LAWS(SC)-1972-1-58

BALKISHANDAS AND TWELVE Vs. STATE BANK OF HYDERABAD

Decided On January 20, 1972
BALKISHANDAS AND TWELVE Appellant
V/S
STATE BANK OF HYDERABAD Respondents

JUDGEMENT

(1.) This appeal is by certificate against the judgment of the Andhra Pradesh High Court which confirmed the judgment and decree of a single Judge of the Original Side of that Court. The first respondent Bank filed a suit against the appellants defendants Nos. 1-4 who are members of the joint family firm, for the recovery of a sum of I. G. R.s 5,00,000/- on the basis of a mortgage deed executed by them in favour of the Bank by securing certain immoveable properties without possession. As a further security, the first defendant on behalf of the joint family, caused the 5th defendant respondent 2 to guarantee the amount borrowed from the Bank and accordingly he executed a promissory note in favour of the 5th defendant on 26-9-1953 for Rs. 5,00,000/- which he in turn endorsed in favour of the Bank. The 5th defendant also executed a separate guarantee in favour of the said Bank on the same date. As the defendants failed to pay the amounts which fell due under the terms of the mortgage, a suit was filed as aforesaid against all the defendants. The 1st defendant who was the manager and Karta of the joint family remained ex parte. The 5th defendant though he appeared in the Court, did not file any written statement and chose to remain ex parte throughout. Defendant 2-4 alone filed written statements resisting the suit on several pleas, two of which alone may be noticed for the purposes of this appeal, namely, (i) that the suit debts were extinguished under section 22 of the Hyderabad Jagirdas Debt Settlement Act 1952 (hereinafter called 'the Act'). inasmuch as no application was presented by the Bank under section 11 of the Act before 30th June, 1953 which was the notified date; and (ii) the Civil Court had no jurisdiction to try the suit as under section 25 of the Act all suits and proceedings for the recovery of a debt due from a Jagirdar have to be transferred to the Jagirdars Debt Settlement Board which alone had jurisdiction to settle it. It appears that the appellants who it is admitted are Jagirdars had money transactions with the Bank prior to the execution of the mortgage on three separate accounts. Ultimately these accounts were closed by payment from the amount of Rs. 5,00,000/- advanced to them by the Bank on a cash credit account secured by the aforesaid mortgage deed. It was contended that as the amounts due on the three earlier accounts to the Bank were debts which were pending on the date of the Act and since these loans were secured by the mortgage, the provisions of the Act are applicable and the debts got extinguished as the Bank had not applied under section 11 before 30-61953 to refer them for settlement by the Jagirdars Debt Settlement Board.

(2.) The trial court on the evidence held that the amounts due from the appellants on the three old accounts were Rs. 5,00,000/- made up of (a) Rs. 2,59,436-0-0 on the L. B. D. Account (b) Rs. 2,05,358-8-8 on Overdraft Account (Clean) (Ledger No. 14) Dwarkadas Kukundas:(c) Rs. 35,205-7-4 on Overdraft Account (Clean) (Ledger No. 2) Dwarkadas Mukundas. It further held that at the request of the appellants they were granted by the first respondent a cash credit to the extent of Rs. 5,00,000/- and in compliance with the terms of sanction the appellants executed a mortgage deed (Ex. P. 10) in favour of the Bank; that from the fresh cash credit account which was opened on 8-8-1953 in the name of the appellant firm with the Bank, the appellants, cleared the earlier liabilities under the three accounts mentioned above which were closed and that on the same date the Bank returned to the appellant thirteen bills duly endorsed in favour of the appellant firm. On these facts, the trial court held that as the 1st respondent was a Scheduled Bank, the provisions of the Act would not be applicable by virtue of section 3 (v) and accordingly the Civil Court would have jurisdiction to enteratin the suit. The suit was, therefore, decreed against the appellants and the second respondent, against which in original side appeal was filed in High Court. By the time the appeal came up for hearing, a Full Bench of the Hyderabad High Court in the case of State Bank of Hyderabad v. Mukundas Raja Bhagwandas and Sons (1963) 2 Andh WR 147 held that under section 25 (1) of the Act, all suits, appeals, applications for execution and proceedings other than revisions, taken before the Courts in regard to debts for which application under section 11 of that Act could be made to the Board and involve the questions as the status of the Debtor and the total extent of his debts, are liable to be transferred if they were pending on the date notified under section 11, i.e. 30-6-1953. But, if they were filed after that date, they are liable to be transferred only on notice by the Board of reason of an application under section 11 or statement under section 21 of the Act. All other suits, appeals, applications for execution or other proceedings, including cases relating to debts incurred subsequent to the notified date are clearly beyond the purview of S. 25 and are not liable to be transferred to the Board, as the Board itself cannot deal with such suits of proceedings because of the limitations placed in the Act. What is meant by the expression 'pending' in section 25 (1) was interpreted as pending on the notified date.

(3.) In view of this decision, the question that were urged before the appellate court were whether the debt was a post-notification debt or a pre-notification debt, namely, whether it was contracted after 30-6-1953 or prior to that date. If it was a pre-notification debt, the said debt would be extinguished by virtue of section 22 of the Act. Even if it was a post-notification debt, it was urged that the civil court would not have jurisdiction under section 25 notwithstanding the judgment of the Full Bench of the Andhra Pradesh High Court referred to above. Further, section 3 of the Act was also challenged as ultra vires of Article 14 of the Constitution of India on the application of the decision of the Supreme Court in the State of Rajasthan v. Mukund Chand, (1964) 6 SCR 903 . It was held by the Bench that the drawing of money in the new account and the payment into the old accounts had discharged the old debts which could not form the basis of a suit against the defendants for recovery of the said amounts. Accordingly, following the Full Bench judgment, it was held that the Civil Court had jurisdiction to entertain the suit as the debt was a post-notification debt and in this view confirmed the judgment and decree of the trial court.