judgement:
Civil Appeal No. 321 (N) of 1970.
From the judgment and order dated the 30th July, 1968 of the Assam & Nagaland High Court at Gauhati in Civil Rule No. 420 of 1966.
S.K. Nandy and Krishna Prosad for the Appellants.
S.N. Choudhary for the Respondents.
The Judgment of the Court was delivered by VARADARAJAN, J.
This appeal by special leave is by the respondents in Civil Rule 420 of 1966 against the Judgment and order dated 30th July, 1968 passed by the Division Bench of the 556 High Court of Assam and Nagaland, allowing the Writ petition with no order as to costs.
That writ petition was filed under article 226 of the Constitution for quashing the order of requisition issued by the Deputy Commissioner, Lakhmipur Dibrugarh, the second appellant in this appeal and the first respondent in the writ petition under Memo No. LA/27511 15/R dated 25.10.1966.
The Memo was issued in exercise of the powers conferred by section 29 (i) of the Defence of India Act, 1962 (51 of 1962) read with the Notification of the Government of India, Ministry of Home Affairs No.
S.O. 1888 dated 10th June, 1965 in respect of the properties described in the schedule attached thereto viz. Sookerating Tea Estate and Budla Beta Tea Estates, situate in Dum Duma, Mauza Lakhmipur District on the ground that the lands were necessary for securing the defence of the country and efficient conduct of military operations.
During the Second World War, in 1940 the Government of India acquired for defence purposes a part of Sookerating Tea Estate with its adjoining lands measuring in all 769.20 acres for constructing an air field.
The air field was constructed over an area of 469 acres and on the remaining 300.20 acres there were tea bushes which were growing wild and overgrown with thick jungles.
After the war was over, the area on which the air field had been constructed viz. 469 acres was transferred to the State Government for its use.
In the writ petition it was stated that area was still Lying unused.
The Government of India wanted to lease out the said 300.20 acres to some established tea planters with a view to earn foreign exchange.
The respondent, a registered partnership firm owning the Bagrodia Tea Estate negotiated with the Estates Military officer, Assam Circle at Shillong and the Ministry of .
Defence, Government of India and entered into an agreement of lease dated 2.3.1962 in respect of the land on a rent of Rs. 6304.20 per annum for a term of one year renewable for a period of one year at a time if the land was not required by the lessor.
The respondent took possession of the land on 10.3.1962 after paying the annual rent in advance on 2.3.1962.
It was alleged in the writ petition that the respondent thereafter improved the land at a cost of Rs. 1,75,000/ and made it into a well managed tea garden.
The Military Estates officer was putting off the execution of the lease deed on some pretext or the other, though the respondent had deposited the requisite stamp papers for the execution of the lease deed.
When the respondent approached the Government of India through a Member of Parliament, the Deputy Minister for Defence 557 informed the Member of Parliament by his letter dated 20.12.1962 that the land was required for defence purposes and that it would not be possible to extend the current lease.
Subsequently the Defence Minister informed the Member of Parliament by his letter dated 1.4.1963 that as several tea planters have evinced interest in the estate it was decided to auction the leasehold right in the land on an annual basis subject to the condition that the land might be resumed for defence purposes at short notice.
No action was taken on the respondent 's request made on 25 1.1963 for renewal of the lease.
But the Military Estate officer, Jorhat Circle, the 4th appellant, issued a notice on 20.3.1963 for leasing the land for one year by public auction.
The respondent filed a writ petition in the High Court and obtained rule nisi as well as an interim order restraining the appellants from giving effect to the said notice dated 20.3.1963.
The petition filed by the appellants on 28.5.1963 for restraining the respondent from plucking tea leaves was rejected.
The respondent filed Title Suit No. 30 of 1963 in the Court of the Subordinate Judge, Upper Assam Districts, Dibrugarh on 18.7.1963 for certain reliefs including confirmation of possession of the land and specific performance of the agreement to lease and obtained an interim.
injunction restraining the appellants from interfering with the possession of the land.
The writ petition was not pressed in view of the institution of Title Suit No. 30 of 1963 by the respondent.
The respondent filed Title Suits Nos. 6 of 1964 and 13 of 1965 in the same Court praying for the same reliefs in respect of the years 1964 and 1965 and obtained temporary injunction.
The respondent filed Title Suit No. 4 of 1966 in the same court for the same relief.
All those suits were pending on the date of institution of the present writ petition.
The respondent received the impugned order of requisition on 26.10.1966 from the second appellant and Subsequently filed the present writ petition for the aforesaid reliefs on several grounds.
The appellants in this appeal and other respondents in the writ petition filed counter affidavits opposing the petition and contending inter alia that the question of requisition of the land for defence purposes has been decided upon by the Government of India and the impugned order is bonafide and has been made by the competent authority under the Defence of India Act.
Two contentions were urged before the Division Bench of the High Court on behalf of the respondent.
The first was that the second appellant, the Deputy Commissioner, Dibrugarh, who has 558 issued the impugned order has stated in the order that in his opinion it was necessary to requisition the property, and it was urged before the learned Judges of the High Court that the Deputy Commissioner was not competent to form the opinion.
Section 29 (I) of the Defence of India Act, 1962 (Sl of 1962) reads: (1) "Notwithstanding anything contained in any other law for the time being in force, if in the opinion of the Central Government or the State Government it is necessary or expedient so to do for securing the defence of India, civil defence, public safety, maintenance of public order or efficient conduct of Military operations, or for maintaining supplies and services essential to the life of the Community that Government may by order in writing requisition any immovable property and may make such further orders as appear to that Government to be necessary or expedient in connection with the requisitioning: Provided that no property or part thereof which is exclusively used by the public for religious worship shall be requisitioned.
" Clauses (a), (b) and (c) of Section 40(I) of the Defence of India Act provide for delegation of the power or duty under the Act or by any rule made thereunder and read: Section 40 Power to delegate: (i) The Central Government may by order, direct that any power or duty which by this Act or by any rule made under this Act is conferred or imposed upon the Central Government shall, in such circumstances and under such conditions, if any, as may be specified in the direction be exercised or discharged also, (a) by any officer or authority subordinate to the Central Government, or (b) whether or not the power or duty relates to a matter with respect to which a State Legislature has power to make laws, by any State 559 Government or by any officer or authority subordinate to such Government, or (c) by any other authority.
" The opinion that the land is necessary for defence purposes can be formed in view of section 40(I) (c) of the Defcnce of India Act by any authority to whom the power to requisition under section 29 (1) of that Act has been delegated by the Government of India.
The Ministry of Home Affairs had, by Notification No. S.O. 1888 dated 10.6.1965 published in the Gazette of India (Extraordinary) dated 11.6.1965, delegated the power conferred by section 29 of the Act to all Collectors, District Magistrates, Additional District Magistrates and Deputy Commissioners in the States and all Political officers in the North Eastern Front Area.
The learned Judges of the High Court have held that the Notification is valid and that the delegation can be unrestricted and found the first contention to be untenable.
No argument was advanced before us by learned counsel for the respondent in regard to that contention.
The first contention has, therefore, to be held to be untenable.
The second contention urged before the High Court successfully on behalf of the respondent was that the impugned order of requisition is malafide.
There can be no doubt that if any authority exercised any power conferred on him by law in bad faith or for collateral purpose, it is an abuse of power and a fraud on the statute.
In such a case there can be no difficulty in striking down that act of the authority by the issue of an appropriate writ under article 226 of the Constitution.
It is true that the Deputy Minister for Defence informed the Member of Parliament who appears to have been pleading for the respondent by his letter dated 20.12.1962 (annexure 'C ' to the writ petition) that the current lease of the land could not be extended because the land was required for defence purposes and that in the subsequent letter dated 1.4.1963 (annexure 'D ' to the writ petition) the then Minister for Defence had informed the said Member of Parliament that since several tea planters have evinced interest in the land it would be in the public interest to auction the leasehold right only on an yearly basis subject to the condition that the land can be resumed at short notice for defence purposes.
