PETITIONER:
STATE BANK OF TRAVANCORE
Vs.
RESPONDENT:
MOHAMMED MOHAMMED KHAN
DATE OF JUDGMENT21/08/1981
BENCH:
CHANDRACHUD, Y.V. ((CJ)
BENCH:
CHANDRACHUD, Y.V. ((CJ)
SEN, A.P. (J)
ERADI, V. BALAKRISHNA (J)
CITATION:
1981 AIR 1744 1982 SCR (1) 338
1981 SCC (4) 82 1981 SCALE (3)1253
CITATOR INFO :
RF 1986 SC1499 (16)
ACT:
Kerala Agriculturists. Debt Relief Act (Act 11) 1970-
Whether a debt owed by an Agriculturist falls within the
purview of section 2(4).
HEADNOTE:
The respondent had an overdraft account with the
Erattupetta Branch of the Kottayam orient Bank Ltd. at the
foot of which he owed a sum of over Rs. 3000/- to the Bank.
The said Bank which was a 'Banking Company' as defined in
the Banking Regulation Act, 1949, was amalgamated with the
appellant Bank with effect from June 17, 1961. The appellant
Bank filed a suit (O,S, 28 of 1963) in the Sub-Court,
Meenachil, against the respondent for recovery of the amount
due from him in the overdraft Account with the Kottayam
orient Bank, the right to recover which had come to be
vested in the appellant as a result of the scheme of
amalgamation. The suit was decreed in favour of the
appellant but when it took out execution proceedings in the
Sub-Court, Kottayam, the respondent filed an application
under section 8 of the Kerala Agriculturists' Debt Relief
Act claiming that being an agriculturist within the meaning
of that Act, he was entitled to the benefit of its
provisions including those relating to the scaling down of
debts. The learned Subordinate Judge dismissed the
application holding: (i) that the respondent was not
entitled to the benefit of the provisions regarding scaling
down of the debt because the debt, having been once owed by
him to the Kottayam orient Bank Ltd. which was a Banking
Company as defined in the Banking Regulation Act, 1949, was
outside the purview of section S of the Act which provided
for the scaling down of debts owed by agriculturists; and
(ii) that he was only entitled to the benefit of the proviso
to section 2(4) (l) of the Act under which the amount could
be repaid in eight half yearly instalments
The Revision Application preferred by the respondent
was referred to the Full Bench of the High Court. It was
contended on behalf of the appellant Bank that the debt owed
to it by the respondent was excluded from the operation of
the Act by reason of section 2 (4) (a) (ii) and section 2
(4) (1) of the Act. By its judgment dated February 1, 1978
the High Court rejected that contention, allowed the
Revision Application and held that the respondent was
entitled to all the relevant benefits of the Act, including
the benefit of scaling down of the debt and hence the appeal
by special leave.
339
Dismissing the appeal, the Court
^
HELD: 1:1. The appellant Bank will not be entitled to
the benefit of the exclusion contained in section 2 (4) (a)
(ii) of the Kerala Agriculturists' Debt Relief Act, 1970 in
view of clause (B) of the proviso to the section and the
respondent's claim to the benefits of the Act will remain
unaffected by that provision. [345H, 346 A]
1: 2. The respondent is admittedly an agriculturist and
he owes a sum of money to the appellant Bank under a decree
passed in its favour by the Sub-Court, Meenachil, in O.S.
