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PETITIONER: BALKISHANDAS & 12 OTHERS

       Vs.

RESPONDENT: STATE BANK OF HYDERABAD AND ANR.

DATE OF JUDGMENT20/01/1972

BENCH: REDDY, P. JAGANMOHAN BENCH: REDDY, P. JAGANMOHAN HEGDE, K.S. PALEKAR, D.G.

CITATION:  1972 AIR 1053            1972 SCR  (3) 157  1972 SCC  (1) 530

ACT: Hyderabad Jagirdars Debt Settlement Act, 1952-S. 11 and  25- Its  scope-Mortgage  executed  in  favour  of   Bank-Whether extinguished by virtue of S. 11 and 25 of the Act.

HEADNOTE: Respondent  1, a bank, filed a suit against appellants  Nos. 1 to 4, members of a joint family, for the recovery of Rs. 5 lakhs on the basis of a mortgage deed executed in favour  of the  bank, by securing certain immovable properties  without possession.   Defendant  No. 5 became a  guarantor  for  the amount borrowed and executed a separate guarantee in  favour of the Bank.  The appellants, who were Jagirdars, had  money transactions  with  the bank prior to the execution  of  the mortgage  on  three separate accounts.   The  accounts  were however,  closed by payment from the amount of Rs.  5  lakhs advanced to them on the basis of the Mortgage deed.  As  the defendants  failed to pay the amounts which fell  due  under the terms of the mortgage, a suit was filed against all  the defendants.   The  firm and the 5th defendant  remained  ex- parte, but defendants Nos. 2-4 defended the suit.  The trial court, decreed the suit against the appellants and the  High Court  also confirmed the judgment and decree of  the  trial court.   In an appeal by certificate, two main  points  were urged  :-(I) that the suit debts were extinguished under  S. 22  of  the Hyderabad Jagirdars Debt  Settlement  Act  1952, inasmuch as no application was presented by the Bank  u/s.11 of the Act before the 30th June, 1953 which was the notified date and (2) the civil court had no jurisdiction to try  the suit  because u/s 25 of the Act, all suits  and  proceedings for  the  recovery  of  a debt from a  Jagirdar  had  to  be transferred  to the Jagirdars Debt Settlement  Board,  which alone  had jurisdiction to settle it.  It was  contended  on behalf  of the appellants that the mortgage executed by  the appellants  did not create any new debt but  merely  secured the payment of prior debts which was the balance due to  the Bank on the 3 accounts as on the date of the mortgage  which debts  were  pending debts within the meaning of  S.  25(1). Dismissing the appeal, HELD : (i) From the terms of the mortgage deed, it was clear that the debt of Rs. 5 lakhs was a fresh debt created by and

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secured  thereunder with interest that may become  due  from the  date of the mortgage and that there was no question  of the  mortgage deed having been executed as a  settlement  of prior  debts so as to attract the provisions of Sections  11 and 25 of the Act. [163 A] (ii) The  expression  ’pending’  in Section  25  related  to proceedings  which  were pending on the  notified  date  and could  not mean any proceedings which were instituted  after such  date.  In the facts and circumstances of the case  the debt  created  by  the mortgage deed is  a  fresh  debt  and therefore,  the  provisions.  of  S. 1 1  and  25  are,  not attracted. [161 E] Joint  family  of  Mukund Dais v. State  Bank  of  Hyderabad [1971] 2 S.C.R. 136, followed. 158 (iii)     Once the provisions of S. 11 and 25 were shown  to be  not applicable, the civil court had jurisdiction to  try the  suit  and  the decree granted by the  Trial  Court  and confirmed  by  the Appellate Court did not suffer  from  any infirmity. [163 H] State of Rajasthan v. Mukund Chand, [1964] 6 S.C.R. 903, and State  Bank of Hyderabad v. Mukunda Raja Bhagwandas &  Ors., 1963 (11) Andhra Weekly Reporter 14, referred to.

