Rajkumari Kaushalya Devi vs Bawa Pritma Singh And Another

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

Court: Supreme Court of India

Case Number: Civil Appeal No. 38 of 1960

Decision Date: 20 April 1960

Coram: K.N. Wanchoo, P.B. Gajendragadkar, K.C. Das Gupta

In the case titled Rajkumari Kaushalya Devi versus Bawa Pritma Singh and Another, decided on 20 April 1960, the Supreme Court of India rendered its judgment. The opinion was authored by Justice K.N. Wanchoo, who sat with Justices P.B. Gajendragadkar and K.C. Das Gupta. The petitioner in the matter was Rajkumari Kaushalya Devi and the respondents were Bawa Pritma Singh and another individual. The judgment was pronounced on the twentieth day of April, 1960. The bench composition is recorded as Justice K.N. Wanchoo, Justice P.B. Gajendragadkar and Justice K.C. Das Gupta. The case is reported in the 1960 volume of the All India Reporter at page 1030 and also appears in the 1960 Supreme Court Reports, third series, page 570. The citation information notes that the case is referenced in the 1964 Supreme Court reports as SC1379 (7). The legal issue concerned the interpretation of the term “pecuniary liability” under the Displaced Persons (Debts Adjustment) Act, LXX of 1951, specifically sections 2(6) and the subsidiary clauses (a), (b), (c), as well as sections 13, 15, 16(5), 17 and 21 of that Act.

The headnote of the reported decision states that the appellant had executed two usufructuary mortgages in favour of the respondents in 1946 covering two properties located in the city of Ferozepur, and that she had also taken those properties on lease on the same date. The respondents thereafter filed an application under section 13 of the Displaced Persons (Debts Adjustment) Act seeking recovery of the principal amount due and the arrears of rent. The appellant challenged the application on the ground that the liability did not constitute a debt within the meaning of the Act because it was not a pecuniary liability and because mortgages relating to properties now situated in India were not covered by the statute. The tribunal rejected the appellant’s contention, allowed the application and issued a preliminary decree for sale. Subsequent appeals by the appellant to the Punjab High Court and to a second forum under the Letters Patent were dismissed. On special leave, the Supreme Court held that a mortgage creates a pecuniary liability on the mortgagor and therefore falls within the definition of “debt” in section 2(6) of the Act. The Court observed that no provision of the Act narrowed the ordinary meaning of “pecuniary liability” as used in that section, nor limited it to liabilities other than those secured by a mortgage. Under clause (c) of section 2(6) a displaced person who is owed a mortgage debt by any other person, irrespective of the other person’s status, and who ordinarily resides in the territories to which the Act applies, may avail himself of the Act’s benefits. The Court further noted that the interests of any prior mortgagee or subsequent mortgagee would not be affected by a decree issued under section 13 of the Act.

The judgment relates to Civil Appeal No. 38 of 1960, filed by special leave against the order of the Punjab High Court dated 6 October 1958 in Letters Patent Appeal No. 52 of 1954, which itself arose from the High Court order of 15 June 1954 in the first appeal from Order No. 149 of 1953. Counsel for the appellant was Y. Kumar, while the respondents were represented by counsel named Bakshi Man Singh and Sardar Singh. The judgment was delivered on 20 April 1960.

