Haridas Mondal vs Anath Nath Mittra

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

Court: supreme-court

Case Number: Civil Appeal No. 508 of 1957

Decision Date: 21 February 1961

Coram: J.C. Shah, J.L. Kapur, M. Hidayatullah

In the matter of Haridas Mondal versus Anath Nath Mittra, the Supreme Court of India delivered its judgment on 21 February 1961. The bench consisted of Justice C.J. Shah, Justice J.L. Kapur and Justice M. Hidayatullah. The case was cited as 1961 AIR 1419 and 1961 SCR (3) 880. The dispute arose under the Bengal Money‑Lenders Act, 1940, specifically involving section 36, and also invoked provisions of the Code of Civil Procedure, 1908, namely section 11 of Order 2, rule 2. The appellant had initially obtained a preliminary mortgage decree against the respondent, followed by a final mortgage decree, and thereafter secured a personal decree for the balance of the debt that remained after the mortgaged property was sold. After obtaining the personal decree, the appellant sought its execution. In response, the respondent filed a suit under section 36 of the Bengal Money‑Lenders Act, seeking to reopen the personal decree. That suit did not request the reopening of the earlier preliminary or final decrees. The court, however, reopened the personal decree and substituted it with an instalment decree for a reduced amount, a decision that the High Court later upheld. When the respondent failed to make the instalment payments, the appellant again applied for execution of the decree. The respondent then instituted another suit under section 36, this time aiming to reopen both the preliminary and final decrees. The subordinate judge dismissed the suit on the ground of res judicata, a view affirmed by the district judge on appeal. The High Court, hearing a second appeal, reversed those findings and ordered that the preliminary and final decrees be reopened, remanding the matter to the trial court to pass a fresh preliminary decree. The appellant consequently appealed to the Supreme Court by special leave. The Court, speaking for Justices Kapur and Shah, held that section 36 of the Bengal Money‑Lenders Act contemplated only one suit for reopening transactions, including decrees, and did not permit a series of successive suits for the same purpose. If a borrower, in such a suit, fails to claim the full relief to which he is entitled and thereby abandons a portion of his right, he is barred from seeking that abandoned portion in a later suit. The Court observed that the principle underlying rule 2 of Order 2 of the Code of Civil Procedure, as well as the doctrine of res judicata, applied equally to a suit filed under section 36 of the Act. Justice Hidayatullah, however, added a separate view: when the respondent approached the executing court under section 36, he had not filed a suit but merely made an application, and the court was obligated to grant him complete relief even if he had not expressly asked for it. If the court failed to do so and the respondent subsequently filed a suit, the Court held that no question of waiver or constructive res judicata could arise, a conclusion supported by the non‑ obstante wording of sub‑sections (1) and (6) of section 36. This reasoning clarified that the duty of the court to provide the entire relief contemplated by the Act superseded any procedural limitation that might otherwise invoke res judicata.

In this case the Court observed that the issue raised under the statutory provision concerned primarily the duty of the court to grant full relief under the Act rather than the mere right of a party. The remedies prescribed by the Act were not intended to be mutually exclusive, either by express language or by necessary implication, and they were meant to provide the broadest possible relief to borrowers. The Court referred to the decisions of Jadhunath Roy v. Kshiti­sh Chandra Acharya Chaudhuri (1949) L.R. 76 I.A. 179 and Joy Chand Lal Babu v. Kamalaksha Chaudhuri (1949) L.R. 76 I.A. 131. Because the Act required that decrees against the respondent be reopened, no rule of the Code of Civil Procedure or any principle of equity could prevent the suit, the former being expressly excluded and the latter rendered inapplicable by the substantive provisions of the Act. The judgment was rendered in the civil appellate jurisdiction as Civil Appeal No. 508 of 1957, granted by special leave from a decree dated 3 June 1955 of the Calcutta High Court in appeal from Appellate Decree No. 1090 of 1949. Counsel for the appellant and the respondent were instructed, and the judgment of Justices Kapur and Shah was delivered by Shah, J., while Justice Hidayatullah delivered a separate opinion.