JUDGMENT: CIVIL APPELLATE JURISDICTION : Civil Appeal No. 547 of 1967. Appeal from the judgment and decree dated November 14,  1966 of  the Andhra Pradesh High Court in Original  Side  Appeal. No. 9 of 1959. A.   R.  Somnath Iyer, R. K. P. Shankardass, R.  V.  Ramarao and P.    K. Pillai, for the appellants. S.   V.   Gupte,  A.  V.  Rangam  and  A.  Subhashini,   for respondent No. 1. The Judgment of the Court was delivered by P.   Jaganmohan  Reddy,  J. This appeal  is  by  certificate against the judgment of the Andhra Pradesh High Court  which confirmed  the judgment and decree of a single Judge of  the Original  Side  of that Court.  The  first  respondent  Bank filed a suit against the appellants-defendants Nos. 1-4  who are members of the joint family firm, for the recovery of  a sum  of I.G. Rs. 5,00,000/- on the basis of a mortgage  deed executed  by them in favour of the Bank by securing  certain immovable  properties  without  possession.   As  a  further security, the first defendant on behalf of the joint family, caused  the  5th  defendant-respondent 2  to  guarantee  the amount borrowed from the Bank and accordingly he executed  a promissory note in favour of the 5th defendant on  26-9-1953 for  Rs. 5,00,000/- which he in turn endorsed in  favour  of the  Bank.   The  5th defendant  also  executed  a  separate guarantee  in favour of the said Bank on the same date.   As the  defendants  failed to pay the amounts  which  fell  due under  the  terms  of  the mortgage, a  suit  was  filed  as aforesaid against all the defendants.  The 1st defendant who was  the manager and Karta of the joint family remained  ex- parte.   The 5th defendant though he appeared in the  Court, did  not  file  any written statement and  chose  to  remain exparte  throughout.   Defendants 2-4  alone  filed  written statements  resisting.  the suit on several  pleas,  two  of which alone may be noticed for the purposes of this  appeal, namely,  (i)  that the suit debts  were  extinguished  under section  22 of the Hyderabad Jagirdars Debt  Settlement  Act 1952   (hereinafter  called  ’the  Act’),  inasmuch  as   no application  was presented by the Bank under section  11  of

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the Act before 30th June 1953 which was the notified  1 5 9 date;  and (ii) the Civil Court had no jurisdiction  to  try the  suit  as  under section 25 of the  Act  all  suits  and proceedings  for the recovery of a debt due from a  Jagirdar have  to  be transferred to the  Jagirdars  Debt  Settlement Board which alone had jurisdiction to settle it.  It appears that  the  appellants who it is admitted are  Jagirdars  had money  transactions with the Bank prior to the execution  of the  mortgage on three separate accounts.  Ultimately  these accounts  were  closed  by payment from the  amount  of  Rs. 5,00,000/-  advanced  to them by the Bank on a  cash  credit account  secured  by the aforesaid mortgage  deed.   It  was contended  that  as  the amounts due on  the  three  earlier accounts  to the Bank were debts which were pending  on  the date  of the Act and since these loans were secured  by  the mortgage,  the provisions of the Act are applicable and  the debts  got  extinguished as the Bank had not  applied  under section 11 before 30-6-1953 to refer them for settlement  by the Jagirdars Debt Settlement Board. The  trial court on the evidence held that the  amounts  due from  the  appellants  on the three old  accounts  were  Rs. 5,00,000/-  made  up of (a) Rs. 2,59,436-0-0 on  the  L.B.D. Account;  (b) Rs. 2,05,358-8-8 on Overdraft Account  (Clean) Ledger  No.  14) Dwarkadas Mukandas; (c) Rs.  35,205-7-4  on Overdraft Account (Clean) (Ledger No. 2) Dwarkadas Mukundas. It  further held that at the request of the appellants  they were  granted by the first respondent a cash credit  to  the extent  of Rs. 5,00,000/and in compliance with the terms  of sanction the appellants executed a mortgage deed (Ex.  P-10) in  favour  of  the Bank; that from the  fresh  cash  credit account  which  was opened on 8-8-1953 in the  name  of  the appellant  firm  with the Bank, the appellants  cleared  the earlier liabilities under the three accounts mentioned above which  were  closed  and  that on the  same  date  the  Bank returned  to the appellants thirteen bills duly endorsed  in favour  of  the appellant firm.  On these facts,  the  trial court held that as the 1st respondent was a Scheduled  Bank, the provisions of the Act would not bE applicable by  virtue of  section 3(v) and accordingly the Civil Court would  have jurisdiction   to  entertain  the  suit.   The   suit   was, therefore,  decreed  against the appellants and  the  second respondent, against which an original side appeal was  filed in  the  High  Court.  By the time the appeal  came  up  for hearing,  a  Full Bench of the Hyderabad High Court  in  the case of State Bank of Hyderabad v. Mukundas Raja  Bhgawandas and  Sons and Ors.(1) held that under section 25(1)  of  the Act,  all  suits  appeals, applications  for  execution  and proceedings other than revisions, taken before the Courts in regard  to debts for which applications under section 11  of that  Act  could  be  made to  the  Board  and  involve  the questions,  as  to the status of the Debtor  and  the  total extent of his debts, are liable to be transferred if they (1)  (1963) (II) Andhra Weekly Reporter, 147. 160 were  pending on the date. notified ’under section 11,  i.e. 30-6-1953.   But, if they were filed after that  date,  they are liable to be transferred only on notice by the Board  by reason of an application under section 11 or statement under section   21  of  the  Act.   AR  other   ;suits,   appeals, applications  for execution or other proceedings,  including cases relating to debts incurred subsequent to the  notified date  are clearly beyond the purview of section 25  and  are not  liable  to be transferred to the Board,  as  the  Board itself cannot deal with such suits or proceedings because of

