State of Punjab Vs. Okara Grain Buyers
Syndicate Ltd. & Ors [1963] INSC 220 (15 November 1963)
15/11/1963 AYYANGAR, N. RAJAGOPALA AYYANGAR,
N. RAJAGOPALA GAJENDRAGADKAR, P.B.
SUBBARAO, K.
WANCHOO, K.N.
MUDHOLKAR, J.R.
CITATION: 1964 AIR 669 1964 SCR (5) 387
ACT:
Statute, interpretation of-State, if bound by
statute"Person", if includes State-Displaced persons' (Debts
Adjustment) Act, 1951, scope of.
HEADNOTE:
The thirteen respondents who were displaced
creditors from West Pakistan filed at various places before the Tribunals
created under the Displaced Persons'(Debts Adjustment) Act, 1951, petitions (1)
[1963] Supp. 1 S.C.R. 730.
388 under s. 13 of the Act claiming certain
amounts from the State of Punjab. A preliminary objection was raised by the
appellant that these petitions were not maintainable against the State. The
objections were rejected by the Tribunals which held that the claims were
maintainable. The State went in revision to the High Court but those revisions
were also rejected. The State came to this Court by Special Leave.
The contentions raised before this Court were
that what was claimed from the Government was not a "debt" within the
meaning of the Act of 1951 and that the State of the Punjab was not a "
person" against whom an application under s. 13 of the Act could be made.
It was also contended that the State was not bound by the statute.
Held:What was claimed from the State was a
debt and the applications under s. 13 of the Act against the State of the
Punjab were maintainable.
The test for determining whether the
Government is bound by a statute is whether it is expressly named in the provision
which it is contended binds it, or whether it is manifest from the terms of the
statute that it was the intention of the legislature that it shall be bound and
the intention to bind would be clearly made out if the beneficient purpose of
the statute would be wholly frustrated unless the Government were bound.
Section 32 of the Act provides that the debts
owing by the State to a displaced debtor ought to be ascertained for
determining the paying capacity of the debtor and relief afforded to the displaced
debtor on the basis that such debts due to him are realisable assets within the
scope of the Act. It follows that the debt due by the Government or by the
State is within the Act by necessary implication because the same is necessary
for working out the relief to which a displaced debtor who files an application
under s. 5 or s. 11(2) is entitled. Section 32 contemplates a balancing of
credits and debits with a view to adjust them in a manner consonant with equity
and justice of the case as felt by the legislature. The entire scheme will go
awry and the balance and harmony which are intended to be brought in would be
nullified and disharmony brought into the working of the Act if the contention
of the appellant that the State is not bound by the Act is accepted.
The rule of interpretation of statutes that
the State is not bound by a statute unless it is so provided in express terms
or by necessary implication is good law in India.
As it cannot be said of the State that it
either voluntarily resides or carries on business or personally works for gain,
the State may not be within the contemplation of the expression "
person" against whom claims could be made under s. 13 on that basis.
However, it is not correct to say that the State is not a constitutional or
even jurisdiction-, entity for the reason it does not partake the
characteristics of or satisfy in whole the definition 389 of a corporation. The
State is an organised political institution which has several of the attributes
of a corporation. Under Art. 300 of the Constitution, the Government of the
Union and the Government of a State are enabled to sue and be sued in the name
of Union of India and the Government of the State as the case may be. It is not
improper to speak of the Union and the State as constitutional entities which
have attributes de-fined by the Constitution. So in order to carry out the
beneficent purpose of the statute it must be held to be a person under s. 13.
A comparison of the Displaced Persons
(Institution of Suits) Act, 1948 with that of the Displaced Persons (Debts Adjustment)
Act, 1951 shows that the later Act has definitely a more extended scope and is
designed to secure substantive advantages to displaced persons which were
wholly foreign to the Act of 1948 which had a very limited scope.
Roberts v. Ahern, 1 C.L.R. 406, Director of
Rationing and Distribution v. The Corporation of Calcutta, [1961] 1 S.C.R.
158, M/s. Nagi Brothers v. The Dominion of
India, I.L.R. 4 Punjab 358, Province of Bombay v. Municipal Corporation of the
City of Bombay, (1946) L.R. 73 T.A. 271, State of Bihar v. Rani Sonabati
Kumari, [1961] 1 S.C.R. 728, State of West Bengal v. Union of India, [1964] 1
S.C.R. 371 and Advani v. Union of India, I.L.R. 1955 Bom. 970, referred to.
CIVIL APPEALS Nos. 439 To 451 OF 1961.
Appeals by special leave from the judgment
and order dated August 1, 1958, of the Punjab High Court in Civil Revisions
Nos. 229 to 241 of 1953.
S.M. Sikri, Advocate-General for the State
of' Punjab, N.S. Bindra and P.N. Sachthey, for the appellants.
S.K. Kapur, K.K. Jain for B.P. Maheshwari,
for respondent No. 1(A) (in C.A. No. 439/61.) Sardar Singh, for respondents
Nos. 2(A), 3(A) 4(A), 5,6,7,8(A),9,10,11,12, and 13(A).
Daulat Ram Prem and R.N. Sachthey, for
respondent No. 13 (B) (Union of India).
November 15, 1963. The Judgment of the Court
was delivered by AYYANGAR J.--Section 13 of the Displaced Persons (Debts
Adjustment) Act, 1951 (Central Act LXX of 1951) which will be referred to
hereafter as the Act, enacts:
390 13.Claims by displaced creditors against
persons who are not displaced debtors. At any time within one year after the
date on which this Act comes into force in any local area, any displaced
creditor claiming a debt from any other person who is not a displaced person
may make an application, in such form as may be prescribed, to the Tribunal
within the local limits of whose jurisdiction he or the respondent or, if there
are more respondents than one, any of such respondents, actually and
voluntarily resides, or carries on business or personal works for gain,
together with a statement of the debt owing to him with full particulars
thereof " The respondents in each of these 13 appeals, which have been
consolidated for hearing are "displaced creditors" and the point
arising for decision in them is whether they could make a claim under this
provision against the State of Punjab. A petition claiming such relief was
filed by the respondent in Civil Appeal 439 of 1961 before the Subordinate
Judge, Amritsar who was the Tribunal created under the Act for the purpose of
receiving claims under s. 13 and, similarly, the contesting respondents in the
other 12 appeals 440-451 of 1961 made similar claims before the Subordinate
Judge, Hissar. Immediately the claims were filed and notices issued to the
State of Punjab, a preliminary objection to the maintainability of the
applications was raised by the State and the Tribunal at Amritsar passed an
order on May 7, 1953 rejecting the preliminary objection and holding that on a
proper construction of s.13 the claim was maintainable before it.
Similar objections were also raised before
the Subordinate Judge, Hissar who, by orders passed on May 25, 1953, similarly
over-ruled the preliminary objections and held that the claims were
maintainable before him. The State thereafter filed revisions in all the 13
cases to the High Court of Punjab. These petitions came in the first instance
before a learned Single Judge who directed that they should be placed 391
before a Division Bench and the two learned Judges constituting the Division
Bench after referring briefly to the arguments urged on behalf of the State in
support of their contention that the State was not a 'person' against whom a
claim could be made under s. 13 of' the Act, expressed their opinion that the
matter deserved to be decided by a larger Bench and the cases were thereupon
placed before the Chief Justice for constituting a Full Bench for deciding the
point of law which was formulated in these terms:
"Whether an application under s.13 of
the Displaced Persons (Debts Adjustment) Act, 1951 is not maintainable against
the State of Punjab".
A Full Bench of three Judges accordingly
heard arguments upon the point raised and held by a unanimous judgment that the
applications were maintainable and in doing so overruled two earlier decisions
which had taken a contrary view.
The revision petitions were thereafter posted
for final hearing before the learned Chief Justice who had originally heard
them as a Single Judge and who, giving effect to the views expressed by the
Full Bench, dismissed them. The State of Punjab thereafter applied to this
Court for special leave and this being granted, the appeals are now before us.
