# [1956] 1 S.C.R. 100

- **Citation:** [1956] 1 S.C.R. 100
- **Court:** Supreme Court of India
- **Decided:** 1956
- **Case number:** Civil Appeals Nos. 123 to 127 and 135 of 1953
- **Bench:** VIVIAN BosE, Jafer Imam, Chandrasekhara Aiyar
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/1956-1-s-c-r-100-1286
- **Pages:** 25

## Headnote

Provincial Insolvency Act, 1920 (V of 1920), s. 4-Insolvencv
of employees of a company-Having certain amounts standing to their
credit in the Provident Fund of the said company-Whether the •aid
amounts were the properties of the insolvents over which they had di•-
posing power and were thus available for distribution amongst the
creditors-Pr<>vident Fund-R<1les-Oonstr1wtion-W ord "property"
in the Insolvency Act-Meaning of.
The six employees in the Tin Plate Co. of India Ltd. were
adjudged insolvents.
They were members in a Provident Fund of
the said company, having certain amounts standing to their credit in
the Fund.
The appellant-a creditor of the said employees-filed applies·
tions under s. 4 of the Insolvency Act against the company and
Trustees of the Fund for orders that amounts standing to the ci:edit
of the insolvents in the Provident Fun.d account were their proper-
.ties and had vested in the court and were afailable for distribution
amongst.the creditors and therefore should be brought into conrt.
The respondent pleaded in answer that the amount standing to
the credit of ••oh insolvent in the Provident Fund represented the
contributions of the company and of the employees and that the
corpus was a trust fund in the hands of the trustees of the fund;
·so they were not properties of the insolvents over which they bad
a disposing power and thaHhey were not debts due to ·the insolvents. It was said that according to the rules governing the Provident Fund the monies become payable to the employee or any other
member of his fa.mily only on the happening of certain contingencies
snch a.S retirement, discharge. dismidsal or death and that till then
na right accrued to the in•olvent. It was further urged that the
trustees could not be removed from the custody and control of the
fund by the Official Receiver.
On a. construction of the Rules of the Provident Fond, -the
Insolvency Court held in favour of the creditor. On appeal, the High
Court held that under the rules of the Fund, the insolvents· had no
preaent disposing power over the monies standing to their credit and
that the Fund had vested in the Trustee. On appeal to the Supreme
Court:
Held that it is reasonably clear from these rules that a snbscriber
~.C.R:
SUPREME COURT REPOJtTS
101
htJos a present interest in the Fund though the moneys may become payable to him, or his nominee or heirs only in the future. Even where
there is a declaration about the nominee who is to receive payment
after the subscriber's death, the fund would still be the property of
the subscriber in the hands of the nominee for the satisfaction of his
debts, as there is no present gift to take effect immediately.
It could not be maintained that the subscribers had no right,
title or interest in the fund or that such interest as they may possess was dependent upon a possible contingency which may or may
not occur. The amount standing to the credit of a subscriber even
if payable in future would be a debt due by the company to him
within the meaning of s. 60 of the Code and hence liable to attachment and sale.
A person cannot enter into any arrangement or agreement by
which his own title will cease in the event of bankruptcy for it
would then be a fraud perpetrated on the Insolvency Law.
The liability of the estate to be attached by creditors on a bankruptcy or judgment is an incident of the estate, and no attempt to
deprive it of that incident by direct prohibition would be valid.
Notwithstanding the rules of the Fund in the present case, the
subscribers have an interest in the moneys which can vest in the
Official Receiver on their adjudication.
The word "property" in the Insolvency Act is used in the
widest possible sense which includes even property which may belong to or-is vested in another but over which the insolvent has a
disposing power which he may exercise for his own benefit; and
this part of the definition has reference obviously to powers of ap·
pointment and the power of a Hindu fa

## Text

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19S6
February 14
100
SUPREME COURT REPORTS
MUKTI LAL AGARWALA
v.
[1956]
TRUSTEES OF THE PROVIDENT FUND OF
THE TIN PLATE CO. OF INDIA LTD.
AND OTHERS.
'
[VIVIAN BosE, JAFER IMAM and CHANDRASEKHARA
AIYAR JJ.)
Provincial Insolvency Act, 1920 (V of 1920), s. 4-Insolvencv
of employees of a company-Having certain amounts standing to their
credit in the Provident Fund of the said company-Whether the •aid
amounts were the properties of the insolvents over which they had di•-
posing power and were thus available for distribution amongst the
creditors-Pr<>vident Fund-R<1les-Oonstr1wtion-W ord "property"
in the Insolvency Act-Meaning of.
The six employees in the Tin Plate Co. of India Ltd. were
adjudged insolvents.
They were members in a Provident Fund of
the said company, having certain amounts standing to their credit in
the Fund.
