Lakshmi Achi And Others vs T.V.V. Kailasa Thevar And Others

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

Court: Supreme Court of India

Case Number: Civil Appeal No. 617 of 1960

Decision Date: 7 March 1963

Coram: S.K. DAS

In the matter titled Lakshmi Achi and Others versus T.V.V. Kailasa Thevar and Others, the Supreme Court of India rendered its judgment on 7 March 1963. The petition was filed by Lakshmi Achi and other plaintiffs against respondents identified as T.V.V. Kailasa Thevar and others. The dispute concerned the operation of the Madras Agriculturists Relief Act, 1938 (Mad. 4 of 1938) as amended by Madras Act 23 of 1948, specifically sections sixteen sub‑paragraph iii and nineteen sub‑section 2, in the context of a debt‑relief claim involving an agriculturist debtor.

The factual background recorded by the Court showed that the appellants had instituted a mortgage suit against respondent No. 1 together with other defendants. The trial court issued a preliminary decree on 15 May 1937 and a final decree on 20 January 1938. Both appellants filed appeals against the preliminary decree in the High Court of Madras. While those appeals were pending, the Madras Agriculturists Relief Act, 1938 came into force. All defendants except respondent No. 1 then applied to the High Court for relief under the Act. Their applications succeeded, and the High Court issued a new preliminary decree on 25 March 1942 that reduced the amount recoverable in accordance with the statutory provisions.

Respondent No. 1 neither contested the original suit nor appeared in the pending appeals, and he made no application for relief under the Act at that time. Consequently, the High Court’s preliminary decree was held to confirm, as against respondent No. 1, the decree originally passed by the trial court. After the High Court decree, respondent No. 1 approached the trial court seeking relief under the Act, but the trial court dismissed the application on the ground that the High Court’s judgment rendered the petition untenable before that court. The respondent subsequently applied to the High Court for setting aside the ex parte decree to the extent that it deprived him of his statutory right to relief, but that application was also dismissed.

On 25 January 1949 the legislature enacted Madras Act XXIII of 1948, which amended the 1938 Act by inserting sub‑section (2) into section 19. The amended section 19 read in part: “(1) where before the commencement of this Act, a court has passed a decree for the repayment of a debt, it shall, on the application of any judgment‑debtor who is an agriculturist … apply the provisions of this Act to such decree and shall notwithstanding anything contained in the Code of Civil Procedure, 1908, amend the decree accordingly or enter satisfaction, as the case may be.” Sub‑section (2) added that “the provisions of sub‑section (1) shall also apply to cases where, after the commencement of this Act, a court has passed a decree for the repayment of a debt payable at such commencement.” Section 16 of the amending Act further declared that the amendments would apply to all suits and proceedings in which the decree or order had not been fully executed or satisfied, including the category identified as sub‑paragraph (iii).

Respondent No 1 again filed an application before the trial Court seeking relief under the agricultural relief Act, relying on the amendment, but the trial Court dismissed that application. The respondent then appealed to the High Court, and the High Court granted relief under the same Act. Unsatisfied, the appellants appealed the High Court’s order to the Supreme Court. The Supreme Court held that the decree originally issued by the trial Court had been superseded by a preliminary decree that the High Court rendered on 25 March 1942. Subsequently, a final decree based upon that preliminary decree was entered by the District Judge on 25 September 1943, and that final decree alone remained operative in the proceedings. Consequently, section 19(2) of the 1938 Act, read together with section 16(iii) of the amending Act, created a new right in favour of Defendant No 1. The Court referred to the authorities Jowad Hussain v. Gendan Singh, A.I.R. (1926) P.C. 93; Gajadhar Singh v. Kishan Jiwan Lal, (1917) I.L.R. 39 All. 641; and The Collector of Customs Calcutta v. The East Indian Commercial Co. Ltd. [1963] 2 S.C.R. 563. It observed that the term “debt” in the Act also embraces a decretal debt, following Narayanan Chettiar v. Ammamalai Chettiar, [1959] Supp. I S.C.R. 237. The Court further explained that clause (iii) of section 16 of the amending Act applied because the final decree had not been fully satisfied before the commencement of the amending Act, thereby creating a fresh right for Defendant No 1 under subsection (1) of section 19. The Court concluded that Defendant No 1 could not be deprived of the new right granted by the amendment merely because his earlier applications for relief under the Act had been dismissed before that right existed.

