10 September 1970
Supreme Court


Case number: Appeal (civil) 1138 of 1966






DATE OF JUDGMENT: 10/09/1970


CITATION:  1971 AIR  449            1971 SCR  (2) 136  1970 SCC  (2) 766  CITATOR INFO :  R          1972 SC1053  (4)

ACT: Hyderabad Jagirdar Settlement Act, 1952, ss. 11 and  25-Suit filed after notified date with respect to post notified date debt-Jurisdiction of Debt Settlement Board.

HEADNOTE: Section  11 of the Hyderabad Jagirdar Settlement Act,  1952, enables a creditor or a Jagirdar (debtor) to move the  Board under  the Act for settlement of debts due by the  Jagirdar. Such application should be made on or before June 30,  1953, the  date  notified  under  the  section  and  if  no   such application was made the debt stood extinguished.  Under  s. 25, if a suit or appeal or execution proceeding was  pending in  relation  to  such  debt  in any  court  it  had  to  be transferred to the Board. The  respondent-bank filed a suit in July 1956  against  the appellants for recovery of Rs. 40,000/- and odd due in  July 1954, on account of a cash and credit account opened by  the appellants  with the respondent.  The suit was decreed.   In December  1959,  the bank filed an  execution  petition  for executing the decree. On  the  question whether the execution petition  should  be transferred  to the Jagirdar Debt Settlement Board under  s. 25(1) of the Act. HELD : There are two conditions for the applicability of  s. 25. (a) The expression ’pending’ in s. 25(1) must relate  to proceedings  which  were pending on the  notified  date  and could  not  take  in  any  proceedings  which  came  to   be instituted  after  such  date; and (b) The  suit  and  other proceedings  must  be in respect of a debt  with  regard  to which  a Jagirdar or the creditor could make an  application to  the  Board on or before the notified date.   Thus,  only those-debts  which were due on or before the  notified  date from  a debtor or in respect of which any  proceedings  were pending  in  any  court or before the  Board  could  be  the subject-matter of the settlement by the Board. [142 E-H] Since both the conditions for the applicability of s. 25  of the  Act  were  not  satisfied  in  the  present  case   the



proceedings were not liable to be transferred. [143 B-C] Babibai thakuji v. Fazludin Usmanbai, I.L.R. [1954] Bom 535, approved. Since  the liability of the principal debtor and the  surety is a joint and several liability, a direction that the  bank should  proceed first against the principal debtor and  only afterwards  for  any balance which could  not  be  realised, against the surety, could not be granted. [144 A-B]

JUDGMENT: CIVIL  APPELLATE  JURISDICTION : Civil Appeals Nos.  113  to 1140 of 1966. 137 Appeals  by  special leave from the  judgments  and  decrees dated  February 8, 1963 of the Andhra Pradesh High Court  in Civil  Revision Petition No. 572 of 1960 and C.C.C.  Appeals Nos. 63 and 66 of 1969. M.C.  Chagla and K. R. Chaudhuri, for the appellants  (in C.As.  Nos. 1138 of 1966) and the respondents (in C.As.  No. 1140 of 1966). B.V. Subramanyam and A. V. Rangam, for the respondent (in C.A. No. 1138 of 1966) respondent No. 1 (in C.A. No. 1 L 139 of 1966) and the appellant (in C.A. No. 1140 of 1966). The Judgment of the Court was delivered by- Grover, J. These appeals arise out of two different  litiga- tions  although  some of the parties are  the  same.   Civil Appeal No. 1138 of 1966 is directed against the judgment  of the  Andhra Pradesh High Court dated February 8, 1963  in  a revision petition.  The other two cross appeals i.e. 1139 of 1966  and  1140  of 1966 arise out  of  the  judgment  dated February  1,  1963 passed by the same High Court in  a  suit which  had been filed by the State Bank of Hyderabad on  the basis  of  a  promissory note dated November  27,  1953  for recovery  of Rs. 70,000.  We shall dispose of  Civil  Appeal No. 1138 of 1966 first.  The Hyderabad State Bank had  filed a suit in July 1956 against the joint family business  known as  Mukund Das Raja Bhagwandas & Sons and the four  sons  of Raja  Bhagwan  Das  who  had  died,  the  sons  having  been impleaded as defendants 2 to 5. There was a sixth  defendant also  Srikishen Sookhdev Malani.  According to the claim  of the Bank defendants 2 to 5 were members of a joint undivided family,  defendant No. 2 being the Head Karta  and  Manager. On  February 2, 1951 defendant No. 2 in his  above  capacity requested  the  Bank to grant what is called a  "clean  cash credit"  limit  of  Rs. 1,00,000 against  the  guarantee  of defendant  No. 6. Defendant No. 2 was allowed to withdraw  a sum of Rs. 99,500 by three cheques from February 8, 1951  to February  12,  1951.   After the confirmation  of  the  cash credit  limit by the Committee of the Board of Directors  of the  Bank on February 22, 1951, defendant No. 2  executed  a promote  in  favour of defendant No. 6  for  the  sanctioned limit of Rs. 1,00,000.  This pronote was endorsed in  favour of  the Bank and thereafter the sum of Rs,99,500  which  had been  withdrawn  pending the sanction of the  Committee  was debited  to  the cash credit account opened in the  name  of defendant  No.  1 and credited to the  personal  account  of defendant No. 2. It was averred that defendant No.  2-Karta, Head and Manager-was drawing monies from time to time in the cash  credit account of defendant No. 1. The  drawing  limit was, L235Sup.CI/71 138 reduced  subsequently to Rs. 50,000.  On September  3,  1952 defendant  No.  2  as  Karta and  Manager  of  joint  family