The appellant-a creditor of the said employees-filed applies·
tions under s. 4 of the Insolvency Act against the company and
Trustees of the Fund for orders that amounts standing to the ci:edit
of the insolvents in the Provident Fun.d account were their proper-
.ties and had vested in the court and were afailable for distribution
amongst.the creditors and therefore should be brought into conrt.
The respondent pleaded in answer that the amount standing to
the credit of ••oh insolvent in the Provident Fund represented the
contributions of the company and of the employees and that the
corpus was a trust fund in the hands of the trustees of the fund;
·so they were not properties of the insolvents over which they bad
a disposing power and thaHhey were not debts due to ·the insolvents. It was said that according to the rules governing the Provident Fund the monies become payable to the employee or any other
member of his fa.mily only on the happening of certain contingencies
snch a.S retirement, discharge. dismidsal or death and that till then
na right accrued to the in•olvent. It was further urged that the
trustees could not be removed from the custody and control of the
fund by the Official Receiver.
On a. construction of the Rules of the Provident Fond, -the
Insolvency Court held in favour of the creditor. On appeal, the High
Court held that under the rules of the Fund, the insolvents· had no
preaent disposing power over the monies standing to their credit and
that the Fund had vested in the Trustee. On appeal to the Supreme
Court:
Held that it is reasonably clear from these rules that a snbscriber
~.C.R:
SUPREME COURT REPOJtTS
101
htJos a present interest in the Fund though the moneys may become payable to him, or his nominee or heirs only in the future. Even where
there is a declaration about the nominee who is to receive payment
after the subscriber's death, the fund would still be the property of
the subscriber in the hands of the nominee for the satisfaction of his
debts, as there is no present gift to take effect immediately.
It could not be maintained that the subscribers had no right,
title or interest in the fund or that such interest as they may possess was dependent upon a possible contingency which may or may
not occur. The amount standing to the credit of a subscriber even
if payable in future would be a debt due by the company to him
within the meaning of s. 60 of the Code and hence liable to attachment and sale.
A person cannot enter into any arrangement or agreement by
which his own title will cease in the event of bankruptcy for it
would then be a fraud perpetrated on the Insolvency Law.
The liability of the estate to be attached by creditors on a bankruptcy or judgment is an incident of the estate, and no attempt to
deprive it of that incident by direct prohibition would be valid.
Notwithstanding the rules of the Fund in the present case, the
subscribers have an interest in the moneys which can vest in the
Official Receiver on their adjudication.
The word "property" in the Insolvency Act is used in the
widest possible sense which includes even property which may belong to or-is vested in another but over which the insolvent has a
disposing power which he may exercise for his own benefit; and
this part of the definition has reference obviously to powers of ap·
pointment and the power of a Hindu father who is the managing
member of a joint family.
The fact that on the. date of the adjudication the insolvent could not transfer the property does not militate
against the view that he has a vested interest in the same.
Banchharam Majumdar v. Adyanath Bhattacharjee, ([1909)
I.L.R. 36 Cal. 936), . Dugdale v. Dugdale ([1888) 38 Ch. D.
176), Ex parte Dever. In re. Suse and Sibeth ([1887) 18 Q.B.
D. 660), Hudson v. Gribble ([1903) 1 K.B. 517), D. Palai1/a v.
T. P; Sen and another (A.I.R. 1935 Pat. 211), Secretary, Burma Oil
Subsidiary Provident F?,tnd (IndiaJLtd. v. Dadibhar Singh (A.I.R.
1941 Rang. 256), Gajraj Sheokarandas v. Sir liukamchand Sarupchand and another (A.LR. 1939 Bom. 90), Anandrao alias Adkoba
s/o Risaram-ji v. Vishwanath Watuji Kalar and others, (A.I.R. 1944
Nag. 144), Ismail J akaria if Co. v. Burmah Shell Provident Trust Ltd.
(A.I.R. 1942 Sind 4 7), Bishwa Nath Sao v. The Official Receiver
([1936) I.L.R. 16 Pat. 60), and Sat Narain v. Behari Lal and
Others ([1924] 52 I.A. 22), referred to.
CIVIL APPELLATE JURISDICTION:
Civil Appeals
Nos. 123 to 127 and 135 of 1953.
7956
Mukti Lal
Agarwal a
v.
Trustees of the
Provide11t Ftmd of
the Tin Plate Co.
of India Ltd.
and others
102
SUPREME COURT REPORTS
[1956)
1956
On appeal from the judgment and decree dated
the 12th May 1950 of the Patna High Court in Appeal
MuktiLal
f
0
Od
N
d
Agarwala
rom riginal r ers
os. 266, 267, 268, 271, 274 an
v.
280 of 1948 arising out of the Order dated the 26th
Tn.steesof th•
June 1948 of the Court of the District Judge, Purulia
p,.,,.;~entFund of in Insolvency Cases Nos. 1/44, 13/46, 12/46, 10/46 and
th• Tin ".'late Co. 44/41 respectively.
of India Ud.