No. 28 of 1963. The liability which the respondent owes to
the appellant Bank is, therefore a "debt" within the meaning
of section 2 (4) of the Act. [344 F-G]
However, since the appellant Bank, namely, the State
Bank of Travancore, . is a subsidiary bank within the
meaning of section 2 (k) of the State Bank of India
(Subsidiary Banks) Act, 1959 and also as contemplated by
sub-clause (ii) of clause (a) of section 2(4) of the Act,
the decretal amount payable by the respondent to the
appellant Bank will not be a debt within the meaning of
section 2(4) of the Act. [345 C-D]
1: 3. By reason of clause (B) of the proviso to section
2 (4) (a) (ii) of the Act, which proviso is in the nature of
an exception to the exceptions contained in the said section
the amount payable to a subsidiary bank is not to be
regarded as a debt within the meaning of the Act, only if
the right of the subsidiary bank to recover the amount did
not arise by reason of any transfer effected by operation of
law subsequent to July 1, 1957. Here, the notification
containing the scheme of amalgamation was published on May
16. 1961. Thus, the right of the appellant Bank, though is a
subsidiary Bank, to recover the amount from the respondent
arose by reason of a transfer effected by operation of law,
namely, the scheme of amalgamation, which came into effect
after July 1, 1957. [345 D-E, G]
2: l. The State Bank of Travancore, is not a 'company'
properly so called. It is a subsidiary bank. It was
established by the Central Government in accordance with The
Act of 1959 and is not a 'company and, therefore not a
banking company. Therefore, the decretal debt which the
respondent is liable to pay to the appellant is not owed to
a "banking company". It was indeed not owed to any "banking
company" at all on July 14, 1970 being the date on which the
Act came into force. [346 G-H, 347 A]
3: 1. The exclusion provided for in clause (I) of
section 2 (4) of the Act can be availed of, if the debt is
due to a banking company at the time of the commencement of
the Act. [352 D-E]
3: 2. The object of the Act is to relieve agricultural
indebtedness. In order to achieve that object, the
legislature conferred certain benefits on agricultural
debtors but, while doing so, it excluded a class of debts
from the operation of the Act, namely, debts of the
description mentioned in clauses (a) to (n) of section 2
(4). One class of debts taken out from the operation of the
Act is debts owed to banking companies, as specified in
clause (1). The reason for this exception being that, unlike
money lenders who
340
exploit needy agriculturists and impose upon them harsh and
onerous terms while granting loans to them, representative
institutions, like banks and banking companies, are governed
be their rules and regulations which do not change from
debtor to debtor and which, if anything, are intended to
benefit the weaker sections of society. [348 A-C]
3: 3. Relief to agricultural debtors who have suffered
the oppression of private money-lenders, has to be the
guiding star which must illumine and inform the
interpretation of the beneficient provisions of the Act.
When clause (1) speaks of a debt due "before the
commencement" of the Act to a banking company, it does
undoubtedly mean what it says, namely, that the debt must
have been due to a banking company before the commencement
of the Act. But it means something more: that the debt must
also be due to a banking company at the commencement of the
Act. Reading into the clause the word "at" which is not
there, is the only rational manner by which meaning and
content could be given to it, so as to further the object of
the Act. [349 B-E]
Further clause (I) speaks of a debt due before the
commencement of the Act, what it truly means to convey is
not that the debt should have been due to a banking company
at some point of time before the commencement of the Act,
but that it must be a debt which was incurred from a banking
company before the commencement of the Act. [349 E-F]
Thus, the application of clause (I) is subject to these
conditions: (i) The debt must have been incurred from a
banking company; (ii) the debt must have been so incurred
before the commencement of the Act; and (iii) the debt must
be due to a banking company on the date of the commencement
of the Act. These are cumulative conditions and unless each
one of them is satisfied, clause (I) will not be attracted
and the exclusion provided for therein will not be available
as an answer to the relief sought by the debtor in terms of
the Act. [349G-H, 350 A]
3: 4. Section 2 (4) which defines a "debt" had to
provide that debt means a liability due from or incurred by
an agriculturist "on or before the commencement" of the Act.
It could not be that liabilities incurred before the
commencement of the Act would be "debts" even though they
are not due on the date of commencement of the Act. The
words "on or before the commencement" of the Act are used in
the context of liabilities "due from or incurred" by an
agrieculturist. For similar reasons, clause (j) had to use
the expression "at the commencement" of the Act, the subject
matter of that clause being debts due to widows. The benefit
of the exclusion provided for in clause (j) could only be
given to widows to whom debts were due "at the commencement"
of the Act. The legislature could not have given that
benefit in respect of debts which were due before but not at
the commencement of the Act. Thus, the language used in the
two provisions is suited to the particular subject matter
with which those provisions deal and is apposite to the
context in which that language is used.
