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Life Insurance Corporation of India Vs. Sham Surat Singh and ors. - Court Judgment

LegalCrystal Citation
SubjectCommercial
CourtDelhi High Court
Decided On
Case NumberSuit Appeal No. 277 of 1971
Judge
Reported inAIR1983Delhi291; ILR1981Delhi759
ActsPunjab Relief of Indebtedness Act, 1934 - Sections 30; Code of Civil Procedure (CPC), 1908 - Order 34, Rule 4
AppellantLife Insurance Corporation of India
RespondentSham Surat Singh and ors.
Advocates: Ravinder Sethi,; G.N. Aggarwal and; H.D. Triyogi, Advs
Cases Referred(Gough v. Gough
Excerpt:
.....plaintiff which is incidentally a state corporation but is nevertheless a mortgagee. ; 2. the term 'debt' includes all the liabilities of a debtor in cash or in kind, secured or unsecured. the term as defined in section 7(1) alone has to be read in section 30. the term 'debtor' as defined in section 7(2) has nothing to do with the applicability of section 30. ; 3. the debtor who has incurred a debt has only to satisfy the conditions laid down in section 7(1). he has not to show that he is also a 'debtor' as defined in section 7(2). when the suit is in respect of a debt as defined in section 7(1), the rule of damdupat as enacted in section 30 is immediately attracted. ; 4. the mortgagor need not be a 'debtor' within the meaning of the term as defined in section 7(2) in order to..........a sword of offence. but l.i.c. is not excluded. (7) section 30 refers to the definition of the term 'debt' as defined in section 7 of the act. section 7(1) defines the term 'debt' in these terms : ' debt' includes all liabilities of a debtor in cash or in kind, secured or unsecured, payable under a decree or order of a civil court or otherwise, whether mature or not, but shall not include debts incurred for the purposes of trade, arrears of wages, land revenue or any debt which is barred by the law of limitation, or debts due to co-operative banks or to co-operative societies or to the state bank of india or to any banking company registered under the indian companies act, 1913, prior to the first day of april, 1937, or any bank included in the second schedule to the reserve bank of.....
Judgment:

Avadh Behari Rohtagi, J.

(1) The angle question in this suit is regarding interest.

(2) The plaintiff, Life Insurance Corporation of India, on 28th May, 1971 brought a suit for the recovery of Rs. 3,56,291.86 by sale of the mortgaged property against the borrowers on the foot of a mortgage dated 19th June, 1962. The plaintiff Corporation is the mortgagee. The defendants are the borrowers. The Corporation advanced a sum of Rs. 3,18,335.67 to the borrowers. In terms of the mortgage deed the Corporation appointed a receiver of the mortgaged property to receive and recover rents, profits and income thereof under the provisions of the Transfer of Property Act, 1882. To begin with, the Zonal Managers were appointed receivers. Thereafter a committee of receivers was appointed by the court and then a sole receiver was appointed. After the death of the sole receiver some of the borrowers were appointed receivers to receive and recover rents, profits and income of the property.

(3) The real question for decision now is: What is the amount due to the Corporation on the foot of the mortgage The answer to this question will depend on another question. That question is whether the principle of damdupat as enacted in Section 30 of the Punjab Relief of Indebtedness Act, 1934 (the Act) as extended to Delhi applies to this suit. Counsel! for the Corporation says that Section 30 of the Acf has no application to the present suit. The Corporation claims interest @ 7-1/2% p.a. with half yearly rests as provided in the mortgage deed. The borrowers, on the other hand, contend that Section 30 of the Act forbids the court to pass a decree for a sum larger than twice the amount of the sum actually advanced less- any amount already received by the Corporation. Section 30(2) of the Act says :

'In any suit in respect of a debt as defined inspection 7, advanced after the commencement of this Act. no Court shall pass or execute a decree or give effect to an award in respect of such debt for a larger sum than twice the amount of the sum found by I he Court to' have been actually advanced less any amount already received by a creditor.'

(4) This section codifies the ancient doctrine of damdupat as known to Hindu Law. This Act was enacted with object of protecting borrowers whose needs or advertises compelled them to borrow money against the oppressive exaction of money lender which often they were powerless to resist. The Act prohibits a court from passing a decree in respect of a debt for a larger sum than twice the amount of sum actually found by the court to have been advanced less any amount already received by the creditor. The Act is a shield of protection to the debtor. This- is the legislative policy behind the Act. The court has- to enforce the legislative policy.

