1. These are six connected applications challenging the validity of Part IV of the Marwar Relief of Indebtedness Act of 1941 (hereinafter called the Act) dealing with Debt Conciliation Boards. We propose to decide these cases by one judgment as the main arguments raised in them are the same.
2. Before we mention the grounds on which the validity of the provisions of Part IV of the Act is being attacked, we would like briefly to mention the facts of these six cases.
3. In Birdichand's case (No. 46 of 1955), the Debt Conciliation Board has acted under Section 13 (2) of the Act, and discharged the debt.
4. In Civil Writs No. 121 of 1955, No. 158 of 1955, No. 36 of 1956, and 74 of 1956 proceedings are going on the application of the debtors under Section 11 of the Act.
5. In Civil Writ No. 41 of 1956 also proceedings are going on the application of the debtor under Section 11 of the Act, but in this case besides certain sums due on Bahee Khatas, some amount due on a decree of a Court is also involved.
6. The case of the applicants is that the Act is only in force in a part of the State of Rajasthan, which was formerly known as the State of Marwar. Therefore Part IV of the Act dealing with Debt Conciliation Boards being only in force in a part of the present State of Rajasthan, there is territorial discrimination between different parts of Rajasthan.
Further, even in Marwar Part IV has only been brought into force in a few sub-divisions like Bali, Nagpur, Merta and Jodhpur, and not in the entire territory covered by the former State of Marwar. Therefore, it is urged that a discrimination between one part of the State of Rajasthan and another part has arisen in consequence of this Act, and such discrimination must be struck down under Article 14 of the Constitution.
Consequently, we should declare Part IV of the Act ultra vires of the Constitution after the 26th of January 1950. Some other minor points were also raised on behalf of the various applicants, but we do not think it necessary for present purposes to refer to them as there is, in cur opinion, nothing in those points.
7. The applications have been opposed on behalf of the State, and it is urged that the provisions contained in Part IV of the Act are not opposed to the provisions of the Constitution, and are not void. It is said that the object of the Act was to provide for relief of indebtedness, particularly of the tenantry, and the Debt Conciliation Boards were established to fulfil this purpose. The Act, and particularly Part IV, is, therefore, a progressive and ameliorative measure, and should be preserved even though it may not be in force in other parts of Rajasthan.
8. Before we consider the relevant provisions of the Act and the arguments for and against its validity in the context of Article 14 of the Constitution, we should like to dispose of a point which arose during the course of arguments, and which was not raised in the applications. It was found that Section 1, Sub-section (2) of the Act, which provided for the application of the Act, had made no mention of Part IV at all.
It was, therefore, felt that Part IV might never have been brought into force because it was omitted from the section applying the Act. We, therefore, sent for the original Council Resolution No. 9, dated 11th of August 1941, to find out whether this omission of Part IV from Section 1 (2) was deliberate or only a misprint. We found that in the Council Resolution Part IV was to come into force over the whole of the State except the Sambhar Shamlat area just like Parts III, V, VI and VII, so that the omission of Part IV in the section in the Gazette in which the Act was published was a misprint. This is also borne out by the fact that the authorised Hindi translation, which was also published in the Gazette on the same day, contained the mention of Part IV as extending to the whole of Marwar except the Sambhar Shamlat area along with Parts 111, V, VI and VII. We also find that in December 1944, this defect was noticed, and a correction was issued on the 23rd of December 1944, published in the Jodhpur Government Gazette of January 6 of 1945, at p. 376.
The Act came into force from 1945, and it is clear that Part IV was also in force throughout Marwar except Sambhar Shamlat area. There is no doubt, therefore, that Part IV was in force in the former Marwar State, and remained in force in that area after the Rajas-than State came into existence.
It may, however, be mentioned that the former Marwar State never appointed any Conciliation Board as envisaged in Part IV, and this part of the Act, though it remained on the statute book, was never actually put to use. It is only, for the first time, from 1952 or 1953 onwards that the State of Rajasthan constituted certain Debt Conciliation Boards in a few sub-divisions of what was former Marwar State.
