Joshi Girjadharji and Another vs Lachmanji Panth and Others

Rewritten Version Notice: This is a rewritten version of the original judgment.

Court: Supreme Court of India

Case Number: Civil Appeal No. 64 of 1951

Decision Date: 25 April 1952

Coram: M. Patanjali Sastri, Saiyid Fazal Ali, B.K. Mukherjea

In the matter titled Joshi Girjadharji and Another versus Lachmanji Panth and Others, decided on 25 April 1952, the Supreme Court of India heard Civil Appeal No 64 of 1951. The bench consisted of Chief Justice M Patanjali Sastri, Justice Saiyid Fazal Ali and Justice B K Mukherjea. The petitioners were Joshi Girjadharji and another individual; the respondents were Lachmanji Panth and others. The dispute concerned the application of the Uttar Pradesh Debt Redemption Act of 1940, particularly sections 2(9) and 21, and the meaning of the terms “loan” and “suit to which the Act applies.” A mortgage deed had been executed on 28 July 1931 by several mortgagors for a term of six years, which expired in July 1937. The mortgagees filed a suit in May 1938 and a decree was passed in March 1939. On 11 April 1942 the mortgagees applied for relief under the Debt Redemption Act. The respondents opposed this application on the ground that one of the mortgagors, identified as S, had been assessed for income tax and therefore was not an agriculturist, which they argued made the suit ineligible to fall within the scope of the Act. Evidence showed that S earned a monthly salary of Rs 90 and had been subject to income-tax assessment from February 1932 through the year 1936. The Allahabad High Court, relying on a Full Bench decision in Ketki Kunwar v Ram Saroop, held that under section 21 the mortgage money could be recovered only from the mortgaged property and not from the personal assets of the mortgagors, rendering the proviso to section 2(9) inapplicable. Consequently, the High Court concluded that the question of whether S was an agriculturist on the date of the mortgage was irrelevant, and because S was acknowledged to have been an agriculturist at the time of the suit, it decided that the judgment debtors were entitled to relief under the Act. On appeal, the Supreme Court considered the proposition that, assuming the proviso to section 2(9) applied, the definition of “loan” required that the advance be made to a person who was an agriculturist at the date of the advance. The Court observed that S was not an agriculturist on 28 July 1931 because the Indian Finance (Supplementary and Extending) Act of 1931, which lowered the taxable minimum from Rs 2,000 to Rs 1,000, was enacted only in November 1931 and income-tax was first deducted from S’s salary in February 1932. The Court therefore posed the question whether the Full Bench decision in Ketki Kuwar v Ram Saroop was correct.

In this case the Court recorded that the appeal stemmed from an application filed by five of the ten judgment-debtors under section 8 of the Uttar Pradesh Debt Redemption Act of 1940, seeking to determine the amount owed to them in accordance with sections 9 and 10 of the same Act and to modify the decree dated 31 March 1939 that had been issued by the Additional Civil Judge, Banaras, in original suit number 33 of 1938. The Court then summarized the material facts. It stated that on 22 June 1922 a mortgage deed had been executed by Madho Ram, Sita Ram, Jai Ram and Lakshman, all sons of Pandit Raja Ram Pant Sess, whereby they mortgaged certain immovable properties in favour of Damodarji, son of Kamta Nathji, owner of the Kothi Joshi Shivanath Vishwanath, for the purpose of repaying a sum of eight thousand rupees that had been advanced on that date by way of a cheque. The deed provided that interest would accrue at twelve annas per cent per month and that interest would be payable quarterly. On 28 July 1931 the same mortgagers and their sons executed a further mortgage over the identical properties in favour of Kothi Kamta Nathji Vishwanathji, this time for the repayment of three thousand rupees, again with interest at twelve annas per cent per month and quarterly rests. The second deed recited that the eight-thousand-rupee sum had been advanced on that date by cheque and that the proceeds had been used to discharge the liability arising under the earlier mortgage deed to Damodarji, proprietor of Kothi Shivanath Vishwanath. The Court noted that the Uttar Pradesh Agriculturists’ Relief Act, No. XXVII of 1934, had come into force in 1935. In May 1938 Girjadharji, son of Damodarji, and Murlidharji, a minor son of Gangadharji who was another son of Damodarji, instituted suit number 33 of 1938 in the Court of the Additional Civil Judge, Banaras, against the mortgagers and their sons, claiming recovery of nine thousand four hundred seventy-seven rupees and two annas as principal together with interest accrued up to the date of the suit and further interest under the mortgage deed of 28 July 1931. The Court reported that, according to the High Court judgment under appeal, the mortgagers in their written statement relied on the benefit of the Uttar Pradesh Agriculturists’ Relief Act. The plaintiffs argued that the mortgagers were members of a joint Hindu family and that, because Sita Ram, one of the mortgagers, had been assessed to income-tax, the mortgagers were not agriculturists as defined in section 2(2) of that Act and therefore could not enjoy the relief provided to agriculturists. The trial Court, by its judgment dated 31 March 1939, held that although Sita Ram had been assessed to income-tax for the year 1931-32, the amount of such tax did not exceed the cess payable on the land he held; consequently the second proviso to section 2(2) was not applicable to him and he was held to be an agriculturist. Because the other mortgagers were also agriculturists, the Court concluded that all of them were entitled to the benefits of the Act. Accordingly, after reducing the interest, the Court declared a sum of nine thousand four hundred ninety-seven rupees, fourteen annas and one paisa to be due as principal, interest and costs up to 31 March 1939, and a preliminary mortgage decree for sale was passed in that suit. The Court then turned to the subsequent legislative change when the Uttar Pradesh Debt Redemption Act, No. XIII of 1940, became effective in 1940. On 11 April 1942 five of the judgment-debtors filed an application under section 8 of that Act before the Additional Civil Judge, Banaras, who issued a decree. In the petition they asserted that the debt had actually been advanced in 1922, that the petitioners were agriculturists within the meaning of Act XIII of 1940, and that the decree-holders could obtain interest only at the reduced rate of four rupees eight annas.