As would be seen from the foregoing, the only
question that arises for consideration is whether under s. 13 of the Act a
"displaced creditor" could make a claim against the Government either
of the State or of the Union, subject to the limitation of one year referred to
in the opening words of the provision. It is not in dispute that each one of
the contesting respondents is "a displaced person" nor is it the
contention that the State is a displaced person. These two matters being put
aside,, the submission of the appellant in brief is twofold: (1) that what is
claimed in the applications filed against the State is not "a debt"
within the definition of the term in the Act to be presently referred to and
(2) that even if it be held that the sum claimed is a "debt" the same
is not being claimed from a person of whom it could 392 be said that he or it
"actually and voluntarily resides or carries on business or personally
works for gain. Both these arguments stem from a single postulate and that is
that the State is not within the scope of the enactment, not being named
expressly or by necessary implication, and hence is not bound in respect of the
liabilities, if any which the respondents might have against it by the
provisions of the Act, and therefore is not subject to the jurisdiction of the
tribunals created by the Act. It is the further contention that far from the
intention of the enactment being to bind the State, the language that it
employs and the provisions that it enacts, both from the point of view of the
positive provisions as well as the omissions, tend strongly to establish that
the State was outside the Act. These submissions were supported by an elaborate
and able argument which covered a very wide ground of constitutional law and
general juries prudence which we shall notice and deal with, in their proper
place. It would be seen from this brief statement of the points involved that
nothing very much turns on the facts of the case. We would, however, set out
the facts in one of the appeals, Civil Appeal 439 of 1961, merely as
illustrative of the type of claims involved in these appeals. We should,
however, hasten to add that in regard to most of' these applications made by
the respondents to the Tribunal there is a dispute about the facts themselves
and about the genuineness and the quantum of the claim which have not yet been
investigated, since only the preliminary objection to the maintainability of
the applications has been decided and not the merits of the claims or the
defence.
In Civil Appeal 439 of 1961 the facts as
stated in the application were briefly as follows: The respondents are M,/s.
Okara Grain Buyers Syndicate Ltd. They were originally carrying on business in
Okara in District Montgomery of the undivided Punjab now in Pakistan. The
Government of the then undivided Punjab instructed the respondents to supply
210 bags of imported maize to M/s Anil 393 Starch Products Ltd., Ahmadabad in
August 1947. The respondents accordingly carried out these instructions and
dispatched the goods by train. Delivery of the same was taken by M/s Anil
Starch Products. Subsequent to the partition of India the respondents
transferred their place of business from Okara to Amritsar and the Company was
duly registered with the Registrar of Companies in the State of Punjab. In July
1948 after the respondents moved over to Amritsar, they submitted to the State
Government their bill for the value of the maize supplied, being a sum of Rs. 3059/9/-.
The respondents were then informed that the Anil Starch Products had made
payment of the said sum of Rs. 3059/9/to the Director-General of Food Supplies.
East Punjab in or about October-November, 1948. This was brought to the notice
of the Government of the State of Punjab which was required to make the payment
to the respondents but as no payment was made, they made an application against
the Government under s. 13 of the Act to the Subordinate Judge who was
constituted as the Tribunal under the Act. In this they claimed payment of Rs.
3059/9/together with interest at 6% from the 15th August, 1947 till the date of
the application. We might mention that it was not in dispute that under the
relevant constitutional instruments to which we shall refer later, if the claim
were true, it would be enforceable by suit against the appellant-State.
As stated earlier, nothing turns in these
appeals on the merits of the claim or about the defence to it on the merits by
the State, but we are only concerned with the preliminary objection to the
maintainability of the application based upon the provisions of the Act on the ground
that what is claimed from the Government of the State is not a "debt"
within the Act and that the State of Punjab is not a "person" against
whom an application under s. 13 of the Act could be made.
As a step leading to the consideration of
these submissions it would be necessary to advert to and 394 read certain of
the provisions of the Act which have a bearing on the matter in controversy.
Section 2 contains the definitions of the terms used in the Act and it enacts:
"2. Definitions.-In this Act, unless the
context otherwise requires.-(6)'debt' means any pecuniary liability, whether
payable presently or in future, or under a decree or order of a civil or
revenue court or otherwise, or whether ascertained or to be ascertained, which(c)is
due to a displaced person from any other person (whether andisplaced person or
not) ordinarily residing in the territories to which this Act extends;
but does not include any pecuniary liability
due under a decree passed after the 15th day of August, 1947, by any court
situate in West Pakistan or any pecuniary liability the proof of which depends
merely on an oral agreement;" to quote only what is material for these
appeals. A definition of the expression "displaced person" used in
cl. (c) above is to be found in sub s. (10) which reads:
"2. (10) 'displaced person' means any
person who, on account of the setting up of the Dominions of India and
Pakistan, or on account of civil disturbances or the fear of such disturbances
in any area now forming part of West Pakistan, has, after the 1st day of March,
1947, left, or been displaced from, his place of residence in such area and who
has been subsequently residing in India, and includes any person who is
resident in any place now forming part of India and who for that reason is
unable or has been rendered unable 395 to manage supervise or control any
immovable property belonging to him in West Pakistan, but does not include a
banking company," Special provisions have been made in the Act in regard
to claims due to displaced banking companies and the phrase 'displaced bank'
is, by sub-S. (7), stated to mean:
"2. (7) 'Displaced bank' means a banking
company which, before the 15th day of August, 1947, carried on the business of
banking, whether wholly or partially, in any area now forming part of West
Pakistan and is declared to be a displaced bank within the meaning of this Act
by the Central Government by notification in the Official Gazette;"
Sub-section (8) contains the definition of 'displaced creditor' which it states
means:
"(8). 'Displaced creditor' means a
displaced person to whom a debt is due from any other person, whether a
displaced person or not;" while sub-s. (9) defines 'displaced debtor' and
it runs:
" (9). 'Displaced debtor' means a
displaced person from whom a debt is due or is being claimed;" Sub-section
(12) defines 'Tribunal' and it runs:
"(12). 'Tribunal' means any civil court
specified under section 4 as having authority to exercise jurisdiction under
this Act;" There are, however, some substantive provisions which have a
bearing on the proper construction of S. 13, but we &hall defer reference
to them at this stage.
On the terms of S. 13 of the Act set out
earlier, the matters in controversy may be stated thus: Starting from the
premise, as to which there is no contest, that the respondent is "a
displaced person", the questions to be considered are: (1) Is he a
displaced creditor? This would, having regard to the definition of the term
'displaced creditor' in S. 2(8), depend upon (2) whether the claim made by him
is a "debt" which 'Would be the second point for consideration viz.,
is the sum claimed as due from the State a "debt" within the meaning
of s. 2(6) (c) and lastly (3) Would the State be 'any other person' within s.
13? Now, what is invoked by the learned Advocate General is the well-known rule
of construction which in the phraseology which is apt to the constitutional set
up in the U.K. is expressed in the proposition that "the Crown is not
bound by a statute unless it appears that it is brought within it by express
words or by necessary intendment." We shall in due course consider the
scope of this rule of construction which has been held by this Court to be
applicable to the interpretation of Indian statutes both are as well as postConstitution,
but at this stage it is sufficient to mention three matters in relation to it.
The first is that the expression " Crown" or "King" in the
rule has to be understood as referring to the Executive Government of the State
in the context of our Constitution. If authority were needed for what we
consider so obvious a proposition it is to be found in the judgment of
Griffith, C.J. in Roberts v. Ahern(). The next is that it is common ground that
there is no express mention of the State or the Government of the State in the
Act now under consideration. Lastly, the rule is merely one of construction
which raises an initial presumption in its favour, not any hard and fast rule.
it is a rule intended to give effect to the intentions of the legislature and
consequently if there is either in the purpose of the Act or in its provisions
a manifestation of a clear intention to the contrary. the presumption would be
rebutted and the State' would be bound. There being, in the cases before us, no
contention that there is any lack of legislative power for the Union Parliament
to bring in the debts due to or owing by the Government of the State and the
Union within the ambit of the enactment, the whole question is whether by the
provisions it has enacted Parliament has manifested a clear intention to
include these debts also within the scheme of the Act.
