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Issues: (i) Whether a warrant of attachment could be issued under Order XXI, Rule 46 of the Code of Civil Procedure when, on the relevant date, no debt was due and payable by the garnishee and the defaulter's assets had vested in the Defaulters' Committee under the exchange bye-laws. (ii) Whether the SEBI circular requiring the award amount to be kept in a separate account conferred an enforceable entitlement on the award-holder notwithstanding the subsequent declaration of the respondent as a defaulter and the operation of the exchange bye-laws.
Issue (i): Whether a warrant of attachment could be issued under Order XXI, Rule 46 of the Code of Civil Procedure when, on the relevant date, no debt was due and payable by the garnishee and the defaulter's assets had vested in the Defaulters' Committee under the exchange bye-laws.
Analysis: The relevant question was whether any attachable debt existed in the hands of the garnishee on the date of the warrant. The amounts lying with the garnishee towards the respondent's securities had, upon the declaration of default, vested in the Defaulters' Committee under the statutory exchange bye-laws. Once that vesting took place, the monies were required to be dealt with only in the manner provided by the bye-laws and not otherwise. In those circumstances, there was no subsisting debt due from the garnishee to the respondent or to the award-holder capable of being reached by garnishee process.
Conclusion: The warrant of attachment could not validly be issued, and the garnishee notice was liable to be set aside.
Issue (ii): Whether the SEBI circular requiring the award amount to be kept in a separate account conferred an enforceable entitlement on the award-holder notwithstanding the subsequent declaration of the respondent as a defaulter and the operation of the exchange bye-laws.
Analysis: The circular, even assuming it had been incorporated into the exchange framework, could not override the statutory effect of the bye-laws once the respondent was declared a defaulter. The circular contemplated payment only after the expiry of the time for challenge to the award, and before that stage was reached the relevant monies stood vested in the Defaulters' Committee. The Court also treated the circular as incapable of receiving retroactive operation so as to displace the legal consequences that had already followed from the declaration of default.
Conclusion: The circular did not create an enforceable right to attachment or payment in the award-holder's favour.
Final Conclusion: The challenge to the attachment succeeded, and the garnishee was relieved from liability under the impugned warrant and notice.
Ratio Decidendi: Once amounts standing to the credit of a defaulter vest in the Defaulters' Committee under statutory exchange bye-laws, they cease to be attachable as a debt in the garnishee's hands, and a subsequent circular cannot displace that legal vesting or operate retrospectively to create a contrary entitlement.
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