Set off for reversed execution recoveries permitted; credit allowed, payments of revenue and cess excluded.

Appellant's entitlement to set off was assessed on two issues: (i) recovery by respondent in execution of a decree later reversed - the court applied the principle of mutual set off and analogous insolvency/liquidation adjustments, holding that where ownership of disputed sale proceeds remained unresolved until final appellate disposal the right to claim set off accrues on final determination and credit in execution is permissible; outcome: appellant entitled to credit for the amount recovered in the reversed execution. (ii) payments made by appellant for revenue and cess - because liability rested with the original owner, those payments do not constitute a proper set off; parties to bear their own costs.

---

---

Issues: Whether the appellant is entitled to deduction/set off from the amount sought in execution by the respondent of (i) the sum recovered by the respondent in execution of the Subordinate Judge's decree for costs which was subsequently reversed, and (ii) sums paid by the appellant for revenue and cess, together with interest.

Analysis: The entitlement to set off for sums previously recovered in execution of a decree subsequently reversed is governed by the principle that mutual dealings between parties permit taking an account and adjusting balances; statutory and insolvency provisions recognise such set off in liquidation. Order 21, Rule 18 and Order 21, Rule 19 of the Code of Civil Procedure permit credit in execution in appropriate circumstances; insolvency provisions (Sections 46 of the Provincial Insolvency Act and 47 of the Presidency Towns Insolvency Act) and Section 229 of the Indian Companies Act apply analogous principles in liquidation by allowing adjustment of mutual claims so that a creditor does not obtain a preferential recovery to the prejudice of the other party. Where ownership of disputed sale proceeds was unresolved until final disposal of the appeal, the right to claim set off accrues on final determination; Article 181 of the Limitation Act governs the limitation point and supports accrual on disposal of the appellate proceedings. The liability for revenue and cess rested with the original owner (the Pakrasis) and not with the mortgagee; consequently such payments by the appellant do not constitute a proper set off against the respondent's debt.

Conclusion: The appellant is entitled to set off and credit for the sum of Rs. 989-11-0 recovered by the respondent in execution of the reversed Subordinate Judge's decree. The appellant is not entitled to credit for sums paid on account of revenue and cess. The parties shall bear their respective costs throughout.

---