9. From the main submissions of the parties, which we have briefly mentioned above, it will be clear that the attack of the applicant is that Part IV of the Act is in force only in a part of the State, and there is no justification why this discrimination should continue after the 26th of January 1950.
The defence of the State is that Part IV of the Act is a progressive and ameliorative piece of legislation, and even if it be in force only in a part of the State, that is no reason for depriving this part of the State of this beneficent measure simply because other parts of the State were not advanced enough in the time of the former rulers to have similar legislation. Reliance in this connection is placed on the observations of this Court in -- Manohar Singhji v. State of Rajasthan, ILR (1951) 1 Raj 888: (AIR 1953 Raj 22) (A); Madan Singh v. Collector, Sikar, ILR (1953) 3 Raj 606: (AIR 1954 Raj 104) (B).
10. A brief analysis of the provisions of Part IV is called for in order to determine the nature of this legislation. This Part consists of 23 sections from Section 7 to Section 29. Section 7 defines a 'Debt' and a 'Debtor', and confines the application of the Part to what we may call agricultural tenants or agricultural labourers; but it is worth mention that the definition of the word 'debt' includes an amount payable under a decree or order of a Civil Court. Section 8 (1) (a) is important, and is in these terms -
'The Government of Jodhpur may for the, purpose of amicable settlement between debtors and their creditors establish debt conciliation boards.'
The rest of the section provides for the method of appointment and the jurisdiction of the board is only ancillary to Clause (a) of Sub-section (1). Section 9 provides, that an application to effect a settlement between a debtor and his creditors may be made either by the debtor or by any of the creditors. Sections 10 to 12 provide procedure for making of the applications and giving of notice.
Then comes Section 13 which lays down that the board shall publish a notice calling upon every creditor of the debtor to submit a statement of debts owed to such creditor by the debtor within two months of the publication of the notice, though the time may be extended beyond two months for good and sufficient cause on the application of a creditor. Then comes Sub-section (2) of Section 13 which is important and may be given in extenso -
'Every debt, of which a statement is not submitted to the board in compliance with the provisions of Sub-section (1) shall be deemed for all purposes and all occasions to have been duly discharged;
Provided that if a creditor proves to the satisfaction of the board, or, if no board is vested with jurisdiction by the Government of Jodhpur, to the satisfaction of a Civil Court that the notice was not served on him and that he had no knowledge of its publication, the board or Court may revive the debts.'
10a. Section 14 provides for the procedure of the board, but the proviso to Section 14(1) is of importance, and runs thus --
'Provided that a decree or order of a Civil Court shall be conclusive evidence as to the amount of the debt to which the decree relates but the amount may be reduced as the result of an agreement arrived at in accordance with Section 17.'
11. Section 15 provides that the board shall attempt amicable settlement. Section 16 gives power to the board to compel the attendance of parties and witnesses, and the production of documents. Section 17 provides for agreement between the debtor and the creditors and the registration of such agreement with the specific direction that the board shall pass an order dismissing the application so far as it relates to the creditors who have not come to amicable settlement. An agreement made under Section 17 (1) has the force of a decree in a Civil Court. Sections 18 and 19 are incidental provisions of no particular importance.
12. Then comes Section 20 which is important and is here set down in extenso -
'(1) Where, during the hearing of any application made under Section 9, any creditor refuses to agree to an amicable settlement the board may, if it is of opinion that the debtor has made such creditor a fair offer which the creditor ought reasonably to accept grant the debtor a certificate, in such form as may be prescribed in respect of the debts owed by him to such creditor,
Provided that the Board shall not grant a certificate unless the Board is satisfied that the creditors to whom not less than 40 per cent, of the debtor's debt are owing have come to an amicable settlement with the debtors.
(2) Where any creditor sues in a Civil Court for the recovery of a debt in respect of which a certificate has been granted under Sub-section (1) the Court notwithstanding the provisions of any law for the time being in force, shall not allow the plaintiff any costs in such suit, or any interest on the debt after the date of certification under Sub-section (3) in excess of simple interest at six per centum per annum on the amount due on the date of such certificate.
