contract :
performance has to be in the manner and at the time which the promisee
prescribes or sanctions. Browne had not authorised the Reserve Bank to receive
payment of the money on his behalf, nor had he sanctioned payment to the
Reserve-Bank in discharge of the liability of the 'Railway Administration.
Illustration (d) to S. 50 of the Contract Act on which reliance was placed by
the High Court reads :
A, desire B., who owes him Rs.100, to send
him a note for Rs. 100 by post. The debt is discharged as soon as B, puts into
the post a letter containing the note duly addressed to A." The
illustration only covers cases in which a creditor has directed the debtor to
send him the amount owed by the, debtor in a certain manner. Browne asked the
Railway Administration by the first intimation to send the amount by bank draft
and later to the Westminster Bank, Birmingham.
Only after the direction of Browne regarding
transmission of the fund was complied with, the obligation of the Railway
Administration could be discharged and not till then. In our view, the High
Court was in error in holding that the money in the hands of the Reserve Bank
of India had ceased to be provident fund money and was liable to be attached.
It was somewhat faintly suggested that the
Union of India had no interest in maintaining an application for removal of
attachment. But the Union of India was a trustee for the subscriber of the
money. When the amount lying with the Reserve Bank as the agent of the Railway
Administration was attached the Union had clearly an interest to maintain the
application for removal of attachment.
The order of attachment of the amount into
which the two cheques drawn by the Railway Administration were converted on
encashment was contrary to the terms of S. 3 of the Provident Funds Act, 1925.
The appeal is therefore allowed and the order
passed by the High Court is set aside. There will be no order as to costs.