(5) The Act is a social legislation. It is the product of social awareness that characterised the mid-thirties. It was enacted to achieve a social end. The social end was to give 'relief of indebtendness', as the title suggests. One practical means adopted to achieve that end was to codify the ancient rule of damdupat. The Act strikes at transactions entered into by rapacious money lenders reserving an unconscionable or exorbitant rate of interest.

(6) But as the Act applies to private money lenders it applies to conglomerations of power. It applies to Life Insurance Corporation with full rigour. True L.I.C. is an instrumentality of the State but nonetheless a mortgagee. It has advanced money to borrowers. These are debts. All 'debts' are covered by the definition of the term in Section 7(1) whether secured of unsecured, mature or not, simple or decretal. A mortgage debt is a debt. It is true some defined liabilities are excluded from that definition. It is also true that certain concentrations of power and wealth like banks are excluded from the purview of Section 7(1). Lest the shield of protection becomes a sword of offence. But L.I.C. is not excluded.

(7) Section 30 refers to the definition of the term 'debt' as defined in Section 7 of the Act. Section 7(1) defines the term 'debt' in these terms : ' debt' includes all liabilities of a debtor in cash or in kind, secured or unsecured, payable under a decree or order of a civil court or otherwise, whether mature or not, but shall not include debts incurred for the purposes of trade, arrears of wages, land revenue or any debt which is barred by the law of limitation, or debts due to co-operative banks or to co-operative societies or to the State Bank of India or to any banking company registered under the Indian Companies Act, 1913, prior to the first day of April, 1937, or any bank included in the Second Schedule to the Reserve Bank of India Act 1934, other than debts transferred to such societies, banks or banking companies during the pendency of an application under section 9 in which such debts could be taken into consideration for the purposes of this Act, or debts transferred to such societies, banks or banking companies on or after the 2nd day of September, 1938, if in the opinion of the board such transfer was effected with a view to avoid the operation of this Act.' Immediately after this' the term 'debtor' is denned in Section 7(2) :

''debtor' means a person who owes a debt and

(I)who both earns his livelihood mainly by agriculture, and is either a landowner, or tenant of agricultural land, or a servant of a landowner, or of a tenant of agricultural land, or

(II)who earns his livelihood as a village menial paid in cash or kind for work connected with agriculture, or

(III)whose total assets do not exceed five thousand rupees Provided that a member of a tribe, notified as agricultural under the Punjab Alienation of Land Act, 1900, shall be presumed to be a debtor as defined in this section until it is proved that his income from other sources is greater than his. income from: agriculture.

Explanationn (i) A debtor shall not lose his status as such through involuntary unemployment or on ac- count of incapacity temporary or permanent, by bodily infirmity, or, if he is or has been in service of Military, Naval or Air Forces of the Union only on account of his pay and allowances or pension exceeding his income from agricultural sources.

(II)A debtor shall not lose his status as such by reason.' of the fact that he makes income by using his plough cattle for purposes of transport.

(III)A debtor shall not lose his status as such only because he does not cultivate with his own hand.'

(8) 'THE central question is whether the term 'debt' used in- Section 30 refers only to sub-section (1) of Section 7 or by incorporation also refers to sub-section (2) of Section 7. In other Words, will a person who is not a 'debtor' within the statutory sense as defined in Section 7(2) be also entitled to the benefit of Section 30 of the Act on the simple ground that his debt fails within the terms of Section 7(1) The term 'debt' includes all liabilities of a debtor in cash or in kind, secured or unsecured. Will a town dweller whose assets exceed much more than Rs. 5000 be entitled to the benefit of the rule of damdupat if the creditor brings a suit against him and claims a decree for a sum larger than twice the amount he had advanced to the borrower

(9) In my opinion the term 'debt' as defined in Section 7(1) alone has to be read in Section 30. The term 'debtor' as defined in Section 7(2) has nothing to do with the applicability of Section 30. This conclusion is based on the scheme of arrangement of the Act. The Act is divided into 8 part's. Section 7 appears in Part Iv headed as 'Debt Conciliation Boards'. The term: 'debtor' as defined in Section 7(2) was defined for the benefit of those persons who were entitled to apply to the 'Debt Conciliation Boards' for the reduction of their debts'. Only a 'debtor' as defined in Section 7(2) can apply to the Debt Conciliation Board set up by the Chief Commissioner. Such a person must fulfill one of the three qualifications enumerated in Section 7(2). He must have the 'status' of a 'debtor' defined in sub-section (2). If he has lost that status he cannot apply to the Debt Conciliation Board. For example, if his assets exceed Rs. 5000 he will not be entitled to apply to the Debt Conciliation Board for the scaling down of his debts.

