Deputy Commissioner, Hardoi Vs. Rama
Krishna Narain & Ors [1953] INSC 55 (8 October 1953)
08/10/1953 MAHAJAN, MEHR CHAND
MAHAJAN, MEHR CHAND MUKHERJEA, B.K.
JAGANNADHADAS, B.
CITATION: 1953 AIR 521 1954 SCR 506
ACT:
U. P. Encumbered Estates Act, 1934, s. 11
(2)-Proceedings under s. 11(2)-Appeal from order rejecting claim- Creditors who
did not take active steps-Whether necessary parties.
HEADNOTE:
Creditors who did not take an active part in
the proceedings are not necessary parties to an appeal from an order rejecting
a claim made in a proceeding under section 11 (2) of the U. P. Encumbered
Estates Act, 1934. The technical rules of the Civil Procedure Code regarding
the impleading of parties should not be applied to such proceedings. The matter
should be viewed in a more liberal way, regard being always had to the fact
that there is no collusion between the debtor and the claimant.
I Rameshwar v. Ajodhia Prasad (A.I.R. 1941
Oudh 580), Chaudhri Bishuanth Prasad v. Sarju Saran Tewar (A.I.R. 1942 Oudh 16),
Lakshmi Narain v. Satgurnath (A.I.R. 1942 Oudh 339) and Benares Bank Ltd. v.
Bhagwandas (A.I.R. 1947 All.
18) overruled.
APPELLATE JURISDICTION: Civil Appeal No. 59
of1951.
Appeal from the Judgment and Decree dated the
22nd August, 1944, of the High Court of Judicature at Allahabad (Verma and
Hamilton JJ.) in First Appeal No. 345 of 1940 arising out of the Judgment and
Decree dated the 24th August, 1940, of the Court of the Special Judge, 1st
Grade of Shahjahanpur in Miscellaneous Case No. 52 of 1940 and Original Suit
No. 2 of 1938.
Chaudhry Niamutullah (Gopalji Mehrotra, with
him) for the appellant.
Onkar Nath Srivastava for respondent No. 5.
1953. October 8. The Judgment of the Court was delivered by MAHAJANN J . 507
MAHAJAN J.-This appeal is before us on a certificate granted by the High Court
of Judicature at Allahabad under section 110 of the Code of Civil Procedure and
the only point it raises is whether the appeal preferred by the appellant to
the High Court was imperfectly constituted, inasmuch as all the creditors were
not impleaded as parties to that appeal.
The facts are that on the 28th October, 1936,
Rama Krishna Narain and others submitted an application under section 4 of the
U. P. Encumbered Estates Act, 1934, to the sub- divisional officer, Tilhar,
Shahjahanpur, praying that the provisions of the -said Act be applied to them.
This application was eventually transferred by the sub-divisional officer to
the court of the special judge, first grade, Shahjahanpur. The landlords on 26th August, 1938, submitted a written statement to the special judge under section 8 of
the Act and therein stated inter alia that they had a pro- prietary interest to
the extent of ten annas share in 52 items of taluqdari villages which formed
part of taluka Bharawan. A notice of this application was published as required
by section 11(1) of the Act in the U.P. Gazette dated 13th May, 1939. On 30th November, 1939, Raja Dev Singh, who subsequently became a ward of the Court
of Wards, filed a claim petition under section 11(2) of the Act and alleged
therein that he was the proprietor of 6 1/2 pies share in 47 items of property
mentioned in schedule (A)- of the landlords' written statement. This claim was.
disallowed by the special judge by an order
dated 24th August, 1940, and it was held that Raja Dev Singh was not the owner
of the property claimed by him in his objection petition. The Deputy
Commissioner of Hardoi who is the Court of Wards of Bharawan estate filed an
appeal against this decision of the special judge to the High Court. All the
applicant-landlords were impleaded as respondents in the appeal along with the
Unao Commercial Bank Ltd., one of the creditors who had taken part in the
proceedings before the special judge at that stage. It does not appear from the
record that the other creditors had either filed written statements 67 508
under section 10 or had made any allegation that the landlords had secreted any
property. Their names were not mentioned in the memorandum of parties annexed
to the memo of costs, and in these circumstances they were not impleaded as
respondents in the appeal. Subsequently the appellant made an application for
impleading them as respondents in the appeal and prayed that he be given the
benefit of section 5 of the Indian Limitation Act. This application was
rejected, and eventually the appeal was dismissed on the ground that it was.
defective and could not be entertained in the absence of all the creditors as
respondents in the appeal. The, cross-objection filed by the Unao Commercial
Bank with respect to costs was allowed.
