Report No. 70
15.11. Need for change.-
The question to be considered by us is not which of these views is correct, but which view is of practical benefit. To take the narrow and strictly literal view, namely, that because of the word "then" in section 8, first paragraph, the subsequent decree is not transferred, leads to an anomaly. The transferor of the debt, having transferred his rights, would not be interested in executing the decree.
On the narrow view, the transferee of the debt would not get any right to execute the decree as an assignee. The result would be that the transferee of the debt would be required to file a suit for specific performance of the contract to transfer the decree and it is only when he obtains a decree in that suit that he can apply for execution of the money decree as an assignee. If this is the correct position, it should be remedied. The law should aim at shortening rather than lengthening litigation-unless of course, there are any other considerations of justice to the contrary.
In this particular case, there appear to be none. Such procedural formalities, if any, as are required under the Code of Civil Procedure, 1908, should, of course, be complied with by the purchaser of the debt in his capacity as the transferee of the decree even after the proposed amendment. That applies to express transfers also. But the expression "securities" in section 8 should, in this special case, be widened so as to cover, in the situation where a suit has already been instituted, the decree that may be passed in favour of the plaintiff.
15.12. Order 21, rule 16.-
One of the major points of difference between Das & Bhagwati JJ. related to Order 21, rule 16, of the Civil Procedure Code, which is quoted below:
"16. Application for execution by transferee of decree.-Where a decree or, if a decree has been passed jointly in favour of two or more persons, the interest of any decree-holder in the decree is transferred by assignment in writing or by operation of law, the transferee may apply for execution of the decree to the Court which passed it; and the decree may be executed in the same manner and subject to the same conditions as if the application were made by such decree-holder:
Provided, that, were the decree, or such interest as aforesaid, has been transferred by assignment, notice of such application shall be given to the transferor and the judgement-debtor, and the decree shall not be executed until the Court has heard their objections (if any) to its execution:
Provided also that, where a decree for the payment of money against two or more persons has been transferred to one of them, it shall not be executed against the others."
15.13. Propositions underlying each judgment.-
It would appear from the judgements of the three Judges-S.R. Das, J., Bhagwati, J., and Iman, J.-that while they all agreed that the purchaser of the debt could avail itself of the provisions of section 146 of the Civil Procedure Code, there was a sharp cleavage of opinion amongst them as the applicability of Order 21, rule 16, of the Civil Procedure Code and as to the exact position of the purchaser company. S.R. Das, J. based his decision on the following propositions:
(a) Section 8 does not operate to pass any future property and the transfer of the book debts did not transfer the decree as a legal incident.1-2
(b) If the document could be construed as a transfer of, or an agreement to transfer, the decree to be passed in future, the beneficial interest in the decree would, by operation of equity, have passed to the purchaser and the purchaser company would become within the meaning of Order 21, rule 16, transferee by operation of law.3 In this case, however, there was no agreement to transfer the decree.
(c) But, in the eye of the law, the transferor of the debt, vis-a-vis the purchaser of the debt was nothing more than a benamidar for the purchaser and on this basis it was the purchaser who was the real owner of the decree. Since the purchaser was, after the transfer, the owner of the debt and the legal incidents thereof, it was the real owner of the decree.4 This dictum, with respect, is in apparent conflict with the previous dictum.5
(d) Since the purchaser company became the owner of the decree immediately on its passing in the above sense, it could come under section 146.6
1. Para. 15.12, supra.
2. Pp. 1379, 1380 of the SCR.
3. Pp. 1401, 1402 of the SCR.
4. P. 1405 of the SCR.
5. Pp. 1379, 1380 of the SCR.
6. P. 1405 of the SCR.
15.14. The propositions.-
So far as they are material-enunciated in the judgment of Bhagwati J. can be stated as follows:
(a) In cases of transfer of book debts or property which is actionable claim, there is necessarily involved also a transfer of the transferor's right in a decree which may be passed in his favour in a pending litigation, and the moment a decree is passed in his favour by a court of law, that decree is also automatically transferred in favour of the transferee by virtue of the assignment in writing already executed by the transferor.1 This is by virtue of section 8.
(b) Of course, this transfer is subject to the provisions of section 132 of the Transfer of Property Act to the effect that the transferee should take the actionable claim subject to all the liabilities and equities to which the transferor was subject in respect thereof at the date of the transfer.2
(c) So far as Order 21, rule 16, C.P.C. is concerned, the transferee in the above-mentioned circumstances is a transferee by "assignment in writing3" and not by operation of law.