The trial court held that the amount of income-tax assessed against the mortgagor did not exceed the cess payable on the land he held, and therefore the second proviso of section 2(2) was inapplicable to him. Consequently, the court found that he qualified as an agriculturist, and because the other mortgagors were also agriculturists, all of them were entitled to the benefits provided by the U.P. Agriculturists’ Relief Act. After reducing the interest, the court declared that a sum of Rs 9,497-14-1 was due as principal, interest and costs up to 31 March 1939, and it passed a preliminary mortgage decree for sale in the suit. In 1940 the U.P. Debt Redemption Act (No. XIII of 1940) came into force. On 11 April 1942 five of the judgment-debtors filed an application under section 8 of that Act before the Additional Civil Judge, Banaras, who had previously passed the decree. In their petition they asserted that the debt had actually been advanced in 1922, that the petitioners were agriculturists within the meaning of Act XIII of 1940, that the decree-holders could only recover interest at the reduced rate of Rs 4-8-0 per cent per annum from 1922, and that, after adjusting the accounts, no amount would remain outstanding against the petitioners. They prayed that an account of the money-lending business be prepared from the beginning of 1922 and that the decree in suit No. 33 of 1938 be modified by reducing the amount due. The decree-holders responded with a petition of objection, claiming, inter alia, that the petitioners were not agriculturists; that they and respondents 3 to 7 were members of a joint Hindu family at the time the mortgage deed of 28 July 1931 was executed; that Sita Ram had paid income-tax both at the date of the mortgage and at the time of the application; that none of the members of the petitioners’ family qualified as agriculturists within the meaning of the Act and therefore were not entitled to its benefits; and that the debt advanced under the mortgage deed of 28 July 1931 was not a “loan” as defined in the Act, so the Act did not apply. It is noteworthy that although the judgment-debtor applicants specifically requested that accounts be taken from 1922, when the loan was said to have been actually advanced, the decree-holders did not contest that factual position. During the hearing before the Additional Civil Judge, the counsel for the decree-holders admitted that, with the exception of Sita Ram, the remaining judgment-debtors were agriculturists under Act No. XIII of 1940, but that because Sita Ram was a party to the mortgage they could not claim the benefit of the Act. Two witnesses, Suraj Mani Tripathi and Sita Ram, were examined on behalf of the judgment-debtor applicants. Sita Ram testified that he had been a teacher at Harish Chandra Intermediate College in Banaras since 1907 and that in 1930 his salary was Rs 90 per month.

In the testimony presented, Sita Ram declared that his salary at Harish Chandra Intermediate College was ninety rupees per month, that he had paid income-tax from February 1932 through 1936, and that he had paid no income-tax thereafter. His statements were supported by Suraj Mani Tripathi, who served as the college’s accountant from 1930 to 1942. Referring to the college’s accession roll, Tripathi testified that Sita Ram’s monthly remuneration remained ninety rupees throughout 1930, that no income-tax was levied or deducted in 1930, and that the same salary and lack of tax deduction continued in 1931. Tripathi further confirmed that the first deduction of income-tax from Sita Ram’s salary occurred in February 1932. The decree-holders offered no contrary evidence during the hearing of the application filed under section 8 of the 1940 Act.