The judgment was recorded in a civil appellate jurisdiction as Civil Appeal No 617 of 1960, arising by special leave from the Madras High Court judgment dated 2 December 1955 in C.M.A. No 355 of 1951. Counsel for the appellants comprised a senior advocate and two junior advocates, while counsel for Respondent No 1 consisted of a senior advocate and three junior advocates. The Supreme Court delivered its opinion on 7 March 1963, with Justice S.K. Das authoring the judgment. The appeal concerned the High Court’s decision to set aside the order of the learned District Judge of East Tanjore dated 30 August 1950, which had been made on an application filed by the first respondent under section 19 of the Madras Agriculturists Relief Act (Act IV of 1938), as amended by the Madras Agriculturists Relief (Amendment) Act of 1948 (Act XXIII of 1948). The District Judge had dismissed the application on the ground that it was unsustainable in law. The High Court, however, set aside that dismissal, holding that the respondent’s request to reduce the decree against him should not have been dismissed summarily, and that the trial judge should have examined whether the respondent qualified as an agriculturist entitled to the benefit of the amended principal Act.

The Court observed that the lower court had erred by dismissing the application at the threshold and that the learned District Judge should have examined the issue of whether the respondent qualified as an agriculturist entitled to the benefits of the principal Act as amended in 1948. Although the material facts were not heavily disputed, the Court noted that a lengthy factual background needed to be set out in order to understand a very narrow point of law. That narrow point was whether the application filed by the first respondent before the District Judge of East Tanjore, recorded as Original Suit No. 30 of 1934 and filed on 6 December 1950, was legally untenable. The Court then proceeded to recount the extensive history. The appellants before the Supreme Court were the successors of the original plaintiffs, who as mortgagees had instituted a suit, identified as Original Suit No. 30 of 1934, in the court of the District Judge of East Tanjore seeking enforcement of a mortgage against the first respondent, who was also designated as Defendant 1 in that suit, together with six other persons. The mortgage deed that formed the basis of the suit had been executed by Defendant 1 on his own behalf and on behalf of his minor undivided brother, Defendant 2, and additionally in the capacity of authorized agent for Defendants 3 through 7, all of whom were participants in a joint‑family enterprise. All defendants except Defendant 1 contested the suit; against Defendant 1 the proceedings continued ex parte. On 15 May 1937 the trial judge issued a preliminary decree ordering Defendant 1 and Defendants 3‑7 to pay a sum of Rs 1,08,098; the decree further provided that, should they fail to pay, the plaintiffs would be entitled to obtain a final decree for the sale of the mortgaged property. The same preliminary decree dismissed the action against Defendant 2. Following that decree, two appeals were lodged before the Madras High Court. The first appeal, Appeal No. 48 of 1938, was filed by Defendants 3‑7, who argued that the mortgage did not bind them personally nor affect their interests in the joint‑family property. The second appeal, Appeal No. 248 of 1938, was filed by the plaintiffs, who challenged the trial judge’s decision to dismiss their claim against Defendant 2. While these appeals were pending, the principal Act came into force. Defendants 2‑7 then applied to the High Court, requesting that, should a decree be rendered against them, the resulting debt be reduced in accordance with the provisions of the principal Act. Defendant 1, who had never appealed during the earlier proceedings, made no such application. The High Court transmitted these applications to the lower court for investigation, directing the District Judge to determine whether the applicants were agriculturists and, if so, to what extent the decretal liabilities should be reduced. The District Judge conducted the required inquiry and returned a finding that the applicants indeed qualified as agriculturists and that the

