RAJA SARDAR NARAIN AND OTHERS versus RAJA SARDAR NARAIN AND OTHERS.

DAS GUPTA J.-This appeal raises the question of interpretation of s. 15 of the United Provinces Encumbered Estates Act, 1934. On March 1, 1924, Sardar Nihal Singh, the predecessor of the appellant before us, borrowed a sum of rupees one lakh from Raja Durga Narain Singh, predecessor of the respondents, on mortgage of a house in Butlergunj, Lucknow and also the entire Zamindari interest in a village Parsera. Interest was 8 per cent. per. annum compound with six .monthly rests. In 1932 Raja Durga Narain Singh brought a suit for recovery of Rs. l,83,791-5-9 on account of principal and interest due on the mortgage, by sale of the mortgaged property. Iu this suit the Subordinate Judge, Lucknow, made a preliminary decree declaring the amount due to the plaintiff on the mortgage calculated up to March 29, 1935, to be Rs. 1,83,791-5-9 up to the date of the suit, Rs. 49,280-2-6 as the amount due on account of interest thereupon from March 13, 1932, the date of the suit to March 29, 1935, the date fixed for payment. A sum of Rs. 4,314-2-9 was awarded as the cost of the suit. The defendant was ordered to pay this total sum of Rs. 2,37,385-11-0 before the 29th day of March, 1935, with future interest at 6 per cent. per annum simple on the principal sum of rupees one la.kb. The amount not having been.paid on that date, the Court on an application made by the mortgagee-decreeholder made a final decree on May 9, 1935, directing sale of the property for recovery of the sum of Rs. 2,37,503-5-6 with future interest as in the preliminary decree,.( this sum being the total of Rs. 2,37,305-11-0 of the prelimine.ry decree, Rs. 116-10-1 the interest from March 30, 1935, and rupee one the cost of the fine.I decree). An application for revision under s. 115 of the Code of Civil Procedure in connection with this decree was rejected by the Chief Court ofOudh on April 20, 1937. Before this, on October 26, 1936, an a.pplice.tion had been me.de by Se.rda.r N iha.l Singh under s. 4 of the U. P. Encumbered Estates Act, requesting the provisions of the Act to be applied to him. After this a.pplica.tion ca.me before the Specie.I Judge in accordance with the provisions of s. 6, the. mortga.gee-decreeholder Re.je. Durga. Na.re.in Singh filed a. written statement of his cle.im on September 30, 1937, and stated tha.t the a.mount due to him on the be.sis of his decree wa.s Rs. 2,51,904-8-6 including Rs. 14,300 a.s interest subsequent to the fine.I decree till September 30, 1937, e.nd a. sum of Rs. 51-3-0 the decree for costs in his favour by the Oudh Chief Court when rejecting the mortge.gor's a.pplica.tion for revision. He pre.yed tha.t a. decree for Rs. 2,51,904-8-6 be pa.BBed in his favour a.go.inst the e.pplica.nt Sa.rde.r Niha.I Singh e.nd his property. The applicant contested this claim plea.ding that the principal a.mount borrowed from the cla.ime.nt being rupees one le.kh the cla.ime.nt we.a not entitled to recover a.ny sum as interest thereupon in exceBB of the principal a.mount under s. 14 of the Encumbered Esta.tee Act. This plea. was rejected by .the Specie.I Judge who held tha.t the cla.ime.nt was entitled to Rs. 2,37,503-5-6 for which the fine.I decree we.a pa.seed, e.nd e.lso Rs. 51-3-0 as costs in the matter of revision e.pplice.tion and further to 6 per cent. per annum interest on rupees one la.kb from May 29, 1935, the date of the fine.I decree till the da.te of the application under the Encumbered Esta.tea Act, i.e., October 26; 1936. Accordingly he ge.ve the claimant a. simple money decree for ,Rs. 2,46,338-8-6 with proportionate costs a.nd future interest a.t the re.te of 4 per.cent. per e.ooum simple from the da.te of a.pplica.tion till realisation.