business of defendant No. 1 executed a fresh pronote for the reduced  limit  of Rs. 50,000 in favour of defendant  No.  6 which was endorsed by him in favour of the Bank.   Defendant No.  6  also  executed  a fresh  letter  of  guarantee.   On December  28, 1953 there was a balance of Rs. 36,201-9-8  in the  cash  credit  account  of  defendant,  No.  1  and   as collateral security for the same defendant No. 2 executed  a fresh pronote in favour of defendant No. 1 the guarantor for Rs.  35,000  which  was  endorsed in  favour  of  the  Bank. Defendant No. 6 further executed a fresh letter of guarantee in  favour of the Bank.  Defendant No. 2 had  confirmed  the amount due under the cash credit account in his letter dated July 7, 1954.  On account of this cash credit account a  sum of  Rs.  40,869-1-10  was  due from defendants  1  to  5  as principal debtors and defendant No. 6 as guarantor  together with  interest.  Defendant No. 2 filed a  written  statement taking up various pleas contesting the claim of the Bank but no  objection was raised on the basis of the  provisions  of the  Hyderabad  Jagirdar  Settlement  Act  1952  which   was published  in  the  Official  Gazette  on  March  18,  1952, hereinafter  ,called  the  "Act".  Defendants  3  to  5  and defendant   No.  6  also  filed  their  written   statements contesting the claim but no plea was ,raised on the basis of the provisions of the Act.  As many as 10 issues were framed by  the learned Fourth Additional Judge, City  Civil  Court, Hyderabad. The  suit was decreed by the trial court personally  against the  2nd  and  the 6th defendant and  against  joint  family assets  of defendants 2 to 5. In view of the fact  that  the 6th defendant did not raise any serious contest to the claim it  was  directed that the plaintiff could  proceed  in  the first instance against the joint family assets of defendants 2 to 5 and person of the second defendant .and if the entire sum  was not realized then it could levy  execution  against the  sixth  defendant.  Future interest was awarded  at  the rate  of 5 1/2 per annum.  No appeal was filed  against  the aforesaid  decree.   In  December 1959  the  Bank  filed  an execution  petition  in the court of the  Fourth  Additional Judge.  On March 10, 1960 the learned judge passed an  order transferring  the  execution petition to the  Jagirdar  Debt Settlement  Board  under  S. 25(1) of  the  Act.   The  Bank challenged  the order of transfer before the High  Court  on the  revisional side.  The learned single judge,  who  heard the  revision petition, referred three questions of law  for consideration  by  a larger bench.  The  questions  referred were as follows:-               "1, Whether on a true construction of s. 25(1)               of  the  Act,  it has  application  to  suits,               appeals  and  applications for  execution  and               proceedings  other than revisional in  respect               of debts not existing on or               139               before  the notified date under section II  of               the Act, pending in any civil or revenue court               involving  the  questions as set out  in  that               section ?               2.    ’Whether   in   execution    proceedings               relating  to decrees obtained in  suits  filed               after  the notified date, the Court  could  go               behind  the  decrees  passed  and  trace   the               history of the transactions which resulted  in               the liability under the decree ?               3.    If the answer to question (1) is in  the               affirmative, whether section 2 5 ( 1 ) of  the               Act  has  to  be  struck  down  as   violating



