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PETITIONER: STATE OF PUNJAB

       Vs.

RESPONDENT: OKARA GRAIN BUYERS SYNDICATE LTD.AND ORS.(AND CONNECTED APPE

DATE OF JUDGMENT: 15/11/1963

BENCH: AYYANGAR, N. RAJAGOPALA BENCH: AYYANGAR, N. RAJAGOPALA GAJENDRAGADKAR, P.B. SUBBARAO, K. WANCHOO, K.N. MUDHOLKAR, J.R.

CITATION:  1964 AIR  669            1964 SCR  (5) 387

ACT: Statute,  interpretation  of-State,  if  bound  by  statute- "Person",   if  includes  State-Displaced  persons’   (Debts Adjustment) Act, 1951, scope of.

HEADNOTE: The  thirteen respondents who were displaced creditors  from West  Pakistan filed at various places before the  Tribunals created under the Displaced Persons’(Debts Adjustment)  Act, 1951, petitions (1)  [1963] Supp. 1 S.C.R. 730. 388 under  s.  13 of the Act claiming certain amounts  from  the State of Punjab.  A preliminary objection was raised by  the appellant that these petitions were not maintainable against the  State.  The objections were rejected by  the  Tribunals which  held  that the claims were maintainable.   The  State went in revision to the High Court but those revisions  were also  rejected.   The State came to  this Court  by  Special Leave. The contentions raised before this Court were that what  was claimed  from  the Government was not a  "debt"  within  the meaning of the Act of 1951 and that the State of the  Punjab was not a "  person" against whom an application under s. 13 of  the Act could be made.  It was also contended  that  the State was not bound by the statute. Held:What was claimed from the State was a debt and the applications under s. 13 of the Act against the State of the Punjab were maintainable. The test for determining whether the Government is bound  by a statute is whether it is expressly named in the  provision which  it is contended binds it, or whether it  is  manifest from  the terms of the statute that it was the intention  of the legislature that it shall be bound and the intention  to bind would be clearly made out if the beneficient purpose of the statute would be wholly frustrated unless the Government were bound. Section  32 of the Act provides that the debts owing by  the State  to  a displaced debtor ought to  be  ascertained  for

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determining  the  paying capacity of the debtor  and  relief afforded  to  the displaced debtor on the  basis  that  such debts  due to him are realisable assets within the scope  of the Act.  It follows that the debt due by the Government  or by  the  State is within the Act  by  necessary  implication because the same is necessary for working out the relief  to which a displaced debtor who files an application under s. 5 or  s.  11(2)  is  entitled.   Section  32  contemplates   a balancing  of credits and debits with a view to adjust  them in a manner consonant with equity and justice of the case as felt by the legislature.  The entire scheme will go awry and the balance and harmony which are intended to be brought  in would  be nullified and disharmony brought into the  working of the Act if the contention of the appellant that the State is not bound by the Act is accepted. The rule of interpretation of statutes that the State is not bound by a statute unless it is so provided in express terms or by necessary implication is good law in India. As it cannot be said of the State that it either voluntarily resides or carries on business or personally works for gain, the  State  may  not  be within  the  contemplation  of  the expression " person" against whom claims could be made under s. 13 on that basis.  However, it is not correct to say that the  State  is not a constitutional or  even  jurisdiction-, entity   for   the   reason  it   does   not   partake   the characteristics of or satisfy in whole the definition 389 of  a  corporation.   The State is  an  organised  political institution  which  has  several  of  the  attributes  of  a corporation.   Under  Art.  300  of  the  Constitution,  the Government  of the Union and the Government of a  State  are enabled to sue and be sued in the name of Union of India and the  Government of the State as the case may be.  It is  not improper   to   speak  of  the  Union  and  the   State   as constitutional  entities which have attributes  de-fined  by the  Constitution.  So in order to carry out the  beneficent purpose of the statute it must be held to be a person  under s. 13. A comparison of the Displaced Persons (Institution of Suits) Act,  1948  with  that  of  the  Displaced  Persons   (Debts Adjustment)   Act,  1951  shows  that  the  later  Act   has definitely  a more extended scope and is designed to  secure substantive  advantages  to  displaced  persons  which  were wholly  foreign to the Act of 1948 which had a very  limited scope. Roberts  v. Ahern, 1 C.L.R. 406, Director of  Rationing  and Distribution v. The Corporation of Calcutta, [1961] 1 S.C.R. 158, M/s.  Nagi Brothers v. The Dominion of India, I.L.R.  4 Punjab  358, Province of Bombay v. Municipal Corporation  of the City of Bombay, (1946) L.R. 73 T.A. 271, State of  Bihar v. Rani Sonabati Kumari, [1961] 1 S.C.R. 728, State of  West Bengal v. Union of India, [1964] 1 S.C.R. 371 and Advani  v. Union of India, I.L.R. 1955 Bom. 970, referred to.

JUDGMENT: CIVIL APPEALS Nos. 439 To 451 OF 1961. Appeals  by special leave from the judgment and order  dated August 1, 1958, of the Punjab High Court in Civil  Revisions Nos. 229 to 241 of 1953. S.M. Sikri, Advocate-General for the State of’ Punjab,  N.S. Bindra and P.N. Sachthey, for the appellants. S.K.  Kapur, K.K. Jain for B.P. Maheshwari,  for  respondent No. 1(A) (in C.A. No. 439/61.)

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Sardar   Singh,  for  respondents  Nos.  2(A),  3(A)   4(A), 5,6,7,8(A),9,10,11,12, and 13(A). Daulat Ram Prem and R.N. Sachthey, for respondent No. 13 (B) (Union of India). November 15, 1963.  The Judgment of the Court was  delivered by AYYANGAR  J.--Section  13 of the  Displaced  Persons  (Debts Adjustment)  Act, 1951 (Central Act LXX of 1951) which  will be referred to hereafter as the Act, enacts: 390 13.Claims  by displaced creditors against persons who  are not  displaced debtors.  At any time within one  year  after the  date  on which this Act comes into force in  any  local area, any displaced creditor claiming a debt from any  other person   who  is  not  a  displaced  person  may   make   an application,  in  such  form as may be  prescribed,  to  the Tribunal within the local limits of whose jurisdiction he or the  respondent or, if there are more respondents than  one, any  of such respondents, actually and voluntarily  resides, or carries on business or personal works for gain,  together with  a  statement  of  the debt  owing  to  him  with  full particulars thereof " The respondents in each of these 13 appeals, which have been consolidated  for hearing are "displaced creditors" and  the point  arising  for decision in them is whether  they  could make  a  claim  under this provision against  the  State  of Punjab.   A petition claiming such relief was filed  by  the respondent   in  Civil  Appeal  439  of  1961   before   the Subordinate  Judge,  Amritsar who was the  Tribunal  created under  the Act for the purpose of receiving claims under  s. 13  and, similarly, the contesting respondents in the  other 12  appeals 440-451 of 1961 made similar claims  before  the Subordinate  Judge,  Hissar.  Immediately  the  claims  were filed  and  notices  issued  to  the  State  of  Punjab,   a preliminary   objection  to  the  maintainability   of   the applications  was  raised by the State and the  Tribunal  at Amritsar  passed  an  order on May  7,  1953  rejecting  the preliminary   objection  and  holding  that  on   a   proper construction  of s.13 the claim was maintainable before  it. Similar  objections were also raised before the  Subordinate Judge,  Hissar  who,  by  orders passed  on  May  25,  1953, similarly  over-ruled  the preliminary objections  and  held that  the  claims were maintainable before him.   The  State thereafter  filed revisions in all the 13 cases to the  High Court of Punjab.  These petitions came in the first instance before a learned Single Judge who directed that they  should be placed 391 before   a  Division  Bench  and  the  two  learned   Judges constituting  the Division Bench after referring briefly  to the  arguments  urged on behalf of the State in  support  of their  contention that the State was not a ’person’  against whom  a  claim  could  be made under  s.  13  of’  the  Act, expressed  their  opinion  that the matter  deserved  to  be decided  by  a  larger Bench and the  cases  were  thereupon placed  before  the Chief Justice for  constituting  a  Full Bench for deciding the point of law which was formulated  in these terms: "Whether an application under s.13 of the Displaced  Persons (Debts Adjustment) Act, 1951 is not maintainable against the State of Punjab". A  Full  Bench of three Judges accordingly  heard  arguments upon the point raised and held by a unanimous judgment  that the  applications  were maintainable and in doing  so  over- ruled two earlier decisions which had taken a contrary view.