When the District Judge concluded that the debt, if reduced under the principal Act, would equal Rs 49,255 together with interest calculated at six per cent per annum from 1 October 1937, the High Court scheduled the appeals for a final hearing. On 25 March 1942 the judges of the Madras High Court accepted the lower court’s finding and declared that defendants 2 through 7 were entitled to have their debt reduced in accordance with the Act. The Court observed that no application for relief under the Act had been filed on behalf of defendant 1; consequently, defendant 1 received no benefit from the principal Act. A decree was drawn up to reflect this decision. The decree specified that defendants 2 to 7 each owed Rs 49,255 plus interest at six per cent per annum, while the decree of the trial judge regarding defendant 1 was affirmed, subject only to a minor adjustment of the interest rate. Following the decree, defendant 1 petitioned the District Judge of East Tanjore, claiming that he was also an agriculturist and therefore eligible for relief under the principal Act. The District Court dismissed this application on 25 February 1943, holding that the High Court’s decree had definitively denied any such relief and that the lower court therefore could not entertain the request. Defendant 1 then approached the High Court itself, seeking to set aside the ex parte decree that barred him from the Act’s benefits. The High Court rejected this application on 13 December 1943. Because no payment was made pursuant to the preliminary decree, the District Judge issued a final decree on 25 September 1943 in line with the High Court’s order. Execution proceedings began on 16 August 1944 when an execution petition was filed in the East Tanjore District Court. During execution, some mortgaged properties were sold to the decree‑holders for a total of Rs 12,005, and a partial satisfaction of the decree was recorded for that amount. Throughout these proceedings the judgment‑debtors proposed certain settlement terms.

At that stage the estate of the decree‑holders was under the control of court‑appointed receivers. With the court’s sanction, the receivers agreed to accept a payment of Rs 24,000 from or on behalf of defendant 2 and to release defendant 2 and his share of the mortgaged property from the decretal charge. Similarly, the receivers consented to receive Rs 48,000 from defendants 3 through 7 and to discharge them and their properties from the decretal debt. Regarding defendant 1, the receivers also agreed to accept a sum of Rs 37,500, on the condition that a person named Yacob Nadar would pay that amount on behalf of defendant 1, acknowledging that the decree against defendant 1 had been assigned to him. No such payment was ever made on defendant 1’s behalf, although the receivers did receive the agreed sums from defendants 2 through 7, thereby satisfying their respective portions of the decretal liability.

According to the arrangement, the receivers agreed that if a payment were made on behalf of defendant No 1, on the condition that the decree against him was assigned to the payer, they would accept that payment. No such payment was ever made for defendant No 1. However, a sum of Rs 24,000 was paid on behalf of defendant No 2, and as a result his properties were released from the decretal charge. Defendants No 3 through No 7 also made a payment of Rs 48,000‑and‑odd, which they paid in two installments, thereby discharging their part of the decretal debt. The three payments made by defendants No 2 to No 7 therefore amounted in total to Rs 72,610‑12‑0. On 6 March 1947 defendant No 1 deposited in the court a sum of Rs 3,215 and filed a petition under section 47 of Order XXI rule 2 of the Code of Civil Procedure, praying that the amount he deposited together with the amounts already paid by defendants No 2 to No 7 should entirely extinguish the balance due under the decree as reduced by the High Court in favour of defendants No 2 to No 7. Defendant No 1 further prayed that, since the decree was one and indivisible, a full satisfaction of the decree should be recorded, thereby releasing the mortgaged property and also absolving himself from any further liability in respect of the decretal debt. In substance, defendant No 1 argued that the mortgage debt was indivisible and that, although the decree specified different amounts payable by two groups of defendants, the decree‑holders were bound by the decree to release the whole mortgaged property once the amount prescribed for defendants No 2 to No 7 had been paid. The district judge rejected this contention, but the High Court, on appeal, accepted it, allowed defendant No 1’s application and directed that the lower court enter a full satisfaction of the mortgage decree. The decree‑holders then appealed to this Court in Civil Appeal No 32 of 1950, the judgment of which is reported in V. Ramaswami Ayyangar and others v. T. N. V. Kailasa Thavar (1). This Court held that, although the general rule is that a mortgaged decree is indivisible, exceptions are recognised in special circumstances where the integrity of the mortgage has been disturbed at the initiative of the mortgagee. The Court further observed that there was no legal defect in scaling down a mortgage decree in favour of one judgment debtor while leaving the decree unchanged with respect to the other debtors, because the principal Act was a special statute intended to give relief not to debtors generally (1) [1951] S.C.R. 292, but only to a defined class of debtors—namely, agriculturists as defined by the Act—thereby carving out an exception to the general law. Consequently, the decision of this Court left the decree unscaled as against defendant No 1. When the appeal