In his affidavit the Deputy Commissioner, Lakhimpur, the second appellant has stated that the land was not required for defence purposes until 1964 and that the need for defence purposes arose thereafter and the impugned order was issued.
560 It must be noted in this connection that it was not disputed before us that the war with Pakistan started in June 1965.
This Court could even take judicial notice of that fact The impugned requisition order was passed on 25.10.1966.
Therefore, it cannot be stated that there was no need of the land for defence purposes in October 1966 from the mere fact that Deputy Minister for Defence had stated in his letter dated 20 12.1962 referred to above that the current lease could not be extended because the land was required for defence purposes and the Minister for Defence had stated in his letter dated 1.4.1963, referred to above, that as several tea planters have evinced interest in the land it would be in the public interest to auction the leasehold right in the land on a yearly basis alone subject to the condition that it can be resumed at a short notice for defence purposes.
That letter of the Minister for Defence does not altogether rule out the possibility of the land being required for defence purposes at any time and being made available for those purposes at short notice.
Defence requirements may change from time to time depending upon various factors including intelligence reports about the enemy 's movements and preparations for war.
The High Court has held in favour of the respondent on the question of want of bonafides on the part of the appellants on the basis that in the aforesaid title suits filed by the respondent it was not pleaded by the appellants that the land was required for defence purposes.
The learned Judges of the High Court appear to have accepted the submission made before them on behalf of the respondent in this appeal that no such plea had been raised in the pleadings in the title suits filed by the respondent.
That submission is incorrect, and it is unfortunate that the attention of the learned Judges had not been invited to the material on record to ., show that such a contention was in fact put forward by the 4th appellant in his pleading in the title suits.
In the auction notice (annexure 'E ') dated 20.3.1963 itself it was stated that the lease will be subject to the condition that whenever the Government needs the land for defence purposes it will be determined by issue of notice giving 30 days time without payment of any compensation.
In the written statement dated 17.7.1965 filed by the 4th appellant in the Title Suit No. 6 of 1965, it was stated in respect of the allegation made in para 26 of the plaint in that suit that since the land is required for defence purposes the defendant was not bound to renew the lease and that even in Title Suit No. 6 of 1964 the defendants have filed written statement contesting the claim of the respondent/plaintiff.
It was also stated in that written statement in regard to the allegations made in para 11 of the plaint that the 561 land is required for defence purposes.
In regard to the allegations in paragraph 26 of the plaint it was contended in the written statement that the land is required for defence purposes and that any lease under the present emergency would be detrimental to the interests of the defence of the country.
Even in the counter affidavit dated 17.7.1965 filed in the application for interim injunction moved in the Title Suit No. 15 of 1965 the 4th appellant had stated that the land is required for defence purposes, and there is no question of holding any auction for lease of the land, that if the order of interim injunction is not vacated the defence preparation of the country will be hampered as the land is urgently needed for defence purposes and the interest of the nation will suffer, that no irreparable loss or damage which cannot be compensated in money would result from vacating the injunction and that on the other hand denying the use of the land for defence purposes at this critical juncture would cause irreparable loss to the Government and the nation as a whole.
In the written statement dated 22.6.1965 filed in Title Suit No. 4 of 1966 the 4th appellant had stated with regard to allegations made in para 11 of the plaint that it is asserted that the land is bonafide required for defence purposes.
Thus it is seen from the materials on record that at least in Title Suits Nos. 15 of 1965 and 4 of 1966, the plea that the land was required urgently for defence purposes was taken by the 4th appellant who appears to have put forward the defence of the appellants in this appeal as a whole.
The learned judges of the High Court were, therefore, not right in observing in their judgment that the intention of the Government is to lease the land to the highest bidder in the hope of getting a large amount of money because the land had been developed into a working tea garden, that the purpose cannot be said to be bonafide and that it must be held that the land is being requisitioned only for collateral purposes.
The only basis for this inference of the learned Judges of the High Court is the supposed failure of the defendants in the title suits filed by the respondent to take the plea that the land is required for defence purposes.
That basis being found to be wrong and unavailable.
it is not possible to agree with the learned Judges of the High Court that the requirement of the land for defence purposes was not bonafide.
The Government of India whose case the 4th appellant had put forward in the respondent 's title suits as mentioned above is the most competent authority to know when the need for defence purposes will arise or has arisen, and there is no material on record to hold in this case that the land was not required on the date of impugned requisition bonafide for defence purposes and that the appellants were putting forward such 562 a case in the impugned order only as a ruse to auction the land for larger amount of rent.
Under these circumstances we find ourselves unable to uphold the judgment of the learned Judges of the High Court.
We accordingly allow the appeal with costs and dismiss the writ petition.
P.B.R. Appeal allowed.

summary:
On a part of a large area of land acquired by the Government during World War II an aerodrome was constructed and on the remaining 300 odd acres which remained unused a thick jungle grew over the years.
Pursuant to the decision of the Government of India to lease out the unused portion of the land, the respondent entered into an agreement with the Government and took possession of the land after paying one year s rent in advance.
The respondent alleged that, after taking possession of the land, he had spent a large sum of money in clearing the jungle and making it a well managed tea garden.
He also alleged that the concerned Government officials were putting off execution of the lease deed on some pretext or the other.
Having had no satisfactory reply from the Government, the respondent moved the Government of India through a Member of Parliament who was informed that the land was required for defence purposes and that it would not be possible to extend the lease.
A few months later the Defence Minister informed the Member of Parliament that the Government had decided to auction the lease hold right on an annual basis in order that possession of the land could be resumed for defence purposes at short notice.
A notice for public auction was thereafter issued .
The respondent filed a writ petition in the High Court and obtained an order restraining the appellants from auctioning the land.
In the meantime the respondent filed title suits against the Government.
The respondent contended that the auction notice was malafide because having found that the jungle had been cleared and the land had been developed into a workable tea garden, the Government wished to lease the land to the highest bidder for getting a large amount of money and that this was for a collateral purpose. ' The High Court upheld this contention.
555 Allowing the appeal, ^ HELD: If any authority exercised in bad faith or for collateral purpose power conferred on it by law such action would be struck down as an abuse of power and a fraud on the statute.
[559 E F] In the present case however there is much evidence on record to establish that there was no lack of bona fides OD the part of the Government and that the action sought to be taken by it was not for a collateral purpose.
Had the attention of the High Court been drawn to the material on record, there was no possibility of the High Court coming to the conclusion that it did.
Although in 1962 the Deputy Minister for Defence in the first instance informed the member of Parliament, who interceded on behalf of the respondent that the land was required for defence purposes and for that reason it would not be possible to extend the then current lease but later stated that it was decided to lease out the land to the highest bidder by way of public auction on a yearly basis and the Deputy Commissioner in the affidavit had stated that the land was not required for defence purposes until 1964, the need for defence purposes did arise when the war with Pakistan broke out in 1965.
It could not, therefore, h said that the Government did not need the land for defence purposes in 1966 when the order was issued.
Defence requirements depend on many unforeseeable factors.
[559 F H] That apart, the appellants did state right from the beginning that the lease was subject to the condition that whenever the Government needed the land for defence purposes it would be determined by notice without payment of compensation and that the Government was not bound to renew the lease.
[560 F G] There is, therefore, nothing to support the Finding of the High Court that the Government had never put forward the plea that the land would be required for defence purposes at any stage in the title suits and that it was putting forward such a case only as a ruse to auction the land for a larger amount of rent.
[561H]


judgement:
Civil Appeal No. 1376 of 1978.
(Appeal by special leave from the judgment and order dated the 1st February, 1978 of the Kerala High Court in M.F.A. No. 53 of 1977) L.N. Sinha, Attorney General, J. M. Joseph, K John and Shri Narain for the Appellant.