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The  revision  petitions were thereafter  posted  for  final hearing before the learned Chief Justice who had  originally heard  them as a Single Judge and who, giving effect to  the views  expressed  by the Full Bench,  dismissed  them.   The State of Punjab thereafter applied to this Court for special leave and this being granted, the appeals are now before us. As would be seen from the foregoing, the only question  that arises for consideration is whether under s. 13 of the Act a "displaced   creditor"  could  make  a  claim  against   the Government  either of the State or of the Union, subject  to the limitation of one year referred to in the opening  words of the provision.  It is not in dispute that each one of the contesting respondents is "a displaced person" nor is it the contention that the State is a displaced person.  These  two matters being put aside,, the submission of the appellant in brief  is  two  fold:  (1)  that  what  is  claimed  in  the applications filed against the State is not "a debt"  within the  definition  of  the term in the  Act  to  be  presently referred  to  and (2) that even if it be held that  the  sum claimed  is  a "debt" the same is not being claimed  from  a person of whom it could 392 be  said that he or it "actually and voluntarily resides  or carries  on  business or personally works  for  gain.   Both these  arguments  stem from a single postulate and  that  is that the State is not within the scope of the enactment, not being named expressly or by necessary implication, and hence is not bound in respect of the liabilities, if any which the respondents  might have against it by the provisions of  the Act, and therefore is not subject to the jurisdiction of the tribunals created by the Act.  It is the further  contention that  far from the intention of the enactment being to  bind the  State, the language that it employs and the  provisions that it enacts, both from the point of view of the  positive provisions  as  well  as the  omissions,  tend  strongly  to establish  that  the  State  was  outside  the  Act.   These submissions were supported by an elaborate and able argument which  covered a very wide ground of constitutional law  and general juries prudence which we shall notice and deal with, in  their  proper place.  It would be seen from  this  brief statement  of  the points involved that  nothing  very  much turns on the facts of the case.  We would, however, set  out the  facts in one of the appeals, Civil Appeal 439 of  1961, merely  as  illustrative of the type of claims  involved  in these  appeals.  We should, however, hasten to add  that  in regard   to  most  of’  these  applications  made   by   the respondents  to  the Tribunal there is a dispute  about  the facts  themselves and about the genuineness and the  quantum of  the  claim which have not yet been  investigated,  since only the preliminary objection to the maintainability of the applications  has  been decided and not the  merits  of  the claims or the defence. In  Civil  Appeal  439 of 1961 the facts as  stated  in  the application  were  briefly as follows: The  respondents  are M,/s.    Okara  Grain  Buyers  Syndicate  Ltd.   They   were originally  carrying  on  business  in  Okara  in   District Montgomery  of  the undivided Punjab now in  Pakistan.   The Government  of  the  then undivided  Punjab  instructed  the respondents to supply 210 bags of imported maize to M/s Anil 393 Starch  Products  Ltd.,  Ahmedabad  in  August  1947.    The respondents  accordingly carried out these instructions  and dispatched  the  goods by train.  Delivery of the  same  was taken  by  M/s  Anil  Starch  Products.  Subsequent  to  the partition  of India the respondents transferred their  place

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of business from Okara to Amritsar and the Company was  duly registered  with the Registrar of Companies in the State  of Punjab.   In July 1948 after the respondents moved  over  to Amritsar, they submitted to the State Government their  bill for  the  value of the maize supplied, being a  sum  of  Rs. 3059/9/-.  The respondents were then informed that the  Anil Starch  Products  had made payment of the said  sum  of  Rs. 3059/9/-  to  the Director-General of Food  Supplies.   East Punjab in or about October-November, 1948.  This was brought to the notice of the Government of the State of Punjab which was  required to make the payment to the respondents but  as no  payment was made, they made an application  against  the Government  under s. 13 of the Act to the Subordinate  Judge who was constituted as the Tribunal under the Act.  In  this they claimed payment of Rs. 3059/9/- together with  interest at  6%  from  the 15th August, 1947 till  the  date  of  the application.   We might mention that it was not  in  dispute that under the relevant constitutional instruments to  which we  shall refer later, if the claim were true, it  would  be enforceable by suit against the appellant-State. As  stated  earlier, nothing turns in these appeals  on  the merits of the claim or about the defence to it on the merits by the State, but we are only concerned with the preliminary objection  to the maintainability of the  application  based upon  the provisions of the Act on the ground that  what  is claimed  from  the Government of the State is not  a  "debt" within  the  Act  and  that the State of  Punjab  is  not  a "person" against whom an application under s. 13 of the Act could be made. As a step leading to the consideration of these  submissions it would be necessary to advert to and 394 read  certain  of  the provisions of the Act  which  have  a bearing  on the matter in controversy.  Section  2  contains the definitions of the terms used in the Act and it enacts: "2.  Definitions.-In this Act, unless the context  otherwise requires.-- (6)’debt’  means any pecuniary liability, whether  payable presently  or  in future, or under a decree or  order  of  a civil or revenue court or otherwise, or whether  ascertained or to be ascertained, which- (c)is  due  to a displaced person from  any  other  person (whether an- displaced person or not) ordinarily residing in the territories to which this Act extends; but does not include any pecuniary liability due under a decree passed after  the 15th  day  of  August, 1947, by any court  situate  in  West Pakistan  or  any  pecuniary liability the  proof  of  which depends merely on an oral agreement;" to  quote  only  what  is material  for  these  appeals.   A definition of the expression "displaced person" used in  cl. (c) above is to be found in sub s. (10) which reads: "2. (10) ’displaced person’ means any person who, on account of the setting up of the Dominions of India and Pakistan, or on  account  of  civil  disturbances or  the  fear  of  such disturbances in any area now forming part of West  Pakistan, has,  after  the  1st  day of March,  1947,  left,  or  been displaced from, his place of residence in such area and  who has  been subsequently residing in India, and  includes  any person  who  is resident in any place now  forming  part  of India and who for that reason is unable or has been rendered unable 395 to  manage  supervise  or  control  any  immovable  property

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belonging  to him in West Pakistan, but does not  include  a banking company," Special  provisions have been made in the Act in  regard  to claims  due  to displaced banking companies and  the  phrase ’displaced bank’ is, by sub-S. (7), stated to mean: "2.  (7)  ’Displaced bank’ means a  banking  company  which, before the 15th day of August, 1947, carried on the business of  banking,  whether wholly or partially, in any  area  now forming  part  of  West Pakistan and is  declared  to  be  a displaced bank within the meaning of this Act by the Central Government by notification in the Official Gazette;" Sub-section  (8)  contains  the  definition  of   ’displaced creditor’ which it states means: "(8).  ’Displaced creditor’ means a displaced person to whom a  debt  is due from any other person, whether  a  displaced person or not;" while sub-s. (9) defines ’displaced  debtor’ and it runs: "  (9).   ’Displaced debtor’ means a displaced  person  from whom a debt is due or is being claimed;" Sub-section (12) defines ’Tribunal’ and it runs: "(12).   ’Tribunal’  means any civil court  specified  under section 4 as having authority to exercise jurisdiction under this Act;" There are, however, some substantive provisions which have a bearing  on the proper construction of S. 13, but  we  &hall defer reference to them at this stage. On  the  terms  of S. 13 of the Act  set  out  earlier,  the matters in controversy may be stated thus: Starting from the premise,  as  to  which  there  is  no  contest,  that   the respondent  is  "a displaced person", the  questions  to  be considered are: (1) Is he a displaced creditor?  This would, having  regard  to  the definition of  the  term  ’displaced creditor’ in S. 2(8), depend upon (2) whether the claim made by him is a "debt" which ’Would be the second point for con- 396 sideration viz., is the sum claimed as due from the State  a "debt"  within  the meaning of s. 2(6) (c)  and  lastly  (3) Would the State be ’any other person’ within s. 13? Now, what is invoked by the learned Advocate General is  the well-known  rule  of construction which in  the  phraseology which  is  apt to the constitutional set up in the  U.K.  is expressed in the proposition that "the Crown is not bound by a statute unless it appears that it is brought within it  by express  words or by necessary intendment." We shall in  due course consider the scope of this rule of construction which has  been  held  by  this Court  to  be  applicable  to  the interpretation of Indian statutes both are as well as  post- Constitution, but at this stage it is sufficient to  mention three  matters  in relation to it.  The first  is  that  the expression  "  Crown"  or  "King" in  the  rule  has  to  be understood  as referring to the Executive Government of  the State in the context of our Constitution.  If authority were needed  for what we consider so obvious a proposition it  is to be found in the judgment of Griffith, C.J. in Roberts  v. Ahern().  The next is that it is common ground that there is no  express  mention of the State or the Government  of  the State in the Act now under consideration.  Lastly, the  rule is  merely  one  of construction  which  raises  an  initial presumption in its favour, not any hard and fast rule. it is a  rule  intended to give effect to the  intentions  of  the legislature  and  consequently  if there is  either  in  the purpose of the Act or in its provisions a manifestation of a clear  intention to the contrary. the  presumption would  be rebutted and the State’ would be bound.  There being, in the cases  before  us, no contention that there is any  lack  of