[350 C-F]
3:5. The object of the Act being to confer certain
benefits on agricultural debtors, the legislature would be
under an obligation, while excepting a certain category of
debts from the operation of the Act, to make a
classification which will answer the test of article 14.
Debts incurred from banking companies and
341
due to such companies at the commencement of the Act would
fall into a separate and distinct class, the classification
bearing a nexus with the object of the Act. If debts
incurred from private money-lenders are brought within the
terms of clause (I) on the theory that the right to recover
the debt had passed on to a banking company sometime before
the commencement of the Act, the clause would be
unconstitutional for the reason that it accords a different
treatment to a category of debts without a valid basis and
without the classification having a nexus with the object of
the Act. [350G-H, 357A-B]
State of Rajasthan v. Mukanchand [1964] 6 SCR 903;
Fatehchand Himmatlal v. State of Maharashtra, [1977] 2 SCR
828, applied.
JUDGMENT:
CIVIL APPELLATE JURISDICTION: Civil Appeal No. 1376 of
1978.
(Appeal by special leave from the judgment and order
dated the 1st February, 1978 of the Kerala High Court in
M.F.A. No. 53 of 1977)
L.N. Sinha, Attorney General, J. M. Joseph, K John and
Shri Narain for the Appellant. D
C.S. Vaidlyanathan, (A.C.), for the Respondent.
The Judgment of the Court was delivered by
CHANDRACHUD, C.J. The question which arises in this
appeal by special leave is whether a debt owed by the
respondent, an agriculturist, to the appellant-The State
Bank of Travancore-falls within the purview of the Kerala
Agriculturists’ Debt Relief Act, 11 of 1970, hereinafter
called ‘the Act’.
The respondent had an overdraft Account with the
Erattupetta Branch of the Kottayam Orient Bank Ltd., at the
foot of which he owed a sum of over Rs. 3000/- to the Bank.
The said Bank which was a ‘Banking Company’ as defined in
the Banking Regulation Act, 1949, was amalgamated with the
appellant Bank with effect from June 17, 1961 in pursuance
of a scheme of amalgamation prepared by the Reserve Bank of
India in exercise of the powers conferred by section 45 (4)
of the Banking Regulation Act and sanctioned by the Central
Government under sub-section (7) of section 45. Upon the
amalgamation, all assets and liabilities of the Kottayam
Orient Bank stood transferred to the appellant Bank. The
notification containing the scheme of amalgamation was
342
published in the Gazette of India Extra-ordinary dated May
16, 1961 .
The appellant filed a suit (O.S. No. 28 of 1963) in the
Sub Court, Meenachil, against the respondent for recovery of
the amount due from him in the overdraft Account with the
Kottayam Orient Bank, the right to recover which had come to
be vested in the appellant as a result of the aforesaid
scheme of amalgamation. That suit was decreed in favour of
the appellant, but when it took out execution proceedings in
the Sub-Court, Kottayam, the respondent filed a petition
under section 8 of the Act seeking amendment of the decree
in terms of the provisions of the Act. The respondent
claimed that he was an agriculturist within the meaning of
the Act and was therefore entitled to the benefit of its
provisions, including those relating to the scaling down of
debts. The learned Subordinate Judge assumed, what was
evidently not controverted, that the respondent was an
agriculturist. But the learned Judge held that the
respondent was not entitled to the benefit of the provision
regarding scaling down of the debt because the debt, having
been once owed by him to the Kottayam Orient Bank Ltd.,
which was a ‘Banking Company as defined in the Banking
Regulation Act, 1949, was outside the purview of section 5
of the Act which provided for the scaling down of debts owed
by agriculturists. According to the learned Judge, the
respondent was only entitled to the benefit of the proviso
to section 2 (4) (l) of the Act under which the amount could
be repaid in eight half-yearly instalments. Since the relief
which the respondent had asked for was that his debt should
be scaled down and since he was held not entitled to that
relief, his application was dismissed by the learned Judge.
