CHANAKY A NATIONAL LAW

UNIVERSITY

PATNA

PROJECT OF CODE OF CIVIL PROCEDURE

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Distribution of Assets
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Submitted To:- Dr. B. Ravi Narayan Sarma, (Assistant Professor of Law)
Submitted By:- Rishabh Goswami
Semester - V
Roll No. 1363
 CONTENTS

+Acknowledgement .........................................................................................3

I. INTRODUCTION .....................................................................................4

II. Provisions related to distribution of assets of judgment debtor among decree

holders ............................................................................................................8

Rate-able Distribution:.................................................................................8

Mode of Distribution: ................................................................................ 11

III. Separate Suit ......................................................................................... 12

Suit for Refund: ......................................................................................... 13

IV. Execution of decree in specific performance of contract.......................... 14

Preliminary Decree and Final Decree: ........................................................ 14

V. Conclusion............................................................................................ 17

VI. Bibliography ......................................................................................... 19

 +ACKNOWLEDGEMENT
Writing a project is one of the most significant academic challenges, I
have ever faced. Though this project has been presented by me but there
are many people who remained in veil, who gave their all support and
helped me to complete this project.

First of all, I am very grateful to my subject teacher Dr. Ravi Ranjan

Kumar without the kind support of whom and help the completion of the
project was a herculean task for me. He donated his valuable time from
his busy schedule to help me to complete this project and suggested me
from where and how to collect data.

I am very thankful to the librarian who provided me several books on this

topic which proved beneficial in completing this project.

I acknowledge my friends who gave their valuable and meticulous advice

which was very useful and could not be ignored in writing the project.

Last but not the least, I am very much thankful to my parents and family,
who always stand aside me and helped me a lot in accessing political
dignitaries and parties.

I thank all of them!

Rishabh Goswami

Roll No. 1363, Sem Vth

B.A.LL.B. (Hons.)
 I. INTRODUCTION

We all must have wondered that when a suit involves more than one plaintiff, and
when the suit is decided in favour of such plaintiffs, how the further process would
go. From passing of judgement to execution of decree, the whole process goes hand
in hand. As such, a judgement for co-plaintiffs is passed as a whole but when it
comes to execution of decree, there might be a special provision.

For example, A and B are co-plaintiffs and the after the judgement in their favour
they are decree-holders. For the purpose of execution of decree, since A is entitled
to the half the property in the suit related to property whereas B is entitled to only
one fourth. The execution of such property is done in the matter of attachment and
sale. Whatever the amount be received after selling off that property, for the purpose
of such execution of decree, A will get exactly half the amount whereas B will get
exactly one fourth the amount. This process of distribution is called distribution of
assets for civil suits and the provisions regarding the same are provided under
Section 73 of the Code of Civil Procedure, 1908. 1

The jurisprudential approach behind this provision intends to secure an equal footing
for the purpose of execution of decree for the decree holders so that each of them
secures their equitable share lawfully. 2 It has been held that the underlying object of
Section 73 is two-fold, firstly, to prevent unnecessary multiplicity of execution

1 Sir Dinshah Fardunji Mulla, T. L. Venkatarama Aiyar, 'Mulla on the Code of Civil Procedure: Act V of 1908'
1967.
2 ‘Provision in Regard to Distribution of Assets’, Law Times Journal, available at:

http://lawtimesjournal.in/provision-regard-distribution-assets/, last accessed on: 21st Oct. 2017.

proceedings and secondly, to secure equitable distribution of property by placing all
the decree holders on same footing. 3

Section 73 provides where assets are held by a court and more persons than one
have, before the receipt of such assets, made application to the court fo r the
execution of decrees for the payment of money passed against the same judgment
debtor and have not obtained satisfaction thereof, the assets, after deducting the costs
of realization, shall be relatively distributed among all such persons provided where
any property is sold subject to a mortgage or charge, the mortgagee or incumbrancer
shall not be entitled to share in any surplus arising from such sale. Where any
property liable to be sold in execution of a decree is subject to a mortgage or charge,
the Court may, with the consent of the mortgagee or incumbrancer, order that the
property be sold free from the mortgage or charge, giving to the mortgagee or
incumbrancer the same interest in the proceeds of the sale as he had in the property
sold.4 Where any immovable properly is sold in execution of a decree ordering its
sale for the discharge of an incumbrancer thereon, the proceeds of sale shall be
applied— firstly, in defraying the expenses of the sale.