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legislative  power for the Union Parliament to bring in  the debts due to or owing by the Government of the State and the Union within the ambit of the enactment, the whole  question is  whether by the provisions it has enacted Parliament  has manifested  a  clear intention to include these  debts  also within the scheme of the Act. (1)  1 C.L.R. 406 at p. 418. 397 As   preliminary  to  the  detailed  consideration  of   the provisions of the Act, it would be useful to appreciate  the historical  background  of this legislation which  seeks  to confer  certain  substantive  and  adjectival  benefits   on persons, who owing to the situation created by the partition of  the country in 1947 were forced to migrate from what  is now West Pakistan into the present State of Punjab. Prior to partition, under s. 176 of the Government of  India Act,  1935 the Provincial Government of the Punjab could  be sued by the name of the Province in regard to claims arising against the State on contracts entered into by it.  When the partition of India was effected and the State of the  Punjab was  divided  between  Pakistan  and  the  rest  of   India, provision had necessarily to be made in regard to the claims which  persons had against the former province of  undivided Punjab.   This  was  effected  by  the  Indian  Independence (Rights,  Property & Liabilities) Order, 1947 which  in  its 8th  paragraph  dealt  with contracts entered  into  by  the Governor-General before the 15th August, 1947 (the appointed day)  as  well as by the undivided province of  the  Punjab. Paragraph 8(3) ran: "8.  (3) Any contract made on behalf of the Province of  the Punjab before the appointed day shall, as from that day,- (a)if  the contract is for purposes which as from  that  day are exclusively purposes of the Province of East Punjab,  be deemed to have been made on behalf of that Province  instead of the Province of the Punjab; and (b)in  any other case be deemed to have been made on  behalf of  the Province of West Punjab instead of the  Province  of the Punjab; and  all  rights and liabilities which have accrued  or  may accrue under any such contract shall, to the extent to which they  would have been rights or liabilities of the  Province of the Punjab, be rights 398 or  liabilities  of  the  Province of  East  Punjab  or  the Province of West Punjab, as the case may be" it was not disputed that in regard to the claims which  were the  subject  of  the applications from  which  the  appeals before  us arise, if tenable on the merits, would be  claims which  could be properly made against the State  of  Punjab. Reading this provision in con.junction with Art. 300 of  the Constitution  the  result  would  be  that  if  a  suit  for enforcing  the claim were filed against the appellant  State apart from any contention on the merits or based on any plea of  limitation, there could be no defence to the suit,  save that  under procedural law of India as enacted in the  Civil Procedure Code, as understood by a long course of  decisions interpreting the provisions of the Code, the suit would have to  be  filed in the Court having  territorial  jurisdiction over the area where the cause of action ?or the suit  arose. Very soon after partition the Indian legislature enacted the Displaced Persons (Institution of Suits) Act, 1948 which re- ceived  the assent of the Governor-General- on September  4, 1948.  It was a temporary enactment which was to be in force for three years and it replaced an earlier ordinance of  the same  name--Ordinance  XVIII of  1948  containing  identical

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provisions.   Its  principal object was to provide  for  and validate  certain suits which had been instituted in  India, though   the  cause  of  action  therefore  had  arisen   in territories  which  became Pakistan and  for  extending  the period  of  limitation  for  the  institution  of  suits  by displaced  persons  .  Section  4  of  the  enactment  which constituted its core ran: "4. Notwithstanding anything contained in section 20 of  the Code  of Civil Procedure, 1908 (V of 1908) or in  any  other law  relating  to the local limits of  the  jurisdiction  of Courts  or  in any agreement to the  contrary,  a  displaced person  may  institute a suit in a Court  within  the  local limits  of whose jurisdiction he or the defendant or any  of the defendants, where there are more than one at the time of the commence- 399 ment  of  the  suit, actually and  voluntarily  resides,  or carries on business, or personally works for gain, if- (i)  the  defendant, or where there are more than one,  each of  the  defendants,  actually and  voluntarily  resides  or carries on business,’ or personally works for gain in  India and is not a displaced person; (ii)the  cause of action, wholly or in part, arises or  has arisen  in  a place now situate within  the  territories  of Pakistan; (iii)the  Court  in  which the suit  is  instituted  is otherwise competent to try it; and (iv)the suit does not relate to immovable property." At the time when this enactment lapsed on the expiry of  the period of 3 years which was its life, came the Act which was a comprehensive piece of legislation designed to redress not merely the procedural difficulties to obviate which was  the main object of the temporary Act of 1948, but the  enactment of  substantive  provisions to alleviate  the  hardships  of those  who after suffering, in most cases, grievous loss  of property in Pakistan were forced to migrate to the Punjab. Pausing here, we might mention, and there was no dispute  as to  this,  that  so far as  private  individuals  i.e.,  all parties  other  than the Government of the Union or  of  the State,  were  concerned,  the enactments of  1948  and  1951 effected the necessary alterations in the procedural law  as to  the  forum to which displaced persons  could  resort  in which  proceedings  should  be instituted  to  overcome  the difficulties consequent on the entire cause of action having arisen  in Pakistan.  The contention of the  appellant-State before  us was that as regards causes of action against  the State, the matter was left where it was. The judgment of the Full Bench of the High Court  negativing this  contention is an elaborate one, but its reasoning  may be  summarised  as  resting  on  the  following  postulates: unless there was 400 an explicit exemption of the State from the operation of any particular  statute, the State was bound by its  provisions, (2) that the object of the Displaced Persons (Institution of Suits.)  Act of 1948 and the present Act was  to  supplement the  Independence (Liabilities) Order, 1947 and  to  furnish the adjectival relief to the substantive rights conferred by it  against  the  State, (3) that  unless  the  construction contended  for by the respondent was accepted, most  persons who had claims against the State of the type contemplated by para (3) of the Independence (Liabilities) Order, 1947 would be remedyless-a circumstance which would be repugnant to the basic  idea  underlying  the  Indian  Independence  (Rights, Property   &  Liabilities)  Order,  (1947).    The   learned

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Advocate-General  contested the correctness of each  one  of these and submitted to us an elaborate argument which may be summarised thus: (1)This   Court   has,  in  Director  of   Rationing   and Distribution  v.  The  Corporation of  Calcutta  &  Ors.,(1) accepted as correct the rule of construction adopted in  the U.K.  that the State is not bound by a statute unless it  is so  provided in express terms or by  necessary  implication. Applying  this principle of interpretation to the  terms  of the  Act, far from the State being expressly named as  being bound,  there  are indications arising from the  nature  and description  of the persons brought within the scope of  the enactment   which   clearly  exclude  the  State   and   the obligations of the State from its purview. (2)The Act was preceded by the Displaced Persons Suits Act 1948  which employed substantially the same  phraseology  as the  Act now under consideration.  The scope of the  earlier Act,  viz., the liability of the Government was the  subject of adjudication before the High Court of Punjab in M/s  Nagi Bros.  v. The Dominion of India(2), where it had  been  held that the provisions of its s. 4 was held not to permit suits against the Dominion of India for the reason that the  State was  not a "person" within its terms.  The  re-enactment  of the law, on the expiry of the Act (1) [1961] 1.S.C.R. 158. (2) I.L.R. 4 Punjab 358. 401 of  1948, adopting substantially the same phraseology in  s. 13  and  other relevant sections to  indicate  the  "person" against  whom  the  claim  could be  made  was  therefore  a legislative  confirmation  of  that  ruling  and  a   strong indication that Parliament intended the same result. (3)  Lastly,  the  hardship which might be caused  in  cases where claimants might be left without remedy in case   the construction  for which he contended was accepted,  must  in the nature of things be in a few marginal cases at the most, and  even if they were more widespread, would not by  itself be   a  factor  which  could  weigh  either  to  rebut   the presumptive rule that statutes do not bind the State, or the other  argument  arising from  legislative  confirmation  of previous judicial construction, particularly when  according to  him no ambiguity existed in the construction of the  Act or the language employed in its various relevant provisions. We  shall  now proceed to deal with the submissions  in  the order in which we have set them out.  The learned  Advocate- General is right when he says that this Court in Director of Rationing and Distribution v. The  Corporation  of  Calcutta and Ors.(1) has     accepted the continued applicability  of the  principle of construction of statutes laid down by  the Privy Council in Province of Bombay v. Municipal Corporation of  the  City  of  Bombay.(2) In the  case  of  Director  of Rationing"), s. 386(1) of the Calcutta Municipal Act forbade any  "person" to use or permit to be used any  premises  for the purposes named otherwise than or in conformity with  the terms  of  the  licence granted  by  the  corporation.   The question  that was considered by this Court was whether  the Director  of Rationing representing the Food  Department  of the Government of West Bengal was subject to this provision. The  High Court of Calcutta had held that in the absence  of any provision in the enactment exempting the Government from the  operation  of s. 386 the Government of West  Bengal  as well (1)  [1961] 1 S.C.R. 158      (2) [1946] L.R. 73 I.A. 271. 1/SCI/64-26 402

