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TMI Blog1993 (12) TMI 53X X X X Extracts X X X X X X X X Extracts X X X X ..... ded to the second respondent and the same was registered in their office. Similarly, an irrevocable power of attorney was executed by the first respondent authorising the bank to receive payment of all amounts which may become due in respect of the contracts entered into between the first respondent and Southern Railway. The original power of attorney was forwarded to the third respondent and it was since then returned. It is averred in the petition that the powers of attorney constitute an equitable assignment of the amounts due or which may become due to the first respondent from respondents Nos. 2 and 3 and the bank was constituted the owners of those amounts. The bank was, therefore, entitled to receive payment of all amounts due to the first respondent from respondents Nos. 2 and 3. The bank has got a charge and a lien over those amounts. The fourth respondent, the Income-tax Officer, B-Ward, Ernakulam, issued orders under section 226(3) of the Income-tax Act calling upon respondents Nos. 2 and 3 to deposit the amounts due from them to the first respondent to the credit of the Central Government. These orders were issued on the basis that a sum of Rs. 1,03,148 was due from t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... relate to periods subsequent to the execution of the powers of attorney and that the amounts did not cease to be payable to the first respondent and that the fourth respondent has jurisdiction and power to issue the impugned orders. In the additional counter-affidavit filed by the fourth respondent it is stated that the fourth respondent has so far collected Rs. 6,091 and Rs. 56,267 from respondents Nos. 2 and 3, respectively, in pursuance of the notices issued. No counter-affidavit is seen filed by respondents Nos. 1 to 3 and 5 in the original petition. An affidavit was filed by the first respondent in pursuance of the direction in C.M.P. No. 6470 of 1988, wherein mention is made about the value of the work order and stating that the second respondent is not in a position to give the exact dates on which the bills of the first respondent were passed. The affidavit further states that an amount of Rs. 6,091.86 outstanding to the credit of the contractor was remitted to the Income-tax Department on July 6, 1983. The second respondent expressed inability to trace the bills since they related to the year 1975. The third respondent has filed a statement with an annexure showing the de ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... k as our attorney in our name and on our behalf to do or execute that all or any of the acts or things thereinafter mentioned that is to negotiate and receive payment of all moneys due to us as per bills signed by us and drafts (including earnest money deposit and retention amounts) and credit it to our account in reduction of the money advanced, (2) to compromise, negotiate and receive proceeds of all bills, deposits as and when due to us by cheques direct from the Divisional Accounts Officer, Southern Railway/Construction/Trivandrum or any other officer or officers, (3) making payments that may be payable by us in future, (4) to issue receipts or discharge for payments as received and their receipts shall complete discharge of the amounts due to us under the agreements. Intimation of both the powers of attorney was given to the respondents Nos. 2 and 3, respectively. Exhibit P-2 is the acknowledgment received from the second respondent and exhibit P-4, the acknowledgment received from the third respondent. It was thereafter that the fourth respondent by exhibit P-5, dated November 22, 1975, requested the second respondent to pay all monies which have become due and which the se ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... idated or unliquidated or which may become liquidated on a future date. On the other hand, an order for payment of money presupposes that the party to whom the order is entrusted has in his hand the money of the drawer. Such money has to be applied according to the directions of the order of the party who is entitled to it. There is no such obligation in the case of an actionable claim. Keeping in mind the distinguishing features of an "actionable claim" and a "pay order", there is no difficulty in finding that exhibits P-1 and P-3 are not in the nature of pay orders whereas they are assignments of an actionable claim or a chose-in-action. A "chose" means a thing and a "chose-in-action" means a thing in action. According to Halsbury, the expression "chose-in-action" in the literal sense means a thing recoverable by action as contrasted with a "chose-in-possession", namely, a thing of which a person has not only ownership but also actual physical possession. A chose-in-action is assignable and is treated as property under Chapter 8 of the Transfer of Property Act which calls it "an actionable claim". "Actionable claim" means a claim to any debt other than a secured debt or a benef ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... embodying an arrangement between the contractor and the bank according to which the bank agreed to advance monies to the contractor on the security of the bills and the contractor has given the necessary authority to the bank to collect the amount covered by those bills, the requirements of section 130 of the Transfer of Property Act are complied with and the transferee gets a right over the amount covered by the bills on the principle of equitable assignment. In support of his contention that exhibits P-1 and P-3 amount to an equitable assignment, Sri Warrier has drawn