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Kempamma Vs. Sha Devichand Misrimal and Co. - Court Judgment

LegalCrystal Citation
SubjectCommercial
CourtKarnataka High Court
Decided On
Case NumberC.R.P. No. 14 of 1980
Judge
Reported inILR1985KAR2426; 1985(2)KarLJ180
ActsKarnataka Debt Relief Act, 1976 - Sections 3 and 8
AppellantKempamma
RespondentSha Devichand Misrimal and Co.
Appellant AdvocateB.M. Chandrashekharaiah, Adv.
Respondent AdvocateT.S. Ramachandra, Adv. for R-1 and 2; ;M. Dasappa, Adv. for R3 and 4
DispositionRevision dismissed
Excerpt:
.....the transaction would not amount to a debt at all.;(ii) the court can, even while interpreting the debt relief act, go into the real nature of the transaction when it was really entered into between the parties.;revision dismissed - clause 2.2(b): [dr. k. bhakthavatsala, j] benefit under the scheme petitioners request for grant of pension under the scheme was rejected - non-fulfilment of the eligibility criteria by the petitioner- held, since the petitioner has not fulfilled the required conditions as per the swatantra sainik sanman pension scheme, specifically clause 2.2(b) of the swatantra sainik sanman pension scheme, the petitioner is not entitled for the pension. merely because he has been granted pension under the state scheme, is not ipso facto entitled to central pension under..........nature of the transaction resulting in the decree and to show that the provisions of the karnataka debt relief act, 1976, (k.d.r. act' for short), are not applicable to the transaction in question in view of section 8(h) of the k.d.r. act.2. respondents 1 and 2 are the decree-holders. the revision-petitioner and respondents 3 and 4 are thejudgment debtors. the decree-holders are undisputedly wholesale cloth merchants. the revision-petitioner andrespondents 3 and 4 are retail cloth merchants. it is undisputed that the revision-petitioner and, respondents 3 and 4 were purchasing cloth from the decree-holders and that there was a settlement of account under which the revision-petitioner and respondents 3 and 4 were liable to pay rs. 30,000/- at the foot of the accounts.3. according to the.....
Judgment:
ORDER

Kulkarni, J.

1. This a third judgment-debtor's revision against the order dated 21-11-1979 passed by the Principal Civil Judge, Mandya, in Execution Case No. 174 of 1977, on his file, allowing the plaintiffs to adduce evidence to show the nature of the transaction resulting in the decree and to show that the provisions of the Karnataka Debt Relief Act, 1976, (K.D.R. Act' for short), are not applicable to the transaction in question in view of Section 8(h) of the K.D.R. Act.

2. Respondents 1 and 2 are the decree-holders. The Revision-Petitioner and respondents 3 and 4 are thejudgment debtors. The decree-holders are undisputedly wholesale cloth merchants. The Revision-Petitioner andrespondents 3 and 4 are retail cloth merchants. It is undisputed that the Revision-Petitioner and, respondents 3 and 4 were purchasing cloth from the decree-holders and that there was a settlement of account under which the Revision-Petitioner and respondents 3 and 4 were liable to pay Rs. 30,000/- at the foot of the accounts.

3. According to the decree-holder, the Revision-Petitioner and respondents 3 and 4 executed a simple mortgage deed on 17-12-1969 for Rs. 30,000/-, which was the sum arrived at on the settlement of accounts due at the foot of the accounts. The decree-holders, after giving deduction to the amounts paid, filed Original Suit No. 67 of 1973 for recovery of the amount on the strength of the mortgage deed, alleging in the plaint that the consideration of Rs. 30,000/- mentioned in the simple mortgage deed, was the amount found due on the settlement of accounts of accounts on the cloth purchased by the Revision-Petitioner and respondents 3 and 4 from the decree-holders. The said suit was decreed for Rs. 38,51l-60p.

