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H. Naik, Official Liquidator, Puri Bank Ltd. Vs. Kanhu Charan Das - Court Judgment

LegalCrystal Citation
SubjectCompany
CourtOrissa High Court
Decided On
Case NumberExecution Case No. 51 of 1953
Judge
Reported inAIR1954Ori186; 20(1954)CLT417; [1954]24CompCas392(Orissa)
ActsBanking Companies Act, 1949; Banking Companies (Amendment) Act, 1953 - Sections 45A and 45B; Constitution of India - Article 254(1) and 254(2); Code of Civil Procedure (CPC) , 1908; Tenancy Law; Orissa Estates Abolition Act, 1952 - Sections 18, 19, 20(2), 28(3), 33 and 37(3); Transfer of Property Act, 1882 - Sections 67
AppellantH. Naik, Official Liquidator, Puri Bank Ltd.
RespondentKanhu Charan Das
Appellant AdvocateU.N. Rath and ;G. Jena, Advs.
Respondent AdvocateAdv. General
Excerpt:
.....1996 (2) glt 246, are not good law]. - power of high court to decide all claims in respect of banking companies :the high court shall, save as otherwise expressly provided in section 45c have exclusive jurisdiction to entertain and decide any claim made by or against a banking company which is being wound up (including claims by or against any of its branches in india) or any application made under section 153, indian companies act, 1913 (7 of 1913) by or in respect of a banking company or any question of priorities or any other question whatsoever, whether of law or fact, which may relate to or arise in the course of the winding up of a banking company, whether such claim or question has arisen or arises or such application has been made or is made before or after the date of the..........over the liquidation proceedings of the bank by virtue of the powers conferred by part iiia of the banking companies act, 1949 (as amended) has exclusive jurisdiction to determine and take steps for the realisation of the mortgage money or else whether the provisions of the o. e. a. act would oust the jurisdiction of this court.3. at this stage i may briefly recapitulate the relevant provisions of the o. e. a. act, 1951. as soon as a notification is issued under section 3(1) of that act the proprietary interest of an intermediary in an estate vests in the state government and the only right that subsists in the property is the right to receive compensation as determined and apportioned under the provisions of that act. a suit in a civil court is expressly barred by sections 5(e) and 39.....
Judgment:
ORDER

Narasimham, J.

1. This is a reference by the Official Liquidator of Puri Bank (under liquidation) for a direction from this Court as to whether under Sections 18 and 19, Orissa Estates Abolition Act (Orissa Act 1 of 1952) he should file a claim on behalf of the Bank before the claims Officer for determination of the amount payable to the Bank out of the total compensation money due to the judgment-debtor whose estate has already vested in the State Government in accordance with the provisions of the said Act. The Advocate General appeared on behalf of the Government to oppose the reference. But none appeared on behalf of the judgment-debtor though notice was served on him.

2. The Puri Bank (which is now under liquidation) was the mortgagee of the proprietary interest of the judgment-debtor in village Barhat Trilochanpur. In M. S. No. 19 of 1951 filed by the Official Liquidator, this Court passed a preliminary mortgage decree on 8-2-1952 and made it final on the 20th January, 1953 and directed that the mortgaged property should be sold. The Official Liquidator then filed an execution proceeding on 5-11-1953. Before further action could be taken by this Court in the execution proceeding, the mortgaged property vested in the State Government on 22-1-1954 by virtue of a notification issued under Section 3 of the O. E. A. Act Doubtless, by virtue of Sub-section (2) of Section 73, T. P. Act the decree-holder would be entitled to claim payment of the mortgaged money out of the total amount due to the mortgagor as compensation. The main question for consideration is whether this Court exercising its jurisdiction over the liquidation proceedings of the bank by virtue of the powers conferred by Part IIIA of the Banking Companies Act, 1949 (as amended) has exclusive jurisdiction to determine and take steps for the realisation of the mortgage money or else whether the provisions of the O. E. A. Act would oust the jurisdiction of this Court.

3. At this stage I may briefly recapitulate the relevant provisions of the O. E. A. Act, 1951. As soon as a notification is issued under Section 3(1) of that Act the proprietary interest of an intermediary in an estate vests in the State Government and the only right that subsists in the property is the right to receive compensation as determined and apportioned under the provisions of that Act. A suit in a Civil Court is expressly barred by Sections 5(e) and 39 of that Act. Section 18 says that within six months from the date of vesting every creditor of the proprietor whose debt is secured by a mortgage may apply to a Claims Officer appointed under the Act for the purpose of determining the amount of debt legally and justly payable to him. Sections 19 and 20 contain procedural provisions in respect of the claim cases filed before that officer.