While the appeal before the Supreme Court was still pending, the legislature enacted the Amending Act of 1948, which became effective on 25 January 1949, and the Court will now read the operative provisions of that amendment. Relying on those provisions, Defendant No. 1 filed a second application seeking to have the decretal debt reduced; this request was recorded as Application No. 79 of 1950. The learned District Judge dismissed the application, holding that it could not be sustained under law. Upon appeal, the High Court reversed that view, concluding that the application was legally viable and directing that an enquiry be conducted to determine whether Defendant No. 1 qualified as an agriculturist within the meaning of the principal Act. The present appeal challenges the order issued by the High Court. Before the Court can address the issues raised in this appeal, it is necessary to set out the pertinent provisions of the principal Act together with those inserted by the 1948 amendment, provisions on which Defendant No. 1 bases his claim for relief.

Section 19 of the principal Act reads as follows: “19. (1) Where before the commencement of this Act, a court has passed a decree for the repayment of a debt, it shall, on the application of any judgment‑debtor who is an agriculturist or in respect of a Hindu joint family debt, on the application of any member of the family whether or not he is the judgment‑debtor or on the application of the decree holder, apply the provisions of this Act to such decree and shall, notwithstanding anything contained in the Code of Civil Procedure, 1908, amend the decree accordingly or enter satisfaction, as the case may be Provided that all payments made or amounts recovered, whether before or after the commencement of this Act, in respect of any such decree shall first be applied in payment of all costs as originally decreed to the creditor. (2) The provisions of sub‑section (1) shall also apply to cases where, after the commencement of this Act, a Court has passed a decree for the repayment of a debt payable at such commencement.” It is important to note that the original Section 19 of the principal Act was later renumbered as sub‑section (1) of the same section, and sub‑section (2) was inserted by Section 10 of the 1948 Amending Act. Section 16 of the Amending Act of 1948 provides: “16. The amendments made by this Act shall apply to the following suits and proceedings namely: (i) all suits and proceedings instituted after the commencement of this Act; (ii) all suits and proceedings instituted before the commencement of this Act, in which no decree or order has been passed, or in which the decree or order passed has not become final, before such commencement; (iii) all suits and proceedings in which the decree or order passed has not been executed or satisfied in full before the commencement of this Act Provided that no creditor shall be required to refund any sum which has been paid to or realised by him, before the commencement of this Act.” These provisions form the statutory framework that the Court must examine in determining whether Defendant No. 1 may obtain the benefit sought under sub‑section (2) of Section 19 read with clause (iii) of Section 16 of the 1948 amendment.