D C.S. Vaidlyanathan, (A.C.), for the Respondent.
The Judgment of the Court was delivered by CHANDRACHUD, C.J.
The question which arises in this appeal by special leave is whether a debt owed by the respondent, an agriculturist, to the appellant The State Bank of Travancore falls within the purview of the Kerala Agriculturists ' Debt Relief Act, 11 of 1970, hereinafter called 'the Act '.
The respondent had an overdraft Account with the Erattupetta Branch of the Kottayam Orient Bank Ltd., at the foot of which he owed a sum of over Rs. 3000/ to the Bank.
The said Bank which was a 'Banking Company ' as defined in the Banking Regulation Act, 1949, was amalgamated with the appellant Bank with effect from June 17, 1961 in pursuance of a scheme of amalgamation prepared by the Reserve Bank of India in exercise of the powers conferred by section 45 (4) of the Banking Regulation Act and sanctioned by the Central Government under sub section (7) of section 45.
Upon the amalgamation, all assets and liabilities of the Kottayam Orient Bank stood transferred to the appellant Bank.
The notification containing the scheme of amalgamation was 342 published in the Gazette of India Extra ordinary dated May 16, 1961 .
The appellant filed a suit (O.S. No. 28 of 1963) in the Sub Court, Meenachil, against the respondent for recovery of the amount due from him in the overdraft Account with the Kottayam Orient Bank, the right to recover which had come to be vested in the appellant as a result of the aforesaid scheme of amalgamation.
That suit was decreed in favour of the appellant, but when it took out execution proceedings in the Sub Court, Kottayam, the respondent filed a petition under section 8 of the Act seeking amendment of the decree in terms of the provisions of the Act.
The respondent claimed that he was an agriculturist within the meaning of the Act and was therefore entitled to the benefit of its provisions, including those relating to the scaling down of debts.
The learned Subordinate Judge assumed, what was evidently not controverted, that the respondent was an agriculturist.
But the learned Judge held that the respondent was not entitled to the benefit of the provision regarding scaling down of the debt because the debt, having been once owed by him to the Kottayam Orient Bank Ltd., which was a 'Banking Company as defined in the Banking Regulation Act, 1949, was outside the purview of section 5 of the Act which provided for the scaling down of debts owed by agriculturists.
According to the learned Judge, the respondent was only entitled to the benefit of the proviso to section 2 (4) (l) of the Act under which the amount could be repaid in eight half yearly instalments.
Since the relief which the respondent had asked for was that his debt should be scaled down and since he was held not entitled to that relief, his application was dismissed by the learned Judge.
The respondent preferred an appeal to the High Court of Kerala, the maintainability of which was challenged by the appellant on the ground that no appeal lay against the order passed by the Subordinate Judge on the application filed by the respondent under section 8 of the Act.
The High Court accepted the preliminary objection but granted permission to the respondent to convert the appeal into a Civil Revision Application and dealt with it as such.
In view of the general importance of the questions involved in the matter, the revision application was referred by a Division Bench to the Full Bench.
It was contended in the High Court on behalf of the appellant, Bank that the debt owed to it by the respondent was excluded 343 from the operation of the Act by reason of section 2 (4) (a) (ii) and section 2 (4) (1) of the Act.
By its judgment dated February 1, 1978 the High Court rejected that contention, allowed the Revision Application and held that the respondent was entitled to all the relevant benefits of the Act, including the benefit scaling down of the debt.
The Bank questions the correctness of that judgment in this appeal.
Section 8 of the Act provides, in so far as is material, that where, before the commencement of the Act, a court has passed a decree for, the repayment of a debt, it shall, on the application of a judgment debtor, who is an agriculturist, apply the provisions of the Act to such a decree and shall amend the decree accordingly.
It is in pursuance of this section that the respondent applied to the executing Court for amendment of the decree.
Section 4(1) of the Act provides that notwithstanding anything contained hl any law or contract or in a decree of any court, but subject to the provisions of sub section (5), an agriculturist may discharge his debts in the manner specified in sub sections (2) and (3).
Sub section (2) of section 4 provides that if any debt is repaid in seventeen equal half yearly instalments together with interest at the rates specified in section 5, the whole debt shall be deemed to be discharged.
Sub section (3) specifies the period within which the instalments have to be paid.
The respondent claims the benefit of the provision contained in section 4 (1) of the Act.
In order to decide whether the respondent is entitled to the relief claimed by him, it would be necessary to consider the provisions of sections 2 (1) and 2 (4) of the Act.
The short title of the Act shows that it was passed in order to give relief to indebted agriculturists in the State of Kerala.
The State Legislature felt the necessity of passing the Act because, the Kerala Agriculturists ' Debt Relief Act, 31 of 1958, conferred benefits on agricultural debtors in respect of debts incurred by them before July 14, 1958 only.
The Statement of objects and Reasons of the Act slows that the agricultural indebtedness amongst the poorer sections of the community showed an upward trend after July 14, 1958 owing to various economic factors.
A more comprehensive legislation was therefore introduced by the State Legislature in the shape of the present Act in substitution of the Act of 1958.
The Act came into force on July 14, 1970.
Section 2 (1) of the Act which defines an "agriculturist" need not be reproduced because it was common ground at all stages bet 344 ween the parties that the respondent is an agriculturist within the meaning of the definition in section 2 (1).
Section 2 (4) of the Act, in so far as is material for our purposes, reads thus: "Section 2 (4):"debt" means any liability in cash or kind, whether secured or unsecured, due from or incurred by an agriculturist on or before the commencement of this Act, whether payable under a contract, or under a decree or order of any court, or otherwise, but does not include: (a) any sum payable to: (i) the Government of Kerala or the Government of India or the Government of any other State or Union territory or any local authority; or (ii) the Reserve Bank of India or the State Bank of India or any subsidiary bank within the meaning of clause (k) of section 2 of the State Bank of India (Subsidiary Act, 1959, or the Travancore Credit Bank (in liquidation) constituted under the Travancore Credit Bank Act, IV of 1113: Provided that the right of the bank to recover the sum did not arise by reason of: (A) any assignment made or (B) any transfer effected by operation of law, subsequent to the 1st day of July, 1957".
As stated above, the respondent is admittedly an agriculturist and he owes a sum of money to the appellant Bank under a decree passed in its favour by the Sub Court, Meenacil, in O.S. No. 28 of 1963.
The liability which the respondent owes to the appellant Bank is therefore a "debt" within the meaning of section 2 (4) of the Act.
But certain liabilities are excluded from the ambit of the definition of "Debt".
The liabilities which are thus excluded from the definition of debt are specified in clauses (a) to (n) of section 2 (4).
We are concerned in this appeal with the liabilities specified in clause (a) (ii) and clause (1) of section 2 (4), which are excluded from 345 the operation of clause 2 (4).
We will first consider the implications of the exclusion provided for in sub clause (ii) of clause (a) of section 2 (4).
Under the aforesaid sub clause, any sum payable to a subsidiary bank within the meaning of section 2 (k) of the , is excluded from the definition of "debt".
Section 2 (k) of the Act of 1959 defines a "subsidiary bank" to mean any new bank, including the Hyderabad Bank and the Saurashtra Bank.
The expression "new bank" is defined in section 2 (f) of the Act of 1959 to mean any of the banks constituted under section 3.
Section 3 provides that with effect from such date, as the Central Government may specify, there shall be constituted the new banks specified in the section.
Clause (f) of section 3 mentions the State Bank of Travancore amongst the new banks which may be constituted under section 3.
It is thus clear that the appellant Bank, namely, the State Bank of Travancore, is a subsidiary bank as contemplated by sub clause (ii) of clause (a) of section 2 (4) of the Act.
