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PETITIONER: STATE OF GUJARAT

       Vs.

RESPONDENT: VORA SAIYEDBHAI KADARBHAI AND ORS,

DATE OF JUDGMENT02/03/1995

BENCH: VENKATACHALA N. (J) BENCH: VENKATACHALA N. (J) SEN, S.C. (J)

CITATION:  1995 AIR 2208            1995 SCC  (3) 196  JT 1995 (2)   644        1995 SCALE  (2)81

ACT:

HEADNOTE:

JUDGMENT: 1.   Was  the  High Court of Gujarat justified  in  striking down the expression "or an order reducing his debt is  made" used  in sub-section (2) of Section 14 of the Gujarat  Rural Debtors Relief Act, 1976 "the Act" on the ground that it  is ultra  vires Article 19(1)(f) and.  Article19(1)(g)  of  the Constitution by its judgment in Vora saiyedbhai Kadarbhai v. saiyed Intajam Hussen Sedumiya and Ors. [AIR 1981 Guj. 1541, is the only question which arises for our consideration  and decision in these Civil Appeals, by special leave since  the special  leave in them is granted by this Court confined  to that question. 2.   The  striking  down  of the, said  expression  in  sub- section (2) of Section 14 of the Act as unconstitutional  by the  High Court, enables a creditor to retain  the  property pledged or mortgaged with him by the debtor as security  for his debt where such debt is merely scaled down and not fully wiped  off, under the provision of the Act.  But,  the  said expression, if had not been struck down by the High Court, a property pledged or mortgaged with the creditor as  security by  the debtor for his debt, would have stood released  from the  security  and returned by the creditor  to  the  debtor forthwith, notwithstanding the fact that the debt payable by the  debtor to the creditor stood merely scaled down or  re- duced  and did not stand fully discharged or wiped  off,  as becomes obvious from a reading of sub-section (2) of Section 14 of the Act, which runs thus:               "S. 14. (1)............               (2).  Where a certificate of discharge of  any               debt  is  granted  to a  debtor  or  an  order               reducing  his  debt is made under  section  8,               every  property pledged or mortgaged  by  such               debtor as a security of such debt shall  stand               released  in  favour of such  debtor  and  the               creditor  shall with return such  property  to               the debtor."

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                                                  (underlining               is ours) 3.  No doubt, the Act where the above sub-section finds  its place,  was as a whole challenged before the High Court,  as that  which was ultra vires the Constitution.  However,  the High  Court,  as seen from its judgment adverted to  at  the outset,  relying  upon  the judgments  of  the  Constitution Benches  of this Court in Fatehchand Himmatlal v.  State  of Maharashtra   [(1977)  2  S.C.C.  6701,  and  Pathumma   and Ors.v.State  of  Kerala  and Or$. [(1978) 2  scc  1],  where Debtors Relief, Acts similar to the Act had been found to be constitutional, upheld the constitutionality of the Act,  as such, but for its view that the 647 aforesaid expression in sub-section (2) of Section 14 of the Act,  was ultra vires Articles 19(1)(f) and 19(1)(g) of  the Constitution and of striking down the same as stated   earlier. 5.   None of the creditors who had impugned  the  provisions of  the Act as unconstitutional before the High Court,  have come  to  this  Court questioning  the  correctness  of  the judgment  of the High Court, upholding the provisions  as  a whole as constitutional.  The debtors who will not get  back their  properties pledged or mortgaged as security  for  the debts, because of the striking down of the expression "or an order  reducing  his  debt is made"  in  subsection  (2)  of Section  14 of the Act by the High Court, though could  have questioned  the  correctness of such striking down  in  this Court,  it  is obvious that their  financial  inability  has prevented  them from doing so. Be that as it may, the  State has questioned the correctness of the said striking down  by the  High  Court by filing the present appeals  against  the judgment of the High Court and, very rightly. 6.   We heard Shri Anip Sachthey, learned counsel  appearing for  the  appellants and Shri G. Vishwanatha  Iyer,  learned senior counsel, who was requested by us to appear on  behalf of the respondents herein who were unrepresented. 7.   Sub-section  (2)  of section 14 which we  have  already reproduced, as is seen, was intended to release the debtors’ properties  with the creditors as security for  their  debts and  make  the  creditors return  those  properties  to  the debtors whether they are debtors whose debts had stood fully discharged or they are debtors whose debts were scaled down, enabling  them to pay the same in small instalments  spread- over a period of 10 years or more, without interest. 8.  As to who are those debtors whose debts are scaled  down to Rs. 1,400/- or a lesser amount and how such amounts  were payable  by them to the creditors without interest  in  easy instalments, is stated by the High Court, thus               "Section  9 which provides for payment of  the               debt determined by the Debt Settlement Officer               lays  down that a debt found due by  the  Debt               Settlement Officer shall be paid by the debtor               to   the   creditor  in   ten   equal   annual               instalments without any interest.   Therefore,               where  the  debt  of a " small  farmer"  or  a               "rural artisan" is scaled down to Rs. 1,400/-,               it is not going to bear interest for the  next               ten  years.  Secondly, its recovery  has  been               spread  over  a period of ten years.   It  has               been  made payable in very easy  installments.               Added  to it is the provision made by  Section               10.  The liability to pay the scaled down debt               in   ten  annual  instalments  is   also   not               absolute.   Section 10 provides that  whenever               the  State Government suspends or  remits  the