             Articles  14  and  1,  9  (1  )  (f)  of   the               Constitution ?" The  first  question was answered by the Full Bench  in  the negative.   The second question has also similarly  answered and  it was held that the executing court was not  competent to reopen the case by tracing the history of the transaction which resulted in the liability under the decree.   Question No.  3 was not answered.  In accordance with the opinion  of the  Full Bench and on a further consideration of the  facts the  learned single judge disposed of the revision  petition holding that s. 25(1) of the Act was not applicable and  the order of transfer was liable to be set aside.  The executing court  was directed to proceed and deal with  the  execution application in accordance with law. It is necessary to notice the historical background and  the relevant  provisions  of  the Act in  order  to  decide  the questions  which fall for determination.  By  the  Hyderabad (Abolition  of Jagirs) Regulation passed on August 15,  1949 the  jagirs  were abolished.  The  jagirdars  were  declared entitled  to  a  share in the jagir  net  income  which  was inalienable  except  with  the  previous  sanction  of   the Government.  On January 25, 1950, another Regulation  called the  Hyderabad  Jagir  (Commutation)  Regulation  1359F  was enacted.   It  provided,  inter  alia,  for  the  method  of calculating  the  commutation  in  respect  of  jagirs.   As pointed  out  by  the  High  Court  the  enactment  of   the Regulation affected the jagirdars in a large measure.  Their former  resources  were not available to them to  pay  their debts.   The  creditors  were also faced  with  a  difficult situation  which affected their prospects of recovering  the loans  fully.   It was in this background that the  Act  was passed.  Its provisions were mainly borrowed from the Bombay Agricultural  Debtors Relief Act 1947.  Debt was defined  by s.  2(e)  to  mean any liability in  cash  or  kind  whether secured  or  unsecured due from a jagirdar  whether  payable under  a  decree  or order of a civil  court  or  otherwise. Section 3 provided exceptions in cases of five categories of debts which were not liable to be scaled down.  One of those was the debt due to a scheduled bank. 140 Chapter   It  containing  ss.  4  to  10  dealt   with   the constitution  and powers of the Board for the settlement  of debts.   ’Section  1  1 provided that any  jagirdar  or  his creditor could make an application to the Board on or before such  date as the Government might notify for settlement  of debts  due by a jagirdar.  Under s. 12  notwithstanding  the fact  that no application had been filed under S. 1 1  every creditor  on being required to do so by any of  his  debtors had  to  file a correct statement before the  Board  of  his claims  against such a debtor and similarly every debtor  on being  so  required by any of his creditors had  to  file  a correct statement.  According to s. 15 if any debtor and any or  all of his creditors arrived at a settlement in  respect of any debt due by the debtor to the creditor the debtor  or any of the creditors could make an application and the Board could  proceed to record that settlement in accordance  with the  procedure prescribed by the section.  Under s.  22  all debts  in respect of which no application for adjustment  or settlement was made in accordance with the provisions of the Act  were  to stand extinguished.  Under s. 24 on  the  date fixed for a hearing of an application made under S. 1 1  the Board  was to decide as preliminary issues whether a  person for  the  settlement of whose debt an application  had  been made was a debtor and whether the total amount of debts  due from such person on the date of the application exceeded the



