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Pramod M. Jhaveri and anr. Vs. Sukhdeo Ramratan and anr. - Court Judgment

LegalCrystal Citation
SubjectCriminal
CourtMumbai High Court
Decided On
Case NumberInsolvency Petn. No. 11 of 1974
Judge
Reported inAIR1977Bom42; 1978MhLJ300
ActsMaharashtra Debt Relief Act, 1976 - Sections 2, 3, 4, 7, 7(1), 7(3), 7(4), 7(5), 7(6), 7(7), 7(8), 11, 11(1) and 12; Maharashtra Debt Relief Ordinance, 1975 - Sections 2(2); Presidency Towns Insolvency Act - Sections 3, 4, 5, 6, 7 and 13(2); Housing Repairs and Rents Act, 1954; Insolvency Law; Bankrupt Law
AppellantPramod M. Jhaveri and anr.
RespondentSukhdeo Ramratan and anr.
Appellant AdvocateU.J. Makhija, ;H.J. Thacker, ;B.S. Chandnani and ;Chande, Advs.;D.R. Zaiwala, Adv. as Amicus Curiae
Respondent AdvocateS.V. Shah, ;K.K. Vyas, Jaisinghani, ;Nerulkar and ;C.K. Shah, R.S. Daruwalla, Advs.
Excerpt:
the case debated whether the maharashtra debt relief act, 1976 was applicable to proceedings of insolvency and whether the jurisdiction of insolvency court was barred - the debtor claimed that he was entitled to benefits or protection of the act - the court adjudged that proceedings of insolvency, or the claims arising in insolvency proceedings lie within the ambit of the provisions of the act. - maharashtra scheduled castes, scheduled tribes, de-notified tribes (vimukta jatis), nomadic tribes, other backward classes and special backward category (regulation of issuance and verification of) caste certificate act (23 of 2001), sections 6 & 10: [s.b. mhase, a.p. deshpande & p.b. varale, jj] caste certificate petitioner seeking appointment against the post reserved for member of schedule.....order1. in this creditors' petition for an order of adjudication, an interesting but neat question of law arises for determination. the question is whether the insolvency court has jurisdiction to adjudicate upon claims based on the provisions of the maharashtra debt relief act, 1976 (hereinafter referred to as 'the act'), or whether such claims must be determined by the authorised officer constituted thereunder. in a large number of cases, whether they are petitions for orders of adjudication or notice of motion for setting aside insolvency notices, thisthreshold question arises. it was therefore, considered necessary that in the above-mentioned petition, this question be tried as a preliminary question. having regard to the pendency of the various other matters, in which this question.....
Judgment:
ORDER

1. In this creditors' petition for an order of adjudication, an interesting but neat question of law arises for determination. The question is whether the Insolvency Court has jurisdiction to adjudicate upon claims based on the provisions of the Maharashtra Debt Relief Act, 1976 (hereinafter referred to as 'the Act'), or whether such claims must be determined by the authorised officer constituted thereunder. In a large number of cases, whether they are petitions for orders of adjudication or notice of motion for setting aside insolvency notices, thisthreshold question arises. It was therefore, considered necessary that in the above-mentioned petition, this question be tried as a preliminary question. Having regard to the pendency of the various other matters, in which this question arises, counsel for the parties thereto, were permitted to address the Court on this question, Consequently, besides the learned counsel for the petitioning creditors and the debtors herein, counsel appearing in the other matters also addressed the Court. On behalf of the creditors, principal submissions were made by Shri Makhija, the learned counsel for the petitioning-creditors herein. He was supported by Shri Thakkar, Shri Chande and other counsel appearing on behalf of the various creditors in the other proceedings. On behalf of the debtors, main arguments were advanced by Shri S.V. Shah. He was supported by Shri C.K. Shah, Shri Vyas, Shri Hinduja and Shri Jaysinghani. Shri D. R. Zaiwala appeared amicus cu-riae. The arguments advanced at the bar have been grouped together and have been, for the sake of convenience, compendiously referred to as arguments of counsel for the debtors or those for the creditors.

2. The above-mentioned insolvency petition was filed on 18th January, 1974, by Messrs. Punjalal H. Shah, in respect of a debt of Rs. 1,447.31 p. being the balance on a decree on admission, obtained by the said petitioning-creditors in a Suit filed in the Court of the Small Causes, Bombay. The said petitioning-creditors were substituted from time to time. Ultimately, the present petitioning-creditors Sukhdeo Ramratan and another, came on the scene 'in respect of their claim of Rs. 5,226.17 ps., payable under an ex parte decree passed in their favour by the Bombay City Civil Court in Suit No. 1637 of 1972.

3. The petition is founded on the facts that an insolvency notice dated 16th October, 1973, was served on the debtors on 18th October, 1973, but the debtors did not adopt any proceedings to have the said insolvency notice set aside. Nor did the debtors comply with the said insolvency notice with the result that the act of insolvency was complete on 23rd November, 1973.