4. Thereafter, the decree-holders sued out Execution Case No. 174 of 1977 for recovering the said decretal amount. The Revision-Petitioner and respondents 3 and 4, who are the judgment-debtors, contended that they are debtorswithin the meaning of the K.D.R. Act and that thus the debt stood wiped out or discharged and thus they are not liable to pay the decretal amount to the decree-holders.

5. The decree-holders, on the other hand, contended that the Revision-Petitioner and respondents 3 and 4 were not debtors within the meaning of the K.D.R. Act and that even if they are assumed to be debtors under the K.D.R. Act, the said amount is in respect of goods sold and thus it did not amount to a debt within the meaning of the K.D.R. Act and thus, the amount in question was one which came within the exception mentioned in Section 8(h) of the K.D.R. Act. For this purpose, they wanted to show the real nature of the transaction covered by the decree and for that purpose, they wanted to lead evidence. The Revision-Petitioner and respondents 3 and 4 contended that the Court could not go behind the decree at all and should not permit the decree-holders to adduce evidence to show the nature of the transaction which culminated in the decree.

6. The word 'debt' has been defined by Section 3(b) of the K.D.R. Act as :

''debt' means any liability in cash or in kind, whether decreed or not and includes any amount which is in substance a debt, but does not include arrears of taxes due to the Central or State Government or a local authority; '

Section 4 of the K.D.R. Act gives relief from indebtedness. It reads as :

'4. Relief from indebtedness : - Notwithstanding anything in any law for the time being in force or in any contract or instrument having force by virtue of any such law and save as otherwise expressly provided in this Act, with effect from the date of commencement of this Section,-

(a) every debt advanced before the commencement of this Section including the amount of interest, if any, payable by the debtor to the creditor shall be deemed to be wholly discharged ;

(b) no Civil Court shall entertain any suit or proceeding against the debtor for the recovery of any amount of such debt including interest, if any....etc., etc.'

Learned Counsel Shri Ramachandra, for the decree-holders. drew my attention to Section 8(h) of the K.D.R. Act, which reads as :

'8. Certain debts and liabilities not to be affected :

Nothing in this Act shall affect the following categories of debts and liabilities of small farmers, landless agriculturallaborers and weaker Sections of the people, namely :-

(h) any debt which represents the price of goods purchased by such debtor.'

7. It has been laid down by this Court in Ganesh Bisto Desai - v. - Nagesh Bisto Desai, 1977 (2) K.L.J. 476 thus :

'To be entitled to relief under the Act, the claimants must show that two conditions coalesce. The first is that they must show that they are debtors by the statutory standards. Secondly, they must show that the transaction respecting which they claim relief is and the liability thedischarge of which they seek arise out of a 'debt advanced'. These two conditions must coexist.'

In the said case, the question involved was whether the costs awarded in the suit would amount to a 'debt' within the meaning of the K.D.R. Act. It was held that the costs did not amount to a 'debt' within the meaning of the K.D.R Act.

8. The definition of the word 'debt' in Section 3(b) of the K.D.R. Act means any liability in cash or in kind, whether decreed or not and includes any amount which is in substance a debt. Therefore, in order to constitute atransaction as a debt, it should amount to a liability in cash or in kind, which is in substance a debt. Therefore, the crux of the matter is as to what is the real nature of the transaction entered into by the judgment-debtors. The nature of the transaction would be with reference to the time when it was advanced. The subsequent alteration of the transaction is not of much importance in such matters. The initial nature of the transaction when the liability was incurred is alone the criteria in order to determine the nature of thetransaction. The stress is on the word 'advanced'. The amount should be advanced as a debt. If it is not advanced as a debt then the transaction would not amount to a debt at all. The word 'advanced' came to be interpreted by Sabhahit, J., in A.I.R 1979 Karnataka 83 Venkatarathnam - v. - Nagendra Gupta - ILR (Karnataka) 1979 (1) 646 = 1979 (1) KLJ 283 as:

'The word 'advance' is defined in Concise Oxford Dictionary thus : 'advance, v.t. move or put forward, bring forward, also pay and lend.'