pp. 119–120

On e.ppee.l, the Chief Court of Oudh rejected the appelle.nt's contention the.t the Specie.I Judge we.s bound by s. 14 of the Act to limit the decree to a sum of rupees two lakhs only and held that. in so far as the preliminary decree found Rs. 1,83,791-5-9 as the amount due on the mortgage on March 29, 1932, it ·was not inconsistent with s. 14 of the Encumbered Est.ates Act, and so the Special Judge was bound to accept this finding under s. 15. It held however that in so far as this decree allowed interest pendente lite on the above amount from March 19, 1932, to March 29, 1935, at 8% per annum, it was inconsistent with sub-s. 7 of s. 14. The Chief Court accordingly held that this interest pendente lite must be reduced to 4t% simple. After saying that a sum of Rs. 4,314-2-9 would be added on account of costs, rupee one should be added on account of the costs of the final decree and Rs. 51-3-0 as costs of a revision application, the Court held that the principal amount of Rs. 1,00,000 sl:.all carry interest from March 29, 1935, till the date of application under s. 4 of the Encumbered E~tates Act, viz., October 26, 1936, and that the aggregate of these figures shall ·carry interest from October 27, 1936, till realisation at 4 per cent. per annum. It directed a decree for the sum thus found to be substituted for that passed by the Subordinate Judge. An application for leave to appeal to the Privy Council against this decree was made on January 13, 1947. This application was disposed of on April 14, 1953. Holding that the valuation of t_he suit was well over Rs. 20,000 and the value of the appeal to the Supreme Court was Rs. 41,971-2-9 the Chief Court gave, in view of the modification made by it in the lower court's decree, a certificate that the case fulfils ~he requirements of s. 110 of the Code of Civil Procedure and that the applicant had a right to appeal to the Supreme Court. On the strength of that certificate the present appeal was filed.

pp. 120–121

When the appeal came up for hearing before a Bench ·of four judges of this Court Mr. Andley, on behalf of the respondents stated that in this case he was raising a constitutional point. Thereupon the Court directed that the matter be posted before the Constitution Bench. That is how the 11-ppeal has come up for hearing and final disposal before us.

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I SlJPRE:lfE COCHT REPORTS

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Mr. Andlcv stated before us that the Constitutional point which lie had wanted to raise was whether J·ndgment of tbe Chief Court was one of affirmance under Art. 133(1) of tbc Constitution but that not wish to pursue t.his point. As Mr. Andley does "lot. press hiH constitutional })oint, no further of this is necess1Hv.

p. 122

The real coutro~'ersy in the case betwncn the is, as already indicat-0cl, a• regarc!H th<' interpretation of s. 15 of the Enc:umbcred EHtateH Act. The portion of s. 15 i~ in these words:-

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"In determining the amount due on the loan which haA been the snbject. of decree Special .Judge shall accept the findings of which passed the decree except in so far as inconsistent with the provisions of s. 14." A later amendmont by which after the words tigures "s. 14 ", the wordH "ors. 4 of the U. P. dars Debts Reduction Act, 1952:' were added relevant for our purpose. Section 14 runs as follows:-

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" 14. (1) The Speci!tl ,Judge sha.ll, by in writing, fix a date for enquiring into the ma.de in pursuance of the notice published in ance with s. 9 aud gh·e notice of such date claimants and the persou who made the application under 4.

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(2) The Special Judge shall examine ca.ch and after hearing such parties as desired to be and considering the evidence, if any, produced them shall determine the amount, if any, the landlord to the claimant on the elate of the cation under s. 4.

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(3) All evidence recorded in any suit or proceeding which is stayed under sub-section (1) of may be taken by the Special Judge as recorded before himself.

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( 4) In examining each claim tho Special .Judge shall have and exercise all the powers of the which a suit for the recovery of the money due lie and shall decide the questions in issue principles as those on which such court would decide them, subject to the following provisions, namely

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(a) the amount of interest held to be due on the date of the application shall not exceed that, portion of the principal which may still be found to be due on the date of the application:

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(b) the provisions of the United Provinces Agriculturists Relief Act, 1934, shall not be applicable to proceedings under this Act.

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(5) For the purpose of ascertaining the principal under clause (a) of sub-section (4) the Special Judge shall treat as principal any accumulated interest which has been convert.ed into principal at any statement or settlement of account or by any contract made in the course of the transaction on or before December 31, 1916.

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Explanation :-Interest which on or before Decem· her 31, 1916, became part of the principal under the express terms of original contract shall, for the purposes of this section, be deemed to be principal.

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(6) For the purposes of ascertaining the principal under clause (a) of sub-section (4) the Special Judge shall not treat as principal any accumulated interest which has been converted into principal at any statement or settlement of accounts or by any contract made in t.he course of the transactions after December 31, 1916.

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(7) If the Special Judge linds that any amount is due to the claimant he shall pass a simple money decree for such amount, together with any costs which he may allow in respect of proceedings iri his court and of proceedings in any civil court stayed under the provisions of this Act, together with pendente lite and future interest, at a rate not greater than. the rate specified in section 27, and if he finds that no amount is due he may pass a decree for costs in favour of the landlord. Such decree shall be deemed to be a decree of a civil court of competent jnrisdiction but no decree against the landlord shall be executable within Uttar Pradesh except under the provisions of the Act:

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Provided that no pendente lite interest shall be · allowed in the case ot any debt where the creditor was in possession of any portion of the debtor's property in lieu of interest payable on such debt."