'
and others
S. C. Isaacs (P. K. Chatterjee, with him) for the
appellant.
Bhabananda Mukherji, S. N. Mukherji and B. N.
Ghose, for the respondents.
1956. February 14.
The Judgment of the Court
was delivered by
CHANDRASEKHARA AIYAR J.-These appeals are by
a creditor of six employees in the Tin Plate Co. of
India Ltd. who had been adjudged insolvent@. The
employees are members in a Provident Fund of the
Tin Plate Co. and there were amounts standing to
their credit in the said Fund.
The creditor, Mukti Lal Agarwala, filed applications
under section 4 of the Insolvency Act for orders that
the amounts standing to the credit of the insolvents
in the Provident Fund account were their properties
and had vested in the court and were available for
distribution amongst the creditors. He sought a
direction that the monies may be brought into Court.
The petitions were directed primarily against the
Tin Plate Co. Ltd. and the Trustees of the Provident
Fund. They pleaded in answer that the amount
standing to the credit of each insolvent in the Provident Fund represented the contributions of the Company and of the employees and that the corpus was
a trust fund in the hands of the trustees of the fund;
~o they were not properties of the insolvents over
which they had a disposing power and that they were
not debts due to the insolvents. It was said that according to the rules governing the Provident Fund
the monies become payable to the employee or any
other member of his family only on the happening of
certain contingencies such as retirement, discharge,
••
S.C.R.
SUPREME COURT REPORTS
103
dismissal or death and that till then no right accrued
1956
to the insolvent.
It was further urged that the
Muktt Lal
trustees could not be removed from the custody and
Agarwa!a
control of the fund by the Official Receiver.
v.
The Insolvency Court, which was the court of the
Trustees of the.
District Judge at Purulia, heard the petitions and Pro1Ji~ent Fund 0f
found on a construction of the rules of the Provident the[;n/'":;d Co.
Fund that the monies standing to the credit of A & C
0
0:~ :~hers.
accounts in the name of each insolvent was his property over which he had a disposing power and hence Clrandrasekhara
they were ava.ilable for distribution among the crediAiyarJ.
tors under the Insolvency Act.
The trustees of the Fund and the Tin Plate Co.
carried the matter on appeal to the High Court at
Patna and they were successful. The learned Judges
(V. Ramaswami and Sarjoo Prasad, JJ.) held that
under the rules governing the Fund the insolvents
had no present disposing power over the monies
standing to their credit and that the Fund was really
vested in the trustees.
As the amount involved in the several petitions
taken together was over Rs. 20,000, the High Court
granted leave to the creditors to appeal to this court.
Tho main contentions urged by Mr. Isaacs on behalf of the appellants were three in number:-
( a) The monies standing to the credit of each
insolvent in the Provident Fund are his property,
though payable at a future date and the question of
present disposing power arises only for bringing within the scope of the definition what may not otherwise be regarded as "property".
(b) Though the .Provident Fund rules speak of a
trust Fund and trustees, in reality, there was no
transfer of ownership by the employees in favour of
the trustees and that there is no trust as such.
(c) In any event, even on the footing that a trust
was created over the Fund, the beneficial interest continues in the employees and this interest would vest
in the Official Receiver for the benefit of the creditors
in insolvency.
We have to examine the soundness of these contentions.
104
SUPREME COURT REPORTS
[1956]
1956
The Provident Fund was started on the lst January, 1929. The rules and regulations of this Fund
Mukti Lal
Agaro;ala
are found in the deed of trust dated the 15th July,
v.
1930, marked as Exhibit I. These rules, as amended
Trustees of the
from time to time in certain respects by supplePro•id~ntFund.0/ mentary deeds, are given in the appendix to this
the T"' Plat• Co. judgment.
oflnd1aLtd.
0 th
k"
f
d
f
d" d"
.
h
andoJhers
· n
e ma mg o an .or er o a JU icat1on, t e
whole of the property of the insolvent shall vest in
Chandrasekhara the court or in a Receiver and shall become divisible
Aiyar J.
among the creditors. (Section 28(2) of the Provincial
Insolvency Act). The property of the insolvent for
the purposes of vesting shall not include any
property which is exempted by the Code of Civil
Procedure, or by any other enactment for the time
being in force from liability to attachment and sale
in execution of a decree (section 28(5)). Section 2(d)
of the Act states:" 'Property' includes any property
over which or the profits of which any person has a
disposing power which he may exercise for his own
benefit". A person has a disposing power over property which he may exercise for his own benefit, such
as a power of appointment conferred on him under a
will or a settlement, or the power of a Hindu father
who is the manager of a joint Hindu family to sell
the shares of his sons in the family property in discharge of their pious obligation to pay off his debts.