The appeal was filed against the judgment of the Punjab High Court. For the purposes of this decision the essential facts were as follows. In 1946 the appellant executed two usufructuary mortgages in favour of the respondents over two separate properties located in the city of Ferozepore. On the very same day she also took the possession of both properties under lease arrangements. Subsequently the respondents instituted proceedings under section 13 of the Displaced Persons (Debts Adjustment) Act, No LXX of 1951 (hereinafter referred to as the Act) seeking recovery of the principal amount that remained due together with the rent that they claimed to be in arrears. The appellant opposed the application on several grounds, one of the principal grounds being that the relief sought could not be entertained because the liability in question did not constitute a debt within the meaning of the Act. The tribunal rejected the appellant’s contention and issued a preliminary decree ordering the sale of the mortgaged properties. The decree provided that the appellant would have six months within which to pay the amount specified in the decree; if she failed to do so, the respondents would be entitled to cause a final decree to be prepared and to proceed with the sale of the properties. The appellant appealed this decision to the Punjab High Court, but the High Court dismissed the appeal. A further appeal was taken under the Letters Patent, and that appeal was also dismissed. Thereafter the appellant applied for special leave to appeal to this Court, and the special leave was granted, bringing the matter before this Court. The sole question for determination was whether a liability that arises out of a mortgage falls within the definition of “debt” contained in section 2(6) of the Act. The relevant portion of that provision reads: “Debt means any pecuniary liability, whether payable presently or in future, or under a decree or order of civil or revenue court or otherwise, or whether ascertained or to be ascertained, which (a) in the case of a displaced person who has left or been displaced from his place of residence in any area now forming part of West Pakistan, was incurred before he came to reside in any area, now forming part of India; (b) in the case of a displaced person who, before and after the 15th day of August, 1947, has been residing in any area now forming part of India, was incurred before the said date on the security of any immovable property situate in the territories now forming part of West Pakistan: Provided that where any such liability was incurred on the security of immovable properties situate both in India and in West Pakistan, the liability shall be so apportioned between the said properties that the liability in relation to each of the said properties bears the same proportion to the total amount of the debts as the value of each of the properties as at the date of the transaction bears to the total value of the properties furnished as security, and the liability, for the purposes of this clause, shall be the liability which is relatable to the property in West Pakistan; (c) is due to a displaced person from any other person (whether a”.

In this case the appellant argued that liability arising from a mortgage is not a pecuniary liability and therefore section 2(6) does not apply to a mortgage debt; he further urged that the legislative scheme shows that mortgages relating to property situated in present‑day India are not covered by the Act at all. Section 2(6) defines “debt” as any pecuniary liability and restricts the definition by three sub‑clauses that refer to the identity of the person who might owe the debt or to whom the debt might be owed. Sub‑clauses (a) and (b) concern debts owed by a displaced person as defined in the Act, whereas sub‑clause (c) concerns a debt due to a displaced person. Sub‑clause (c) must be read independently of (a) and (b) because it speaks of a displaced person as creditor, while the first two sub‑clauses speak of a displaced person as debtor. Accordingly, under sub‑clause (c) a displaced person who is a creditor may recover a debt owed to him from any other person, whether that other person is a displaced person or not, provided that the other person ordinarily resides in the territories to which the Act extends. The appellant’s principal contention was that a mortgage debt does not constitute a pecuniary liability and therefore falls outside the definition of “debt” in section 2(6). The Court rejected that contention. It held that the expression “pecuniary liability” embraces any liability of a monetary nature. The Court then examined the definition of “mortgage” in section 58 of the Transfer of Property Act, 1882, which describes a mortgage as a transfer of an interest in a specific immovable property undertaken to secure the payment of money advanced or to be advanced by way of loan, or to secure an existing or future debt, or to secure performance of an obligation that may give rise to a pecuniary liability. The money advanced by way of loan that is secured by a mortgage plainly creates a monetary liability. While a mortgage also conveys an interest in the mortgaged property as security, the underlying loan or debt that the mortgage secures remains a monetary liability of the mortgagor. Consequently, a mortgage debt creates a pecuniary liability on the part of the mortgagor and therefore falls within the definition of “debt” under section 2(6). The Court additionally noted that the Displaced Persons (Institution of Suits) Act, 1948, which has been practically repealed by the present Act, had previously excluded suits relating to immovable property under section 4, but the current legislation makes no such exclusion.

