Full Judgment Text
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PETITIONER:
JT. FAMILY OF MUKUND DAS RAJA BHAGWAN DASS &SONS ETC.
Vs.
RESPONDENT:
STATE BANK OF HYDERABAD
DATE OF JUDGMENT:
10/09/1970
BENCH:
GROVER, A.N.
BENCH:
GROVER, A.N.
SHAH, J.C.
HEGDE, K.S.
CITATION:
1971 AIR 449 1971 SCR (2) 136
1970 SCC (2) 766
CITATOR INFO :
R 1972 SC1053 (4)
ACT:
Hyderabad Jagirdar Settlement Act, 1952, ss. 11 and 25-Suit
filed after notified date with respect to post notified date
debt-Jurisdiction of Debt Settlement Board.
HEADNOTE:
Section 11 of the Hyderabad Jagirdar Settlement Act, 1952,
enables a creditor or a Jagirdar (debtor) to move the Board
under the Act for settlement of debts due by the Jagirdar.
Such application should be made on or before June 30, 1953,
the date notified under the section and if no such
application was made the debt stood extinguished. Under s.
25, if a suit or appeal or execution proceeding was pending
in relation to such debt in any court it had to be
transferred to the Board.
The respondent-bank filed a suit in July 1956 against the
appellants for recovery of Rs. 40,000/- and odd due in July
1954, on account of a cash and credit account opened by the
appellants with the respondent. The suit was decreed. In
December 1959, the bank filed an execution petition for
executing the decree.
On the question whether the execution petition should be
transferred to the Jagirdar Debt Settlement Board under s.
25(1) of the Act.
HELD : There are two conditions for the applicability of s.
25. (a) The expression ’pending’ in s. 25(1) must relate to
proceedings which were pending on the notified date and
could not take in any proceedings which came to be
instituted after such date; and (b) The suit and other
proceedings must be in respect of a debt with regard to
which a Jagirdar or the creditor could make an application
to the Board on or before the notified date. Thus, only
those-debts which were due on or before the notified date
from a debtor or in respect of which any proceedings were
pending in any court or before the Board could be the
subject-matter of the settlement by the Board. [142 E-H]
Since both the conditions for the applicability of s. 25 of
the Act were not satisfied in the present case the
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proceedings were not liable to be transferred. [143 B-C]
Babibai thakuji v. Fazludin Usmanbai, I.L.R. [1954] Bom 535,
approved.
Since the liability of the principal debtor and the surety
is a joint and several liability, a direction that the bank
should proceed first against the principal debtor and only
afterwards for any balance which could not be realised,
against the surety, could not be granted. [144 A-B]
JUDGMENT:
CIVIL APPELLATE JURISDICTION : Civil Appeals Nos. 113 to
1140 of 1966.
137
Appeals by special leave from the judgments and decrees
dated February 8, 1963 of the Andhra Pradesh High Court in
Civil Revision Petition No. 572 of 1960 and C.C.C. Appeals
Nos. 63 and 66 of 1969.
M.C. Chagla and K. R. Chaudhuri, for the appellants (in
C.As. Nos. 1138 of 1966) and the respondents (in C.As. No.
1140 of 1966).
B.V. Subramanyam and A. V. Rangam, for the respondent (in
C.A. No. 1138 of 1966) respondent No. 1 (in C.A. No. 1 L 139
of 1966) and the appellant (in C.A. No. 1140 of 1966).