Thus the word has several meanings. That meaning which suits the context and which makes for harmonious meaning of the three sections, quoted above, should obviously be preferred if we take the meaning 'put forward', it suits the context and makes for harmonious reading of the three Sections. Instead, if we take the meaning of the word'advance' as 'lent' it restricts the meaning of the word 'debt' and h conflicts with the definition of the term 'debt' and renders Section 8 of the Act otiose. Such a construction cannot be countenanced in a welfare legislation like the Debt Relief Act.'

The said interpretation put by Sabhahit, J., runs contrary to the Division Bench ruling reported in 1977(2) Kar. L.J. 476.

Further, the definition of the word 'debt' is an exhaustive definition unlike the other definitions to be found in Debt Relief Acts of Kerala and other States. Therefor, it is the nature of the liability when it was entered that will have to be gone into.

As can be seen from 15 years Digest, Volume 7, Page 57, it has been held in 1960(2) Kar. L.R. 81 = 1960 Ker. L.T. 927, Nippani Tobacco Co. vs. Sekharanas:

'Promissory note representing sum as price of goods purchased for trade - Suit for recovery - Debt is exempted under Section 2(c)(vi) :

'After defining the expression 'debt' in clause (c) of Section 2, what is taken out of this category under sub-clause (vi) is 'any debt' which represents the price of goods purchased for the purpose of trade.'

That means that the Act has clearly got in contemplation the original debt whatever may be the subsequent conduct as between the parties. This becomes clear when reference is made to sub-clauses 3, 4, 5 and 7 where what is exempted is any liability. Section 9 of the K.D.R. Act gives a right to the agriculturists to prove the nature of transactions and power is given to a Court to ascertain whether the transaction is a debt. Therefore, even though the suit may have been based on the promissory note, it is open to the Court in order to give relief or to deny relief to an agriculturist to find out the real nature of the debt in the first instance. Where, therefore, the amount due under apromissory note represents the price of the goods purchased for purposes of trade, it was held that it comes within the exception provided under Section 2(c)(vi) of the Act.

Further, it has been held by the Kerala High Court in 1960(1) Ker. L.R. 709 = 1960 Ker. L.J. 681 = 1960 Ker. L.T. 525, Mariakutty vs. Lonan as:

'The words 'representing' is one of wide import and execution of documents in respect of debts which represent the price of goods purchased for the purpose of trade or renewal of such documents will not make the Debt Relief Act applicable to such debts. The acceptance of ahypothecation deed in respect of such a debt executed by the debtor does not alter the character of a debt.'

Section 8(h) of the K.D.R. Act also reads as :

'....any debt which represents the price of the goods purchased by a debtor.'

Therefore, Section 8(h) of the K.D.R. Act is in pari materia with Section 2(c)(vi) of the Kerala Agricultural Debtors' Relief Act, 1958.

In Krishna Kurup Sankara Kurup - v. - Mathew Joseph, : AIR1963Ker30 it has been held that in the case of a debt on a simple mortgage, the principal remains the original sum lent not-withstanding the fact that a decree has been passed upon the mortgage. The decree can be re-opened to ascertain the principal for the purpose of payment under the Act or for recording satisfaction of the decree.

It has been held in G. K. Wani - v. - Vasta Ramsing Fasepardhi, : AIR1979Bom30 that Section 11(1) does not bar the jurisdiction of Civil Court to decide whether decretal claim arose out of a contract or out of a transaction not connected with money-lending. It has been put aptly in para-5 as :

'Mr. Desai was unable to point out any provision in chapter III (in which Section 11 occurs) which requires the authorised officer to decide the question under Section 22(g). Hence, his contention that Section 11(1) bars the jurisdiction of the Civil Court from considering whether the claim arose out of the contract or out of a transaction not connected with money-lending must be rejected.'

Learned Counsel Shri Ramachandra also placed reliance on State Bank of Travancore - v. - Mohammed Mohammed Khan, : [1982]1SCR338 . Therein, the provisions of Kerala Agricultural debtors' Relief Act came to be considered. The definition of the word 'debt', as found in the Kerala Act, extracted in the above decision, reads :

' '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 - .....etc., etc......'

