1968 (12) TMI 92 - SC - Income Tax

Provident Fund Protected: Court Rules Against Attachment, Emphasizes Payment Procedures

UOI. Versus RADHA KISSAN AGARWALA

The Supreme Court held that provident fund money is immune from attachment under the Provident Funds Act, 1925, as long as it remains under the control of ... Whether by sending the two cheques to the Reserve Bank of India in performance of the manner of Payment prescribed by Browne, the debt was discharged, and the money must be deemed to have been paid out to the subscriber Browne? Held that:- Only after the direction of Browne regarding transmission of the fund was complied with, the obligation of the Railway Administration could be discharged and not till then. In our view, the High Court was in error in holding that the money in the hands of the Reserve Bank of India had ceased to be provident fund money and was liable to be attached. It was somewhat faintly suggested that the Union of India had no interest in maintaining an application for removal of attachment. But the Union of India was a trustee for the subscriber of the money. When the amount lying with the Reserve Bank as the agent of the Railway Administration was attached the Union had clearly an interest to maintain the application for removal of attachment. The order of attachment of the amount into which the two cheques drawn by the Railway Administration were converted on encashment was contrary to the terms of S. 3 of the Provident Funds Act, 1925. Appeal allowed. Issues:1. Immunity from attachment of provident fund money under the Provident Funds Act, 1925.2. Interpretation of Rule 1413 of the Provident Fund Sterling Accounts Rules.3. Application of Section 50 of the Indian Contract Act in the context of payment obligations.4. Interest of Union of India in maintaining an application for removal of attachment.Detailed Analysis:1. The judgment dealt with the issue of immunity from attachment of provident fund money under the Provident Funds Act, 1925. The Union of India claimed immunity from attachment of the cheques representing provident fund money, citing Section 3 of the Provident Funds Act, 1925, which states that such funds are exempt from attachment. The executing court initially overruled this objection, stating that the funds had lost their character as provident fund money and were not immune from attachment. However, the Supreme Court held that as long as the money remained under the control of the Railway Administration as provident fund money, it was indeed exempt from attachment under the law.2. The interpretation of Rule 1413 of the Provident Fund Sterling Accounts Rules was a crucial aspect of the judgment. Rule 1413 outlined the procedure for payment in sterling to a subscriber and imposed obligations on the Accounts Officer to remit the amount through a bank for payment at the specified place. In this case, Browne had given prior intimation of his intention to receive the provident fund amount in sterling in the United Kingdom. The Railway Administration, acting as a trustee for Browne, was obligated to convert the amount into sterling and remit it accordingly. The Supreme Court emphasized that until the money was converted and transmitted to Browne, it retained its character as provident fund money and was immune from attachment.3. The application of Section 50 of the Indian Contract Act was discussed concerning the manner of payment obligations. The High Court had relied on illustration (d) to Section 50, which deals with the discharge of debt upon performance as prescribed by the promisee. However, the Supreme Court clarified that Browne had not authorized the Reserve Bank to receive payment on his behalf, and the obligation of the Railway Administration to transmit the funds as per Browne's directions had to be fulfilled before discharge of liability. The Court emphasized that the High Court's interpretation was erroneous in holding that the funds had lost their character as provident fund money.4. The judgment also addressed the interest of the Union of India in maintaining an application for the removal of attachment. Despite suggestions that the Union had no interest, it was established that the Union of India, acting as a trustee for the subscriber, had a clear interest in maintaining the application to protect the provident fund money from attachment. The Court concluded that the order of attachment was contrary to the provisions of the Provident Funds Act, 1925, and allowed the appeal, setting aside the High Court's order.In conclusion, the Supreme Court's judgment emphasized the immunity of provident fund money from attachment, the importance of following prescribed rules for payment, the necessity of fulfilling payment obligations as directed, and the legitimate interest of the Union of India in protecting subscriber funds.