The appellant on 21st November, 1944, filed a
petition for leave to appeal to His Majesty in Council. It was alleged in this
application that the valuation of the subject-matter of the appeal in the trial
court in the High Court and before His Majesty in Council was over Rs. 10,000
and that though in the result the judgment and decree of the High Court
affirmed the judgment and decree of the trial court , a substantial question of
law affecting not only the parties but of general interest was involved. The
High Court with- out deciding whether the appeal raised a substantial question
of law granted leave to the appellant under section 110 of the Code of Civil
Procedure on the ground that the judgment of the High Court being -one of
variance, and the value of the subject.-matter in dispute in the trial court as
well as in the appeal to His Majesty in Council being over Rs. 10,000, the case
fulfilled the requirements of that section.
Mr. Srivastava who represented the
debtors-landlords before us raised a preliminary objection that the certificate
under section 110 of the Civil Procedure Code was defective and the appeal was
thus incompetent and could not be entertained by us. He contended that the only
variation made by the High Court in the judgment of the trial judge was in
respect of costs and such a variation in the matter of costs only did not
invoice the decree a decree of variance, and that 509 being. so, the ground on
which the High Court had granted the certificate was erroneous and the
certificate being defective this appeal could not be heard. In our opinion,
this contention is without force. It is no doubt true that costs are not taken
into consideration and are treated as extraneous to the subjectmatter of a
suit, and variation in the matter of costs does not make the decree of the
appellate court a decree of variance; but as already stated, the appellant did
not pray for the certificate on that ground. He had expressly alleged that the
decree being one of affirmance he was entitled to a certificate, because the
subject of the suit as well as of the appeal was a sum of orver Rs. 10,000 and
the case involveda4 substantial question of law. It is obvious that the ground
on which the appeal was dismissed by the High Court raises a question of law of
importance to the parties and that being so, on that ground alone the appellant
was entitled to a certificate under section I 10, Civil Procedure Code. The
certificate therefore is good, though the -around on which it was granted is
erroneous. It is always open to an appellant to support the certificate on
grounds other than those, on which it has been actually ordered to be given.
The preliminary objection therefore fails.
In order to determine whether the creditors
are necessary parties in proceedings under chapters 3 and 4 of the U.P.
Encumbered Estates Act, 1934, it is necessary
to refer to the relevant provisions of the Act. The law was enacted for giving
relief to encumbered estates in U. P. Section 4 provides that any landlord, who
is subject to or whose immoveable property or any part thereof is encumbered
with private debts, may make an application in writing to the Collector of the
district, stating the amount of such private debts and also of his public debts
both decreed and undecreed and requesting that the provisions of this Act be
applied to him.. The section gives an option to the landlord who is subject to
private debts to make an application for obtaining relief under the provisions
of the Act. The Collector then transmits the application to the special judge
appointed under the Act.
510 The direct consequence of the acceptance
of such an application by the collector is that the creditors are deprived of
their rights of proceeding against such a landlord in civil or revenue courts
in respect of their debts and all attachments made in execution of decrees
become null and void and no process in execution can issue after that date. The
provisions of the Act are clearly detrimental to the contractual rights of the
creditors and to their remedies in civil law and such a statute can by no
stretch of imagination be described to have been enacted for the benefit of
creditors. Section 8 of the Act confers power on the special judge of calling
upon the applicant to submit to him within a period to be fixed -by him in this
behalf, a written statement containing full particulars respecting the public
and private debts to which he is subject or with which his immoveable property
is encumbered;
of the nature and extent of his proprietary
rights in land;
of the nature and extent of his property
which is liable to attachment and sale; and lastly, of the names and addresses
of the creditors, so far as can be ascertained by him. If the applicant fails
to submit a written statement as called for or furnish the information referred
to in the proviso to sub-section (2), the special judge is empowered to dismiss
the application. The landlord is not required to implead any creditors as party
respondents in his written statement, but he has to furnish information,
regarding the names and addresses of his creditors so far as they are known to
or can be ascertained by him and his failure to give information may result in
a dismissal of the application.