4. On behalf of the debtors an affidavit-in-reply was filed on 4th March, 1975. In the said affidavit-in-reply the main defences raised by the debtors were, that the firm M/s. Cosmic Corporation, of which they were the partners and in respect of the debts of which firm the said insolvency proceedings were adopted, was closed in November 1971. According to the debtors, the said firm was dissolved and did not exist since then. The debtors also mentioned about the proceedings adopted by them for extension of time to comply with the insolvency notice in question. On 22nd August, 1975, the Governor of Maharashtra promulgated the Maharashtra Debt Relief Ordinance, 1975, being Ordinance No. VIl of 1975. Having regard to the provisions of the said Ordinance, the debtors filed a further affidavit affirmed on 8th October, 1975, inter alia, claiming protection under the provisions of the said Ordinance. In the said affidavit, the debtors claimed that this Court had no jurisdiction to entertain the proceedings; The said Ordinance was replaced by the Maharashtra Debt Relief Act, 1976, which was brought in force on 3rd January, 1976. Consequent thereupon the debtors further filed an affidavit affirmed on 11th March, 1976, inter alia claiming protection under the Act and benefits conferred upon the workers and other debtors as provided thereunder.

5. The defences of the debtors, as disclosed by the three affidavits referred to above, relate to: (a) the defences based upon the provisions of the Act, (b) the defences arising out of the plea that the said firm of M/s. Cosmic Corporation was closed in 1971, and did not exist thereafter and (c) the plea that the debtors had made an application for extension of time for compliance with the insolvency notices upon which the petition is founded. The only defence that needs to be dealt with here is the defence relating to the provisions of the Act.

6. The facts relied upon, in support of the claims of the debtors based on the provisions of the Act, are to the effect that the first debtor viz., pramod M. Jhaveri is a broker and does not earn more than Rs. 400/- per month. The assets disclosed by the 1st debtor, by his affidavit affirmed on 27th March 1975, indicate that he hag no immoveable properties worth any name. The 2nd judgment-debtor viz., Smt. Jyotsna Pramod Jhaveri, claims that she does not do any business and is merely a house-wife. She admits being a partner in the said firm M/s. Cosmic Corporation. She claims that she does not own any immovable properties. From the affidavit of assets and liabilities dated 27th March, 1975, however, it may be observed that tenancy rightsin respect of a residential 'single' room at Bhartiya Bhavan (formerly servants quarter) at Marine Drive, is shown as part of the assets of the debtors. The said affidavit further shows that the tenancy rights in respect of the said premises stand in the name of the brother of the 2nd debtor. Some arguments were advanced in respect of this aspect of the matter but as it will be seen presently, it would be apposite, for determination of preliminary questions to assume without deciding that the debtors are workers within the meaning of the said Act and are covered by the provisions of the said Act.

7. Normally, a court decides the question of jurisdiction upon the basis of the averments made by the person who invokes its jurisdiction, whether he be a plaintiff or a petitioner. This however, does not mean that it is wholly impermissible for a court to refer to a written statement or a reply in order to determine whether it has jurisdiction to deal with claims or questions raised before it. In my opinion, there may be situations where it may be necessary or desirable for a Court to look into the defences in order to determine its jurisdiction. Such, for example, would be the case where a defence is based on a mandate of law which clearly bars the jurisdiction of the Court in respect of the subject matter of adjudication before it. Under the American legal system, it is one of the demur able situations. Under the American systems, a plea of demurrer is said to be 'an answer in law' (see New Jersey y. New York (1831) 8 L. Ed. 414 . in English law the pleas on demurrer in the High Court are regulated by the provisions of Rules of the Supreme Court. Even earlier thereto, legal pleas were allowed to be raised on demurrer. In fact, the concept of demurrer connoted as follows:--

'Demurrer is when any action is brought and the defendant pleadings a plea to which plaintiff answered that he will not answer for that it is not sufficient plea in law, and the defendant saith to the contrary that it is a sufficient plea and thereupon both parties doe submit the cause to the judgment of the court --then it is called a demurrer, for that they goe not forward in pleading, but abide upon the judgment of that point and is said, in the Latine used in the record, Moratur in liege'

(Terms de la Ley. Cf. Stroud: Judicial Dictionary ).

Even under the modern English practice in certain situations certain points are permitted to be raised on pleadings for decisions as preliminary issues. In Everett v. Ribbands (1952) 2 QB 198, Romer, L. J., said :--

'Where there is a point of law if decided in one way, is going to be a decisive of litigation advantage ought to be taken of the facilities afforded by the Rules of Court to have disposed of at the close at the pleadings or very shortly afterwards'.

8. Provisions of Order 14 also warrant pleas of legal character being dealt with as preliminary issues. I am persuaded to decide these pleas, more particularly because of an emphatic argument made on behalf of the debtors. It is urged that having regard to the injunction of Section 4 of the Act, this court has no jurisdiction to entertain the suit. Emphasising the word 'entertain', say, the counsel for debtors that the moment a defence is raised that the debtor is entitled to the protection of the provisions of the Act, even a question whether such a defence is bona fide or not will have to be determined by the forum constituted under the Act, viz., the authorised officer. It is not necessary for me to determine this subtle question of legal semantics. But such a contention is sufficiently compelling to call for determination of preliminary questions, J, therefore, proceed on the assumption that it is permissible for this Court to look into the nature of the defences raised. I also proceed on the assumption, without deciding, that the debtors are workers or debtors within the meaning of the said Act. These assumptions have been made to deal with the demur able pleas raised by the debtors. This course is largely dictated by the consideration that in some of matters which are before me to-day, it is indisputable that the debtors therein are workers or debtors factually covered and protected by the provisions of the Act.