(3) Where after the date of an agreement made in accordance with Section 17 or of certification any unsecured creditor sues for the recovery of a debt, in respect of which a certificate has been granted under Sub-section (1) or any creditor sues for the recovery of a debt incurred after the date of such agreement, any decree passed in such suit notwithstanding anything contained in the Marwar Code of Civil Procedure, shall not be executed until six months after the expiry of the period fixed in the agreement authenticated under Sub-section (1) of Section 17.'
It will be seen that Section 20 deprives the creditors of their costs and interest above 6 per cent, under certain circumstances.
13. Section 21 bars the jurisdiction of Civil Courts under certain contingencies. Section 22 bars appeal or revision except in one case. Section 23 gives power of review to the board. Section 24 permits the appearance of legal practitioners with the permission of the board. Section 25 provides a bar to the filing of new suits, and Section 26 extends the period of limitation. Section 27 makes members of the boards public servants and Section 28 gives power, to Government for making rules. Section 29 is again important and runs as, follows -
'In making any rule the Government of Jodhpur may direct that a breach thereof shall be punishable with fine which may extend to fifty rupees.'
14. These in brief are the provisions of Part IV. The first question which to our mind arises is as to what is the nature of these provisions. Are these Debt Conciliation Boards really debt conciliation boards, or, if we may so call them, debt conciliation tribunals, as they are generally understood, or are they something more. Now conciliation in its very nature does not involve adjudication.
In the Oxford English Dictionary, Vol. II, at p. 767, conciliation means the action of bringing into harmony; harmonising, reconcilement. Further at the same page 'Court (tribunal) of conciliation means a Court for composing disputes by offering to the parties a voluntary settlement, the case proceeding to a judicial Court if this is not accepted.
The function therefore of a conciliation tribunal or a conciliation board is composition of disputes by agreement between the parties with the good offices of the tribunal with the rider that if the parties do not agree, no penalty will be imposed on them, and they would have a right to go to the judicial Courts for determination of their disputes. 'Conciliation Court' in Webster's New International Dictionary, Vol. I, p. 553, is said to mean a Court created to bring about settlement of small controversies by agreement of the parties, avoiding litigation.
Here again the emphasis is on settlement of controversies by agreement of the parties, and there is no compulsion so far as the decision of the dispute is concerned. Of course, the parties may be compelled to appear before the conciliation tribunal, and this is provided by Section 16 of the Act also.
But having compelled their appearance before itself, the tribunal then proceeds to try to effect a settlement by agreement. If it succeeds, well and good. If it fails, the matter comes to an end, and the parties are left to their remedies in the proper Courts of law. This is what we understand to be the purpose of a conciliation tribunal, be it named conciliation Court or debt conciliation board.
15. We may also refer here to conciliation officers and boards of conciliation under the Industrial Disputes Act (No. XIV) of 1947. Sections 11 and 12 of that Act will show that the purpose of the conciliation officers and conciliation boards is merely to attempt to arrive at an agreed settlement. Where it is not possible to arrive at an agreed settlement between the parties, the conciliation officer or the conciliation board merely reports to Government, and thereafter the matter may be referred to the Industrial Tribunal.
There is no disability of any kind attaching to either party in case a settlement is not arrived at through the efforts of the conciliation officer or the conciliation board. This provision, of the Industrial Disputes Act clearly bears out what we have said about the nature of a conciliation tribunal.
16. It is also, in our opinion, clear that the intention of the Legislature in the present case was to establish such a conciliation tribunal as we have described above, for Section 8 (1) (a) of the Act provided that the Government of Jodhpur might, for purposes of amicable settlement between debtors and their creditors, establish debt conciliation boards.