(10) For the purposes of Part V which is headed as 'Damdupat' the debtor who has incurred a debt has only to satisfy the condition of Section 7(1). He has not to show further that he is also a 'debtor' as defined in Section 7(2). All that is necessary for the application of the rule of damdupat is t'hat the person invoking it must be a debtor,, whatever his status. When the suit is in respect of a debt as defined in Section 7(1), irrespective of who the debtor is and what his status is, the rule of damdupat as enacted in Section 30 is immediately attracted.

(11) Counsel for the Corporation contends that though it is true that the term: 'debt' is referred to specifically in Section 30(2) the term 'debtor' is used in Section 7(1) and must thereforee be understood in the sense in which the term is defined by sub-section (2) of Section 7. He says that word 'debtor' as used in Section 7(1) is defined in Section 7(2). He contends that the term 'debtor' as used in Section 7(1) has no other meaning except this that the person who has contracted the debt must also show that he is a 'debtor' within the statutory sense of the term. In support of his contention he has referred me to Risala v. Zile Singh. 1975 Plr 583 (per A.D. Koshal J.).

(12) This precise question has been the subject mater of a full bench of the Punjab High Court in Mangat Rai v. Kidar Nath 1961 (63) Plr 617 (Per Mehar Singh, Grover and Mahajan JJ). Two questions were referred to the full bench. We are directly concerned with one of them. That was the question: 'Whether it is open to the legal representatives of a debtor to invoke the help of Section 30 of Punjab Relief of Indebtedness Act in a suit for possession by redemption?' The principal argument before the full bench in that case was that the legal represen'ative of a deceased debtor is not a 'debtor' within the meaning of the term as defined in Section 7(2) and thereforee he was not entitled to the benefit of Section 30 of the Act, namely, the rule of damdupat. This argument was rejected by the court. It was held that the legal representative of a debtor will be entitled to the benefit of the statutory protection contained in Section 30 of the Act. I will quote two passages from the judgment of the full bench which sum up their views. Speaking for the court Mehar Singh J said :

'IN sub-section (2) of Section 7 of Punjab Act No. 7 of 1934, 'debtor' is defined to mean a person who owes a debt and has one of the three other qualifications mentioned therein. The definition of 'debtor' in this provision is a narrower definition on account of one of the three additional qualifications, than ^he meaning of flies word as a person who owes a debt. This narrower. definition is given in this provision for the purposes cf Part Iv of the Act dealing with proceedings before Debt Conciliation Boards and it is confined only to this Part. It has been contended on behalf of the defendants that the meaning of the word 'debt' in section 7(1) of this Act should be confined only to a 'debtor' as defined in sub-section (2) of that section, but for that there is no justification as the word 'debtor' is specially defined in sub-section (2) with limited meaning for the purposes of Part Iv of this Act, while the meaning of the word 'debt' in sub-section (1) being inclusive is not narrowed by the definition. It is true that some defined liabilities' are excluded from that definition but that does not make the meaning of the word 'debt' in sub-section (1) as merely confined to a debt owed by a 'debtor' as defined in sub-section (2). A 'debtor' as defined in that sub-section of course is a person who owes a debt, but a 'debt' as defined in sub-section (1) may be owed by a 'debtor' as defined in sub-section (2) and may also be owed by a debtor falling outside the narrower definition of the word 'debtor' as given in sub-section (2).' (p. 620).

At page 621 the court said :

'IN sub-section (1) of section 30 of Punjab Act No. 7 of 1934 prohibition is against passing or executing. the decree in a suit in respect of a debt as defined in section 7 of this Act. Section 30 makes no reference to a 'debtor' as defined in Section 7(2), it only refers to a 'debt' as defined in section 7(1). If the suit relates to a: 'debt' as defined therein, the rule of damdupat as enacted in section 30, is immediately attracted, whether or not the party seeking its benefits is within or outside the scope of that word 'debtor' as defined in section 7(2). So reference to the definition of the word 'debtor' as defined in section 7(1), irrespective of who the point. When the suit is in respect of a 'debt' as defined in section 7(1), irrespective of who the defined in section 7(1), irrespective of who the rule of damdupat applies under section 30 of this Act.'

