Report No. 110
41.15. State Government to amend section 317.-
However, we must deal with a suggestion made by a State Government1 for the amendment of the law. The suggestion is to amend section 317(1) so as to provide that when letters of administration are granted to the Administrator-General, it shall not be necessary for him to file2 the inventory and accounts required to be filed by that section.
1. Law Commission File No. 3(2)/58-L.C., S. No. 93.
2. As to the practice in Bombay, see Bai Panbai Morarji, AIR 1927 Born 438 (349) (Mirza, J.).
41.16. Merits of suggested amendment.-
In our view, the suggested amendment has considerable merit, there being good reasons for exempting the Administrator-General from the operation of section 317. In the first place, he is already exempt from the major obligation to execute an administration bond,1 and it is logical that he should be exempted from section 317 also.
In the second place, his accounts are audited regularly2 by the competent officers.' Hence, no further security is required. In the third place, his position, being statutory, is quite different from that of a purely non-official executor. It would, therefore, be proper to exempt him from the duty to file an inventory of his own accord; though the power of the court to require him to do so may be preserved.
1. Section 26, Administrator-General's Act, 1963.
2. Section 43, Administrator-General's Act, 1963.
41.17. Recommendation to amend section 317.-
For the reasons given above, we recommend that section 317 of the Indian Succession Act, 1925, should be amended by adding the following Exception to the section:
"Exception-Where the Administrator-General is the executor or administrator, he shall not be bound to exhibit an inventory or an account of the estate under this sub-section, unless the court has directed him to do so, in which case he shall exhibit the inventory or the account, as the case may be, within such period as the Court may allow: but copies of the accounts maintained by him shall be filed in court."
41.18. Section 318-Inventory in case of grant valid throughout India.-
This takes us to section 318, which provides that where a grant has been made of probate or letters of administration intended to have effect throughout India, the inventory must include all property in India along with a statement of its value in each state separately, and the probate fee shall be payable accordingly, i.e. on the entire amount of value in India.
The section needs no change.
41.19. Section 319.-
Section 319 provides that the executor or administrator shall collect, with all reasonable diligence, the property of the deceased and the debts that were due to him at the time of his death.
The section does not require any change.
41.20. Section 320-Priority for certain expenses.-
Section 320 deals with the payment of funeral expenses and death bed charges, including fees for medical attendants, and fees for boarding and lodging for one month previous to the death of the deceased. These must be paid before all other debts.
We have no comments on this section.
41.21. Section 321.-
Section 321 deals with the next category of expenses in the order of priority. We are concerned this time with the expenses of obtaining probate or letters of administration, including the cost of judicial proceedings necessary for administering the estate. These must be paid next, after the funeral expenses and death bed charges referred to in section 320.
The section does not require any change.
41.22. Section 322.-
Section 322 provides that wages due for services rendered to the deceased within three months next preceding his death by any labourer, artisan or domestic servant shall next be paid, and then the other debts of the deceased according to their respective priorities (if any).
The section needs no change, not having created any problems.
41.23. Section 323.- This takes us to section 323, quoted below:
"323. Save as aforesaid, no creditor shall have a right of priority over another; but the executor or administrator shall pay all such debts as he knows of, including his own, equally and rateably as far as the assets of the deceased will extend."
This section also needs no change.
41.24. Section 324.- Section 324 reads as under:-
"324. (1) If the domicile of the deceased was not in India, the application of his movable property to the payment of his debts is to be regulated by law of India.
(2) No creditor who has received payment of a part of his debt by virtue of sub-section (1) shall be entitled to share in the proceeds of the immovable estate of the deceased unless he brings such payment into account for the benefit of the other creditors.
(3) This section shall not apply where the deceased was a Hindu Muhammadan, Buddhist, Sikh or Jain or an exempted person."
The illustration is as follows:-
"A dies, having his domicile in a country where instruments under seal have priority over instruments not under seal, leaving movable property to the value of 5,000 rupees, and immovable property to the value of 10,000 rupees, debts on instruments under seal to the amount of 10,000 rupees, and debts on instruments not under seal to the same amount. The creditors holding instruments under seal receive half of their debts out of the proceeds of the movable estate.
The proceeds of the immovable estate are to be applied in payment of the debts on instruments not under seal until one-half of such debts has been discharged. This will leave 5,000 rupees which are to be distributed rateably amongst all the creditors without distinction, in proportion to the amount which may retain due to them."
41.25. Sub-section (2).-
The only part of the section that requires comment in sub-section (2), whose utility seems rather difficult to appreciate. The sub-section assumes that by virtue1 of sub-section (1), the creditor has received some kind of special rights. This assumption is not, however, correct when one has regard to present sub-section (1). The situation seems to have arisen by reason of certain accidents of drafting. This point will be best understood if the history of the section is examined.