9. The Maharashtra Debt Relief Ordinance 1975, was promulgated on 22nd August, 1975. It was conceived as a welfare measure seeking 'to provide for relief from indebtedness to certain farmers, rural artisans, rural labourers and workers'. The appointed day designated by the said Ordinance was the day on which it came into force viz., 22nd August, 1975. Section 2 (e) of the said Ordinance defined 'debt', Section 2 (f) defined 'debtor'; Section 2 (o) denned'worker'. Section 3 enumerated the consequences flowing from the commencement of the said Ordinance. It provided non obstinate clause for discharge of every debt outstanding on the appointed day. It also enumerated further consequences viz., non-recoverability of such debt; non-entertainment of suits and proceedings relating thereto and abatement thereof. The section also provided for release and return of the property pledged or mortgaged by the debtor covered by the said Ordinance. It contemplated the instrumentality of the police authorities or other authorities, to assist the debtor in the matter of securing delivery of the possession of the pledged- or mortgaged property.

10. Section 2 (2) of the said Ordinance is very material for the purpose of the present controversy. The said section reads as follows:--

'If a question arises whether a person is a marginal or small farmer, or a rural labourer, or rural artisan, or a worker, the question shall be referred to an officer not below the rank of a Tahsildar duly appointed by the State Government in that behalf, and the decision of such officer on the question shall be final and conclusive and shall not be called in any civil court;

Provided that no such question shall be decided unless an opportunity has been given to such person to be heard.'

11. The Act which replaced the Ordinance, by Section 3 thereof, revives all debts covered by the said Ordinance. It further provides that 'the provisions of the said Ordinance as amended by this Act as herein provided shall operate in relation to all such revived debts, as if those provisions were always amended and in operation on the appointed day.' The Act comprises of six Chapters and 23 sections. The Act makes several departures from the provisions of the Ordinance.

12. Section 2 (e) of the Act defines debt. It provides;

' 'Debt' means any liability, in cash or kind, outstanding on the appointed day, being a liability arising out of a loan (with interest if the loan is taken by a worker and with or without interest, in any other case), whether secured or unsecured, due from a debtor whether payable under a decree or order of any court or otherwise.'

13. The expression, 'arising out of a loan' being the qualifying expression for the liability is an innovation not to be found in the corresponding provision of the Ordinance. Section 2 (f) which defines 'debtor' also makes a departure and alters the parameter. It provides for a total annual income of a worker as not exceeding Rs. 6,000/-, if living in an urban area and not exceeding Rs. 4,800/-, if living elsewhere. The corresponding provisions in the Ordinance provided for the limit of Rs. 2,400/- per annum. Section 2 (o) of the Act defining 'worker', retains the formulae thereof to be found in the Ordinance, save and except that the said Section 2 (o) deletes qualifications as to income mentioned in the corresponding provisions of the said Ordinance.

14. The Act omits Section 2 (2) of the Ordinance which provided for reference to the officer contemplated thereunder and thereby contemplated exclusion of the jurisdiction of the civil court in respect thereof. The Act however, makes provisions in Sections 11 and 12 thereof in respect of the bar of jurisdiction of the civil court or in respect of references to be made in regard to the issues which are required to be settled or decided or dealt with by the authorised officer constituted under the Act. Departing from the wide phraseology of Section 2 (2) of the Ordinance viz., 'whether a person is a marginal or a small farmer or a rural labourer, or rural artisan, or a worker, the question shall be referred to an officer', Section 11 (1) of the Act merely provides; 'no civil court shall have jurisdiction to settle, decide or deal with any question which is by or under this chapter required to be settled, decided or dealt with by the Authorised Officer'. Sub-section (2) of Section 11, further provides that 'no order of the State Government or of any officer or authority made under this Chapter shall be questioned in any court'. The said Chapter is Chapter III which provides for 'Liquidation of certain debts'. Section 12 provides for reference. It ordains in subsection (1) thereof, 'if a suit instituted in any Civil Court, involves any issues which are required to be settled, decided, or dealt with, by the Authorised Officer under this Act, the civil court shall stay the suit and refer such issues to the Authorised Officer for determination'. Subsection (2) of Section 12 provides for the procedure on reference.

15. Section 7 of the Act provides for procedure where a creditor disputes a debtor's claim. It contemplates adjudication of such questions and disputes by the Authorised Officer. Section 7 (1)provides that in case a creditor raises 'a question that the person who claims to be his debtor is not a marginal farmer, a rural artisan, a rural labourer or, as the case may be, a worker, or disputes the eligibility of the debtor for relief under this Act on any other ground including the valuation of the immoveable property, if any, of a worker, then the creditor 'shall make an application in writing' to the Authorised Officer. Sub-section (2) provides for such an application, and inter alia requires such an application be made within 7 days from the happening of two alternative contingencies mentioned therein. Sub-section (3) of Section 7 provides that application of the creditor shall not be entertained by the authorised officer unless the creditor deposits the pledged property or documents relating to pledge or both or the value of such property if the property is not available. Sub-sections (4), (5), (6) and (7) of Section 7 prescribe procedure and confer powers on the Authorised Officer. Sub-section (8) of Section 7 inter alia provides that the decision of the authorised officer shall be final and conclusive and shall not be called in question in any civil court.

