Distribution of Assets (Section 73)

Section 73: Proceeds of execution-sale to be rateably distributed among decree-holders.—

(1) Where assets are held by a Court and more persons than one have, before the receipt of such assets, made application to the Court for the execution of decrees for the payment of money passed against the same judgment-debtor and have not obtained satisfaction thereof, the assets, after deducting the costs of realisation, shall be rateably distributed among all such persons:

Provided as follows:—

(a) where any property is sold subject to a mortgage or charge, the mortgagee or incumbrancer shall not be entitled to share in any surplus arising from such sale;

(b) where any property liable to be sold in execution of a decree is subject to a mortgage or charge, the Court may, with the consent of the mortgagee or incumbrancer, order that the property be sold free from the mortgage or charge, giving to the mortgagee or incumbrancer the same interest in the proceeds of the sale as he had in the property sold;

(c) where any immovable property is sold in execution of a decree ordering its sale for the discharge of an incumbrance thereon, the proceeds of sale shall be applied—

first, in defraying the expenses of the sale;

secondly, in discharging the amount due under the decree;

thirdly, in discharging the interest and principal monies due on subsequent incumbrances (if any); and

fourthly, rateably among the holders of decrees for the payment of money against the judgment-debtor, who have, prior to the sale of the property, applied to the Court which passed the decree ordering such sale for execution of such decrees, and have not obtained satisfaction thereof.

(2) Where all or any of the assets liable to be rateably distributed under this section are paid to a person not entitled to receive the same, any person so entitled may sue such person to compel him to refund the assets.

(3) Nothing in this section affects any right of the Government.


1. Objective of the Section 73 of the Code

Vilas Transport Co. v. Sangli Sahakari Bank Ltd., 2011 SCC OnLine Bom 1324 : (2012) 4 Mah LJ 820: “……the object of section 73 is to prevent unnecessary multiplicity of execution proceedings, to obviate, in case where there are many decree holders, each competent to execute his decree by attachment and sale of particular property, the necessity of each and every one separately attaching and separately selling the property. The object is to provide a cheap and expeditious remedy for execution of money decree held against the same judgment debtor by judgment creditors without necessity for separate proceedings. The other object is to secure equitable administration of the property by securing all decree holders by rateably applying the proceeds or the assets by distribution in accordance with the provisions.”


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