If the matter were to rest there, the decretal amount payable by the respondent to the appellant Bank will not be a debt within the meaning of section 2 (4) of the Act, since the appellant is a subsidiary bank within the meaning of section 2 (k) of the .
But by reason of clause (B) of the proviso to section 2 (4) (a) (ii) of the Act, the amount payable to a subsidiary bank is not to be regarded as a debt within the meaning of the Act, only if the right of the subsidiary bank to recover the amount did not arise by reason of any transfer effected by operation of law subsequent to July 1, 1957.
The proviso is thus in the nature of an exception to the exceptions contained in section 2 (4) (a) (ii) of the Act.
The respondent initially owed a sum exceeding Rs. 3000/ to the Erattupetta Branch of the Kottayam Orient Bank Ltd. which was amalgamated with the appellant Bank with effect from June 17, 1961 pursuant to an amalgamation scheme prepared by the Reserve Bank of India.
All the rights, assets and liabilities of the Kottayam Orient Bank were transferred to the appellant Bank as a result of the amalgamation.
The notification containing the scheme of amalgamation was published on May 16, 1961.
Thus, the right of the appellant Bank, though it is a subsidiary Bank, to recover the amount from the respondent arose by reason of a transfer effected by operation of law, namely, the scheme of amalgamation, which came into effect after July 1, 1957.
Since clause (B) of the proviso to section 2 (4) (a) (ii) is attracted, the appellant Bank will not be entitled to the benefit of the exclusion contained in section 2 (4) (a) 346 (ii) of the Act and the respondents claim to the benefits of the Act will remain unaffected by that provision.
That makes it necessary to consider the question whether the appellant Bank can get the advantage of any of the other exclusionary clauses (a) to (n) of section 2 (4) of the Act.
The only other clause of section 2 (4) which is relied upon by the appellant in this behalf is clause (1), according to which the word 'debt ' as defined in section 2 (4) will not include: "any debt exceeding three thousand rupees borrowed under a single transaction and due before the commencement of this Act to any banking company; (emphasis supplied) Provided that in the case of any debt exceeding three thousand rupees borrowed under a single transaction and due before the commencement of this Act to any banking company, any agriculturist debtor shall be entitled to repay such debt in eight equal half yearly instalments as provided in sub section (3) of section 4, but the provisions of section 5 shall not apply to such debt.
" The question for consideration is whether the amount which the respondent is liable to pay under the decree was "due before the commencement of the Act to any Banking Company".
Turning first to the question whether the appellant Bank is a banking company, the learned Subordinate Judge assumed that it is, but no attempt was made to sustain that finding in the High Court.
Shri Abdul Khader, who appears on behalf of the appellant conceded before us that it is not a banking company.
The concession is rightly made, since according to section 2(2) of the Act, 'Banking Company ' means a banking company as defined in the Banking Regulation Act, 1949.
Section S(c) of the Act of 1949 defines a banking company to mean any Company which transacts the business of banking in India (subject to the provision contained in the Explanation to the section).
Thus, in order that a bank may be a banking company, it is in the first place necessary that it must be a "company".
The State Bank of Travancore, which is the appellant before us, is not a 'company ' properly so called.
It is a subsidiary bank which falls within the definition of section 2(k) of the .
It was established by the Central Government in accordance with the Act of 1959 and is not a 'company ' and 347 therefore, not a banking company.
It must follow that the decretal debt which the respondent is liable to pay to the appellant is not owed to a banking company.
It was indeed not owed to any banking company at all on July 14, 1970, being the date on which the Act came into force.
It may be recalled that the respondent owed a certain sum exceeding three thousand rupees to the Kottayam Orient Bank Ltd., a banking company, on an overdraft account.
That Bank was amalgamated with the appellant Bank with effect from May 16, 1961, as a result of which the latter acquired the right to recover the amount from the respondent.
It filed Suit No. 28 of 1963 to recover that amount and obtained a decree against the respondent.
lt is precisely this small conspectus of facts, namely, that the amount was at one time owed to a banking company but was not owed to a banking company at the commencement of the Act, which raises the question as regards the true interpretation of clause (1) of section 2 (4).
The fact that the amount which the respondent owes to the appellant was not owed to a banking company on the date on which the Act came into force, the appellant not being a banking company, does not provide a final solution to the problem under consideration.
The reason for this is that clause (1) of section 2(4) speaks of a debt "due before the commencement" of the Act to any banking company, thereby purporting to make the state of affairs existing before the commencement of the Act decisive of the application of that clause.
The contention of the learned Attorney General, who led the argument on behalf of the appellant, is that the respondent owed the debt before the commencement of the Act to a banking company and, therefore, the appellant is entitled to claim the benefit of the exclusion provided for in clause (1).
The argument is that, for the purposes of clause (1), it does not matter to whom the debt is owed on the date of the commencement of the Act: what matters is to whom the debt was owed before the commencement of the Act.
The learned Attorney General is apparently justified in making this submission which rests on the plain language of clause (1) of section 2(4), the plain, grammatical meaning of the words of the statute being generally a safe guide to their interpretation.
But having considered the submission in its diverse implications, we find ourselves unable to accept it.
348 In order to judge the validity of the submission made by the Attorney General, one must of necessity have regard to the object and purpose of the Act.
The object of the Act is to relieve agricultural indebtedness.
In order to achieve that object, the legislature conferred certain benefits on agricultural debtors but, while doing so, it excluded a class of debts from the operation of the Act, namely, debts of the description mentioned in clauses (a) to (n) of section 2(4).
One class of debts taken out from the operation of the Act is debts owed to banking companies, as specified in clause (1).
The reason for this exception is obvious.
It is notorious that money lenders exploit needy agriculturists and impose upon them harsh and onerous terms while granting loans to them.
But that charge does not hold true in the case of representative institutions, like banks and banking companies.
They are governed by their rules and regulations which do not change from debtor to debtor and which, if any thing, are intended to benefit the weaker sections of society.
It is for this reason that debts owing to such creditors are excepted from the operation of the Act.
A necessary implication and an inevitable consequence of the Attorney General 's argument is that in order to attract the application of clause (1) of section 2 (4), it is enough to show that the debt was, at some time before the commencement of the Act, owed to a banking company; it does not matter whether it was in its inception owed to a private money lender and, equally so, whether it was owed to such a money lender on the date of the commencement of the Act.
This argument, if accepted, will defeat the very object of the Act.
The sole test which assumes relevance according to that argument is whether the debt was owed, at any time before the commencement of the Act, to a banking company.
It means that it is enough for the purpose of attracting clause (1) that, at some time in the past, may be in a chain of transfers, the right to recover the debt was vested in a banking company.
A simple illustration will elucidate the point.
If a private money lender had initially granted a loan to an agricultural debtor on usurious terms but the right to recover that debt came to be vested in a banking company some time before the commencement of the Act, the debtor will not be able to avail himself of the benefit of the provisions of the Act because, at some point of time before the commencement of the Act, the debt was owed to a banking company.
And this would be so irrespective of whether the banking company continues to be entitled to recover the debt on the date of the commencement of the Act.
Even if it assigns its 349 right to a private individual, the debtor will be debarred from claiming the benefit of the Act because, what is of decisive importance, according to the Attorney General 's argument is the fact whether, some time before the commencement of the Act, the debt was due to a banking company.
We do not think the Legislature could have intended to produce such a startling result.
The plain language of the clause, if interpreted so plainly, will frustrate rather than further the object of the Act.
Relief to agricultural debtors, who have suffered the oppression of private moneylenders, has to be the guiding star which must illumine and inform the interpretation of the beneficent provisions of the Act.
When clause (1) speaks of a debt due "before the commencement" of the Act to a banking company, it does undoubtedly mean what it says, namely, that the debt must have been due to a banking company before the commencement of the Act.
But it means something more: that the debt must also be due to a banking company at the commencement of the Act.
