Report No. 54
Earlier recommendation as to section 60(1), Proviso (i)
1E.33. The earlier Report proposed amendment to section 60(1), proviso, clause (i), to extend the existing proviso to private salaries also. It was considered that there is no reason why the exemption from repeated attachment, embodied in the proviso, should not extend to private salaries. But in view of the reasons which we have stated above, it is better to delete the proviso.
1. 27th Report, note on section 60, para. 2.
Section 60 and Policy of Life Insurance
1E.34. An interesting point which fell to be considered1 by the previous Commission, in the earlier Report, related to granting exemption from attachment to policies of insurance. We quote the relevant discussion from the Report-
"In the Law Commission's Report on Insolvency Laws,2 in the clause dealing with description of property of the insolvent divisible amongst his creditors, a provision has been proposed that policies of life insurance, etc., in respect of the insolvent's own life shall not be comprised in the property of the insolvent divisible among his creditors (except to the extent of a charge on the policies in respect of the amount of the premium paid on the policies during the two years preceding the insolvency). The question whether an exemption from attachment in respect of insurance policies should be given, either absolutely or subject to a certain maximum, has been considered. It has been decided not to recommend any such change.
There are certain points of difference between insolvency on the one hand and execution by a single decree-holder on the other. In insolvency, the hypothesis is that the debtor has not sufficient assets for meeting his debts, and therefore (apart from the property specifically exempted), everything else goes for the satisfaction of the creditors. Secondly, in insolvency the law has to strike a balance between the debtor's needs and the claims of the whole body of creditors, while that is not so in the case of execution of a single decree. Thirdly, in insolvency, the carrying on of business, the acquisition of property and other economic activities by the insolvent are subject to the control of the court, which is not the case in execution."
1. 27th Report, note on section 60 and policies of insurance.
2. 26th Report (Insolvency Laws), App 1, clause 48(1)(b).
1E.35. We have reconsidered the matter. This is not because we found the reasoning given on the Report on the Code defective-we regard it as cogent so far as it goes-but because the changed social and political climate appeared to justify a re-thinking on the subject. In order to encourage thrift, the habit of life insurance should be encouraged, and that consideration, in its turn, justifies a more liberal approach as regards exemption of policies of life insurance from attachment.
No doubt, considerations justifying an exemption have to be balanced against the legitimate claims of a creditor who has taken all the trouble of obtaining a decree, and who is engaged in the still more troublesome venture of executing it. The less obstacles are placed in his way, the better. Nevertheless, on the same principle on which moneys in certain provident funds are exempt from attachment1, there is a case for the exemption of moneys due on a policy of life insurance. Further, we do not think that there should be any limit as to the maximum that is to be exempt out of the amount due on the policy.
1. 3. Section 60(1), Proviso, clause (k).
Recommendation to insert new clause (ka)
1E.36. We, accordingly, recommend that the fallowing clause should be added in the proviso to section 60(1),
"(ka) money payable under a policy of life insurance."
Section 60(1), Proviso, and controlled tenancies
1E.37. The question whether tenancies to which the Rent Control Act in force in the State concerned applies, should, be exempt from attachment, was considered by the previous Commission.1 A provision exempting them from vesting in the Official Assignee on insolvency had been proposed in the Law Commission's Report on insolvency.2 But, as regards exemption from attachment, the Commission took the view that the case stood on a different footing, and no change was, therefore, considered necessary on this point.
1. 27th Report, note on section 60 and tenancies.
2. 26th Report, (Insolvency Laws), App 1, clause 48(1).
1E.38. We have considered the matter further. By virtue of provisions in the Rent Control laws, such tenancies usually become incapable of assignment except under certain restrictions. The Bombay Rent Control Act,1 for example, provides:-
"15. (1) Notwithstanding anything contained in any law, (but subject to any contract to the contrary) it shall not be lawful after the coming into operation of this Act for any tenant to sub-let the whole or any part of the premises let to him or to assign or transfer in any other manner his interest therein:-
(Provided that the State Government may, by notification in the Official Gazette, permit in any area the transfer of interest in premises held under such leases or class of leases and to such extent as may be specified in the notifications)."
1. Section 15(1), Bombay Rents etc. Central Act, 1947.
1E.39. We think that in order to prevent harassment to tenants, an amendment in section 60 also is called for in this respect, so as to make them exempt.
Recommendation to insert, clause (kb)
1E.40. Accordingly, we recommend that the following clause should be added in the proviso to section 60(1)-
"(kb) the interest of a lessee of a residential building to which the provisions of the law relating to control of rents and for the lime being in force applies."