The Judgment of the Court was delivered by-
Grover, J. These appeals arise out of two different litiga-
tions although some of the parties are the same. Civil
Appeal No. 1138 of 1966 is directed against the judgment of
the Andhra Pradesh High Court dated February 8, 1963 in a
revision petition. The other two cross appeals i.e. 1139 of
1966 and 1140 of 1966 arise out of the judgment dated
February 1, 1963 passed by the same High Court in a suit
which had been filed by the State Bank of Hyderabad on the
basis of a promissory note dated November 27, 1953 for
recovery of Rs. 70,000. We shall dispose of Civil Appeal
No. 1138 of 1966 first. The Hyderabad State Bank had filed
a suit in July 1956 against the joint family business known
as Mukund Das Raja Bhagwandas & Sons and the four sons of
Raja Bhagwan Das who had died, the sons having been
impleaded as defendants 2 to 5. There was a sixth defendant
also Srikishen Sookhdev Malani. According to the claim of
the Bank defendants 2 to 5 were members of a joint undivided
family, defendant No. 2 being the Head Karta and Manager.
On February 2, 1951 defendant No. 2 in his above capacity
requested the Bank to grant what is called a "clean cash
credit" limit of Rs. 1,00,000 against the guarantee of
defendant No. 6. Defendant No. 2 was allowed to withdraw a
sum of Rs. 99,500 by three cheques from February 8, 1951 to
February 12, 1951. After the confirmation of the cash
credit limit by the Committee of the Board of Directors of
the Bank on February 22, 1951, defendant No. 2 executed a
promote in favour of defendant No. 6 for the sanctioned
limit of Rs. 1,00,000. This pronote was endorsed in favour
of the Bank and thereafter the sum of Rs,99,500 which had
been withdrawn pending the sanction of the Committee was
debited to the cash credit account opened in the name of
defendant No. 1 and credited to the personal account of
defendant No. 2. It was averred that defendant No. 2-Karta,
Head and Manager-was drawing monies from time to time in the
cash credit account of defendant No. 1. The drawing limit
was, L235Sup.CI/71
138
reduced subsequently to Rs. 50,000. On September 3, 1952
defendant No. 2 as Karta and Manager of joint family
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business of defendant No. 1 executed a fresh pronote for the
reduced limit of Rs. 50,000 in favour of defendant No. 6
which was endorsed by him in favour of the Bank. Defendant
No. 6 also executed a fresh letter of guarantee. On
December 28, 1953 there was a balance of Rs. 36,201-9-8 in
the cash credit account of defendant, No. 1 and as
collateral security for the same defendant No. 2 executed a
fresh pronote in favour of defendant No. 1 the guarantor for
Rs. 35,000 which was endorsed in favour of the Bank.
Defendant No. 6 further executed a fresh letter of guarantee
in favour of the Bank. Defendant No. 2 had confirmed the
amount due under the cash credit account in his letter dated
July 7, 1954. On account of this cash credit account a sum
of Rs. 40,869-1-10 was due from defendants 1 to 5 as
principal debtors and defendant No. 6 as guarantor together
with interest. Defendant No. 2 filed a written statement
taking up various pleas contesting the claim of the Bank but
no objection was raised on the basis of the provisions of
the Hyderabad Jagirdar Settlement Act 1952 which was
published in the Official Gazette on March 18, 1952,
hereinafter ,called the "Act". Defendants 3 to 5 and
defendant No. 6 also filed their written statements
contesting the claim but no plea was ,raised on the basis of
the provisions of the Act. As many as 10 issues were framed
by the learned Fourth Additional Judge, City Civil Court,
Hyderabad.
The suit was decreed by the trial court personally against
the 2nd and the 6th defendant and against joint family
assets of defendants 2 to 5. In view of the fact that the
6th defendant did not raise any serious contest to the claim
it was directed that the plaintiff could proceed in the
first instance against the joint family assets of defendants
2 to 5 and person of the second defendant .and if the entire
sum was not realized then it could levy execution against
the sixth defendant. Future interest was awarded at the
rate of 5 1/2 per annum. No appeal was filed against the
aforesaid decree. In December 1959 the Bank filed an
execution petition in the court of the Fourth Additional
Judge. On March 10, 1960 the learned judge passed an order
transferring the execution petition to the Jagirdar Debt
Settlement Board under S. 25(1) of the Act. The Bank
challenged the order of transfer before the High Court on
the revisional side. The learned single judge, who heard
the revision petition, referred three questions of law for
consideration by a larger bench. The questions referred
were as follows:-
"1, Whether on a true construction of s. 25(1)
of the Act, it has application to suits,
appeals and applications for execution and
proceedings other than revisional in respect
of debts not existing on or
139
before the notified date under section II of
the Act, pending in any civil or revenue court
involving the questions as set out in that
section ?
