Sadasukh Kabra vs Jugal Kishore Singh

P.N. Mookerjee, J.—On 24th January, 1947 the appellant Sadasukh Kabra recovered a mortgage decree against the Respondent Jugal Kishore Singh for a sum of Rs.10,518/-. The decree was obtained in Title Suit No.10 of 1944 of the 2nd Court of the Subordinate Judge of 24-Parganas and it was made on compromise and one of its terms was that the decretal amount would be paid in six equal annual instalments, the first of such instalments being made payable on or before 24th January 1948. It was also provided in the compromise petition which was made a part of the decree that, in default of payment of any of the above instalments, the whole of the outstanding decretal amount would be at once recoverable by execution.

Default having been made in the payment of the very first instalment, the appellant decree-holder put the decree into execution in Title Execution Case No.18 of 1948. The application for execution was filed on 25th February, 1948, and, after service of the usual Code of Civil Procedure, the judgment-debtor appeared and prayed for time to file objections.

On 22nd April, 1948, two applications were filed by the judgment-debtor, one purporting to be u/s 47 of the CPC and Section 40 of the Bengal Money Lenders Act and the other u/s 36 - apparently under sub-section (6) - the latter Act. The first was registered as Miscellaneous Case No.43 of 1948 and the second was given the consecutive number, namely, Miscellaneous Case No.44 of 1948.

In Miscellaneous Case No.43, the applicant judgment-debtor prayed for dismissal of the execution case principally upon the ground that, the decree in question having been made in contravention of the Bengal Money Lenders Act, it was a nullity. In the other case (Misc. Case No.44 of 1948), the prayer was for reopening of the adjustment (which evidently meant the compromise) and for other reliefs under the Bengal Money Lenders Act. In substance, the judgment-debtor in this Miscellaneous Case No.44 of 1948 asked for a re-opening of the compromise decree and for the passing of a new decree, - a new preliminary mortgage decree, - in accordance with the provisions of the Bengal Money Lenders Act.

Both the above cases were heard together by the learned Subordinate Judge who, by his judgment, dated March 28, 1950, dismissed Miscellaneous Case No.43 of 1948 but allowed the other Miscellaneous Case No.44 of 1948, re-opened and set aside the compromise decree and, in its place, passed a new instalment mortgage decree in the preliminary form for Rs.10,412/- (including costs of the original suit and the execution case) under the Bengal Money Lenders Act.

The new decree has purported to scale down the claim of interest from 9 per cent, p.a. to 8 per cent. p.a. simple; it has also purported to reduce the principal claim from Rs.5,108/- to Rs.5,000/-, the extra Rs.108/- being held to be interest accrued, and it has further expressly limited the total amount to double the original principal namely, Rs.5,000/- (including interests paid). The new decree has also provided for a larger number of instalments, commencing from a much later date, namely, Rs.650/- in December, 1950, and Rs.1,000/- each in December every year for the next nine years (1951 to 1959), the cost amount of Rs.762/- being made payable within September, 1950.

The decree-holder house appealed and there can be little doubt that he has some genuine cause for complaint. That he has been prejudiced by the reopening of the old decree and the passing of the new decree, as made by the learned Subordinate Judge, is undeniable. The loan is an old one, it having been given in 1936-37. The suit was brought in 1944 and, during the intervening six or seven years, only a small sum of Rs.350/- was paid as interest, viz., Rs.250/- on 24th November, 1939, and Rs.100/- on 19th September, 1942. There has been no further payment except of the cost amount of Rs.762/- which was payable under the new decree in September, 1950, but which was actually paid in December, 1950. The judgment-debtor''s conduct was hardly fair or bona fide, although he will be clearly entitled to relief if and to the extent that the new decree, as made by the learned Subordinate Judge, would be found supportable in law, his conduct or his mala-fides, if any, being wholly irrelevant in the matter of consideration of his claim for relief under the Bengal Money Lenders Act.

The question thus is whether and to what extent the Bengal Money Lenders Act would affect the old decree and permit its re-opening and support the new decree as made by the learned Subordinate Judge.