16. The learned counsel for the debtors submit that upon a true construction of the provisions of Sections 4, 7, 11 and 12, the claim of the debtors for protection under the provisions of the Act is beyond the pale of the jurisdiction of this Court. The learned counsel submits that a question or claim which relates to the status of the debtor as a worker or the qualification of the debt in question for immunity under the Act, is a question or a claim which by the express provision of the Act or by necessary implications flowing therefrom, has to be determined by the Authorised Officer. According to the learned counsel, provisions of Section 4, more particularly (b) and (c) thereof read with Sections 11 and 12 remove determination of all claims and questions arising under the Act from the province of the Civil Courts and transport them to the Authorised Officer for his exclusive adjudication.

17. Against the arguments of the learned counsel for the debtors, the contention raised on behalf of the creditors is that the Act does not apply to insolvency proceedings because insolvency proceedings are not intended to enforce a debt. It is submitted that Insolvency Court has exclusive jurisdiction to try all claims arising in an insolvency proceeding. Say the learned counsel that under:the Act there is no express bar to this Court entertaining disputes as to whether a debtor is a worker within the meaning of the said Act or as to whether the debt on which the insolvency proceedings are founded qualifies for the benefits of the Act. The learned counsel submit that there is no exclusion of the jurisdiction of this Court even by the necessary implication, regard being had to the relevant provisions of the Act or the scheme unfolded thereby.

18. The conflict between the two view points canvassed before me, will have to be resolved with reference to the provisions of the Act, as also the relevant provisions of the Presidency Towns Insolvency Act (hereinafter referred to as the 'Insolvency Act'). It will have to be determined as to whether (i) the provisions of the Act or immunities conferred thereby or the embargoes postulated thereunder cover the insolvency proceedings and if go, (ii) which is the forum for adjudging questions or the claims pertaining thereto.

19. The jurisdiction of this Court to administer insolvency law is rooted in its charter. Clause 18 of the Letters Patent confers upon it powers and authorities, 'with respect to original and appellate jurisdiction and otherwise as are constituted by the laws relating to insolvent debtors in India'. Sections 3, 4, 5, 6 and 7 of the Insolvency Act provide for constitution and the powers of the insolvency Courts. Section 7 is a very material section. It inter alia confers upon the insolvency Court 'full power to decide all questions of priorities and all other questions whatsoever, whether of law or fact which may arise> in any case of insolvency coming within the cognizance of the Court or which the Court may deem it expedient or necessary to decide for the purpose of doing complete justice or making a complete distribution of property in any such cases.'

20. The genesis, nature and content of the insolvency proceedings have been succinctly expounded in Halsbury's Laws of England, 3rd Edn. Vol. 2 at page 250, paragraph 463. The learned Author writes:

'Bankruptcy is a proceeding by which the. State takes possession of the property of a debtor by an officer appointed for the purpose, and such property is realised and, subject to certain priorities, distributed rateably amongst the persons to whom the debtor owes money or has incurred pecuniary liabilities,'

21. Undoubtedly, as also enunciated by Henley in Bankrupt Law (3rd Edn. Page 1), one of the chief aims of the law of Bankruptcy is, 'the distribution of the effects of the debtor in the most expeditious, the most equal and the most economical mode'. These objects of the law of Insolvency have been given statutory effect and are sought to be subserved, by the provisions' of the Insolvency Act; more particularly by Section 17, Sections 33 to 37 and Sections 46 to 76 thereof. The provisions of the Insolvency Act and the Letters Patent of this Court leave no manner of doubt that the proceedings under the provisions of the Insolvency Act before this Court are the proceedings of civil nature and pertain to the ordinary original civil jurisdiction of this Court. This aspect of the matter is concluded by the judgment of the Privy Council in In the matter of Candas Narrondas; Navivahas v. C. A. Turner, Official Assignee, reported in ILR (1889) 13 Bom 520 (PC).

22. An insolvency petition filed by the creditor for an order of adjudication under Section 13(2) of the Insolvency Act, requires proof of (a) the debt of the petitioning creditor and (b) and the act of insolvency. It is settled law that the debt must exist before the act of insolvency is committed by the debtor. A catena of cases both in England and India have established the legal principles that such a debt must exist at the time of the presentation of the petition; and that it must continue to exist at the hearing thereof as also at the time of making of the order of adjudication (see M/s. Bhimji Nanji and Co. : (1969)71BOMLR638 ; also Ex Parte Hammond (1873) LR 16; Re Stables (1894) 1 Mans. 68; Re A Debtor v. Scott (1954) 3 All ER 74; Ahmed Mahmomed v Praphulla Nath Tagore : AIR1939Cal35 .

23. In the light of the foregoing discussion as to the nature of the insolvency proceedings and the requirements of a creditor's petition to sustain an order of adjudication, it may now be seen as to whether these proceedings or the claims arising therein come within the provisions of the Act. Section 2(e) Of the Act defines debt. It takes in 'a liability arising out of a loan'. The said definition embraces all loans whether they are secured or unsecured or whether they were payable under a decree or an order of any court or otherwise. Thus, a debt on which a creditor's petition is founded will fall within the concept ofliability contemplated by Section 2 (e) of the Act, provided however, such a liability arises out of a transaction of loan. Consequently, all petitions or acts of insolvency referable to liabilities arising out of loan transactions come within the purview of the definition of debt in Section 2 (e) of the Act, provided debt relates to a person who is covered by the 2 (o) of the said Act. In other words, a combined provisions of Sections 2 (f) and person who earns his livelihood through any profession, calling or trade including a Badli worker, will be entitled to the benefits of the Act provided his total income 'from ail sources did not exceed, if living in an urban area six thousand rupees during the year immediately before 1st August, 1975, and if living elsewhere, four 'thousand and eight hundred rupees during that year'.