Section 9 requires the special judge to
publish in the official gazette a notice in English calling upon all persons
having claims in respect of private debts both decreed and undecreed against
the person or the property of the landlord to present to the special judge
within three months from the date of the publication of the notice, a written
statement of their claims. He is also required to cause copies of such notice
to be published in such paper or papers as he may direct and to exhibit it at
his own office, at the office of the collector and at some 511 conspicuous
place where the landlord resides. He is further directed to send a copy of the
notice and a copy of the written statement under sub-section (1) of section 8
by registered post to each of the creditors whose names and addresses are
mentioned in the statement under clause,(d) of sub-section (1) of section 8.
Section 10 provides that every claimant referred to in section 9 shall in the
written statement of his claim give full particulars thereof and shall state so
far as - they are known to or can be ascertained by him, the nature and extent
of the landlord's proprietary rights in the land and the nature and extent of
the landlord's property other than proprietary rights in land. The provisions
of this section not only require a creditor to give particulars of his own debt
but also give him opportunity to contend that the landlord has secreted some
property. Section 11 (1) of the AA directs the special judge to publish a
notice specifying the property mentioned by the applicant under section 8 or by
any claimant under section 10. The object of the provisions made in section 11
(1) is to find out the extent of the property that can be utilized to-wards
liquidation of the debts ascertained under the subsequent provisions of the
Act. Section 11 (2) provides as follows:- Any person having any claim to the
property mentioned in such notice shall, within a period of three months, from
the date of the publication of the notice in the official gazette make an
application to the special judge stating his claim and the special judge shall
determine whether the property specified in the claim, or any part thereof is
liable to attachment sale or mortgage in satisfaction of the debts of the
applicant." Sub-section (3) directs the special judge to determine such
claims before he proceeds to determine the amount due to any creditor under
section 14. He is further directed not to pass any decree under section 14
until the expiry of a period of one month from the last day on which he determines
a claim under section 11. Sub-section (4) off section 11 provides that any
order passed by the special judge under this section shall be 512 deemed to be
a decree of a civil court of competent jurisdiction. Section 13 enacts that
every claim, decreed or undecreed against the landlord shall, unless made
within the time prescribed be deemed for ;III purposes and on all occasions to
have been duly discharged. Section 14 lays down the procedure for determination
of the amount of debts.
The judge is directed to give notice of the
date of enquiring into the claims of the creditors to the different claimants
and to the person who has made the application under ,section 4. He is directed
to examine each claim after hearing all such parties as desire to be heard and
after considering the evidence, if any, produced by them. The section lays down
them mode of calculating interest on the amount of such claims and provides for
the application of the provisions of the Usurious Loans Act to the proceedings
under the Act. Sub-section (7), provides as follows:---- "If the special
judge finds that any amount is due to the claimant be shall pass a simple money
decree for such amount together with any costs which he may allow in respect of
proceedings 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 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
jurisdiction but no decree against the landlord shall be executable within the
United Provinces except under the provisions of this Act." Section 18
provides that subject to the right of appeal or revision, the effect of a
decree of the special judge under sub- section (7) of section 14 shall be to
extinguish the previously existing rights, if any, of the claimant, together
with all rights, if any, of mortgage or lien by which the same are secured and,
where any decree is given by the special judge to substitute for those rights a
right to recover the amount of the decree in the manner and to the extent
specified in the Act. Section 45 provides for appeals and revisions against
orders and decrees of the special judge.
513 It is apparent from the provisions of the
Act cited above that the U.P. Encumbered Estates Act is no more, nor less than,
a code for the administration of the assets of the landlord-debtor and for giving
relief to him in a number of ways against the contractual rights of his
creditors. It clearly deprives the creditors of any remedies that they would
ordinarily have in ordinary civil courts and extinguishes the mortgages held by
them. Sectional(2) deals with claims of third parties to the property alleged
by the landlord as belonging to him and the judge is required to determine
whether such property is liable to attachment or sale. It is noteworthy that
under section 14(1) the special judge is directed to follow a certain
procedure, but no such procedure is prescribed under section 1 1(2). In section
14 he is required to fix a date and to give notice of the date of inquiring
into the claims of the creditors to all the claimants. There is no such parallel
requirement in respect of claims of third parties under section 11(2), though
as a matter of practice similar procedure is also followed in an enquiry under
this section.