The mortgage was an equitable one and it is dated 6.2.37. Premises No.12, Fern Road was given by the mortgagor as collateral security. The title deeds were delivered to the mortgagee and a memo or letter of confirmation [Ext. 7(a)] of even date was also written by the mortgagor to the mortgagee. There was an "on-demand" property-note [Ext. 8(a] of the same date (6-2-37) for Rs.5,108/-, but it is admitted that the said amount represented two sums, one Rs.2,108/- made up of Rs.2,000/-, advanced on an earlier date (2-7-36) (Vide Ext.8), and the accumulated interest (Rs.108/-) thereon at the stipulated rate of 9 per cent. p.a., and a fresh advance of Rs.3,000/- made on 6.2.37. The rate of interest for this new loan also was 9 per cent. p.a., as the property-note dated 6.2.37 [Ext. 8(a)] mentions that rate as the rate of interest. the record also discloses that there were two written agreements relating to the above two transactions of 1936 and 1937 (Vide Ext. 10) and purporting to embody in detail the terms thereof, a "****" or period of repayment of two years being apparently fixed by the 997 document (Ext. 10) which stipulates full and final repayment on or before February 7, 1939. These agreements, however, have not been referred to or relied upon by either party for any purpose whatsoever and further reference to them seems to be unnecessary. We may just state however, as a matter of incidental interest, that the 1936 agreement appears to have been expressly cancelled when the later equitable mortgage was created on February 6, 1937, and no question of invalidity of the transactions of 1936 and/or 1937 was at all mooted or raised either here or in the Court below on the ground of non-registration of the above two agreements, probably because - and that is hardly open to doubt - the compromise decree would have been a complete and sufficient answer to any such contention. Apart from any question under the Bengal Money Lenders Act, the position whereunder we shall presently examine, the compromise dated January 24, 1947, was a perfectly good compromise and the decree, made on it, was certainly valid and fully operative and binding between the parties. The judgment-debtor no doubt alleged some sort of coercion and undue influence in the making of the compromise but that allegation is entirely unfounded. The compromise, therefore, is invulnerable and immune from all attacks except under the Bengal Money Lenders Act and the decree made upon it, is a sufficient and effective answer to all complaints of the judgment-debtor save to the extent that the same can be supported and the decree touched or affected under the said Act. We shall, accordingly, proceed at once to consider the effect of the Bengal Money Lenders Act upon the compromise decree to determine the rights of the parties to the present proceedings.

Relying upon the provisions of the Bengal Money Lenders Act, Mr. Dalal who appears for the respondent Judgment-debtor has made two submissions. He has referred, in particular, to the provisions of Section 30 and Sections 2(4) (Explanation) and 40(5) of the said Act and he has contended that the impugned compromise decree in the present case was made in contravention of the said statutory provisions and as such it was (1) a nullity or (2), in any event, liable to be reopened u/s 36 of the Act.

As to the first submission of Mr. Dalal, it is enough to say that, even assuming that the decree in question contravened the statutory provisions referred to by him, it is difficult to hold that it was a nullity. There can be no question that the Court had jurisdiction to decide the suit and for that purpose to decide the questions under the Bengal Money Lenders Act and to pass a decree in the light of its said decision. It had jurisdiction to decide wrongly as well as rightly but its decree could not be treated as a nullity merely because the Court came to a wrong conclusion on the question or questions under the Bengal Money Lenders Act or made a decree in contravention of the above provisions. None of the sections, quoted by Mr. Dalal, goes to the root of the Court''s jurisdiction. They merely affect the rights of the parties or the question of proof or burden of proof. The error, if any, would, in this context, obviously be a mere error of law as distinguished from an error of jurisdiction or, to take it at its worst, an error in the exercise of jurisdiction and not in its assumption. Such an error would not certainly invalidate the decree. If, therefore, this had been the case of a contested decree the argument of nullity would have at once failed. Nor would the result be different because the impugned decree in the instant case happens to have been made on consent or compromise. It is well-settled that a judgment by consent is as effective an estoppel between the parties as a judgment whereby the Court exercises its mind in a contested case (vide LR (1895) 1 Ch 37 at pages 45 and 46 [In re South America and Mexican Company Ex parte: Bank of England] and that a decree, made on compromise, so long as it stands, operates as an estoppel and binds the parties in the same way as a contested decree and until and unless it is set aside in appropriate proceedings it remains fully valid and operative and cannot be treated as a nullity collaterally, (vide 45 CLJ 24 ) [Ramesh Chandra Banikya and others v. Moomraj Khan and others] Mahommad Hossein Choudhury Vs. Khana Kazi and Others, ; 34 CWN 887 at pp. 888-9 & 890[Esahaque Mia and another v. Dula Mia Patwari]; Girish Chandra Singha and Another Vs. Mohammad Rausan Mian and Others, ; ILR 35 Bom 371 at p. 378 [Cowasji Temulji and others v. Kisandas Ticumdas and another] and Basangouda Giriyeppagouda Patil Vs. Basalingappa Mallangouda Patil, . Clearly, therefore, the Respondent''s objection that the impugned compromise decree was a nullity must fail and, in that view, the dismissal of his objections u/s 47 C.P.C. and of the resulting Misc. Case No.43 of 1948 must be upheld.