The respondent preferred an appeal to the High Court of
Kerala, the maintainability of which was challenged by the
appellant on the ground that no appeal lay against the order
passed by the Subordinate Judge on the application filed by
the respondent under section 8 of the Act. The High Court
accepted the preliminary objection but granted permission to
the respondent to convert the appeal into a Civil Revision
Application and dealt with it as such. In view of the
general importance of the questions involved in the matter,
the revision application was referred by a Division Bench to
the Full Bench.
It was contended in the High Court on behalf of the
appellant, Bank that the debt owed to it by the respondent
was excluded
343
from the operation of the Act by reason of section 2 (4) (a)
(ii) and section 2 (4) (1) of the Act. By its judgment dated
February 1, 1978 the High Court rejected that contention,
allowed the Revision Application and held that the
respondent was entitled to all the relevant benefits of the
Act, including the benefit scaling down of the debt. The
Bank questions the correctness of that judgment in this
appeal.
Section 8 of the Act provides, in so far as is
material, that where, before the commencement of the Act, a
court has passed a decree for, the repayment of a debt, it
shall, on the application of a judgment-debtor, who is an
agriculturist, apply the provisions of the Act to such a
decree and shall amend the decree accordingly. It is in
pursuance of this section that the respondent applied to the
executing Court for amendment of the decree. Section 4(1) of
the Act provides that notwithstanding anything contained hl
any law or contract or in a decree of any court, but subject
to the provisions of sub-section (5), an agriculturist may
discharge his debts in the manner specified in sub-sections
(2) and (3). Sub-section (2) of section 4 provides that if
any debt is repaid in seventeen equal half yearly
instalments together with interest at the rates specified in
section 5, the whole debt shall be deemed to be discharged.
Sub-section (3) specifies the period within which the
instalments have to be paid. The respondent claims the
benefit of the provision contained in section 4 (1) of
the Act.
In order to decide whether the respondent is entitled
to the relief claimed by him, it would be necessary to
consider the provisions of sections 2 (1) and 2 (4) of the
Act. The short title of the Act shows that it was passed in
order to give relief to indebted agriculturists in the State
of Kerala. The State Legislature felt the necessity of
passing the Act because, the Kerala Agriculturists’ Debt
Relief Act, 31 of 1958, conferred benefits on agricultural
debtors in respect of debts incurred by them before July 14,
1958 only. The Statement of objects and Reasons of the Act
slows that the agricultural indebtedness amongst the poorer
sections of the community showed an upward trend after July
14, 1958 owing to various economic factors. A more
comprehensive legislation was therefore introduced by the
State Legislature in the shape of the present Act in
substitution of the Act of 1958. The Act came into force on
July 14, 1970.
Section 2 (1) of the Act which defines an
“agriculturist” need not be reproduced because it was common
ground at all stages bet-
344
ween the parties that the respondent is an agriculturist
within the meaning of the definition in section 2 (1).
Section 2 (4) of the Act, in so far as is material for
our purposes, reads thus:
“Section 2 (4):”debt” means any liability in cash or kind,
whether secured or unsecured, due from or
incurred by an agriculturist on or before the
commencement of this Act, whether payable
under a contract, or under a decree or order
of any court, or otherwise, but does not
include:-
(a) any sum payable to:-
(i) the Government of Kerala or the Government of
India or the Government of any other State or
Union territory or any local authority; or
(ii) the Reserve Bank of India or the State Bank
of India or any subsidiary bank within the
meaning of clause (k) of section 2 of the
State Bank of India (Subsidiary Act, 1959, or
the Travancore Credit Bank (in liquidation)
constituted under the Travancore Credit Bank
Act, IV of 1113:
Provided that the right of the bank to recover the
sum did not arise by reason of:-
(A) any assignment made or
(B) any transfer effected by operation of law,
subsequent to the 1st day of July, 1957″.