The intention of establishing these boards was not to create new tribunals for the adjudication of disputes, but to create machinery by which, amicable settlement between debtors and creditors might be arrived at. Section 8 (1) (a), therefore, clearly provided for a conciliation Court or tribunal as that term is generally understood. But when we come to the other provisions of the Act, the Legislature seems to have either forgotten that it was only establishing conciliation tribunals, or, if that is not so, it has given to these conciliation tribunals powers which do not generally appertain to such tribunal's.
As we have said above, the basic idea of a conciliation tribunal is that it compels parties to appear before it if necessary, and then tries to effect a settlement between them. If a settlement is arrived at by agreement, the 'settlement has the effect of a decree of a Court; but if no settlement is arrived at the parties are not penalised, and are left to their ordinary remedies in Courts of law. But if an element of compulsion is introduced, the tribunal does not remain a conciliation tribunal whatever else it might become.
17. Now the intention of the Legislature in Section 8 (1) (a) of the Act was to establish a conciliation tribunal and no more, but in subsequent sections of the Act the Legislature seems to have gone beyond the scope of a conciliation tribunal. Look at Section 13 (2). It provides that if on a notice published by the board a settlement is not submitted within a certain time, the debt would be wiped out.
Now such a provision in our opinion has no place in a statute providing for a conciliation tribunal, and if a tribunal, though it is called a debt conciliation board, is given such powers, it no longer remains a mere conciliation tribunal, but becomes something more. Therefore, the debt conciliation board under this Act, though it began under Section 8 (1) (a) as a conciliation tribunal, has become something more by virtue of Section 13 (2).
18. Then we come to the proviso to Section 14 (1) which again appears to us to be a most extraordinary provision to make for a conciliation tribunal. In the very nature of things, the conciliation tribunal is there to avoid recourse to litigation, and to prevent parties from going to Court. It seems, therefore, strange indeed that a conciliation tribunal should be given the power to reduce the amount of a civil Court decree as the result of an, agreement between the parties.
Actually reading this proviso along with the definition of the word 'debt' which includes a decree or order of a Civil Court, the conclusion at which we arrive is that this conciliation tribunal can wipe out Civil Court decrees if for some reason or other the creditor is unable to make a statement of claim within the time allowed by Section 13 (1).
This, in our opinion, is the very antithesis of what a conciliation tribunal as one generally understands it Is supposed to do. Its purpose is to effect a conciliation, and if that is not possible to leave the parties to go to Court and not to wipe out decrees passed by Courts. The proviso to Section 14 (1), read with the definition of the word 'debt', therefore, provides something which is entirely foreign to a conciliation tribunal.
19. Then we come to Section 20, Sub-section (1) lays down that if in the opinion of the board, the offer made by a debtor is a fair offer and the creditor unreasonably does not accept it, the board may grant a certificate to this effect in cases where 40 per cent, of the creditors have come to an amicable settlement. When such certificate is granted, the creditor when he sues in the Civil Court loses his costs and any contractual interest above 6 per cent, from the date of the certificate. Thus in a sense the creditor is being compelled to come to an agreement by virtue of the penalties provided in Sub-section (2) of Section 20, if the board is of the opinion that the offer of a settlement by the debtor is reasonable. This again is a provision which cuts across the very idea of a conciliation tribunal and makes a tribunal with such powers something more than a mere debt conciliation board.
Further, under Sub-section (3) of Section 20, if a creditor, who has not agreed to conciliation, sues and gets a decree, he cannot execute his decree till such time as the instalments provided in Section 17 come to an end, with the result that what may be called a recalcitrant creditor may be forced to some sort of agreement for he knows otherwise that other creditors have priority, and he might never be able to recover his debt. Here again is an indirect compulsion on the creditor, which is in a sense opposed to the very idea of a conciliation tribunal.
20. Section 21 (a) (iii) and (b) are consequential provisions to Sections 13 and 20, and so is a portion of Section 22. Sections 23 to 28 call for no comments. But Section 29 again is an extraordinary provision making the breach of any rule made under Section 21 a punishable offence. Section 29 does not lay down who is going to punish under that section, but, if it is the debt conciliation board, we must say that it is most extraordinary to arm a conciliation tribunal with the power to punish with fine.