To secure repayment of Rs 2,500, Anath Nath Mittra (hereinafter “Mittra”) mortgaged four parcels of land to Haridas Mondal (hereinafter “Mondal”) by deed dated 25 April 1930. Mondal instituted suit No. 18 of 1937 on 11 June 1937 in the Court of the Second Subordinate Judge, Midnapore, seeking enforcement of the mortgage, and obtained a preliminary mortgage decree for Rs 5,000 together with interest and costs. That decree later became absolute; in execution, the mortgaged property was sold for Rs 4,160, leaving a balance of Rs 2,176.66 still due under the mortgage decree. Of the four parcels sold, Mondal purchased three and the remaining parcel was bought by Mittra’s wife. Mondal then applied under Order 34, Rule 6 of the Civil Procedure Code for a personal decree and on 7 September 1940 obtained a decree ordering Mittra to pay Rs 2,338.15. Mondal sought execution of that personal decree through Miscellaneous Execution Case No. 11 of 1941. Subsequently, the Bengal Legislature enacted the Bengal Money‑lenders Act, 1940, which authorised courts, in certain circumstances, to reopen existing decrees. Exercising this power, Mittra filed a suit under section 36 of that Act seeking reopening of the personal decree. On 16 August 1941 the Subordinate Judge, Midnapore, decreed in favour of Mittra, directing that a new decree for Rs 1,431.15 be drawn and that the amount due under the personal decree be paid in three annual instalments. An appeal against this decree was lodged in the District Court, Midnapore; the District Judge dismissed the appeal and sustained the cross‑objections raised by Mondan.

In Second Appeal No 1442 of 1942, the High Court of Judicature at Calcutta set aside the decree that had been issued by the District Judge and reinstated the decree that had been passed by the Subordinate Judge in the Second Court at Midnapore. After the High Court’s decree, Mittra failed to pay the amount that had been directed, and Mondal consequently applied for execution of that decree. Mittra then instituted another suit under section 36 of the Bengal Money‑lenders Act in the Second Court of the Subordinate Judge at Midnapore, seeking to reopen the preliminary and final decrees that had earlier been passed in the mortgage suit. The Subordinate Judge dismissed the suit, holding that it was barred by the principle of res judicata. An appeal against that dismissal was lodged before the District Court, which affirmed the Subordinate Judge’s order. The High Court, on a further appeal, ordered that both the preliminary and final decrees be reopened and remanded the matter to the trial court for the purpose of passing a fresh preliminary decree. The present appeal, filed with special leave, challenges the High Court’s order. Section 30 of the Bengal Money‑lenders Act, 1940, provides, to the extent it is relevant, that notwithstanding any other law or agreement, after the commencement of the Act a borrower shall not be liable to pay a sum of principal and interest, together with any amount already paid or included in any decree, that exceeds twice the principal of the original loan; furthermore, the borrower shall not be liable to pay interest at a rate exceeding eight per cent per annum on secured loans. Simple. Section 36 authorises the reopening of liability on any loan, secured or otherwise, that contravenes the provisions of section 30. Sub‑section (1) of section 36 states that, notwithstanding any other law, if in any suit brought by a borrower for relief under this section—whether heard ex parte or otherwise—the court has reason to believe that exercising one or more of the powers conferred by the section will give relief to the borrower, the court shall exercise any such powers it deems appropriate. The powers granted to the court include reopening the transaction, taking accounts between the parties, releasing the borrower from any liability that exceeds the limits laid down in clauses (1) and (2) of section 30, offsetting, wholly or in part, and revising or altering any security or agreement relating to the loan. The exercise of those powers is subject to certain provisos, which are not material for the purpose of this appeal. Sub‑section (2) provides that a court which reopens a decree is prohibited from doing anything that would affect the rights that have been acquired in good faith by any person other than the decree‑holder as a consequence of the execution of the reopened decree; however, the court is enjoined to order the restoration to the judgment‑debtor of