(1) 1 C.L.R. 406 at p. 418.
397 As preliminary to the detailed
consideration of the provisions of the Act, it would be useful to appreciate
the historical background of this legislation which seeks to confer certain
substantive and adjectival benefits on persons, who owing to the situation
created by the partition of the country in 1947 were forced to migrate from
what is now West Pakistan into the present State of Punjab.
Prior to partition, under s. 176 of the
Government of India Act, 1935 the Provincial Government of the Punjab could be
sued by the name of the Province in regard to claims arising against the State
on contracts entered into by it. When the partition of India was effected and
the State of the Punjab was divided between Pakistan and the rest of India,
provision had necessarily to be made in regard to the claims which persons had
against the former province of undivided Punjab. This was effected by the
Indian Independence (Rights, Property & Liabilities) Order, 1947 which in
its 8th paragraph dealt with contracts entered into by the Governor-General
before the 15th August, 1947 (the appointed day) as well as by the undivided
province of the Punjab.
Paragraph 8(3) ran:
"8. (3) Any contract made on behalf of
the Province of the Punjab before the appointed day shall, as from that day,(a)if
the contract is for purposes which as from that day are exclusively purposes of
the Province of East Punjab, be deemed to have been made on behalf of that
Province instead of the Province of the Punjab; and (b)in any other case be
deemed to have been made on behalf of the Province of West Punjab instead of
the Province of the Punjab;
and all rights and liabilities which have
accrued or may accrue under any such contract shall, to the extent to which
they would have been rights or liabilities of the Province of the Punjab, be
rights 398 or liabilities of the Province of East Punjab or the Province of
West Punjab, as the case may be" it was not disputed that in regard to the
claims which were the subject of the applications from which the appeals before
us arise, if tenable on the merits, would be claims which could be properly
made against the State of Punjab.
Reading this provision in con.junction with
Art. 300 of the Constitution the result would be that if a suit for enforcing
the claim were filed against the appellant State apart from any contention on
the merits or based on any plea of limitation, there could be no defence to the
suit, save that under procedural law of India as enacted in the Civil Procedure
Code, as understood by a long course of decisions interpreting the provisions
of the Code, the suit would have to be filed in the Court having territorial
jurisdiction over the area where the cause of action ?or the suit arose.
Very soon after partition the Indian
legislature enacted the Displaced Persons (Institution of Suits) Act, 1948
which received the assent of the Governor-Generalon September 4, 1948. It was a
temporary enactment which was to be in force for three years and it replaced an
earlier ordinance of the same name--Ordinance XVIII of 1948 containing
identical provisions. Its principal object was to provide for and validate
certain suits which had been instituted in India, though the cause of action
therefore had arisen in territories which became Pakistan and for extending the
period of limitation for the institution of suits by displaced persons .
Section 4 of the enactment which constituted its core ran:
"4. Notwithstanding anything contained
in section 20 of the Code of Civil Procedure, 1908 (V of 1908) or in any other
law relating to the local limits of the jurisdiction of Courts or in any
agreement to the contrary, a displaced person may institute a suit in a Court
within the local limits of whose jurisdiction he or the defendant or any of the
defendants, where there are more than one at the time of the commencement of
the suit, actually and voluntarily resides, or carries on business, or
personally works for gain, if(i) the defendant, or where there are more than
one, each of the defendants, actually and voluntarily resides or carries on
business,' or personally works for gain in India and is not a displaced person;
(ii)the cause of action, wholly or in part,
arises or has arisen in a place now situate within the territories of Pakistan;
(iii)the Court in which the suit is
instituted is otherwise competent to try it; and (iv)the suit does not relate
to immovable property." At the time when this enactment lapsed on the
expiry of the period of 3 years which was its life, came the Act which was a
comprehensive piece of legislation designed to redress not merely the
procedural difficulties to obviate which was the main object of the temporary
Act of 1948, but the enactment of substantive provisions to alleviate the
hardships of those who after suffering, in most cases, grievous loss of
property in Pakistan were forced to migrate to the Punjab.
Pausing here, we might mention, and there was
no dispute as to this, that so far as private individuals i.e., all parties
other than the Government of the Union or of the State, were concerned, the
enactments of 1948 and 1951 effected the necessary alterations in the
procedural law as to the forum to which displaced persons could resort in which
proceedings should be instituted to overcome the difficulties consequent on the
entire cause of action having arisen in Pakistan. The contention of the
appellant-State before us was that as regards causes of action against the
State, the matter was left where it was.
The judgment of the Full Bench of the High
Court negativing this contention is an elaborate one, but its reasoning may be
summarised as resting on the following postulates:
unless there was 400 an explicit exemption of
the State from the operation of any particular statute, the State was bound by
its provisions, (2) that the object of the Displaced Persons (Institution of
Suits.) Act of 1948 and the present Act was to supplement the Independence (Liabilities)
Order, 1947 and to furnish the adjectival relief to the substantive rights
conferred by it against the State, (3) that unless the construction contended
for by the respondent was accepted, most persons who had claims against the
State of the type contemplated by para (3) of the Independence (Liabilities)
Order, 1947 would be remedy less-a circumstance which would be repugnant to the
basic idea underlying the Indian Independence (Rights, Property &
Liabilities) Order, (1947). The learned Advocate-General contested the
correctness of each one of these and submitted to us an elaborate argument
which may be summarised thus:
(1)This Court has, in Director of Rationing
and Distribution v. The Corporation of Calcutta & Ors.,(1) accepted as
correct the rule of construction adopted in the U.K. that the State is not
bound by a statute unless it is so provided in express terms or by necessary
implication.
Applying this principle of interpretation to
the terms of the Act, far from the State being expressly named as being bound,
there are indications arising from the nature and description of the persons
brought within the scope of the enactment which clearly exclude the State and
the obligations of the State from its purview.
(2)The Act was preceded by the Displaced
Persons Suits Act 1948 which employed substantially the same phraseology as the
Act now under consideration. The scope of the earlier Act, viz., the liability
of the Government was the subject of adjudication before the High Court of
Punjab in M/s Nagi Bros. v. The Dominion of India(2), where it had been held
that the provisions of its s. 4 was held not to permit suits against the
Dominion of India for the reason that the State was not a "person"
within its terms. The re-enactment of the law, on the expiry of the Act (1)
[1961] 1.S.C.R. 158.
(2) I.L.R. 4 Punjab 358.
401 of 1948, adopting substantially the same
phraseology in s. 13 and other relevant sections to indicate the
"person" against whom the claim could be made was therefore a
legislative confirmation of that ruling and a strong indication that Parliament
intended the same result.
(3) Lastly, the hardship which might be
caused in cases where claimants might be left without remedy in case the
construction for which he contended was accepted, must in the nature of things
be in a few marginal cases at the most, and even if they were more widespread,
would not by itself be a factor which could weigh either to rebut the
presumptive rule that statutes do not bind the State, or the other argument
arising from legislative confirmation of previous judicial construction,
particularly when according to him no ambiguity existed in the construction of
the Act or the language employed in its various relevant provisions.
We shall now proceed to deal with the
submissions in the order in which we have set them out. The learned Advocate General
is right when he says that this Court in Director of Rationing and Distribution
v. The Corporation of Calcutta and Ors.(1) has accepted the continued
applicability of the principle of construction of statutes laid down by the
Privy Council in Province of Bombay v. Municipal Corporation of the City of
Bombay.(2) In the case of Director of Rationing"), s. 386(1) of the
Calcutta Municipal Act forbade any "person" to use or permit to be
used any premises for the purposes named otherwise than or in conformity with
the terms of the licence granted by the corporation. The question that was
considered by this Court was whether the Director of Rationing representing the
Food Department of the Government of West Bengal was subject to this provision.