The question that requires consideration in
these circumstances is -whether the rules of the first schedule to the Code of
Civil Procedure should be rigorously applied to proceedings under the
Encumbered Estates Act, and whether the creditors who are no doubt' .persons
interested in those proceedings and who would ultimately be entitled to recover
their decretal debts from the property the extent of which falls for
determination in an enquiry under section II, are necessary parties in the
enquiry, or are merely proper parties thereto and as such entitled only to
notice of the proceedings. Order 1, Rules I and 3 of the Code of Civil
Procedure, provide in regard to the persons who are to be joined as plaintiffs
or those who have to be joined as defendants in suits. Rule 1 is in these
terms:- "All persons may be joined in one suit as plaintiff, in whom any
right to relief in respect of or arising of the same act or transaction or
series of act transactions is alleged to exist, whether 514 severally or in the
alternative, where, if such persons brought separate suits, any common question
of law or fact would arise." Rule 3-provides:- " All persons may be
joined as defendants against whom any right to relief in respect of or arising
out of the same act or transaction or series of acts or transactions is alleged
to exist, whether jointly, severally or in the alternative, where, if separate
suits were brought against such persons any common question of law or fact
would arise." It is apparent that strictly speaking the provisions of
these rules cannot be applied to the proceedings contemplated by the U. P.
Encumbered Estates Act. These proceedings cannot be. described as suits. It was
conceded at the Bar that an inquiry into third party claims under section 11(2)
cannot be described as a suit. Neither section 8 nor section 1 1 provides that
the creditors have to be impleaded as parties respondents in such an objection
application. As already said, the section provides that the applicant has to
give information about the names of the creditors and the amounts due to them.
Till the time that a decree is passed under section 14 in favour of any of the
creditors it cannot be, said that any one of them is entitled to share in the
property of the debtor. It is only when a claim has been made under section 10
by a creditor and it has ripened into a decree that he is entitled to share in
the assets of the landlord. But if he commits a default in submitting a written
statement of the claim under section 10, the claim stands discharged under
section 13.
In this particular case it is not clear
whether any of the creditors except the Unao Commercial Bank had made a claim
under section 10. It is also -not clear whether any decree under section 14 has
been passed in favour of any of the creditors. An inquiry for the determination
of the quantum of the debts of the landlord can only be made after third party
claims have been settled under the provisions of section 11(2). In view of
these provisions it seems difficult to hold that the technical and 515 strict
rules as to impleading of parties can have appli- cation to proceedings under
section 11 of the U.P.
Encumbered Estates Act. It is true that the
creditors must be given notice and opportunity to say whether the landlord has
secreted any property, but if they do not do so and are content with the
disclosures made by the landlord they cannot be said to have any further
interest in the quantum of the property which the landlord has mentioned under
the provisions of section 8 in his written statement. In that situation, if a
third party claims any item of property mentioned by the landlord in the
written statement, the controversy at that stage lies only between the landlord
and the claimant, though in the result the creditors may either be benefited or
deprived of some of the 'assets which the landlord discloses in the application
as liable to attachment and sale towards payment of decrees that may be passed
in favour of the creditors.
It can well be assumed that the fight at that
stage being a bona fide fight between the objector and the landlord, the
interests of the creditors will be fully represented by the landlord and any
decision obtained in his favour or against him would be binding on all the
creditors on the principles enacted in explanation 6 to section I 1, Civil
Procedure Code. If, therefore, in such a contest the claimant loses and the
landlord succeeds, then in an appeal against that decision he need only implead
the landlord as a party respondent and it is not necessary to implead all the
creditors as respondents merely on the ground that ultimately they would be
affected by-the result, either to their benefit or to their detriment. The
court has power, if it considers that the presence of the creditors is
necessary at the hearing, to give them notice of the appeal so that they may
have the opportunity of placing their con- tentions before it. The observance
of such a procedure may well conduce to a fair hearing of the appeal, even if
the creditors have raised no plea of any kind before the special judge. In a
case, however, where the creditors raise a plea that the landlord has secreted
certain property and it should be included in the schedule and such property is
then claimed by a third 516 party, they may well be regarded as real parties to
the controversy and failure to implead them may result in the appeal being
imperfectly constituted. In the situation that arises in the present case the
appeal should have been held to be properly constituted because all those who
raised any controversy whatsoever as to the ownership of the property in
dispute were impleaded.
