Mastan Singh and Others vs Mt. Sohag Wanti and Another

Chopra, J.—The only point of law involved in this Letters Patent appeal is whether the representatives of a debtor can also take benefit of the provisions of Section 5, Patiala Relief of Indebtedness Act.

The facts out of which the dispute arose are these: One Kaka Ram mortgaged his house in Sunam for Rs. 310 to Babu Lal by a regd. Deed dated 1-7-81. The mtge. was with possession & one of its essential terms was that the mtgor. was to pay interest on Rs. 310 at the rate of 1 1/4 per cent. per mensem & the rent received by the mtgee. was to be credited to his account. It was also stipulated that in case of default of payment of the balance of the annual interest the mtgee. was entitled to recover the prinoipal as well as unpaid interest from the mortgaged property & also from the person & other property of the mtgor. The mtgee. rights were subsequently transferred by Babu Lal in favour of the applts Mastan Singh & Ors. for Rs. 450 by a regd deed dated 14-11-87. Some ten years after the death of Kaka Ram, the mtgor. his daughtors Mt. Sohag Wanti & Bhagwanti resps. brought the present suit for redemption of the house on payment of Rs. 310. The original mtgee. & also his transferees were marshalled as defts. The defts. did not object to the pltf.''s right to redeem but demanded Rs. 1240-3-0 as the amount due to them on the mtge. The only dispute between the parties thus was regarding the amount that was payable to the defts. The trial Sub-Judge found this amount to be Rs. 237-3-0 & decreed the suit on payment thereof. The Dist. J. on defts.'' appeal raised it to Rs. 995, Pltfs. second appeal to this Ct. was accepted & the redemption was allowed on payment of Rs. 326-5-0 only. The Single Bench has, however, certified the case to be a fit one for appeal u/s 52 of Ordinance X [10] of 2005, & this is an appeal by the defts.

The only item that is disputed before us is that of interest. The stipulated rate of interest, as already observed, was Rs. 1-4-0 per cent. per mensem, i.e. Rs. 15 per oent. per annum & if the interest is calculated at this rate it comes to Rs. 1029-6-0 which is the amount claimed by the applts. On the other hand, the case of the resps. is that according to Section 5, Relief of Indebtedness Act the maximum rate of interest permissible ia Rs. 7/8 per cent. per annum, & when calculated at this rate, the amount comes to Rs. 514. This is what has been allowed by the Single Bench. It may be mentioned here that Section 6, Patiala Relief of Indebtedness Act, makes Part 3 of the Act in which Section 5 falls, applicable to all suits pending on or instituted after the commencement of the Act. The Act came into force in Sawan 2000 & the suit was brought in 2003. Section 5 of the Act admittedly applies to secured as well as unsecured debts & Sub-section (3) of it enjoins that the section shall apply to any suit, whatever its form may be, if such suit is substantially one for the recovery of a loan or for the enforcement of any agreement or security in respect of a loan or for the redemption of any such security. The present case would thus be admittedly hit by Section 5 of the Act if the section is otherwise applicable. Now Section 5 lays down that

notwithstanding anything contained in any other enactment in force in the State for the time being, wherein any suit brought against a debtor whether agriculturist or not, & whether heard ex parte or otherwise, the Ct. has reason to believe that the interest is excessive.

The Ct. may relieve the debtor of all liability in respect of excessive interest. Clause (e) of Sub-section (2) of Section 5 provides that the Ct. shall deem interest to be excessive if it exceeds 7 1/2 per cent. per annum simple interest in case of secured loans. In case the pltfs. were entitled to the relief granted to the debtors by this mandatory provision of law, obviously the maximum rate of interest that can be allowed to the mtgees. would be at the rate of 7 1/2 per cent. per annum.