In taking the above view, we have not overlooked the reported decisions in ILR 26 Mad 31 and 14 CLJ 337. Those decisions, however, we may respectfully point out, are open to the criticism that they have take too narrow a view of the effect of a compromise decree while conceding exaggerated powers to the executing Court (vide (1944) 2 MLJ 210; vide also ILR 35 Mad 75) and, even apart from that, we do not think that the principle underlying them would apply to the facts before us. The primary and, indeed, the material contravention, if any, in the present case was, as we shall presently see, of Section 2(4) (Explanation) and Section 40(5) of the Bengal Money Lenders Act which relate only to the question of proof or burden of proof and do not involve any question of public policy or statutory prohibition or legal injunction, sufficient to affect the validity of a contract or compromise in Court proceedings or to preclude waiver or admission in course of the same. Such contravention, if any, would not, in our opinion, affect or invalidate the impugned agreement or compromise, although it may support an argument that, in accepting the said agreement and recording the compromise, the Court acted illegally or with material irregularity in the exercise of its jurisdiction. That, however, would not make its decree a nullity. We ought to state, further that we are not concerned here with the equitable powers of the Court which influenced the decisions in 33 CLJ 244 and the volume of case-law, leading to it or built upon it.

We must make it clear also that this is not a proceeding under the general law for setting aside a compromise decree on grounds which would invalidate a contract as recognised in LR (1895) 2 Ch 273 [Huddersfiled Banking Company Limited v. Henry Lister & Son Limited]; LR (1897) 2 Ch 534 [Wilding v. Sanderson] and LR (1899) AC 114 [Great North-West Central Railway Company and others v. Charlebois and others]. This is a special action u/s 36 of the Bengal Money Lenders Act which in order to succeed, must succeed on the terms of the said section. For this purpose, the language of the section will have to be examined and construed and its scope determined, so far as it will be relevant in the facts of the present case, and we shall immediately address ourselves to that task after certain preliminary findings. It must be noted, however, that the section (Section 36 of the Bengal Money Lenders Act) prescribes special reliefs and special remedies which should not be confused with the general right of action of an aggrieved party in regard to a compromise or compromise decree and should be kept separate and distinct and should not be decided by applying principles, available for setting aside compromise decree under the general law. This general remedy is, no doubt, available in appropriate cases to all persons (including borrowers), feeling aggrieved by a compromise decree, in addition to special remedies, if any, under special statutes, but, if the borrower chooses to apply under the special statute, namely, the Bengal Money Lenders Act, and prefers not to seek his relief under the general law in an appropriate proceeding in that behalf, his claim must be considered only under the special statute, leaving aside the general consideration under the general law. In this view, the three leading English decisions LR (1895) 2 Ch 273 [Huddersfiled Banking Company Limited v. Henry Lister & Son Limited], LR (1897) 2 Ch 534 [Wilding v. Sanderson] and LR (1899) AC 114 [Great North-West Central Railway Company and others v. Charlebois and others], cited above, and the numerous authorities, following them both here and in England, would not apply that he present case and the respondent cannot call them to his aid or seek to derive any assistance from them. We may add also that, upon the findings, already made by us, and the further findings, which we shall be making presently, the respondent judgment-debtor''s case would not, even otherwise, come within the benefits of any of the above-quoted authorities.