We are fully conscious of the fact that the
view that we have expressed above is not in conformity with a number of
decisions of the Oudh Chief Court and the Allahabad High Court. It is therefore
necessary to examine those decisions in order to see whether the reasons given
therein are sound or erroneous.
In Rameshwar v. Ajodhia Prasad(1) a Bench of
the Oudh Court held that all the creditors who were impleaded as parties to the
application under the Act are necessary parties to an appeal by the objector
against an adverse order passed against him under section 11. -This judgment
proceeds on the assumption that all the creditors having been impleaded as
parties to the application and not having been made respondents in the appeal,
the appeal became imperfectly constituted. In this case the question whether
under the provisions of the Encumbered Estates Act an applicant is required to
implead creditors as parties to the application was neither argued nor
considered; on the other hand, it was assumed that all the creditors have to be
impleaded as parties in the application made by the claimants under the Act.
That assumption is, of course, erroneous. Under section 4 the applicant is
entitled to request the collector, that the provisions of the Act be applied to
him and relief given to him under its provisions. He is not required even to
give information about the names and addresses of creditors and no question of
impleading anyone as a respondent arises at that stage. When the collector has
forwarded this application to the special judge, then the special judge is
empowered to call upon the applicant to file a written statement and therein he
is bound %to give information About the (1) A.I.R. 1941 Oudh 580, 517 names and
addresses of his creditors so far as they are known to him or can be
ascertained by him. In the written statement which he is called upon to file on
a requisition by the special judge he is not called upon to implead any persons
as parties, in the sense in which that term is used in the Code of Civil
Procedure. This decision therefore is not of any help on the point that was
argued before us.
In Chaudhri Bishunath Prasad v. Sarju Saran
Tewari(1), another Bench of the Oudh Court held that an enquiry into the
indebtedness of the landlord is to be carried out by the special judge in the
presence of all the creditors, that though it is true that each creditor is
interested in establishing his own debt against the landlord, he is further
interested that the landlord should not be allowed to withhold any property
from the court, and that if 'a claimant under section I I sets up a title to
the property shown by the landlord to belong to him, although the real contest
may for the time being be between the claimant on the one hand and the landlord
on the other hand, it is to the ultimate interest of the entire body of the
creditors that the property should be held to belong to the landlord, and if
the decision is in favour of the landlord, all the creditors will be entitled
to have their debts satisfied out of such property; but if, however, the
decision is against them, the property will go out of the reach of the
creditors and will not be available to them for the satisfaction of their
debts. It was further held that as all. the creditors had not been joined as
parties to the appeal and as they were interested in the result of the appeal,
it could not be held that they were wholly unconcerned in the result of the
case and therefore the appeal was not maintainable. It seems to us that in
making these observations the learned Judges did not clearly bear in mind the
distinctions between the provisions of sections 11 and 14 of the Act. Section
14 lays down a definite procedure so far as the enquiry into the claims of
creditors is concerned . Each creditor has to establish his claim against the
landlord as he (1) A.I.R. 1942 Oudh 16.
518 would do if he had filed a suit against
him. This enquiry is made after the quantum of the property of the debtor has
been ascertained under section 11. As already pointed out, if any creditor
raises any dispute as to the quantum of the property as he is entitled to raise
such a dispute in his written statement filed under section 10, in that
situation it may well be held that such a creditor is directly interested in
the enquiry under section 11 ; but it is difficult to see that all other
creditors who have accepted the list of property filed by the debtor as true
are directly interested in the enquiry under that section and are as such
necessary parties and that without impleading them the enquiry cannot proceed.