21. This analysis of the various provisions contained in Part IV shows that the debt conciliation boards, as provided in this Part of the Act, are not really conciliation tribunals as one understands these tribunals. They are much more than conciliation tribunals, though the intention of the Legislature, as is clear from Section 8 (1) (a), was merely to establish debt conciliation boards for purposes of amicable settlement and nothing more.
22. Now there is no doubt that enforcement of Part IV of the Act does create discrimination between that part of Rajasthan which was formerly Marwar State and the rest of Rajasthan. This legislation, therefore, would be hit by Article 14 unless it can be justified on the basis of reasonable classification, or on the ground that the legislation is a law for the good of the community at large in this part of Rajasthan, and should, therefore, be saved as a progressive and ameliorative law.
23. So far as reasonable classification is concerned, it has not been urged, nor is there any basis on which we can come to that conclusion that there is something peculiar in this part of Rajasthan which requires this law as compared to other parts of Rajasthan.
24. We shall, therefore, have to fall back on the consideration whether Part IV of the Act is a progressive and ameliorative law for the benefit of the community at large in this part of the State. If it is, it can be upheld in view of the decisions of this Court in ILR (1951) 1 Raj 888: (AIR 1953 Raj 22) (A) and in ILR (1953) 3 Raj 606: (AIR 1954 Raj 104) (B). But if this law cannot be justified on this ground it will have to be struck down in whole or in part as offending Article 14 of the Constitution.
25. Now there is no doubt that conciliation through conciliation tribunals is considered to be a measure for the good of the community at large inasmuch as it avoids litigation and settles disputes between persons and persons with their assent. If this law only did that, and these debt conciliation boards were only conciliation tribunals as we understand these tribunals to be, there would be no reason to strike down this law, and it should be allowed to stand as a progressive and ameliorative law for the good of the community in this part of the State.
But this is unfortunately not so. The debt conciliation boards created under Part IV of the Act are not merely conciliation tribunals as understood generally and as explained by us above. These boards have been given certain powers which do not, in our opinion, appertain to the region of conciliation. It is because of these powers of a coercive nature which these boards possess that we have to consider if they can be allowed to function in a part of the State when in the rest of the State there are no such boards.
In other words, can it be said that these coercive powers which these boards possess and which result in a certain type of discrimination can also be upheld as progressive and ameliorative provisions for the good of the community as a whole.
26. Let us take first the provision contained in Section 13 (2). That provides that the debt would be deemed to be discharged under certain circumstances, namely where the creditor has not given a statement of his case within the time allowed by law after publication of a notice. There is certainly a provision for relaxing the time limit, but by and large the debt will be deemed to be discharged if the statement is not submitted in time.
In Birdhichand's case, for example, we find that the conciliation board discharged the debt even though Birdhichand was present before the board, and was giving, what in our opinion seems to be, good reason why he was unable to submit a statement within time. Is there any reason why, in the name of conciliation, creditors in this part of the State only should have their debts discharged simply because the notice issued by the conciliation board might not have come to their knowledge
It may be said that they could bring to the notice of the board that they had no knowledge, and therefore the time should be extended. But this would amount to asking a favour from the board which the board in its wisdom might or might not show to them. As we have said before, such wholesale discharge of debts is no part of a conciliation tribunal's duties. Nor do we see any reason why such a law should be prevalent in one part of the State only and not in others.
Nor do we think that such a discharge of debts can, by itself, be called ameliorative and progressive, for we cannot and should not forget the interest of the creditors also. As a matter of fact, by this kind of discharge of debts the conciliation boards have been turned into some type of insolvency Courts.
There is to our mind no reason why this kind of procedure analogous to insolvency Courts should be applied only to a part of the State and not to the rest. We are, in the circumstances, not prepared to hold that Section 13 (2) of the Act is an ameliorative and progressive law for the benefit of the community at large, and should, therefore, be saved.