The record also contained an income-tax assessment form, filed as an exhibit during the mortgage suit trial and dated 9 February 1933. That assessment indicated that on that date Sita Ram was assessed a tax of one rupee fourteen annas on an income of one hundred and eighty rupees for the fiscal year 1931-32. After considering the evidence, the Additional Civil Judge delivered his judgment on 22 February 1943, finding that Sita Ram had not been assessed to income-tax either at the time of the section 8 application or at the time the mortgage was executed in 1931. Consequently, the Judge concluded that the applicants were agriculturists and that the dispute concerned a loan as defined in Act XIII of 1940.

The Judge then examined whether the accounts should be reopened from the earlier mortgage dated 2 June 1922 or from the later mortgage dated 28 July 1931. The decree-holders, having presented no fresh evidence, relied on the material already adduced in suit No. 33 of 1938. After reviewing that evidence, the Judge determined that, with respect to the judgment-debtors, the mortgagees in both mortgages were the same persons. He criticized the decree-holders for not producing the books of accounts. Upon reopening the accounts from 2 June 1922, the Judge concluded that the entire principal and interest payable under the Act had already been fully discharged and that no amount remained due by the judgment-debtors under the decree in suit No. 33 of 1938. Accordingly, he declared the decree completely discharged and directed that a note to that effect be entered in the Register of Suits.

The decree-holders appealed this order to the High Court. A Division Bench comprising Chief Justice B. Mallik and Justice Bind Basni Prasad delivered their judgment on 16 April 1948. The Bench held that the question of whether Sita Ram was an agriculturist on 28 July 1931 was immaterial, because it was not contested that all the judgment-debtors were agriculturists on the date of the suit. The Judges referred to section 21 of the Act and, relying on the Full Bench decision in Ketki Kunwar v. Ram Saroop, concluded that the mortgage amount could be recovered only from the mortgaged property and not personally from the mortgagors, rendering the proviso to the definition of “loan” in section 2(9) inapplicable. Consequently, the High Court dismissed the appeal on this point alone.

In the earlier discussion the Court observed that, under the relevant statutory provision, the mortgage amount could be recovered solely from the mortgaged property and not from the mortgagors personally. Consequently, the proviso to the definition of “loan” found in section 2(9) of the Act was held to be inapplicable, and the Court concluded that it was unnecessary to prove that the borrowers were agriculturists at the time the advance was made. Since the judgment-debtors were acknowledged to have been agriculturists on the date the suit was filed, the matter fell squarely within the scope of the Full Bench decision of the High Court in Ketki Kunwar v. Ram Saroop (1). On that basis, the High Court dismissed the appeal on this issue alone. The question of whether the accounts should be reopened from 1922 or from 1931 was never raised by the decree-holders.

The decree-holders have now sought to challenge the decision before this Court on a certificate issued under section 110 of the Code of Civil Procedure. Counsel for the appellant, appearing on behalf of the decree-holders, has vigorously contested both the correctness of the Full Bench judgment relied upon by the High Court and the High Court’s interpretation of section 21 and section 2(9) of the Act. The present Court, however, considers that the appeal can be resolved on a simpler ground and therefore chooses not to opine on those intricate questions, which remain uncertain.

The present application is filed under section 8 of the Uttar Pradesh Debt Redemption Act, 1940. Sub-section (1) of that provision, excluding the proviso, reads as follows: “Notwithstanding the provisions of any decree, or of any law for the time being in force, an agriculturist or a workman liable to pay the amount due under a decree to which this Act applies passed before the commencement of this Act, may apply to the Civil Court which passed the decree or to which the execution of the decree has been transferred, for the amendment of the decree by reduction according to the provisions of this Act of the amount due under it, and on receipt of such application the Court shall, after notice to the opposite party, calculate the amount due from the applicant in accordance with the provisions of sections 9 and 10 and shall amend the decree accordingly.” From the language of this sub-section, three conditions are essential for a person to exercise the right it confers: first, the applicant must be an agriculturist; second, that agriculturist must be liable to pay the amount due under a decree to which the Act applies; and third, the decree in question must have been passed before the commencement of the Act. Counsel for the appellant has conceded that the judgment-debtors were indeed agriculturists at the time suit No. 33 of 1938 was filed and also at the time the application under section 8 was made in 1942.

