GOVINDA REDDI Vs. GORLA RAMI REDDI

JUDGEMENT

(1.) During the pendency of a suit which the appellant filed to recover a sum of Rs. 264-8-0 due on a simple mortgage from the respondent, the respondent applied to the Debt Conciliation Board for the settlement of his debts and the trial of the civil suit was accordingly stayed. The result of the proceedings before the Debt Conciliation Board was that the respondent's debt to the appellant was deemed to have been fully discharged for all purposes and for all occasions under the provisions of Section 10(2) of the Debt Conciliation Act because of the failure of the appellant to file a statement as required under Section 10(1). After this order had been passed by the Debt Conciliation Board, the suit was taken up for hearing by the District Munsiff of Penukonda; and it was decided on the additional issue framed, namely, "what is the effect of the order of the Debt Conciliation Board dated 29th July, 1940?" The District Munsiff was of opinion that the effect of the order was that the debt had been discharged and so dismissed the suit; and his decree was confirmed on appeal by the District judge of Anantapur.

(2.) Section 10(1) of the Debt Conciliation Act provides that after the debtor has been examined, a notice should be issued and served or published in the manner prescribed calling upon every creditor of the debtor to submit a statement of debts owed to such creditor by the debtor; and Section 10(2) provides that " subject to the provisions of Sub-section (3) every debt of which a statement is not submitted to the Board in compliance with the provisions of Sub-section (1) shall be deemed for all purposes and all occasions to have been duly discharged." It is admitted that the appellant received notice calling upon him to submit a statement of debts and that he did not submit the required statement. It is however argued by earned Counsel for the appellant that the debt in this case should not have been deemed to have been discharged (1) because it was a debt admitted by the respondent debtor and (2) because it was a secured debt and under the second proviso to Section 14 of the Act if a secured creditor does not agree to the settlement his right to proceed against the secured property shall not be affected. Neither of these submissions, in my opinion, has any substance. The fact that in this case the debtor admitted the debt has nothing to do with the question. Even if the debt was admitted, there was still the question of whether a settlement should be made in respect of it; and Section 10(2) was enacted, it seems clear, to secure diligence on the part of the creditor and to prevent him by dilatory tactics from avoiding an adjudication by the Board on the question of the settlement of the debts. The same reasoning in effect applies to the argument that Section 10(2) will not affect secured debts. The sub- section refers to "every debt" and makes no distinction between secured and unsecured debts. Moreover, although under Section 14, a secured creditor cannot be affected by a settlement unless he agrees to it, a secured debt may, if he does agree, be settled and it is necessary that the statement required by Section 10(1) should be furnished in respect of both the secured and unsecured debts.

(3.) Learned Counsel for the appellant has referred me to a case decided by the House of Lords, Hill V/s. East and West India Dock Co. (1884) 9 A.C. 448 in which, in construing a provision of the Bankruptcy Act that in certain circumstances a lease made to the bankrupt but disclaimed by the trustee shall be deemed to have been surrendered, it was held that notwithstanding the disclaimer the lessee remained liable upon his covenant on the ground, as stated by Lord Blackburn, that the words " deemed to have been surrendered " means shall be surrendered so far as is necessary to effectuate the purposes of the Act and no further. Even if it is permissible to apply this observation to the construction of the words " shall be deemed " appearing in subsection 2 of Section 10 of The Debt Conciliation Act, it seems to me clear that the decision will not help the appellant. Sub-section 2 of Section 10 was clearly enacted, as already stated, in order to enable the Board to perform its functions under the Act, and that the creditor should not be able to prevent the arrangement of a settlement by the Board merely by dilatory conduct. The appellant's debt, therefore, was deemed to be discharged because he had failed to comply with the provisions of the Act which required him to submit a statement of debts owed to him by the debtor, and the discharge of the debt in the circumstances must be regarded as effecting the purpose of the sub-section which is by providing a penalty for failure to comply with the notice under Section 10(1) to enable the Board without unreasonable delay to hear and determine the application presented to it by the debtor.