In para 17, the Supreme Court stated as :

'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 sometime 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 to 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 ofattracting clause (1) that at sometime 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, sometime before the commencement of the Act, the debtor will not beable, 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 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 Attorney General's argument is the fact whether sometime before the commencement of the Act, the debt was due to a banking company. We do not think that the Legislature could have intended to produce such a startling result.'

In para-18, the Supreme Court stated as:

'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 the private money-lender 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.

In para-19, the Supreme Court has stated thus :

'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.'

9. Learned Counsel Shri Chandrasekharaiah, for the Revision Petitioner relied on : [1968]3SCR367 Ramanathan Chettiar - v. - Ramanathan Chettiar where the question arose whether a deposit made would amount to a debt within the meaning of the MadrasAgriculturists' Relief Act, 1938. The definition of the word 'debt' as defined in the Madras Agricultural Debtors' Relief Act has been extracted in para-5 of the said judgment. It reads :

' any liability in cash or kind, whether secured or unsecured, due from an agriculturist, whether payable under a decree or order of a civil or revenue Court or otherwise, but does not include rent as defined in clause (iii) or 'Kanaratham' as defined in Section 3(1)(1) of the Malabar Tenancy Act.'

Thus, we find in this definition the absence of the word 'advanced'. On the other hand, the word 'debt' defined by the Karnataka Act means any amount which is in substance a debt. Further, Section 4 of the Karnataka Act which gives relief to the debtors uses the word 'advanced'. Therefore, the definition of the word 'debt' found in the Kerala and Karnataka Acts appears to be different from the definition of the word 'debt' defined by Madras Agriculturists' Relief Act, which was the subject matter of discussion in the said Supreme Court decision. The Supreme Court held in para-7 that the debt could be defined as a liability to pay inpresent or in future an ascertainable sum of money.

It is true that the liability to pay in present or in future does not determine the nature of the transaction. The crux of the matter in the said decision was whether the deposit amounted to a debt or not. Therefore, the facts in the said Supreme Court decision appear to be different from the facts involved in the present case. Further, as already shown above the definition of the word 'debt' which was the subject-matter of discussion by Supreme Court is different from the definition of the word 'debt' and the definition of the word 'debtor' given by the Karnataka Act.

10. Learned Counsel Shri Chandrasekharaiah then relied on Pooranmal v. -Sushila Devi, AIR 1979 M.P. 5. The M.P. High Court held:

'By using the words 'all liabilities' in Section 2(4) it is apparent that the legislature intended to include even such other liability which may not be actually in the nature of loan as commonly understood. All liabilities have first been included in the definition of the term 'debt and thereafter whatever was sought to be excepted was separately exempted by Section 6'.

The M. P. High Court held that in view of the peculiar definition found in the M.P. Act a decretal liability for an ascertained sum and due under the decree is covered by the inclusive definition of 'debt' as given in the said Act. Therefore, the definition of the word 'debt' given in the said Act is different from the definition of the word 'debt' given in the Karnataka Act.

11. Shri Chandrasekharaiah then relied on A.I R. 1969 Rajasthan 125 Gullaram - v. - Govindram. The definition of the word 'debt' given in the said Rajasthan Act includes all liabilities owing to a creditor, in cash or kind, secured or unsecured, payable under a decree or order of the Civil Court or otherwise, whether due or not due, but shall not include land revenue or anything recoverable as land revenue other than liabilities payable under a decree of a village panchayat or any money for the recovery of which a suit is barred by limitation. Therefore, the definition of the word 'debt' in the said Rajasthan Act is rather akin to the definition of the word 'debt' given in the said M.P. Act and so it will not be of any guidance while defining the provisions of the K.D.R. Act which has defined the word 'debt' and the word 'debtor' in a particular fashion.