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             payment  of  one-half  or more  of  the  land-               revenue,   the   payment  of  whole   of   the               instalment  due  for that year  and  the  full               amount  of instalment due for each  subsequent               year  under Section 9 shall be  postponed  for               one year.  In other words, if, during a period               of  ten  years,  there  is  a  suspension   or               remission  of  one-half or more of  the  land-               revenue  payable  to  the  State,  the  annual               instalments otherwise payable over a period of               ten years under Section 9 become payable  over               a  period of eleven years.  If the payment  of               one-half  or  more  of  the  land-revenue   is               suspended  or remitted more than  once  during               the  period  of  ten  years  contemplated   by               Section  9, then, as many years are added  for               payment of annual instalments under Section 9.               Section 10 further provides that in case               648               the  State Government suspends or remits  less               than  one-half of the land-revenue during  any               particular  year,  one-half of the  amount  of               instalment  for  that  year  and  full  amount                             during subsequent year under Section 9 shall b e               postponed for a period of one year."               9.    As  seen from the judgment of  the  High               Court, an examination made by it of the scheme               of  debt reduction and payment of the  reduced               debt as above, has made it conclude, thus:               "33.   The  analysis  of the  scheme  of  debt               reduction  and its payment which we have  made               clearly  shows that whilst a large  number  of               debtors  are  wholly  discharged.  others  are               required to pay only a small amount in a  very               easy  manner.  Its payability has been  spread               over  a period of time and may be  interrupted               by  the circumstances contemplated by  Section               10. This scheme, in our opinion, makes  little               difference  between those money-lenders  whose               debts  have  been fully wiped  off  and  those               whose  debts  have been partially  wiped  off.               The   later  class  is  un  Rely  to   recover               substantial amount of capital advanced by them               to their debtors.               10.Again,  an  examination made  by  the  High               Court  of the objects intended to be  achieved               by  the Act, has made it reach its  conclusion               in that regard, thus:               "The  Legislature  wants  to  protect   weaker               sections  of our society against  exploitation               by  non-institutional creditors who behave  in               such  manner as they think fit.  The  impugned               provisions   of  the  Act   have,   therefore,               reasonable nexus with the object of  relieving               weaker  sections  of  our  society  from   the               clutches of non-institutional creditors  which               the impugned Act seeks to achieve."               11.In  the  course of its  judgment  the  High               Court  referring to the debtors including  the               small  farmers  and  rural  artisans  who  are               sought  to  be relieved  of  the  indebtedness               under the Act has concluded, thus:               "The  debtors  under  the  provisions  of  the               impugned  Act comprising four  categories  are