As stated above, the respondent is admittedly an
agriculturist and he owes a sum of money to the appellant
Bank under a decree passed in its favour by the Sub-Court,
Meenacil, in O.S. No. 28 of 1963. The liability which the
respondent owes to the appellant Bank is therefore a “debt”
within the meaning of section 2 (4) of the Act. But certain
liabilities are excluded from the ambit of the definition of
“Debt”. The liabilities which are thus excluded from the
definition of debt are specified in clauses (a) to (n) of
section 2 (4). We are concerned in this appeal with the
liabilities specified in clause (a) (ii) and clause (1) of
section 2 (4), which are excluded from
345
the operation of clause 2 (4). We will first consider the
implications of the exclusion provided for in sub-clause
(ii) of clause (a) of section 2 (4). Under the aforesaid
sub-clause, any sum payable to a subsidiary bank within the
meaning of section 2 (k) of the State Bank of India
(Subsidiary Banks) Act, 1959, is excluded from the
definition of “debt”. Section 2 (k) of the Act of 1959
defines a “subsidiary bank” to mean any new bank, including
the Hyderabad Bank and the Saurashtra Bank. The expression
“new bank” is defined in section 2 (f) of the Act of 1959 to
mean any of the banks constituted under section 3. Section 3
provides that with effect from such date, as the Central
Government may specify, there shall be constituted the new
banks specified in the section. Clause (f) of section 3
mentions the State Bank of Travancore amongst the new banks
which may be constituted under section 3. It is thus clear
that the appellant Bank, namely, the State Bank of
Travancore, is a subsidiary bank as contemplated by sub-
clause (ii) of clause (a) of section 2 (4) of the Act. If
the matter were to rest there, the decretal amount payable
by the respondent to the appellant Bank will not be a debt
within the meaning of section 2 (4) of the Act, since the
appellant is a subsidiary bank within the meaning of section
2 (k) of the State Bank of India (Subsidiary Banks) Act,
1959. But by reason of clause (B) of the proviso to section
2 (4) (a) (ii) of the Act, the amount payable to a
subsidiary bank is not to be regarded as a debt within the
meaning of the Act, only if the right of the subsidiary bank
to recover the amount did not arise by reason of any
transfer effected by operation of law subsequent to July 1,
1957. The proviso is thus in the nature of an exception to
the exceptions contained in section 2 (4) (a) (ii) of the
Act.
The respondent initially owed a sum exceeding Rs.
3000/- to the Erattupetta Branch of the Kottayam Orient Bank
Ltd. which was amalgamated with the appellant Bank with
effect from June 17, 1961 pursuant to an amalgamation scheme
prepared by the Reserve Bank of India. All the rights,
assets and liabilities of the Kottayam Orient Bank were
transferred to the appellant Bank as a result of the
amalgamation. The notification containing the scheme of
amalgamation was published on May 16, 1961. Thus, the right
of the appellant Bank, though it is a subsidiary Bank, to
recover the amount from the respondent arose by reason of a
transfer effected by operation of law, namely, the scheme of
amalgamation, which came into effect after July 1, 1957.
Since clause (B) of the proviso to section 2 (4) (a) (ii) is
attracted, the appellant Bank will not be entitled to the
benefit of the exclusion contained in section 2 (4) (a)
346
(ii) of the Act and the respondents claim to the benefits of
the Act will remain unaffected by that provision.
That makes it necessary to consider the question
whether the appellant Bank can get the advantage of any of
the other exclusionary clauses (a) to (n) of section 2 (4)
of the Act. The only other clause of section 2 (4) which is
relied upon by the appellant in this behalf is clause (1),
according to which the word ‘debt’ as defined in section 2
(4) will not include:-
“any debt exceeding three thousand rupees borrowed
under a single transaction and due before the
commencement of this Act to any banking company;
(emphasis supplied)
Provided that in the case of any debt exceeding
three thousand rupees borrowed under a single
transaction and due before the commencement of this Act
to any banking company, any agriculturist debtor shall
be entitled to repay such debt in eight equal half-
yearly instalments as provided in sub-section (3) of
section 4, but the provisions of section 5 shall not
apply to such debt.”
The question for consideration is whether the amount
which the respondent is liable to pay under the decree was
“due before the commencement of the Act to any Banking
Company”.