There is no provision in the Act that mirrors the language of the earlier statutes. Section 6 of the Displaced Persons (Legal Proceedings) Act, No XXV of 1949, which has since been repealed, referred to decrees or orders for the payment of money. By contrast, section 15 of the present Act, dealing with the same subject, omits those words and instead uses the expression “proceedings in respect of any debt.” Consequently, the Act must be regarded as a comprehensive statute covering every form of pecuniary liability. The Court therefore concluded that section 2(6) expressly embraces a mortgage debt, and that, under sub‑paragraph (c) of the same provision, any displaced person to whom such a debt is owed by any other individual—whether displaced or not—and who ordinarily resides in the territories to which the Act applies, may invoke the benefits of the Act. The Court then examined whether any element of the Act’s scheme might contradict the plain wording of section 2(6).

Counsel for the appellant initially pointed to sub‑paragraph (b) of section 2(6), highlighting that this sub‑clause specifically addresses mortgage debts secured by immovable property situated in the territories forming part of West Pakistan. The argument advanced was that a distinct provision existed for mortgage debts relating to immovable property in West Pakistan, and that if the legislature had intended to include mortgages on immovable property now located in India, a comparable specific provision would have been inserted. Furthermore, the proviso to sub‑paragraph (b) provides for the apportionment of a mortgage debt when the secured property is partly in West Pakistan and partly in India, limiting the application of sub‑paragraph (b) to the portion of the debt secured by the West Pakistani property and thereby excluding the portion secured by Indian property. This limitation is attributable to the later provision in section 16, which creates a charge on compensation payable to a displaced person for a mortgage debt secured on immovable property in Pakistan, or alternatively, on property exchanged for the Pakistani property on which the debt was charged. Accordingly, the special rule in sub‑paragraph (b) does not diminish the ordinary meaning of the words used in sub‑paragraph (c) nor does it restrict the broad phrase “pecuniary liability” to liabilities other than those secured by a mortgage. Moreover, sub‑paragraph (b) itself demonstrates that a mortgage debt falls within the definition of pecuniary liability, as it treats any such liability as a debt within the meaning of section 2(6).

The Court observed that a debt incurred on the security of any immovable property situated in West Pakistan falls within the definition of “debt” under section 2 (6) and therefore qualifies as a pecuniary liability. It was next submitted that, because the legislature had expressly exempted Indian property that was encumbered from the operation of sub‑clause (b) for displaced debtors, there could be no justification for allowing displaced creditors to rely on the Act with respect to mortgage debts. The Court noted, however, that this submission overlooked the provision in sub‑clause (a), which permits a displaced debtor to avail himself of the Act once it is held that the expression “pecuniary liability” also embraces mortgage debt. The Court reiterated that sub‑clause (b) dealt with a special situation that was later detailed in section 16 of the Act, whereas the general right of a displaced debtor to benefit from the Act is found in sub‑clause (a). Consequently, sub‑clause (a) necessarily covers mortgage debt because such debt constitutes a pecuniary liability. Counsel then relied on section 16 (5), which provides a creditor the option to elect to be treated as an unsecured creditor in relation to the debt, thereby bringing the provisions of the Act into play. It was argued that this sub‑section required the creditor to make the election before obtaining the benefit of the Act. The Court held that this argument had no force, for sub‑section (5) of section 16 is limited to situations where the mortgage, charge or lien is on immovable property situated in West Pakistan and does not extend to cases where the security is on immovable property located outside West Pakistan.

The Court further considered the reference to section 17 of the Act, which deals with debts secured on movable properties and is again concerned with displaced debtors, outlining how equities are to be balanced between a displaced debtor and his creditor with respect to such debts. The Court found nothing in section 17 that would diminish the broad language employed in section 2 (6) (c). It also examined the reference to section 21, which provides for scaling down debts. This provision is a general rule applicable to debts of every kind, and it contains no indication that the term “debt” as defined in section 2 (6) is limited solely to claims for money, thereby excluding mortgage debt. Accordingly, the Court concluded that no provision in the Act or in its overall scheme curtails the meaning assigned to the words “pecuniary liability” as used in section 2 (6) read with sub‑clause (c). Finally, the Court noted the contention that, if mortgage debts on property situated in India fell within the scope of the Act, there would be no enforcement mechanism comparable to section 16 for the creditor’s rights. The Court observed that this argument was not supported by any specific provision in the Act.

