Attachment of bank debt creates no preference in liquidation; decree-holder must rank as unsecured creditor and obtain company-court leave for execution.

Attachment of a debt due from a bank did not create any preferential right for the decree-holder after the bank entered liquidation; the decree-holder merely stepped into the judgment-debtor's shoes and had to rank as an unsecured creditor in winding up. The leave of the Company Court was required before execution against the Official Liquidator, and permission to continue proceedings or seek a garnishee order did not extend to levy of execution. The bank was not shown to have acted fraudulently or to have used liquidation to defeat execution, so it was entitled to resist the process. The decree-holder's remedy lay only in the winding-up proceedings.

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Issues: (i) whether attachment of a debt due from a bank to a judgment-debtor conferred a preferential right on the decree-holder after the bank went into liquidation; (ii) whether leave of the Company Court was necessary before proceeding in execution against the Official Liquidator; (iii) whether the bank's conduct disentitled it from resisting execution.

Issue (i): whether attachment of a debt due from a bank to a judgment-debtor conferred a preferential right on the decree-holder after the bank went into liquidation.

Analysis: Attachment under Order XXI of the Civil Procedure Code merely prohibited payment to the judgment-debtor and did not create a higher right in the decree-holder than the judgment-debtor himself possessed against the bank. The decree-holder only stepped into the shoes of the judgment-debtor and, as a creditor of the bank, had no preference over other creditors. The Court held that no valid order compelling the bank to deposit the money had been made before liquidation, and attachment by itself did not give the decree-holder a preferential claim in winding up.

Conclusion: The decree-holder had no preferential right and was bound to rank only as an unsecured creditor in the winding up.

Issue (ii): whether leave of the Company Court was necessary before proceeding in execution against the Official Liquidator.

Analysis: Section 171 of the Indian Companies Act barred continuation or commencement of legal proceedings against the company without leave of the winding-up court. The leave obtained was construed as permission only to continue the pending proceedings and to seek a garnishee order, not as authority to levy execution against the company through the liquidator. Since obtaining a garnishee order and executing against the garnishee were distinct steps, the leave did not extend to execution against the bank.

Conclusion: Leave of the Company Court was necessary for execution against the Official Liquidator, and the leave obtained was insufficient for that purpose.

Issue (iii): whether the bank's conduct disentitled it from resisting execution.

Analysis: The Court found no fraud or trickery by the bank. The money was not standing to the credit of the judgment-debtor, the depositor was dead, claim proceedings had been taken by the legal representatives, and the winding up was not a voluntary liquidation designed to defeat execution. The bank's objections were therefore held to be bona fide and not fraudulent.

Conclusion: The bank was not disentitled by fraud or misconduct from resisting the execution process.

Final Conclusion: The appeals failed in their entirety, and the decree-holder was left to pursue any remedy only in the winding-up proceedings as an unsecured creditor.

Ratio Decidendi: Attachment of a debt due from a company does not create a preferential right in the creditor, and once the company enters liquidation the creditor can proceed only according to company-winding-up law, subject to the leave requirement for proceedings against the company or its liquidator.

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