p. 123

Obviously there can be no question of any incon~is­ tency in a finding of a court which has passed a decree on the basis of a loan, with the provisions mentioned in sub-ss. l, 2 & 3 of s. 14; nor is there a.ny question of any inconsistency with the provisions of sub-secttion 7 of s. 14, a.s those provisions apply only.after the Special .Judge has found the a.mount due to the claimant a.nd tho question of inconsistency of a.ny finding in the decree with the provisions of s. 14 arise under s. 15 at the stage when the a.mount dno is being determined. Sub-sections 4, 5 and 6 of s. 14 however require eareful consideration of the Special Judge, when oxa.mining a decree of a. Civil Court, to find whether any of the findings of the court is inconsistent with those provisions. If they a.re inconsistent with a.ny of those provisions he has to reject the findings to the extent of such inconsistency. Thus, if for example, the provisions of the Usurious Loans Act., 1918, would be beneficial t.o t.he applicant landlord and ha\•e not been ta.ken into consideration by the court which pass-

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ed the decree the Special Judge will have to give effect •to s. l4(4)(b) of the Act t-0 modify the finding of the Court as regards the a.mount due, a.fter applying the provisions of the Usurious Loa.ns Act. On the other hand, if the provisions of the U. P. Agriculturists Relief Act, 1934, ha.ve been applied by the Civil Court, tho finding a.a regards the a.mount due in so far as the same wa.s based on those provisions cannot, in view of its inconsistency with sub-s. 4(c) of s. 14 be accepted by the Civil Court a.nd he will ha.ve to modify the ~a.me, leaving out t.he provisions of the U. P. Agriculturists Relief Act. Similarly if in arriving at the a.mount due, the Court which passed the decree has a.cted inconsistently with sub-ss. 5 and 6 of s. 14, t.he finding will have to be modified by the Special ,Judge by applying the provisions of su b-ss. 5 a.nd 6. So, a.lso if tho finding of the Court which passed the decree is " inconsistent with " the provisions of sub-s. 4(a.) of s. 14 of the Encumbered Eta.tea Act the finding' will ha.ve to be rejected in so fa.r a.s it is inconsistent. The question that ha.s a.risen in this case and ma.y a.s well a.rise in other eases, is whether when in a.soerta.ining the amount due on the basis of a loan, at the date of the snit, the Con rt which passed the decree did not allow interest exceeding the portion of the principal which was still due at the date of the suit, the finding as regards the amount due is inconsistent with s. 14(4) (a) because the consequence of that finding as regards the amount due, together with interest allowed thereupon, is that on the date of the a.pplication the amount of interest due exceeds the portion of the principal remaining unpaid on the date of the application. On behalf of the decree-holder-claimant it is contended that all that is necessary to save inconsistency with sub-s. 14(4)(a) is that the principle that the a.mount of interest shall not exceed the amount of the unpaid principal has been followed, in passing the decree and tho fact that the result of the finding would be that on the date of the application u/s. 4 of the Act the interest due. would exceed the portion of the principal unpaid on such date is of no conseq11ence. This contention cannot in our opinion be accepted.

pp. 124–125

The requirement of sub-s. 4(a) of s. 14 is that" the amount of interest held to be due on the date of the application shall not exceed that portion of the principal which may still be found. to be due on the date the application." The words "on the date of the application " cannot be ignored. There can be no doubt that these words "on the date of the application" were deliberately used in the sub-section for the purpose of benefiting the landlord applicant to this extent that whatever interest due on the contract may amount to, it will be limited to the amount of the principal found st.ill remaining due, on t.he date of the application. When the Legislature goes fort.her and provides that if prior to the application a decree has been made on the basis of the loan the findings of the Court which passed the decree shall he accepted but forbids such acceptance if such finding is inconsistent with the provisions of s. 14, the intention clearly is that the fact that there has been a decree will not make any difference as regards the duty of the Special Judge to give the applicant the benefit of the provisions of s. 14. When the Court passed the decree, there was no a.pplica.tiou under tho Encumbertid Estates Act, and so, there could bo no quest.ion of the Cc>urt then complying with the provisions of s. 14(4)(a}. Even so, when the Special .Judge !ms t.o reject such of the findings as are" inconsi•tcnt" with s. 14, he must find out the effect of the several findings of ·the court to ascertain whether there is such inconsistenc\'. Where the consequence of the finding of the cou~t. which passed the dccreH is that the provisions of s. 14(4)(a} about the a.mount of interest due on tho date of the application not exceeding the unpaid principal on that dat-0 arc contravened, the finding should be held to be inconsiHtent with these provisions. In saying that if in the decree the court did not allow interest a.s on the date of the snit lo exceed the principal then remaining due ther'l is inconsistency withs. 14(4}(a}, the respondont.'s connsel in effect asking us lo read for the words " in so far as they a.re inconsist.ent with the provisions of s. 14" the words" in so far as thev would have been inconsistent with the proviHions o( s. 14, if the date of the institution of the suit be deemed to be the date of the application under s. •1." For this we cannot find a.ny justification. Not only would this defeat the bf'nefi.,ial pnrposc of tho legislation under s. 14(4}(a); but this will also not be the natural meaning of the words " in so far a.~ they a.re incozrnistent with the proviHions of s. 14."