We quite see that we are reading into the clause the word "at" which is not there because, whereas it speaks of a debt due "before" the commencement of the Act, we are reading the clause as relating to a debt which was due "at" and "before" the commencement of the Act to any banking company.
We would have normally hesitated to fashion the clause by so restructuring it but we see no escape from that course, since that is the only rational manner by which we can give meaning and content to it, so as to further the object of the Act.
There is one more aspect of the matter which needs to be amplified and it is this: When clause (1) speaks of a debt due before the commencement of the Act, what it truly means to convey is not that the debt should have been due to a banking company at some point of time before the commencement of the Act, but that it must be a debt which was incurred from a banking company before the commencement of the Act.
Thus, the application of clause (1) is subject to these conditions: (i) The debt must have been incurred from a banking company; (ii) the debt must have been so incurred before the commencement of the Act, and (iii) the debt must be due to a banking company on the date of the commencement of the Act.
These are cumulative conditions and unless each one of them is satisfied, clause (1) will not be attracted and the exclusion provided for there 350 in will not be available as an answer to the relief sought by the debtor in terms of the Act.
Our attention was drawn by the Attorney General to the provisions of sections 2 (4) and 2 (4) (j) of the Act the former using the expression "on or before the commencement" of the Act and the latter "at the commencement" of the Act.
Relying upon the different phraseology used in these two provisions and in clause (1) inter se, he urged that the legislature has chosen its words carefully and that when it intended to make the state of affairs existing "at" the commencement of the Act relevant, it has said so.
We are not impressed by this submission.
Section 2 (4) which defines a "debt" had to provide that debt means a liability due from or incurred by an agriculturist "on or before the commencement" of the Act.
It could not be that liabilities incurred before the commencement of the Act would be "debts" even though they are not due on the date of commencement of the Act.
The words "on or before the commencement" of the Act are used in the context of liabilities "due from or incurred" by an agriculturist.
For similar reasons, clause (j) had to use the expression "at the commencement" of the Act, the subject matter of that clause being debts due to widows.
The benefit of the exclusion provided for in clause (j) could only be given to widows to whom debts were due "at the commencement" of the Act.
The legislature could not have given that benefit in respect of debts which were due before but not at the commencement of the Act.
Thus, the language used in the two provisionals on which the learned Attorney General relies is suited to the particular subject matter with which those provisions deal and is apposite to the context in which that language is used.
We have given to the provision of clause (1) an interpretation which, while giving effect to the intention of the legislature in the light of the object of the Act, brings out the true meaning of the provision contained in that clause.
The literal construction will create an anomalous situation and lead to absurdidities and injustice.
That construction has therefore to be avoided.
Any other interpretation of clause (1) will make it vulnerable to a constitutional challenge on the ground of infraction of the guarantee of equality.
The object of the Act being to confer certain benefits on agricultural debtors, the legislature would be under an obligation, while excepting a certain category of debts from the operation of the Act, to make a classification which will answer the test of article 14.
Debts incurred from banking companies and due to such companies at the commencement of the Act would fall into 351 a separate and distinct class, the classification bearing a nexus with A the object of the Act.
If debts incurred from private money lenders are brought within the terms of clause (1) on the theory that the right to recover the debt had passed on to a banking company sometime before the commencement of the Act, the clause would be unconstitutional for the reason that it accords a different treatment to a category of debts without a valid basis and without the classification having a nexus with the object of the Act.
In State of Rajasthan vs Mukanchand section 2 (e) of Jagirdar 's Debt Reduction Act, 1937 was held invalid on the ground that it infringed Article 14 of the Constitution.
The object of that Act was to reduce the debts secured on jagir lands which had been resumed under the provisions of the Rajasthan Land Reforms and Resumption of Jagirs Act.
The Jagirdar 's capacity to pay debts had been reduced by the resumption of his lands and the object of the Act was to ameliorate his condition.
It was held that no intelligible principle underlies the exempted category of debts mentioned in section 2(e) since the fact that the debts were owed to a government or to a local authority or similar other bodies, had no real relationship with the object sought to be achieved by the Act.
In Fatehand Himmatlal vs Slate of Maharashtra, in which the constitutionality of the Maharashtra Debt Relief Act, 1976 was challenged, it was held by this Court that the exemption granted by the statute to credit institutions and banks was reasonable because liabilities due to Government, local authorities and other credit institutions were not tainted by the view of the debtor 's exploitation.
Fatehchand would be an authority for the proposition that clause (1), in the manner interpreted by us, does not violate Article 14 of the Constitution.
Shri Vaidyanathan, who appears on behalf of the respondent, contended that the claim made by the appellant Bank falls squarely under section 2 (4) (a) (ii) of the Act and that if the appellant is not entitled to the benefit of the specific provision contained therein, it is impermissible to consider whether it can claim the benefit of some other exclusionary clause like clause (1).
Counsel is right to the extent that the appellant is not entitled to claim the benefit of the provision contained in section 2 (4)(a)(ii) because of Proviso B to that 352 section.
The simple reason in support of this conclusion is that the right of the appellant to recover the debt arose by reason of a transfer effected by operation of law subsequent to July 1, 1957.
We have already dealt with that aspect of the matter.
But we are not inclined to accept the submission that if a particular case falls under a specific clause of section 2 (4) which is found to be inapplicable, the creditor is debarred from claiming the benefit of any of the other clauses (a) to (n).
The object of the exclusionary clauses is to take category of debts from out of the operation of the Act and there is no reason why, if a specific clause is inapplicable, the creditor cannot seek the benefit of the other clauses.
The exclusionary clauses, together, are certainly exhaustive of the categories of excepted debts but to make those clauses mutually exclusive will be to impair unduly the efficacy of the very object of taking away a certain class of debts from the operation of the Act.
We are not therefore, inclined to accept the submission made by the learned counsel that section 2 (4) (a) (ii) is exhaustive of all circumstances in which a subsidiary bank can claim the benefit of the exceptions to section 2 (4).
For these reasons we affirm the view of the High Court that the exclusion provided for in clause (1) of section 2 (4) of the Act can be availed of if the debt is due to a banking company at the time of the commencement of the Act.
We have already indicated that the other condition which must be satisfied in order that clause (1) may apply is that the debt must have been incurred from a banking company before the commencement of the Act.
For these reasons we dismiss the appeal.
Appellant will pay the costs of the respondent throughout.
S.R. Appeal dismissed.

dataset_name: IN-Abs

summary:
The respondent had an overdraft account with the Erattupetta Branch of the Kottayam orient Bank Ltd. at the foot of which he owed a sum of over Rs. 3000/ to the Bank.
The said Bank which was a 'Banking Company ' as defined in the Banking Regulation Act, 1949, was amalgamated with the appellant Bank with effect from June 17, 1961.
The appellant Bank filed a suit (O,S, 28 of 1963) in the Sub Court, Meenachil, against the respondent for recovery of the amount due from him in the overdraft Account with the Kottayam orient Bank, the right to recover which had come to be vested in the appellant as a result of the scheme of amalgamation.
The suit was decreed in favour of the appellant but when it took out execution proceedings in the Sub Court, Kottayam, the respondent filed an application under section 8 of the Kerala Agriculturists ' Debt Relief Act claiming that being an agriculturist within the meaning of that Act, he was entitled to the benefit of its provisions including those relating to the scaling down of debts.
The learned Subordinate Judge dismissed the application holding: (i) that the respondent was not entitled to the benefit of the provisions regarding scaling down of the debt because the debt, having been once owed by him to the Kottayam orient Bank Ltd. which was a Banking Company as defined in the Banking Regulation Act, 1949, was outside the purview of section S of the Act which provided for the scaling down of debts owed by agriculturists; and (ii) that he was only entitled to the benefit of the proviso to section 2(4) (l) of the Act under which the amount could be repaid in eight half yearly instalments The Revision Application preferred by the respondent was referred to the Full Bench of the High Court.