2. ’Whether in execution proceedings
relating to decrees obtained in suits filed
after the notified date, the Court could go
behind the decrees passed and trace the
history of the transactions which resulted in
the liability under the decree ?
3. If the answer to question (1) is in the
affirmative, whether section 2 5 ( 1 ) of the
Act has to be struck down as violating
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Articles 14 and 1, 9 (1 ) (f) of the
Constitution ?"
The first question was answered by the Full Bench in the
negative. The second question has also similarly answered
and it was held that the executing court was not competent
to reopen the case by tracing the history of the transaction
which resulted in the liability under the decree. Question
No. 3 was not answered. In accordance with the opinion of
the Full Bench and on a further consideration of the facts
the learned single judge disposed of the revision petition
holding that s. 25(1) of the Act was not applicable and the
order of transfer was liable to be set aside. The executing
court was directed to proceed and deal with the execution
application in accordance with law.
It is necessary to notice the historical background and the
relevant provisions of the Act in order to decide the
questions which fall for determination. By the Hyderabad
(Abolition of Jagirs) Regulation passed on August 15, 1949
the jagirs were abolished. The jagirdars were declared
entitled to a share in the jagir net income which was
inalienable except with the previous sanction of the
Government. On January 25, 1950, another Regulation called
the Hyderabad Jagir (Commutation) Regulation 1359F was
enacted. It provided, inter alia, for the method of
calculating the commutation in respect of jagirs. As
pointed out by the High Court the enactment of the
Regulation affected the jagirdars in a large measure. Their
former resources were not available to them to pay their
debts. The creditors were also faced with a difficult
situation which affected their prospects of recovering the
loans fully. It was in this background that the Act was
passed. Its provisions were mainly borrowed from the Bombay
Agricultural Debtors Relief Act 1947. Debt was defined by
s. 2(e) to mean any liability in cash or kind whether
secured or unsecured due from a jagirdar whether payable
under a decree or order of a civil court or otherwise.
Section 3 provided exceptions in cases of five categories of
debts which were not liable to be scaled down. One of those
was the debt due to a scheduled bank.
140
Chapter It containing ss. 4 to 10 dealt with the
constitution and powers of the Board for the settlement of
debts. ’Section 1 1 provided that any jagirdar or his
creditor could make an application to the Board on or before
such date as the Government might notify for settlement of
debts due by a jagirdar. Under s. 12 notwithstanding the
fact that no application had been filed under S. 1 1 every
creditor on being required to do so by any of his debtors
had to file a correct statement before the Board of his
claims against such a debtor and similarly every debtor on
being so required by any of his creditors had to file a
correct statement. According to s. 15 if any debtor and any
or all of his creditors arrived at a settlement in respect
of any debt due by the debtor to the creditor the debtor or
any of the creditors could make an application and the Board
could proceed to record that settlement in accordance with
the procedure prescribed by the section. Under s. 22 all
debts in respect of which no application for adjustment or
settlement was made in accordance with the provisions of the
Act were to stand extinguished. Under s. 24 on the date
fixed for a hearing of an application made under S. 1 1 the
Board was to decide as preliminary issues whether a person
for the settlement of whose debt an application had been
made was a debtor and whether the total amount of debts due
from such person on the date of the application exceeded the
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sum of Rs. 5,000. If the Board found that such a person was
not a debtor or that the amount was less than Rs. 5,000 the
application was to be dismissed. Section 25 provided for
transfer of pending suits, appeals, applications and
proceedings to the Board. This section may be reproduced in
extenso :-
S.25 "(1) All suits, appeals, applications for
execution and
proceedings other than revisional in respect
of any debt pending in any civil or revenue
court shall, if they involve the questions
whether the person from whom such debt is due
is a debtor and whether the total amount of
debts from him on the date of the application
is less than Rs. 5,000 be transferred to the
Board.