Turning first to the question whether the appellant
Bank is a banking company, the learned Subordinate Judge
assumed that it is, but no attempt was made to sustain that
finding in the High Court. Shri Abdul Khader, who appears on
behalf of the appellant conceded before us that it is not a
banking company. The concession is rightly made, since
according to section 2(2) of the Act, ‘Banking Company’
means a banking company as defined in the Banking Regulation
Act, 1949. Section S(c) of the Act of 1949 defines a banking
company to mean any Company which transacts the business of
banking in India (subject to the provision contained in the
Explanation to the section). Thus, in order that a bank may
be a banking company, it is in the first place necessary
that it must be a “company”. The State Bank of Travancore,
which is the appellant before us, is not a ‘company’
properly so called. It is a subsidiary bank which falls
within the definition of section 2(k) of the State Bank of
India (Subsidiary Banks) Act, 1959. It was established by
the Central Government in accordance with the Act of 1959
and is not a ‘company’ and
347
therefore, not a banking company. It must follow that the
decretal debt which the respondent is liable to pay to the
appellant is not owed to a banking company. It was indeed
not owed to any banking company at all on July 14, 1970,
being the date on which the Act came into force. It may be
recalled that the respondent owed a certain sum exceeding
three thousand rupees to the Kottayam Orient Bank Ltd., a
banking company, on an overdraft account. That Bank was
amalgamated with the appellant Bank with effect from May 16,
1961, as a result of which the latter acquired the right to
recover the amount from the respondent. It filed Suit No. 28
of 1963 to recover that amount and obtained a decree against
the respondent.
lt is precisely this small conspectus of facts, namely,
that the amount was at one time owed to a banking company
but was not owed to a banking company at the commencement of
the Act, which raises the question as regards the true
interpretation of clause (1) of section 2 (4).
The fact that the amount which the respondent owes to
the appellant was not owed to a banking company on the date
on which the Act came into force, the appellant not being a
banking company, does not provide a final solution to the
problem under consideration. The reason for this is that
clause (1) of section 2(4) speaks of a debt “due before the
commencement” of the Act to any banking company, thereby
purporting to make the state of affairs existing before the
commencement of the Act decisive of the application of that
clause. The contention of the learned Attorney General, who
led the argument on behalf of the appellant, is that the
respondent owed the debt before the commencement of the Act
to a banking company and, therefore, the appellant is
entitled to claim the benefit of the exclusion provided for
in clause (1). The argument is that, for the purposes of
clause (1), it does not matter to whom the debt is owed on
the date of the commencement of the Act: what matters is to
whom the debt was owed before the commencement of the Act.
The learned Attorney General is apparently justified in
making this submission which rests on the plain language of
clause (1) of section 2(4), the plain, grammatical meaning
of the words of the statute being generally a safe guide to
their interpretation. But having considered the submission
in its diverse implications, we find ourselves unable to
accept it.
348
In order to judge the validity of the submission made by the
Attorney General, one must of necessity have regard to the
object and purpose of the Act. The object of the Act is to
relieve agricultural indebtedness. In order to achieve that
object, the legislature conferred certain benefits on
agricultural debtors but, while doing so, it excluded a
class of debts from the operation of the Act, namely, debts
of the description mentioned in clauses (a) to (n) of
section 2(4). One class of debts taken out from the
operation of the Act is debts owed to banking companies, as
specified in clause (1). The reason for this exception is
obvious. It is notorious that money lenders exploit needy
agriculturists and impose upon them harsh and onerous terms
while granting loans to them. But that charge does not hold
true in the case of representative institutions, like banks
and banking companies. They are governed by their rules and
regulations which do not change from debtor to debtor and
which, if any thing, are intended to benefit the weaker
sections of society. It is for this reason that debts owing
to such creditors are excepted from the operation of the
Act.
A necessary implication and an inevitable consequence
of the Attorney General’s argument is that in order to
attract the application of clause (1) of section 2 (4), it
is enough to show that the debt was, at some time before the
commencement of the Act, owed to a banking company; it does
not matter whether it was in its inception owed to a private
money-lender and, equally so, whether it was owed to such a
money-lender on the date of the commencement of the Act.