It was contended on behalf of the appellant Bank that the debt owed to it by the respondent was excluded from the operation of the Act by reason of section 2 (4) (a) (ii) and section 2 (4) (1) of the Act.
By its judgment dated February 1, 1978 the High Court rejected that contention, allowed the Revision Application and held that the respondent was entitled to all the relevant benefits of the Act, including the benefit of scaling down of the debt and hence the appeal by special leave.
339 Dismissing the appeal, the Court ^ HELD: 1:1.
The appellant Bank will not be entitled to the benefit of the exclusion contained in section 2 (4) (a) (ii) of the Kerala Agriculturists ' Debt Relief Act, 1970 in view of clause (B) of the proviso to the section and the respondent 's claim to the benefits of the Act will remain unaffected by that provision.
[345H, 346 A] 1: 2.
The respondent is admittedly an agriculturist and he owes a sum of money to the appellant Bank under a decree passed in its favour by the Sub Court, Meenachil, in O.S. No. 28 of 1963.
The liability which the respondent owes to the appellant Bank is, therefore a "debt" within the meaning of section 2 (4) of the Act.
[344 F G] However, since the appellant Bank, namely, the State Bank of Travancore, .
is a subsidiary bank within the meaning of section 2 (k) of the and also as contemplated by sub clause (ii) of clause (a) of section 2(4) of the Act, the decretal amount payable by the respondent to the appellant Bank will not be a debt within the meaning of section 2(4) of the Act.
[345 C D] 1: 3.
By reason of clause (B) of the proviso to section 2 (4) (a) (ii) of the Act, which proviso is in the nature of an exception to the exceptions contained in the said section the amount payable to a subsidiary bank is not to be regarded as a debt within the meaning of the Act, only if the right of the subsidiary bank to recover the amount did not arise by reason of any transfer effected by operation of law subsequent to July 1, 1957.
Here, the notification containing the scheme of amalgamation was published on May 16.
Thus, the right of the appellant Bank, though is a subsidiary Bank, to recover the amount from the respondent arose by reason of a transfer effected by operation of law, namely, the scheme of amalgamation, which came into effect after July 1, 1957.
[345 D E, G] 2: l.
The State Bank of Travancore, is not a 'company ' properly so called.
It is a subsidiary bank.
It was established by the Central Government in accordance with The Act of 1959 and is not a 'company and, therefore not a banking company.
Therefore, the decretal debt which the respondent is liable to pay to the appellant is not owed to a "banking company".
It was indeed not owed to any "banking company" at all on July 14, 1970 being the date on which the Act came into force.
[346 G H, 347 A] 3: 1.
The exclusion provided for in clause (I) of section 2 (4) of the Act can be availed of, if the debt is due to a banking company at the time of the commencement of the Act.
[352 D E] 3: 2.
The object of the Act is to relieve agricultural indebtedness.
In order to achieve that object, the legislature conferred certain benefits on agricultural debtors but, while doing so, it excluded a class of debts from the operation of the Act, namely, debts of the description mentioned in clauses (a) to (n) of section 2 (4).
One class of debts taken out from the operation of the Act is debts owed to banking companies, as specified in clause (1).
The reason for this exception being that, unlike money lenders who 340 exploit needy agriculturists and impose upon them harsh and onerous terms while granting loans to them, representative institutions, like banks and banking companies, are governed be their rules and regulations which do not change from debtor to debtor and which, if anything, are intended to benefit the weaker sections of society.
[348 A C] 3: 3.
Relief to agricultural debtors who have suffered the oppression of private money lenders, has to be the guiding star which must illumine and inform the interpretation of the beneficient provisions of the Act.
When clause (1) speaks of a debt due "before the commencement" of the Act to a banking company, it does undoubtedly mean what it says, namely, that the debt must have been due to a banking company before the commencement of the Act.
But it means something more: that the debt must also be due to a banking company at the commencement of the Act.
Reading into the clause the word "at" which is not there, is the only rational manner by which meaning and content could be given to it, so as to further the object of the Act.
[349 B E] Further clause (I) speaks of a debt due before the commencement of the Act, what it truly means to convey is not that the debt should have been due to a banking company at some point of time before the commencement of the Act, but that it must be a debt which was incurred from a banking company before the commencement of the Act.
[349 E F] Thus, the application of clause (I) is subject to these conditions: (i) The debt must have been incurred from a banking company; (ii) the debt must have been so incurred before the commencement of the Act; and (iii) the debt must be due to a banking company on the date of the commencement of the Act.
These are cumulative conditions and unless each one of them is satisfied, clause (I) will not be attracted and the exclusion provided for therein will not be available as an answer to the relief sought by the debtor in terms of the Act.
[349G H, 350 A] 3: 4.
Section 2 (4) which defines a "debt" had to provide that debt means a liability due from or incurred by an agriculturist "on or before the commencement" of the Act.
It could not be that liabilities incurred before the commencement of the Act would be "debts" even though they are not due on the date of commencement of the Act.
The words "on or before the commencement" of the Act are used in the context of liabilities "due from or incurred" by an agrieculturist.
For similar reasons, clause (j) had to use the expression "at the commencement" of the Act, the subject matter of that clause being debts due to widows.
The benefit of the exclusion provided for in clause (j) could only be given to widows to whom debts were due "at the commencement" of the Act.
The legislature could not have given that benefit in respect of debts which were due before but not at the commencement of the Act.
Thus, the language used in the two provisions is suited to the particular subject matter with which those provisions deal and is apposite to the context in which that language is used.
[350 C F] 3:5.
The object of the Act being to confer certain benefits on agricultural debtors, the legislature would be under an obligation, while excepting a certain category of debts from the operation of the Act, to make a classification which will answer the test of article 14.
Debts incurred from banking companies and 341 due to such companies at the commencement of the Act would fall into a separate and distinct class, the classification bearing a nexus with the object of the Act.
If debts incurred from private money lenders are brought within the terms of clause (I) on the theory that the right to recover the debt had passed on to a banking company sometime before the commencement of the Act, the clause would be unconstitutional for the reason that it accords a different treatment to a category of debts without a valid basis and without the classification having a nexus with the object of the Act.
[350G H, 357A B] State of Rajasthan vs Mukanchand ; ; Fatehchand Himmatlal vs State of Maharashtra, ; , applied.


judgement:
Civil Appeal Nos.
1286 1291 of 1973.
Appeals by certificate from the judgment and order dated the 30th June, 1972 of the Andhra Pradesh High Court at Hyderabad in Referred Case No. 5 of 1971.
507 A. Subba Rao for the Appellant.
S.C. Manchanda, and Miss A. Subhashini, for the Respondent.
The Judgment of the Court was delivered by VENKATARAMIAH, J.
The only question which arises for consideration in these six appeals by certificate is whether an order of assessment passed under the Indian Income tax Act, 1922 (hereinafter referred to as 'the Act ') by the Income tax Officer in the case of a Hindu undivided family without holding an inquiry into the validity of the claim made within a reasonable time by a member of the Hindu family that a partition had taken place among the family is liable to be merely cancelled in appeal by the Income tax Appellate Tribunal (for short, 'the Tribunal ') without a further direction to the assessing authority either to modify the assessment suitably or to pass a fresh order of assessment in accordance with law.
The assessee is a Hindu undivided family and the assessment years are 1955 56 and 1957 58 to 1961 62.
An assessment order made on May 30, 1959 in respect of the assessment year 1955 56 had been set aside by the Appellate Assistant Commissioner on February 24, 1962 with a direction to make a fresh assessment.
When fresh assessment proceedings were commenced pursuant to the above said direction in respect of the assessment year 1955 56,, the assessment proceedings for the assessment years 1957 58 and 1958 59 were also taken up.
