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Pakala Narayan Rao Naidu and ors. Vs. Gurunath Padhi and anr. - Court Judgment

LegalCrystal Citation
SubjectCommercial
CourtOrissa High Court
Decided On
Case NumberMisc. Appeal No. 68 of 1948
Judge
Reported inAIR1953Ori3; 19(1953)CLT81
ActsDebt Law; Orissa Money-lenders Act, 1939 - Sections 10(1), 10(2) and 10(3); Code of Civil Procedure (CPC) , 1908 - Sections 38
AppellantPakala Narayan Rao Naidu and ors.
RespondentGurunath Padhi and anr.
Appellant AdvocateP.V.B. Rao, Adv.
Respondent AdvocateP.C. Chatterjee, Adv. for Respondent No. 1
DispositionAppeal dismissed
Cases ReferredLtd. Khulna v. Amulya Krishna Basu
Excerpt:
.....thereafter on the basis of a loan remains unsatisfied in whole or in part on the date on which the orissa money-lenders (amendment) act, 1947, comes into force, the court which passed the decree or the court or ether authority to which the decree is sent for execution shall, on the application of the judgment-debtor exercise the powers specified in sub-section (2) and the decree shall be modified accordingly. sub-section (3) was inserted by an amendment made in the year 1947 (orissa act xviii of 1947). 4. sub-section (1) embodies the well known rule of 'damdupat' and prohibits absolutely a court from passing a decree for an amount of interest, in excess of the original principal. sub-section (3) confers on an executing court the powers specified in sub-section (2), in respect of decrees..........to the appellants-decree-holders, in exercise of the powers conferred by section 10 of the orissa money lenders act.2. the original loan that was advanced to the respondents' predecessor-in-interest was only rs. 2,000 based on two promissory notes for rs. 1,000 each dated 1-9-28 and 5-10-28. in due course, fresh promissory notes for the principal and interest due were executed by the debtor on 1-9-31 and 21-7-34. the last promissory note was for a sum of rs. 3,647-3-4. two payments of rs. 100 on 19-7-37 and rs. 800 on 12-7-40 were made by the debtor and then the creditor instituted a suit (o. s. 48 of 1942) in the court of the subordinate judge, berhampur for the realisation of the balance of the debt with interest. the suit was eventually compromised and a compromise decree for.....
Judgment:

Narasimham, J.

1. This is an appeal against an order of the Subordinate Judge of Berhampur scaling down the decretal amount payable by the respondents-judgment-debtors to the appellants-decree-holders, in exercise of the powers conferred by Section 10 of the Orissa Money Lenders Act.

2. The original loan that was advanced to the respondents' predecessor-in-interest was only Rs. 2,000 based on two promissory notes for Rs. 1,000 each dated 1-9-28 and 5-10-28. In due course, fresh promissory notes for the principal and interest due were executed by the debtor on 1-9-31 and 21-7-34. The last promissory note was for a sum of Rs. 3,647-3-4. Two payments of Rs. 100 on 19-7-37 and Rs. 800 on 12-7-40 were made by the debtor and then the creditor instituted a suit (O. S. 48 of 1942) in the Court of the Subordinate Judge, Berhampur for the realisation of the balance of the debt with interest. The suit was eventually compromised and a compromise decree for Rs. 7,000 was passed directing the payment of the decretal amount in three following instalments :

On 12-5-44 -- Rs. 1,250. On 13-3-45 -- Rs. 3,000. On 30-12-46 -- Rs. 2,750.

The first instalment was paid in due course, but as there was a default in paying the succeeding instalments, the decree-holders applied for execution of the decree. The judgment-debtors thereupon filed an objection urging that the decretal amount should be scaled down, under Section 10 of the Orissa Money Lenders Act and that they were not bound to pay more than double the original loan, viz., Rs. 4,000 towards principal and interest. This objection was allowed by the learned lower Court and the decree was scaled down accordingly.

3. The first question that arises for consideration is whether the lower Court acted correctly in applying the provisions of Section 10 of the Orissa Money Lenders Act to the present case. That section consists of 3 sub-sections which are as follows: --

(1) Notwithstanding anything to the contrary contained in any other law or in anything having the force of law or in any contract, no Court shall in any suit whether brought by a money-lender or by any other person in respect of a loan advanced before or after the commencement of this Act, pass a decree for an amount of interest for the period preceding the institution of the suit which, together with any amount already realised as interest through Court or otherwise, is greater than the amount of the loan originally advanced.