sum of Rs. 5,000.  If the Board found that such a person was not a debtor or that the amount was less than Rs. 5,000  the application  was  to be dismissed. Section 25  provided  for transfer   of  pending  suits,  appeals,  applications   and proceedings to the Board.  This section may be reproduced in extenso :-               S.25 "(1) All suits, appeals, applications for               execution and               proceedings  other than revisional in  respect               of  any debt pending in any civil  or  revenue               court  shall,  if they involve  the  questions               whether the person from whom such debt is  due               is  a debtor and whether the total  amount  of               debts from him on the date of the  application               is  less than Rs. 5,000 be transferred to  the               Board.               (2)   When  an application for  adjustment  of               debts  made to a Board under section 1 1 or  a               statement  submitted to a Board under  section               21 includes a debt in respect of which a suit,               appeal,    application   for   execution    or               proceeding  other than revisional  is  pending               before  a  civil or revenue court,  the  Board               shall give notice thereof to such other court.               On  receipt of such notice, such  other  court               shall transfer the suit, appeal,, appli-               141               cation  or proceeding, as the case may be,  to               the Board.               (3)   When  any suit, appeal,  application  or               proceeding  is transferred to the Board  under               sub-s.  (1)  or sub-s.  (2),  the  Board,shall               proceed as if an application under section  11               had been made to it.               (4)   If the Board, to which any suit, appeal,               application or proceeding is transferred under               sub-s. (1) or  subsection  (2),  decides   the               preliminary issues mentioned in clause (a)  of               sub-section (1) of section 24 in the  negative               or  mentioned in clause (b) of the  said  sub-               section   (1)  in  the  negative,   it   shall               retransfer  the suit, appeal,  application  or               proceeding to the court from which it had been               transferred  to itself after the disposal  and               subject  to the result of the appeal where  an               appeal  is filed, and after the expiry of  the               period  prescribed  for  an  appeal  where  no               appeal is filed.               (5)   When  any suit, appeal,  application  or               proceeding is retransferred to the court under               subsection  (4) the said court  shall  proceed               with the same."               .lm0               141               Section  28  dealt  with the  mode  of  taking               accounts  and s. 35 provided for  the  scaling               down  of  the  debts  payable  by  debtors  in               accordance  with their paying capacity in  the               manner indicated therein.  An award was to  be               made  according to s. 36 and  further  scaling               down  of debts could be done under s. 37.   In               terms  of s. 11 the Government  notified  June               30,  1953  as the last day for  settlement  of               debts due by jagirdars.  The Full Bench of the               High  Court quite rightly observed that s.  11



             was the basic provision enabling the  creditor               or the debtor to move the Board under the  Act               for   settlement  of  debts.   The  Act   also               recognised   other   modes  which   would   be               tantamount   to   the  making   of   such   an               application  to  the  Board so  as  to  confer               jurisdiction   on  it  to  settle   debts   in               accordance  with the procedure  prescribed  by               the  Act.   Section 25 embodied one  of  these               modes.   If  a  suit or  appeal  or  execution               proceeding  etc.  was pending in  relation  to               such   debt  in  any  court  it  had   to   be               transferred  to  the Board.  The  Board  would               proceed   to  deal  with  it  as   though   an               application  under s. 11 had been  made.   The               suit  or other proceedings had to relate to  a               debt in respect of which an application  under               s.  11 could have been made to the Board.   It               was also necessary that               142               the proceedings should be pending in the court               on the date notified.  This Would follow  from               the  provisions of s. 11.  There could  be  no               difficulty about proceedings which were  taken               in  a court subsequent to an application  made               to the Board under s. 11   That proceeding  had               necessarily  to be transferred on  the  notice               given  by  the  Board.  The  point  which  was               canvassed  before the Full Bench of  the  High               Court   was  that  the  expression   "pending"               occurring in s. 25 was of wider amplitude  and               covered  all cases of debts  whether  incurred               before  or  subsequent to the  notified  date.               The High Court, after an exhaustive discussion               of the various provisions of the Act, came  to               the   conclusion   that   there   were   clear               indications  in  them  that the  debts  to  be               determined  and scaled down by the Board  were               only  such debts as were existing on the  date               of the application provided for by s. 11. This               is what was finally observed:               "Thus  the entire scheme of the Act  makes  it               abundantly  clear that matters concerned  with               the  debts  prior to the date  of  application               alone  (which  date of  course  cannot  extend               beyond the notified date under section 11) are               within  the cognisance and competence  of  the               Board.  It follows that only cases relating to               such debts and no other debts are liable to be               transferred to it under s. 25(1)." In  our judgment the High Court came to the correct  conclu- sion  that the expression "pending" in s. 25(1) must  relate to  proceedings which were pending on the notified date  and could  not  take  in  any  proceedings  which  came  to   be instituted  after such date.  The, other condition  for  the applicability   of  s.  25  was  that  the  suit  or   other proceedings  must  be in respect of a debt  with  regard  to which  a jagirdar or the creditor could make an  application to the Board on or before the date which the Government  had notified  for  settlement of debts due by the  jagirdar.   A close   examination  of  s.  22  puts  the   matter   beyond controversy.   If no application had been made under  s.  11 within  the  period  specified therein or  for  recording  a settlement made under s. 15 every debt due by the debtor was to stand extinguished.  In a case of the present kind a debt



