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2024 Supreme(Online)(MAD) 38205

HIGH COURT OF MADRAS
P. B. Balaji, J
Union of India – Appellant
Versus
S. Indirani – Respondent
CRP. PD. Nos.2098, 2099 & 2100 of 2021



Advocates:
For the Appellants/Petitioners: G. Ilangovan
For the Respondents: J. Ramakrishnan

Section 73(3) of the Code of Civil Procedure, 1908 explicitly exempts the Government from the provisions governing rateable distribution of assets under Section 73, allowing the Government to protect its financial interests in execution proceedings without the necessity of possessing a pre-existing decree or adjudication.

Headnote:(A) Code of Civil Procedure, 1908 - Section 73 - Rateable distribution - Exemption for Government - Section 73(3) explicitly saves the rights of the Government from being affected by the principles of rateable distribution - Where a Government entity claims recovery of misappropriated funds from a judgment-debtor, it is not bound by the conditions of having a decree or adjudication under Section 73 to object to the withdrawal of execution sale proceeds. (Para 17, 18)

(B) Execution Proceedings - Payment of court-deposited money - Where the source of funds in court is disputed and subject to pending litigation, the court has an equitable duty to preserve the funds until the rightful claimant is determined, even if the claimant has not yet secured a formal decree. (Para 11, 12)

Facts of the case:
An employee of the Department of Posts was alleged to have misappropriated funds. Pending recovery, his family obtained an ex-parte maintenance decree and moved to auction his property. The auction purchasers deposited funds in court. The petitioner (Union of India) sought to prevent the release of these funds, fearing the maintenance decree was collusive, and sought impleadment to recover the misappropriated money. The Trial Court dismissed the applications, stating the petitioner had no locus until its own suit for recovery was successful.

Findings of Court:
The High Court held that Section 73(3) of the CPC exempts the Government from the restrictive requirements of rateable distribution. Thus, the Government could maintain the applications. The court ordered that the funds in court deposit be protected pending the resolution of the recovery suits.

Issues: 1. Whether the Government is bound by the requirements of Section 73 of the Code of Civil Procedure, 1908 in seeking to secure execution proceeds? 2. Whether the Court should release disputed funds while recovery suits are pending?

Ratio Decidendi: Section 73(3) recognizes an overriding right of the Government, rendering the constraints of Section 73 of the CPC (such as the requirement of a prior decree) inapplicable to the Government. Equity requires that funds remain in court when a prima facie claim exists and the decree itself is under challenge.

Result: Civil Revision Petitions allowed; Trial Court order set aside; directions issued to settle pending suits within stipulated time.

Table of Content
1. court oversight in execution proceedings involving third-party claims. (Para 1 , 2 , 3 , 4)
2. parties' contentions regarding collusive decrees and the scope of rateable distribution. (Para 5 , 6 , 7 , 8)
3. government immunity from constraints of section 73 cpc regarding rateable distribution of assets. (Para 9 , 10 , 11 , 12 , 13 , 14 , 15 , 16 , 17 , 18 , 19 , 20)

Prayer in CRP. PD. Nos.2098 & 2099 of 2022: The Civil Revision Petition filed under Article 227 of the Constitution of India, to set aside the fair and decreetal order dated 31.03.2021 made in I.A. No.1 of 2020 & I.A. No.743 of 2019 and I.A. No.489 of 2019 in I.A. No.363 of 2019 in O.S. No.466 of 2012 on the file of II Additional Subordinate Court, Salem and allow the above I.As.

COMMON ORDER

The Union of India as a third party has approached this Court by way of the above revisions, challenging the order of the Trial Court in I.A. No.1 of 2020, I.A. No.743 of 2019 and I.A. No.489 of 2019 in I.A. No.363 of 2019 in O.S. No.466 of 2012 on the file of the II Additional Subordinate Court, Salem.

2. The case of the revision petitioner is that the third respondent who was an employee under the Department of Post has misappropriated a sum of Rs.26,00,000/- for which he was suspended from his service and steps were initiated for recovering the money misappropriated by the employee. In the meantime, his wife and daughter filed a suit against the employee, viz., the 3rd respondent seeking maintenance in O.S.No.466 of 2012. In the said suit, an ex-parte decree came to be passed and the respondents 1 and 2 sought to execute the same by filing Execution Petition by bringing the property of the 3rd respondent for sale through Court auction.

3. In Execution Proceedings, the auction purchaser who bid for the property successfully also deposited a sum of Rs.15,25,000/- in Court and the 1st respondent/wife of the employee, filed a petition for a payment of Rs.7,99,584/- in I.A.No.362 of 2019. The said Application was not opposed by her husband viz., the 3rd respondent and consequently, the amount was withdrawn by the 1st respondent. When a similar Application was filed by the 2nd respondent/daughter of the 1st and 3rd respondent, the revision petitioner filed an Application objecting to the withdrawal and also seeking to implead itself.

4. The revision petitioner also filed an Application for claiming the amount due to the petitioner from the 3rd respondent. The Trial Court dismissed all these Applications, as against which the present revision petitions have been filed.

5. I have heard Mr.G.Ilangovan, learned counsel for the revision petitioner and Mr.J.Ramakrishnan, learned counsel for R1 and R2. The 3rd & 4th respondents have chosen to stay away from the proceedings despite service of summons.

6. The learned counsel for the revision petitioner would submit that the decree obtained by the respondents 1 & 2 is clearly a collusive decree and the husband, 3rd respondent, employee of the revision petitioner did not even choose to contest the proceedings and there were no matrimonial proceedings between the 1st respondent and 3rd respondent and all of them resided in the very same premises, which all clearly go to show that the decree was obtained only to defeat the rights of the revision petitioner. The learned counsel would therefore submit that if the remaining amount is also withdrawn by the daughter of the employee of the revision petitioner, then nothing would remain for the revision petitioner to recover the misappropriated amount of Rs.26,00,000/-. He would therefore seek for the revision petitions being allowed and the orders passed by the Trial Court to be set aside.

7. Per contra, Mr.J.Ramakrishnan, learned counsel for the respondents 1 and 3 would submit that the decree is not a collusive decree and the property was also sold in Court auction, subject to an earlier mortgage and therefore, the petitioner can only proceed against the purchaser and not against

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