From these two passages it is clear that the full bench rejected the contention of the mortagage that the mortgage most be a 'debtor' within the meaning of the term as' defined in section 7(2) in order to avail of the benefit of a rule of damdupat. They said that the 'narrower definition' of the word. 'debtor' is meant only for purposes of Part Iv of the Act dealing with the Debt Conciliation Boards. This narrower definition has no application to the word 'debtor' as used in section 7(1). There the expression 'debtor' is used in a generic sense meaning a person who owes a debt irrespective of the fact whether he is an agriculturist or a menial or a person possessed of limited assets. The statutory definition given in section 7(2), the judges were at pains to point out, was' applicable only to the Debt Conciliation Boards and the persons applying to them for the purposes of reduction of their debts. Whether a. person was comprehended within the definition of section 7(2) or was outside the scope of that definition it matters little to the applicability of section 7(1) because the rule of damdupat can be availed of by every person who owes a debt.

(13) The full bench referred to a division bench ruling of their own court in Hukam Singh v. Duli Lal Singh (Bhandari Cj and Falsaw J). They approved, of that decision because it was' in accordance with the view expressed by Them.

(14) The decision of the full bench was the subject matter of an appeal -to the Supreme Court in Kidar Nath v. Mangat Rai, : [1970]3SCR213 . The Supreme Court affirmed the judgment of the Punjab full bench and dismissed the appeal with costs'. The Supreme Court said :

'SECTION 7 of the Punjab Relief of Indebtedness Act, 1934, defines a 'debt' as inclusive of 'all liabilities of a debtor in cash or kind, secured or unsecured, payable under a decree of order of a civil court or otherwise, whether mature or not.................... The definition of the expression 'debt' thereforee includes all liabilities of a .debtor .in cash or in. kind, secured, or unsecured. The liability of a mortgagor to pay the money due under the mortgage and to ' pay interest accruing due is clearly a debt....... . It cannot be said that under the three mortgagees there was no debt due by the mortgagor. Nor do we agree with counsel for the mortgagee that the benefit: of section 30 of the Punjab Relief of Indebtedness Act is available only to the original mortgagor and not to his representatives.' (p. 593).

(15) The Supreme Court confirmed the view of the full bench. They agreed with the High Court that the definition of the term 'debt' as given in section 7(1) is an inclusive definition. The definition of the term 'debtor' in section 7(2) is' a narrower definition. The term 'debtor' as used in section 7(1) is a word of much wider impute because it uses the word 'inclades'. It thereforee means this that the 'debtor' in the statutory sense of section 7(2) will also be included in the expression 'debtor' used in section 7(1). Besides .him all debtors who owe money to others and. are liable to .pay that amount, whether secured or unsecured, whether mature or not, are also debtors and entitled tol the benefit of the rule of damdupat. In a word the expression 'debt' used in section 7(1) is inclusive. The term 'debtor' as used in Section 7(2) is exclusive. It exclusively talks of those persons who possess the three, qualifications laid down in section 7(2). Others are excluded from its' scope.

(16) The object of Section 30 is quite clear. By section 30(2) in a suit filed in respect of a debt as defined in section 7, advanced after the commencement of the Act, the Court is enjoined not to pass a decree for a sum larger than twice the amount found by the court to have been actually advanced, less any amount already received by a creditor. There is an embargo upon the court not to declare any amount due on the mortgage which is in excess of twice the amount actually advanced less any amount received by the mortgagee. The Act is a modern version of ancient laws against usuary. It attempts to give soft terms to those who are weighed down with indebtedness'.

(17) The view taken by the full bench was upheld by the Supreme Court on the point which has now directly arisen before me. The term 'debtor' used in Section 7(1) mast thereforee be read in the wider sense of the word as including all persons who owe debts' to 'others, whether the debt is secured of unse' cured, mature or not. For the application of the rule or damdupat in section 30(2) the person need not necessarily be a 'debtor' as defined in section 7(2). Because that is a narrow definition and it is in the sense of this' narrow meaning that the expression 'debtor is defined in Section 7(2). In Section 7(1) the word 'debtor' is used in a generic sense as descriptive of that clause of persons from whom debts are due and owing.

(18) Risala v. Zile Singh (1975) Plr 583 on which counsel for the Corporation relies was a case decided by a learned single judge of the Punjab High Court. The full bench of his own court was not cited before him. Nor was the Supreme Court ruling which affirmed the view of the full bench brought to his notice. Nor was he referred to the division bench ruling of Bhandari Cj and Falsaw J. thereforee this authority cannot be preferred to the view of the full bench which .received the imprimatur of the Supreme Court.