Earlier a letter had been addressed on October, 10, 1960 by Kapurchand Shrimal to the Income tax Officer in connection with a notice received by the assessee under section 18A (1) of the Act in respect of the assessment year 1961 62 stating that all the movable and immovable properties of the assessee had been partitioned by metes and bounds under partition deeds and that the Hindu undivided family (the assessee) was no longer receiving any income as such and there was therefore no question of payment of any advance tax by it.
The second para of that letter contained a specific request to record the factum of the partition for the purpose of the Act.
Again on June 16, 1961 M/s S.G. Dastagir and Co. addressed a letter on behalf of the assessee in connection with advance tax demanded for the assessment year 1962 63, the second para of which contained a similar request for recording the factum of partition.
Before the fresh assessments were completed for the three years referred to above a third letter dated March 11, 1962 was addressed to the same 508 officer who received it on the next day itself in which again there was a claim made regarding the partition.
But this letter however was written specifically in respect of the assessment year 1957 58.
On March 21, 1962, M/s S.G. Dastagir too addressed a further letter to the Income tax Officer reminding him of the earlier letters of October 10, 1960 and June 16, 1961 and that letter stated: "Apart from these letters the matter has been discussed with you on a number of occasions personally during the course of the assessment proceedings of the year 1957 58 and your attention has already been drawn to the facts that an order under section 25A has to be passed before the completion of the assessment for the year 1957 58.
The letter dated 11th March, 1962 was addressed to you by the assessee only when it was gathered that you were going to pass the assessment order for the year 1957 58 without making the contemplated enquiry under section 25A." The assessments for the years 1955 56 to 1958 59 were however completed between August 31, 1962 and March 27, 1963 without holding an inquiry as contemplated by section 25A of the Act regarding the factum of partition.
The Income tax Officer, thereafter started an inquiry under section 25A and by his order dated March 30, 1965 refused to record the partition.
On appeal the Appellate Assistant Commissioner by his order dated November 8, 1967 set aside the said order and directed the Income tax Officer to record the partition under section 25A as on July 10, 1960.
That order became final as no appeal was filed against it by the Department.
It should be stated here that the Income tax Officer passed assessment orders against the assessee for the assessment years 1959 60, 1960 61 and 1961 62 on March 26, 1964, March 30, 1965 and March 26, 1966 respectively before the Appellate Assistant Commissioner held that the partition had taken place on July 10, 1960.
In the appeals filed before the Appellate Assistant Commissioner against the assessment orders for the years in question i.e. 1955 56 and 1957 58 to 1961 62 it was contended that the assessments were liable to be set aside on the ground that the inquiry into the claim of partition which was a condition precedent for making an order of assessment on the Hindu undivided family had not been made as required by section 25A of the Act.
The Appellate Assistant Commissioner rejected the above contention.
The assessee there upon filed appeals before the Tribunal against the orders of the 509 Appellate Assistant Commissioner and one question which was A common to all the appeals that was urged before the Tribunal was about the validity of the assessment made against the assessee (Hindu undivided family) without holding an inquiry regarding the claim of partition before the assessment proceedings were completed.
While the assessee contended that the assessments were liable to be cancelled on account of the non compliance with the mandatory provisions of section 25A of the Act it was urged on behalf of the Department that in fact there was no violation at all of section 25A and even if it was held that there was any such violation the proper order to be passed was either to direct the Income tax officer to give effect to section 25A (2) of the Act without cancelling the assessments made on the assessee or to set aside the assessments with a direction to the Income tax Officer to pass fresh orders of assessment.
On a consideration of the submissions made by the parties, the Tribunal came to the conclusion that the assessments which had been made without holding an inquiry into the claim of partition as required by section 25A of the Act were illegal and void Accordingly it cancelled the assessments and added 'We do not consider it necessary to direct fresh assessments.
It would be open to the Income tax Officer to do so if the law otherwise so permits. ' Thereafter at the instance of the Revenue a reference was made by the Tribunal to the High Court of Andhra Pradesh under section 66(1) of the Act in all the cases for a decision on the following question: "Whether on the facts and in the circumstances of the case, the assessments made by the Income tax Officer on the Hindu undivided family of Shri Kapurchand Shrimal for the years under reference without passing an order under section 25A were valid ?" We are not concerned in these appeals with another question arising out of the assessment order made for the year 1958 59 which was also referred alongwith the above common question.
The High Court after hearing the learned counsel for the parties answered the common question which arose in all the appeals stating that the assessment made by the Income tax Officer without passing the order under section 25A on the claim of partition were valid but only required modification and directed the Tribunal while giving effect to the order of the High Court to direct the Income tax Officer to modify the assessments in the light of section 25A (2) of 510 the Act.
Aggrieved by the decision of the High Court the assessee has filed these appeals.
Section 25A of the Act which arises for consideration in these cases reads thus: "25A. Assessment after partition of a Hindu undivided family (1) Where, at the time of making an assessment under section 23, it is claimed by or on behalf of any member of a Hindu family hitherto assessed as undivided that a partition has taken place among the members of such family, the Income tax Officer shall make such inquiry thereinto as he may think fit, and, if he is satisfied that the joint family property has been partitioned among the various members or groups of members in definite portions he shall record an order to that effect: Provided that no such order shall be recorded until notices of the inquiry have been served on all the members of the family.
(2) Where such an order has been passed, or where any person has succeeded to a business, profession or vocation formerly carried on by a Hindu undivided family whose joint family property has been partitioned on or after the last day on which it carried on such business, profession or vocation, the Income tax Officer shall make an assessment of the total income received by or on behalf of the joint family as such, as if no partition had taken place, and each member or group of members, shall in addition to any income tax for which he or it may be separately liable and notwithstanding anything contained in sub section (1) of section 14, be liable for a share of the tax on the income so assessed according to the portion of the joint family property allotted to him or it; and the Income tax Officer shall make assessments accordingly on the various members and groups of members in accordance with the provisions of section 23; Provided that all the members and groups of members whose joint family property has been partitioned shall be liable jointly and severally for the tax assessed on the total income received by or on behalf of the joint family as such.
511 (3) Where such an order has not been passed in respect A of a Hindu family hitherto assessed as undivided, such family shall be deemed, for the purposes of this Act, to continue to be a Hindu undivided family.
A Hindu undivided family is an entity which is treated as an assessee for the purposes of the Act.
In the Act as it was originally passed there was no effective machinery to assess the income which was received by a Hindu undivided family during an accounting year but was no longer in existence as such at the time of assessment.
By reason of section 14(1) of the Act which provided that no tax would be payable by an assessee in respect of any sum which he received as a member of a Hindu undivided family, there was further difficulty in subjecting such income tax.
Section 25A was, therefore, enacted to get over these difficulties by providing for a special procedure to be followed in a case where a claim was made that there has been a partition satisfying the tests laid down in that section.
Sub section (3) of section 25A of the Act provides that a Hindu undivided family which is being assessed as such shall be deemed for the purposes of the Act to continue to be a Hindu undivided family until an order is passed under sub section (1) of section 25A that a partition has taken place among the members of the family as stated therein.
Sub section (1) of section 25A provides that if at the time of making as assessment a claim is made by or on behalf of any member of a Hindu undivided family which is being assessed till then as undivided that a partition has taken place among the members of such family, the Income tax officer shall make such inquiry there into as he may think fit and if he is satisfied that the joint family property has been partitioned among the various members groups of members in definite portions he shall record an order to that effect.
Such order can however be made only after notices of the inquiry have been served on all the members of the family.
It may be noted that sub section (I) of section 25A does not actually prescribe the form in which such a claim can be made.
It does not also state the specific stage of the assessment proceedings when such claim should be made.