Shri Dalip Chand, the learned Counsel for the applts. urges that the ward ''debtor'' used in Section 5(1) does not include the legal representative of a debtor also, & that the relief under the section was meant to be given to the original debtor only. His argument is that the legal representative of a debtor was not personally bound to pay anything to the creditor. All that the creditor would be entitled was to proceed against the property that had been secured & that had fallen to the hauds of the legal representative. Since according to the dictionary meaning a debt is something that is due from one person to Anr. & a debtor is only a person who owes a debt to Anr. or one who is indebted to Anr. , a legal representative according to him, could not be called a ''debtor.'' He, therefore, contends that the pltfs., who were the daughters of the mtgor., could not take benefit of the provisions of this section. Reliance for this interpretation of the word ''debtor'' is placed on Sahib Ditta Mal v. Mohra Mal AIR 1945 Lah. 58 & Dalip Singh v. Honda Ram 48 P.L.R. 421. Both of these cases, however, were u/s 7, Punjab Relief of Indebtedness Act, & in first of these it was held that the word ''debtor'' in Section 7 contemplates a person from whom a debt is personally due either because he himself incurred it or because otherwise he became liable to discharge it. It was further observed that

the liability of the legal representative to pay the deceased''s debt is not his personal liability &, therefore, the legal representative of a deceased debtor does not fall within the definition of the word ''debtor'' given in Section 7.

In this case the son of a mtgor. had applied to the Debt Conciliation Board u/s 9, Relief of Indebtedness Act & got an order in his favour from the Board. The mtgee, instituted a suit for a declaration that the order of the Board was without jurisdiction because the appct. before them was not the mtgor. himself but his son who had inherited the estate that was bound to pay the debt. The facts of 48 P.L.R. 421 also were almost similar except that the debtor in the later case was a transferee of the equity of redemption & not the legal heir of the original mtgor. Achhru Ram J. who wrote the judgment in the case & with whom Ram Lal J. agreed accepted the view adopted in AIR 1945 Lah. 58 & held that

the transferee of equity of redemption being under no personal liability to the mtgee. for the amount due to him on the footing of the mtge. cannot be regarded as a debtor of the mtgee.

Reference was also made to a F.B. decision of the Lahore H.C. in Lechman Singh v. Natha Singh AIR 1940 Lah. 401 in which it was observed that

usufructuary mtge. did not create a ''debt'' as contemplated by Section 7(1) & nor was a usufructuary mtgor. a debtor within the meaning of Section 7(2) of the Act.

The reasoning employed was that a usufructuary mtge. excluded any personal liability on the part of the mtgor. & therefore, it did not create any debt which may be due from him. This again was a case u/s 7 of the Act & the definition of ''debt'' or ''debtor'' propounded in the case was meant for the purposes of Section 7, Relief of Indebtedness Act. It may be mentioned here that Section 7 falls under part IV of the Act which relates to "Debt Conciliation Board" while Section 5 falls under Part III relating to ''Usurious Loans.'' Sub-section (1) & (2) of Section 7 define the words ''debt'' & ''debtor'' respectively & the section expressly provides that these definitions were only meant for the purposes of the Part in which the section fell. These words have, however, been left undefined for the purposes of Part III in which Section 5 falls, & the definitions given in Section 7 are of no help while interpreting that section. The contention of Shri Dalip Chand is that the definition of debtor in Section 7(1) is not exhaustive It only enlarges the ordinary meaning of debt so as to include certain liabilities of the debtor enumerated therein & at the same time it excludes from its purview certain other of his liabilities which would otherwise be included in it. The argument is that since in the cases cited & reld. upon by him the ordinary dictionary meanings of ''debt'' & ''debtor'' were used to interpret the word in Section 7 they were equally helpful when the word ''debtor'' used in Section 5(1) is to be interpreted. There might have been some force in the argument of the learned Counsel if the legislature had left the matter unclarified & if provision for the relief being available to the legal representative as well had not been made in the section itself. My own view is that Sub-section (3) to Section 5 which has already been reproduced, clinches the issue when it provides that the section shall be applicable to all suits, whatever their form may be, in which the question involved necessitates a decision as to the amount due on a loan. The word ''debt or ''debtor'' does not appear in this part of the section & there is nothing to restrict its application only to cases where the original contracting parties to a loan are before the Ct. In the present suit which is one for redemption the substantial question to be decided is as to the amount due on the loan. The mtge in dispute was undoubtedly a loan as defined by Section 2(iii) of that Act, & that makes Sub-section (3) of Section 5 applicable to the case. The obvious result that follows is that successors-in interest of the original mtgor. can also take benefit of the relief granted by Section 5 & that interest on a higher rate than 7 1/2 per cent. per annum cannot be allowed to the mtgee.