(2) Where, in any suit, as is referred to in Sub-section (1), it is found that the amount already realised as interest through Court or otherwise, for the period preceding the institution of the suit, is greater than the amount of the loan originally advanced, so much of the said amount of interest as is in excess of the loan shall be appropriated towards the satisfaction of the loan and the Court shall pass a decree for the payment of the balance of the loan, if any.

(3) Where a decree passed by a Court on the 1st April, 1936, or thereafter on the basis of a loan remains unsatisfied in whole or in part on the date on which the Orissa Money-Lenders (Amendment) Act, 1947, comes into force, the Court which passed the decree or the Court or ether authority to which the decree is sent for execution shall, on the application of the judgment-debtor exercise the powers specified in Sub-section (2) and the decree shall be modified accordingly.

Sub-section (3) was inserted by an amendment made in the year 1947 (Orissa Act XVIII of 1947).

4. Sub-section (1) embodies the well known rule of 'Damdupat' and prohibits absolutely a Court from passing a decree for an amount of interest, in excess of the original principal. Sub-section (2) contains consequential directions for appropriating towards payment of the original principal, that portion of the interest paid which is in excess of an amount equal to the original principal. Sub-section (3) confers on an executing Court the powers specified in Sub-section (2), in respect of decrees passed after the 1st April, 1936, and remaining unsatisfied on the date on which the amending Act of 1947 was brought into force.

5. On behalf of the appellants it was urged that Sub-sections (1) and (2) apply prior to the passing of the decree and those provisions should be complied with by the Court while passing the decree; whereas Sub-section (3) is applicable at the execution stage. It was, therefore, urged that in the present case the only power which the executing Court had was the power conferred by Sub-section (3) and that in exercise of that power the executing Court may, if it finds that the total interest realised prior to the institution of the suit was greater than the amount of the original loan, appropriate so much of the said amount of interest as is in excess of the loan, towards satisfaction of the principal amount; but where, as in this, case, the total interest realised amounted only Rs. 900 and was far below the principal, there can be no question of exercising the power conferred by Sub-section (2) or by Sub-section (3).

It was further urged that Sub-section (1) alone conferred on the Court, the power to limit the decretal amount to twice the amount of the original principal but that the said power could not be exercised by an execution Court inasmuch as Sub-section (3), in terms, refers only to Sub-section (2) and not to Sub-section (1) of that section. The learned lower Court, however, rejected this argument by observing that though Sub-section (3) contained a reference only to Sub-section (2), the latter sub-section referred to Sub-section (1) and that consequently, the power of the executing Court under Sub-section (3) must be deemed to include the power conferred on a Court by Sub-section (1) also.

6. On a strict construction of the three sub-sections of Section 10 of the Orissa Money Lenders Act, I cannot accept the interpretation put by the learned lower Court. The express mention of Sub-section (2) in Sub-section (3) and the significant omission of any reference to Sub-section (1) in that sub-section, must lead to an inference that the power conferred by Sub-section (3) on an executing Court is limited by the provisions of Sub-section (2) only and cannot be extended to the provisions of Sub-section (1). That is to say, if at the time of execution of a decree based on a loan it is found that the amount of interest paid (prior to the date of the institution of the suit) is more than the principal, the excess may be appropriated towards principal. But where the interest paid is below that sum, the executing Court cannot by relying on Sub-section (3) scale down the decree on the ground that the decretal amount is more than twice the principal. It is unnecessary to speculate as to why the Legislature while inserting Sub-section (3) in Section 10 of the Act by the amending Act of 1947 omitted a reference to Sub-section (1) in Sub-section (3). The language of Sub-section (3) is clear and unambiguous and does not support the view taken by the lower Court.

7. But this does not conclude the matter. On behalf of the respondents it was urged that so much of the decree as was in excess of the amount that could be validly decreed under the provisions of Sub-section (1) of Section 10 was passed without jurisdiction and that the executing Court was not bound to execute that portion of the decree which was in excess of the jurisdiction of the decreeing Court. Mr. P. V. B. Rao, on behalf of the appellants, however, relied on the well known rule about an executing Court not going behind the decree and urged that merely because the decreeing Court overlooked the provisions of Sub-section (1) of Section 10 it cannot be said that the Court had no inherent jurisdiction to pass such a decree. Mr. Rao submitted that if the judgment-debtors felt aggrieved by the compromise decree, they might have applied for review, or by way of revision, or by another suit challenging the validity of the decree.