24. Section 4 is the key section of the Act. It ordains that every debt of a worker whose immoveable property if any, does not exceed Rs. 20,000/- in market value and every debt of any other debtor outstanding on the appointed day, shall be deemed to be wholly discharged. Section 4 is a non obstinate provision. It also provides for a legal fiction. A non obstinate clause and a legal fiction created by a law, must be given full effect. Consequently, it must be held that the debt including the debt which is foundation of an insolvency proceeding, if it answers the description thereof under the provisions of the Act must be held to be wholly discharged, The expression 'wholly discharged' must mean discharged for all intents and purposes including for the purposes of furnishing a cause of action for an insolvency proceeding or an order therein.

25. Provisions of clauses (a), (b) and (c) of Section 4 also reinforce the aforesaid position. The said clause (a) is in three parts. It interdicts (i) recovery of the debt from a debtor; (ii) recovery of debt from or against any moveable' or immovable property belonging to a debtor and (iii) proceeding against such properties by way of attachment or sale in any manner in execution of a decree, or order relating to such debt. The second interdict aforesaid viz., against the recovery of a debt by realisation, from and out of moveable or immovable properties would cover insolvency proceedings. By its very definition and content an insolvency proceeding is an equitable mode of enforcement of debt and liabilities' orrecovery of such debts or discharge ofliabilities by realisation of the assets ofthe insolvent and by distribution thereofamongst the body of creditor.

26. The expression 'civil court' mentioned in clause (b) of Section 4 must be held to take in the insolvency court deriving its powers and authorities from the Letters Patent of this Court and the provisions of the Insolvency Act. The expression 'proceeding' contained in the said clause has a wide denotation. The word proceeding is a web of several con-aspectual strands. It is a word of multiple import. It has a wide spectrum of variable shades of meanings. It is capable of a narrow as also a wide connotation. The interpretation of such an expression, therefore, largely depends upon the nature of the statute in question, the collocation of words in which it is found and the objectives the Act is designated to subserve. The expression must, of necessity, take its colour from intendments of the Act or the remedies provided thereby or the mischief sought to be remedied by it. The. Act is conceived as a social welfare legislation to provide relief from indebtedness. Insolvency being one of the modes in which the indebtedness of a debtor can be enforced through the instrumentality of an insolvency court, any legislative provision for relief therefrom must be held to include a relief from the claims in insolvency proceedings in respect of indebtedness of a person covered by the Act. The plain intendment of the Act is to remedy the mischief arising out of loan transactions. This cannot be fully eradicated if the coverage of the Act is denied to a vital and a sensitive area where debtors are subjected to the extraordinary remedies of the 'Civil death' or compulsory vesting of their properties in an officer of the State entrusted with the obligation of distributing the realisations thereof amongst his creditors.

27. Moreover, the expression 'proceeding' immediately follows the word 'suit'. It must take, its colour from the said expression. Even otherwise the word 'proceeding' includes 'a prescribed course of action for enforcing a legal right', (see 'Words and Phrases' at p. 83 C. F. Prem's Judical Dictionary, (1964) Vol. III at page 1310). An insolvency proceeding is for the enforcement of a right of a creditor. It partakes all the trappings of a judicial procedure which characterises the trial of suits or civil actions. I am therefore of opinion that theprovisions of clause (b) of Section 4 also apply to the insolvency proceedings. Clause (c) in using the expression 'suits and proceedings' keeps company with clause (b). It also has to be read Noscitur a Sociis. Therefore, clause (c) also must be held to apply to insolvency proceedings based on a debt covered by the Act.

28. The conspectus of Section 2 (e), (f) and (o) and Section 4 as also the principles enshrined therein, when seen in the setting of the intendments, scheme and the purposes of the Act must lead to an inference that a debt payable by a worker whose income during the period of one year immediately before the 1st August, 1975, did not exceed Rs. 6,000/-if he lived in an urban area as denned by the said Act or did not exceed Rs. 4,800/-if he lived elsewhere, must come within the reach of the said Act. This debt includes all liabilities of such a debtor arising out of a transaction of a loan. The impact of Section 4 on such a debt is its total annihilation. The categorical imperative of Section 4 is that all debts falling within the coverage of the Act and of a person answering the description contained therein if outstanding on the appointed day, that is to say, 22nd August, 1975, must be treated as wholly discharged. In so far as the existence of a debt is sine qua non for an insolvency proceeding more particularly a creditor's petition based on non-compliance with the insolvency notice or in so far as such a debt sustains an insolvency notice or an act of insolvency arising from non-compliance thereof, it must be held that all debts which come within the mischief of the provisions of Section 4 would become non est and would be incapable of sustaining any such proceedings in insolvency, as are of necessity, referable to such debts. I therefore reject the contention of the learned counsel for the creditors that an insolvency proceedings or the claims arising in insolvency proceedings are outside the traditional periphery of the provisions of the Act. I hold that the Act is applicable to insolvency proceedings also.

