Marur Basappa vs Basavarajappa C.E. and Others

In this writ petition, this Court is called upon to decide the validity of a brief order running to 6 lines with a long and distressing narration of facts and examining the various legal contentions urged by the parties in support of their respective cases.

According to the petitioner, he is a licensed money lender at Kodlipet Town and has lent a sum of Rs. 800 to respondent No. 1 and one Lingarajappa jointly who have jointly executed an ''On demand promissory note'' for the said amount. But, according to respondent No. 1 who has remained absent despite service of notice, he and his son Lingarajappa have borrowed a sum of Rs. 400 from the petitioner on an ''On demand promissory note'' which was executed by them for Rs. 800. As to what exactly is the amount lent or as to what exactly is the amount due by respondent No. 1 and his son Lingarajappa are matters that cannot be decided by me in a proceeding under Art. 226 of the Constitution. In any event, the controversy has no bearing on the points urged and to be decided in the writ petition.

It appears, the petitioner some time in February 1976 got issued a legal notice to respondent No. 1 and his son Lingarajappa demanding repayment of the amounts borrowed by them. On receipt of the legal notice, respondent No. 1 for himself and his son, addressed a letter dated 4-2-1976 to the President of the Ruling Congress, Somawarpet Taluk, Kodlipet Circle, pleading his inability to pay the amounts demanded by the petitioner and for an enquiry and protection to him and the other members of his family. It is useful to reproduce the letter addressed by respondent No. 1 which reads thus:

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On the original of the said letter, I find the seal of the Somwarpet Taluk Congress Committee and an Endorsement by its President to the effect "A.C. Mercara on 10-2-76". It is possible that the President has forwarded the said letter to the Assistant Commissioner, Mercara, who also happens to be the ex-officio Sub-Divisional Magistrate, (to be hereinafter referred to as ''the SDM.'') or has personally delivered the same to SDM. From the records of the office of the SDM, it is not possible to gather and state as to how the said letter was received and who delivered the same. Evidently on receipt of the said letter, the SDM., issued two notices one in English and another in Kannada the Kannada one being a translation of English on 24-3-1976 to the petitioner calling upon him to show cause as to why he should not be prosecuted under the provisions of the Karnataka Debt Relief Ordinance of 1975, which had been replaced by the Karnataka Debt Relief Act of 1976 (Karnataka Act, No. 25 of 1976) (hereinafter referred to as ''the KDR. Act''). The notice issued in Kannada to the petitioner served on him on 1-4-1976 reads thus:

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Apparently in response to the said notice, the petitioner filed written objections dated 5-4-1976 before the SDM inter-alia contending that he had no jurisdiction to decide the matter in issue and the KDR. Act was inapplicable and therefore the application of respondent No. 1 be rejected. On receipt of the objections filed by the petitioner as to what happened can be best seen by reading the order sheet of the SDM reproduced hereunder:

"In the Court of the Sub-Divisional Magistrate, Mercara Sub Division., A4. Debt. 82/75-76.

Basavarajappa, S/o Eregowda, Kerekeri village. Applicant.

v.

Marur Basappa, Kodlipet. Respondent.

Submitted:-

The respondent has denied the claims of the show cause notice issued from this Court.

His written reply to the show cause notice dated 5th April, 1976 may be perused (kept below).

The application filed by the applicant is also put up for kind perusal and further orders. 1-5-76: Case called. The applicant present. The respondent not present. He has sent an application requesting adjournment. Case adjourned to 19-5-1976 as the SDM. is on other duty.

Sd/-C.E. Basavarajappa (in Kannada) Sd/-Sub-Divisional Magistrate''s Court, Mercara Division.

Income certificate produced.

14-5-76: Case called Applicant present. Respondent absent. Prosecute respondent. N.B.W. issued on 25/5.

Sd/-C.E. Basavarajappa (in Kannada) Id/- 14-5-

"2-6-76: Case called. The respondent present. Case adjourned to 18-6-76 as the SDM. is on other duty. N.I. 3/6

Sd/-Marur Basappa (in Kannada) By order, Sd/-Sub Divisional Magistrate''s Court, Mercara Division, Mercara Coorg.

18-6-76: Case called. The applicant and respondent present. Respondent directed to produce pronote and evidence on his side. Adjourned to 2-7-76.

Sd/-Marur Basappa and C.E. Basavarajappa. Id/- 18-6

2-7-76: Case called. The applicant present. Issues N.B.W. on respondent as he is absent. Adjourned to 9/7.

Sd/-C.E. Basavarajappa. Id/-

9-7-76: Case called. Applicant present, Respondent is brought under arrest. Released on personal bond. Respondent produces the pronote. Heard the respondent. Applicant produces income certificate. Pronote extinguished since the applicant is eligible to get the benefit. It is so ordered.