8. The well known rule that an executing Court has no jurisdiction to go behind the decree is however subjected to certain well-defined exceptions. It has generally been held that where the decree is a nullity either in whole or in part, due to want of jurisdiction on the part of the Court passing it, the executing Court may refuse to give effect to that decree in whole or in part as the case may be. It has also been held that where a decree contravenes an express provision of an enactment which is based on public policy that decree cannot be executed. Thus, in -- 'Raja of Vizianagaram v. Dantivada, Chelliah', 28 Mad 84 it was held that a decree for the sale of inam lands granted as remuneration for the performance of duties by hereditary village officers was not executable because it contravened Section 5 of the Madras Hereditary Village Offices Act (Act III of 1895).

This view was followed in a later Madras decision reported in -- 'Rajah of Kalahasti v. Venkatadri Rao', 50 Mad. 897 where a consent decree for the sale of a portion of an impartible estate was held to be non-executable because of the prohibition against such sale, contained in Section 6 of the Madras Impartible Estates Act (II of 1904). The learned Judges while discussing '28 Mad 84 and --'Mayan Pathuti v. Pakuran', 22 Mad 347 pointed out the distinction between a prohibition in a Statute for the benefit of a private person on the one hand and a prohibition in a Statute having some object of public policy in view. Odgers J. said

'Therefore, there seems to me to be a considerable body of opinion that, although a final decree may be passed without objection or even by consent, still the parties have no power by their act, not indeed has the Court power, to evade the clear provisions of a statute if it is passed in the interests of public policy and not merely to benefit a particular class or individual.'

Curgenven, J. while agreeing with this view stated as follows:

'But there is a class of cases to which I think, these considerations do not apply, where execution of the decree would involve the infraction of a provision of law enacted in the public interest. The consideration that the parties may not have raised the point does not apply, because it may not have been in their interest to do so; and however far the doctrine that the executing Court should enforce the decree as it stands may be pushed, it cannot extend to an enforcement which involves breach of such a provision.'

22 Mad 347 was distinguished on the ground that the statutory provision contravened in that case (Section 99 of the old T. P. Act) was a provision intended for the benefit of a particular class viz., mortgagers, and not intended in the interest of public policy.

In --'Meenakshi Ammal v. Chidambaram Chettiar AIR 1947 Mad 341', the same principle was followed and a decree for the sale of certain property (unenfranchised service inam lands) whose alienation was prohibited by statute or opposed to public policy was not executed. The Calcutta High Court also adopted the same line of reasoning in--'Lakshmi Bibi Kujrani v. Atal Behari Haldar' 40 Cal. 534 and refused to execute a decree for the sale of an occupancy holding in contravention of Section 47 of the Chota Nagpur Tenancy Act. Similarly, the Allahabad High Court in --'Katwari v. Sita Ram Tiwari', 43 All 547 (P.B.) refused to execute a decree for the sale of an occupancy holding in contravention of Section 20 of the Agra Tenancy Act, 1901. In --'Mohiuddin v. Mt. Kashmiro Bibi', AIR 1933 All 252 (P.B.) the Allahabad High Court (F.B.) went a step further and held that the penalty clause in a compromise decree may be modified by the executing Court by applying the provisions of Section 74 of the Contract Act. In --'Dayaram Kishandas v. Mannulal Sheodin', AIR 1949 Nag. 106 it was held that an order of the Deputy Commissioner (which had the force of a decree) was a nullity and incapable of execution inasmuch as it contravened Section 12 (2) of C. P. and Berar Relief of Indebtedness Act (XIV of 1939).

9. I am aware of the slightly divergent view taken in --'Pirji Safdar Ali v. The Ideal Bank Ltd.,' AIR 1949 East Punj. 94, where a Pull Bench held that a decree passed for the sale of certain property in contravention of the provisions of Section 16 of the Punjab Alienation of Land Act could be challenged only in accordance with the procedure laid down in that Act and that it was not open to the party at the execution stage to object to the saleability of the property on the ground that the decree contravened the said statutory provision. That decision, however, is based on a construction of the special provisions of the Punjab Act in question and cannot be relied upon to support the general proposition that a decree passed in contravention of a statutory provision based on public policy must be executed at all costs.