In accordance with the provisions governing the reopening of a decree, the court was required to return to the judgment‑debtor any property that the decree‑holder had acquired as a result of executing the reopened decree, provided that such property remained in the possession of the decree‑holder on the date the decree was reopened. The court was also mandated to direct the judgment‑debtor to pay the full sum of the new decree, which was passed under clause (a), in a series of instalments it deemed appropriate. Additionally, the court was instructed that if any instalment was not paid, the decree‑holder should be placed in possession of the property that had been restored to the judgment‑debtor, and that the amount the decree‑holder had paid to acquire that property in execution of the reopened decree should be set off against the outstanding balance of the new decree. Sub‑section (6) further provided that, notwithstanding any other law then in force, a court which had passed a decree in a suit to which the Act applied and which had not been fully satisfied by 1 January 1939, could exercise the powers conferred by sub‑sections (1) and (2) in any proceeding for execution of that decree. Section 36, sub‑section (1), contemplated that a borrower could institute a suit for relief under that section, thereby vesting the court with authority to reopen decrees already issued. In 1941, Mittra filed a suit under section 36 of the Act seeking to reopen the personal decree that had been passed under Order 34, Rule 6 of the Civil Procedure Code. In Schedule “A” to the plaint, Mittra set out the principal sum due under the mortgage, the interest at eight per cent accruing from the date of the mortgage to the date of the suit, the costs of the suit, and, after allowing credit for the price realised by the sale of the properties, submitted that Mondal was entitled to recover only Rs 66‑13‑2, which should be awarded to Mondal in twenty equal annual instalments. By invoking section 36, Mittra was unquestionably entitled to seek the reopening of the preliminary decree, the decree absolute for sale, and the personal decree; however, in the first suit he expressly relinquished his right to reopen the preliminary decree and the decree absolute, choosing instead to obtain an order that only the personal decree be reopened. During the execution of the mortgage decree, one parcel of land was purchased by Mittra’s wife, and it is presumably because of this circumstance that Mittra was unwilling to have the preliminary decree reopened. The District Judge of Midnapore, who heard the appeal against the order passed by the second Subordinate Judge in the first suit under section 36, observed that it was admitted before him by counsel for the appellant that reopening the entire transaction would not be to the appellant’s benefit and that the appellant did not desire such a reopening.

In this case the appellant, Mittra, expressed that he did not want the preliminary decree and the decree absolute to be reopened. Accordingly, the only relief he sought was that the new decree issued by the learned Subordinate Judge for the amount of Rs 1,431‑15‑0 be reduced to Rs 66‑13‑2, as specified in his application under section 36 of the Act.

The Court observed that in the first suit filed by Mittra under section 36, he deliberately abandoned the claim to reopen both the preliminary decree and the decree absolute, and he obtained relief on the explicit basis that he did not desire those decrees to be reopened. The Court then considered whether Mittra could thereafter institute another suit to obtain relief under section 36 by seeking the reopening of the same decrees. The Court held that section 36 envisions the filing of a single suit for reopening transactions, including decrees, and does not permit successive suits for the same purpose. If, in the first suit, a borrower either fails to obtain the relief he requested or abandons his right to that relief, the borrower cannot later file a second suit for relief that could have been claimed in the earlier proceeding.

The Court found the argument that Mittra was unable to claim the reopening of the preliminary decree and decree absolute in the first suit to be without merit. Sub‑section (6) of section 36 provides that the right to grant relief in execution proceedings of an unsatisfied decree vests in the court that passed the original decree. The first suit under section 36 was filed in the same court that had originally passed the mortgage decree. The abandonment of the claim to reopen the preliminary and final decrees was therefore not due to any incompetence of the court to grant relief, but solely because Mittra at that stage chose not to pursue such reopening.

The Court disagreed with the High Court’s view that the rule contained in Order 2, Rule 2 of the Code of Civil Procedure does not apply to a suit under section 36 of the Act. Moreover, the Court held that any right to claim relief that could have been asserted but was not raised in the earlier suit must be treated as res judicata. Accordingly, the appeal was allowed and Mittra’s suit No 105 of 1947 was dismissed with costs throughout.