It is to be remembered further that, in the present case, the relevant contravention if any, was of Section 2(4) (Explanation), read with Section 40(5), of the Bengal Money Lenders Act. The initial and the crucial question would be whether the loan in question was a commercial loan or not within the meaning of the definition of Section 2(4) of the Act. If that question be answered in the affirmative, the Bengal Money Lenders Act would be excluded and, necessarily, therefore, no question u/s 30 of the Act or of its contravention would arise. On the question of character of the disputed loan, the parties joined issue in the original suit (Title Suit No. 10 of 1944) and by the impugned compromise (which is printed at pages 12-13, Part I, of the Paper Book) the loan was agreed to be treated as a commercial loan, necessarily excluding application of the Bengal Money Lenders Act, and, once that was done, the rest of the compromise, be it the rate of interest or the quantum or amount decreed, could not be touched as, the Act being excluded, Section 30 would not apply. The relevant enquiry thus becomes limited to a consideration of the effect of the impugned compromise, so far as it purported to treat the disputed loan as a commercial loan within the meaning of the Bengal Money Lenders Act. The material sections are, therefore, Section 2(4) [Explanation] and Section 40(5) and the point is whether there was any contravention of those provisions and, if so, with what effect.

Now Section 2(4) [Explanation] and Section 40(5) deal essentially with proof of a commercial loan, - the former dealing with the nature and sufficiency of such proof and the latter with the question of onus or burden of proof. These are pre-eminently matters connected with the law of evidence and a contravention of them would not certainly affect the jurisdiction of the Court or render its decree whether on contest, consent or default, a nullity.

The real question is whether the impugned compromise decree is liable to be re-opened u/s 36 of the Bengal Money Lenders Act. That Section (Section 36) entitles the Court to re-open certain classes of decrees under certain circumstances in certain proceedings. The judgment-debtor''s application was obviously one u/s (6), Clause (a)(i) of Section 36 which permits re-opening of decrees and the passing of new decrees in the same manner and to the same extent as sub-sections (1) and (2). The impugned decree also does not obviously come under the expressly excluded class, mentioned in proviso (ii) of sub-section (1). It will, therefore, be liable to be re-opened if it has been made in contravention of Section 30 of the Act unless the Court''s power in that behalf is held excluded on some preliminary ground, admissible under the section.

Section 36 in both its relevant sub-sections (1) and (6) opens with the words "Notwithstanding anything contained in any law for the time being in force". It has, however, been held by this Court (Vide Sk. Md. Abel alias Abed v. Altaf Hossain, Civil Revision Case No.309 of 1943, decided by Mukherjea and Pal, JJ., as they then were, on 21st April, 1943) that the rule of res judicata has not altogether been abrogated by the said opening words - the non-obstante clause, as it is technically called, - and that, subject to certain exceptions, that rule will apply to prevent re-opening of decrees u/s 36. In effect, their Lordships held that, if the position under the Bengal Money Lenders Act had once beer considered or decided or purported to have been decided between the parties, the question cannot be re-opened. That was the actual decision in the case and the observations at various places of the two separate judgments of their Lordships must be understood in that light. It was also held by Pal, J., as he then was, that the re-opening of a post-Act decree was permissible under the Bengal Money Lenders Act, only when the contravention was of clause (a) of Section 30(1).

With the above view we respectfully agree.