In this case, the Court observed that the proposition advanced by the appellant was incorrect. Section 10 of the Act authorises a displaced creditor to claim against a displaced debtor, while Section 13 authorises a displaced creditor to claim against any person who is not a displaced debtor. Section 11 then prescribes the procedure for dealing with an application made under Section 10A, and sub‑section (2) of that provision allows a decree to be passed against the displaced debtor under specified circumstances. In a similar manner, Section 14(2) empowers a tribunal to pass such a decree in relation to an application made under Section 13, as the tribunal deems appropriate. Both of these decrees are enforceable under Section 28 of the Act. Consequently, even where the debt in question is a mortgage debt, the Act contains a mechanism for its enforcement, although this mechanism differs from the provision in Section 16, which dealt with the special situation of mortgaged property situated in West Pakistan.

The Court further noted that Section 3 of the Act declares that the provisions of the Act and of the Rules and Orders made thereunder shall have effect notwithstanding any inconsistency with any other law then in force. This overriding clause renders a suit such as the present one maintainable despite any contradictory provisions contained in other statutes. The appellant’s final contention was that if Section 2(6)(c) permits a displaced creditor to file an application under Section 13 with respect to a mortgage debt, then prior or subsequent mortgagees would suffer hardship because they could not be dealt with under the Act. The Court explained that Section 13 enables a displaced person who claims a debt from any other person who is not a displaced person to apply, within one year of the Act’s commencement, to the appropriate tribunal in the local area. The provision is clearly intended to provide relief only for a limited period.

Section 25 of the Act provides that all proceedings under the Act are to be regulated by the provisions of the Code of Civil Procedure, except where the Act or its rules expressly provide otherwise. Even assuming that Order XXXIV, rule 1 of the Code of Civil Procedure does not apply to proceedings under the Act, and that all parties having an interest in the mortgage security cannot be joined as parties as required by that rule, the interest of prior or junior mortgagees would nevertheless remain unaffected by any decree passed under the Act. The explanatory note to Order XXXIV, rule 1 indicates that a prior mortgagee need not be made a party to a suit for sale brought by a junior mortgagee. Accordingly, the rights of a prior mortgagee are not altered by a decree issued under Section 13, just as his rights remain unchanged by a decree issued under Order XXXIV. In summary, the Court concluded that the rights of both prior and subsequent mortgagees are insulated from any decree issued pursuant to Section 13, and therefore there is no justification for limiting the plain meaning of Section 2(6)(c).

The Court observed that the decree issued under Order XXXIV did not affect the rights of the prior mortgagee. It further held that mortgagees who held mortgages after the displaced creditor and who applied under section 13 were likewise protected, and their interests would not be jeopardized by any decree that might be passed under section 13. The Court explained that even under Order XXXIV, which ordinarily requires a puisne or subsequent mortgagee to be joined as a party in a suit for sale, a decree obtained in a suit in which the subsequent mortgagee was not joined as a party did not impair that mortgagee’s rights. The proceedings in such a suit were not binding on the subsequent mortgagee and therefore could not affect his rights under the second mortgage. Consequently, the Court stated that the subsequent mortgagee could still pursue the property by suing his own mortgagor, even though the property might have been sold by decree of an earlier mortgagee in a suit to which the subsequent mortgagee was not a party. In sum, the Court concluded that the interest of either a prior mortgagee or a subsequent mortgagee, if any existed, would not be affected by a decree passed on an application under section 13. Accordingly, there was no justification to narrow the plain meaning of the words used in section 2(6)(c) on the ground that proceedings under the Act would prejudice the rights of prior or puisne mortgagees. The Court therefore found no merit in the appeal, dismissed it with costs, and entered an order of dismissal of the appeal.