The High Court of Calcutta had held that in
the absence of any provision in the enactment exempting the Government from the
operation of s. 386 the Government of West Bengal as well (1) [1961] 1 S.C.R.
158 (2) [1946] L.R. 73 I.A. 271.
1/SCI/64-26 402 as the Director of Rationing
were also bound. It was from this decision that the appeal was preferred to
this Court.
This Court allowed the appeal and held that
the decision of the Privy Council in Province of Bombay v. Municipal
Corporation of the City of Bombay(.) laid down the correct rule of
interpretation of statutes and that the coming into force of the Constitution
did not make any difference as regards the applicability of that rule. Sinha
C.J.
observed:
"The rule of interpretation of statutes
adopted in England and applied by the Privy Council to an Indian statute in
Province of Bombay v. Municipal Corporation of the City of Bombay (1946) L.R.
73 I. A. 271) that the State is not bound by a statute unless it is so provided
in express terms or by necessary implication, is still good law." The next
question to be considered is the scope of this rule of construction. In this
connection learned counsel for the respondent drew our attention to the
following paragraph:
"It is well-established that the common
law of England is that the King's prerogative is illustrated by the rule that
the Sovereign is not necessarily bound by a statutory law which binds the
subject. This is further enforced by the rule that the King is not bound by a
statute unless he is expressly named or unless he is bound by necessary
implication or unless the statute, being for the public good, it would be
absurd to exclude the King from it.
Blackstone's Commentaries, (Vol. 1, 261-262)
accurately summed up the legal position as follows:"The King is not bound
by any act of Parliament. unless he be named therein by special and particular
words. The most general words that can be devised...... affect not him in the
least, If they may tend to restrain or diminish (1) [1946] L.R 403 any of his
rights or interests. For it would be of most mischievous consequence to the
public, if the strength of the executive power were liable to be curtailed
without its own express consent by constructions and implication of the
subject. Yet, when an act of Parliament is expressly made for the preservation
of public rights and the suppression of public wrongs, and does not interfere
with the established rights of the crown, it is said to be binding as well upon
the king as upon the subject; and, likewise, the king may take the benefit of
any particular act, though he be not specially named". (Quoted at p. 355
of Holdsworth, A History of English Law, Vol.X) (italics ours).
Based on this passage, particularly the words
italicised, his submission was that the Act now for interpretation is one
enacted for the public good and that consequently the presumption would be that
the executive government was bound by it. We consider that the passage
extracted is not capable of that construction. It has to be read not in vacuo
and divorced from the rest of the judgment but in conjunction with the express
approval of the rule of construction as explained by the Privy Council in
Province of Bombay V. Municipal Corporation of the City of Bombay(-) Lord du
Parcq dealt with the submission regarding statutes "enacted for the public
good" being exceptions to the rule in these terms:
"It was contended on behalf of the
respondents that whenever a statute is enacted 'for the public good' the Crown,
though not expressly named, must be held to be bound by its provisions and
that, as the Act in question was manifestly in. tended to secure the public
welfare, it must bind the Crown. This contention, which did not meet with
success in the High Court, was again raised before their Lordships. The
proposition which the respondents thus sought to maintain is supported by early
authority, and is to be found in Bacon's Abridgment and other textbooks (1)
[1946] L.R. 73 I.A, 271 404 but in their Lordships' opinion it cannot now be
regarded as sound except in a strictly limited sense. Every statute might be
supposed to be 'for the public good', at least in intention, and even when, as
in the present case, it is apparent that one object of the legislature is to
promote the welfare and convenience of a large body of the King's subjects by
giving extensive powers to a local authority, it cannot be said, consistently
with the decided cases, that the Crown is necessarily bound by the
enactment." We consider that the principle here explained should also be
deemed to have been approved of and accepted by this Court in the Director of
Rationing case") In another passage in the same judgment Lord du Parcq
explained the scope and ambit of the rule which have in terms relevance to the
question arising in these appeals. The learned Lord said:
"The general principle to be applied in
considering whether or not the Crown is bound by general words in a statute is
not in doubt.
The maxim of the law in early times was that
no statute bound the Crown unless the Crown was expressly named
therein.............. But the rule so laid down is subject to at least one
exception. The Crown may be bound, as has often been said, 'by necessary
implication'.
If, that is to say, it is manifest from the
very terms of the statute, that it was the intention of the legislature that
the Crown should be bound, then the result is the same as if the Crown had been
expressly named. It must then be inferred that the Crown, by assenting to the
law, agreed to be bound by its provisions".
He added a little later:
"In the present case the High Court
disposed of the submission by a finding that, on the material before them, it
was not shown to be for the public good that the Crown should be bound by the
Municipal Act. This is, perhaps, not a wholly satisfactory way of dealing with
the (1) [1961] 1 S.C.R. 158.
405 respondents' contention, which was, not
that the court must consider whether it is for the public good that the Crown
should be bound by a particular Act, but that wherever an Act is 'for the
public good' it must be taken to bind the Crown. Their Lordships prefer to say
that the apparent purpose of the statute is one element, and may be an
important element, to be considered when an intention to bind the Crown is
alleged. If it can be affirmed that, at the time when the statute was passed
and received the royal sanction, it was apparent from its terms that its
beneficent purpose must be wholly frustrated unless the Crown were bound, then
it may be inferred that the Crown has agreed to be bound" In the view we
take of the construction of the provisions of the Act before us, in the light
of the principles of construction formulated by Lord du Parcq, we do not consider
it necessary to examine whether there are any further limitations,
qualifications or exceptions to the rule as applied to Indian statutes as have
been accepted in the United Kingdom which have been set out and expounded at
pages 438-443 of the sixth edition of Craies on Statute Law.
We shall therefore proceed to examine the
provisions of the Act on the footing that the test for determining whether the
Government is bound by a statute is whether it is expressly named in the
provision which it is contended binds it, or whether it "is manifest that
from the terms of the statute, that it was the intention of the legislature
that it shall be bound", and that the intention to bind would be clearly
made out if the beneficent purpose of the statute would be wholly frustrated
unless the Government were bound. We might here point out that a question such
as has now arisen has been before this Court on at least two earlier occasions.
In the State of Bihar v. Rani Sonabati Kumari(1) the question raised was
whether Government was bound by the provisions of O. XXXIX. r. 2(3) of the
Civil Procedure Code where the expression (1) [1961) 1 S.C.R. 728.
406 used to designate the party subject to be
proceeded against was "person". This Court held that in the context
of the other provisions of the Order and the other relevant law, the word
"person" was intended to include in its connotation the state where
it was a party against whom any order of injunction had been passed. A similar
question also arose in The State of West Bengal v. The Union of India"'
filed in this Court against the Union of India and others. Sinha, C.J. speaking
for the majority observed:
"The rule that the State is not bound,
unless it is expressy named or by necessary implication in the statute is one
of interpretation. In considering the true meaning of words or expression used
by the Legislature the Court must have regard to the aim, object and scope of
the statute to be read in its entirety. The Court must ascertain the intention
of the Legislature by directing its attention not merely to the clauses to be
construed but to the entire statute; it must compare the clause with the other
parts of the law, and the setting in which the clause to be interpreted
occurs." We shall therefore proceed to consider the terms of the Act in
the light of these principles and see whether debts due to displaced persons by
the Government are within its scope, by reason either of the words used or by
reason of the same being necessitated by the policy, purpose or provisions of
the Act.
As regards the phraseology used in the
enactment, the submission of the learned Advocate-General was simple.
Assuming that on the merits the claims made
by the contesting respondents in the several appeals were enforceable against
the State of Punjab he submitted that the earlier legislation referred to by
the learned Judges of the Full Bench could not and did not materially assist in
the construction of the Act. Under s. 8 of the Indian Independence (1) [1964] 1
S.C.R. 371.
