Case: Jugalkishore Saraf Vs. Raw Cotton Co. Ltd

Two persons named Mahomedali Habib and Sakerkhanoo Mahomedali Habib used to carry on business as merchants and pucca adatias in bullion and cotton at Bombay under the name and style of Habib & Sons. In 1948 that firm instituted a suit in the Bombay City Civil Court, being Summary Suit No 233 of 1948, against the present appellant Juga-lkishore Saraf, a Hindu inhabitant carrying on business at Bombay, for the recovery of Rs. 7, 113-7-0 with interest at 6 per cent. per annum said to be due by him to the firm in respect of certain transactions in gold and silver effected by the firm as pucca adatias. On the 7th February, . 1949 when that summary suit was still pending a document was executed whereby it was agreed that the two partners would transfer and Messrs Raw Cotton Company, Limited, (hereinafter called the respondent company) would accept the transfer of, inter alia, all book and other debts due to them in connection with their business in Bombay and full benefit of all securities for the debts and all other property to which they were entitled in connection with the said business. The respondent company did not take steps under 0. XXII, r. 10 of the Code of Civil Procedure to get themselves substituted as plaintiffs in the place and stead of Habib & Sons, the plaintiffs on record, but allowed the suit to be continued in the name of the original plaintiffs. Evidently, the two partners migrated from India to Pakistan and their properties vested in the Custodian of Evacuee Property. On the 15th December 1949 a decree was passed in the summary suit for the sum of Rs. 8, 018-7-0 for the debt and interest and the sum of Rs. 410 for costs of the suit, aggregating to Rs. 8, 428-7-0, and for further interest at 4 per cent. per annum from the date of the decree until payment. Habib & Sons being the plaintiffs on record the decree was passed in their favour.On the 11th December 1950 the Custodian of Evacuee Property, Bombay, informed the respondent company that by an order made on the 2nd August 1950 the Additional Custodian of Evacuee Property had confirmed "the transaction of transfer" of the business of Habib & Sons to the respondent company. On or about the 25th April, 1951 the respondent company presented before the Bombay City Civil Court a tabular statement purporting to be an application for execution under Order XXI, rule 11 of the Code of Civil Procedure. In the last column of the tabular statement, under the heading "The mode in which the assistance of the Court is required", the respondent company prayed that the Court "be pleased to declare the Applicants the assignees of the decree as the decrement debt along with other debts bad been transferred by the plaintiffs to the Applicants by a deed of assignment dated the 7th February 1949 which was confirmed by the Custodian of Evacuee Property, Bombay, and order them to be substituted for the plaintiffs". There was, in that column, no specification of any of the modes in which the assistance of the Court might be required as indicated in clause(j)of Order XXI, rule 11 of the Code.On the 10th May 1951 the Bombay City Civil Court issued a notice under Order XXI, rule 16 of the Code to Habib & Sons, who were the decree-holders on record, and Jugalkishore Saraf, who was the defendant judgment-debtor, requiring them to show cause why the decree passed in the suit on the 15th December 1949 in favour of the plaintiffs and by them transferred to the respondent company, should not be executed by the said transferees against the said defendant judgment-debtor. The defendant judgment-debtor showed cause by filing an affidavit affirmed by him on the 15th June 1951. Amongst other things, he denied that the document in question had been executed or that the document transferred the decree to the respondent company.The matter was tried on evidence and the execution of the document was proved by the evidence of an attesting witness which has been accepted by the executing Court. The executing Court, however, rejected the second contention and made the notice absolute with costs and gave leave to the respondent company to execute the decree against the judgment-debtor. The judgment-debtor filed an appeal before the High Court. The appeal was heard by Dixit, J. Before him the execution of the document was not challenged and nothing further need be said about that. The only substan- tial question raised wag whether the respondent company were the transferees of the decree within the meaning of Order XXI, rule 16. The learned Judge answered the question in the affirmative on the authority of the decisions of the Bombay High Court in Purmananddas Jivandas v. Vallabdas Wallji([1877] I.L.R. 11 Bom. 506) and in Chimanlal Hargovinddas v. Ghulamnabi(I.L.R. [1946] Bom. 276)   and affirming the order of the executing Court dismissed the appeal. The judgment-debtor preferred a Letters Patent Appeal before the High Court which was dismissed by Chagla, C.J., and Shah, J., following the two earlier decisions mentioned above. They, however, granted, under article 133 (1) (c) of the Constitution, a certificate of fitness for appeal to this Court.