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as  the Director of Rationing were also bound.  It was  from this  decision that the appeal was preferred to this  Court. This Court allowed the appeal and held that the decision  of the  Privy  Council  in  Province  of  Bombay  v.  Municipal Corporation of the City of  Bombay(.) laid down the  correct rule of interpretation of statutes and that the coming  into force  of  the Constitution did not make any  difference  as regards   the  applicability  of  that  rule.   Sinha   C.J. observed:                "The  rule  of  interpretation  of   statutes               adopted in England  and applied by  the  Privy               Council to an  Indian statute in  Province  of               Bombay v.  Municipal  Corporation of the  City               of  Bombay (1946) L.R. 73 I. A. 271) that  the               State  is not bound by a statute unless it  is               so  provided in express terms or by  necessary               implication, is still good law." The next question to be considered is the scope of this rule of construction.  In this connection learned counsel for the respondent drew our attention to the following paragraph:               "It is well-established that the common law of               England  is  that the  King’s  prerogative  is               illustrated by the rule that the Sovereign  is               not necessarily bound by a statutory law which               binds  the subject.  This is further  enforced               by  the rule that the King is not bound  by  a               statute unless he is expressly named or unless               he is bound by necessary implication or unless               the  statute,  being for the public  good,  it               would  be absurd to exclude the King from  it.               Blackstone’s  Commentaries, (Vol. 1,  261-262)               accurately  summed  up the legal  position  as               follows:-               "The  King is not bound by any act of  Parlia-               ment.  unless he be named therein  by  special               and particular words.  The most general  words               that  can be devised...... affect not  him  in               the  least,  If they may tend to  restrain  or               diminish                (1)  [1946] L.R               403               any of his rights or interests.  For it  would               be  of  most mischievous  consequence  to  the               public, if the strength of the executive power               were  liable to be curtailed without  its  own               express    consent   by   constructions    and               implication of the subject.  Yet, when an  act               of  Parliament  is  expressly  made  for   the               preservation   of   public  rights   and   the               suppression  of  public wrongs, and  does  not               interfere  with the established rights of  the               crown,  it is said to be binding as well  upon               the  king as upon the subject; and,  likewise,               the   king  may  take  the  benefit   of   any               particular  act,  though he be  not  specially               named".  (Quoted  at p. 355 of  Holdsworth,  A               History of English Law, Vol.X) (italics ours). Based  on this passage, particularly the  words  italicised, his  submission was that the Act now for  interpretation  is one  enacted for the public good and that  consequently  the presumption would be that the executive government was bound by  it.   We  consider that the  passage  extracted  is  not capable  of  that construction.  It has to be  read  not  in vacuo  and  divorced from the rest of the  judgment  but  in conjunction  with  the  express  approval  of  the  rule  of

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construction  as explained by the Privy Council in  Province of Bombay V. Municipal Corporation of the City of  Bombay(-) Lord  du Parcq dealt with the submission regarding  statutes "enacted  for the public good" being exceptions to the  rule in these terms:               "It was contended on behalf of the respondents               that  whenever a statute is enacted  ’for  the               public  good’ the Crown, though not  expressly               named,  must  be  held  to  be  bound  by  its               provisions  and that, as the Act  in  question               was manifestly in. tended to secure the public               welfare,   it  must  bind  the  Crown.    This               contention, which did not meet with success in               the High Court, was again raised before  their               Lordships.    The   proposition   which    the               respondents   thus  sought  to   maintain   is               supported  by  early authority, and is  to  be               found  in Bacon’s Abridgment and  other  text-               books               (1)   [1946] L.R. 73 I.A, 271               404               but in their Lordships’ opinion it cannot  now               be  regarded  as sound except  in  a  strictly               limited   sense.   Every  statute   might   be               supposed to be ’for the public good’, at least               in intention, and even when, as in the present               case,  it is apparent that one object  of  the               legislature  is  to promote  the  welfare  and               convenience  of  a large body  of  the  King’s               subjects by giving extensive powers to a local               authority,  it  cannot be  said,  consistently               with  the  decided cases, that  the  Crown  is               necessarily bound by the enactment." We consider that the principle here explained should also be deemed  to have been approved of and accepted by this  Court in  the Director of Rationing case") In another  passage  in the  same  judgment Lord du Parcq explained  the  scope  and ambit  of  the  rule which have in terms  relevance  to  the question arising in these appeals.  The learned Lord said:               "The  general principle to be applied in  con-               sidering whether or not the Crown is bound  by               general  words in a statute is not  in  doubt.               The  maxim of the law in early times was  that               no  statute bound the Crown unless  the  Crown               was expressly named therein..............  But               the  rule so laid down is subject to at  least               one exception.  The Crown may be bound, as has               often  been said, ’by necessary  implication’.               If,  that is to say, it is manifest  from  the               very  terms  of the statute, that it  was  the               intention  of the legislature that  the  Crown               should  be bound, then the result is the  same               as if the Crown had been expressly named.   It               must  then  be  inferred that  the  Crown,  by               assenting  to the law, agreed to be  bound  by               its provisions".               He added a little later:               "In  the present case the High Court  disposed               of  the submission by a finding that,  on  the               material  before them, it was not shown to  be               for  the public good that the Crown should  be               bound by the Municipal Act.  This is, perhaps,               not a wholly satisfactory way of dealing  with               the                (1)  [1961] 1 S.C.R. 158.

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             405               respondents’  contention, which was, not  that               the court must consider whether it is for  the               public good that the Crown should be bound  by               a particular Act, but that wherever an Act  is               ’for the public good’ it must be taken to bind               the Crown.  Their Lordships prefer to say that               the  apparent  purpose of the statute  is  one               element,  and may be an important element,  to               be  considered when an intention to  bind  the               Crown is alleged.  If it can be affirmed that,               at  the time when the statute was  passed  and               received  the royal sanction, it was  apparent               from  its  terms that its  beneficent  purpose               must  be  wholly frustrated unless  the  Crown               were  bound, then it may be inferred that  the               Crown has agreed to be bound" In the view we take of the construction of the provisions of the  Act  before  us,  in the light  of  the  principles  of construction formulated by Lord du Parcq, we do not consider it  necessary  to  examine whether  there  are  any  further limitations,  qualifications  or exceptions to the  rule  as applied  to  Indian statutes as have been  accepted  in  the United  Kingdom  which have been set out  and  expounded  at pages 438-443 of the sixth edition of Craies on Statute Law. We shall therefore proceed to examine the provisions of  the Act on the footing that the test for determining whether the Government is bound by a statute is whether it is  expressly named  in the provision which it is contended binds  it,  or whether it "is manifest that from the terms of the  statute, that  it was the intention of the legislature that it  shall be  bound", and that the intention to bind would be  clearly made  out if the beneficent purpose of the statute would  be wholly  frustrated  unless the Government  were  bound.   We might here point out that a question such as has now  arisen has  been  before  this  Court  on  at  least  two   earlier occasions.  In the State of Bihar v. Rani Sonabati Kumari(1) the question raised was whether Government was bound by  the provisions of O. XXXIX. r. 2(3) of the Civil Procedure  Code where the expression (1)  [1961) 1 S.C.R. 728. 406 used to designate the party subject to be proceeded  against was  "person".  This Court held that in the context  of  the other  provisions of the Order and the other  relevant  law, the word "person" was intended to include in its connotation the  state  where it was a party against whom any  order  of injunction  had been passed.  A similar question also  arose in The State of West Bengal v. The Union of India"’ filed in this  Court against the Union of India and  others.   Sinha, C.J. speaking for the majority observed:               "The rule that the State is not bound,  unless               it   is   expressy  named  or   by   necessary               implication   in   the  statute  is   one   of               interpretation.    In  considering  the   true               meaning  of  words or expression used  by  the               Legislature the Court must have regard to  the               aim,  object  and scope of the statute  to  be               read  in its entirety.  The Court must  ascer-               tain  the  intention  of  the  Legislature  by               directing  its  attention not  merely  to  the               clauses  to  be construed but  to  the  entire               statute;  it must compare the clause with  the               other  parts  of the law, and the  setting  in               which the clause to be interpreted occurs."