Secondly, in discharging the amount due under the decree. Thirdly, in discharging
the interest and principal moneys due on subsequent incumbrances, if any. 5 Fourthly,
rateably among the holders of decrees for the payment of money against the
judgment debtor, who have, prior to the sale of the property, applied to the court
which passed the decree ordering such sale for execution of such decrees, and have
not obtained satisfaction. Where all or any of the assets liable to be rateably
distributed under this section are paid to a person not entitled to receive the same,

3 Suraj Lal v. Krishna Das Padrama Raj Krishna Sagar Works Ltd., AIR 1961 All 371.

4 Ray Sukumar, ‘The Code of Civil Procedure’, 255, 2008.

5 The Code of Civil Procedure, Act XIV of 1882.
any person so entitled may sue such person to compel him to refund the assets.
Lastly, nothing in this Section affects any right of the Government. 6

There are few conditions which must be meted out for the purpose of application of
the provision regarding distribution of assets which are that the applicant for rateable
distribution must have obtained a decree and applied for execution of decree to the
appropriate court. Such application should have been made prior to the receipt of the
assets by the court. The assets of which a rateable distribution is claimed must be
assets held by the court. 7 The attaching creditor as well as the decree-holder claiming
to participate in the assets should be holders of decrees for payment of money and
such decrees should have been obtained against the same judgement-debtor.8

There has been a provision in subsection 3 of the section 76 which says that a priority
shall be given to the Government debts during distribution of assets during execution
of a decree.9 The better understanding can be established for the same in the case of
Excise and Taxation Officer v. Gauri Mal Butali Trust10 wherein it was stated that
“The Common Law doctrine, that if the debts due to the Crown are of equal degree
to the debts due to a private citizen, then the crown must have priority against the
private citizen, is a part of the law of this country. The preferential rights of the state
in a democratic socialist republic are necessary, and raison d’être for such a
prevailed status given to a state, in view of its functions and duties, has to continue. 11

It must be also kept in mind that an order of execution of decree is not appealable
therefore even an order made under section 73 of the Code for the purpose of

6 Section 73, The Code of Civil Procedure, Act XIV of 1882.

7 Jatindra Kumar Das, ‘CODE OF CIVIL PROCEDURE’, p.893, 2013.
8 Biswambar v. Aparna Charan, AIR 1935 Cal 290.
9 Supra Note 6.
10 AIR 1961 Punj 292.
11 Ibid.
distribution of assets is not appealable though prior to the Amendment Act of 1976,
it was made appealable. Similarly, a revision of the said order can be made if
provisions of section 115 are satisfied. As a concluding remark it can be said that the
provisions for distribution of assets provides a fair claim for each decree holder. It
was further held that the remedy under the Civil Procedure Code is of superior
judicial quality than what is generally available under other statutes, and the judge
being entrusted exclusively with administration of justice, is expected to do better. 12

12 Ghan Shyam Das v. Anant Kumar Sinha, AIR 1991 SC 2251.

 II. PROVISIONS RELATED TO DISTRIBUTION OF
ASSETS OF JUDGMENT DEBTOR AMONG DECREE
HOLDERS

Section 73 of the Code which provides for rate-able distribution of the assets of the
judgment debtor among decree holders. 13 The said provision says that where assets
are held by a court and more persons than one has, before the receipt of such assets
made application to the court for execution of decree for the payment of money
passed against the same judgment debtor and have not obtained satisfaction thereof,
the assets, after deducting the costs of realization, shall be rateably distributed among
all such persons.14

Rate-able Distribution:

The proviso thereunder stipulates the conditions which a person applying for rate-
able distribution has to comply. Sub-section (2) of Section 73 says that where all or
any of the assets liable to be rate-ably distributed under the said section are paid to
a person not entitled to receive the same, any person so entitled may sue such person
to compel him to refund the assets. 15

Section 73 of the Code of Civil Procedure16 reads thus:

73. Proceeds of execution sale to be ratably distributed among decree holders: -

13 Supra Note 5.
14 1, All India Reporter, p.292, 1946.
15 Supra Note 6.
16 Ibid.
(1) Where assets are held by a court and more persons than one has, before the receipt
of such assets, made application to the court for the execution of decrees for the
payment of money passed against the same judgment debtor and have not obtained
satisfaction thereof, the assets, after deducting the costs of realization, shall be
ratably distributed among all such persons:

Provided as follows: -

(a) where any property is sold subject to a mortgage or charge, the mortgagee or
incumbrancer shall not be entitled to share in any surplus arising from such sale;