Justice Hidayatullah, after reviewing the judgment delivered by his brother Justice Shah, expressed that he could not agree with reversing the judgment under appeal. He noted that the appellant, a money‑lender, had advanced Rs 2,500 on a simple mortgage of four properties. A suit filed by the appellant was decreed on 13 November 1937, when a preliminary decree for Rs 5,000 plus costs was passed against the respondent. That decree became final on 25 February 1938. On 17 May 1939 the four properties were sold for Rs 4,160, and the balance due at that time...

After the sale of the four mortgaged properties, the amount still owed on the loan was Rs 2,176/‑. The appellant, who held the decree, bought three of the four properties, while the fourth property was purchased by the mortgagor’s wife. On 7 September 1940 the court passed a personal decree against the respondent for the sum of Rs 2,338‑15‑3. The decree was executed in 1941. In the interim, the Bengal Money‑Lenders Act came into force on 1 August 1940. Subsequently, the respondent filed an application under section 36 of that Act seeking the reopening of the decree. The respondent did not specify which particular decree he wanted to be reopened; however, in the same application he presented a full statement of account showing the total amount reduced in accordance with the provisions of the Bengal Money‑Lenders Act and the proceeds realized from the sale of the four properties. He requested that a fresh decree be issued for the remaining balance of Rs 66‑13‑2. The court allowed the application in part and passed a fresh decree for Rs 1,431‑15‑0. The Subordinate Judge noted that, had the earlier decrees been reopened, the total amount due would have been Rs 5,591‑15‑0, but because Rs 4,160/‑ had already been paid, there was no need to cancel the sale or order restitution; instead, the judge directed that a new decree be drawn up for the balance of Rs 1,431‑15‑0. The respondent appealed this order, while the appellant filed a cross‑objection. The District Judge dismissed the respondent’s appeal, allowed the appellant’s cross‑objection, and consequently dismissed the application for reopening.

The respondent then appealed to the High Court, where Justice R. C. Mitter allowed the appeal. Justice Mitter held that the personal decree was liable to be reopened and restored the fresh decree for Rs 1,431‑15‑0 that had been passed by the Subordinate Judge. The respondent was ordered to pay the amount in instalments under Justice Mitter’s directions, but he fell into default, and a money‑execution proceeding was instituted against him. In response, the respondent instituted a suit under section 36 of the Bengal Money‑Lenders Act seeking the reopening of the preliminary, final and personal decrees. The Subordinate Judge dismissed this suit on the ground of constructive res judicata and on the basis of Order 0.2, Rule 2 of the Code of Civil Procedure. The respondent’s appeal to the District Judge also failed. On a further appeal to the High Court, Justices K. C. Das Gupta (as he then was) and Guha allowed the appeal. The learned judges ruled that Order 0.2, Rule 2 of the Code of Civil Procedure did not apply to the present suit because that rule concerns a previous suit and not an application filed in execution for relief. They emphasized that, under the Bengal Money‑Lenders Act, the court has a duty to reopen any decree when such reopening is likely to give relief to the borrower, and that the grant of relief does not depend on the borrower’s desire or claim. They further noted that Justice Mitter had expressed the view that the relief to be granted is incumbent upon the court and is independent of the borrower’s wishes. The appeal before this Court was filed with special leave.

In the present appeal, counsel for the respondent, identified as Mr N C Chatterjee, asserted that the suit brought before the court was barred by the doctrines of res judicata, waiver and estoppel. He further maintained that the Divisional Bench of the High Court had erred in directing the reopening of three decrees because the respondent had never, on any earlier occasion, requested that those decrees be reopened. The respondent’s submission therefore challenged both the procedural basis for the reopening and the substantive right to obtain fresh relief under the statute.

The Court then turned to the provisions of the Bengal Money‑lenders Act to determine the scope of the statutory power to reopen decrees. The Act, although originally enacted to regulate the activities of money‑lenders and to control money‑lending practices, also contained a number of protective measures for borrowers. Among these protective measures were a limitation on the amount popularly referred to as “Damdupat” and a statutory ceiling fixing the rate of interest at eight per cent simple in cases involving secured loans. Section 36 of the Act expressly required that any transaction violating these protective provisions be reopened. The statutory mandate to reopen was not confined solely to the underlying transactions; it extended to the decrees issued in respect of those transactions, provided that the decrees had not been fully satisfied by the first day of January 1939.