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We shall therefore proceed to consider the terms of the  Act in  the light of these principles and see whether debts  due to displaced persons by the Government are within its scope, by reason either of the words used or by reason of the  same being  necessitated by the policy, purpose or provisions  of the Act. As  regards  the  phraseology used  in  the  enactment,  the submission  of  the  learned  Advocate-General  was  simple. Assuming  that  on  the  merits  the  claims  made  by   the contesting   respondents   in  the  several   appeals   were enforceable  against the State of Punjab he  submitted  that the earlier legislation referred to by the learned Judges of the  Full Bench could not and did not materially  assist  in the  construction  of  the Act.  Under s. 8  of  the  Indian Independence (1)  [1964] 1 S.C.R. 371. 407 (Rights,  Property & Liabilities) Order, 1947, the right  of the respondents would, reading it along with Art. 300 of the Constitution, be merely a right to institute a suit and that could  be no justification for holding that the  respondents were  conferred rights to file applications under s.  13  of the  Act unless its terms were satisfied.  In order  that  a claim   may  fall  within  s.  13  it  should  satisfy   the requirements  of the section relating to the nature  of  the claim:  (1)  it must be to a displaced  creditor  (that,  of course,  was satisfied in the sense that he was a  displaced person  to whom amounts were due; (2) such a person must  be claiming  "a debt" i.e., a debt falling within s.  2(6)  (c) i.e.,  a debt due from "a person" "ordinarily  residing"  in the  territories  to  which the Act extends,  and  (3)  such person  should  be  one who is  not  a  "displaced  person." "Person"  is not defined in the Act, but in the  absence  of any express provision therefor or by reason of any necessary implication  arising  from the provisions of  the  Act,  the State  or  the  Government  of the  State  would  not  be  a ’person’.    This  was  particularly  so  in  view  of   the description of the "person" referred to or described in  the relevant provisions viz., of whom it could be said that he " actually or voluntarily resided" or "carried on business  or personally worked for gain".  It is only "a person" who  had these  attributes or to whom these characteristics could  be attributed  that was intended to be brought within the  term ’person’  and as it could not be said of the State  that  it either  "voluntarily  resided" or "carried on  business"  or "personally worked for gain" such a body was not within  the contemplation of the expression ’person’ against whom claims could  be  made  under  the section.   In  support  of  this submission, based on the connotation of the term ’person’ as used  in this Act, we were referred to the decision  of  the Bombay  High Court pronounced by Chagla, C.J. in  which  the identical   question  now  debated  before  us   viz.,   the construction  of s. 13 of the Act was considered and it  was held  that no application under that section could  be  made against the Union Government.  The learned Advocate-General 408 naturally relied very strongly on this judgment as correctly interpreting  s. 13 and his complaint was that  the  learned Judges  of  the  Full Bench of the Punjab  High  Court  when dealing  with  this question in the  proceedings  which  had given  rise to these appeals, were in error in  refusing  to follow the decision of the Bombay High Court. The decision of the Bombay High Court is reported in  Advani v. Union of India(1).  An application under s. 13 of the Act had  been  filed before the Judge of the  City  Civil  Court

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Bombay-the appropriate tribunal under the Act-making a claim against the Union of India.  The learned Judge who heard the application  took the view that the Union of India  was  not bound  by Act LXX of 1951 and that s. 13 would not enable  a displaced person to make an application against the Union of India.   The  matter was brought up in appeal  to  the  High Court  and  the learned Judges dismissed  the  appeal.   The reasoning adopted for their conclusion was exactly identical with the submissions made to us on the construction of s. 13 we  have summarised a little while before which laid  stress on   the   definition  of  "debt"  in   s.   2(6)(c)   being inappropriate to a debt owed by a State having regard to the description  of  the  person by whom it  was  payable.   The question  whether  the  Union of India would  be  "a  person ordinarily  residing in the territory of India to which  the Act extends" was, in this context, examined in great detail, on  the  assumption  that the Union of  India  might  be  "a person’  i.e., an artificial or a juristic  "person"  within the  Act.   Chagla, C.J. then referred to a long  catena  of cases  in  which  it  had been held that  it  could  not  be predicated that the Government resided in any place or  that it carried on any business in any particular place.  It was, therefore, held that the claim made was not a debt under  s. 2(6)(c) and therefore the application was not  maintainable. We  see  force in the submission of  the  learned  Advocate- General  and if the matter bad to be decided solely  on  the basis of the expressions used to define the word "debt" (1)  I L.R. 1955 Bom. 970. 409 and the description of the "person" against whom proceedings could  be  taken  under  s.  13  of  the  Act,  there  would undoubtedly  be grave difficulties in the way  of  accepting the   view  that  "person"  was  intended  to  include   the Government of the Union or of the State. But  the  matter  does  not  stop  here,  and  the  question depending,  as it is, on "the intention of the  legislature" cannot be answered without an examination of the  provisions and  purposes of the Act for ascertaining as Lord  du  Parcq said,  "whether  its  beneficent  purpose  would  be  wholly frustrated  unless the Crown were bound".  It was  the  same enquiry that was envisaged by this Court when it said in the West Bengal suit(1)               "The Court must ascertain the intention of the               legislature  by  directing its  attention  not               merely  to the clauses to be construed but  to               the entire statute; it must compare the clause               with  the  other  parts of the  law,  and  the               setting in which the clause to be  interpreted               occurs." Before,  however, we do so, it is necessary to advert to  an argument  addressed  to  us  by  the  respondent  that   the expression "person" used in the Act must be held to  include the  State,  inasmuch  as not  merely  natural  persons  but artificial   and  juristic  entities  like   companies   and corporations as well as unincorporated bodies are  expressly brought within the Act.  In this connection strong  reliance was placed on the definition of ’displaced person’ according to  which  only  ’banking  companies’  were  excluded   thus indicating   that  other  companies  were  within  it.    If companies  other than banking-companies, besides  firms  and associations  of persons were included in the word  ’person’ it was submitted for the respondent, there was no anomaly or impropriety  in including the State also as an entity  which could  be comprehended by the word ’person’.  It  was  urged that  if  the  reason  for  excluding  the  State  from  the

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connotation  of the expression "person" was that no  "actual or (1)  [1964] 1 S.C.R. 371. 410 voluntary  residence"  could be attributed to it,  the  same would  equally  apply  to companies, as well  as  firms  and associations of persons in regard to whom no doubt was  cast on  their  being included within the scope of the  Act.   In this connection it was point%-,-’ out that it was only in  a very  notional or artificial sense that residence  could  be attributed    to   artificial   persons   like   firms    or unincorporated   associations   or  to   corporations,   the submission  being  that if these bodies  could  be  included there  was no reason why the concept of  notional  residence could not be extended to a juristic entity like a State. The  learned Advocate-General submitted to us  an  elaborate and  erudite  argument  as  to  whether  the  State  was   a corporation in any sense, the conclusion which he desired us to  draw being that though the State was a body politic,  it had  not  the  characteristics of a  corporation.   In  this connection  he  referred  us to various  writers  on  Public International  Law and on Political Science and  to  certain decisions of the American Courts.  We do not, however,  feel called upon to examine these submissions and pronounce  upon their correctness in view of the conclusion we have  reached on  a construction of the provisions of the Act.  We  would, however, make two observations: (1) that the mere fact  that certain  artificial entities like corporations  are  brought within  the scope of the Act, would not by itself rebut  the presumptive rule of construction that the State is not bound by a statute unless it is brought within its scope expressly or by necessary implication, (2) it would not be correct  to say that the State is not a constitutional or even  juristic entity  for  the  reason  that  it  does  not  partake   the characteristics of or satisfy in whole, the definition of  a corporation.    The   State  is   an   organised   political institution  which  has  several  of  the  attributes  of  a corporation.   Under  Art.  300  of  the  Constitution,  the Government  of the Union and the Government of a  State  are enabled to sue and be sued in the name of Union of India and of  the  Government of the State, as the case  may  be.   It would not, therefore, be improper to speak of the 411 Union  and the State as constitutional entities  which  have attributes defined by the Constitution. From the above it follows that the respondent does not  gain any  advantage  for  the decision of the  matter  now  under debate  by  being able to establish that the  State  or  the Government  of  a State is an entity nor  the  appellant  by demonstrating that the State is not a juristic person of the same type as a corporation.  We do not therefore propose  to deal any further with this point. We shall now proceed to detail the substantive provisions of the  enactment  which bear upon the question now  at  issue. That  it  was a beneficent piece of legislation  enacted  to afford  relief to persons who had suffered  displacement  by reason  of  the partition is not in dispute.   The  hardship which  such  persons  suffered either  as  creditors  or  as debtors was the subject of alleviation by the Act.  In broad outline  without going into minute details the substance  of the  remedial  provisions  was this:  As  regards  displaced creditors the relief afforded to them was by permitting them an inexpensive procedure for enforcing their claims together with prescribing the forum which made substantial departures from  the  principles  which underlay s.  20  of  the  Civil