(19) The definition of the term 'debt' in Section 7(1) is an inclusive definition. The High Court took this view. The Supreme Court affirmed it. 'The word 'include' is generally used in interpretation clauses in order tol enlarge the meaning of words' or phrases occurring in the body of the statute. And when so used these words or phrases must be construed as comprehending, not only such things as they signify according to their natural import, but also these things which the interpretation clause declares that they shall include. In my view the word 'includes' as used in Section 7(1) is not a word of limitation. It mean what. it says' >that it includes the matters thereafter mentioned. It is a word of enlargement rather than of restriction.

(20) INCLUDE' is a word to which parliamentary draftsmen seem considerably addicted. One reason for this is it permits enlargement of the meaning of the terms occurring in the body of the statute. It signifies that which is included in addition to something else that is not stated to be included or may not be so included. The word 'include' puts the draftsman, but not necessarily the court, in a happy position.

(21) Section 7(2) defines a 'debtor'. It uses the word 'means'. This is a hard-and-fast definition, and no other meaning can be assigned to the expression than is put down in the definition, (Gough v. Gough (1891) 2 Qb 665. This is in contradistinction to the word 'includes' used in Section 7(1). The word 'includes' is extensive and not restrictive as is the word 'means'. The difference between the two definitions is this. Of the word 'debtor' we are given an exhaustive definition. Of the word 'debt' the definition is inclusive. The word 'debt' will comprehend not only the meaning assigned to it in the definition but also what is understood among the people at large by the word 'debt'.

(22) Section 30(2) forbids the court from passing a decree for an amount larger than twice the amount actually advanced. The amount advanced in this case is' Rs. 3,18,335.67. I can thereforee pass a decree only for twice the amount of this sum less the amount received by the Corporation. On this basis counsel for the parties are agreed, that after .giving credit for all the payments received by the Corporation a sum o.f Rs. 94,917.14 p. is due to the Corporation from the defendants'. This is in accordance with the agreed statement marked Annexure 'A' on the file.

(23) Now remains the question of expenses incurred by the Life Insurance Corporation in the course of their management of the property. K is agreed by counsel for both sides that the amount of expenses comes to Rs. l,10,694.65p. till today. It is also not disputed that the Corporation will be entitled to interest on this amount of expenses at the rate of 71/2% p.a. This is provided in the mortgage deed. Apart from this, Order 34, Rule 4 read with Rule 2 Civil Procedure Code. also allow the mortgagee interest on expenses.The rate has been agreed to at 71/2% in the mortgage bond. It is agreed that interest on expenses comes to Rs. 97,000.00 .

(24) I, thereforee, pass a preliminary decree for Rs. 94,917.14p on account of principal and interest till today on the sum advanced. The Corporation will also be entitled to Rs.' 1,10,694.65 on account of expenses incurred by them and interest thereon amounting to Rs. 97,000.00 . The Corporation will also be entitled to proportionate costs of the suit. The defendants are allowed a period of 6 months to pay the amount. The Corporation shall be entitled to simple interest at the rate of 71% p.a. till the date of payment on the amounts of Rs. 94,917.14 and Rs-. l,10,694.65p.

(25) A sum of Rs. 39,595.36p. is in deposit with the Grind- leys Bank in account No. 182221. This is deposited by the receiver under the orders of the court. The bank will pay the amount of Rs. 39,595.36p. to the Life Insurance Corporation forthwith. Unused cheque book of the aforesaid account will be returned to the Corporation.

(26) It is clarified here that this amount of Rs'. 39,595.36 has already been taken into account in arriving at the figures of Rs. 94,917.14 and Rs. 1,10.694.65 p.

(27) Defendants have paid Rs. 10201- to the Oriental Fire and General Insurance Company Ltd. vide receipt No. 504786 dated 28th April, 1980. This is the fire insurance premium in respect of policy No. 51328 for the year 1980. Counsel for the Corporation says that they also paid fire premium amounting to Rs. 4761- on April 1, 1980 in respect of the same property. The Corporation has no objection if the defendants' claim the refund of Rs. 1020.00 from the Oriental Fire and General Insurance Co. Ltd. I thereforee allow the defendants to claim refund of .the said amount from the Oriental Fire and General Insurance Co. .Ltd.


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