407 (Rights, Property & Liabilities)
Order, 1947, the right of the respondents would, reading it along with Art. 300
of the Constitution, be merely a right to institute a suit and that could be no
justification for holding that the respondents were conferred rights to file
applications under s. 13 of the Act unless its terms were satisfied. In order
that a claim may fall within s. 13 it should satisfy the requirements of the
section relating to the nature of the claim: (1) it must be to a displaced
creditor (that, of course, was satisfied in the sense that he was a displaced
person to whom amounts were due; (2) such a person must be claiming "a
debt" i.e., a debt falling within s. 2(6) (c) i.e., a debt due from
"a person" "ordinarily residing" in the territories to
which the Act extends, and (3) such person should be one who is not a
"displaced person." "Person" is not defined in the Act, but
in the absence of any express provision there for or by reason of any necessary
implication arising from the provisions of the Act, the State or the Government
of the State would not be a 'person'. This was particularly so in view of the
description of the "person" referred to or described in the relevant
provisions viz., of whom it could be said that he " actually or voluntarily
resided" or "carried on business or personally worked for gain".
It is only "a person" who had these attributes or to whom these
characteristics could be attributed that was intended to be brought within the
term 'person' and as it could not be said of the State that it either
"voluntarily resided" or "carried on business" or
"personally worked for gain" such a body was not within the
contemplation of the expression 'person' against whom claims could be made
under the section. In support of this submission, based on the connotation of
the term 'person' as used in this Act, we were referred to the decision of the
Bombay High Court pronounced by Chagla, C.J. in which the identical question
now debated before us viz., the construction of s. 13 of the Act was considered
and it was held that no application under that section could be made against
the Union Government. The learned Advocate-General 408 naturally relied very
strongly on this judgment as correctly interpreting s. 13 and his complaint was
that the learned Judges of the Full Bench of the Punjab High Court when dealing
with this question in the proceedings which had given rise to these appeals,
were in error in refusing to follow the decision of the Bombay High Court.
The decision of the Bombay High Court is reported
in Advani v. Union of India(1). An application under s. 13 of the Act had been
filed before the Judge of the City Civil Court Bombay-the appropriate tribunal
under the Act-making a claim against the Union of India. The learned Judge who
heard the application took the view that the Union of India was not bound by
Act LXX of 1951 and that s. 13 would not enable a displaced person to make an
application against the Union of India. The matter was brought up in appeal to
the High Court and the learned Judges dismissed the appeal. The reasoning
adopted for their conclusion was exactly identical with the submissions made to
us on the construction of s. 13 we have summarised a little while before which
laid stress on the definition of "debt" in s. 2(6)(c) being
inappropriate to a debt owed by a State having regard to the description of the
person by whom it was payable. The question whether the Union of India would be
"a person ordinarily residing in the territory of India to which the Act
extends" was, in this context, examined in great detail, on the assumption
that the Union of India might be "a person' i.e., an artificial or a
juristic "person" within the Act. Chagla, C.J. then referred to a
long catena of cases in which it had been held that it could not be predicated
that the Government resided in any place or that it carried on any business in
any particular place. It was, therefore, held that the claim made was not a
debt under s. 2(6)(c) and therefore the application was not maintainable.
We see force in the submission of the learned
Advocate General and if the matter bad to be decided solely on the basis of the
expressions used to define the word "debt" (1) I L.R. 1955 Bom. 970.
409 and the description of the
"person" against whom proceedings could be taken under s. 13 of the
Act, there would undoubtedly be grave difficulties in the way of accepting the
view that "person" was intended to include the Government of the
Union or of the State.
But the matter does not stop here, and the
question depending, as it is, on "the intention of the legislature"
cannot be answered without an examination of the provisions and purposes of the
Act for ascertaining as Lord du Parcq said, "whether its beneficent
purpose would be wholly frustrated unless the Crown were bound". It was
the same enquiry that was envisaged by this Court when it said in the West
Bengal suit(1) "The Court must ascertain the intention of the legislature
by directing its attention not merely to the clauses to be construed but to the
entire statute; it must compare the clause with the other parts of the law, and
the setting in which the clause to be interpreted occurs." Before,
however, we do so, it is necessary to advert to an argument addressed to us by
the respondent that the expression "person" used in the Act must be
held to include the State, inasmuch as not merely natural persons but
artificial and juristic entities like companies and corporations as well as
unincorporated bodies are expressly brought within the Act. In this connection
strong reliance was placed on the definition of 'displaced person' according to
which only 'banking companies' were excluded thus indicating that other
companies were within it. If companies other than banking-companies, besides
firms and associations of persons were included in the word 'person' it was
submitted for the respondent, there was no anomaly or impropriety in including
the State also as an entity which could be comprehended by the word 'person'.
It was urged that if the reason for excluding the State from the connotation of
the expression "person" was that no "actual or (1) [1964] 1
S.C.R. 371.
410 voluntary residence" could be
attributed to it, the same would equally apply to companies, as well as firms
and associations of persons in regard to whom no doubt was cast on their being
included within the scope of the Act. In this connection it was point%-,-' out
that it was only in a very notional or artificial sense that residence could be
attributed to artificial persons like firms or unincorporated associations or
to corporations, the submission being that if these bodies could be included
there was no reason why the concept of notional residence could not be extended
to a juristic entity like a State.
The learned Advocate-General submitted to us
an elaborate and erudite argument as to whether the State was a corporation in
any sense, the conclusion which he desired us to draw being that though the
State was a body politic, it had not the characteristics of a corporation. In
this connection he referred us to various writers on Public International Law
and on Political Science and to certain decisions of the American Courts. We do
not, however, feel called upon to examine these submissions and pronounce upon
their correctness in view of the conclusion we have reached on a construction
of the provisions of the Act. We would, however, make two observations: (1)
that the mere fact that certain artificial entities like corporations are
brought within the scope of the Act, would not by itself rebut the presumptive
rule of construction that the State is not bound by a statute unless it is
brought within its scope expressly or by necessary implication, (2) it would
not be correct to say that the State is not a constitutional or even juristic
entity for the reason that it does not partake the characteristics of or
satisfy in whole, the definition of a corporation. The State is an organised
political institution which has several of the attributes of a corporation.
Under Art. 300 of the Constitution, the Government of the Union and the
Government of a State are enabled to sue and be sued in the name of Union of
India and of the Government of the State, as the case may be. It would not,
therefore, be improper to speak of the 411 Union and the State as
constitutional entities which have attributes defined by the Constitution.
From the above it follows that the respondent
does not gain any advantage for the decision of the matter now under debate by
being able to establish that the State or the Government of a State is an
entity nor the appellant by demonstrating that the State is not a juristic
person of the same type as a corporation. We do not therefore propose to deal
any further with this point.
We shall now proceed to detail the
substantive provisions of the enactment which bear upon the question now at
issue.
That it was a beneficent piece of legislation
enacted to afford relief to persons who had suffered displacement by reason of
the partition is not in dispute. The hardship which such persons suffered
either as creditors or as debtors was the subject of alleviation by the Act. In
broad outline without going into minute details the substance of the remedial
provisions was this: As regards displaced creditors the relief afforded to them
was by permitting them an inexpensive procedure for enforcing their claims
together with prescribing the forum which made substantial departures from the
principles which underlay s. 20 of the Civil Procedure Code which obviously
could not wholly fit into the problems created by partition. The relief
afforded to displaced debtors was naturally more extensive. Besides certain
special provisions in respect of secured debts there were elaborate provisions
for scaling down debts due to unsecured creditors, the principle underlying being
that the debtor should be left with enough to live, while the creditors should
between themselves take the entirety of the property save that which was left
to the debtor. There was a sort of distribution of the assets among the proved
creditors. The benefits provided for the displaced debtor and to the displaced
creditor were an integrated scheme; the one running into the other.