would  have  stood extinguished if no application  had  been made  under  s. 11 within the specified  period.   Thus  the material  date would be the one notified by  the  Government under  s.  11   and only those debts which were  due  on  or before  that data from a debtor or in respect of  which  any proceedings  were  pending in a court or  before  the  Board could be, the subject matter of settlement by the Board.  It may  be  mentioned  that in Babibai  Thakurji  v.   Fazludin Usmanbal(1) a similar provision of (1)  I.L.R. [1954] Bom. 535. 143 the  Bombay  Agricultural Debtors’ Relief Act on  which  the provisions   of   the  Act  were  modelled   came   up   for consideration and it was said with reference to s. 19(1)  of that Act that only those suits were liable to be transferred which  were  pending  on the date when  an  application  for adjustment  of debts could have been made under s. 4  (which corresponded  to s. 1 1 of the Act).  In other words,  if  a suit  was  filed after the time to make an  application  for adjustment  of debts had expired such a suit was not  liable to  be  transferred.   Since both  the  conditions  for  the applicability of s. 25 of the Act were not satisfied in  the present case the decision. of the High Court must be  upheld and  the  appeal (C.  A. 1138/66) dismissed.)  In  order  to avoid further proceedings which will entail needless expense learned  counsel  for  the  parties  have  agreed  that  the judgment-debtots will pay the decretal amount in four  equal annual   instalments.   The  first  instalment  which   will represent 1/4th of the decretal amount shall be deposited in the  executing  court on or before the first  January  1971. The  subsequent  instalments each year  shall  be  similarly deposited on or before first January.  In case of failure on the part of the judgment-debtors to make the deposit of  any one  of the istalments in time the entire amount  due  shall become recoverable at once.  As and when the said deposit is made  the  decree-holder will be entitled  to  withdraw  the same.   An  order is directed to be made in  terms  of  this settlement between the parties. Civil Appeals Nos. 1139 & 1140/66 arise out of the decree in C.C.C.A. Nos. 63 & 66 of 1959 dated February 1, 1963 in O.S. No.  37  of 1958, So far as the appeal against the  Bank  is concerned there is no merit in it because it has been proved and  that finding could not be successfully assailed  before us  that the debt in question was a post notification  debt. In  other words it came into existence after June  30,  1953 which  was the date notified by the Government as  the  last date  for  settlement  of  debts  due  by  jagirdars  by  an application  made  under s. 11 of the Act.  In view  of  our decision in the connected appeal (C.A. 1138/66) s. 25(1)  of the  Act  was,  not applicable to the  suit  filed  for  the recovery  of  such a debt.  Civil Appeal No. 1139  of  1966, therefore, has no merit and is hereby dismissed. Civil  Appeal No. 1140 of 1966 which has been  preferred  by the  Bank  involves a very short point.   According  to  the decree of the High Court the plaintiff, namely, the Bank was to  proceed  and  execute  the  decree  against  the  second defendant  in the first instance and was to proceed  against the first defendant only afterwards for such balance  amount which  could not be realized from the second defendant.   It is  not  disputed that the liability of the first  and  the. second defendant was joint and several and the decree of the High Court, proceeded on the basis of some equitable relief 144 which was sought for and granted to the first defendant.  We are  unable  to  hold and no  such  principle  or  statutory



provision has been pointed out to us that any such equitable relief could be granted in a suit of the nature filed by the Bank  against  the two defendants.  We  would,  accordingly, allow  this appeal to the extent of deleting clause  (2)  of the decree and adding in clause (1) the following words: Both  the defendants shall be jointly and  severally  liable for the payment of the decretal amount. In  view of the entire circumstances the parties in all  the appeals are left to bear their own costs in this Court. V.P.S. 145