Court's reasoning:
It is quite plain that if .Order XXI, rule 16 is thus construed the respondent company cannot possibly contend that the decree now sought to be executed by them was, after its passing, transferred to them by an assignment in writing within the meaning of that rule, for the document in question was executed on the 7th February 1949 but the decree was passed subsequently on the 15th December 1949. Whether they can claim to have become the transferees of the decree after it was passed by operation of law within the meaning of this rule or to have otherwise become entitled to the benefit of it is a different matter which will be considered later on. For the moment it is enough to say that there had been no transfer of the decree to the respondent company by any assignment in writing executed after the decree was passed, as contemplated and required by Order XXI, ruleis to be noted that to attract the application of this equitable principle there must be an agreement to transfer the decree to be passed in future. As soon as the decree is passed equity fastens upon it and, by treating as done what ought to be done, that is by assuming that the transferor has executed a deed transferring the decree to the transferee as in all conscience he should do equity regards the transferee as the beneficial owner of the after-acquired decree. The equitable principle we are considering only implements or effectuates the agreement of the parties. This equity does not, however, take upon itself the task of making any new agreement for the parties either by filling up the lacunas or gap in their agreement or otherwise. If, therefore, there is no agreement between the parties to transfer the future decree the equitable principle referred to above can- not come into play at all. In order, therefore, to test the propriety of the application of this equitable principle to the facts of the present case we have to enquire whether there was here any agreement between the parties to transfer the decree to be passed in the then pendingHigh Court has held that the decree to be passed was also included in this document. The reasoning appears to be this: Clause 1 of the document comprised six several items of properties. Each of these items referred to "the said Indian business". The Fourth item was "All the book and other debts due to the vendors in connection with the said Indian business and the full benefits of all securities for the debts" and the last and residuary item was "All other property to which the vendors are entitled in connection with the said Indian business". One of the book debts was the subject-matter of the pending suit. The decree that the plaintiff would obtain in, that suit would, therefore, be property or right "in connection with the said Indian business". Therefore, as they were transferring all property in connection with their business they must have intended to transfer the future decree also. Therefore, it must be regarded as covered by the document. I am unable to accept this line of reasoning. It cannot be overlooked that there was no mention in that document of any suit or decree to be passed in that suit as one would have expected if the parties really intended to transfer the future decreethe assignment of the debt the respondent company undoubtedly became entitled to get themselves substituted under Order XXII, rule 10 as plaintiffs in the pending suit but they did not choose to do, so and allowed the transferors to continue the suit and a decree to be passed in their favour. The true position, therefore, is that at the date of the transfer of the debt to the respondent company the transferors could not transfer the decree, because the decree did not exist. On a true construction of the document the transferors agreed only to transfer, besides the five items of specified properties, "All other properties to which the vendors are entitled", that is to say, all properties to which at the date of the document they were entitled. At the date of the document they had the right to proceed with the suit and to get such relief as the Court by its decree might award but no decree had yet been passed in that suit, and, therefore, property to which they were then entitled could not include any decree that might in future bethere is a contract for the transfer of property which is not in existence at the date of the contract, the intending transferee may, when the property comes into existence, enforce the contract by specific performance, provided the contract is of the kind which is specifically enforceable in equity. It is only when the transferor voluntarily executes a deed of transfer as in all conscience he should do or is compelled to do so by a decree for specific performance that the legal title of the transferor in that property passes from him to the transferee. This transfer of title is brought about not by the prior agreement for transfer but by the subsequent deed of transfer. This process obviously involves delay, trouble and expenses. To obviate these difficulties equity steps in again to short circuit