29. The application of the provisions of the Act to the insolvency proceedings based on a creditor's claim to a debt immunised by the Act having been held, the only question which remains to be considered is whether a claim by a debtor that he is a worker or a debtor within the meaning of the Act or that he is otherwise entitled to benefits or theprotection of the Act can be decided by the Insolvency Court. As is stated above, an Insolvency court, in any case, this Court exercising insolvency jurisdiction is a civil court. It is a court of record constituted by its Letters Patent. It therefore, is a superior court. The canon of construction applicable to the cases where questions arise as to the exclusion of the superior courts is that such an exclusion is not to be inferred unless and until there are express words in the statute or that such an exclusion can be inferred by necessary implication. In Board of Governors of the London Hospital v. Jacobs, reported in (1956) 2 All ER 603, a question arose as to whether a certificate issued under the provisions of Housing Repairs and Rents Act, 1954, was binding on the court and excluded the jurisdiction of the court to review it. It was argued on behalf of the landlords that issuance of the certificate from the local authority and a declaration made under the said Act which satisfied the provisions thereof, were binding and 'the powers of the court were wholly ousted in regard to any challenge by the tenant to a declaration of fulfilment by the landlord'. In repelling the said contention Lord Evershed, M. R., observed at page 607 of the report as follows:

'the point submitted on behalf of the landlords seems to me of so far-reaching a character that I find it unnecessary to express at any length the grounds for the view that I take, grounds which rest on principles of very longstanding namely, that very clear words will be required to oust altogether the jurisdiction of the Queen's courts in matters of private rights.'

30. The principle of longstanding referred to by the learned Judge above, is a principle which was articulated emphatically as far back as 1842, by Tindel, C. J., in Albon v. Pyke, reported in (1842) 4 M. &C.; 421, the learned Chief Justice expounded that:

'The general rule undoubtedly is that the jurisdiction of superior Courts is not taken away except by express words or necessary implication.'

31. In India the statutory recognition of the principle is to be found in Section 9 of the Code of Civil Procedure. The said section provides that the civil courts have jurisdiction to try all the suits of a civil nature excepting suits of which their cognizance is expressly orimpliedly barred. The section makes no distinction between a superior or an inferior court. It puts all civil courts at par.. In Dhulabhai v. State of Madhya Pra-desh, reported in : [1968]3SCR662 , the Supreme Court was called upon to consider the question of exclusion of the jurisdiction of the civil courts. At page 81, the Supreme Court enunciated the principle in the following words:--

'At the very start we may observe that the jurisdiction of the civil courts is all embracing except to the extent it is excluded by an express provision of law or by clear intendment arising from such law. This is the purport of Section 9 of the Code of Civil Procedure. How Section 9 operates is perhaps best illustrated by referring to the categories of cases, mentioned by Willes, J., in Wolverhampton New Waterworks Co. v. Hawkesford (1859) 6 CB 336. They are: 'one is where there was a liability existing at common law, and that liability is affirmed by a statute which gives a special and peculiar form of remedy different from the remedy which existed at common law; there, unless the statute contains words which expressly or by necessary implication exclude the common law remedy the party suing has his election to pursue either that or the statutory remedy. The second class of case is, where the statute gives the right to sue merely, but provides no particular form of remedy there, the party can only proceed by action at common law. But there is a third class, viz., where a liability not existing at common law is created by a statute which at the same time gives a special and particular remedy for enforcing it. The remedy provided by the statute must be followed and it is not competent to the party to pursue the course applicable to oases of the second class'.

32. In my opinion, the principle of construction which upon the dicta of Willes, J., is applicable to 'right to sue' cases mentioned above, also applies to 'right to defences or immunities' cases because right to defences or immunities is a jural correlative of right to sue'. Thus in cases where statutory defences or immunities are given but no particular form of remedy for adjudication of such defences or enforcement of such immunities are given parties claiming immunities have to proceed by an action at the common law. In other words, such defences and immunities or corresponding obligations arising therefrom have to be agitatedbefore a Court of competent jurisdiction in an action filed in that behalf.

33. As observed above, the Ordinance by Section 2 (2) thereof expressly excluded the jurisdiction of the courts by providing in terms, 'if a question arises whether a person is a marginal or small fanner, or a rural labourer, or rural artisan, or a woker, the question shall be referred to an officer not below the rank of a Tahsildar duly appointed by the State Government in that behalf, and the decision of such officer on the question shall be final and conclusive and shall not be called in question in any civil court'. This was the legislative barricade raised by the said section against the courts deciding a question as to the status of a debtor as a worker or as a person belonging to the other categories benefited by the said Act. This provision is however, been omitted in the Act. In my opinion, the omission by the legislature is intentional and deliberate. This is further buttressed by the fact that in Sections 11 and 12, phraseology used by the Legislature is different. It is an established law that a change of language in an amending or repealing Act postulates a change of law. (See S. V. Natesa Mudliar v. Sri Dhanpal Bus Service Pvt Ltd., : AIR1964Mad136 (FB) ).

34. The contention raised on behalf of the debtors that all the claims of a debtor arising under the Act are the matters which have to be 'settled, decided or dealt with by the authorised officer' is not wholly correct. It is only partially true. In other words only claims which relate to release and delivery of possession of security fall within the scope of authorised officer's authority. In this connection it would be necessary to turn to the provisions of Sections 4, 6, 7, 9, 10, 11 and 12 of the Act.