In clause (b) of sub-section (2) of section 38 of the
English Bankruptcy Act, 1914, this power is specified
in these words:-
"The capacity to exercise and to take proceedings for exercising all such powers in or over or in respect of property as might have b"een exercised by the
bankrupt for his own benefit at the commencement
of his bankruptcy or before his discharge, except the
right of nomination to a vacant ecclesiastical benefice;".
All that we have to find out is whether the amounts
standing to the credit of the several subscribers in
the fund who have been adjudged insolvents are divisible among their creditors. If so, they would vest
S.C.R.
SUPREME COURT REPORTS
105
in the court or the Official Receiver and would become
1956
available for distribution. Whether they have any
Mukt; Lal
present interest in the monies is the primary quesAgarwala
ti on that falls to be considered.
v.
Section 60 of the Civil Procedure Code sets out
Trustees of the
what property is liable to attachment and sale and PrO<Jident Fund of
h
· ·
·
t
Th fi t
t f
t"
60
the Tin Plate Co.
~ at items are no .
e rs par o sec 10n
runs
of India Ud.
in these terms:
and others
"The following property is liable to attachment
and sale in execution of a decree, namely, lands,
Chandrasekhara
houses, or other buildings, goods, money, bank-notes,
Aiyar J.
cheques, bills of exchange, hundis, promissory notes,
Government securities, bonds or other securities for
money, debts, shares in a corporation and, save as
hereinafter mentioned, all other saleable property,
movable or immovable, belonging to the judgmentdebtor, or over which, or the profits of which, he has
a disposing power which he may exercise for his own
benefit, whether the same be held in the name of the
judgment-debtor or by another person in trust for
him or on his behalf".
The exempted items do not apply. Clause (k) deals
with funds governed by the Provident Fund Act.
Reference has, however, been made to clause (m)
which speaks of "an expectancy of succession by
survivorship or other merely contingent or possible
right or interest".
Let us now advert to the relevant rules of the
Fund. The object of the Fund as set o,ut in rule 2 is
to accumulate for the benefit of the Company's employees who have joined the Fund certain sums as a
future provision for them and for their families.
Under rule 3, any employee, who has completed one
year's service with the Company, shall be eligible for
membership. Rule 4 provides for a declaration as
regards the disposition of the Fund in the event of
death. This declaration can be cancelled and changed.
Rule 5 provides that if the declaration becomes obsolete, the trustees could decide who were to be
recognized as the next-of-kin and that payment by
them to such person will be an absolute discharge.
Every member shall be allowed to contribute any
11
1956
Mukti Lal
Agarwola
v.
Trustees of the
Provident Fund of
the Tin Plate Co.
of India Ud.
and others
Chandrasekhara
AiyarJ.
106
SUPREME COURT REPORTS
[1956]
sum not exceeding-one-twelfth of his or her earnings
and such amounts would be credited in the name of
each member in an account called 'A' Account.
(Rule 6). At the end of each year, an amount equal
to the contribution by the member shall be paid by
the Company and credited to another account to be
opened in the name of the member and to be denominated his or her 'B' Account. An increased contribution by the Company in certain events at particular
specified rates is contemplated by rule 7(B). This
further sum will go into a 'C' account to be opened
in the name of each member.
Rule 8 provides that
the moneys of the Fund shall be invested by the
Trustees in accordance with the provisions from time
to time in force under the Indian Income-tax (Provident Funds Relief) Act, 1929. Every year the A, B
and C Accounts are to be made up including the income from the investments according to certain calculations.
Then come the important rules 10, 11, 12, 13, 15,
16, 17 & 18. Though the Fund is intended as a future
provision for the employees and their families,
the membership is purely voluntary and arises on an
application to the Company, the trustees having
nothing to do with the admission.
It is only the
management of the Fund and the control of its funds
which vests in the trustees under rule 1.
There is no
transfer of the ownership of the Fund.
The contributions made by the members are not compulsory in
their nature. The monies of the Fund may, no doubt,
be invested by the trustees, but the subscriber does
not divest himself or herself of control over the Fund
in certain respects. He or she can declare to whom
the monies are to be paid in the event of his or her
death. This declaration can be changed at any time.
If the service terminates after fifteen years, the subscriber can get the full amount in the A, B & C
Accounts. If he or she retires with the Company's
consent before completion of fifteen years' service,
he or she can get the amounts standing in A & C
Accounts together with a portion in B account. Dismissal, or misconduct, or resignation without the
-
S.C.R.
SUPREME COURT REPORTS
107
Company's consent before completion of the 15
1956
years would still entitle the subscriber to the payMukti Lal
ment of the moneys in A & C Accounts. The proviAgancala
sion in rule 16 that on the death of any member, the
v.
amount will be paid to the next-of-kin, of course proTmstces of the
ceeds on the same footing that the property belongs Prot'ident Fund 0f
t
h
b
'b
Wh h
h
· ·
th t ·
tire Tin Plate Co.
o t e su sen er.
et er t e provisions
a m
11 a· Lt/
the event of the declaration becoming obsolete, or a
0 a.::i ;:,,er~·
member becoming insane or demented, the moneys
can be paid at the absolute discretion of the trustees Chandrascklrara
to whomsoever they determine to be the next-of-kin,
Aiyar J.
or hold to be a proper and suitable person to receive
payment, are valid is not a question that arises in
these appeals.