Rules I and 3 of Schedule I Of the Code of Civil Procedure do not lay down that
every person who is ultimately interested in the result of a suit should be
impleaded as a defendant. All that these rules insist upon is that all persons
should be joined as defendants against whom any right to relief is alleged to
exist, provided that such right arises in respect of the same act or
transaction or series of acts or transactions and the case is one where common
question of law or fact would arise. It is not possible to hold that the
objector can claim any right to relief against the creditors as such.
The right to relief in the enquiry under
section 11 is only against the landlord who alleges himself to be the owner of
the property which the claimant says belongs to him, and creditors have no
right of interest in the property claimed by the objector. The test of ultimate
benefit therefore laid down by the Oudh Court for holding that all creditors
are necessary parties in the enquiry under section 11 of the U.P. Encumbered
Estates Act does not fulfill the conditions laid down in the Code for
impleading parties as plaintiffs or as defendants. If they are not necessary
parties in the true sense of the term in the enquiry under section 11, a
fortiori failure to implead them as respondents in the appeal detective.
In Lakshmi Narain v. Satgurnath(1) another
Bench of the Oudh Court took the' same view. In this case.
(1) A.I.R. 1942 Oudh 339.
519 the earlier decisions of the Oudh Court
were followed The view was reiterated that creditors are parties in the
proceedings under the Encumbered Estates Act.
In Benares Bank Ltd., Benares v. Bhagwandas
(1), a Full Bench of the Allahabad High Court considered this question and
expressed the same opinion as had been expressed in the Oudh decisions referred
to above. Mr. Justice Braund, who was one of the Judges constituting the Full
Bench, with great reluctance shared the opinion of the majority merely out of
respect for the opinion of Pathak J. and it appears that, left to himself, he
would have held otherwise. The majority judgment was delivered by Pathak J. He
enunciated two tests for deciding whether a certain person was a necessary
party in a proceeding: (1) that there must be a right to some relief against
such party in respect of the matter involved in the proceedings in question,
and (2) it should not be possible to pass an effective decree in the absence of
such party, and proceeded to observe that the creditors of a landlord who have
claimed relief under the Encumbered Estates Act are necessary parties to the
proceedings under that Act and that the object of the Act is to compel the
landlord to surrender his entire property for the benefit of his creditors and
to liquidate the debts of all the creditors in accordance with and to the
extent per- mitted by the Act. There can be no question that these are the true
tests for determining whether a person is a necessary party to certain
proceedings but the question is whether judged on these tests the creditors of
a landlord under the U. P. Encumbered Estates Act can be said to be necessary
parties in an enquiry under section 11. It seems to us that in the first
instance it is an incorrect assumption to make that the object of the Act is to
grant relief to the creditors of a landlord; it is quite the converse. The
object of the Act is to grant relief to the landlord whose estate is encumbered
with debts, by scaling, down the debts and by depriving the creditors of their
(1) A.I.R. 1947 All. 18.
520 civil remedies. The creditors are allowed
to prove their debts and obtain decrees from the special judge according to the
provisions of and to the extent allowed by the Act and they lose all their
rights on securities held by them.
Coming to the application of the tests laid
down by the learned Judge, it is not possible to hold that any right of relief
exists in an objector under section 11 as against the creditors. It is also
difficult to see how an effective decree cannot be passed as regards title to
the property in the absence of creditors. One test of the effectiveness of a
decree is whether that decree can be executed without the presence of creditors
as regards property decreed in favour of a claimant. It is obvious that in
execution proceedings a warrant of attachment and for delivery of possession
can only be issued against the owner, viz., the landlord, and not against the
creditors. In these proceedings the special judge can give no relief to the
objector against the creditors. So on the tests mentioned by the learned Judge
it is clear that the creditors of a debtor are not necessary parties in these
administrative proceedings under the Encumbered Estates Act, though they may be
given notice of those proceedings and afforded opportunity to watch those
proceedings in order to see that no property is secreted from them and it is
preserved for satisfaction of decrees that may eventually be passed in their
favour.
In his judgment Pathak J. proceeded to
observe that though the landlord is a, party to the dispute under section 11,
it is obvious that the main party who is vitally interested in that dispute is
the entire body of creditors, because the issue that arises out of such a
-claim is whether the property which is the subject matter of the claim is
liable for the satisfaction of the debts due to the entire body of creditors.