Chapter V contains detailed provisions for the assessment of total compensation payable to the proprietor whose estate has been taken over under the Act; first by an officer known as the Compensation Officer and later on by a Tribunal constituted under the Act. It is unnecessary to describe in detail most of the provisions in that Chapter. But I may refer to Sub-section (3) of Section 28 in which it is specified that where the interest of a proprietor in an estate is subject to a mortgage the compensation payable to the mortgagee in satisfaction of his debt should not exceed a certain specified percentage of the total compensation as assessed under the provisions of that Chapter.

Chapter VI deals with the manner of payment of compensation and Sub-section (3) of Section 37 says that the total compensation is payable in thirty annual equated instalments from the date of vesting; but the proviso to that sub-section confers discretion on the Government to pay the compensation in one lump sum.

4. I may now quote Sections 45A and 45B of the Banking Companies Act, 1949 (as amending Act of 1953.

'45A. Part IIIA to override other laws : The provisions of this Part and the rules made thereunder shall have effect notwithstanding anything inconsistent therewith contained in the Indian Companies Act, 1913 (7 of 1913) or the Code of Civil Procedure, 1908 (Act 5 of 1908) or the Code of Criminal Procedure, 1898 (Act 5 of 1898) or any other law for the time being in force or any instrument having effect by virtue of any such law but the provisions of any such law or instrument in so far as the same are not varied by, or inconsistent with, the provisions of this Part or rules made thereunder shall apply to all proceedings under this Part.

45B. Power of High Court to decide all claims in respect of banking companies : The High Court shall, save as otherwise expressly provided in Section 45C have exclusive jurisdiction to entertain and decide any claim made by or against a banking company which is being wound up (including claims by or against any of its branches in India) or any application made under Section 153, Indian Companies Act, 1913 (7 of 1913) by or in respect of a banking company or any question of priorities or any other question whatsoever, whether of law or fact, which may relate to or arise in the course of the winding up of a banking company, whether such claim or question has arisen or arises or such application has been made or is made before or after the date of the order of the winding up of the banking company or before or after the commencement of the Banking Companies (Amendment) Act, 1953.'

The Banking Companies (Amendment) Act of 1953 was passed mainly because liquidation proceedings in respect of a large number of banks that had failed had proved unsatisfactory due to the procedure for winding up of such banking companies being cumbersome, prolonged and expensive. On the report of the Banks' Liquidation Proceedings Committee, 1952, the Parliament passed the amending Act with a view to simplify the procedure and expedite the proceedings. By Section 45A the provisions of Part IIIA were expressly declared to override the provisions of all other laws in force if there is any inconsistency between those laws and the provisions of the Act. But the provisions of those laws which are not inconsistent with that Act were declared to apply to all winding up proceedings.

Section 45B conferred exclusive jurisdiction on the High Court to entertain and decide any claim made by or against a banking company under liquidation including any question of priority or any other question whatsoever whether of law or fact which may relate to or arise in the course of winding up of such a company. The use of the words 'any other question whatsoever' makes it abundantly clear that the narrow ejusdem generis construction should not be applied and the widest possible construction should be put regarding the exclusive jurisdiction of the High Court to deal with all matters relating to or arising out of the winding up of a banking company.

5. The inconsistency between Sections 45A and 45B of the Banking Companies Act and Sections 18, 19, 37(3) and 39, Orissa Estates Abolition Act will now be clear. Where the mortgagee of the proprietor of an estate is a banking company under liquidation and the estate is taken over by the Government under the provisions of the Orissa Act, two important questions arise :

(i) Who is the proper authority to investigate and determine the sum payable out of the total compensation to the mortgagee banking company?

(ii) Is the Government entitled to spread over the payment of such compensation to the banking company for a period of thirby years under Section 37(3) of the O. E. A. Act subject of course to their discretion to pay the entire compensation as a lump sum as permitted by the proviso to that sub-section?

6. The Banking Companies (Amendment) Act, 1953 was passed by the Parliament in exercise of the powers conferred by Article 246(1) of the Constitution read with entry 43 of List I of the seventh Schedule which confers on the Parliament exclusive jurisdiction to make laws regarding the winding up of banking companies. The use of the non-obstante clause in Clause (1) of Article 246 further indicates the predominance or supremacy of the Union Parliament in making laws with respect to that subject. The O. E. A. Act was made by the Orissa Legislature in exercise of the powers conferred by Clauses (2) and (3) of Article 246 of the Constitution read with entry 39 of List II and entry 42 of List III of the Seventh Schedule. Following the well-known 'pith and substance' doctrine there seems no doubt that both the Acts have been validly passed by competent Legislatures and Mr. Rath on behalf of the Official Liquidator rightly did not urge that any provisions of the O. E. A. Act was ultra vires.