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             constituted  into a class by itself and it  is               that  class which is sought to be relieved  of               its   indebtedness.   They  are   poor   rural               agriculturists  or poor persons living in  the               rural areas of the State." 12.Despite  the  aforesaid conclusions reached by  the  High Court  as regards (1) poverty striken debtors who had to  be relieved  of  their  indebtedness under  the  Act;  (2)  the exploitation  of  such  debtors  by  the   non-institutional creditors;  (3)  relief required for such debtors  from  the clutches  of  such creditors; it has found  that  the  small farmers  and  rural artisans who had to  repay  their  debts scaled  down to an amount not exceeding Rs. 1,400/-  without interest  and  in  easy  instalment as  those  who  are  not entitled  to  obtain release of their  properties  from  the creditors given to them as security and seek return of  them from them unless they discharge their debts, for,  according to  it, a provision which gives such relief to  the  debtors would go against the rights of the creditors conferred under Articles 19(1)(f) and 19(1)(g) of the Constitution, inasmuch as such provision would impose an unreasonable  restriction. What the High Court his stated in this regard to put in  its own words, is the following:               "In  the  first instance, what  a  moneylender               gets, in a case in which there is an order  to               pay him the scaled down debt, is a very  small               amount of his debt and the               649               repayability  of  that small amount  has  been               spread  over  at least a period of  10  years.               Thirdly, sub-section (2) of Section 14 renders               the repayability of such a scaled down  amount               spread  over such a long period of time,  very               uncertain  and insecure.  If  the  Legislature               has thought fit that at least in some cases  a               part  of  the  debt should be  repaid  by  the               debtor  to  his creditor, that part  at  least               must  remain secured until it is  repaid.   To               deprive  a small money-lender of his cover  of               protection  after  telling  him  that  he   is               entitled  to  recover  some  amount  from  his               debtor,  is,  in our  opinion,  no  reasonable               restriction  within  the  meaning  of  Article               19(1)(f)   and   Article   19(1)(g)   of   the               Constitution.   If the security  remains  with               the  money-lender, he cannot do anything  with               it because sub-section (1) of Sec. 14 requires               him not to damage, destroy or tamper with  it.               Therefore,   in  our  opinion,  it  is   more,               reasonable to think that the security given by               a debtor to his creditor should remain  intact               in the hands of his creditor until the  debtor               pays  up  his  scaled  down  debt.   To   hold               otherwise is to render the adjudicated debt of               the  creditor insecure and to expose him,  for               all  intents  and purposes, to the  danger  of               losing  it over a period of time during  which               it has been made repayable in instalments." 13.The aforesaid reasons putforth by the High Court to  hold that a small farmer or a rural artisan who is made liable by the Legislature to pay a scaled down debt up to Rs.  1,400/- without  interest during a period of ten years and more,  if is allowed the return of the property given as security  for his  debt,  would make the creditor lose such  security  for payment  of  such  debt unreasonably  and,  therefore,  such