Id/- 9-7."

For clarity and proper understanding, It is desirable to notice as to what happened on a few dates found in the order sheet of the SDM.

On 14-5-1976 the SDM. has directed the prosecution of the petitioner on the ground that he was absent. On the right hand column of the order sheet, there is a note evidently by a Clerk to the effect-"N.B.W. issued on 25.5.". I presume N.B.W. stands for a Non-bailable warrant. In pursuance of the said order, it appears no prosecution was launched by the S.D.M. against the petitioner at any time. On 18-6-1976 the S.D.M. directed the petitioner to produce the pronote and evidence on his side on 2-7-1976 on which day, the S.D.M. holding that the petitioner was absent, directed the issue of a non-bailable warrant and posted the case to 9-7-1976. A non-bailable warrant was actually signed by the S.D.M. on 3-7-1976 and was issued to the Sub-Inspector of Police with a direction to arrest the petitioner and produce him before him on 9-7-1976. In pursuance of the said non-bailable warrant a Head Constable arrested the petitioner and produced him before the S.D.M. on 9-7-1976. The Endorsement of the Head Constable for having executed the non-bailable warrant reads thus:

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On 9-7-1976, the S.D.M. passed an order extinguishing the debt In pursuance of which the pronote was also delivered to respondent No 1 on the same day In this writ petition, the petitioner has challenged the order dated 9-7-1976 of the S.D.M. (Exhibit ''C'') and for a mandamus to return the ''On demand promissory note'' or in the alternative for payment of a sum of Rs. 1,000/-.

At the forefront of his case Shri C.N. Seshagiri Rao, learned Counsel for the petitioner, contended that an application for extinguishment of a debt due on an ''On demand promissory note'' was not maintainable under the Act and therefore the S.D.M. had no jurisdiction and power to entertain the application of respondent No. 1 and grant him any relief. On the other hand, Shri C. Shivappa, learned High Court Govt. Pleader, contended that an ''On demand promissory note'' was a moveable property pledged by a debtor and therefore the S.D.M. had jurisdiction to entertain the application and grant relief to respondent No. 1.

An ''On demand promissory note'' is a negotiable instrument and is not an article that can be pledged as a security for a debt. In Sec. 4 of the Negotiable Instrument Act of 1881 a ''promissory note'' is defined as "an instrument in writing (not being a Bank note or a currency note) containing an unconditional undertaking, signed by the maker, to pay a certain sum of money only to, or to the order of, a certain person, or to the bearer of the instrument." A promissory note is negotiable and can be assigned also. The word ''pledge'' occurring in the KDR. Act in the absence of a definition in that Act has to be given the same meaning that is given to it in Sec. 172 of the Indian Contract Act of 1872. Sec. 172 defines the word ''pledge'' as the bailment of goods as security for payment of a debt or performance of a promise is called ''pledge''. The bailor is called the ''pawnor'' and the bailee is called the ''pawnee''. In my view, a debt secured under an ''On demand promissory note'' cannot be treated as a pledged article as contended by the learned High Court Govt. Pleader.

Undoubtedly the KDR Act encroaches on the rights of citizens and imposes burdens and therefore the principles of strict construction succinctly set out by Maxwell on the Interpretation of Statutes (11th Edition) at page Nos. 275 to 277 have to be applied and they are:

"Sec. 2: Statutes encroaching on rights or imposing burdens-Encroachment of rights.

Statutes which encroach on the rights of the subject, whether as regards person or property, are similarly subject to a strict construction in the sense before explained. It is a recognised rule that they should be interpreted, if possible, so as to respect such rights A statute under which a house owner is being deprived of his rights to property should be construed strictly against the local authority. If there is ambiguity as to the meaning of the section, inasmuch as it is a disabling section, the construction which is in favour of the freedom of the individual (to contract) should be given effect. Proprietary rights should not be held to he taken away by Parliament without provision for compensation unless the legislature has so provided in clear terms. It is presumed, where the objects of the Act do not obviously imply such an intension, that the legislature does not desire to confiscate the property or to encroach upon the rights of persons, and it is therefore expected that if such be its intention, it will manifest it plainly if not in express words at least by clear implication and beyond, reasonable doubt. It is a proper rule ofconstruction not to construe an Act of Parliament as interfering with or injuring person''s rights without compensation, unless one is obliged so to construe it. But a local authority was permitted by the erection of street shelters to interfere with the adjacent property owner''s right to a free frontage, since the section impliedly authorised such interference in reasonable exercise of the powers which it conferred."

In the light of the above principles, I have to examine the provisions of the Act.