An examination of the history of the Act & the objects for which it was enforced further support the conclusion that I have arrived at. In 1918 with a view to preventing the Civil Cts. from being used for purposes of enforcing harsh & unconscionable loans carrying interest at usurious rates the Indian legislature promulgated the Usurious Loans Act (X [10] of 1918) & it was extended to the whole of British India of the pre-partition days. Section 3 of this Act lays down that where in any suit to which the Act applies the Ct. has reason to believe that interest is excessive it shall exercise all or any of the powers given in the section. Clause (e) to Sub-section (a) of Section 3 enjoins upon the Cts. to deem the rate of interest on a secured loan to be excessive if it exceeds 12 per cent. per annum. By Section 2(3), the Act was made applicable to all suits for the recovery of loans or for the enforcement or redemption of any security. The Act, however, applied only to the loans advanced or the mtges. effected after the enforcement of the Act. But as already observed Section 5 of the Act in question admittedly applies to prior loans as well, provided the suit was pending on or instituted after the commencement of the Act. The provisions of the Usurious Loans Act apply with equal force whether the person who claims its benefit is the person to whom the loan was originally advanced, or is his representative in interest, or a legal heir. Undoubtedly the object of the Act, which was to prevent the enforcement of harsh & unconscionable loans carrying interest at usurious rates, would be frustrated if usurious rates of interest were to be allowed to the creditor when the liability under the loan is enforced against the successor-in-interest of the person to whom it was originally advanced, & if the benefit of the provisions were to be restricted only to the original debtors.

Now it can easily be seen that Section 5, Patiala Relief of Indebtedness Act, which falls under part III with the heading ''usurious loans'' is a reproduction, with slight necessary variation, of Section 3 of Act X [10] of 1918, & was enforced for a similar purpose. Section 5, Punjab Relief of Indebtedness Act, (Punjab Act VII [7] of 1934) also adopted Section 3 of Act X [10] of 1918 with certain amendments, & the language used in the section leaves no doubt that the benefit of it was not restricted to the persons to whom the loan was actually advanced. I am, therefore, unable to accept the argument of the learned Counsel that a legal representative of the original debtor cannot lay claim to the benefit afforded by Section 5, Patiala Relief of Indebtedness Act.

Another objection raised by Shri Dalip Chand is that the Section 5 would have no application if loan was sought to be enforced by a transferee for value of the original creditor. It may be remembered that Babu Lal mtgee. transferred his rights to the applts. by a regd. deed dated 14-11-87. The consideration paid by the applts. was Rs. 450. It is, therefore, argued that the applts, who were bona fide transferees for value of the mtgee. rights were not bound by the provisions of Section 5 of the Act. In the first instance no such objection was taken by the applts. in their written statement nor was it raised in their first appeal to the Dist. J. The point does not appear to have been pressed or argued even before the Single Bench of this Ct. in S.A. It would be highly unfair to the opposite party if the point is allowed to be raised for the first time in this appeal, particularly when it is not purely a question of law patent on the facts on record. Otherwise also I do not see any substance in the contention. Reliance in support of the argument is placed by the learned Counsel on Sub-section (4) to Section 5 which reads as follows:

(4) Nothing in this section shall affect the rights of any transferee for value who satisfied the Ct. that the transfer to him was bona fide & that he had, at the time of such transfer, no notice of any fact, which would have entitled the debtor as against the lender to relief" under this section.

A simple reading of the Sub-section shows that it relates to the relief to which the debtor would have been entitled at the time of the transfer, & the section was excluded from its operation if the bona fide transferee for value had no notice of the facts giving rise to that relief. The Act had not come into force when the transfer in favour of the applts. was effected & thus the debtor was not entitled to any relief under the Act at the time. Even if the transfer was bona fide for value the sub-section would not save the operation of the section for the simple reason that the debtor was not entitled to any relief when the rights of the creditor were transferred. Question of notice of the debtor''s right to a relief under the Act would not arise in cases where the transfer took place before the Act came into force, & the language of the sub-section does not allow that it was meant to be applicable to all such transferees. If that had been the intention of the legislature the sub-section must have being differently worded.

No other item is contested & the amount of interest has been found to have been rightly calculated at the rate of 7 1/2 per cent. per annum. I do not, therefore, see any force in this appeal. It is, consequently dismissed, but in view of the points of law involved I leave the parties to bear their own costs.

Gurnam Singh, J.

I agree.