In this matter the respondent identified as No. 1 asserted that he was entitled to the benefit of subsection (2) of section 19 read together with clause (iii) of clause 16 of the amending Act of 1948. The learned District Judge rejected the respondent’s claim on three distinct grounds. First, the Judge observed that in the suit designated O. S. No. 30/1934 the preliminary decree had been passed on 15 May 1937 and the final decree on 28 January 1938, both dates occurring before the principal Act came into force on 22 March 1938. Accordingly, the Judge held that subsection (2) of section 19 could not apply because the decree was issued prior to the commencement of the principal legislation. Second, the Judge reasoned that subsection (2) of section 19 was intended to apply only to cases where a debt was payable on the very date on which the principal Act commenced. In the present case, however, there was no debt payable on that date; the debt had already matured into a decree before the commencement of the Act. Hence, the Judge concluded that subsection (2) of section 19 was inapplicable. Third, the Judge considered the effect of a prior determination in which the decree against respondent No. 1 had been reduced. That earlier decision, rendered by the District Judge in I. A. No. 104 of 1942 on 25 February 1943 and subsequently affirmed by the High Court in later proceedings, barred the respondent from making a fresh claim under subsection (1) of section 19. Although subsection (1) of section 19 contains the words “notwithstanding anything contained in the Code of Civil Procedure,” the Judge held that the phrase referred only to procedural provisions concerning amendment of decrees and the satisfaction of decrees, and did not override the doctrine of res judicata. The doctrine, being a broader principle than the specific rule set out in section 11 of the Code, prevented the relitigation of the matter. The High Court, on the other hand, approached the case on the premise that the decree had been passed after the commencement of the principal Act, and therefore concluded that subsection (2) of section 19, inserted by the amending Act of 1948, was applicable. The High Court observed that the decree‑holders had not made a serious attempt before it to support the District Judge’s view that the debt in question was not a debt within the meaning of the principal Act because it had already become a decree before the Act’s commencement. Referring to clause 16 of the amending Act, the High Court held that respondent No. 1 was entitled to the benefit of subsection (2) of section 19 read with clause (iii) of clause 16 of the amending Act of 1948, taking into account the circumstances surrounding the respondent’s claim.

In this case, the Court observed that the benefit which the principal Act conferred on defendant No. 1 prior to its amendment in 1948 had been denied by the learned District Judge, and the High Court had not removed the new right that the amending Act provided, on the condition that defendant No. 1 could demonstrate that he was an agriculturist as defined by the principal Act. Counsel for the appellants submitted that the view of the High Court was erroneous. He argued that the present suit did not fall within subsection (2) of section 19 because the decree for repayment of the debt had been issued before the commencement of the principal Act, that is, before 22 March 1938. He pointed out that a preliminary decree against defendant No. 1 had been rendered on 15 May 1937 and that a final decree had followed on 28 January 1938. He further referred to the decree of the High Court dated 25 March 1942, in which clause (6) expressly stated that, as regards defendant No. 1, the direction given by the learned District Judge in the decree of 15 May 1937 would remain confirmed. Accordingly, counsel contended that the only provision from which defendant No. 1 could seek relief was section 19 as it stood before the 1948 amendment, a provision applicable to decrees passed before the principal Act commenced. Since the claim under that provision had already been rejected both by the District Judge and by the High Court on earlier applications, counsel argued that defendant No. 1 could not make a fresh claim under the same provision. He also maintained that the provisions introduced by the 1948 amending Act were inapplicable to the present facts and therefore no new right had been created for defendant No. 1. The crucial issue for determination, the Court noted, was whether the decree relevant to the present dispute was one passed before the commencement of the principal Act or after it. The Court acknowledged that the District Judge had indeed issued a preliminary decree on 15 May 1937 and a final decree on 28 January 1938. However, those orders were superseded by the preliminary decree issued by the High Court on 25 March 1942. The Court referred to the earlier authority in Ramaswami Ayyangar’s case, which explained that the 1942 preliminary decree was drawn up in accordance with the High Court’s judgment, scaling down the amounts due from defendants 2 to 7, while affirming the trial Judge’s decree as to defendant No. 1, subject only to a minor amendment concerning the rate of interest. Thus, the decree of 25 March 1942 was a preliminary decree inasmuch as it directed the parties accordingly.