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Procedure Code which obviously could not wholly fit into the problems  created  by  partition.  The  relief  afforded  to displaced  debtors  was naturally more  extensive.   Besides certain special provisions in respect of secured debts there were  elaborate  provisions for scaling down  debts  due  to unsecured creditors, the principle underlying being that the debtor  should  be  left  with enough  to  live,  while  the creditors should between themselves take the entirety of the property save that which was left to the debtor.  There  was a  sort  of  distribution of the  assets  among  the  proved creditors.   The benefits provided for the displaced  debtor and to the displaced creditor were an integrated scheme; the one running into the other. Chapter 11 in which s. 13 occurs is headed ’Debt  Adjustment Proceedings’.  It opens with 412 s.5  which deals with applications by displaced debtors  for the adjustment of their debts.  That section runs, to  quote only the material words:               "A  displaced debtor may make  an  application               for  the  adjustment  of  his  debts,  to  the               Tribunal  within  the local  limits  of  whose               jurisdiction   he  actually  and   voluntarily               resides, or carries on business or  personally               works for gain." Sub-section (2) specifies what the application shall contain and among the matters to be included in the application are: (1) a schedule containing full particulars of all his debts, whether  owed  jointly or individually, with the  names  and addresses    of    his    creditors    and    his     joint- debtors..................   (2)  a  schedule  of   all   his properties, both movable and immovable, including claims due to  him.  The purpose of these schedules would  be  apparent from s. 32 which deals with the manner in which the debts of a  displaced  debtor are to be scaled down and to  which  we shall  draw attention later.  Sections 6 to 9 lay  down  the procedure regarding applications made under s. 5, the object of the procedure being the ascertainment of the total of the debts  owing by a displaced debtor and the total  amount  of his assets, the relief which the Act grants on the basis  of this  ascertainment  being  the  subject  matter  of   later provisions.   Sections 10 to 14 deal with the converse  case of  claims  by displaced creditors first  against  displaced debtors  and  next  against debtors who  are  not  displaced debtors.   In their case also the procedure is  directed  to the ascertainment of the genuineness and the quantum of  the claims  in  the  presence of the  interested  parties.   The interrelation  between  these  two  sets  of  provisions  is perhaps brought out by s. 11 which enacts:               "Procedure on creditor’s petition.-               (1)   Where  an application under  section  10               has been made, the Tribunal shall cause notice               thereof  to be served on the displaced  debtor               calling upon him either to show cause, if any,               against   the  application  or  to   make   an               application on his own behalf under section 5.               413               (2)   If,  in response to a notice under  sub-               section  1  ),,the displaced debtor  makes  an               application in accordance with the  provisions               of  section  5,  the  Tribunal  shall  proceed               further  in the matter as if it had  commenced               with  an application by the  displaced  debtor               under section 5, and all the other  provisions               of  this Act shall apply accordingly; but,  if

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             the  displaced debtor does not choose to  make               any  such  application,  the  Tribunal  shall,               after  considering such evidence, if  any,  as               may be produced before it, determine the claim               and pass such decree in relation thereto as it               thinks fit.               (3)   The  period of limitation  specified  in               subsection  (1) of section 5 in respect of  an               application  by a displaced debtor  shall  not               apply to an application made under sub-section               (2)." It  was  features of this type that we had in mind  when  we said  that the provisions regarding the relief to  displaced debtors  and  displaced creditors had to  be  read  together since  the Act dealt with them as one  integrated  whole-the one running into and determining the other. Some  of  the  reliefs to  which  displaced  debtors  making applications  under ss. 5 and 11 (2) would be  entitled  are dealt  with  in  ss. 15, 16 and 17 but to these  it  is  not necessary to refer as they are not material for the purposes of  the  point arising for decision.  What is,  however,  of more  immediate relevance are the provisions in Ch.  III  in which  s. 32 occurs which is headed ]Reliefs’.   Section  29 which is the first of the sections in this Chapter and those following it set out the reliefs which shall be available to displaced debtors.  They include s. 29-Cesser of accrual  of interest,  s. 30--Exemption from arrest or imprisonment  for the  recovery of any debt, and s. 31 --- an  enlargement  of the  scope  s.  60 of the Civil Procedure  Code  as  regards property which shall not be liable to attachment in the case of  "  displaced  debtors.  Next, we come to  s.  32.   This section runs: 414 "32.   Scaling down of debts.-(1) Where, on the  application of a displaced debtor under section 5 or sub-section (2)  of section  11, the Tribunal has determined the amount  due  in respect  of each debt in accordance with the  provisions  of this Act, it shall proceed to determine the paying  capacity of the debtor. (2)  If  the  paying capacity of the debtor is equal  to  or exceeds  the  aggregate sum of all the debts  so  determined (exclusive of any debt in respect of which the creditor  has elected  to  retain  the security  in  accordance  with  the provisions of section 16), the Tribunal shall pass a  decree for  the aggregate sum so determined, specifying the  amount due  to each creditor and shall allow repayment  thereof  in instalments, in accordance with the provisions contained  in section  33,  unless for reasons to be recorded  it  directs otherwise. (3)  If  the paying capacity of the debtor is less than  the aggregate  sum referred to in sub-section (2), the  Tribunal shall  divide the decree into two parts and provide  in  the first  part  thereof (hereinafter referred to as  the  first part  of the decree) that the sum equivalent to  the  paying capacity  shall,  subject  to the  provisions  contained  in section  33,  be realised from the assets of the  debtor  in India,  and provide in the second part thereof  (hereinafter referred  to  as  the second part of the  decree)  that  the balance  shall  be  realised,  subject  to  the   provisions contained in subsection (6), from any compensation which the debtor may receive: Provided  that  if  no such compensation  is  received,  the balance shall be irrecoverable. (4)  A creditor who has elected to retain his security under section  16 shall have no right to realise any money due  to

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him  from the assets of the debtor in India, but nothing  in this sub-section shall affect any of the rights given to him by section 16. 415 (5)  A  creditor shall have the right at any time  at  least six months before the receipt by the debtor of  compensation to apply that the whole or the balance of the first part  of the  decree, in so far as any debt due to him is  concerned, may be added to the second part of the decree, and thereupon he shall have no right to realise any money from the  assets of the debtor in India. (6)  For  the purposes of this Act, the amount payable  from the compensation for the satisfaction of the second part  of the  decree shall be that amount as bears to  the  aggregate amount  of  all the debts in the second part of  the  decree (including therein. any sum added to it under sub-section  ( 5 ) and the sum determined in favour of the secured creditor in the manner specified in the proviso to clause (a) of sub- section (3) of section 16) as the compensation in respect of the  property  of  the  debtor  payable  to  him  under  the Displaced Persons (Claims) Act, 1950 (XLIV of 1950) bears to the verified claim; and the balance of the compensation,  if any, shall be refunded to the displaced debtor. (7)  Every  instalment  paid  by  the  displaced  debtor  in respect of the first part of the decree and any sum  payable from  the  compensation in accordance with  sub-section  (6) shall be distributed rateably amongst the decree-holders, if more persons than one are entitled thereto: Provided that the secured creditor who has not elected to be treated  as an unsecured creditor under section 16 shall  be entitled  to a prior charge on the amount payable  from  the compensation. (8)  Where  a displaced person receives compensation by  way of exchange of property, then, subject to the prior  charge, if  any, of a creditor under section 16, the  aggregate  sum payable in respect of the second part of the decree shall be a  second  charge  upon  the property  received  by  way  of exchange bears to the value of the original property 416 verified  and  valued under the Displaced  Persons  (Claims) Act, 1950 (XLIV of 1950). (9)  Where a displaced person makes a default in the payment of any instalment fixed in respect of the first part of  the decree  or does not pay the amount determined in  accordance with subsection (4) of section 16 or sub-section (8) of this section  for which the first or the second charge  may  have been  created upon the property received by way of  exchange the  creditor may apply for the execution of the  decree  by the  attachment  and sale of the attachable  assets  of  the judgment-debtor  or by the sale of the property obtained  by way  of exchange upon which the charge has been created,  as the  case may be, and the amount realised by such  execution shall be distributed rateably among the decree-holders: Provided  that  nothing contained in this  subsection  shall affect the rights of any charge-holders. (10) For the purposes of this Act, where the compensation is paid  in  cash,  the amount which  shall  be  available  for purposes of satisfaction of the debts in the second part  of the decree shall in no case exceed seventy-five per cent  of the  amount of such compensation; and where it is by way  of exchange property, the extent of the property which shall be available  for  the said purposes shall in  no  case  exceed seventy-five per cent in value of such property. Explanation.--In   this  section  the   expression   ’paying capacity’ means the aggregate of the market value of all the