Retirement or death is not a met'e possibility. It is
a contingency that is sure to happen, sooner or later.
Dismissal for misconduct or resignation without consent before 15 years' service will secure earlier payment.
(Rule 11).
It is reasonably clear from these rules that a subscriber has a present interest in the Fund though the
moneys may become payable to him, or his nominee
or heirs only in the future. Even where there is a
declaration about the nominee who is to receive payment after the subscriber's death, the fund would
still be the property of the subscriber in the hands of
the nominee for the satisfaction of his debts, as there
is no present gift to take effect immediately.
It is not easy to see how it could be maintained
that the subscribers have no right, title or interest in
the fund, or that such interest as they may possess is
dependent upon a possible contingency which may or
may not occur. The amount standing to the credit of
a subscriber even if payable in future would be a
debt due by the Company to him within the meaning
of section 60 of the Code and hence liable to attachment and sale. See Banchharam Majumdar v. Adyanath Bhattacharjee(1).
Rule 17, which provides that on the adjudication
of the debtor as an insolvent the amounts sta.nding
to his credit in the Fund shall be liable to be forfeited
(1) [1909) I.L.R. 36 Cal. 936.
108
SUPREME COURT REPORTS
(1956]
1956
to the Fund, was strongly relied upon by the responMukti Lal
dents. But such a condition or agreement is invalid.
Agarwata
A man may give (in India only by will) property or
v.
its income to a donee with a condition that the donee's
Trustees of the
interest will cease on bankruptcy and the property
Provident Fund of will in that event go to another- if insolvency superthe Tin Plate Co
h
"JI
'
t '
h Offi · 1
if 1 d' Ltd
· venes, t e property w1
not ves m t e
C1a
0
an~;':i.er~·
Receiver. If there is no gift over on the cesser of the
donee's interest, the property will reve"rt to the donee
Cliandrasekhara and will vest in the Official Receiver on the donee's
Aiyar J.
insolvency. But a person cannot enter into any
arrangement or agreement by which his own title will
cease in the event of bankruptcy, for it would then
be a fraud perpetrated on the Insolvency Law. This
principle has been enunciated in an early English case
Wilson v. Greenwood(') in the following words and
adopted in later cases too:
"The general distinction seems to be, that the
owner of property may, on alienation, qualify the
interest of his alienee, by a condition to take effect
on bankruptcy; but cannot, by contract or otherwise,
qualify his own interest by a like con di ti on, determining or controlling it in the event of his own
bankruptcy, to the disappointment or delay of his
creditors".
In Re Dugdale(') we find the following observations
of Kay, J.-
"The liability of the estate to be attached by
creditors on a bankruptcy or judgment is an incident of the estate, and no attempt to deprive it of
that incident by direct prohibition would be valid.
If a testator, after giving an estate in fee simple to
A, were to declare that such estate should not be subject to the bankruptcy laws, that would clearly be
inoperative. I apprehend that this is the test.
An
incident of the estate given which cannot be directly
taken away or prevented by the donor cannot be
taken away indirectly by a condition which would
cause the estate to revert to the donor, or by a conditional limitation or executory devise which would
(ll (1818) 36 E.R. 469, 476; I Swans. 471, 486.
(2! (1888] 88 Ch. D. 176, 182.
<
S.C.R.
SUPREME COURT REPORTS
109
cause it to shift to another person".
T956
The proposition is thus· stated in Williams on BankMukti Lal
ruptcy(') at page 293: "But the owner of property
Agaru•ala
cannot~ by contract or otherwise, qualify his own
v.
interest by a condition determining or controlling it
Tmstees of the
in the event of his own bankruptcy to the prejudice Prcwid.etit Fund of
f h' creditors"
the Tm Plate Co.
0
lS
·
of India Ltd.
It appears to us to be unnecessary to refer to all
and others
the decisions cited and relied upon in the course of
the arguments on either side. A few cases may, howChandrasekhara
ever, be dealt with. The English decisions relied upon
;liyar J.
by the learned counsel for the appellant do not furnish much guidance. Ex part Dever. In re Suse and
Sibeth(2) was a case of what is obviously a contingent
interest dependent upon a mere possibility. The decision in Hudson v. Gribble(8) dealt with a different
question altogether. Under a scheme framed by the
Municipal Corporation, persons in its service were to
contribute to a Fund for the encouragement of thrift
among their officers and servants a certain percentage
of their salaries to be deducted from time to time
from those salaries.