(b) where any property liable to be sold in execution of a decree is subject to a

mortgage or charge, the Court may, with the consent of the mortgagee or
incumbrancer, order that the property be sold free from the mortgage or charge,
giving to the mortgagee or incumbrancer the same interest in the proceeds of the sale
as he had in the property sold;

(c) where any immovable properly is sold in execution of a decree ordering its sale
for the discharge of an incumbrancer thereon, the proceeds of sale shall be applied;

firstly, in defraying the expenses of the sale;

secondly, in discharging the amount due under the decree;

thirdly, in discharging the interest and principal moneys due on subsequent

incumbrances (if any); and;

fourthly, rate-ably among the holders of decrees for the payment of money against
the judgment debtor, who have, prior to the sale of the property, applied to the court
which passed the decree ordering such sale for execution of such decrees, and have
not obtained satisfaction thereof.
(2) Where all or any of the assets liable to be rate-ably distributed under this section
are paid to a person not entitled to receive the same, any person so entitled may sue
such person to compel him to refund the assets.

(3) Nothing in this Section affects any right of the Government.

Section 73 of the Code requires that the application for execution of the decree must
have been filed by the person seeking rate-able distribution to the court holding
assets before the assets came into the custody of such court. 17 Time and again it has
been held by various binding decisions as to what are the mandatory requirements
which a person applying for rate-able distribution has to comply, one of which being
that the application for execution should have been filed to the court which holds the
assets before the assets came into the custody of the said court. The Kerala High
Court has reiterated that in Boban v. Sajith Kumar18.

In M. Jambanna v. K. Honnappa19, referring to Sec.73 and Order XXI, Rule 11 of

the Code it is held that the important condition for applicability of Section 73 is that
the party seeking rate-able distribution should have filed an application for execution
of the decree for the payment of money before the receipt of assets.

Section 73 does not require a separate application for rate-able distribution and there
can be no objection to include a prayer for distribution of the assets in the application
which is really for execution of the decree itself. The same view was taken by the
Allahabad High Court in M/s. Suraj Lal v. P.R.K. Sugar Works20 and the Mysore
High court in Shamsunder and Co. v. Sunnilal Vesaji21. In the said decisions it is
held that the decree holder who had his decree under execution prior to the executing

17 26, The Madras Law Times, p.525, 1920.

18 2003 (3) KLT SN Case No.176, p.137.
19 AIR 1957 Andhra Pradesh 1017.
20 AIR 1961 Allahabad 371.
21 AIR 1961 Mysore 12.
court getting the assets of the judgment debtor in its hands, is entitled to claim rate-
able distribution under Section 73.22

It is not necessary to make an application for rate-able distribution by a judgment-

creditor in order to enable him to get the benefit conferred by S.73 on the judgment -
creditors.23 It is also held that there is nothing in Section 73 of the Code warranting
the inference that in addition to the decree holder applying for execution of his
decree, he should also have made a separate application for rate-able distribution.

The Supreme court in Kotak & Co. v. State of U.P. 24 held that application by the
person claiming rate-able distribution must have been made to the court which is
holding the assets before such assets came to the hands of that court.

Hence, it was not necessary for the decree holder having filed an application to
execute the decree in his favour before the assets came to the custody of the
executing court to file a separate application for rate-able distribution before the
executing court.25

Mode of Distribution:

Rateable distribution should be made according to the amount due to each decree
holder at the time of distribution of assets, such order can be enforced by summary
process of execution.26

22 V. V. Chitaley, S. Appu Rao, 'The Code of Civil Procedure (V of 1908)', 1957.

23 Legal India, ‘RATEABLE DISTRIBUTION OF ASSETS OF JUDGMENT DEBTOR AMONG DECREE
HOLDERS’, 2011, available at: https://www.lawkam.org/civil/rateable -distribution-of-assets-of-judgment-
debtor/1526/, last accessed on: 22nd Oct. 2017.
24 (1987) 1 SCC 455.
25 Supra Note 7.
26 Subodh Chandra Sarkar, Prabhas Chandra Sarkar, Sudipto Sarkar, 'Sarkar's the Law of Civil Procedure', 2006.
 III. SEPARATE SUIT

