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Judgment
K. Ramaswamy, J.
The petitioner is the Registrar. The lower court directed attachment of a sum of Rs. 12,500 lying with the petitioner which was offered as a security by the judgment-debtors by operation of section 12 of the Andhra Pradesh Chit Funds Act (9 of 1971), for short "the Act". Assailing the legality thereof, the Registrar filed this revision petition.
The facts not in dispute are these: The first judgment-debtor is the chit fund company and the second respondent is its branch manager. They have conducted a chit under the Act with forty members. The chit was for Rs. 25,000. A sum of Rs. 12,500 was deposited as security which was attached. Section 12 of the Act in Chapter III postulates the duties of the foreman thus :
"12. Security to be given by the foreman. - (1) For the proper conduct of the chit, every foreman shall, before applying for the certificate of commencement u/s 7, -
(a) execute an indenture of mortgage and trust in favour of the Registrar as trustee charging by way of security property sufficient to the satisfaction of the Registrar for the realisation of the chit amount; or
(b) (i) deposit in any approved bank an amount not less than half of the chit amount; or
(ii) invest in government securities of the face value or market value, whichever is less, of not less than half of the chit amount, and transfer the amount so deposited or the Government securities in favour of the Registrar to be held in trust by him as security. "
(Provisos to this section are not necessary for the purpose of this case. Hence, they are omitted).
Sub-section (3) provides :
" (3) Subject to the provisions of section 530 of the Companies Act, 1956, the security given by the foreman under sub-section (1) shall not be liable to be attached in execution of a decree or otherwise -
(i) until the chit is determined and the claims of all the sub-scribers are fully satisfied;
(ii) until all dues payable by the foreman under this Act to the Registrar or any other officer have been paid;
(iii) where owing to the default of the prized subscriber the prize amount due remains unpaid even after the termination of a chit, until the foreman deposits the prize amount in an approved bank mentioned in the chit agreement and intimates in writing the fact of such deposit to the prized subscriber. "
Sub-section (4) read as follows:
" (4) The Registrar shall, after the termination of a chit and after satisfying himself that the requirements under clauses (i) and (ii) of subsection (3) have been complied with, release the property charged by way of security or order the release of the cash security or the Government securities referred to in sub-section (1) in such manner as may be prescribed. "
Rule 22 of the Andhra Pradesh Chit Rules, 1971, for short, "the Rules", which is relevant for the purpose of this case, reads thus
"22. Procedure for release of security. - (1) (a) The Registrar may, for the purpose of sub-section (4) of section 12, call upon the foreman to produce a cop duly certified to be a true copy, of any register and books of account maintained by the foreman and shall exhibit a notice in his office notice board stating that the security is propose to be released and that any person objecting to such release may file with the Registrar his statement of objections, if any, within fifteen days from the date of exhibition of the notice. A copy of the notice in duplicate shall be sent to (i) every other Registrar, and (ii) every Tahsildar in whose jurisdiction the whole or part of the property given as security is situated for exhibition of one copy on the notice boards of their officers and retransmission of the other copy with an endorsement of the fact of such exhibition.
(b) If no objections are received within the period specified in the notice, the Registrar shall release the security. The Registrar, shall if so required by the foreman, execute and register a deed of release at the cost of the foremen.
(2) If any objections are received, the Registrar shall enquire into the objections summarily within fourteen days after the date of expiry of the period specified in the notice referred to sub-rule (1) and record his decision in writing and communicate a copy thereof to the foreman and to the objector. "
A reading of these provisions would lead to the following conclusions Before applying for certificate to commence the chit, section 7 enjoins in peremptory language that on person shall commence any auction or drawing of any chit unless he has obtained a certificate of commencement from the Registrar. The judgment-debtor, foreman, before applying for a certificate u/s 7, shall execute an indenture of mortgage and trust in favour of the Registrar as trustee charging by way of security property sufficient to the satisfaction of the Registrar for the realisation of the chit amount or he shall deposit cash of not less than half of the chit amount or Government security for the face value or market value of not less than half of its chit amount. The amount thus deposited shall not be liable for attachment in execution of a decree or otherwise subject to the provisions of section 530 of the Companies Act. The duration of the indenture of mortgage and the charge on the amount thus deposited shall ensure until the chit is terminated and the claims of all the subscribers are fully satisfied and until all the dues payable by the foreman under this Act to the Registrar or any other officer have been paid and where owing to the default of the prized subscriber, the prize amount due remains unpaid even after the termination of a chit, until the foreman deposits the prize amount in an approved bank mentioned in the chit agreement and intimates in writing the fact of such deposit to the prized subscriber The indenture thus created and the amount thus deposited get terminated only after the Registrar is satisfied that the requirements under clauses (i) and (ii) of sub-section (3) haven been complied with and thereafter on passing an order u/s 12(4) releasing the property charged by way of security or the cash security referred to therein in sub-section (1) in the manner prescribed in rule 22 of the Rules. But, before releasing the security, the registrar shall call upon the foreman to produce a copy duly certified to be the true copy of any register and books of account maintained by the foreman and shall exhibit a notice on his office notice board in the manner prescribed in rule 22. Thus, until an order is passed by the registrar by operation of sub-section (4) of section 12 after following the procedure prescribed in rule 22, the amount charged cannot be released and till then no attachment can be ordered.
No doubt, under Order Order 21, rule 46, Civil Procedure Code, the executing court has power to order attachment against the garnishee. But the Act is a special law which received the assent of the President and prevails over the Code. So, section 12 prevails over Order 21, rule 46, etc.
In this case, the lower court merely relying upon the letter dated January 31, 1984, written by the Registrar has come to the conclusion that the subscribers on the concerned chit have made no claims on the registrar. Therefore, it attached the security with the Registrar under Order 21, rule 46, and rule 46A, CPC and notice was issued directing him as garnishee to produce it to the court. This order is in derogation of the mandatory language of section 12. The registrar is a trustee to the subscribers of the chit is liable to discharge the trust to the subscribers. Only in release, the amount kept in trust becomes amenable to the general body of creditors. Therefore, the order of the executing court is vitiated by error of jurisdiction. The matter is accordingly remitted to the executing court to conduct an enquiry, after giving opportunity to all the parties, into whether the foreman has discharged the liability u/s 12(3) and the chit is terminated and the claims of all the subscribers are satisfied or anything due to the Registrar or other officers is subsisting an whether any order has been passed by the Registrar under sub-section (4) of section 12 read with rule 22, and only on recording a finding that such order u/s 12(4) is passed, to take appropriate action according to law. The executing court is directed to dispose of the enquiry as expeditiously as possible within a period of four months from the date of receipt of the order. The civil revision petition is accordingly allowed, but in the circumstances, without costs.