Were they exempt from payment of income-tax under the first rule of section 146
of the Income-Tax Act, 1842, was answered in the
negative. The point was whether they were exempt
because they were "sums payable or chargeab)e on
the salaries by virtue of any Act of Parliament where
the same have been really and bona fide paid and
borne by the party to be charged".
It is true that
Lord Justice Vaughan Williams says at page 525 that
the sums contributed never ceased to be the property
of the persons from whose salaries or wages they
were deducted; and Lord Justice Stirling observes at
page 528 "It is obvious that, though the amounts so
deducted are not immediately paid to the person employed, they remain his property to a great extent".
Both of them refer to the fact that the subscribers
were entitled to get back their contributions upon
retiring from the service. But they were dealing with
particular words employed in an Act of Parliament
(1) 16th Edition.
( 2) [1887] 18 Q.B.D. GGO.
(3) [1903] 1 K.B. 617.
110
SUPREME COURT REPORTS
[1956]
7956
and the rules made under a Corporation Act. General
observations of the kind should not be extracted from
Mukli Lal
h
h
h
Agarwala
t e context in w ich t ey were used and applied to
T,
other facts and different language.
'
Trt1stcesofthe
Coming to the Indian decisions, D. Palaiya v. T. P.
Provident Fund of Sen and another(') is a case where the rules of a prothe Tin Plate Co. vident fund created by the Tata Steel Company were
oflnddotia,Ltd.
similar to the rules we have before us but the foran
1ef's
,
•
fe1ture clause was construed as applymg only to the
Chandrasekhara portion of the amount at the credit of members'
AiyarJ.
account contributed by the company and it was read
to mean that it was inapplicable to the subscribers'
own contributions. Secretary, Burma Oil Subsidiary
Provident Fund (India) Ltd. v. Dadibhar Singh(')
which held against the vesting proceeded upon the
footing that there was a trnst created in favour of the
trustees. Even if so, what was to happen to the
beneficial interest was not dealt with. The relevant
observations are:
"The forfeiture does not vest the money in the
trustees, the money having already vested in them.
The money cannot be attached as a 'debt' due to the
judgment-debtor, because the word 'debt' as used in
S. 60 and in 0. 21, R. 46, Civil Procedure Code means
an actually existing debt that is a perfected and
absolute debt, not merely a sum of money which may
or may not become payable at some future time or
the payment of which depends upon contingencies
which may or may not happen''.
The decision of Beaumont, C. J. and Rangnekar, J.
in Gajraj Sheokarandas v. Sir Hukamchand Sarupchand
and another(') does not apply because in that case
there was a clause in the articles providing that all
moneys received by the East India Cotton Association from its members would be under the absolute
control of the Association and could be used by it as
if the moneys belonged to it absolutely. Further the
deposit was also subject to certain liens. Subject to
the liability to forfeiture and to the satisfaction of
the liens, the deposit with interest was repayable to
(!) A.I.R. 1936 Pat. 211.
(2) A.LR. 1941 Rang. 266, 259.
(3) A.LR. 1999 Bom. 9Q.
·
-
S.C.R.
SUPREME COURT REPORTS
lll
the member on his ceasing from any cause to be a
1956
member. The facts were, therefore, very different.
M11kti Lal
Anandrao alias Adkoba s/o Risaramji v. Vishwanath
Agarwala
Watuji Kalar and others(1) is again a case where the
v.
money ceased to belong to the employee and the title
Tl'Usteesofthc
was in the trustees. Referring to a Karachi case Provi~etit F1md of
reported in Ismail J akaria & Co. v. Burmah-Shell the Tin ~late Co.
P
'd t T
t Ltd (2) B
J d' t'
· h d ·
of India Ltd.
rovi en
rtts
. ,
ose, .
IS 1ngu1s e
It on
and others
the ground that there the money was not vested in
the trustees but was only handed over to them for Cliandrasekhara
the purposes of management, which was not the case
Aiyar J.
before him.
The learned counsel for the respondents strongly
relied on Bishwa Nath Sao v. The Official Receiver(8)
and argued that there can be no property within the
meaning of the Insolvency Act unless the insolvent
had a present absolute power of disposal over the
same but the decision which is that of a Full Bench
and which interpreted the decision of the Privy Council in Sat Narain v. Behm·i Lal(') does not support
any such position; all that was held was that on the
insolvency of a father, his power to sell the shares of
his sons in the joint family property to discharge the
pious obligation vests in the Official Receiver, though
the shares themselves do not so vest.
Sufficient has been stated 'above to show that notwithstanding the rules of the Fund in the present case,
the subscribers have an interest in the moneys which
can vest in the Official Receiver on their adjudication.
Even if we regard the deed creating the fund as a
trust deed, notwithstanding that, no ownership has
been transferred to the trustees and all that they have
got is the right of the management and control, the
subscribers, who joined the fund have undoubtedly
got a beneficial interest which will vest in the Official
Receiver as property liable to attachment and sale
under section 60 which uses the language "whether
the same be held in the name of the judgment-debtor
or by another person in interest for him or in his
behalf".