In the event that the amounts specified in the decree were not paid, the decree provided that the mortgaged properties would be sold. Because no payment was made in accordance with the preliminary decree issued by the High Court, the District Judge issued a final decree on 25 September 1943 that incorporated the terms of the earlier preliminary decree. The final decree of 25 September 1943 was the decree that was subsequently put into execution.

The law was clear that when an appeal was filed against a preliminary decree, the period for filing an application for a final decree commenced from the date of the appellate decree. This rule was illustrated in Jowad Hussain v. Gendan Singh, where the Privy Council endorsed observations made by Justice Benerjee in Gajadhar Singh v. Kishan Jiwan Lal. Justice Benerjee had explained that the rule governing applications for a final decree in mortgage actions contemplated the issuance of only one final decree in a suit for the sale of mortgaged property. He further stated that the essential condition for a final decree was the existence of a conclusive preliminary decree between the parties, and that when an appeal was filed, the decree of the appellate court became the final decree in the proceeding.

The principle that the appellate order became the operative order once the appeal was resolved, and consequently that the decree of the lower court merged into the decree of the appellate court, had been affirmed by this Court in The Collector of Customs, Calcutta v. The East India Commercial Co. Ltd. Applying that principle, the Court held that the operative decree in the present matter was the preliminary decree dated 25 March 1942 issued by the High Court, which was subsequently rendered final by the decree dated 25 September 1943.

Because the operative decree was the one described above, the case fell within the ambit of subsection (2) of Section 19 together with the provisions of Section 16 of the Amending Act of 1948. Subsection (2) of Section 19, read with clause (iii) of Section 16, conferred upon defendant No. I (respondent No. I) the right to claim the benefit of the principal Act, even though his earlier applications for such benefit had been rejected before the amendment. The combination of subsection (2) of Section 19 and Section 16 created a new entitlement for respondent No. I, and that entitlement could not be barred by the doctrine of res judicata.

The Court further examined the true scope and effect of Section 16 as previously considered in Narayanan Chettiar v. Annamalai Chettiar. Referring to clause (iii) of Section 16, the Court explained that the clause applied to suits and proceedings in which the decree or order had become final but had not been fully executed or satisfied before 25 January 1949. This interpretation meant that even though a final decree for repayment of the debt had been passed before that date, the decree’s lack of full execution prior to the commencement of the Amending Act of 1948 allowed an agriculturist debtor to seek relief under the Act.

On January 25, 1949, the law permitted an agriculturist who was a debtor to obtain relief under the Act, provided that the decree or order against him had not been fully executed or satisfied before that specified date. The Court emphasized that the term “debt” in the Act must be interpreted broadly. It was explained that “debt” includes any liability, whether payable in cash or kind, secured or unsecured, that is owed by an agriculturist. Such liability may arise under a decree or order issued by a civil court, a revenue court, or any other source of obligation. Consequently, the term also embraces what is described as a decretal debt, meaning a debt arising from a judicial decree.

In the matter presently before the Court, clause (iii) of section 16 was held to be applicable because the final decree that had been passed on September 25, 1943 remained unsatisfied in its entirety at the time the amending Act of 1948 came into force, that is, prior to January 25, 1949. By virtue of clause (iii) of section 16 of the amending Act of 1948, respondent No. I acquired the right to rely upon subsection (2) of section 19. The Court observed that this right could not be taken away from him merely because his earlier applications for relief under the principal Act had been dismissed before the new right was created by the amending Act. The judgment cited the authority (1) [1959] Supp. 1 S.C.R. 237 to support this conclusion. Accordingly, the Court found that the view expressed by the High Court was correct. Respondent No. 1 was therefore entitled to the benefit of subsection (2) of section 19 read together with clause (iii) of section 16 of the amending Act of 1948, on the condition that he proved his status as an agriculturist within the meaning of the principal Act. As a result, the appeal was dismissed with costs, and the order of dismissal was affirmed.