35. Section 4 can be divided in three parts. The first part comprises of the opening clause. The second part comprises of clauses (a), (b), (c) and (d) thereof. The third part comprises of clause (e). The first part of Section 4 deals with the debts. It provides for discharge of all debt whether secured or unsecured. Consequences of such discharge debts as debts simpliciter are dealt with in second part viz., clauses (a), (b), (c) and (d), whereas third part deals with the properties pledged or mortgaged by the debtor their release and return to the debtors.

36. Clause (e) of Section 4 provides that such properties as are pledged and mortgaged by a debtor must be returned to the debtor forthwith on the debtor making an application in writing in that behalf. It enjoins upon the creditor to pass a receipt to the debtor of having received an application. In cases, where the creditor refuses to pass a receipt the debtor is given liberty to have his application endorsed to the said effect by an officer referred to in Section 6 of the Act. Under Section 6, in the event of the creditor failing to return the property pledged or mortgaged by a debtor, the Police Commissioner or the District Magistrate or the other authorities mentioned therein are obligated to take or caused to be taken such steps or use or caused to be used such force as might be reasonably necessary for securing delivery of possession of the properties pledged or mortgaged by the debtor.

37. Counsel for the debtors emphasises the opening words in Sub-section (1) of Section 7. The opening words are to the effect that 'if, in the course of implementing the provisions of Section 4' a dispute arises as to the eligibility of the debtor for relief' under the Act, 'on any other ground including the valuation of the im-moveable property if any' then the creditor has to make an application in writing to the authorised officer. It is true that the opening words of Sub-section (1) of Section 7 mention the provisions of Section 4 as a whole and do not refer to any specific clause thereof. But in my opinion reading Section 7 as a whole, the reference to Section 4 in opening part of Sub-section (1) of Section 7 must be said to be a reference only to clause (e) of the said Section 4. The governing concept in Sub-section (1) of Section 7 is, implementation of the provisions of Section 4'. The implementation to which the said Sub-section (1) refers is the implementation in regard to return of the pledged or the mortgaged properties belonging to the debtor and which implementation has to be done through the instrumentalities of the authorities mentioned in Section 6. It cannot be said that when the courts give effect to the consequences enumerated in Clauses (a), (b), (c) and (d) of Section 4, the courts can be said to be the instrumentalities charged with the task of implementing the provisions of the said Section 4. The courts do not implement the provisions of law. The courts merely enforce the rights and liabilities recognised by law. Halsbury's Laws of England 4th Edn. Vol. 2, paragraph 502 at page 255 suggests the principle succinctly:

'A judicial process is concerned with the ascertainment, declaration and enforcement of rights and liabilities as they exist, in accordance with some recognised system of law.'

38. The aforesaid exposition of law by Halsbury is based on the dicta of the Australian High Court (Issacs and Rich, JJ.) in Waterside Workers Federation v. J. W. Alexander Ltd (1918) 25 CLR 434 . The said dicta received imprimatur of the Privy Council in Attorney-General of the Commonwealth of Australia v. Raginam and the Boiler-makers' Society of Australia reported in (1957) 2 All ER 45. In Regi-nam's case (supra) the Privy Council was concerned with the doctrine of separation of powers enshrined in the Constitution of the Commonwealth of Australia in the context of the competence of Federal Parliament. In our country also, the same jurisprudential approach is postulated by the Constitution. It is therefore, said that legislation can remove the basis of a decision rendered by a competent court but it cannot set at naught Judicial orders directly (see Ahmedabad Corporation v. New Shrock Weaving & Spinning Co. : [1971]1SCR288 ). Thus all that clauses (a) (b), (c) and (d) of Section 4 do is to provide legal basis for court's decision. In other words, when the courts take cognizance of the injunctions contained in the provisions of Clauses (a), (b), (c) and (d) of Section 4, the courts merely enforce the rights which accrue to the debtors therein or recognise immunities granted to the debtors concerned, or effectuate legal disabilities of the creditors in that behalf. The courts merely work out rights, liabilities and obligations created by the said provisions. Any other construction of the said provisions will be at variance with the basic tenets of Indian Constitutional polity and will expose the said provisions to the vice of unconstitutionality. Such an interpretation has to be eschewed. I take the view that in taking cognizance of the provisions of Section 4, Courts cannot be said to be implementing the said provisions.

39. There is a further reason to hold that the provisions of Sub-section (1) of Section 7 refer to contingencies arising under clause (e) of Section 4. Sub-section (1) of Section 4 provides for an application to an authorised officer by a creditor. Thus 'an application' in Sub-section (1) becomes 'the application' inSub-section (2) of Section 7. Sub-section (2) provides that such an application should state the 'facts of the case in brief and the point raised for the decision of the authorised officer'. More importantly, it also provides that such an application should be made 'within 7 days from the date of receipt of the application by the creditor, under clause (2) of Section 4 or from the date of the endorsement made on the application under the clause. This period of 7 days mentioned in Sub-section (2) shows that the application by the creditor can have no reference to the situations contemplated by clauses (a), (b), (c) and (d) of Section 4. It cannot be said that Sub-section (2) of Section 7 provides for two different situations: its earlier part viz., statement of facts of point to be raised 'deals with all applications-whether relating to clauses (a) to (d) clause (e) of Section 4, and the latter part deals only with particular situations mentioned in clause (e) of Section 4. This will be a wrong reading of Sub-section (2) of Section 7. Sub-section (2) has to be read as a whole. It cannot be contemplated that the said Sub-section in its two parts deals with two different situations differently. This would make the provisions of the said Sub-section (2) ambiguous.

