Supreme Court: In an appeal filed by the third-party claimant (‘appellant’) in a garnishee proceeding, the three-Judges Bench of B.K. Mukherjea*, S.R. Das and Vivian Bose, JJ., stated that an agreement to be effectual as an assignment of a claim to a debt (actionable claim) must be in writing and comply with the provisions of Section 130 of the Transfer of Property Act, 1882. Thereafter, referring to the letter, which referred to security deposits, the Supreme Court stated that it was difficult to say that it operated as an assignment of the existing security deposits lying with the Railway Authorities to the credit of the defendants or was intended to operate as such. It was not addressed to the creditor, nor used the language of an assignment.
Thus, the Supreme Court stated that in these circumstances, it was unable to say that apart from the agreements of the years 1946 and 1948 which did not include the security deposits, an assignment of the deposits was intended to be affected by this letter. Accordingly, the Supreme Court dismissed the present appeal.
Background
The respondent instituted a summary suit in the Bombay High Court against another firm known as G.V. Patel (‘defendants’) and obtained a decree against the latter for a sum of Rs. 81,800 on 2-9-1949. On 19-9-1949, the respondents applied for execution of the decree by attachment of moneys amounting to Rs. 75,000 alleged to belong to the defendants and lying deposited with the Controller of Grain Shops, GIP Railway, Bombay.
On 4-10-1949, an attachment order was served upon the Controller of the Grain Shops directing him to hold the sum of Rs. 75,000 until further orders of the court and subsequently, a garnishee order was also issued. The garnishee represented to the court that he had with him an amount of Rs. 23,000 in his hands due and payable to the defendants, and this amount was subject to a prohibitory order issued by the Joint Civil Judge, Poona.
On 10-10-1949, the appellant filed a suit in the Bombay High Court, claiming a sum of Rs. 1,39,777 alleged to be due to it as advances made from time to time to the defendants based on certain agreements. On 11-11-1949, the Bombay High Court, passed an order directing the GIP Railway Administration to pay to the Sheriff of Bombay all moneys belonging to the defendants which were in their hands. It was further directed that anyone desiring to obtain an order for payment of these moneys should give notice to one Sadashiv Ramchandra and to the respondent.
On 12-12-1949, the garnishee paid to the Sheriff of Bombay a sum of Rs 23,013 only. Pursuant to the order of the court dated 11-11-1949, the respondents took out notice on 1-2-1950, under Rule 337 of the Bombay High Court Rules against Sadashiv Ramchandra and the appellant requiring both of them to appear before the court and state the nature of their respective claims regarding the sum of money lying with the Sheriff of Bombay.
The appellant appeared and laid a claim alleging that it was entitled to the whole sum of Rs 23,013 by reason of assignment in its favour by the defendants. It was this claim which was the subject-matter of controversy between the respondents and the appellant and the question for determination was whether the appellant was a secured creditor in respect of the amount payable under the garnishee notice.
The matter came up before Bombay High Court, whereby vide judgment dated 22-1-1951, decided the point in favour of the appellant. The respondents then filed an appeal to the appellate division of the High Court, whereby the initial judgment was reversed, holding that no security was created in favour of the appellant in respect of the amount held as deposit by the GIP Railway Administration.
The question was whether the appellant acquired the right of an assignee or of a secured creditor in respect to the sum of money lying with the GIP Railway Administration and which the latter paid to the Sheriff of Bombay under orders of the court.
Analysis, Law, and Decision
The Supreme Court stated that the appellant was given an irrevocable power of attorney to collect moneys due on all the bills submitted by the defendants, and it appeared that the defendants used to endorse upon each one of the bills a direction to pay the amount due on the same to the appellant and at the same time acknowledge the receipt of the amounts to their credit with the appellant.
The Supreme Court stated that although the security deposits were deducted from the amounts payable on the bills, the bills were taken to be completely discharged, and the deductions were transferred to the security deposit account of the Railway. If the bills were taken to be completely discharged even after these deductions, it could not be held that these deposits still retained the character of moneys payable on the bills, and as soon as they ceased to have that character, the security of the appellant in respect of them must also be taken to have ceased.