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restriction  would be no reasonable restriction  within  the meaning  of  Article 19(1)(f) and Article  19(1)(g)  of  the Constitution, is to say the least, would defeat and nullify the very objects of  the Act of relieving poor debtors from their indebtedness and of relieving them from the clutches of the creditors which  the High  Court  itself  had,  as pointed  out  by  us  earlier, regarded   as   a  reasonable  restriction   not   offending Article .19(1)(f) and Article 19(1)(g) of the  Constitution. Moreover,  the reason given by the High Court  for  striking down the expression "or an order reducing his debt is  made" in   sub-section   (2)  of  Section  14  of   the   Act   as unconstitutional, as that necessary to help the creditors to realise  the  scaled  down  debts  of  debtors  from   their properties retained as security, has made us think that  the High  Court  has  not  only overlooked  the  fact  that  the Legislation,  the  constitutional  validity  of  which   was questioned  before it was intended to help the debtors  from the  stranglehold  of  the creditors and  not  to  help  the creditors  in keeping the debtors under their  stranglehold, but also has totally ignored the guidance given to courts by this  Court  in  the approach to be  made  for  meeting  the challenge to constitutionality of such legislation  intended for the benefit of debtors which was very much found in  the observations  in  Fatehchand (supra) and  Pathumma  (supra). Material  observations of this Court in  Fatehchand  (supra) which, according to us, were ignored by the High Court  were these               "The    subject-matter   of    the    impugned               legislation is indebtedness, the beneficiaries               are  petty farmers, manual workers and  allied               categories  steeped in debt and bonded to  the               money-lending  tribe.  So, in passing  on  its               constitutionality,    the    principles     of               Development   Jurisprudence  must  come   into               play.......               A  meaningful,  yet minimal, analysis  of  the               Debt Act, read in the light of the                  650               times  and circumstances which  compelled  its               enactment,  will bring out the humane  setting               of the statute.  The bulk of the beneficiaries               are   rural  indigents  and  the  rest   urban               workers.   These are weaker sections for  whom               constitutional   concern  is   shown   because               institutional  credit  instrumentalities  have               ignored them.  Money-lending may be  ancillary               to  commercial activity and benignant  in  its               effects, but money-lending may also be ghastly               when  it  facilitates  no flow  of  trade,  no               movement   of   commerce,  no   promotion   of               intercourse,  no  servicing of  business,  but               merely  stagnates rural economy,  strangulates               the borrowing community and turns malignant in               its repercussions.  The former may surely  -be               trade but the latter - the law may well say  -               is  not  trade.   In this view,  we  are  more               inclined   to  the  view  that  this   narrow,               deleterious  pattern of money- lending  cannot               be classed as ’trade..........................               14.The other significant observations of  this               Court  in  Fatehchand (supra) which  the  High               Court has ignored, were these:               "A pathetic picture of the money- lender being               deprived of his loan assets while being forced

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             to repay his lender was drawn but that  cannot               affect the reasonableness of the relief to the               grass-roots  borrower.   Nor is  it  valid  to                             ’attack the Act on the score that the who  deb t               i.e.,  the very capital of the  business,  has               been  dissolved.   More often  than  not,  the               moneylender  would have, over  the  long-lived               debts  and  repeated renewals,  realized  more               than  the principal if economic  studies  tell               the  tale  truly.  The injustice of  today  is               often   the  hangover  of  the  injustice   of               yesterday,  as  spelt  out  by  history.   The               business   of  money-lending  has   not   been               prohibited.   The Act is a  temporary  measure               limited to grimy levels of society.   Existing               debts of some classes of indigents alone  have               been  liquidated.   If impossible  burdens  on               huge  human  numbers are  not  lifted,  social               orderliness  will  be  threatened  and  as   a               regulatory measure this limited step has  been               taken by the Legislature.  Regulation, if  the               situation is necessitous, may reach the  limit               of prohibition.  Disorder may break out if the               law  does  not step in to grant  some  relief.               Trade cannot flourish where social orderliness               is  not secure.  If the tensions  and  unrests               and  violence  spawned by the  desperation  of               debtors are not dissolved by State action,  no               money  lending trade can survive.  It  follows               that  for  the  very  survival  of  Trade  the               regulatory  measure of relief of  indebtedness               is  required.   What form this  relief  should               take  is  ordinarily for  the  legislature  to               decide.  It is not ordinarily for the Court to               play  the  role  of Economic  Adviser  to  the               Administration.   Here  amelioratory  measures               have been laid down by the Legislature so that               the  socio-economic  scene  may  become   more               contended, just and orderly.  Obviously,  this               is regulatory in the interest of Trade itself.               This  policy decision of the House  cannot  be               struck  down  as perverse by the  Court.   The               restrictions   under   the   Debt   Act    are               reasonable.  Equally clearly, if the steps  of               liquidation   of current debts and  moratorium               are  regulatory,  Article  301  does  not  hit               them." 15.  Pathumma (supra) is a seven-Judge Bench judgment     of this Court.  There, while     upholding                  the constitutionality of the Kerala Agriculturists (Debt Relief) Act, 1970, which was similar to the Act under consideration, it  was  observed  that  the  Courts  cannot  look  at   the restrictions  imposed  under a beneficial  legislation  only from  the point of view of the citizen who is affected,  for that  cannot be a correct or safe approach inasmuch  as  the restriction  is  bound  to be irksome  and  painful  to  the citizen  even  though  it may be for the  public  good,  and hence,  a  just balance must be struck in  relation  to  the restriction and 651 the  public  good that is done to the people at  large.   In that  context,  reliance  was placed by this  Court  on  the observations  made  by this Court in Jyoti  Pershad  v.  The Administrator for the Union Territory of Delhi [(1962) 2 SCR