Whether in view of sub-sec.(2) of Sec.73, the executing court should have kept its
hands off in the matter and directed to file a separate suit.27 What Sub-sec. (2) of
Sec.73 says is only that a person entitled to rateable distribution “may file a suit for
compelling a person who has received the amount to refund the amount”. It is only
an enabling provision. That provision does not restrict or curtail power of the
executing court to direct the person who has received the entire amount
notwithstanding the pendency of request for rateable distribution to refund the
amount. If a wrong or mistake is done by the court, that shall not prejudice a party.
In such circumstances, the principle “actus curiae neminem gravabit” must apply.
The court has to correct the mistake it has done, rather than asking the affected party
to seek his remedy elsewhere, by filing a separate suit and getting a decree, which
may or may not be successfully be executed. That position is highlighted in Suryarao
v. Chalamayya 28. There, it is held that where a person not entitled to rateable
distribution is paid wrongfully a portion of the assets, the fact that under Section
73(2) of the Code a remedy by way of suit is provided is no justification for depriving
a court of its inherent jurisdiction to pass appropriate orders reversing, where the
ends of justice so require, its own wrong orders, though it may be a ground for the
court whose inherent jurisdiction is invoked to say that it will not exercise such
jurisdiction and that the party may file a suit. The same view is taken in Laxmi
Narain v. Firm Ram Kumar29 by a Division Bench of that Court. There, the court
had erroneously disbursed the entire assets to one of the decree holders at a time
when the request for rateable distribution by the other decree holders was pending

27 Supra Note 26.

28 AIR (34) 1947 Madras 339.
29 AIR 1971 Rajasthan 30.
consideration. It was held that the court erroneously excluding a person and paying
the amount to others has the power to compel the person who received the entire
amount (as against the provisions of Section 73 of the Code) to refund the rateable
amount due to the excluded decree holder. The Division Bench in that case relied on
the decisions in Thanmull v. K. Krishnaswami30, Surendra Kumar v. Jamini Kumar31
and Simla Banking & I. Co. Ltd. V. Indo S.T. Co. Ltd. 32 in arriving at that conclusion.

Suit for Refund:

Sub sec. 2 of Sec. 73 enacts that a suit lies or refund of a assets wrongly distributed.
Hence, any person who is entitled to all or any of the assets which have been paid to
a person not entitled to them, may sue for the refund of the assets. 33 The cause of
action for such suit arises when the amount is actually paid. The period of limitation
for such suit is three years from the date of payment. 34

30 AIR 1935 Madras 988.

31 AIR 1936 Calcutta 723.
32 AIR 1938 Lahore 754.
33 JATINDRA KUMAR DAS, 'CODE OF CIVIL PROCEDURE', 893, 2013.
34 Ibid.
 IV. EXECUTION OF DECREE IN SPECIFIC
PERFORMANCE OF CONTRACT
The court can direct that the act required to be performed by J.D. may be performed
as far as practicable by D.H. or any other person for and at the cost of J.D.35 This is
an addition to the remedies of attachment of property and detention of the J.D. in
civil prison. A decree for specific performance of agreement of sale is executed by
obtaining from the decree holder a draft of the document prepared in terms of the
decree.36 The draft is then served on the J.D. inviting his objections. After objection,
if any, are dealt with and the draft is approved, the J.D., having failed to execute the
same, the court would cause it to be registered by sending it to the sub registrar either
with an officer of the court or a commissioner appointed for this purpose.

Preliminary Decree and Final Decree:

Preliminary decree in a partition action is a step in the suit which continues until the
final decree is passed. 37 Where the decree relates to any immovable property and the
partition or separation cannot be conveniently made without further inquiry, then the
Court may pass preliminary decree declaring the rights of the several parties
interested in the property and giving such further direction as may be required. In a
suit for partition by coparcener or co-sharer, the Court is not expected to give decree
only for the plaintiff's share, but it has to consider the shares of all the heirs after
making them parties to the suit and then to pass preliminary decree. 38 Therefore, the
preliminary decree for partition is only a declaration of rights of the parties and the
shares they have in the joint family or coparcenery property. The Court can pass

35 7, All India Reporter, 237, 1951.