(d) Of course, there is nothing in Order 21, rule 16, prohibiting the transferee from availing of section 146 of the Civil Procedure Code.4
1. P. 1418 of the SCR.
2. P. 1418 of the SCR; Para. 15.12, supra.
3. P. 1418 of the SCR.
4. P. 1421 of the SCR.
15.15. The propositions on which the judgment of Imam J. was based may be stated as follows:-
(a) The purchaser should be permitted under section 146 to execute the decree as one claiming under the decree-holder.1
(b) While a transfer of, or an agreement to transfer, a decree that may be passed in future may in equity entitle the transferee to claim the beneficial interest of a decree after it is passed, such equitable transfer does not render the transferee a transferee of the decree by assignment in writing within Order 21, rule 16.2
(c) No opinion is expressed as to whether the expression "by operation of law" in Order 21, rule 16 can be given the interpretation suggested by Das. J.3
1. P. 1425 of the SCR.
2. P. 1426 of the SCR.
3. P. 1427 of the SCR.
15.16. Resultant uncertainty.-
It should be pointed out that while, for the particular purpose under consideration before the Supreme Court, the applicability of section 146 enabled the alleged transferee of the debt to execute the decree, the position resulting from the judgment on the more material question, namely, whether there was or was not an assignment and, if so, whether it was by act of parties or by operation of law, was not established with certainty.
The applicability or non-applicability of Order 21, rule 16 of the Civil Procedure Code to the situation under consideration remained indefinite, because while Das, J. excluded its applicability on the ground that there was no agreement to transfer the future decree, Bhagwati J. included it by reason of his construction of section 8 of the Transfer of Property Act, while Imam, J. did not express any opinion as to whether there was an assignment by operation of law.
It should also be stated that Order 21, rule 16, makes a distinction (in the proviso) between cases of assignment by act of parties and assignment by operation of law. In the first case, notice is given to the transferor and the judgment debtor, while, in the second case, notice is not given. Again, the uncertainty in regard to the assignment by act of parties or operation of law leads to uncertainty as to the application of section 132 of the Transfer of Property Act. It is for these reasons that a clarification is necessary.
15.17. It is also legitimate to point out that- High Court decisions (some of them referred to in the Supreme Court judgement) also reveal a difference of views. Bombay cases discussed in the judgment, the Calcutta case in Purna Chandra Bhomik v. Barna Kumari Debi, ILR (1939) 2 Cal 341 and the Madras judgement in Kangati Mahanandi Reddi v. Panikalapati Venkatappa, AIR 1942 Mad 21 are illustrations. The Madras judgement observed that if the matter were res integra, much might perhaps be said for the contention that the assignee under similar circumstances could execute the decree under Order 21, rule 16, Code of Civil Procedure, 1908.
15.18. Need for change.-
It is for these reasons that a clarification is necessary. Whatever be the correct position in theory under the present section as it is worded, practical considerations justify an amendment to the effect that in the situation under discussion, the transfer of a debt1 should operate so as to transfer the decree to be ultimately passed in favour of the transferor subject to the following conditions2:
(a) The transfer was made after the institution of proceedings for recovery of the debt.
(b) The provisions of Order 21, rule 16, C.P.C. should apply as they apply to an express assignment in writing.
(c) The provisions of section 132 of the Transfer of Property Act, 1882 should apply in relation to the assignment-this, in fact, need not be expressly provided.
The merit of the proposed amendment is that:-
(i) it states the position with reasonable certainty;
(ii) it leads to shortening of litigation, since the purchaser of the debt will not be required to institute a suit again calling upon the seller of the debt to transfer the decree;
(iii) it brings into operation the safeguards provided in Order 21, rule 16, C.P.C. leaving no doubt in the matter;
(iv) it protects the rights of the transferor, the transferee and the judgment debtor by providing for application of Order 21, rule 16, C.P.C.
(v) last, but not the least, it defines the position as between the transferor and the transferee in express terms.
1. For brevity "debt" is used. Same position will apply to "actionable claims".
2. This is not a draft.
15.19. Recommendation.-
In the light of the above discussion, we recommend that to section 8, a suitable Explanation should be added on the lines indicated above.