Chapter 11 in which s. 13 occurs is headed
'Debt Adjustment Proceedings'. It opens with 412 s.5 which deals with
applications by displaced debtors for the adjustment of their debts. That
section runs, to quote only the material words:
"A displaced debtor may make an
application for the adjustment of his debts, to the Tribunal within the local
limits of whose jurisdiction he actually and voluntarily resides, or carries on
business or personally works for gain." Sub-section (2) specifies what the
application shall contain and among the matters to be included in the
application are:
(1) a schedule containing full particulars of
all his debts, whether owed jointly or individually, with the names and
addresses of his creditors and his joint debtors.................. (2) a
schedule of all his properties, both movable and immovable, including claims
due to him. The purpose of these schedules would be apparent from s. 32 which
deals with the manner in which the debts of a displaced debtor are to be scaled
down and to which we shall draw attention later. Sections 6 to 9 lay down the
procedure regarding applications made under s. 5, the object of the procedure
being the ascertainment of the total of the debts owing by a displaced debtor
and the total amount of his assets, the relief which the Act grants on the
basis of this ascertainment being the subject matter of later provisions.
Sections 10 to 14 deal with the converse case of claims by displaced creditors
first against displaced debtors and next against debtors who are not displaced
debtors. In their case also the procedure is directed to the ascertainment of
the genuineness and the quantum of the claims in the presence of the interested
parties. The interrelation between these two sets of provisions is perhaps
brought out by s. 11 which enacts:
"Procedure on creditor's petition.(1)
Where an application under section 10 has been made, the Tribunal shall cause
notice thereof to be served on the displaced debtor calling upon him either to
show cause, if any, against the application or to make an application on his
own behalf under section 5.
413 (2) If, in response to a notice under subsection
1 ),,the displaced debtor makes an application in accordance with the
provisions of section 5, the Tribunal shall proceed further in the matter as if
it had commenced with an application by the displaced debtor under section 5,
and all the other provisions of this Act shall apply accordingly; but, if the
displaced debtor does not choose to make any such application, the Tribunal
shall, after considering such evidence, if any, as may be produced before it,
determine the claim and pass such decree in relation thereto as it thinks fit.
(3) The period of limitation specified in
subsection (1) of section 5 in respect of an application by a displaced debtor
shall not apply to an application made under sub-section (2)." It was
features of this type that we had in mind when we said that the provisions
regarding the relief to displaced debtors and displaced creditors had to be
read together since the Act dealt with them as one integrated whole-the one
running into and determining the other.
Some of the reliefs to which displaced
debtors making applications under ss. 5 and 11 (2) would be entitled are dealt
with in ss. 15, 16 and 17 but to these it is not necessary to refer as they are
not material for the purposes of the point arising for decision. What is, however,
of more immediate relevance are the provisions in Ch. III in which s. 32 occurs
which is headed ]Reliefs'. Section 29 which is the first of the sections in
this Chapter and those following it set out the reliefs which shall be
available to displaced debtors. They include s. 29-Cesser of accrual of
interest, s. 30--Exemption from arrest or imprisonment for the recovery of any
debt, and s. 31 --an enlargement of the scope s. 60 of the Civil Procedure Code
as regards property which shall not be liable to attachment in the case of
" displaced debtors. Next, we come to s. 32. This section runs:
414 "32. Scaling down of debts.-(1)
Where, on the application of a displaced debtor under section 5 or sub-section
(2) of section 11, the Tribunal has determined the amount due in respect of
each debt in accordance with the provisions of this Act, it shall proceed to
determine the paying capacity of the debtor.
(2) If the paying capacity of the debtor is
equal to or exceeds the aggregate sum of all the debts so determined (exclusive
of any debt in respect of which the creditor has elected to retain the security
in accordance with the provisions of section 16), the Tribunal shall pass a
decree for the aggregate sum so determined, specifying the amount due to each
creditor and shall allow repayment thereof in installments, in accordance with
the provisions contained in section 33, unless for reasons to be recorded it
directs otherwise.
(3) If the paying capacity of the debtor is
less than the aggregate sum referred to in sub-section (2), the Tribunal shall
divide the decree into two parts and provide in the first part thereof
(hereinafter referred to as the first part of the decree) that the sum
equivalent to the paying capacity shall, subject to the provisions contained in
section 33, be realised from the assets of the debtor in India, and provide in
the second part thereof (hereinafter referred to as the second part of the
decree) that the balance shall be realised, subject to the provisions contained
in subsection (6), from any compensation which the debtor may receive:
Provided that if no such compensation is
received, the balance shall be irrecoverable.
(4) A creditor who has elected to retain his
security under section 16 shall have no right to realise any money due to him
from the assets of the debtor in India, but nothing in this sub-section shall
affect any of the rights given to him by section 16.
415 (5) A creditor shall have the right at
any time at least six months before the receipt by the debtor of compensation
to apply that the whole or the balance of the first part of the decree, in so
far as any debt due to him is concerned, may be added to the second part of the
decree, and thereupon he shall have no right to realise any money from the
assets of the debtor in India.
(6) For the purposes of this Act, the amount
payable from the compensation for the satisfaction of the second part of the
decree shall be that amount as bears to the aggregate amount of all the debts
in the second part of the decree (including therein. any sum added to it under
sub-section ( 5 ) and the sum determined in favour of the secured creditor in
the manner specified in the proviso to clause (a) of subsection (3) of section
16) as the compensation in respect of the property of the debtor payable to him
under the Displaced Persons (Claims) Act, 1950 (XLIV of 1950) bears to the
verified claim; and the balance of the compensation, if any, shall be refunded
to the displaced debtor.
(7) Every installment paid by the displaced
debtor in respect of the first part of the decree and any sum payable from the
compensation in accordance with sub-section (6) shall be distributed rateably
amongst the decree-holders, if more persons than one are entitled thereto:
Provided that the secured creditor who has
not elected to be treated as an unsecured creditor under section 16 shall be
entitled to a prior charge on the amount payable from the compensation.
(8) Where a displaced person receives
compensation by way of exchange of property, then, subject to the prior charge,
if any, of a creditor under section 16, the aggregate sum payable in respect of
the second part of the decree shall be a second charge upon the property
received by way of exchange bears to the value of the original property 416 verified
and valued under the Displaced Persons (Claims) Act, 1950 (XLIV of 1950).
(9) Where a displaced person makes a default
in the payment of any installment fixed in respect of the first part of the
decree or does not pay the amount determined in accordance with subsection (4)
of section 16 or sub-section (8) of this section for which the first or the
second charge may have been created upon the property received by way of
exchange the creditor may apply for the execution of the decree by the
attachment and sale of the attachable assets of the judgment-debtor or by the
sale of the property obtained by way of exchange upon which the charge has been
created, as the case may be, and the amount realised by such execution shall be
distributed rateably among the decree-holders:
Provided that nothing contained in this
subsection shall affect the rights of any charge-holders.
(10) For the purposes of this Act, where the
compensation is paid in cash, the amount which shall be available for purposes
of satisfaction of the debts in the second part of the decree shall in no case
exceed seventy-five per cent of the amount of such compensation; and where it
is by way of exchange property, the extent of the property which shall be
available for the said purposes shall in no case exceed seventy-five per cent
in value of such property.
Explanation.--In this section the expression
'paying capacity' means the aggregate of the market value of all the attachable
assets in India of the displaced debtor plus the income which is likely to
accrue to him for the next three years succeeding, excluding from the
computation of such income a sum calculated at the rate of two hundred and
fifty rupees a month." It is manifest that the basic idea of s. 32 is as
follows:
When a displaced debtor has made an
application under s. 5 or s. 11(2) the Tribunal first 417 ascertains under ss.
5 to 9 the amount of the debt due in respect of each creditor. Next, it
proceeds to determine "the paying capacity" of the debtor and the
relief open to the displaced debtor, or expressed in another way, the reduction
in the debt which his creditors must suffer, is directly dependent on the
paying capacity compared with the total indebtedness of the displaced debtor.