In the present case, no doubt, the impugned decree was a compromise decree but, as we have already said subject to certain exceptions which are not material here, such a decree binds the parties as much as a decree, made in a contested proceeding. In the original suit (Title Suit No. 10 of 1944), there was an express issue between the parties as to whether the loan in question was a commercial loan or not and the parties eventually agreed that it was a commercial loan and the Court accepted the said agreement and disposed of the suit on that basis. In our opinion, as we shall presently explain, there is nothing in Section 2(4) [Explanation] and Section 40(5) or in any of the other provisions of the Bengal Money Lenders Act to preclude, in the course of the suit, admissions on the part of the debtor (borrower) that a particular loan was a commercial loan within the meaning of the Act or to waive proof of the same, thereby relieving the creditor (lender) of his burden or obligation to prove that the disputed loan is a commercial loan and it was quite open to the defendant here to admit in the suit the commercial character of the disputed loan and to waive proof of the same and that was what was done by the impugned compromise and the issue as to the character of the loan was expressly allowed to be decided in favour of the plaintiff. Such decision, though by consent, would conclude the parties (Vide (1899) AC 114 at p. 124 [Great North-West Central Railway Company and others v. Charlebois and others]. The Court, no doubt, acted by consent of parties but it had jurisdiction so to act and, by so acting, it purported to decide this particular issue in the mortgage suit in the plaintiff''s favour. Whether its decision was right or wrong is altogether immaterial but this much is clear that, in recording the compromise and in passing its decree on the basis thereof, it chose - and that was quite within its powers, - to treat the disputed loan as a commercial loan. It is, therefore, no longer open to the defendant to deny that the disputed loan was a commercial loan and, in that view, the Bengal Money Lenders Act would not apply. The opening words of sub-sections (1) and (6) of Section 36 would not, in the light of what we have said above, affect this position.

Even otherwise, the defendant would be in no better position. Granting that the loan was not a commercial loan and the Bengal Money Lenders Act would apply to the case, it is difficult to hold, upon the materials before us, that there has been any contravention of the relevant clause (a) of Section 30(1). The learned Subordinate Judge has only found contravention of clause (c) of that section and the records would not warrant any other conclusion. That the plaintiff granted instalments to the defendant is clear. That he gave up, further, some portion of his claim is also clear. But how much he gave up and on what account it is not possible to say from the materials before the Court. Under the compromise, the decree-holder became entitled to a total sum of Rs.10,518/-. Double the principal would at least be Rs.10,000/- which would leave a balance of Rs.9,650/- after deducting the payment of Rs.350/-. In the compromise nothing was stated about costs and it may well be that the above sum of Rs.10,518/- included costs as well. the scheduled costs in the present case (including Court-fees) would exceed Rs.1,000/-. It is not clear whether the decree-holder gave up these costs either in whole or in part or to what extent, if any, or whether by accepting the total figure of Rs.10,518/- in a lump, he gave up a sufficient portion of the interest which had or would have, on proper calculation, the effect of reducing his claim for principal and interest below double the principal limit. The onus to prove the relevant contravention, viz., of Section 30(1)(a) of the Bengal Money Lenders Act, is clearly upon the defendant who claims to have the decree re-opened u/s 36 and, he having failed to establish such contravention, his application under that section must fail.

We have practically proceeded up till now upon the assumption that there has been some violation of the rule or rules, embodied in Section 2(4) [Explanation] and Section 40(5) of the Bengal Money Lenders Act, and, even upon that assumption, we have come to the conclusion that the present case would not fall within the mischief o Section 36 so as to justify reopening of the impugned compromise decree. We do not think, however, that the above assumption, made by us in favour of the judgment-debtor, would be justified in the facts of the present case. Section 2(4) [Explanation] does not rule out an agreement between the parties to the effect that a particular loan I a commercial loan within the meaning of the section nor does it make such an agreement illegal or unlawful. It merely says, in effect, that, simply because there is such an agreement, the loan in question would not necessarily be held to be a commercial loan or, in other words, that such agreement, if any, would not be conclusive evidence as to the commercial character of the loan. In spite of such an agreement, it may be necessary in a particular case to prove aliunde or by other evidence that the loan is, in substance, a commercial loan. That does not mean, however, that the agreement would be useless or valueless in this matter. It would certainly be some evidence of the character of the loan but the Court is not necessarily to hold merely from this agreement that the loan in question is a commercial loan. The Court has to consider it along with other evidence, if any, as to the character of the loan. The agreement, however, will be one item of evidence on the point and, although, in spite of the agreement and notwithstanding its existence, the Court has to consider whether, in substance, the disputed loan is a commercial loan or not and may hold the contrary, there is nothing to prevent it from holding, in a proper case, upon the evidence, furnished by the agreement itself, that a particular loan is a commercial loan. That was what appears to have been held in 47 CWN 202 and we have only to add our respectful concurrence with the same.