His contention however is that on a matter of mere construction, when there is any inconsistency between any provision of the Banking Companies Act (as amended) and the Orissa Estates Abolition Act the former should prevail. I am inclined to accept this argument. The Banking Companies (Amendment) Act, 1953 is a later specialenactment made by the Parliament for simplifying and expediting the procedure for winding up of banking companies. The Orissa Estates Abolition Act is a general earlier Act dealing with acquisition of all estates within the State; the determination of compensation payable to the persons whose interests were so acquired and the manner of payment of such compensation. Where there is inconsistency between the two, the special later Act should prevail, especially when Section 45A, Banking Companies Act expressly declares that the provisions of Part IIIA of that Act shall have effect notwithstanding anything inconsistent therewith contained in 'any other law for the time being in force'. The O. E. A. Act is a 'law for the time being in force' within the meaning of Section 45A, Banking Companies Act.

7. Clause (1) of Article 254 of the Constitution also leads to the same conclusion. That clause says that when any provision of a law made by the Legislature of a State is repugnant to any provision of a law made by Parliament which Parliament is competent to enact, then the law made by Parliament whether passed before or after the law made by the Legislature of the State, shall prevail and the law made by the Legislature of the State shall 'to the extent of the repugnancy be void. Sections 18, 19 and 33 of the O. E. A. Act being repugnant to Sections 45A and 45B, Banking Companies Act would, therefore, be void to the extent of the repugnancy. That is to say, though they may be valid in respect of claims of other persons they will not be valid as regards the claim of a banking company under liquidation.

8. Hence, the exclusive jurisdiction conferred on the Claims Officer by the O. E. A. Act must give way in face of the provisions of Sections 45A and 45B of the Banking Companies Act by which the; High Court alone has exclusive jurisdiction to determine the claim of a banking company under liquidation for payment out of the compensation money.

9. Doubtless, where there is no conflict between the two Acts the High Court will be bound to follow the provisions of the O. E. A. Act in estimating the amount of compensation payable. The conflict between the two Acts is essentially in respect of the exclusive jurisdiction of the High Court to determine the amount payable to a Banking Company. There is no conflict as regards the estimation of the amount so payable. Thus, the provisions of Section 20(2) of the O. E. A. Act regarding scaling down of interest and the provisions of Section 28(3) of that Act (already referred to) would continue to apply. Those provisions may offend some of the provisions of the Transfer of Property Act regarding the rights of a mortgagee. But the O. E. A. Act has been assented to by the President and hence would prevail over any provision of the Transfer of Property Act inconsistent with it by virtue of Article 254(2) of the Constitution.

10. The construction of Section 37(3) of the O. E. A. Act, however, presents some difficulty, under Section 45B, Banking Companies Act the High Court alone has exclusive jurisdiction to determine any question of law or fact relating to the winding up of a banking company. The question as to whether the amount due to the banking company should be realised in one lump sum or by instalments is a 'question of fact relating to the winding up of the banking company' and would thus be within the exclusive jurisdiction of the High Court. But this jurisdiction would be seriously curtailed if by virtue of Section 37(3) ofthe O. E. A. Act the State Government claim unfettered discretion to pay the sum either in one instalment or in thirty annual equated instalments. If Section 37(3) were to prevail the result would be that the winding up proceedings of banking companies which have advanced loans to proprietors of estates and other 'intermediaries' as defined in the O. E. A. Act would be protected for a period of thirty years and the essential purpose for which the Banking Companies (Amendment) Act, 1953 was passed would be frustrated. I would therefore take the view that Section 37(3) of the O. E. A. Act must give way before Section 45B, Banking Companies Act.

11. In the result the Official Liquidator is directed to apply to this Court and not before the Claims Officer for determination of the amount payable to the banking company out of the total compensation payable for the acquisition of the estate of the judgment-debtor. This Court after determining the sum in the light of the provisions of Sections 20(2) and 28(3) of the Orissa Estates Abolition Act would then take further steps to recover the sum from the compensation money in the hands of the Government.

12. Let a copy of this order be given to the Advocate General and also to the Official Liquidator of the Puri Bank Ltd.


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