Now, the question arises how this
"paying capacity" is to be determined. The expression "paying
capacity" is defined by the Explanation to the section as meaning
"the aggregate of the market value of all the attachable assets in India
of the displaced debtor plus the income which is likely to accrue to him for
the next three years succeeding, excluding from the computation of such income
a sum calculated at the rate of two hundred and fifty rupees a month". It
needs little argument to show that a debt which has accrued due to a displaced
debtor from the State would be an attachable asset in India and if this were
so, it is the requirement of s. 32(1) that the Tribunal shall take into account
that asset also for determining "the paying capacity" of the
"debtor". So far as the Explanation to s. 32 is concerned, it could
not be the contention that the expression "attachable assets in India
belonging to the displaced debtor" should be exclusive of the amounts in
regard to which the State is indebted to the displaced debtor. The expression "attachable
assets" would bring in s. 60 of the Civil Procedure Code, and whatever be
the limitations on the execution of decrees against Government under s. 82 of
the Civil Procedure Code, debts due by the State to a judgment debtor are
certainly attachable. The contrary construction of the words in s. 32 viz.,
that debts due by the State are not assets" besides being inconsistent
with the express terms of the Explanation, would also render the entire scheme
of scaling down provided for in sub-ss. (2) to (10) infructuous and unworkable.
The conclusion that for the purpose of s. 32 a debt due by the State is within
the Explanation and that it has to be taken into account for deter1 SCI/64-27
418 mining the paying capacity would appear to be reinforced by s. 47 which runs
in these terms:
"47. Effect of failure on the part of
displaced debtor to disclose certain matters. Where a displaced debtor has not
mentioned in the relevant schedule to his application any debt owing by him or
any property, movable or immovable, belonging to him, whether such property is
liable to attachment or not liable to attachment at all, nothing contained in
this Act shall prevent(a) in the case of the debt, the creditor from
instituting any proceeding for the recovery thereof under any law for the time
being in force other than this Act; and (b) in the case of the property, from
being attached or otherwise dealt with under any such law." It is manifest
that the 'Property' referred to in the schedule prescribed under s. 5(2) (iii),
the expression "attachable assets" in the Explanation to s. 32, and
the words "property movable or immovable" in s. 47 must all bear the
same connotation. If a debt due to a displaced debtor is not within s. 5 it
could not be within the other provisions just now referred to. If that were the
proper construction, the result would be that the displaced debtor could obtain
the entire benefit provided for by s. 32(2) and (3) etc. and later if he
realised any dues from the State keep the same to himself free of the claims of
all his creditors. It is obvious that such a result could not have been
intended and, therefore, it must be held that such a debt as an asset must be
included in the schedule of properties referred to in s. 5 and that so far as
s. 32 is concerned the debts owing by the State to a displaced debtor ought to
be ascertained for determining the paying capacity of the debtor and relief
afforded to the displaced debtor on the basis that such debts due to him are
realisable assets within the scope of the Act. It would follow that the debt
due by the Government or by the State is within the Act by necessary
implication, because the 419 same is necessary for working out the relief to
which a displaced debtor who files an application under s. 5 or s. 11(2) is
entitled. We have already made reference to s. 11.
Its first sub-section deals with an
application by a displaced creditor who seeks to enforce his claim against a
displaced debtor. The second sub-section permits the displaced debtor to make
an application under s. 5 and the two-the claim and what might be called a
cross-claim-have to be considered together, and the relief open to the
displaced person who might be a debtor or a creditor have to be worked out
conjointly.
No doubt, s. 13 is concerned with claims by
displaced creditors against debtors who are not displaced persons as contrasted
with s. 10 under which claims may be made against debtors who are displaced
persons. But this cannot make any difference. It is not possible by any
principle of construction to hold that the debt due by the State to a displaced
debtor is within the Act for the purpose of ascertaining the paying capacity of
the debtor notwithstanding the definition of "debt" in s. 2(6)(c) but
that the State is not within the scope of s. 13 for the purpose of the same
liability being ascertained. This is so because for the very purpose of
determining paying capacity under s. 32 the genuineness and the quantum of the
alleged debt due by the State is the subject of enquiry and adjudication by the
identical tribunal which would be conducting the enquiry and make the decision
if the claim were made under s. 13. Adopting, therefore, the very principle for
which the learned Advocate-General contends we consider that the test
formulated by Lord du Parcq in Province of Bombay v. Municipal Corporation of
the City of Bombay"' :
"......... Its beneficent purpose must
be wholly frustrated unless the Crown were bound, then it may be inferred that
the Crown has agreed to be bound", is satisfied in the case of the
provisions of the Act now before us. That the Act was passed for the (1) [1946]
L.R. 73 I.A. 271.
420 beneficent purpose of affording relief to
those who owing to the disturbances which followed the partition of the country
suffered grievous wrong is not in dispute. What we have stated earlier about
the impact of s. 32 on the scheme of the Act which so far as relief to debtors
is concerned constitutes the core of the enactment would be wholly frustrated
and defeated if the State were not bound by the Act is equally beyond dispute.
There is one other aspect also from which the
question may be viewed. This is as to whether when a displaced debtor owes a
debt to the State he is bound to include that debt in the schedule which he has
to file under s. 5(2)(i). Now, let us see how if such debts are not to be
included, s. 32 would work. The paying capacity would then be determined
without reference to such a debt. The other creditors will receive satisfaction
in the manner laid down in s. 32(2) & (3) etc. but that would obviously be
on the footing that the debts of the displaced debtor are less than what they
really are. When once on the determination of the paying capacity the others
receive adjustments there is no question of the government coming in later to
disturb that arrangement.
What is allowed under s. 32 to the displaced
debtor cannot be the subject of any attachment or seizure by government for the
payment of debts because s. 3 of the Act enacts:
"3. Over-riding effect of the Act, rules
and orders Save as otherwise expressly provided in this Act, the provisions of
this Act and of the rules and orders made there under s hall have effect
notwithstanding anything inconsistent therewith contained in any other law for
the time being in force, or in any decree or order of a court, or in any
contract between the parties." Every other law, decree of court having
been superseded, the government would be left without remedy to realise its
dues.
Section 32 contemplates a balancing of
credits and debits with a view to adjust them in a manner consonant with equity
and the justice 421 of the case as felt by the legislature. The entire scheme
will go awry and the balance and harmony which are intended to be brought in
would be nullified and on the other hand disharmony brought into the working of
the Act if the contention which the learned Advocate-General supports were
accepted.
Before concluding, it is necessary to add
that before holding that the presumptive rule of the State not being bound by
the provisions of any statute has been overborne by necessary implication
arising from an examination of its purpose and provisions we have taken due
account of the language used in the Act both in s. 13 as well as in the
definition of 'debt' and have arrived at the conclusion that that language is
not intractable nor such as to create any insuperable obstacle in the way of
such a construction.