10. There is thus ample authority to support the view that if a decree is passed in contravention of a statutory provision which is enacted not for the benefit of a private individual or a class of persons but in public interests or in the interests of public policy its executability may be challenged before the executing Court notwithstanding that the decree was not challenged by way of appeal or revision. In the present case, however, no appeal lay because it was a compromise decree though perhaps the judgment-debtors might have applied for review, or for revision to the High Court.

11. Mr. Rao, thereupon urged that the provisions of Section 10(1) of the Orissa Money Lenders Act were not enacted in public interests or public policy but were enacted for the benefit of a class of persons only, viz., debtors and that consequently, the aforesaid principle would not apply to the present case. This argument necessitates a closer examination of some of the provisions of the Orissa Money Lenders Act for the purpose of deciding whether those provisions were enacted primarily in the private interests of individual debtors or else whether they were based on 'public policy' and in the interests of the public. The expressions 'public policy' and 'public interest' are undoubtedly somewhat vague and it is sometimes difficult to say whether a provision of a statute is enacted in the interests of public policy even though it may benefit a class of persons. There are, however, certain English decisions on the construction of the expression 'public policy' which I think are helpful.

In -- 'Egerton v. Brownlow', (1853) 10 E. R. 359 at p. 437 it was stated as early as 1853

'public policy in relation to this question, is that principle of the law which holds that no subject can lawfully do that which has a tendency to be injurious to the public, or against the public good, which may be termed, as it sometimes has been, the policy of the law, or public policy in relation to the administration of the law'.

In -- 'Beard v. Hall', (1908) 1 Ch. D. 383, a note of caution was sounded in determining whether any provision was against public good or against public policy because at different times different views have been entertained as to what was injurious to the public. But a provision which was considered to be against the welfare of or injurious to the community was held to be against public policy. Thus, the main test in deciding whether a particular provision is opposed to public policy or interests, seems to be whether it is injurious to the community or against public good (See Halsbury's Laws of England, 2nd Edn., Vol. 7, p. 153, para 216).

12. The preamble to the Orissa Money Lenders Act says that it was enacted 'to grant relief to debtors in the Province of Orissa'. In the statement of Objects and Reasons it was pointed out that very high rates of interest were current in the Province and that the Usurious Loans Act, 1918, did not give adequate relief to the debtors. It was also observed:

'the need for legislation is felt to be urgent to give some more relief to the large number of people who are at present compelled to pay exorbitant rates of interest'.

Thus, the main object of the Act was to solve the problem of indebtedness (especially in rural areas) which was considered to be a serious evil. In all the standard text books on Indian Economics it was emphasised that for the improvement of Indian agriculture, rural indebtedness should be reduced by drastic measures and the Legislature should intervene so as to save the agriculturists from the clutches of the Mahajans.

Soon after the Congress party first acceptedoffice in 1938, legislation for this purpose was takenup in almost all the Provinces of India and thoughthe names of the various statutes differed slightlythe primary object of all the statutes was to solvethe problem of agricultural indebtedness. Thiswas emphasised by the Federal Court in -- 'Subramanyan v. Muttuswami', AIR 1941 P. C. 47 wherewhile referring to the corresponding Madras Actknown as the Madras Agriculturists Relief Act,the Chief Justice of India said:

'The Act is an attempt to deal in a verycrastic manner with the problem of ruralindebtedness, which has vexed legislatorssince the days of Solon. It contains as otherprovincial Acts passed on the same subjectduring the last few years have also contained,many unusual and at first sight startlingprovisions.'

To a similar effect is the following observations of Spens C. J. in -- 'Bank of Commerce, Ltd. Khulna v. Amulya Krishna Basu', AIR 1944 FC 18 while referring to the Bengal Money Lenders Act:

'The Bengal Money Lenders Act is like the Madras enactment which was the subject matter in 1940 F.C.R. 188: (AIR 1941 F. C. 47), part of a scheme to relieve agricultural indebtedness in the various provinces of this country, taut the enactments passed in the different provinces have not all adopted the same lines.'