Section 36 therefore conferred extensive powers upon courts to reopen decrees. Sub‑section (2) of the same section prescribed the procedure to be followed once a court exercised the power under sub‑section (1) to reopen a decree. The provision required the court, after giving the parties an opportunity to be heard, to pass a fresh decree consistent with the provisions of the Act and to award any costs that the court deemed appropriate. It further directed the court not to interfere with any bona‑fide right acquired by any person other than the decree‑holder as a result of the execution of the reopened decree. Where property of the judgment‑debtor had been acquired by the decree‑holder in execution of the reopened decree, the court was required to order the restoration of such property to the judgment‑debtor, insofar as the property remained in the possession of the decree‑holder at the time the decree was reopened. The court was also empowered to order the judgment‑debtor to pay the whole amount of the new decree in instalments deemed suitable, and to provide that, in the event of default in any instalment, the decree‑holder could be placed in possession of the restored property, with the amount paid for that property being set off against the outstanding balance of the new decree.

The statutory scheme further identified the specific stages at which a decree could be reopened. These stages were enumerated in sub‑sections (1) and (6) of section 36. Sub‑section (1) stipulated that, notwithstanding any other law then in force, a court hearing any suit to which the Act applied, or a suit filed by a borrower seeking relief under the Act, could, if it had reason to believe that exercising one or more of the powers under the Act would benefit the borrower, proceed to exercise those powers. This language formed the foundational basis for the court’s authority to reopen decrees where the Act indicated that such action would provide relief to the borrower.

Sub‑section (6) of the provision states that, notwithstanding any other law in force, the Court that had passed a decree in a suit to which the Act applied and that decree remained unsatisfied as of 1 January 1939 may, at its discretion, exercise any of the powers conferred by sub‑sections (1) and (2). The Court could use those powers either in any execution proceeding relating to the unsatisfied decree or on an application for review of that decree filed within one year after the commencement of the Act. In such review applications the provisions of Rules 2 and 5 of Order XLVII of the First Schedule to the Code of Civil Procedure, 1908, were held not to apply. Further, if an appeal against the decree mentioned in clause (a) was pending before another Court, that Court was empowered either to exercise the same powers itself under sub‑sections (1) and (2), or to refer the matter to the Court that originally passed the decree, directing that Court to exercise the powers. After exercising the powers, the referring Court was required to return the case record together with any additional evidence it had taken, its findings, and the reasons for its decision to the appellate Court, whereupon Rule 26 of Order XLI of the First Schedule to the Code of Civil Procedure, 1908, would become applicable.

The expression “suit to which this Act applies” was defined in the Act to include any suit or proceeding that was instituted or filed on or after 1 January 1939, or that was pending on that date, and it expressly encompassed execution proceedings. Such proceedings could be for the recovery of a loan advanced either before or after the Act’s commencement, for the enforcement of any agreement entered into before or after that date—whether the agreement concerned a settlement of accounts or the taking of any security in respect of a loan—and also for the redemption of any security given before or after the commencement of the Act in relation to a loan. Section 2(21) further clarified that the term “suit” also covered an appeal. Although the definition was later broadened for the purposes of section 36 by way of sub‑section (3), that broader meaning did not affect the analysis at hand. The overall effect of these provisions can be summarised as follows: the reopening of transactions and decrees could be effected in any suit to which the Act applied, in a suit initiated by a borrower seeking relief under section 36, in any execution proceeding of a decree, by an application for review of a decree filed within one year of the Act’s commencement, and by appellate courts at any of these stages. Once the Court was seized of the matter, its subsequent actions were governed strictly by the provisions of the Act, leaving the Court no discretion but to act in accordance with those statutory mandates.