Undoubtedly if s. 13 stood by itself read in
conjunction with the definition of 'debt' in s. 2 (6), the submission that a
debt due by Government was not within them might have weight. But there is
nothing in s. 13 which would negative the construction at which we have arrived
after considering the scheme and purpose of the Act. Taking first the terms of
s. 13, the contention that debts due by the Government are not within the scope
of the provision, is in ultimate analysis based on the last portion of the
section which speaks of "actual and voluntary residence" and
"carrying on business" not being capable of being attributed to the
Government. If, in this context, one looked at s. 20 of the Civil Procedure
Code it will be found that when it dealt with Companies and artificial persons
it was not so much the residence as the situs where the business was carried on
that was treated as being relevant for determining the forum, for Explanation
II to s. 20 reads:
"A corporation shall be deemed to carry
on business at its sole or principal office in India or, in respect of any
cause of action arising at any place where it has also a subordinate office, at
such place", 422 thus departing somewhat from the concept of notional
residence attributed to artificial bodies like trading corporations in the law
relating to income-tax. Expressed differently s. 13 proceeds on the basis of
equating the notional residence of artificial persons or bodies with the actual
residence of natural persons and it is thus that though actual residence could
not be attributed to companies, it is admitted that debts owing by them are
within s. 13 of the Act. It is, therefore, obvious that the reference to
"actual residence" in s. 13 is due to the circumstance that primarily
natural persons are intended to be included by the use of the words "any
other person" and the qualification of residence was necessary to be added
in order to fix the forum in which applications claiming sums due from them
ought to be filed. From this, however, it would not follow that every attribute
referred to should be satisfied by "every person" against whom claims
could be filed. The next question is whether there is any thing which is
clearly discernible in s. 2(6) which could be held to negative the construction
of a State being brought within the scope of the enactment. Confining oneself
to what is strictly material "Debt" is defined as a pecuniary
liability due to a "displaced person" from "any other
person" ordinarily residing in the territory to which the Act extends. It
was because of the circumstance that such a condition of residence would not be
apt in the case of a State or Government as regards which no residence could be
attributed, that it was said that the debt due by a State was not within the
definition. That is, no doubt, a weighty argument and if it stood alone its
effect could be overwhelming, but as against it, it must be noticed that it is
really a part of the definition which has to be applied in the absence of
anything to the contrary in the context and if on a consideration of s. 13 and
the other relevant provisions to which we have referred it was the intention of
the enactment not to exclude the State from its operation, the definition
clause could not per se negative such a construction. The definition would, in
the context of the other pro423 visions, be read as applying the test of
"residence" or "of carrying on business" exclusively to
natural or artificial persons to whom such conditions would be apt.
The second point urged by the learned
Advocate-General was about the legislative confirmation of the meaning of the
word "person" as excluding the State. We have already referred to the
Displaced Persons (Institution of Suits) Act, 1948 and the circumstances in
which it was enacted and the terms of its s. 4. It is the interpretation which
this section received in M/s Nagi Bros. v. The Dominion of India('-) a decision
of the High Court of Punjab that forms the basis of the contention now under
discussion. The question that arose for decision was whether the terms of s. 4
could be availed of by a displaced person to file a suit against the Union of
India, the contention of the latter being that it could be sued only in a court
which had territorial jurisdiction over the area where the cause of action
arose and that since it could not be said to actually and voluntarily reside or
carry on business or personally work for gain in any place in India, it could
not be comprehended within the term "person" in s. 4. This contention
was accepted by the Punjab High Court. Under the general procedural law of
India, as embodied in the Civil Procedure Code, a suit in respect of a transitory
or personal cause of action could be filed only (a) in a court within the
territorial jurisdiction of which the cause of action in whole or in part
arose, or (b) in the territorial jurisdiction of the court where a defendant,
or if the defendants were more than one by one of them, voluntarily and
ordinarily resided or carried on his business (vide s. 20 of the Civil
Procedure Code). A long line of decisions starting from very early days had
construed s. 20 of the Civil Procedure Code and had held that the Government
either of the State or at the Centre--could not be said to reside ordinarily
and voluntarily at any particular place, nor to carry on business at any place,
with the result that where a suit had to be filed against the Government which
was permitted and authorised (1) I.L.R. 4 Punjab 358.
424 by the provisions of the Constitutional
enactments to which we have referred, the suit could be instituted only in a
court with territorial jurisdiction over the place where the cause of action
for the suit arose. Kapur, J. who rendered the decision held, following these
earlier rulings on the construction of the Civil Procedure Code, particularly
s. 20 and other like enactments, that the provisions of s. 4 which enabled
suits to be filed in India notwithstanding that the cause of action arose in
Pakistan could not be availed of by displaced persons to file suits against the
Government-of the State or of the Union.
The net result of this construction was that
in cases where no part of the action arose within India, no suit could be
instituted against the State or the Union Government notwithstanding that by
the combined operation of the Independence (Liabilities) Order, 1947 read with
either s. 176 of the Government of India Act, or Art. 300 of the Constitution,
as the case may be, a liability was cast on the Government of the State and the
Union to make good a claim. This result might be unfortunate but if it was
designed, there was no escape from that conclusion.
The argument of the learned Advocate-General
was that when this enactment of 1948 lapsed by efflux of time in 1951, its
place was taken by the Act and that as the same word "person" with
the qualifying expressions indicating his or its residence or place of business
were repeated in the Act without any specific provision for claims against the
State, Parliament must be taken to have affirmed this decision, adopting its
reasoning and that consequently, in any event, the general rule of
interpretation about the State not being bound by an enactment in which it is
not named expressly or by necessary implication was doubly attracted and
reinforced.
We are clearly of the view that this argument
does not deserve to be accepted. In the first place, we, are concerned solely
with the interpretation of the Act of 1951 and unless there was an. ambiguity
it would be impermissible to refer to any previous 425 legislation for
construing the words in it. The examination we have made of the Act read in
conjunction with the purposes it seeks to achieve which are manifest in its
various provisions have led us unmistakably to the conclusion which we have
expressed earlier. In the circumstances, there is no scope for invoking this
external aid to the construction of the expressions used in the Act.
Secondly, the scope of the two enactments
viz., the Act of 1948 and that of 1951 are widely different, and the latter has
a definitely more extended scope and is designed to secure substantive
advantages to displaced persons which were wholly foreign to the earlier law which
was but of very limited scope. Therefore even if the language used in the two
enactments were identical -which is not even the case here-the same conclusion
would not necessarily follow having regard to the differing scopes of the two
pieces of legislation. It could not therefore be said that the two Acts are in
pari materia so as to attract the rule relied on. Lastly, the rule of
construction which is certainly not one of a compelling nature, is generally
adopted in the construction of consolidating enactments where provisions which
have appeared in earlier repealed statutes which have received an uniform and
accepted judicial interpretation are re-enacted. Obviously that is not the case
here. In the circumstances, we consider it unnecessary to examine whether this
solitary decision on the construction of s. 4 of the Act of 1948, was correct.
We have, therefore, no hesitation in rejecting the second point urged.
The last submission was that the learned
judges were not right in considering that unless the construction of s. 13
which they accepted was correct, almost the entire body of displaced creditors
would be without a remedy in respect of their claims against the Government of
the State and the Union. Though the learned Advocate-General started by saying
that in every case in which there could be a cause of action against the State
Government under para 8 of the Indian Independence (Liabilities) Order, 1947, a
suit would 426 lie after partition, even on the basis of s. 20 of the Civil
Procedure Code, he had to concede that in a number of cases the party would be
without a remedy. Apart from this admission, we consider that in a large number
of cases the cause of action would have arisen in Lahore where the contract
with the Government of the Province of Punjab was concluded and it is possible
that no part of the cause of action might arise in India so as to permit a suit
against the Government of the Punjab or of the Union if the provisions of the
Civil Procedure determined the forum there for. In our judgment nothing turns
on the exact proportion of the cases where the party would be without a remedy.
If the terms of the enactment were ambiguous and had to be interpreted in the
light of the circumstance whether the one construction or the other would leave
parties without a remedy, then in that event something might depend on whether
it was only a marginal case that was beyond the provisions of the Act or the
bulk of the cases.
That, however, is not the position here. We
have arrived at the construction of the provisions of the Act, without
reference to the hardship which the opposite view might cause to particular
displaced creditors. It is for this reason that we say that the question of the
relative number of creditors who would suffer hardship is not strictly material
for the decision. We have, therefore, thought it unnecessary to examine the
precise circumstances in which displaced creditors might or might not be in a
position to institute suits against the State Government to enforce claims
which fell within para 8 of the Independence (Liabilities) Order, 1947.
In these circumstances, we consider, though
for different reasons that the conclusion of the High Court was right and that
the revision petitions were properly rejected.
The appeals therefore fail and are dismissed
with costs,-one bearing fee.
Appeals dismissed.
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