Sub-section (1) of section 324 corresponds to section 283 of the Act of 1865 (10 of 1865). Sub-section (2) corresponds to section 284 of that Act. Before 1889, section 283 [i.e. the predecessor of present sub-section (1) was different from the present rule. In substance, it applied the law of the country of domicile. At that time, therefore, the provision contained in section 284] [which was the predecessor of sub-section (2)] made sense. In 1889 (by Act 6 of 1889), section 283 was amended so as to read (in substance) as section 324(1) now reads.
In section 283 of the Succession Act (10 of 1865), (as originally enacted), the words "the country in which he was domiciled" were used. Subsequently, by Act 6 of 1889, the words "British India" were substituted for the words "the country in which he was domiciled" and the illustration originally attached (section 283 was repealed. This was really a change of substance, and not a mere verbal amendment.
At the time of the amendment of 1889,2 however, section 284 was (apparently by slip) not amended. The unamended section was carried forward in present section 324(2).
1. Note the words "by virtue of".
2. For details, see para. 41.29, infra.
41.26. Original rule of English law.-
It may be mentioned that section 283 (as originally enacted in 1865) followed the English law as regards the priority of debts, as it then obtained in England.1 The vexed question was, what rule was to govern in the administration of assets-the law of the domicile or the law of the situs? Sir J. Romilly, in Wilson v. Lady Dunsay, (1854) 18 Beav 293: 23 LJ Ch 492, held that the personal estate of the testator must be administered on the principle of the law of his domicile.
In Cook v. Gregson, (1854) 2 Drew 286, it was decided that an Irish judgment-creditor of a testator domiciled in Ireland was entitled in England to priority, according to Irish law, in respect of assets which had been brought from Ireland to England2. But the observations of Kindersley V.C., in that case, although not necessary, appeared to put the question as though it were rather dependent on the situs of the assets than on the domicile of the deceased.
1. M.N. Basu Succession Act, (1957), p. 930.
2. Foot's Private International Jurisprudence, p. 343.
41.27. Subsequent developments in English law.-
Section 283, as it found place in the Indian Succession Act, followed the English law as then understood. Subsequently, in 1885, in England, it was laid1 down2 that if a man domiciled in England dies possessing assets in France, the French assets must be collected in France and distributed according to the law of France, but that, in the administration of assets in England, a creditor (of whatever nationality) is entitled to be paid equally with English creditors in the same class.
In 1889, the Indian legislature by Act 6 of the 1889 (following the English law as laid down in 1885) amended section 283, by replacing the words 'the country in which he was domiciled;' by the words 'British India'. It is now well established that administration3-4 is not governed by the law which governs succession (last domicile)-but by the law the country where administration takes place.
1. Kloebe Kannretther (in re:) v. Geiselbrecht, (1895) 28 Ch D 175.
2. Halsbury's, 4th Edn., Vol. 17, pp. 582-583, para. 1128.
3. Wolff Private International Law, (1950), p. 605.
4. Cf. Morris in (1950) Vol. 3 ICLQ 243.
41.28. The following illustration appended to the original section 283 corresponding to present sub-section (1) was also repealed in 1889:
"A dies, having his domicile in a country where instruments under seal have priority over instruments not under seal1, leaving movable property to the value of 10,000 rupees, immovable property to the value of 5,000 rupees, debts on instruments under seal to the amount of 10,000 rupees, and debts on instruments not under seal to the same amount.
The debts on the instruments under seal are to be paid in full out of the movable estate, and the proceeds of the immovable estate are to be applied, as far as they will extend, towards the discharge of the debts not under seal. Accordingly, one half of the amount of the debts not under seal is to be paid out of the proceeds of the immovable estate."
1. Emphasis is added.
41.28A. Anomaly how arising.-
But, as stated already,1 unfortunately section 284 [i.e. present section 324] was retained without any amendment at the time when sub-section (1) was amended in 1889. The words "no creditor who has received payment of a part of his debt by virtue of the last preceding section, etc." were retained, even though they were no longer appropriate after the amendment of sub-section (I). This is how the present anomaly has arisen.
1. Para. 41.26, supra.
41.29. Need for amendment in regard to section 324.-
It is necessary that this anomaly should be rectified. Sub-section (2) has now become not only redundant, but also confusing.
41.30. Recommendation to amend section 324.-
For these reasons, we recommend that section 324(2), and the illustration to the section, should be deleted. If the provisions of the Act relating to domicile are extended to Hindus etc. as recommended by us separately1 sub-section (3) of section 324 will also have to be deleted.
1. See recommendation as to sections 5-20, supra.
41.31. Section 325-debts to be paid before legacies.-
This disposes of section 324. Section 325 provides that debts of every description must be paid before any legacy. It seems to he based on the principle that a man must be just before he is generous.
It needs no change.