In the light of what we have said above, it is open to the Court in a particular case to conclude from the agreement of the parties that the relevant loan is a commercial loan within the meaning of Section 2(4), read with its Explanation, and to hold that the relative burden of proof, which Section 40(5) imposes in that behalf upon the lender, has been discharged by such agreement. That being the position, it is reasonable to hold that, in recording the compromise in the present case, the Court acted on the above view and held the compromise to be perfectly lawful, it being the Court''s duty to record only lawful compromises (vide Order 23 Rule 3 of the Code of Civil Procedure). Before recording a compromise, the Court is, in law, bound to examine its legality or lawful character and, in the absence of anything, pointing to the contrary, the Court must be presumed to have done its duty and to have recorded the compromise only after being satisfied as to its lawful character, particularly when it is reasonably possible to hold in favour of the legality of such compromise. It may be noted further that this instant case was not one where the alleged illegality of the compromise depended on extraneous matters, not likely to have attracted the Court''s attention when it passed the compromise decree, so as to weaken of nullify the above presumption [Vide Great North-West Central Railway Company and others v. Charlebois and others (1899) AC 114 at p. 124]. In that view, the lawful character of the impugned compromise is not open to challenge by either party and the compromise decree would bind them and operate as estoppel by res judication the present dispute.

We would, accordingly, hold that the compromise, assailed in this case was perfectly lawful and that the decree, made on it, did not contravene any provision of the Bengal Money Lenders Act and that, in any event, its legality is not open to challenge in the present proceedings or at the instance of the respondent and the latter''s claim for relief is effectively barred by the compromise decree. The respondent''s prayer for reopening the decree must, therefore, fail.

On the last day of hearing (12.4.56), our attention was drawn to the recent decision of Das Gupta and Guha, JJ. in Civil Revision Case No.2891 of 1954 where on the 10th of this month, There Lordships held that if, after filing a written statement denying the plaintiff''s allegation that the relevant loan was a commercial loan and the framing of an express issue on the point, the defendant fails to appear at the hearing and the suit is decreed ex parte, apparently refusing any relief to the defendant under the Bengal Money Lenders Act, the question of the character of the loan and the applicability of the Act, depending thereupon, are to be deemed to have been impliedly decided against the defendant and the ex parte decree by virtue of such implied decision would operate as res judicata on the said question and would preclude reopening of the decree u/s 36 of the Bengal Money Lenders Act. That was the substance of the decision which applied the rule of implied or constructive res judicata to prevent the re-opening of an ex parte mortgage decree u/s 36(1) of the Bengal Money Lenders Act.

Some of the observations of Das Gupta, J. in the above Civil Revision Case No.2891 of 1954 may be open to the criticism that they do not appear to take sufficient note of certain aspects of the matter which emerge from the discussion of Their Lordships (Mukherjea and Pal JJ.) in the unreported case (Civil Revision Case No.309 of 1943), cited by him and also cited and considered by us above, in relation to the facts before him, but, if we may say so with respect, no legitimate exception can be taken to the conclusion or proposition of law, drawn or deduced by him, that "where a Court has considered (or has purported to consider) the question whether the Bengal Money Lenders Act is applicable or not and has decided (or purported to decide) one way or the other, that decision must be held to operate as res judicata." As a matter of fact, we ourselves have come to the same conclusion on a consideration of the very same unreported decision (Civil Revision Case No.309 of 1943) and have applied it to this case of a compromise decree under the relative rule of estoppel as applicable to such decrees. Further comment is unnecessary.

In the result, this appeal is allowed, the order of the learned Subordinate Judge in Misc. Case No.44 of 1948, reopening and setting aside the old decree, originally passed in Title Suit No. 10 of 1944, and passing a new decree in its place is set aside. The new decree, made by the learned Subordinate Judge in the said Title Suit, is also set aside and the old decree is restored. There will be no order for costs in either Court, so far as the present proceedings are concerned.

Renupada Mukherjee, J.

I agree.