12. Shri Chandrasekharaiah then relied on A.I.R. 1968 Kerala The Catholic Bank of India Ltd - v. - George Jacob 3. It involved the interpretation of the Kerala Agriculturists Debt Relief Act. The provision to Section 2 (c) (xi) of the said Kerala Act makes it clear that the sole benefit conferred on the debtor in respect of debts fallingunder Section. 2 (c) (xi) is that he shall be entitled to repay his debt 'in eight equal half-yearlyinstallments as provided in sub-section (3) of Section 4.' Therefore, the matter involved in the said Kerala Case is altogether different.

Then learned Counsel Shri Chandrasekharaiah relied on A.M. Patel & Co. v. Narayan Gopal Basatwar, : AIR1980Bom367 . TheMaharashtra Debt Relief Act which came to be interpreted in the said Bombay case also excepted the prices of the goods sold on credit and it was held that the price of the goods sold did not amount to a debt. Thus the said decision would more help the argument urged by the other side.

13. Further, learned Counsel Shri Chandrasekharaiah urged that the executing Court could not go behind the decree and determine the nature of the transaction which had already resulted in the decree. State of Tamil Nadu - v. - M. Rayappa Gounder, : AIR1971SC231 will throw some light in the matter. In para-6, the Supreme Court has held :

'This is a strange provision. Prinia facie that provision appears to command the Corporation to refuse to refund the amount illegally collected despite the orders of this Court and the High Court. The State of Gujarat was not well advised in introducing this provision. The prevision attempts to make a direct in road into the judicial powers of the State. The Legislatures under our Constitution have within the prescribed limits, powers to make laws prospectively as well asretrospectively. By exercise of those powers, the legislature can remove the basis of a decision rendered by a competent Court thereby rendering that decision ineffective. But no legislature in this country has power to ask the instrumentalities of the State to disobey or disregard the decision given by Courts. The limits of the power of legislatures to interfere with the directions issued by Courts were considered by several decisions of this Court. In Shri Prithvi Cotton Mills Ltd. - v. - The Broach Borough Municipality, Civil Appeal Nos. 2197 and 2198 of 1966 Dt. 25-4-1969 : [1971]79ITR136(SC) our present Chief Justice speaking for the Constitution Bench of the Court observed :

Before we examine Section 3 to find out whether it is effective in its purpose or not we may say a few words about validating statutes in general, when a legislature sets out to validate a tax declared by a Court to be illegally collected under an ineffective or an invalid law, the cause for ineffectiveness or invalidity must be removed before validation can be said to take place effectively. The most important condition of course, is that the legislature must possess the power to impose the tax, for if it does not, the action must ever remain ineffective and illegal. Granted legislative competence, it is not sufficient to declare merely that thedecision of the Court shall not bind for that is tantamount to reversing the decision in exercise of judicial power which the legislature does not possess or exercise. A Court's decision must always bind unless the conditions on which it is based or so fundamentally altered that thedecision could not have been given in the altered circumstances. Ordinarily, a Court holds a tax to be invalidly imposed because the power to tax is wanting or the statute or the rules or both are invalid or do notsufficiently create the jurisdictions. Validation of a tax so declared illegal may be done only if the grounds of illegality or invalidity are capable of being removed and are in fact removed and the tax thus made legal. Some time this is done by providing for jurisdiction Where jurisdiction had not. been properly invested before. Sometimes this is done by re-enacting retrospectively a valid and legal taxing provision and then by fiction making the tax already collected to stand under the re-enacted law.'

What the Supreme Court in short says is that the Legislature can take away the basis of the decree but it cannot invalidate a decree.

14. Thus, it becomes absolutely clear that the Court can, even while interpreting the Debt Relief Act, go into the real nature of the transaction when it was really entered into between the parties.

15. The view taken by me, as already stated above, gathers strength from the decisions in : AIR1979Bom30 and : [1968]3SCR367 . Therefore, the lower Court was justified in allowing the decree-holders to lead evidence to show the nature of the transaction which had resulted in the execution of the simple mortgage and in the decree.

16. Thus, there is no substance in the Revision and it is dismissed.


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