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125], which were of materiality and as follows:               "Where  the Legislature fulfills  its  purpose               and  enacts  laws,  which  in  its  wisdom  is               considered necessary for the solution of  what               after all is a very human problem the tests of               ’reasonableness’  have  to be  viewed  in  the               context   of  the  issues  which   faced   the               Legislature.  In the construction of such laws               and particularly in judging of their  validity               the  Courts  have necessarily to  approach  it               from  the  point  of view  of  furthering  the               social interest which it is the purpose of the               legislation  to  promote, for the  Courts  are               not, in these matters, functioning as it  were               in  vacuo, but as parts of a society which  is               trying, by enacted law, to solve its  problems               and  achieve social concern and  peaceful  ad-               justment  and  thus furthering the  moral  and               material progress of the community as a whole.               16.It  was  also  observed  therein  that   in               judging  reasonableness  of  restrictions  the               Court  would  be fully entitled to  take  into               consideration   matters  of   common   report,               history  of  the  times,  matters  of   common               knowledge  and the circumstances  existing  at               the  time  of legislation,  relying  upon  the               observations  in Mohd.  Hanif Quareshi &  Ors.               v.  The State of Bihar [1959 SCR  629],  which               were as follows:               "It must be borne in mind that the Legislature               is  free to recognise degrees of harm and  may               confine its restrictions to those cases  where               the  need  is deemed to be  the  clearest  and               finally   that   in  order  to   sustain   the               presumption of constitutionality the Court may               take  into  consideration  matters  of  common               knowledge,  matters  of  common  report,   the               history  of  the times and  may  assure  every               state of facts which can be conceived existing               at the time of legislation. 17.Therefore, when we look at the, provision in  sub-section (2)  of  Section  14  of  the  Act  in  the  light  of   the observations  of this Court made in Fatehchand  (supra)  and other  decisions  adverted  to  by  us,  we  find  that  the Legislature  of Gujarat which had a human problem of  saving the  poverty  striken  debtors from  the  clutches  of  non- institutional  creditors, relieving them of their  debts  to the  extent  found  necessary and getting  return  of  their properties  from the creditors given as security  for  their debts for ekeout their livelihood it was very much justified in introducing the provision in subsection (2) of Section 14 of  the  Act, which enabled the debtors to  get  back  their properties given as security, from the creditors for  making use of them in their own way to ekeout their livelihood,  in as  much as such provision cannot be considered as that  not made  in  social interest by the Legislature  for  promoting social  and  moral  progress of the community  as  a  whole. Therefore, the High Court was wholly wrong in its view  that the provision in sub-section (2) of Section 14 of the Act to the  extent it made the creditors who were entitled  to  get the  scaled down debts from certain debtors would have.  the effect of depriving the creditors of security for the  debt, was an unreasonable restriction under Articles 19(1)(f)  and 19(1)(g)  of  the Constitution and that view  called  to  be interfered  with.   As  is observed by  this  Court  in  the

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judgments  to  which  we  have  adverted,  even  if   social legislations  such as Debt Relief Legislation enacted  by  a Legislature  arc  to make a few creditors  victims  of  such legislation in 652 one  way  or the other, the same cannot be  regarded  as  an unreasonable restriction which cannot be imposed in  respect of  the  rights exercisable by the  citizens  under  Article 19(1)(f) and Article 19(1)(g) of the Constitution. 18.  For the foregoing reasons, we are constrained to uphold the  constitutionality of sub- section (2) of Section 14  of the Act as a whole and set aside the judgment under  appeals insofar  as it has held the words "or an order reducing  his debt  is made" therein as unconstitutional and  struck  them down on that account. 19.  Before  parting with this case, we feel it our  bounden duty  to place on record, our grateful thanks to  Shri.   G. Vishwanatha  Iyer who assisted us, as amicus curiae, at  our request. 20.  In the result, we allow these appeals,  however,   with no costs.