It is true that the Orissa Act does not say in terms, like the Madras Act, that it is meant primarily for the benefit of the agriculturists. But notwithstanding the absence of any mention about agriculturists in the Bengal Act, the Federal Court had no hesitation in saying that the Bengal Act was also a part of the scheme to relieve agricultural indebtedness.

In this Province, as in other provinces, an overwhelming majority of debtors are agriculturists and an Act meant for the relief of the debtors must, in the circumstances, be held to be an Act for the relief of agricultural indebtedness and the consequent economic upliftment of a very large section of the public. It was in pursuance of this public policy that, notwithstanding any contract between an individual debtor and a creditor, the Legislature in Section 9 of the Orissa Act expressly prohibited a Court from passing a decree for interest at more than9 per cent per annum in the case of a secured loan and more than 12 per cent per annum in the case of an unsecured loan. It also prohibited the passing of a decree for compound interest notwithstanding any contract or any other provision of law.

Similarly, in Section 10 (1), it fixed a maximum limit to the amount of interest charged for any loan and prohibited a Court from passing a decree for interest which was more than the amount of loan thereby giving statutory recognition to the well known rule of 'Damdupat'. In Section 11, is conferred on the Court the power to reopen certain transactions and scale down certain debts. These provisions (Sections 9, 10 & 11) of the Orissa Money Lenders Act were based on public policy and were enactedfor the purpose of improving the economiccondition of the debtors, especially agriculturists, who form the bulk of the population. This was the main reason why the Court is prohibited from enforcing any term of contract between a debtor and creditor which offends the provisions of Sub-section (1) of Section 10. Doubtless, the Court which passes a decree is not ordinarily expected to overlook the provisions of the aforesaid sections. But sometimes a contingency may arise, as in this case, where the Court may overlook those provisions. The creditor may enter into a compromise with the debtor (who is not in a position to bargain with him on equal terms) for the payment to him of a sum which is more than double theoriginal principal in direct contravention ofSub-section (1) of Section 10. As it is a compromise 'petition the Court may fail to examine whether the decree can be passed in terms of such compromise in contravention of Section 10 (1) of the Act. To allow such decrees to be executed would be to defeat the very purpose for which that provision was enacted, viz., to relieve the debtor from the rigorous terms of any contract which he might have entered into with the creditor whether in a compromise petition or otherwise.

13. Mr. Rao, thereupon urged that inasmuch as there is no provision in the Orissa Money Lenders Act declaring as unlawful a contract entered into by a debtor with the creditor in contravention of any of the provisions of the Act, the terms embodied in the compromise petition, which were the basis of the compromise decree in this case were lawful. It is, however, unnecessary in this case to consider whether a contract between a creditor and a debtor which contravenes the provisions of Sub-section (1) of Section 10 of the Orissa Money Lenders Act is void or not. Prima facie it would appear that such a contract, being intended to defeat the provisions of the Orissa Money Lenders Act, would be void in view of Section 23 of the Indian Contract Act. But the question for consideration at present is not whether the terms of the compromise petition are lawful but whether the Court can pass a decree on the basis of that petition in total disregard of the express prohibition contained in Sub-section (1) of Section 10. As that provision is based on public policy and enacted in the interests of a large section of the public and should be given effect to notwithstanding any contract to the contrary, I would hold that a decree passed by a Court in contravention of that provision is without jurisdiction to the extent of the contravention and the executing Court cannot give effect to that portion of the decree which is beyond the jurisdiction of the decreeing Court.

14. The mistake committed by the decreeing Court is apparent on the face of the record. In the plaint itself (Ex. 1), the appellants stated that the original loan was only for Rs. 2,000/-. Therefore, the decreeing Court had no jurisdiction to pass a decree for interest for more than Rs. 2,000/- that is, the total decretal amount could not exceed Rs. 4,000/- inclusive of the interest till the date of the institution of the suit. That portion of the decretal amount which exceeds this figure must be held to have passed without jurisdiction and should be ignored by the executing Court. The lower Court was justified in scaling down the decree with a view to conform to the provisions of Sub-section (1) of Section 10 of the Act, though for reasons different from those given by that Court.

15. The appeal fails and is dismissed with costs.

Mohapatra, J.

16. I agree.


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