36 Ms. Adarsh Kaur Gill vs Sh. Mawasi & Others, (2012) ILR 4 Delhi 87.
37 Ibid.
38 T. Ravi Vs. B. Chinna Narasimha, MANU/SCOR/03998/2017.
more than one preliminary decree depending upon the facts and circumstances. For
example, situation giving rise to change in the extent of the shares of the parties to
the suit. Hon'ble Bombay High Court in the case of Kusum Dashrath Kharmare Vs.
Popat Madhav Gangarde and others39, laid down the law that, there is nothing in
the Code of Civil Procedure which prohibits the Court from passing of more than
one preliminary decree if circumstances justify the same and that it may be necessary
to do so particularly in partition suit when after the preliminary decree some parties
die and shares of other parties are thereby augmented. The proceeding is brought to
an end when the final decree is drawn. Hon'ble Bombay High Court in the case of
Annasaheb Rajaram Nagane and another Vs. Rajaram Maruti Nagane and others40
gave directions to the Civil Courts as follows:

By way of general directions, all the civil Courts are directed to remit, to the
Collector, within four months from the date of signing the decree under Section 54
of CPC41, all the relevant papers for partition of property or a separate possession of
undivided estate assessed to the payment of revenue to the Government, without
there being any application or request or prayer for the same; so as to follow the
mandate of Section 54 of CPC. Any application seeking direction to send necessary
papers to the Collector, should be disposed of within 30 days from the receipt
thereof, treating it as an application filed in the disposed of suit, without opening any
independent proceeding in this behalf. 42 Such application should be treated as a
request to a Judge or Court to send necessary papers to the Collector for effecting
partition under Section 54 of CPC. Such application is really nothing but a request
to the Judge or Court to discharge his ministerial duty. 43 In view of this, even no

39 2008(1) Mh.L.J 267.

40 AIR 2001 Bom.303.
41 The Code of Civil Procedure, Act No. 5 of 1908.
42 Ibid.
43 Ibid.
notice to any of the parties to the application is necessary as it is not a petition
seeking any adjudication of any of the rights of the parties. 44

44 Supra Note 43.

 V. CONCLUSION

The multiplicity of proceedings may happen in cases where there are many decree-
holders, each competent to execute his decree by attachment and sale of a particular
property, the necessity of each and every one separately attaching and separately
selling that property.45 It is also aimed at to provide for rateable distribution of assets
upon which two or more decree-holders have equal claims. Section 73 of the Code
of Civil Procedure is intended to provide expeditious, summary and cheap remedy
for the execution of money decrees held against the same Judgment-debtor by
several persons, the claims of rival decree-holders getting adjusted without the
necessity for separate proceedings. 46 Section 73 provides that where assets are held
by a Court, and more persons than one has, before receipt of such assets, made
application to the Court for the execution of decrees for the payment of money
passed against the same Judgment-debtor, and have not obtained satisfaction thereof,
the assets, after deducting the costs of realization, shall be rateably distributed among
all such persons.

From the above discussion, it clearly appears that Order 21 of the code of civil
procedure contains elaborate and exhaustive provisions for execution of decrees and
orders, takes care of different types of situations and provides effective remedies not
only to the decree holders and judgment debtors but also to objectors and third
parties.47 In exceptional cases, where provisions are rendered ineffective or
incapable of giving relief to an aggrieved party, he can file a suit in a civil court. 48

45 Dundappa Virupaxappa Kallolgi v. Annaji Vardaji , AIR 1953 Bom. 65.

46 Supra Note 30.
47 Supra Note 41.
48 Ibid.
The decision can well be concluded with the following observations of Sharma, J.
(as he then was) in Ghan Shyam Das v. Anant Kumar Sinha 49.

“The remedy under Civil Procedure Code is of superior judicial quality than what
is generally available under other statutes, and the judge being entrusted exclusively
with administration of justice, is expected to do better.”50

49 (1983) 4 SCC 7.
50 Ibid.
 VI. BIBLIOGRAPHY
Books:

• Sir Dinshah Fardunji Mulla, T. L. Venkatarama Aiyar, 'Mulla on the Code of Civil
Procedure: Act V of 1908' 1967.
• Ray Sukumar, ‘The Code of Civil Procedure’, 2008.
• Jatindra Kumar Das, ‘CODE OF CIVIL PROCEDURE’, 2013.
• V. V. Chitaley, S. Appu Rao, 'The Code of Civil Procedure (V of 1908)', 1957.
• Subodh Chandra Sarkar, Prabhas Chandra Sarkar, Sudipto Sarkar, 'Sarkar's the Law of
Civil Procedure', 2006.

Research Papers and Journals:

• All India Reporter.

• The Law Times Journal.

Websites:

• www.lawyersclubindia.com › Experts › Civil Law.

• https://www.lawkam.org/civil/rateable-distribution-of-assets-of-judgment-debtor/1526/.
• www.lawzonline.com › Bare acts › Code of Civil Procedure, 1908.
• https://www.nls.ac.in/lib/bareacts/civil/cpc/cpc3.html.
• http://lawtimesjournal.in/provision-regard-distribution-assets/.