In this matter the Court was legally obligated by the statutory provisions to reopen every decree that had been entered against the respondent. The Court noted that Justice R. C. Mitter had correctly observed that the judgment‑debtor was entitled to the reopening of all three categories of decrees – the preliminary decree, the final decree and the personal decree – and that relief could not be withheld merely because the respondent had originally sought the reopening of only the personal decree in the event of a breach of section 30 of the Bengal Money‑lenders Act. However, the learned Judge chose not to remit the case for a fresh application of the Act, nor did he apply the Act himself. Instead, he limited his order to granting the specific relief that the respondent had requested, reasoning that at least that portion should be awarded.

The Court emphasized that the statute did not provide such discretion. The law imposed a mandatory duty upon the Court to apply the Act in its entirety. Subsequently, the respondent instituted a suit in which he demanded all of the reliefs that the Court was required to grant under the Act. The Court held that, unless the suit itself was incompetent, the statutory provisions must be applied even at this later stage, because the borrower’s personal preference could not influence the operation of the statute. Although the respondent, in his earlier application, had asked that the Act be applied only insofar as it benefited him, the Court clarified that his wishes were irrelevant; the Act must be applied exactly as it stands. This view, according to the Court, reflected the correct position of law as accepted by all who had examined the case.

The Court then considered whether any legal bar prevented the respondent from filing the suit. Potential obstacles might have included section 11 of the Code of Civil Procedure, Order 2 rule 2 of the same Code, the doctrine of constructive res judicata, or doctrines of waiver, estoppel, and the equitable principle of approbation and reprobation. The Court observed that the opening words of subsection (1) and again of subsection (6) of section 36 expressly state that “notwithstanding anything contained in any law for the time being in force,” the provisions of section 11 and Order 2 rule 2 are to be disregarded. Waiver and the equitable doctrine of approbation and reprobation apply only when a party has voluntarily relinquished a right; they therefore have no bearing where the issue concerns a statutory duty of the Court rather than a party’s right.

Having been properly moved, the Court was required to perform its statutory duty. The Court further held that if the matter could be presented again through a subsequent proceeding, the doctrines of waiver, estoppel, or constructive res judicata could not be invoked to bar the action. The remedies provided by the Act were not mutually exclusive, either expressly or by necessary implication. Accordingly, the law permitted the Court to enforce the statutory provisions at virtually any stage of the proceedings, whether initiated by the creditor or by the borrower.

The Court noted that, apart from actions commenced by the creditor, the law also allows a proceeding or a suit to be started by the borrower. It held that the purpose of the legislation is plainly to protect borrowers. The Court referred to the authority in Jadunath Roy v. Kshitish Chandra Achariya Choudhury (1), where the Judicial Committee declared that the preliminary decree, the final decree and the personal decree in a suit for the enforcement of a simple mortgage are inseparably linked and, in substance, constitute a single decree; consequently, it is not permissible to reopen one part of the decree while leaving the others untouched. The Court further cited Joy Chand Lal Babu v. Kamalaksha Choudhury (2), observing that a consent decree in a mortgage suit, which merged the preliminary, final and personal decrees into one unified decree, was rightly reopened. According to the Court, the decrees issued against the respondent were required by law to be reopened, and no rule of the Code of Civil Procedure or any principle of equity could prevent the suit from proceeding. The first of those rules was expressly excluded, and equity was scarcely applicable given the statutory scheme governing the matter. The Court emphasized that, even if a decree rendered by Mitter, J. did not comply with the statutory requirements, it could be reopened through a suit. In the Court’s opinion, the order of the Divisional Bench of the Calcutta High Court was correct; to decide otherwise would amount to a refusal to give effect to the protection that the Act painstakingly established in favour of borrowers and against predatory moneylenders, as reflected in the earlier authorities (1) (1949) L.R. 76 I.A. 179 and (2) (1949) L.R. 76 I.A. 131. The Court expressed complete concurrence with the impugned judgment and therefore found it unnecessary to repeat the same reasoning. Consequently, the Court dismissed the appeal and awarded costs. Accordingly, in view of the majority judgment, the appeal was allowed and Mittra’s Suit No. 105 of 1947 was dismissed with costs throughout.