It is seen from the preamble the Act has been enacted to provide relief from indebtedness to small farmers, landless agricultural labourers and weaker sections of the people as defined in the Act from indebtedness. The word ''debt'' has been defined in sub-section (b) of Sec. 3 as meaning any liability in cash or in kind whether decreed or not and includes any amount which is in substance a debt. A debt due by a debtor under an ''On demand promissory note'' would undoubtedly fall within the meaning of the term ''debt'' occurring in sub-section (b) of Sec. 3 of the Act. Sec. 4(a) of the Act declares that the debt due by a debtor is wholly discharged from 25-10-1975. Sec. 4(b) and (c) of the Act give effect to the declaration made, in Sec. 4(a) of the Act by barring the remedy of a suit for recovery of the amounts from a debtor and providing for the abatement of pending proceedings in Courts. Shri C.N. Seshagiri Rao, learned Counsel for the petitioner, did not dispute this. But he pointed out that in case of pledged articles by a debtor and mortgage debts, there was specific provision for extinguishment of those debts and the recovery of the articles or the mortgaged property as the case may be and their delivery to the debtor and there was no provision for extinguishment of a debt due under an ''On demand promissory note'' much less to entertain an application by a debtor and grant him relief though the debt may possibly stand discharged under sub-section (a) of Sec. 4 of the Act. In my view, there is force in the contention of Shri C.N. Seshagiri Rao. Sub-section (e) of Sec. 4 expressly confers power on the SDM to entertain an application and give relief to the debtor in respect of pledged articles. Sub-section (f) Sec. 4 expressly confers power on the SDM to give relief to the debtor in respect of mortgaged property either suo-motu or on an application made by the debtor. In sub-sections (4) and (5) of Sec. 5 of the Act similar power is conferred on the SDM in case of a declaration made by a creditor. In the Act or the Rules framed there under, there is no provision conferring power on the SDM to entertain an application for extinguishment of a debt under an ''On demand promissory note'' and give relief to a debtor. In my view, the absence of such a power in the Act is deliberate and is not far to seek. An on demand promissory note is negotiable and therefore as to who will be ultimately in possession of it and will be entitled to claim the amount from the original debtors or others are difficult to ascertain in each case. It appears to me that the legislature for the above various other reasons has not conferred power on the SDM to entertain an application and grant relief in respect of an ''On demand promissory note'' to a debtor. Whether a debt due under a promissory note from a ''debtor'' defined by the Act can be recovered by the creditor and what are the defences that are open to the parties and whether the State Legislature is competent to enact are matters that do not arise for my determination ana therefore I do not express any opinion on those questions I there-fore hold that the action of the SDM in entertaining the application of respondent No. 1 assuming that there was an application filed before him, extinguishing the debt and directing the return of the on demand promissory note to respondent No. 1 is wholly without jurisdiction and is manifestly illegal.

Shri. C.N. Seshagiri Rao, learned Counsel for the petitioner, next contended that the SDM did not afford his client an opportunity of hearing and therefore the order is vitiated. Shri C. Sivappa, learned Counsel for respondent Nos. 2 and 3 contended that a show cause notice has been issued to the petitioner and that under Sec. 7 of the Act, it was for him to prove that the debtor was not entitled to the protection of the Act and that in the circumstances of the case a fair opportunity had been given by the SDM to the petitioner. In para 2 of the petition, the petitioner has stated as under:

"2. The petitioner had filed objections to Ex.A but the 2nd respondent refused to consider the same. The 2nd respondent did not even hear the petitioner though he has made a wrong note in the order sheet. Even the certificate produced by the 1st respondent herein was not shown to this petitioner in spite of the petitioner making a request to the 2nd respondent. Even the fundamental principles of natural justice were not followed by the 2nd respondent. The pronote was taken away by the 2nd respondent from the petitioner by force and against his consent. Hence this petition."

In the affidavit filed by the SDM these allegations have not been controverted and that being so I have to accept the above assertions of the petitioner. Apart from the above, it is necessary to remember that on 9-7-1976, the petitioner was brought under arrest. Even assuming that the petitioner was wilfully absent on 2-7-1976, the petitioner was not asked to appear on 9-7-1976 in connection with the enquiry. In the non-bailable warrant which is meant for use in connection with the offences under the Indian Penal Code and against the entry providing for indicating the section of that Code, the Debt Relief Act was inserted. As already pointed out by me, the Head Constable executed the warrant and brought the petitioner under arrest. One can easily visualise and understand the plight of the petitioner when he was brought under arrest on 9-7-1976, and the recording by the SDM that the petitioner-respondent was heard cannot be accepted as correct and is liable to be discarded. In the circumstances, I hold that the petitioner had no fair opportunity and the proceedings were conducted in manifest violation of the principles of natural justice.