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attachable assets in India of the displaced debtor plus  the income  which is likely to accrue to him for the next  three years  succeeding,  excluding from the computation  of  such income a sum calculated at the rate of two hundred and fifty rupees a month." It  is manifest that the basic idea of s. 32 is as  follows: When  a displaced debtor has made an application under s.  5 or s. 11(2) the Tribunal first 417 ascertains  under ss. 5 to 9 the amount of the debt  due  in respect  of each creditor.  Next, it proceeds  to  determine "the  paying capacity" of the debtor and the relief open  to the  displaced  debtor, or expressed in an  other  way,  the reduction  in the debt which his creditors must  suffer,  is directly dependent on the paying capacity compared with  the total indebtedness of the displaced debtor. Now, the question arises how this "paying capacity" is to be determined.  The expression "paying capacity" is defined  by the Explanation to the section as meaning "the aggregate  of the  market value of all the attachable assets in  India  of the  displaced  debtor plus the income which  is  likely  to accrue to him for the next three years succeeding, excluding from the computation of such income a sum calculated at  the rate  of  two hundred and fifty rupees a month".   It  needs little argument to show that a debt which has accrued due to a  displaced  debtor from the State would be  an  attachable asset in India and if this were so, it is the requirement of s.  32(1)  that the Tribunal shall take  into  account  that asset  also  for determining "the paying  capacity"  of  the "debtor".  So far as the Explanation to s. 32 is  concerned, it   could  not  be  the  contention  that  the   expression "attachable  assets  in  India belonging  to  the  displaced debtor"  should  be exclusive of the amounts  in  regard  to which  the State is indebted to the displaced  debtor.   The expression  "attachable assets" would bring in s. 60 of  the Civil Procedure Code, and whatever be the limitations on the execution  of decrees against Government under s. 82 of  the Civil Procedure Code, debts due by the State to a  judgment- debtor are certainly attachable.  The contrary  construction of the words in s. 32 viz., that debts due by the State  are not  assets"  besides being inconsistent  with  the  express terms  of  the  Explanation, would also  render  the  entire scheme  of scaling down provided for in sub-ss. (2) to  (10) infructuous  and  unworkable.  The conclusion that  for  the purpose  of  s.  32 a debt due by the State  is  within  the Explanation  and  that it has to be taken into  account  for deter- 1 SCI/64-27  418 mining the paying capacity would appear to be reinforced  by s. 47 which runs in these terms:               "47.   Effect  of  failure  on  the  part   of               displaced debtor to disclose certain matters.-               Where a  displaced debtor has not mentioned in               the  relevant schedule to his application  any               debt owing by him or any property, movable  or               immovable,  belonging  to  him,  whether  such               property is liable to attachment or not liable               to  attachment  at all, nothing  contained  in               this Act shall prevent-               (a)   in  the case of the debt,  the  creditor               from   instituting  any  proceeding  for   the               recovery  thereof under any law for  the  time               being in force other than this Act; and              (b)    in the case of the property, from  being

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             attached or     otherwise dealt with under any               such law." It  is  manifest  that the ’Property’  referred  to  in  the schedule  prescribed  under s. 5(2)  (iii),  the  expression "attachable  assets"  in the Explanation to s. 32,  and  the words "property movable or immovable" in s. 47 must all bear the  same connotation.  If a debt due to a displaced  debtor is  not  within  s.  5 it could  not  be  within  the  other provisions  just now referred to.  If that were  the  proper construction, the result would be that the displaced  debtor could obtain the entire benefit provided for by s. 32(2) and (3)  etc. and later if he realised any dues from  the  State keep  the  same  to himself free of the claims  of  all  his creditors.  It is obvious that such a result could not  have been  intended and, therefore, it must be held that  such  a debt  as  an  asset  must be included  in  the  schedule  of properties  referred to in s. 5 and that so far as s. 32  is concerned the debts owing by the State to a displaced debtor ought to be ascertained for determining the paying  capacity of the debtor and relief afforded to the displaced debtor on the  basis that such debts due to him are realisable  assets within the scope of the Act.  It would follow that the  debt due  by the Government or by the State is within the Act  by necessary implication, because the 419 same  is  necessary for working out the relief  to  which  a displaced  debtor who files an application under s. 5 or  s. 11(2) is entitled.  We have already made reference to s. 11. Its  first  sub-section  deals  with  an  application  by  a displaced creditor who seeks to enforce his claim against  a displaced  debtor.   The  second  sub-section  permits   the displaced  debtor to make an application under s. 5 and  the two-the claim and what might be called a cross-claim-have to be considered together, and the relief open to the displaced person who might be a debtor or a creditor have to be worked out conjointly. No  doubt,  s.  13 is concerned  with  claims  by  displaced creditors  against debtors who are not displaced persons  as contrasted with s. 10 under which claims may be made against debtors who are displaced persons.  But this cannot make any difference.   It  is  not  possible  by  any  principle   of construction  to  hold that the debt due by the State  to  a displaced  debtor  is  within the Act  for  the  purpose  of ascertaining    the   paying   capacity   of   the    debtor notwithstanding  the definition of "debt" in s. 2(6)(c)  but that  the  State is not within the scope of s.  13  for  the purpose of the same liability being ascertained.  This is so because for the very purpose of determining paying  capacity under  s. 32 the genuineness and the quantum of the  alleged debt  due  by  the  State is  the  subject  of  enquiry  and adjudication  by  the  identical  tribunal  which  would  be conducting  the enquiry and make the decision if  the  claim were  made  under  s. 13.   Adopting,  therefore,  the  very principle for which the learned Advocate-General contends we consider  that  the  test formulated by  Lord  du  Parcq  in Province  of Bombay v. Municipal Corporation of the City  of Bombay"’ :                   "......... Its beneficent purpose must  be               wholly frustrated unless the Crown were bound,               then  it  may be inferred that the  Crown  has               agreed to be bound",  is  satisfied in the case of the provisions of the Act  now before us.  That the Act was passed for the (1)  [1946] L.R. 73 I.A. 271. 420

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beneficent purpose of affording relief to those who owing to the disturbances which followed the partition of the country suffered  grievous  wrong is not in dispute.  What  we  have stated  earlier about the impact of s. 32 on the  scheme  of the  Act  which so far as  relief to  debtors  is  concerned constitutes  the  core  of the  enactment  would  be  wholly frustrated  and defeated if the State were not bound by  the Act is equally beyond dispute. There  is one other aspect also from which the question  may be  viewed.  This is as to whether when a  displaced  debtor owes a debt to the State he is bound to include that debt in the  schedule which he has to file under s.  5(2)(i).   Now, let  us see how if such debts are not to be included, s.  32 would  work.  The paying capacity would then  be  determined without reference to such a debt.  The other creditors  will receive  satisfaction in the manner laid down in s. 32(2)  & (3) etc. but that would obviously be on the footing that the debts of the displaced debtor are less than what they really are.  When once on the determination of the paying  capacity the  others receive adjustments there is no question of  the government  coming  in later to  disturb  that  arrangement. What  is allowed under s. 32 to the displaced debtor  cannot be  the subject of any attachment or seizure  by  government for the payment of debts because s. 3 of the Act enacts:               "3.  Over-riding effect of the Act, rules  and               orders Save as otherwise expressly provided in               this  Act, the provisions of this Act  and  of                             the rules and orders made thereunder s hall have               effect  notwithstanding anything  inconsistent               therewith  contained in any other law for  the               time being in force, or in any decree or order               of  a  court, or in any contract  between  the               parties." Every other law, decree of court having been superseded, the government would be left without remedy to realise its dues. Section  32 contemplates a balancing of credits  and  debits with a view to adjust them in a manner consonant with equity and the justice 421 of  the case as felt by the legislature.  The entire  scheme will go awry and the balance and harmony which are  intended to  be brought in would be nullified and on the  other  hand disharmony  brought  into  the working of  the  Act  if  the contention which the learned Advocate-General supports  were accepted. Before  concluding,  it  is necessary  to  add  that  before holding  that  the presumptive rule of the State  not  being bound by the provisions of any statute has been overborne by necessary  implication  arising from an examination  of  its purpose  and  provisions.we have taken due  account  of  the language  used  in the Act both in s. 13 as well as  in  the definition of ’debt’ and have arrived at the conclusion that that  language is not intractable nor such as to create  any insuperable  obstacle  in the way of  such  a  construction. Undoubtedly  if  s. 13 stood by itself read  in  conjunction with  the definition of ’debt’ in s. 2 (6),  the  submission that a debt due by Government was not within them might have weight.  But there is nothing in s. 13 which would  negative the construction at which we have arrived after  considering the  scheme and purpose of the Act.  Taking first the  terms of  s. 13, the contention that debts due by  the  Government are  not within the scope of the provision, is  in  ultimate analysis  based  on the last portion of  the  section  which speaks of "actual and voluntary residence" and "carrying  on