This statement also, in our opinion is not very precise. It is not correct to
say that the result of a decision,in such a claim makes the property liable for
satisfaction of debts due to the entire body of creditors who had made claims
at that stage. The property is only 521 liable for satisfaction of decrees that
may be passed subsequently under section 14. It may well be that of the persons
who have been disclosed as creditor under section 8, a number of them may not
at all be interested in the result of the decision of the claim under section
II. It is an overstatement to make that the main party who is vitally
interested in the dispute is the entire body of creditors '.
The dispute relates to title to property and
according to all principles of impleading of parties it is not the eventual
benefit that a person may derive from a certain decision that is the crucial
test in deciding whether a party is a necessary party or merely a proper party.
Pathak J. proceeded to observe as follows :
"Could it be suggested that in a suit
under Order XXI, rule 63, Civil Procedure Code, the decree holders who desire
to seize the property belonging to the judgment-debtor are not necessary
parties?" With great respect again, this analogy is not very happy or
apposite. Under Order XXI, rule 63, it is only the attaching creditor who has
the right to file a suit or of being impleaded as defendant in a suit by the
judgment- debtor. AR the creditors of the judgment debtor who have not attached
the property are not necessary parties in a suit under Order XXI, rule 63,
though after the decision in that suit they may be entitled to share in the
rateable distribution of the property if they make an application for that
purpose. In a way it is true to say that in all suits by a creditor against a
debtor where the debtor owes to a number of creditors, every other creditor is
interested in seeing that that creditor's suit is dismissed or his debt is considerably
cut down; but from that it does not follow that in a suit on a promissory note
by a creditor against the debtor all the other creditors are necessary parties.
The eventual interest of a party in the fruits of a litigation cannot be hold
to be the true test of impleading parties under the Code of Civil Procedure and
it is rather difficult to hold that where that is not the true test under the
Code, that should be adopted as A test in proceedings of an administrative 522
character under the U. P. Encumbered Estates Act. it cannot be forgotten that
under the provisions of section 11 no provision has been made for issuing
notice to all the creditors. Reference may also be made to rule 6 framed under
the Encumbered Estates Act. This rule provides that the proceedings under this
Act shall be governed by the Code of Civil Procedure so far as they are
applicable. As already pointed out, the provisions of Order 1, rules 1 and 3,
cannot aptly be held applicable in such proceedings. We cannot uphold the view
of Pathak J. that all creditors become parties to the proceedings under the Act
in the technical sense of the term after a notice has been served upon them and
in any event after they have filed the written statements, that they continue
to remain' as parties until the debts are liquidated or proceedings terminated
in accordance with the provisions of the Act. This seems to be too wide a
statement of the law on the point. Can it be said that after each individual
creditor obtains a decree in respect of his claim under section 14, each one of
these creditors has to be impleaded as a party in an appeal preferred by that
creditor or by the debtor. It is not possible to give an answer in the
affirmative to such proposition. no hesitation in saying that though he ultimately
abondoned n thinking that in. We have therefore Mr. Justice Braund, his view,
was right administrative proceedings technical rules of the First Schedule of
the Code of Civil Procedure regarding impleading of parties should not be
invoked and that the matter should be viewed in a more liberal way, regard
always being had to the fact that there is no collusion between the debtor and
the claimant and that there are persons who are bona fide litigating in respect
of the title of the claimant under section 11, and if there has been such a
bona fide fight which results in a decree in an appeal against that decree it
is sufficient that those who took an active part in the proceedings under
section II are impleaded. It is not necessary to implead each and every
creditor who either did pot appear or put forward a written statement under 523
section 10 or took no active part in the proceedings under section 11(2). In
the view that we have taken it is not necessary to decide the question whether
the High Court was right in not exercising its powers under Order XLI, rule 20,
in impleading the creditors as respondents to the appeal.
For the reasons given above we allow this
appeal, set aside the judgment of the High Court and remand the case to that
court for hearing the appeal in accordance with law on its merits. If the High
Court thinks fit that the presence of any creditors would help the court in
arriving at a true decision of the matter it in its discretion may give notice
to the creditors of the date of hearing, We leave the parties to bear their own
costs of this appeal.
Appeal allowed.
Agent for the appellant: C. P. Lal.
Agent for respondent No. 5: S. S. Shukla.
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