Sri C.N. Seshagiri Rao also contended that the order of the SDM is not a speaking order and therefore it is liable to be quashed. Earlier I have reproduced the order of the SDM in its entirety. It can be seen from the order that the SDM has not considered the nature of the objections filed by the petitioner and has not given any finding. In my view, the proceedings under the KDR. Act are quasi-judicial in nature and therefore the authority making an order in addition to giving a fair and proper hearing to the person affected, in its order should also give sufficiently clear and explicit reasons in support of its orders as enunciated by the Supreme Court in Siemens Engineering and Manufacturing Company of India Ltd., v. The Union of India, AIR. 1976 SC. 1785, which are lacking in the case. In that view also, the order of the SDM is manifestly illegal and is liable to be quashed.

Lastly, Shir C.N. Seshagiri Rao contended that the action of the SDM in issuing a non-bailable warrant, arresting the petitioner and compelling him to appear before him by executing the arrest warrant was highhanded, arbitrary and was wholly unauthorised and was made only to glorify the vanity of the officer. Sub-section (9) of Sec. 5 empowers the SDM to enter any premises of the creditor and search and seize articles pledged by debtors and arrange for their safe custody, with extreme care and caution and subject to the safeguards explained by this Court in K.A. Aswatanarayana Setty v. Sub-divisional Magistrate Madhugri, 1977 (1) KarLJ. 14, Except for that power there is no power conferred on the SDM to issue a non-bailable warrant, arrest the creditor, parade and humiliate him in the streets as was done by the SDM in the present case. On 23-8-1976 Malimath, J, issued Emergent Notices to the respondents in the case in pursuance of which notices were served on the SDM and the Secretary to Government, Revenue Department on 28-9-1976 fixing the hearing on 4-10-1976. Evidently Malimath, J, ordered Emergent Notices to respondents so that they would examine the case of the petitioner whatever might have been the earlier illegal action of the SDM., re-trace their steps and voluntarily agree to give necessary relief to the petitioner with grace. But no such step was taken by the respondents in the matter. When the writ petition was posted on 13-12-1977 before me for preliminary hearing (Group ''B''), I issued rule-nisi in the case and directed it to be posted for final hearing on 5-1-1978. At the hearing of the case, Shri C. Shivappa, learned High Court Government Pleader, has produced an affidavit sworn to by one Shri J.K. Ghaste, Assistant Commissioner and Sub-Divisional Magistrate, Madakeri Sub-Division, who was the officer at the material times and passed the order impugned in the writ petition. It is useful to reproduce the affidavit of the said officer which reads thus:

"AFFIDAVIT

I, J.K. Ghaste, S/o. Shri Kalayan Rao, Assistant Commissioner and Sub-Divisional Magistrate, Madakere Sub-Division, Madakeri, today at Bangalore, do hereby solemnly affirm and state as follows:

I am the respondent No. 2 in the writ petition and I am acquainted with the facts of the case.

The petitioner has challenged the order passed by me on 9-7-1976 in the application filed by Shri Basavarajappa for discharging debt under the Karnataka Debt Relief Act.

Since the petitioner had failed to appear and to produce the promissory note, I had issued an Arrest Warrant compelling the appearance and for production of the documents. He appeared before me on 9-7-1976 in pursuance of the Arrest Warrant and produced the Promissory note. He was released on personal bond.

I sincerely regret for having issued the Arrest Warrant against the petitioner for compelling the attendance before me and to produce the promissory note.

Sd/-J.K. Ghaste, 20-12-77 Deponent." In this affidavit also, the officer does not say that the action taken by him was wrong and he has realised the mistake committed by him. In para 5 of his affidavit he simply regrets without saying that he had committed a mistake and without giving an assurance to this Court that he will not commit such highhanded and arbitrary actions in future. At the hearing of the case, Shri C. Shivappa, learned High Court Government Pleader, did not support the action of the SDM in issuing a non-bailable warrant and arresting the petitioner. I therefore hold that the action of the SDM in issuing a non-bailable warrant, arresting the petitioner and humiliating him that too without the authority of law was without jurisdiction and unjustified.

As I have held the action of the SDM besides being without jurisdiction was highhanded and arbitrary and was not intended to serve any actions authorised by law or by the State, it is just and proper that I should direct Shri J.K. Ghaste, Assistant Commissioner and Sub-Divisional Magistrate, Madakeri, to personally pay the costs of this writ petition and not from the State funds.

For the reasons stated above, I quash the impugned order by issue of a writ of certiorari and direct the SDM to obtain the return of the ''On demand promissory note'' from respondent No. 1 and redeliver the same to the petitioner within 30 days from the date of receipt of the order of this Court under proper acknowledgement.

Rule made absolute with costs. Costs are payable by Shri J.K. Ghaste, SDM, personally. Advocate''s fee Rs. 100/-.