attention to the decision of the Supreme Court in Bharat Nidhi Ltd. v. Takhatmal [1969] 39 Comp Cas 114 ; AIR 1969 SC 313. The Supreme Court was interpreting a power of attorney which contained more or less identical recitals. In that case the power of attorney in favour of the appellant authorised him to sue for, recover and receive the monies due in connection with the contracts entered into by one Malhotra with military and other authorities. He needed funds for the execution of his contracts. The money was advanced by the appellant in whose favour the power of attorney was executed. It was declared (at page 11 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t the bill was endorsed in favour of the appellant. The Supreme Court has only read the endorsement in the light of the power of attorney. The recitals in the power of attorney were construed by the Supreme Court and it was held that there can be a valid equitable assignment of the future debts. The Supreme Court has also referred to section 130 of the Transfer of Property Act under which an actionable claim can be transferred. In is further observed that where a document does not amount to a transfer within section 130, it may, apart from and independently of the section, operate as an equitable assignment of the actionable claim. In the light of the principles laid down by the Supreme Court, the absence of an endorsement on the bill, even if there is any, does not make any difference. On the question as to what constitutes an equitable assignment the Supreme Court has referred to Palmer v. Carey [1926] AC 703 (PC) at page 706, where it Was held (at page 117 of 39 Comp Cas ) : "The law as to equitable assignment, as stated in Rodick v. Gandell [1852] 1 De G M G 763, is this : The extent of the principle to be deduced is that an agreement between a debtor and a creditor that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ny particular way does not prevent the creditor from attaching the fund. The Calcutta High Court referred to the law as to equitable assignment as stated by Lord Truro in [1852] 1 De G M and G 763, Rodick v. Gandell in the following manner (at page 608 of 1938 AIR Cal) : ". . . an agreement between a debtor and a creditor, that the debt owing shall be paid out of a specific fund coming to the debtor, or an order given by a debtor to his creditor upon a person owing money or holding funds belonging to the giver of the order directing such person to pay such funds to the creditor, will create a valid equitable charge upon the fund, in other words, will operate as an equitable assignment of the debts or fund to which the order refers." It is then observed that this enunciation of law has never been dissented from. The test to be applied as per this decision is whether there was an intention to assign or create a charge which will give the assignee an equitable interest in the fund itself. In Ninkileri Lakshmikutty Kettilamma v. Thokka Madathil Vishnu Nambisan, AIR 1939 Mad 411, the Madras High Court was considering an insurance policy assigned by the assured in favour of his wif ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... an instrument assigning future book debts which may become due to the assignor in any business carried on by him and one assigning future bequests and devises to which he may under any will become entitled. The subjects of both assignments are equally wide, equally incapable of ascertainment at the time of the assignment, but equally capable of identification when the subject has come into existence and it is sought to enforce the security." Lord Macnaghten in his judgment held (at page 543): " The mode or form of assignment is absolutely immaterial, provided the intention of the parties is clear. To effectuate the intention an assignment for value, in terms present and immediate, has always been regarded in equity as a contract binding on the conscience of the assignor and so binding the subject-matter of the contract when it comes into existence, if it is of such a nature and so described as to be capable of being ascertained and identified." Following the principles stated by the Supreme Court and agreeing with the views of the Madras, Bombay and Calcutta High Courts in the aforementioned decisions, we hold that exhibits P-1 and P-3 are irrevocable powers of attorney by wh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ter it was executed. After executing the power of attorney the first respondent had forwarded the document to respondents Nos. 2 and 3, respectively. That they accepted it at a later date is no reason to hold that the fourth respondent gets a claim over the money which became due between the date of the power of attorney and the date of its acceptance. By exhibits P-1 and P-3 executed on March 8, 1975, and October 15, 1973, respectively, the first respondent had authorised the bank to receive all monies due to the first respondent. A transfer of interest has, therefore, taken place by execution of the power of attorney. The intention to create security has been manifested by producing the powers of attorney before the petitioner-bank. Communication is sent to the debtors, namely, respondents Nos. 2 and 3 in order to inform them about the execution of the power of attorney so as to enable the debtors to make payment to the bank on behalf of the contractor-first respondent. The acceptance of the power of attorney by respondents Nos. 2 and 3 is, therefore, of not much consequence and no claim can therefore be made by the fourth respondent over amounts which became due between the date ..... X X X X Extracts X X X X X X X X Extracts X X X X
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