The Supreme Court stated it was open to the appellant to realise the full amount due under the bills by virtue of its power of attorney and it could have compelled the defendants to make separate payment of the amounts required for the deposits. However, when instead of asserting any such right it agreed to the arrangement mentioned above and allowed some portion of the amounts due on the bills to be treated as security deposit, it could not at the same time treat itself as assignee of the same on the strength of the agreements.
Further, the Supreme Court stated that payments to the appellant as attorney of the defendants were always subject to the deductions which the Railway Administration claimed that they were entitled to make on account of security deposits and other dues. The appellant was definitely given to understand that bills not clearly receipted and endorsed in their favour would not be paid to it but would be paid to the contractors concerned, and further any amounts due in respect of the deductions made from the bills on account of security deposits, etc. would also be paid to the contractors direct.
Thus, the Supreme Court stated that even after the contracts were fulfilled, the security deposits were reckoned not as moneys due on the bills and they were to be paid not to the appellant as holder of the power of attorney from the defendants but directly to the defendants. The appellant apparently acquiesced in this arrangement and therefore, it was rightly held that the security deposits could not be regarded as moneys due on the bills and consequently were not included in the charge which was created by the defendants in favour of the appellant by the two agreements.
The Supreme Court stated that the letter dated 22-3-1949 (‘the letter’) addressed by the defendants to the railway authorities undoubtedly referred to the security deposits and requests the Railway Administration to pay the same to the appellant and not to the defendants directly. The question was whether the letter by itself constituted an assignment in favour of the appellant of the security deposits which had become payable by the GIP Railway to the defendants.
The Supreme Court stated that an agreement to be effectual as an assignment must be in writing and comply with the provisions of Section 130 of the Transfer of Property Act, 1882. Thereafter, referring to the letter, the Supreme Court stated that it was difficult to say that it operated as an assignment of the existing security deposits lying with the Railway Authorities to the credit of the defendants or was intended to operate as such. It was not addressed to the creditor, nor used the language of an assignment.
The Supreme Court stated that the contents of the letter made it quite clear that it was intended to be a mere clarification of the position as it was understood by the defendants under the agreements of the years 1946 and 1948. The letter was not intended to operate as an instrument of transfer of the debts owing to the defendants by the Railway Authorities in favour of the appellant dehors the agreements mentioned above. Although a new agreement was set up in the affidavit, no attempt was made to prove it.
Thus, the Supreme Court stated that in these circumstances, it was unable to say that apart from the agreements of the years 1946 and 1948 which did not include the security deposits, an assignment of the deposits was intended to be affected by this letter. Accordingly, the Supreme Court dismissed the present appeal.
[New Citizen Bank of India Ltd. v. Shah Chotlal Mangalal (Firm), (1954) 2 SCC 869, decided on 09-12-1954]
*Judgment authored by- Justice B.K. Mukherjea
Advocates who appeared in this case :
For the Appellant: J.C. Bhatt and M.S.K Sastri, Advocates
For the Respondent: C.K. Daphtary, Solicitor General of India (S.S Shukla and S.B. Jathar, Advocates, with him)
**Note: Actionable claim
Section 3 of Transfer of Property Act, 1882 (‘the Act’) defines actionable claim. Further, the Supreme Court in Sunrise Associates v. State (NCT of Delhi), (2006) 5 SCC 603, explained actionable claim. It was held that, “Every claim is not an actionable claim. It must be a claim either to a debt or to a beneficial interest in movable property. The beneficial interest is not the movable property itself, and may be existent, accruing, conditional or contingent. The movable property in which such beneficial interest is claimed, must not be in the possession of the claimant. An actionable claim is therefore an incorporeal right.”
Section 130 of the Act provides transfer of actionable claim. As per the provision, transfer of an actionable claim shall be effected, only by the execution of an instrument in writing signed by the transferor or his duly authorised agent. Further, the transfer shall be complete and effectual upon the execution of such instrument, and thereupon all the rights and remedies of the transferor, whether by way of damages or otherwise, shall vest in the transferee, whether such notice of the transfer was given or not. Further, Section 131 of the Act specifies that every notice of transfer of an actionable claim shall be in writing, signed by the transferor or his agent duly authorised in this behalf. If in case the transferor refuses to sign, then it should be signed by the transferee or his agent and shall state the name and address of the transferee.