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business"  not  being  capable of being  attributed  to  the Government.  If, in this context, one looked at s. 20 of the Civil  Procedure  Code it will be found that when  it  dealt with Companies and artificial persons it was not so much the residence  as  the situs where the business was  carried  on that  was  treated  as being relevant  for  determining  the forum, for Explanation II to s. 20 reads:               "A  corporation  shall be deemed to  carry  on               business  at its sole or principal  office  in               India  or, in respect of any cause  of  action               arising  at  any  place where it  has  also  a               subordinate office, at such place",               422 thus  departing  somewhat  from  the  concept  of   notional residence attributed to artificial bodies like trading  cor- porations  in  the law relating  to  income-tax.   Expressed differently  s.  13 proceeds on the basis  of  equating  the notional residence of artificial persons or bodies  with the actual  residence  of natural persons and it  is  thus  that though   actual  residence  could  not  be   attributed   to companies,  it  is  admitted that debts owing  by  them  are within s. 13 of the Act.  It is, therefore, obvious that the reference  to  "actual  residence" in s. 13 is  due  to  the circumstance that primarily natural persons are intended  to be  included by the use of the words "any other person"  and the qualification of residence was necessary to be added  in order  to fix the forum in which applications claiming  sums due  from  them ought to be filed.  From this,  however,  it would not follow that every attribute referred to should  be satisfied  by  "every person" against whom claims  could  be filed.   The  next question is whether there  is  any  thing which is clearly discernible in s. 2(6) which could be  held to negative the construction of a State being brought within the  scope of the enactment.  Confining oneself to  what  is strictly material "Debt" is defined as a pecuniary liability due  to  a  "displaced  person"  from  "any  other   person" ordinarily  residing  in  the territory  to  which  the  Act extends.   It  was because of the circumstance that  such  a condition  of  residence would not be apt in the case  of  a State  or Government as regards which no residence could  be attributed,  that it was said that the debt due by  a  State was not within the definition.  That is, no doubt, a weighty argument  and  if  it  stood  alone  its  effect  could   be overwhelming, but as against it, it must be noticed that  it is  really a part of the definition which has to be  applied in  the absence of anything to the contrary in  the  context and  if on a consideration of s. 13 and the  other  relevant provisions to which we have referred it was the intention of the  enactment not to exclude the State from its  operation, the  definition  clause  could not per se  negative  such  a construction.   The definition would, in the context of  the other pro- 423 visions, be read as applying the test of "residence" or  "of carrying  on business" exclusively to natural or  artificial persons to whom such conditions would be apt. The  second point urged by the learned Advocate-General  was about  the  legislative confirmation of the meaning  of  the word  "person"  as  excluding the State.   We  have  already referred  to  the Displaced Persons (Institution  of  Suits) Act, 1948 and the circumstances in which it was enacted  and the  terms of its s. 4. It is the interpretation which  this section  received  in  M/s Nagi Bros.  v.  The  Dominion  of India(’-) a decision of the High Court of Punjab that  forms the  basis  of  the contention now  under  discussion.   The

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question that arose for decision was whether the terms of s. 4  could be availed of by a displaced person to file a  suit against  the  Union of India, the contention of  the  latter being  that  it  could be sued only in  a  court  which  had territorial  jurisdiction over the area where the  cause  of action arose and that since it could not be said to actually and  voluntarily reside or carry on business  or  personally work  for  gain  in  any place in India,  it  could  not  be comprehended  within  the  term  "person"  in  s.  4.   This contention was accepted by the Punjab High Court.  Under the general  procedural law of India, as embodied in  the  Civil Procedure  Code,  a  suit  in respect  of  a  transitory  or personal cause of action could be filed only (a) in a  court within  the territorial jurisdiction of which the  cause  of action in whole or in part arose, or (b) in the  territorial jurisdiction  of  the  court where a defendant,  or  if  the defendants  were more than one by one of  them,  voluntarily and  ordinarily resided or carried on his business (vide  s. 20  of the Civil Procedure Code).  A long line of  decisions starting  from  very early days had construed s. 20  of  the Civil Procedure Code and had held that the Government either of  the State or at the Centre--could not be said to  reside ordinarily  and voluntarily at any particular place, nor  to carry on business at any place, with the result that where a suit  had  to  be filed against  the  Government  which  was permitted and authorised (1)  I.L.R. 4 Punjab 358. 424 by the provisions of the Constitutional enactments to  which we  have  referred, the suit could be instituted only  in  a court with territorial jurisdiction over the place where the cause of action for the suit arose.  Kapur, J. who  rendered the  decision held, following  these earlier rulings on  the construction of the Civil Procedure Code, particularly s. 20 and other like enactments, that the provisions of s. 4 which enabled suits to be filed in India notwithstanding that  the cause of action arose in Pakistan could not be availed of by displaced  persons to file suits against  the  Government-of the State or of the Union. The net result of this construction was that in cases  where no  part of the action arose within India, no suit could  be instituted  against  the  State  or  the  Union   Government notwithstanding  that  by  the  combined  operation  of  the Independence  (Liabilities) Order, 1947 read with either  s. 176  of  the  Government of India Act, or Art.  300  of  the Constitution,  as the case may be, a liability was  cast  on the  Government  of the State and the Union to make  good  a claim.   This  result  might be unfortunate but  if  it  was designed, there was no escape from that conclusion. The  argument of the learned Advocate-General was that  when this enactment of 1948 lapsed by efflux of time in 1951, its place  was  taken  by  the Act and that  as  the  same  word "person"  with the qualifying expressions indicating his  or its residence or place of business were repeated in the  Act without any specific provision for claims against the State, Parliament  must  be taken to have affirmed  this  decision, adopting its reasoning and that consequently, in any  event, the general rule of interpretation about the State not being bound by an enactment in which it is not named expressly  or by   necessary   implication  was   doubly   attracted   and reinforced. We  are  clearly  of the view that this  argument  does  not deserve  to  be  accepted.   In the  first  place,  we,  are concerned solely with the interpretation of the Act of  1951 and unless there was an. ambiguity it would be impermissible

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to refer to any previous 425 legislation for construing the words in it.  The examination we  have  made  of  the Act read  in  conjunction  with  the purposes  it  seeks  to achieve which are  manifest  in  its various   provisions  have  led  us  unmistakably   to   the conclusion   which  we  have  expressed  earlier.   In   the circumstances, there is no scope for invoking this  external aid to the construction of the expressions used in the  Act. Secondly,  the scope of the two enactments viz., the Act  of 1948  and that of 1951 are widely different, and the  latter has  a  definitely more extended scope and  is  designed  to secure  substantive  advantages to displaced  persons  which were wholly foreign to the earlier law which was but of very limited  scope.  Therefore even if the language used in  the two  enactments were identical -which is not even  the  case here-the same conclusion would not necessarily follow having regard  to  the  differing  scopes  of  the  two  pieces  of legislation.   It could not therefore be said that  the  two Acts  are in pari materia so as to attract the  rule  relied on.  Lastly, the rule of construction which is certainly not one  of  a compelling nature, is generally  adopted  in  the construction  of consolidating enactments  where  provisions which have appeared in earlier repealed statutes which  have received an uniform and accepted judicial interpretation are re-enacted.   Obviously that is not the case here.   In  the circumstances, we consider it unnecessary to examine whether this  solitary decision on the construction of s. 4  of  the Act of 1948, was correct.  We have, therefore, no hesitation in rejecting the second point urged. The  last  submission was that the learned judges  were  not right  in considering that unless the construction of s.  13 which  they accepted was correct, almost the entire body  of displaced creditors would be without a remedy in respect  of their  claims  against the Government of the State  and  the Union.   Though  the  learned  Advocate-General  started  by saying that in every case in which there could be a cause of action  against  the State Government under para  8  of  the Indian Independence (Liabilities) Order, 1947, a suit would 426 lie after partition, even on the basis of s. 20 of the Civil Procedure Code, he had to concede that in a number of  cases the  party  would  be without a  remedy.   Apart  from  this admission,  we consider that in a large number of cases  the cause  of  action  would have arisen  in  Lahore  where  the contract  with the Government of the Province of Punjab  was concluded  and it is possible that no part of the  cause  of action  might arise in India so as to permit a suit  against the  Government  of  the  Punjab or  of  the  Union  if  the provisions  of  the  Civil Procedure  determined  the  forum therefor.   In  our  judgment nothing  turns  on  the  exact proportion  of the cases where the party would be without  a remedy.   If the terms of the enactment were  ambiguous  and had  to  be  interpreted in the light  of  the  circumstance whether  the  one  construction or  the  other  would  leave parties without a remedy, then in that event something might depend  on  whether  it was only a marginal  case  that  was beyond  the provisions of the Act or the bulk of the  cases. That, however, is not the position here.  We have arrived at the  construction  of  the provisions of  the  Act,  without reference  to  the hardship which the  opposite  view  might cause  to  particular displaced creditors.  It is  for  this reason that we say that the question of the relative  number of  creditors  who  would suffer hardship  is  not  strictly material  for the decision.  We have, therefore, thought  it

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unnecessary  to examine the precise circumstances  in  which displaced  creditors might or might not be in a position  to institute  suits  against the State  Government  to  enforce claims  which  fell  within  para  8  of  the   Independence (Liabilities) Order, 1947. In  these circumstances, we consider, though  for  different reasons that the conclusion of the High Court was right  and that the revision petitions were properly rejected. The appeals therefore fail and are dismissed with costs,-one bearing fee. Appeals dismissed. 427