LAGDIR NAUJI Vs. SURENDRA MOHUN NAG

JUDGEMENT

(1.) This is an appeal on behalf of the plaintiff, and it arises out of a suit commenced by him under Order 21, Rule 63, Civil P.C. for establishment of his title to a sum of money amounting to Rs. 925, which was attached before judgments by defendant 1 in a money suit brought by him against defendant 2. The facts so far as they are material for our present purposes may be shortly stated as follows : On 10 October 1933, Defendant 2 who is the proprietor of a firm carrying on business under the name and style of the Assam Produce and Timber Coentered into a contract with A. B. Railway Co. agreeing to supply 10,000 metre gauge sleepers and 125 tons of jungle wood logs within certain specified times. Defendant 2 had no funds of his own to carry on the timber supply business. He approached the plaintiff who is a rich man and a banker and the latter agreed to advance money to defendant 2 on certain terms and conditions which were embodied in an indenture of agreement which has been marked Ex. 3 in the suit. This document inter alia provided that the plaintiff (financier) would advance money to defendant 2 from time to time for the purpose of enabling the latter to carry out his contracts with the A. B. Railway Co. and these sums would carry interest at the rate of 6 per cent per annum. It was stipulated in para. 2 of the indenture that all bills made out by defendant 2 against the Railway Company would be forthwith made over to the plain- tiff who would have the exclusive right to collect the moneys due on the bills under an irrevocable power of attorney to be executed by defendant 2 in his favour. The amounts thus realized would be appropriated by the plaintiff in the first place towards repayment of the advances made by him with interest and the balance would be divided between the plaintiff and defendant 2 in the manner set out in para. 3. According to the plaintiff, he did advance money to defendant 2 on several occasions in pursuance of the agreement, and the advances aggregated to more than Rs. 8000. Defendant 2 executed an irrevocable power of attorney in plaintiff's favour in December 1933 authorizing the plaintiff to make all collections on his behalf and endorse and negotiate all his bills including the railway bills.

(2.) The first bill which was made out by defendant 2 against the railway company for works done as contractor was A. E's Bill No. V/l dated 16 May 1934 and it was for a sum of Rs. 2625. This was handed over by defendant 2 to the plaintiff and the plaintiff presented it in due course to the A. B. Railway Company. In the meantime, defendant 1 who was a creditor of defendant 2 in respect of money due on a hand note instituted a suit for recovery of the same in the Court of the First Munsif at Sylhet and got an attachment before judgment in respect of a sum of Rs. 925 out of this bill which was lying with the. railway company at that time. The plaintiff put forward a claim under Order 21, Rule 58, Civil P.C. but it was rejected as being, filed too late, and thereupon the present suit under Order 21, Rule 63, Civil P.C. was instituted. The plaintiff avers that the money attached by defendant 1 really belongs to the plaintiff and not to defendant 2 and consequently it could not be attached by defendant 1 in the money suit which ho brought against defendant 2. The suit was contested by defendant 1 alone. His contention in substance was that the attachment was quite valid and proper as the money belonged to defendant 2 and not to the plaintiff. It was further said that the deed of agreement set up by the plaintiff was a collusive and benami affair, which was resorted to for the purpose of defrauding the creditors of defendant 2 and that the document was inadmissible in evidence for want of registration and proper stamps. The Munsif who tried the suit, found the indenture of agreement to be a valid and operative document, but he held that the plaintiff could not succeed in the suit as the money really belonged to defendant 2 and the plaintiff was only constituted an agent for the purpose of collecting the bills on his behalf. The title to the money, according to the Munsif, remained with defendant 2 until it was actually appropriated by the plaintiff in accordance with the terms of the agreement and consequently the attachment was held to be proper. This decision was upheld in appeal by the lower Appellate Court.

(3.) Mr. Sen who appears before me in sup-port of this second appeal, has argued in the first place, that the position of the attaching creditor is the same as that of the judgment-debtor in a garnishee proceeding, and as defendant 2 by virtue of the indenture of agreement and the irrevocable power of attorney that he executed in favour of the plaintiff had put it beyond his powers to realize the money from the railway company, defendant 1 could not have larger rights in the matter; He has contended in the second place that there was an equitable charge created in favour of the plaintiff by the indenture of agreement in respect of the money due on the bill and the plaintiff had also a statutory lien on the fund under Section 171, Contract Act. Under the circumstances the attachment could not override the charge but must be taken as subject to the same. As a general proposition of law, it cannot be disputed that in a garnishee proceeding the attaching creditor stands in the shoes of the judgment-debtor : vide Halsbury, Edn. 2, Vol. 14, p. 106. No attachment could be made, when there is no existing debt due by the garnishee to the judgment-debtor, and if the judgment-debtor has already parted with his interest in the debt by assignment or created an equitable charge in respect of the same in favour of another" person, the attaching creditor acquires no larger rights than his debtor. But when the judgment-debtor still remains the owner of the money due by the garnishee, the mere fact that he has entered into a contract with another person that the fund shall be applied in any particular way does not prevent the creditor from attaching the fund. As Lord Wrenbury observed in Palmer V/s. Carey (1926) AC 703: An agreement for valuable consideration that a fund shall be applied in a particular way may found an injunction to restrain its application in any other way. But if there be nothing more, such a stipulation will not amount to an equitable assignment. It is necessary to find further that an obligation has been imposed in favour of the creditor to pay the debt out of the fund.