the process. Treating as done what ought to be done, that is to say, assuming that the intending transferor has executed a deed of transfer in favour of the intending transferee immediately after the property came into existence, equity fastens upon the after- acquired property and treats the beneficial interest therein as transferred to the intendingis true that that agreement makes the application of the equitable principle possible or I may even say that it sots the equity in motion but, nevertheless, it is equity alone which denudes the transferor of his interest in the after-acquired property and passes it to the intending transferee. That being the true position, as I think it is, the after acquired property cannot, logically and on principle, be said to have been transferred to the intending transferee by the agreement in writing. I do not see on what principle this transfer can be said to relate back to the previousappellants have a right in equity to have the performing rights assigned to them and in that sense are equitable owners of those rights; but they are not assignees of the rights within the meaning of the statute. This contention, therefore, fails",The above observations, to my mind, completely cover the present case. On a parity of reasoning the respondent company may have, by operation of equity, become entitled to the benefit of the decree as soon as it was passed but to say that is not to say that there has been a transfer of the decree by the document of the 7th February 1949. And so it has been held in several cases to which reference may now beplaintiff claiming to be the assignee by way of mortgage of that decree instituted this suit against two defendants. The defendant No. 1 was the plaintiff in the earlier suit who had mortgaged to the plaintiff the decree to be passed in that suit and the defendant No. 2 was a person who claimed to be a transferee of the same decree under a conveyance subsequently executed in his favour by the first defendant. The judgment-debtor under the decree in the first suit was not made a party defendant in this suit. The first defendant did not contest this suit and it was only contested by the second defendant. One of the points raised by the contesting defendant was that this subsequent suit which was one for a, pure declaration of title was bad under section 42 of the Specific Relief Act inasmuch as the plaintiff did not pray for consequential relief in the shape of a permanent injunction restraining him, the contesting defendant, from executing theHigh Court allowed the appeal and by its decree declared that Wahed was in his lifetime and those who became his heirs were entitled to recover the properties in suit. Abedoonissa applied for execution of the decree for herself and for one Wajed who was said to be the posthumous son of Wahed born of her womb. Objection was taken, inter alia, that Wajed was not the legitimate son of Wahed. This objection was overruled and it was held that Abedoonissa was entitled to execute the decree for herself and as the guardian of Wajed. Then the judgment-debtor Abdool died. Abdools widow Ameeroonissa filed a suit for a declaration that Wajed was not the legitimate son of Wahed and for setting aside the last mentioned order. Abedoonissa took the point that the matter was concluded by principles of res judicata. To that Ameeroonissas reply was that the proceeding in which the question of the legitimacy of Wajed was decided was wholly incompetent so far asWajed was concerned because, the decree being in favour of Abedoonissa, Wajed was not a transferee of the decree within the meaning of section 208 of Act VIII of 1859 corresponding to Order XXI, rule 16 of the present Code and could not apply for execution and that being so any adjudication on his status in such proceeding was not binding attransfer of property is not by any assignment in writing executed by the transferor in favour of the transferee but is brought about by the operation of the statutory-provisions relating to and governing execution of decrees. Thus this Privy Council decision itself shows that transfers "by operation of law" were not intended by it to be confined to the three cases of death, devolution or succession.More often than not transfers "by operation of law" will be found to be brought about by the operation of statutory law. Thus when a person dies testate there is a devolution of his properties to his legal representatives by operation of the law of testamentary succession which is now mainly statutory in this country. When a person is adjudged insolvent his properties vest in the official assignee and that transfer is brought about by the operation of the insolvency laws which have been codified. Court sale of property in execution of a decree vests the right, title and interest of the judgment-debtor in that property in the auction-purchaser thereby effecting a transfer by operation of the law embodied in the Code of Civil Procedure. Likewise, statutes in some cases provide for the forfeiture of property, e.g. property in relation to which an offence has been