Report No. 110

30.5. Sections 177 & 178-Need for specific rule as to bequest to debtor.-

The sections, so far as they go, are satisfactory and judicial decisions do not seem to have created any serious problems. There is one situation, however, about which a specific rule appears to be desirable. There is no provision in the Act as regards bequest to a debtor, though a bequest by a debtor is covered by section 177. It appears that in England, where the legatee of a general legacy of a share or a residue is a debtor to the estate, he is not entitled to receive the legacy without first bringing his debt into account; and, for this purpose, it makes no difference whether the debt is alive or is barred by limitation.

A similar rule has been judicially applied in India. In a Calcutta case1, A and B were indebted to the estate, and died without satisfying their debt (the debts were barred by limitation). Their descendants claimed a share in the estate of the testator, apparently under a will. It was held that they could not be allowed to receive the share without first satisfying the debts due from them to the estate. This is really analogous to setting off the debt against the legacy. Justice and the presumed intention of the testator support such a course.

1. Loke Nath Mullick v. Odoyachzvar, 1881 ILR 7 Cal 644.

30.6. Recommendation.-

It may be worthwhile to codify this judicial interpretation. We recommend that for this purpose a new section 177A should be inserted as follows:-

"177A. Where a creditor bequeaths a legacy to his debtor, and it does not appear from the will that the legacy is to be paid even if the debt is not repaid by the debtor, the debtor shall not be entitled to the legacy unless so much of the debt as has become due and payable has been repaid."