(1) A.LR. 1944 Nag. 144.
\81 (1937] I.L.R. lG. Pat1rn GO.
(2) A.LR. 1942 Sind 47.
(4) [1924] L.R. 52 I.A. 22.
112
SUPREME COURT REPORTS
(1956)
The learned Judges of the High Court held 'that the
'property' mentioned in the Insolvency Act must be
such that the insolvent has an absolute and unconAgarwala
v.
ditional present disposing power over the same. With
1956
Mukti Lal
Trustees of the
great respect, this, however, does not seem to be a
Providmt Fund of' correct interpretation. The wocd 'property' is used
the r ... Plate Co. in the widest possible sense which includes even proofa~~d~:h1:,~·
perty w~ich ma;Y belong to or is .vest~d in another ~ut
over which the msolvent has a d1sposmg power which
Chandrasekhara he may exercise for his own benefit; and as pointed
Aiyar J.
out already, this part of the definition has reference
obviously to powers of appointment and the power
of a Hindu father who is the managing member of a
joint family.
The fact that on the date of the
adjudication the insolvent could not transfer the
property does not militate against the view that he
has a vested interest in the same. Reference was
made to section 56(3) of the Provinoial Insolvency
Act which provides that "Where the Court appoints
a receiver, it may remove the person in whose possession or custody any such property as aforesaid i1
from the possession or custody thereof: Provided
that nothing in this section shall be deemed to authorise the court to remove from the possession or custody of property any person whom the insolvent has
not a present right so to remove".
This has no relevanoy to the point at issue.
Whenever possession and custody could be taken by the
Receiver, the person in whose possession and custody
the property is can be evicted. If possession or custody could not be taken, still the right of the insolvent will vest in the Official Receiver.
Mention has been made of three accounts in the
Fund called A, B and C; the first represents monies
contributed by the subscriber, the second consists of
monies paid by the Company and the third represents
what may be roughly described as bonus which represents deferred wages.
The learned counsel for
the appellant confined the relief he wanted to the
amounts standing to the credit of each subscriber in
his A and C Accounts and conceded that the B Account monies would stand on_ a different footing. In
..
S.C.R.
SUPREME COURT REPORTS
113
fact, even in the Insolvency Court the creditor con1956
cerned himself only with the A & C Accounts.
Mr. Isaacs contended at first that he was entitled
Mukti Lal
Agarwala
to an order that the monies in the A & C Accounts
v.
should be brought to the Insolvency Court but
Trusteesofthe
later he abandoned this contention. For the respon- Proi;ident Fund of
dents, it was urged that under section IO of the Emthe Tin Plate Co.
Ployees' Provident Funds Act, 1952, which came into
of India Ltd.
and ethers
force after these proceedings were instituted, there
could be no attachment.
This again is a question Chandrasekhara
which is outside the scope of the present proceedings.
Aiyar J.
Once it is held that the right, title and interest of the
insolvents in the A & C Accounts with the Fund vest
in the Official Receiver, it is for him under the
directions of the Insolvency Court to take steps to
realize the same, in whatever manner the law allows
him to do.
The learned counsel for the respondents handed to
us a paper showing which of the respondents was
still in service and which have been discharged, their
dates of appointments and of joining the posts. Mohibulla, Anjab Alli and Hasimulla, respondents insolvents in Civil Appeal No. 124, Civil Appeal No. 127
and Civil Appeal No. 126, have been shown as discharged from service.
A.M. Joseph, Rasid Alli alias
Tasim Alli, and Baldev Singh, respondents in Civil
Appeals 135, 125 and 123, joined the Fund in 1933,
1932 and 1936 respectively and are still in service.
In the result, the appeals are partly allowed and
there will be a declaration that the right, title and
interest of the above mentioned insolvents in the
moneys standing to their credi~ in A & C Accounts
respectively will vest in the Official Receiver. In
other respects the appeals will stand dismissed. The
Tin Plate Co. which is the respondent No. 2, will pay
to the appellant his costs here and in the High Court.
But the costs in this Court will be limited only to
one set.
APPENDIX.
This Indenture made the fifteenth day of July, on~
thousand nine hundred and thirty BETWEEN THE
16
1956
Mukti Lal
Agarwala
v.
Trustees of. the
Pr0t1ident Fund of
the Tin Plate Co.
of India Ud.
and others
··Chandrasekhar a
Aiyar ].
