Decided on November 10,1955



K.Subba Rao, J. - (1.)This is an appeal against the order of the Special Officer appointed under the Madras Electricity Supply Undertakings (Acquisition) Act, 1949, holding that the claimant i.e. the Superintending Engineer, Madras Electricity System, Madras, is entitled to be paid the entire amount claimed by him in preference to the unsecured claims on the ground that his claim is a charged debt. The facts may be briefly stated. The Trivellore Municipal Electrical Undertaking supplied a generating set to the Ongole Electric Supply Company. As the latter company made a default in paying the consideration amount, the former undertaking filed a suit and obtained a decree for a sum of Rs. 18,956/- with subsequent interest and costs. In execution of the decree, the decree-holder attached the properties of the Ongole Electric Supply Company. On 8-3-1950, though the execution application filed by the dectee-holder was dismissed, the attachment was expressly made to stand. Under the Madras Electrcicity Supply Undertakings (Acquisition) Act, 1949, the Government of Madras had taken over the undertaking of the Trivellore Municipality as well as that of the Ongole Electric Supply Co. The Government appointed the District Munsif as a Special Officer and deposited the compensation amount in the Reserve Bank of India to the credit of the Special Officer. As the Trivellore Municipal Electrical undertaking vested in the Government, the Superintending Engineer made a claim to the Special Officer for the recovery of the amount due to the Trivellore Municipality under the a aid decree. The other creditors also filed claims for recovery of the amounts due to them from the Ongole Electric Supply Go. The accredited representative of the company opposed the claim of the Superintending Engineer to a first charge over the compensation deposited before the Special Officer. The Special Officer held, that under the general directions given to him, the Government was entitled to priority over other creditors and that, by reason of the attachment made in execution of the aforesaid decree also, the Government was entitled to have a charge over the amount deposited. On the aforesaid two grounds, he directed payment of the entire amount claimed by the Superintending Engineer, Madras. The accredited representative filed the above appeal.
(2.)Learned Counsel for the appellant, Mr. N. Subrahmanyam, contends that under the Act or under the general law, attachment does not amount to a charge and, therefore, the claimant is not entitled to a charge. He also argues that the Special Officer was wrong relying upon the administrative directions given by the Government, which are not statutory rules made by them in exercise of any power conferred under the statute. Learned Government Pleader, on the other hand, argues that the Special Officer under the Act has absolute discretion to pay the debts in the manner he thinks best and that this Court should not interfere in appeal with his discretion. To appreciate the rival contentions, it is necessary to notice some of the relevant provisions of the Act. But at the outset it may be mentioned that Madras Act XLIII of 1949, whereunder the Special Officer purported to disburse the amount, has been held to be ultra vires by the 'Supreme Court in Rajahmundry Electric Supply Corporation Ltd. v. State of Andhra. Subsequently, another Act was made for the Andhra area, Act XV of 1954, practically incorporating all the Sections in the Madras Act. We shall refer to the provisions of the Andhra Act for both the advocates argued on the basis that the provisions of that Act govern the question now raised before us.. The relevant provisions read :
11 (1): The compensation due to a licensee under this Act shall be paid or deposited in cash as hereinafter provided in this section. 11 (9): Every person claiming any amount deposited in the Bank under the foregoing sub-sections or any portion thereof, shall apply to the Special Officer appointed by the Government in this behalf within three months from the date of the deposit or within such further time as the Special Officer may allow. 11 (10) (a): The Special Officer shall as expeditiously as possible, inquire into all claims made under sub-section 9 and determine the persons who, in his opinion, are entitled to the amount deposited and the sum to which each of them is entitled and disburse the same to him. (c) Any person deeming himself aggrieved by any decision of the Special Officer under Cl. (a) may appeal to the High Court within three months from the date of such decision or within such further time as the High Court may grant."

(3.)The gist of the aforesaid provisions may be stated thus: After the undertaking is taken over by the Government, the compensation due to a licensee is deposited in a Bank. Every person, claiming a share in the amount so deposited, shall apply to the Special Officer who is authorised to decide their claims as expeditiously as possible. After deciding the claims, he is empowered to disburse the amounts to the persons who, in his opinion, are entitled to the amount. The aggrieved party can file an appeal to the High Court. The scheme of the Act, therefore, is to provide a machinery for the expeditious disposal of claims to the amount deposited and for distribution of the same among persons who prove their claims. The provisions of the Act do not indicate how the claims of priority should be decided and paid, if the amount deposited is not sufficient to meet all the claims proved before the Special Officer. Therefore, the Special Officer necessarily will have to exercise his discretion in an equitable manner in accordance with well recognised principles laid down in analogous cases. It is impossible for us to accept the argument of the Government Pleader that his discretion is unfettered and that he can decide the claims in whatever manner he likes best. The fact that a right of appeal is conferred against his order to the High Court is a sure indication that his discretion cannot be exercised arbitrarily. We, therefore, hold on a fair reading of the terms of Sec. 11(10) that the Special Officer in the case of proved and enforceable money claims, whether they fructified into a decree or not, should pay the credtors rateably if the amount deposited is not sufficient to pay the debts in full. That procedure is equitable and is in accord with the principles of Justice. We also agree with the argument of the learned counsel that the Special Officer was not justified in following the administrative instructions of the Government. Under Section 21 (1) of the Act, the Government may, after previous publication, make rules to carry out the purposes of the Act. Under sub-section (2), the Government is authorised without prejudice to the generality of the foregoing power to make rules in respect of matters mentioned in the aforesaid clause. No provision has been-brought to our notice authorising Government to issue administrative instructions to the Special Officer to dispose of the claim in a particular manner for the obvious reason that the Special Officer is expected to dispose of the claims before him judicially. The Special Officer, therefore, erred in acting upon the administrative instructions given to him by the Government.

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