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the  limitations  placed in the Act.  What is meant  by  the expression  ’pending’  in section 25(1) was  interpreted  as pending on the notified date. In  view  of this decision, the questions  that  were  urged before the appellate court were whether the debt was a post- notification  debt  or  a  pre-notification  debt,   namely, whether  it was contracted after 30-6-1953 or prior to  that date.   If  it was a pre-notification debt,  the  said  debt would  be extinguished by virtue of section 22 of  the  Act. Even  if it was a post-notification debt, it was urged  that the civil court would not have jurisdiction under section 25 notwithstanding the judgment of the Full Bench of the Andhra Pradesh High Court referred to above.  Further, section 3 of the Act was also challenged as ultra vires of Article 14  of the Constitution of India on  the    application   of    the decision of the Supreme Court in the State   of Rajasthan v. Mukand Chand.(1) It was held by the Rench    that        the drawing of money in the new account and the payment into the old  accounts had discharged the old debts which  could  not form the basis of a suit against the defendants for recovery of the said amounts.  Accordingly, following the Full  Bench judgment, it was held that the Civil Court had  jurisdiction to  entertain the suit as the debt was  a  post-notification debt  and in this view confirmed the judgment and decree  of the trial court. In   this   appeal  on  the  reasoning  of  the   Court   in Mukandchand’s case(1) the provisions of section 3  exempting Scheduled  Banks from the application of the  provisions  of the Act equally offend Article 14 as was section 2(e) of the Rajasthan   Act  which  was  analogous  so  that   the   1st respondent’s debts to a Jagirdar are liable to be challenged under  any  of the provisions of the Act like those  of  any other  creditor to whom section 3 was not  made  applicable. Before dealing with the contentions raised before us, it  is necessary to state that as a consequence of the abolition of Jagirs  by  the Hyderabad (Abolition of  Jagirs  Regulation) 1358 Fasli (1949 A.D.) and the Hyderabad Jagirs (Commutation Regulation) 1359 F (1950 A.D.) passed on 25-1-1950, the  re- sources  of  the Jagirdars were greatly affected  and  as  a consequence  the-  creditors of those  JagirdaRs  were  also faced with a (1)  [1964] 6 S.C.R. 903. 162               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  Gov-               ernment  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.  1  1               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  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. II and only those debts  which  were