This argument, if accepted, will defeat the very object of
the Act. The sole test which assumes relevance according to
that argument is whether the debt was owed, at any time
before the commencement of the Act, to a banking company. It
means that it is enough for the purpose of attracting clause
(1) that, at some time in the past, may be in a chain of
transfers, the right to recover the debt was vested in a
banking company. A simple illustration will elucidate the
point. If a private money-lender had initially granted a
loan to an agricultural debtor on usurious terms but the
right to recover that debt came to be vested in a banking
company some time before the commencement of the Act, the
debtor will not be able to avail himself of the benefit of
the provisions of the Act because, at some point of time
before the commencement of the Act, the debt was owed to a
banking company. And this would be so irrespective of
whether the banking company continues to be entitled to
recover the debt on the date of the commencement of the Act.
Even if it assigns its
349
right to a private individual, the debtor will be debarred
from claiming the benefit of the Act because, what is of
decisive importance, according to the Attorney General’s
argument is the fact whether, some time before the
commencement of the Act, the debt was due to a banking
company. We do not think the Legislature could have intended
to produce such a startling result.
The plain language of the clause, if interpreted so
plainly, will frustrate rather than further the object of
the Act. Relief to agricultural debtors, who have suffered
the oppression of private moneylenders, has to be the
guiding star which must illumine and inform the
interpretation of the beneficent provisions of the Act. When
clause (1) speaks of a debt due “before the commencement” of
the Act to a banking company, it does undoubtedly mean what
it says, namely, that the debt must have been due to a
banking company before the commencement of the Act. But it
means something more: that the debt must also be due to a
banking company at the commencement of the Act. We quite see
that we are reading into the clause the word “at” which is
not there because, whereas it speaks of a debt due “before”
the commencement of the Act, we are reading the clause as
relating to a debt which was due “at” and “before” the
commencement of the Act to any banking company. We would
have normally hesitated to fashion the clause by so
restructuring it but we see no escape from that course,
since that is the only rational manner by which we can give
meaning and content to it, so as to further the object of
the Act.
There is one more aspect of the matter which needs to
be amplified and it is this: When clause (1) speaks of a
debt due before the commencement of the Act, what it truly
means to convey is not that the debt should have been due to
a banking company at some point of time before the
commencement of the Act, but that it must be a debt which
was incurred from a banking company before the commencement
of the Act.
Thus, the application of clause (1) is subject to these
conditions: (i) The debt must have been incurred from a
banking company; (ii) the debt must have been so incurred
before the commencement of the Act, and (iii) the debt must
be due to a banking company on the date of the commencement
of the Act. These are cumulative conditions and unless each
one of them is satisfied, clause (1) will not be attracted
and the exclusion provided for there-
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in will not be available as an answer to the relief sought
by the debtor in terms of the Act.
Our attention was drawn by the Attorney General to the
provisions of sections 2 (4) and 2 (4) (j) of the Act the
former using the expression “on or before the commencement”
of the Act and the latter “at the commencement” of the Act.
Relying upon the different phraseology used in these two
provisions and in clause (1) inter se, he urged that the
legislature has chosen its words carefully and that when it
intended to make the state of affairs existing “at” the
commencement of the Act relevant, it has said so. We are not
impressed by this submission. Section 2 (4) which defines a
“debt” had to provide that debt means a liability due from
or incurred by an agriculturist “on or before the
commencement” of the Act. It could not be that liabilities
incurred before the commencement of the Act would be “debts”
even though they are not due on the date of commencement of
the Act. The words “on or before the commencement” of the
Act are used in the context of liabilities “due from or
incurred” by an agriculturist. For similar reasons, clause
(j) had to use the expression “at the commencement” of the
Act, the subject matter of that clause being debts due to
widows. The benefit of the exclusion provided for in clause
(j) could only be given to widows to whom debts were due “at
the commencement” of the Act. The legislature could not have
given that benefit in respect of debts which were due before
but not at the commencement of the Act. Thus, the language
used in the two provisionals on which the learned Attorney
General relies is suited to the particular subject matter
with which those provisions deal and is apposite to the
context in which that language is used. We have given to the
provision of clause (1) an interpretation which, while
giving effect to the intention of the legislature in the
light of the object of the Act, brings out the true meaning
of the provision contained in that clause. The literal
construction will create an anomalous situation and lead to
absurdidities and injustice. That construction has therefore
to be avoided.