committed, namely, illicit liquor or opium, etc., and thereby effect a transfer of such property from the delinquent owner to the State. It is neither necessary nor profitable to try and enumerate exhaustively the instances of transfer by operation of law. Suffice it to say that there is DO warrant for confining transfers "by operation of law" to transfers by operation of statutory laws. When a Hindu or a Mohammaden dies intestate and his heirs succeed to his estate there is a transfer not by any statute but by the operation of their respective personal law. In order to constitute a transfer of property "by operation of law" all that is necessary is that there must be a passing of one persons rights in property to another person by the force of some law, statutory oris difficult to appreciate the implication of the first proposition. When on a true construction of the deed it actually operates to transfer a decree then in existence, no equitable principle need be invoked, for in that case the transfer is by the deed itself and as such is by an assignment in writing. It is only when the deed does not effectively transfer the decree because, for instance, the decree is not then in existence, but constitutes only an agreement to transfer the decree after it is passed that the invocation of the equitable principle becomes necessary and it is in those circumstances that equity fastens and operates upon the decree when it is passed and effects a transfer of it. If, however, the learned Judges meant to say that if on a true construction of the deed it did not cover the decree then the equitable principle would not come into play at all and in that case the principle of transfer by operation of law could not be invoked, no exception need then beanswer is that those words are not meaningless but have effect in some cases. Take, by way of an illustration, the second proviso to Order XXI, rule 16 which provides that where a decree for payment of money against two or more persons has been transferred to one of them it shall not be executed against the others. This is a provision which forbids one of the judgment-debtors to whom alone the decree for payment of money has been transferred from making an application for execution and, therefore, he cannot apply under section 146 as a person claiming under the decree-holder. As the respondent company do not fall within Order XXI, rule 16 because the document did not cover the decree to be passed in future in the then pending suit that rule cannot be a bar to the respondent company making an application for execution under section 146 if they satisfy the other requirement of that section, namely, that they can, be said to be claiming under thethe premises, in the eye of the law, the position of the transferors, vis-a-vis the respondent company, was nothing more than that of benamidars for the respondent company and when the decree was passed for the recovery of that debt it was the respondent company who were the real owners of the decree. As between the respondent company and the transferors the former may well claim a declaration of their title. Here there is no question of transfer of the decree by the transferors to the respondent company by assignment of the decree in writing or by operation of law and the respondent company cannot apply for execution of thedecree under Order XXI, rule 16. But the respondent company are, nonetheless, the real owners of the decree because it is passed in relation to and for the recovery of the debt which undoubtedly they acquired by transfer by the document under consideration. The respondent company were after the transfer, the owners of the debt which was the subject matter of the suit and the legal incidents thereof and consequently were the real owners of the decree. The respondent company derived their title to the debt by transfer from the transferors and claimed the same under the latter. When the respondent company be, came the owner of the decree immediately on its passing they must, in relation to the decree, be also regarded as persons claiming under the transferors. The respondent company would not have become the owner of the decree unless they were the owners of the debt and if they claimed the debt under the trans- ferors they must also claim the relative decree under the transferors as accretions, as it were, to their original right as transferees of the debt. In my opinion, the respondent company are entitled under section 146 to make the application for execution which the original decree- holders couldresult, therefore, is that this appeal must be dismissed withassignee of a decree could only make one application for execution under Order XXI, rule 1 1 of the Code of Civil Procedure specifying therein the mode in which the assistance of the Courtwas required and it was only after such application had been made to the Court which passed the decree that the Court would issue notice under Order XXIL rule 16 to the transferor and the judgment debtor and the decree would not be executed until the Court had heard their objections if any to its execution.