Third-party recovery cannot enforce disputed dues where adjustment claims exist; only clearly payable sums may be recovered.

A third party cannot be compelled in recovery proceedings to pay alleged dues of a defaulter where it disputes liability and asserts a right of adjustment against amounts claimed from the defaulter. The dispute between the petitioner and the defaulter was treated as outside the scope of the recovery process, so the recovery direction could not stand on the assumption of undisputed liability. Recovery may proceed only against money clearly shown to be payable to the defaulter, and the respondents remain free to pursue such identifiable sums.

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Issues: Whether the direction requiring the petitioner to pay the amount allegedly due to a defaulter could be sustained when the petitioner asserted a dispute and claim for adjustment against the amount payable.

Analysis: The petitioner challenged the recovery direction on the ground that the amount in its hands was liable to be adjusted against amounts claimed from the defaulter. The disputed claim between the petitioner and the defaulter was held to be outside the scope of the recovery proceedings, and the respondents could not compel payment as though the petitioner was undisputedly liable to the defaulter. The impugned direction was therefore held unsustainable, while leaving the respondents free to proceed against any money shown to be payable to the defaulter.

Conclusion: The recovery direction against the petitioner was set aside and the writ petition was allowed.

Ratio Decidendi: In recovery proceedings, a third party cannot be compelled to pay the alleged dues of a defaulter where liability is disputed and a claim for adjustment is raised; such disputes must be left open and recovery can proceed only against money clearly shown to be payable to the defaulter.

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