(2) When an application for adjustment of
debts made to a Board under section 1 1 or a
statement submitted to a Board under section
21 includes a debt in respect of which a suit,
appeal, application for execution or
proceeding other than revisional is pending
before a civil or revenue court, the Board
shall give notice thereof to such other court.
On receipt of such notice, such other court
shall transfer the suit, appeal,, appli-
141
cation or proceeding, as the case may be, to
the Board.
(3) When any suit, appeal, application or
proceeding is transferred to the Board under
sub-s. (1) or sub-s. (2), the Board,shall
proceed as if an application under section 11
had been made to it.
(4) If the Board, to which any suit, appeal,
application or proceeding is transferred under
sub-s. (1) or subsection (2), decides the
preliminary issues mentioned in clause (a) of
sub-section (1) of section 24 in the negative
or mentioned in clause (b) of the said sub-
section (1) in the negative, it shall
retransfer the suit, appeal, application or
proceeding to the court from which it had been
transferred to itself after the disposal and
subject to the result of the appeal where an
appeal is filed, and after the expiry of the
period prescribed for an appeal where no
appeal is filed.
(5) When any suit, appeal, application or
proceeding is retransferred to the court under
subsection (4) the said court shall proceed
with the same."
.lm0
141
Section 28 dealt with the mode of taking
accounts and s. 35 provided for the scaling
down of the debts payable by debtors in
accordance with their paying capacity in the
manner indicated therein. An award was to be
made according to s. 36 and further scaling
down of debts could be done under s. 37. In
terms of s. 11 the Government notified June
30, 1953 as the last day for settlement of
debts due by jagirdars. The Full Bench of the
High Court quite rightly observed that s. 11
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was the basic provision enabling the creditor
or the debtor to move the Board under the Act
for settlement of debts. The Act also
recognised other modes which would be
tantamount to the making of such an
application to the Board so as to confer
jurisdiction on it to settle debts in
accordance with the procedure prescribed by
the Act. Section 25 embodied one of these
modes. If a suit or appeal or execution
proceeding etc. was pending in relation to
such debt in any court it had to be
transferred to the Board. The Board would
proceed to deal with it as though an
application under s. 11 had been made. The
suit or other proceedings had to relate to a
debt in respect of which an application under
s. 11 could have been made to the Board. It
was also necessary that
142
the proceedings should be pending in the court
on the date notified. This Would follow from
the provisions of s. 11. There could be no
difficulty about proceedings which were taken
in a court subsequent to an application made
to the Board under s. 11 That proceeding had
necessarily to be transferred on the notice
given by the Board. The point which was
canvassed before the Full Bench of the High
Court was that the expression "pending"
occurring in s. 25 was of wider amplitude and
covered all cases of debts whether incurred
before or subsequent to the notified date.
The High Court, after an exhaustive discussion
of the various provisions of the Act, came to
the conclusion that there were clear
indications in them that the debts to be
determined and scaled down by the Board were
only such debts as were existing on the date
of the application provided for by s. 11. This
is what was finally observed:
"Thus the entire scheme of the Act makes it
abundantly clear that matters concerned with
the debts prior to the date of application
alone (which date of course cannot extend
beyond the notified date under section 11) are
within the cognisance and competence of the
Board. It follows that only cases relating to
such debts and no other debts are liable to be
transferred to it under s. 25(1)."
