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Section 323: Save as aforesaid, all debts to be paid equally and rateably

Indian Succession Act • Official Statutory Text & Practice Guide

Statutory Regulation
Legal Standard
Competent Court / Tribunal
Act 1925
Section 322 All 391 Sections of Indian Succession Act Section 324

Legal Commentary & Landmark Judgments: Section 323

Section 323 mandates that, save as aforesaid, all Debts of the deceased must be paid equally and rateably among creditors of equal degree.

  • Pari Passu Distribution Rule: Save as aforesaid, no creditor shall have a right of priority over another by reason merely that his debt is secured by a specialty or judgment.
  • Equal and Rateable Payment: All ordinary debts of the deceased, of whatever degree, must be paid equally and rateably out of the estate assets.
  • Deficiency Apportionment: If the estate is insolvent, each creditor receives a pro-rata dividend based on the proportion of his debt to total liabilities.
Key Landmark Precedents:
  • Ranganathan Chettiar v. Periakaruppan Chettiar AIR 1957 SC 815: The Supreme Court delivered the leading ruling on Section 323, holding that the rateable payment rule abolishes common-law crown debts and specialty priorities, enforcing equal distribution among unsecured creditors.
  • Paschimanchal Vidyut Vitran Nigam Ltd. v. Raman Ispat (2023) 10 SCC 60: Affirmed that Section 323 codifies the fundamental insolvency principle of pari passu distribution among creditors of equal standing.
Courtroom Practice & Strategic Litigation Guidance:

Executors managing an insolvent estate cannot prefer one friendly lender over another; under Section 323, all unsecured creditors (including decree-holders and promissory note holders) must receive an equal percentage dividend on their proved claims.

Section 322 All 391 Sections of Indian Succession Act Section 324