27. Now let us turn to Section 14 (1). This provides for scaling down Civil Court decrees, of course by agreement. We have already said that it is against the very nature of a conciliation tribunal that it should tamper with decrees passed by the Civil Courts. When the parties have already been to Court, there is no question of any further conciliation between them.
It is true that Section 14 (1) envisages revision of Civil Court decrees with consent. But there is no reason why this special provision should be in existence in this part of the State, and why the usual procedure prevalent in other parts of the State, namely execution of Civil Court decrees, and their reduction, if necessary, by agreement between the parties in the executing Court should be given up.
We see nothing of an ameliorative or progressive nature in having this done before a conciliation board rather than in the executing Court. We are, therefore, not prepared to uphold this provision on the ground of its ameliorative or progressive nature. It may be mentioned that there can be no reduction under Section 14 (1) if the creditor does not agree.
It would have been a different matter if there was some provision which provided for revision of Civil Court decrees as, for example, was done in the U. P. Agriculturists' Relief Act (No. XXVII) of 1934. But here there is no relief really to the debtor, and all that has been done by Section 14 is to substitute for the executing Court the debt conciliation board. We do not see anything progressive or ameliorative in such substitution.
Therefore, there is no reason why the people in this part of the State should be deprived of the usual Courts, and should be made to go before the conciliation board with their decrees when the result may be nothing at all, Instead of doing any good it would only mean that the creditors will be delayed in the repayment of the amounts of their decrees if any debtor is so minded as to take them before the conciliation board.
We are, therefore, of opinion that the provision in Section 14 (1) is also in the circumstances discriminatory, and cannot be saved as a progressive or ameliorative law.
28. Then comes Section 20. Under this provision, if 40 per cent, of the creditors accept a settlement with the debtors, and the rest do not, and the board thinks that the offer of settlement made by the debtor is reasonable, it gives a certificate. The consequence of that is that certain disabilities arise with respect to creditors against whom a certificate is given. This again is, in our opinion, coercive, and is foreign to what we consider to be the function of a conciliation tribunal which was the intention of Section 8 (1) to create.
Is there any reason why a creditor should be forced to suffer in the name of conciliation these disabilities in this part of Rajasthan simply because he is not prepared to accept what the board considers to be a reasonable offer by the debtor when there is no such disability applying to creditors in other parts of Rajasthan
29. A real conciliation tribunal may be to the advantage of the community as a whole, but this kind of a tribunal, which has power to impose certain disabilities on the creditor if he does not bow to its will, can hardly be called an instrument of progress as compared to the ordinary Courts.
There is, to our mind, no reason why sucha tribunal, which is much more than a realconciliation tribunal, should be imposed on thispart of Rajasthan alone to the disadvantage ofthe creditors as compared to the rest of Rajasthan. We are, therefore, of opinion that Section 20 also is discriminatory, and is hit by Article 14 of the Constitution.
30. The next question which arises is this. If Section 13 (2), Section 14 (1) and Section 20 are discriminatory and hit by Article 14 of the Constitution, is it possible to keep the rest of Part IV alive after striking down these provisions and naturally other provisions in this part which are ancillary to these three provisions
We have given this matter our anxious consideration, and have come to the conclusion that Part IV would become perfectly useless once these three provisions are struck down as discriminatory. These three provisions are so interwoven into the texture of Part IV that to strike them down means that the whole of Part IV of the Act must be struck down.
We are, therefore, of opinion that Part IV of the Act must be held to be a discriminatory piece of legislation, which is hit by Article 14 of the Constitution, and which must therefore be considered to be void in view of Article 13(1) of the Constitution, as it is inconsistent with Article 14.
31. We, therefore, allow these applications, and order that as Part IV of the Act has become void after the Constitution came into force as a discriminatory piece of legislation, the debt conciliation boards established under the Act have no jurisdiction and quash the orders passed by the boards in these six cases. We hereby direct that the Debt Conciliation Boards at Merta and Bali stop working immediately. In view of the circumstances, we pass no order as to costs.