pp. 125–126

The Chief Court's view that tho Speci3l .Judge has merely to see whether th~ Civil Court that pasRPd the .decree could ha.vo passed the decree which it did pass if that court had hacl to apply the provisions of s. 14, treating the date of the irrntitution of the suit a.s the <la.to of the application cannot therefore be accepted as correcL The samo view had been ta.ken by the Chief Court of Oudh in an earlier decision, of Pandit Ramsagar Prasad v. Mst. 8hayama (' }. A Full Bench oft.he Allahabad High Court had in Rukun-uddin v. Lachhmi Narain(') to ~onsider the question whf'ther a finding in a decree made by a civil court that the creditor is entitled to interest only at the rates specified in U. P. Agriculturists Helief Act was inconsi~tent with the provisions of s. 14 of the U. P. Encumbered Estates Act and was therefore not binding on the Special Judge hearing an application under the U. P. Encumbered. Estates Act. They held that such a finding must be held to be inconsistent with the provisions of 14 and could therefore not be binding on the Special Judge. There can be no doubt about the correctness of this view, or, as as been pointed f h out aboves. 14(4)(c pro-) vides that the provisions of the U. P. Agriculturists Relief Act shall not be applicable to proceedings under the Encumbered Estates Act. One of the learned judges Mr.Justice Verma referred with approval in the course of his judgment to the view taken in Ramsagar Prasad's Gase ( For the reasons mentioned earlier however we are of opinion that the view in Ramsagar Prasad's Gase ( which has been followed by the Chief Court in the present case is wrong.

pp. 126–127

Our conclusion therefore is that the Special Judge is even where there has been a decree by a civil court in respect of a loan bound to follow the provisions of s. 14(4)(a) of the Act so that the amount of interest which he can hold to be due on the date of the application must not exceed the portion of the principal found to be due on the date of the application. Accordingly the present. case the Special Judge should have held the amount of interest due on the date of the application, i.e., October 26, 1936, to amount to rupees one lakh only, that being the principal which was still due on that date. Under the provisions of sub-s. 7 of s. 14 the Special Judge has to "pass simple money decree for such amount, together with auy costs which he may allow in respect ofproceedings in his court and of proceedings in any civil court stayed under the provisions of this Act, together with pendente lite and future interest at a rate not greater· than the rate specified in s. 27." It was in view of this provision that the special .Judge and the High Court allowed interest at the rate of 4% per annum. The proper decree the Special Judge should have passed therefore was one for rupees two lakhs for the loan with permissible interest, plus Rs. 4,314-2-9, Rs, 51-3-0 and rupee

p. 127

[196 I] one on account of costs, that is, for total sum of lls. 2,04,366-5-9 with proportionate costs with interest pendente lite and future interest a.t the rate of 4 per cent. per annum simple from tho date of the application, i.e., October 26, 1936, till realisation. '

p. 128

Accordingly, we allow tho appeal, set aside the decree passed by the courts below and order bat in place of the decree made by the Trial Court be substituted a money decree in the terms as mentioned above.

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Tho appellant will get his costs in the appeal.

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Appeal all-Owed. BABU BARKYA THAKUR

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v. THE STATE OF BOMBAY AND OTHERS. (B. p_ c. J., A. K.

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K. N. and J.C. JJ.)

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Land Acquisilion--Preliminary notification-Land needed for company-Non ·tnrnlion of public p11rpose-Lega!ity-Procudings, if violate f11ndamrntal rights-Land Acquisition Act, 1894 (I of 1894), ss. 5A, 6, 40-Co1>stitution of India, Arts. 19(r)(j), 3r.

p. 128

By a notification under s. 4 of the Land Acquisition Act, 1894, the State of Bombay (now }!aharashtra) sought to acquire certain lands, including those o( the petitioner, which were likely to be needed by a company, manufacturing steel bars and rods, for its factory and buildings and appointed a Special Land Acquisition Officer to !unction as a Collector under s .. 5A of the Act. The petitioner by an objection filed before the said officer denied that the lands were required for a public purpose and prayed that the proceedings quashed. By his petition to this Court under Art. of the Constitution the petitioner challenged the legality of the notification under s. 4 of the Act on the ground that it did not in tern1s say that the acquisition \\'as for a public purpose, and that the acquisition proceedings infringed Arts. 19 and 31 of the Constitution.

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that it is not essential that a notification under 4 of the Land Acquisition Act, 1894, should expressly state that

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