In our judgment the High Court came to the correct conclu-
sion that the expression "pending" in s. 25(1) must relate
to proceedings which were pending on the notified date and
could not take in any proceedings which came to be
instituted after such date. The, other condition for the
applicability of s. 25 was that the suit or other
proceedings must be in respect of a debt with regard to
which a jagirdar or the creditor could make an application
to the Board on or before the date which the Government had
notified for settlement of debts due by the jagirdar. A
close examination of s. 22 puts the matter beyond
controversy. If no application had been made under s. 11
within the period specified therein or for recording a
settlement made under s. 15 every debt due by the debtor was
to stand extinguished. In a case of the present kind a debt
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would have stood extinguished if no application had been
made under s. 11 within the specified period. Thus the
material date would be the one notified by the Government
under s. 11 and only those debts which were due on or
before that data from a debtor or in respect of which any
proceedings were pending in a court or before the Board
could be, the subject matter of settlement by the Board. It
may be mentioned that in Babibai Thakurji v. Fazludin
Usmanbal(1) a similar provision of
(1) I.L.R. [1954] Bom. 535.
143
the Bombay Agricultural Debtors’ Relief Act on which the
provisions of the Act were modelled came up for
consideration and it was said with reference to s. 19(1) of
that Act that only those suits were liable to be transferred
which were pending on the date when an application for
adjustment of debts could have been made under s. 4 (which
corresponded to s. 1 1 of the Act). In other words, if a
suit was filed after the time to make an application for
adjustment of debts had expired such a suit was not liable
to be transferred. Since both the conditions for the
applicability of s. 25 of the Act were not satisfied in the
present case the decision. of the High Court must be upheld
and the appeal (C. A. 1138/66) dismissed.) In order to
avoid further proceedings which will entail needless expense
learned counsel for the parties have agreed that the
judgment-debtots will pay the decretal amount in four equal
annual instalments. The first instalment which will
represent 1/4th of the decretal amount shall be deposited in
the executing court on or before the first January 1971.
The subsequent instalments each year shall be similarly
deposited on or before first January. In case of failure on
the part of the judgment-debtors to make the deposit of any
one of the istalments in time the entire amount due shall
become recoverable at once. As and when the said deposit is
made the decree-holder will be entitled to withdraw the
same. An order is directed to be made in terms of this
settlement between the parties.
Civil Appeals Nos. 1139 & 1140/66 arise out of the decree in
C.C.C.A. Nos. 63 & 66 of 1959 dated February 1, 1963 in O.S.
No. 37 of 1958, So far as the appeal against the Bank is
concerned there is no merit in it because it has been proved
and that finding could not be successfully assailed before
us that the debt in question was a post notification debt.
In other words it came into existence after June 30, 1953
which was the date notified by the Government as the last
date for settlement of debts due by jagirdars by an
application made under s. 11 of the Act. In view of our
decision in the connected appeal (C.A. 1138/66) s. 25(1) of
the Act was, not applicable to the suit filed for the
recovery of such a debt. Civil Appeal No. 1139 of 1966,
therefore, has no merit and is hereby dismissed.
Civil Appeal No. 1140 of 1966 which has been preferred by
the Bank involves a very short point. According to the
decree of the High Court the plaintiff, namely, the Bank was
to proceed and execute the decree against the second
defendant in the first instance and was to proceed against
the first defendant only afterwards for such balance amount
which could not be realized from the second defendant. It
is not disputed that the liability of the first and the.
second defendant was joint and several and the decree of the
High Court, proceeded on the basis of some equitable relief
144
which was sought for and granted to the first defendant. We
are unable to hold and no such principle or statutory
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provision has been pointed out to us that any such equitable
relief could be granted in a suit of the nature filed by the
Bank against the two defendants. We would, accordingly,
allow this appeal to the extent of deleting clause (2) of
the decree and adding in clause (1) the following words:
Both the defendants shall be jointly and severally liable
for the payment of the decretal amount.
In view of the entire circumstances the parties in all the
appeals are left to bear their own costs in this Court.
V.P.S.
145