Any other interpretation of clause (1) will make it
vulnerable to a constitutional challenge on the ground of
infraction of the guarantee of equality. The object of the
Act being to confer certain benefits on agricultural
debtors, the legislature would be under an obligation, while
excepting a certain category of debts from the operation of
the Act, to make a classification which will answer the test
of article 14. Debts incurred from banking companies and due
to such companies at the commencement of the Act would fall
into
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a separate and distinct class, the classification bearing a
nexus with A the object of the Act. If debts incurred from
private money-lenders are brought within the terms of clause
(1) on the theory that the right to recover the debt had
passed on to a banking company sometime before the
commencement of the Act, the clause would be
unconstitutional for the reason that it accords a different
treatment to a category of debts without a valid basis and
without the classification having a nexus with the object of
the Act.
In State of Rajasthan v. Mukanchand section 2 (e) of
Jagirdar’s Debt Reduction Act, 1937 was held invalid on the
ground that it infringed Article 14 of the Constitution. The
object of that Act was to reduce the debts secured on jagir
lands which had been resumed under the provisions of the
Rajasthan Land Reforms and Resumption of Jagirs Act. The
Jagirdar’s capacity to pay debts had been reduced by the
resumption of his lands and the object of the Act was to
ameliorate his condition. It was held that no intelligible
principle underlies the exempted category of debts mentioned
in section 2(e) since the fact that the debts were owed to a
government or to a local authority or similar other bodies,
had no real relationship with the object sought to be
achieved by the Act. In Fatehand Himmatlal v. Slate of
Maharashtra, in which the constitutionality of the
Maharashtra Debt Relief Act, 1976 was challenged, it was
held by this Court that the exemption granted by the statute
to credit institutions and banks was reasonable because
liabilities due to Government, local authorities and other
credit institutions were not tainted by the view of the
debtor’s exploitation. Fatehchand would be an authority for
the proposition that clause (1), in the manner interpreted
by us, does not violate Article 14 of the Constitution.
Shri Vaidyanathan, who appears on behalf of the
respondent, contended that the claim made by the appellant
Bank falls squarely under section 2 (4) (a) (ii) of the Act
and that if the appellant is not entitled to the benefit of
the specific provision contained therein, it is
impermissible to consider whether it can claim the benefit
of some other exclusionary clause like clause (1). Counsel
is right to the extent that the appellant is not entitled to
claim the benefit of the provision contained in section 2
(4)(a)(ii) because of Proviso B to that
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section. The simple reason in support of this conclusion is
that the right of the appellant to recover the debt arose by
reason of a transfer effected by operation of law subsequent
to July 1, 1957. We have already dealt with that aspect of
the matter. But we are not inclined to accept the submission
that if a particular case falls under a specific clause of
section 2 (4) which is found to be inapplicable, the
creditor is debarred from claiming the benefit of any of the
other clauses (a) to (n). The object of the exclusionary
clauses is to take category of debts from out of the
operation of the Act and there is no reason why, if a
specific clause is inapplicable, the creditor cannot seek
the benefit of the other clauses. The exclusionary clauses,
together, are certainly exhaustive of the categories of
excepted debts but to make those clauses mutually exclusive
will be to impair unduly the efficacy of the very object of
taking away a certain class of debts from the operation of
the Act. We are not therefore, inclined to accept the
submission made by the learned counsel that section 2 (4)
(a) (ii) is exhaustive of all circumstances in which a
subsidiary bank can claim the benefit of the exceptions to
section 2 (4).
For these reasons we affirm the view of the High Court
that the exclusion provided for in clause (1) of section
2 (4) of the Act can be availed of if the debt is due to a
banking company at the time of the commencement of the Act.
We have already indicated that the other condition which
must be satisfied in order that clause (1) may apply is that
the debt must have been incurred from a banking company
before the commencement of the Act.
For these reasons we dismiss the appeal. Appellant will
pay the costs of the respondent throughout.
S.R. Appeal dismissed.
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