114
SUPREME COURT REPORTS
[1956]
TINPLATE COMP ANY OF INDIA LIMITED a Joint
Stock Company with Limited Liability duly incorporated under the Indian Companies Act andhavingits
Registered Office at No. 4, Bankshall Street in the
City of Calcutta (hereinafter called "the Company"
of the first part HARRY DOtJGHLAS TOWNEND
CHARLES ROLAND HATFIELD AND JAMES
PERCY AINSCOUGH all of No. 4, Bankshall Street
aforesaid Merchants (hereinafter called the "the
Trustees" which expression shall mean and include
the said Harry Douglas Townend Charles Roland
Hatfield and James Percy Anscough or other the
-"-Trustees of the fund herein mentioned for the
time being appointed as hereinafter mentioned) of
the Second Part and the PERSONS whose names
appear in the Schedule hereto or who may by separate
writings agree to become parties hereto and bound
hereby of the third part WHEREA~ the Company
has decided to start as from the first day of January
one thousand nine hundred and twenty-nine a Provident Fund for the benefit of the employees of the
Company (hereinafter called "the said fund") and
has accepted contributions from the employees from
the first January, one thousand nine hundred and
twenty-nine and for the management and regulations
o.f such fund has framed rules and regulations NOW
THIS INDENTURE WITNESSETH and it is hereby agreed between the parties hereto that the said
Fund shall be governed by the following rules and
regulations:
Rules and Regulations
1. The Fund shall be called "THE PROVIDENT
FUND OF.THE TIN PLATE COMPANY OF INDIA
.:J
LIMITED". The management of the Fund and the
control of its funds shall be vested in the Trustees
who will undertake ·such management without remuneration.
2. The object of the Fund is to accumulate for the
benefit of the Company's Employees who have joined
-
S.C.R.
SUPREME COURT REPORTS
115
the Fund certain sums as a future provision for them
and for their families.
1956
Mukti Lal
3.
All employees of the Company (excepting only
Agarwala
such covenanted employees on the higher grades of Truste;; of tire
pay as may be excluded by the Trustees at their Provident Fu11d of
discretion) upon completion of one year's services the Tin Plate Co.
with the Company shall be eligible for membership of
of India Ltd.
the Fund. Applications to join the Fund shall be in
and others
writing to the Company in a specified form and Chandrasekhara
written notification shall be given by the Company
Aiyar J.
to applicants of their inclusion as members.
4. Every application for membership shall be accompanied by a declaration in a specified form signed
by the applicant in the presence of two witnesses who
shall not be in any way related to the applicant. Such
declaration shall set forth the disposition in the event
of his or her <lea th while a mem her of the Fund of the
money which shall be standing to the applicant's
credit in the Fund. Should a member at any time
desire to cancel his or her form of declaration he or
she may do so by submitting to the Company a revised or substituted form in writing duly signed and
witnessed in the same manner as in the case of the
original form which should specifically cancel and
annul all previous forms of declaration deposited
by the member with the Fund.
·
5. In the event of the declaration as made under
rule 4 having become obsolete full discretion shall
rest with the Trustees as to the disposition of any
sums standing to the credit of a member on his or
her decease and no person or persons shall be recognised as having any claims thereto save and except
such as shall be ascertained by the Trustees or their
delegate duly appointed to make enquiry in that behalf upon satisfactory evidence adduced as to which
the Trustees or their delegate appointed to conduct
the enquiry shall be sole judge to be the next-of-kin
of the deceased member and payment by the Trustees
the moneys representing his or her share in the fund
1956
Mukti Lal
Agaru•ala·
v.
Trustees of the
Provident Fund of
the Titi Plate Co.
of India Ud.
and others
Chandrasekhara
Aiyal' J.
116
SUPREME COURT REPORTS
[1956]
to the persons or person so ascertained shall operate
as an absolute discharge to the Trustees from all
liability therefor to all persons whomsoever.
6.
Each member shall be allowed to contribute a
definite proportion not exceeding one-twelfth of his
or her earnings during auy one year which shall be
deducted from his or her earnings in monthly or weekly
instalments. Conthbutions as above shall be credited
to an account to be opened in the name of each member to be denominated his or her 'A' Account.
For the purpose of this fund, earnings shall be
deemed to mean solely the monthly or weekly sum
paid to the Employee for wages excluding from the
purview of such term all accretions thereto and perquisites in the way of acting allowance commissions
bonus payments overtime messing housing allowance
lodging money travelling expenses and all such similar payments.
7.
(a) On or as at the thirty first December in
each year a sum equal to the amount contributed by
each member to his or her 'A' account during that
year shall be credited by the company to another
account to be opened in the name of each member and
to be denominated his or her 'B' Account. The Company reserves to itself liberty to make such further
contributions as may be requisite for the purposes of
Rule 14 below.
(b) If the net dividend paid by the Company on
its ordinary share capital in respect of any financial
year shall be at a rate of not less th-an seven and a half
per cent on such ordinary share capital a further sum
calculated as hereinafter set out shall be paid by the
Company.
Unless the Company shall decide that
such further sum shall be paid into a separate Fund
or otherwise than into this Fund such further sum
shall be paid into this Fund to another account to
be opened in the name of each person who shall have
been a member on the thirty-first day of December
in the said financial vear and to be denominated his
or her 'C' account.