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             due on or before that date from a debtor or in               respect of which any proceedings were  pending               in  a court or before the Board would  be  the               subject-matter of settlement by the Board". In  view of this legal position, on behalf of the  appellant it is urged that the mortgage executed by the appellants did not  create any new debt but merely secured the  payment  of prior  debts which was the balance due to the Bank on the  3 accounts  as  on the date of the mortgage which  debts  were pending  debts  within  the meaning of s.  25(1).   On  this basis, it is contended that as no application was made under s.  11  in  respect of the prior  debts,  the  debts  became extinguished  and  accordingly  the  mortgage  deed   lacked consideration  to make it enforceable.  Apart from the  fact that   both   the  courts  on  the  evidence   and   on   an interpretation of the mortgage deed, held that the  mortgage transaction  was in respect of a fresh loan advanced to  the appellants  under that deed, no plea that the debt  was  not supported  by  consideration or that the earlier  debts  had been  extinguished was either raised before the trial  court or  before  the  appellate  court.   The  learned  advocate, however,  referred  us to prayer in para 9  of  the  written statement  in  which a plea was taken that the suit  is  not maintainable and that "the plaintiff ought to have submitted its claim before the Debts Settlement Board".  This plea  is general in character and does-not indicate that the suit  is liable  to  be dismissed as the mortgage is  unsupported  by consideration.  There was also neither an issue in the trial court  nor has any ground been taken in the Memo  of  Appeal though as many as 75 grounds were urged against the judgment of  the  trial  court.  We  cannot,  therefore,  permit  the appellant  to  raise any contention based  on  the  mortgage being unenforceable for want of consideration for the  first time in this Court. 163 A  perusal  of  the  terms  of  the  mortgage  deed  clearly justifies  the conclusions that the loan of  Rs.  5,00,000/- was  a  fresh debt created by the mortgage deed.   There  is unimpeachable  evidence to show, and this has been  accepted by both the courts, that all the three prior debts were paid from  out of Rs. 5,00,0001- cash credit loan granted to  the appellants  under  the  mortgage deed and the  13  bills  of exchange,  the time for payment of which had not fallen  due and  some of which were executed by parties other  than  the appellants,  were endorsed in favour of the  appellants  and returned  to them as a consequence of the discharge  of  the debts due on the three prior accounts. The  mortgage  deed states that the properties  detailed  in schedule  annexed  thereto  were  being  mortgaged   without possession  as better security for the repayment of the  sum of  Rs.  5,00,000/under  the  deed  together  with  interest accruing in future and  other sums thereby secured.   Clause 1 of the deed states that the mortgagor shall repay the said sum of Rs. 5,00,000  and all other sums secured  thereunder within a period of 5 years from the date, in the manner  and subject  to  the conditions detailed  thereafter;  that  the mortgagors  shall  pay  interest  on the  said  sum  of  Rs. 5,00,0001-  or such other sum that may remain due from  them to  the mortgagees from time to time at the rate of six  per cent  per annum till the whole amount is fully repaid;  that the  mortgagors  shall pay the interest accruing  due  every three months without default, that the principal sum of  not less than Rs. 1,00,000/was to be paid per year by the end of each  year  following;  and that the  payments  towards  the principal shall not be less than Rs. 5,006/- - at a time per

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month  and the balance to make up Rs. 1,00,000/-  per  annum payable  shall  be  paid  before the  expiry  of  each  year following.   There  are  other  terms to  which  it  is  not necessary to refer except the last one by which it is agreed that  "If  the  mortgagors  commit  breach  of  any  of  the conditions  and  covenants and the  mortgage  money  becomes payable  either  by  reason of default or  any  other  cause whatsoever and the mortgagors fail to pay the amount due  on demand,  the mortgagee will be entitled to sue and bring  to sale  the said properties hereby mortgaged and if  the  sale proceeds are not sufficient to satisfy the mortgagee  decree the mortgagors will pay the said balance personally and from their  other properties both movable and  immovable".   From the  terms of this mortgagee it is evident that the debt  of Rs.  5,00,0001-  is  a fresh debt  created  by  and  secured thereunder  with interest that may become due from the  date of the mortgage and that there is, therefore, no question of the  mortgage deed having been executed as a  settlement  of prior debts so as to attract the provisions of sections 1  1 and  25  of  the Act.  In this view,  the  Civil  Court  had jurisdiction and the decree granted by the trial court  and confirmed by the appellate court 164 does  not  suffer from any infirmity.  The  appellants  have asked  for  a direction to allow them to  pay  the  decretal amount by, instalments but we do not think that there is any justification  for  granting this prayer.   The  respondent, however, is prepared to give them time for payment  provided half  the  amount is paid within a certain period  and  the balance  thereof  thereafter  so that  the  entire  decretal amount  is  payable  within a year from  the  date  of  this judgment.   We  accordingly  direct the  appellants  to  pay within  four months from the date of the judgment  half  the decretal  amount with interest due thereon and  the  balance thereof  together  with  further interest  within  8  months thereafter.  If half the decretal amount is not paid  within four  months as directed, the first respondent will be  free to  execute  the entire decree.  With these  directions  the appeal is dismissed with costs. S.C.                                   Appeal dismissed. 165