40. Sub-section (3) of Section 7 also underpins the fact that sub-section (1) of Section 7 merely deals with situations covered by clause (e) of Section 4. Sub-section (3) categorically provides that 'no application under this section shall be entertained by the authorised officer unless the creditor either deposits the pledged property or any document evidencing such pledge or both or the value of such property if the property for any reason is not available with the creditor' , It would be absurd to suggest that application relating to clauses (a), (b), (c) and (d) of Section 4 would be subject to the conditions precedent of deposit of pledged property or documents of pledge, particularly when in cases covered by the said clauses the debts may be wholly unsecured and there may not be any pledged property involved in connection therewith. Sub-section (3) therefore, upon its plain and unambiguous language must of necessity be held to refer only to all cases arising under clause (e) of Section 4. Thus, when Sub-section (3) of Section 7 refers to an application under this Section it must be deemed as referring to all applications under Section 7 and all these applicationsroust of necessity be the applications referable to clause (e) of Section 4 of the Act. Any other interpretation would render the expressions 'no application under this section' occurring in Sub-section (3) of Section 7 and the expression 'shall be made within 7 days from the date of the receipt of the application by the creditor under clause (e) of Section 4 or from the date of the endorsement made on the application under that clause' occurring in Sub-section (2) of Section 7 otiose or redundant or meaningless in so far as such an interpretation brings within the ambit of Section 7 (1) applications referable to clauses (a), (b), (c) and (d) of Section 4. I am therefore of opinion, that applications contemplated by Sub-section (1) of Section 7 deal with the situations covered by clause (e) of Section 4.

41. By an express intendment of Sub-section (6), the jurisdiction of the authorised officer is confined to such questions as are raised by the creditor in his application. The said Sub-section enumerates powers of the authorised officer. The ambit of the powers mentioned therein, however, is governed by the perimeter of the disputes 'raised by the creditor in his application'.

42. From the above analysis of Section 7 the view that emerges is that the only cases where a creditor refused to release the pledged or mortgaged property to the debtor and disputes the claim of the debtor in that behalf that the creditor has to make an application to the authorised officer. Such an application has to be made within 7 days from the receipt of the application by the creditor under clause (e) of Section 4 or from the date of the endorsement mentioned therein. As a condition precedent for entertainment of such an application the creditor has to deposit the pledged or mortgaged property or documents of the pledge or mortgage or both or the value of such property if the property is not available with the creditor. In such an application the creditor is entitled, as contemplated by Sub-section (1) of Section 7, to dispute that the person concerned is not a worker or can dispute 'the eligibility of the debtor for relief under the Act on any other grounds including the value of immovable property if any'. These are the only questions which a creditor can raise. The jurisdiction of the authorised officer is to determine all questions in relation to orconnected with the questions or disputes which can be raised by the creditors in their applications. Having regard to the words of limitations found in sub-SECTION- (6) of Section 7 viz., 'all questions in relation to or connected with, the questions or disputes raised by the creditor in his application', it must be held that the authorised officer has no jurisdiction to decide questions or disputes which are not capable of being raised by the creditor in his application to the authorised officer. The authorised officer is not required by the Act to go into questions or claims pertaining to debts simpliciter.

43. Reliance was placed on behalf of the debtors on a judgment of a Division Bench of this Court in Appeal No. 144 of 1975, from Insolvency Petition No. 10 of 1975 (unreported: Kantawala, C. J. and Naik, J. dated 8th October, 1975) (Bom). The said judgment was followed by Madan, J., in Insolvency Petition Nos. 115, 126 and 225 of 1975 (Bom) (unreported: dated 8th October, 1975). The ratio of the said decision, however, is not helpful inasmuch as the said decision rested on the mandate of Section 2 (2) of the Ordinance. The said provision has been omitted in the Act. The scheme of the Act is also different from that of the Ordinance. As already seen above the Act makes departures from the provisions of the Ordinance in regard to several material aspects.

44. In my opinion, an authorised officer is entitled to settle, decide or deal with, questions which can be raised by a creditor in his application under Section 7, that is to say, claims arising in connection with release and delivery of possession of 'property pledged or mortgaged by' a debtor. That being so, civil courts have jurisdiction to adjudicate upon and adjudge-all claims, questions and disputes other than those which are raised by the creditor in his application under Section 7. As held above, the applications contemplated by Section 7 of the Act do not take within their sweep claims, questions and disputes pertaining to clauses (a), (b), (c) and (d) of Section 4 in so far as the said disputes relate to unsecured debts or merely to debt aspect of secured debts as contradistinguished from security aspect thereof. In my opinion, the mischief of Sections 11, and 12 does not extend to the cases of unsecured debts or debt-aspects of secured debts, which matters being within the purview of clauses (a) (b), (c) and (d) thereof, have to be dealt by the civil courts concerned.

45. In the result, I hold that this court has jurisdiction in cases of unsecured debts or mere debt-aspects of secured debts to decide as to whether the debtor concerned is a worker or is a debtor within the meaning of the Act or is otherwise entitled to the benefit or the protection of the provisions of the Act Accordingly, the preliminary objections raised on behalf of the debtors as to the jurisdiction of this Court are rejected.

46. The petition shall proceed for determination of the other issues arising therein.

47. Order accordingly.


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