The decree that formed the basis of the suit was issued on March thirty-first, 1939, which occurred well before the Act came into force. Consequently, the remaining issue for the Court was to determine whether the amount claimed was due under a decree that falls within the scope of the Act. Section two six of the Act explains that the expression ‘decree to which this Act applies’ refers to any decree, whether passed before or after the Act’s commencement. Such a decree must arise in a suit that is covered by the provisions of the Act. Section two seventeen defines the term ‘suit to which this Act applies’ as any suit or proceeding that relates to a loan. Therefore, the Court needed to ascertain whether the decree against the judgment-debtors arose out of a suit that concerned a loan. The Act defines ‘loan’ in section two nine as an advance in cash or kind made before June first, 1940, that is recoverable from an agriculturist, a workman, or from such persons jointly. It also covers advances recoverable from the property of an agriculturist or workman and includes any transaction that in substance amounts to such an advance. However, the definition expressly excludes an advance whose repayment liability has been transferred by contract to another person, or an advance made by the Central or Provincial Government, a co-operative society, or a scheduled bank. A proviso adds that an advance recoverable from an agriculturist, whether alone or jointly with others, will not be treated as a loan for the Act’s purposes. Such an advance is considered a loan only if it was made to an agriculturist or to an agriculturist together with other persons. Therefore, to qualify as a ‘loan’ under the Act, the advance must be recoverable from an agriculturist. The term ‘recoverable’ appears, at first glance, to indicate that the critical moment is when the advance becomes recoverable, that is, when the advanced amount becomes due. Under the mortgage dated 1931, the redemption date was six years after execution, which fell in July 1937. Counsel for the respondent, Sri Kunzru, conceded that Sita Ram had not been assessed to income tax since 1936.

The Court assumes, without deciding, that the proviso to section two nine is applicable. To treat the advance as a loan, it must be demonstrated that the advance was made to a person who, at the date of the advance, satisfied the definition of an agriculturist. That definition is found in section two three of the Act. The unresolved question, therefore, is whether Sita Ram had ceased to be an agriculturist because of clause (b) of the proviso to section two three. Clause (b) states that a person ceases to be an agriculturist when he is assessed to income tax, and the assessment date in question is July twenty-eighth, 1931. According to the testimony of Surai Mani Tripathi and the records of Sita Ram's income tax, the first deduction at source occurred in February 1932 by the College authorities. The formal assessment was entered on February ninth, 1933. Thus, Sita Ram was not assessed to income tax on July twenty-eighth, 1931. Consequently, the evidence established that the assessment did not occur on the earlier date, and therefore the issue of whether the earlier assessment disqualified the agriculturist status remained open. The Court therefore noted that the matter required further factual determination before any conclusion could be drawn.

On July 28 1931 the taxable minimum was reduced from Rs 2,000 per annum to Rs 1,000 per annum by the Indian Finance (Supplementary & Extending) Act, 1931, which was enacted on 26 November 1931. Consequently, at the time of the advance on 28 July 1931, Sita Ram, whose salary was below Rs 2,000 per annum, was not only unassessed for income-tax but was also not liable to any assessment. The evidence of Suraj Mani Tripathi shows that the first deduction of income-tax from his salary occurred in February 1932, and the income-tax assessment form for the year 1931-32 (Ex.S) records tax on Rs 180, an amount representing his salary for February and March 1932, the last two months of that assessment year. Accordingly, Sita Ram was not assessed for income-tax on the date of the advance in 1931, nor on the due date specified in the deed in July 1937, nor at the time of the suit in 1938, nor when the application under section 8 was filed in 1942. It follows that he remained an agriculturist on each of those dates. The other judgment-debtors were also admittedly agriculturists. Therefore, the application under section 8 was made by persons who were all agriculturists and who were liable to pay under a decree to which the Act applies, namely a decree issued in a suit concerning a loan as defined by section 2(9). The lower courts were thus correct in concluding that the judgment-debtor applicants were entitled to the benefit of the Act. Sri G.N. Kunzru later submitted that the accounts could not be taken from 1922 because the mortgagees under the two mortgages were different. This point had not been specifically raised in the decree-holders’ petition of objection. The trial court had found as a fact that, for the judgment-debtors, the mortgagees were the same in both mortgages. Although the appeal to the High Court alleged that the mortgagees were different and that the accounts could not be reopened from 1922, that ground was not specifically urged before the High Court. Resolving that issue would require a factual investigation. In the absence of a plea on that matter in the decree-holders’ petition of objection and given their failure to raise the question before the High Court, it would not be appropriate for this final court of appeal, at this stage and under the circumstances, to allow the appellants to raise this factual issue now. Accordingly, the appeal was dismissed with costs. The appeal was dismissed. Agent for the appellants: C.P. Lall. Agent for the respondents: Nannit Lal.