Sub section (2) of section 25A of the Act provides that where an order is passed under sub section (1) thereof recording the partition or where any person has succeeded to a business, profession or vocation formerly carried on by a Hindu undivided family where joint family property has been partitioned on or after the last day on which it carried on such business, profession or vocation the Income tax officer shall make an assessment of the total income received by or on behalf of the 512 joint family as such as if no partition had taken place and each member or group of members shall, in addition to any income tax for which he or it may be separately liable and notwithstanding any thing contained in sub section (section 14, be liable for a share of the tax on the income so assessed according to the portion of the joint family property allotted to him or it.
The Income tax officer is further authorised to make assessments accordingly on various members and groups of members in accordance with section 23 of the Act.
By virtue of the proviso to sub section (2) of section 25A of the Act the liability which so long as an order was not recorded under sub section (I) of section 25A was restricted to the assets of ., the Hindu undivided family is transformed when such an order is recorded into the personal liability of the members for the amount of tax due by the family.
In these appeals there is a finding of fact recorded by the Tribunal that a proper and valid request for recording a partition had been made as far back as October 10, 1960.
The first of the assessment orders impugned in these appeals was passed on August 31, 1962 by the Income tax officer and the other assessment orders were passed subsequently.
It is not shown that the Income tax officer before whom the claim of partition had been made on October 10, 1960 had not got reasonable time to inquire into the claim and then to make the assessment orders on the basis of the finding on the question of partition.
Admittedly all the orders of assessment were passed against the assessee (Hindu undivided family) before holding an inquiry as required by section 25A (I) of the Act into the claim of partition.
In fact the Income tax officer refused to record the partition only on March 30, 1965 but in appeal the Appellate Assistant Commissioner held that a partition had taken place as on July 10, 1960 by his order dated November 8, 1967 and that order had become final.
The questions for consideration are whether under these circumstances the orders of assessment can be treated as valid orders and if they are not whether the Income tax officer can be directed by the appellate authority to pass fresh orders of assessment in accordance with law.
The first decision relied on by the assessee is Kalwa Devadattam and two ors.
vs The Union of.
India and ors.(l) That was a case arising out of a suit in which the validity of certain assessment 513 Orders passed against a Hindu undivided family under the Act and A the proceedings instituted to recover the amounts payable under these assessment orders by sale of certain properties had been questioned.
The plaintiffs in that suit were the sons of one Nagappa.
Nagappa and the plaintiffs who formed a Hindu joint family had carried on business and the said family had been assessed to tax under the Act.
When proceedings were instituted to recover the dues under the assessment orders for the sale of some properties, the plaintiffs filed the suit contending that some of the properties could not be sold as they were their separate properties and the remaining properties could not be sold as they had been allotted to them on partition of the joint family estate on March 14, 1947 before the orders of assessment were made by the income tax authorities.
The claim of the plaintiffs based on the ground of non compliance with section 25A of the Act was rejected by this Court with these observations: "It may be assumed that by this statement within the meaning of section 25A it was claimed "by or on behalf of any member of a Hindu family hitherto assessed as undivided" that a partition had taken place among the members of his family and that the Income tax officer was bound to make an inquiry contemplated by section 25A.
But no inquiry was in fact made and no order was recorded by the Income tax officer about the partition: by virtue of sub section
(3) the Hindu family originally assessed as undivided had to be deemed for the purposes of the Act to continue to be a Hindu undivided family.
If by the assessment of the family on the footing that it continued to remain undivided Nagappa or his sons were aggrieved their remedy was to take an appropriate appeal under section 30 of the Indian Income tax Act and not a suit challenging the assessment.
The method of assessment and the procedure to be followed in that behalf are statutory, and any error or irregularity in the assessment may be rectified in the manner provided by the statute alone, for section 67 of the Indian Income tax Act bars a suit in any Civil Court to set aside or modify any assessment made under the Act.
The Income tax officer made the assessment of tax under the Act.
Granting that he committed an error in making the assessment without holding an inquiry into the partition alleged by Nagappa, the error could be rectified by resort to the machinery provided under the Act and not by a suit in a Civil Court.
" 514 This Court dismissed the suit against the Revenue on three independent grounds: (1) the suit which was in substance one for setting aside an assessment was in law not maintainable because of section 67 of the Act; (2) that in the absence of an order under section 25A (1 assessment of the Hindu joint family was properly made; and (3) even if an order recording partition was made the liability of the plaintiffs to pay income tax assessed on the family could still be enforced against them jointly and severally under section 25A (2) proviso.
The above case was not obviously one in which an order of assessment which had been passed contrary to section 25A of the Act had been challenged in an appeal under the Act.
The next case relied on by the assessee is Additional Income tax officer, Cuddapah vs A. Thimmayya & Anr.(l) There again the question raised was a different one although some of the material facts were similar to the facts in these appeals.
The facts there were those: Krishnappa and his two sons Thimmayya and Venkatanarsu constituted a Hindu undivided family which had carried on some business during the previous years corresponding to assessment years 1941 42 to 1946 47.
When the assessment proceedings for these years were pending, on May 20, 1946 Venkatanarsu claimed before the 'Income tax officer that the property of the family had been partitioned among the members of the family in definite portions.
The said claim was not disposed of till June 30, 1952.
In the meanwhile assessments for the five years in question were completed between September 30, 1948 and November 30, 1950 resulting in a tax liability of Rs. 67,750/ in the aggregate for the five years.
Appeals were preferred against the said orders of assessment but in the appeals it was not contended that the orders were illegal as no inquiry had been made as contemplated in section 25A (1).
The appeals were unsuccessful.
On June 30, 1952, the Income tax officer made an order under section 25A recording that a partition had taken place on November 2, 1946.
As the tax due was not paid the Income tax officer made the order under section 46(S) of the Act on June 25, 1958 calling upon the managing director of a private limited company which had taken over the business of Krishnappa and his two sons not to pay the salaries payable to Thimmayya and Venkatanarsu by the company and to pay it to the credit of Government of India towards the payment of arrears of income tax referred to above.
Thimmayya and 515 Venkatanarsu questioned that order before the High Court under A Article 226 of the Constitution.
The High Court held that the order on the claim made under section 25A(I) on June 30, 1952, was given "a clear retrospective operation", and the Income tax officer was bound "to give effect to that order recognising the partition and to follow up the consequences which flowed from the order".
In the view of the High Court, the petitioners were entitled to insist upon an order for apportionment under section 25A (2) and without such an order, proceedings for collection of tax could not be commenced against them under the proviso to sub section (2) of section 25A.
On appeal this Court held that because prior to the orders of assessment there was no order recording that the property of the family had been partitioned among the members of the family no personal liability of the members arose under the proviso to section 25A (2) to pay the tax assessed thereunder and the remedy of income tax authorities was to proceed against the property, if any, of the Hindu undivided family.
It was therefore held that the Income tax officer was not competent to make the order under section 46 (5) directing the company to withhold the tax from the salaries payable to Thimmayya and Venkatanarasu.
The relevant observations of this Court are these: "In the present case no orders were recorded by the lncome tax officer at the time of making assessments in respect of the five years, and therefore no personal liability of the members of the family arose under the proviso to sub section (2).
The Income tax officer does not seek to reach in the hands of Thimmayya and Venkatanarsu the property which was once the property of the Hindu undivided family: he seeks to reach the personal income of the two respondents.
That the Income tax officer could do only if by virtue of the proviso to sub section (2) a personal liability has arisen against them.
In the absence of an order under sub section (1), however, such a liability does not arise against the members of the Hindu undivided family, even if the family is disrupted.
We are therefore of the view, but not for the reasons mentioned by the High Court, that because there has been before the orders of assessment no order recording that the property of the family has been partitioned among the members, the two respondents are not personally liable to satisfy the tax due by the joint family.
The remedy of the income tax authorities, in the circumstances of the case, 516 was to proceed against the property, if any, of the Hindu undivided family.
That admittedly they have not done.
" It will be seen that in this case no question was raised as to whether the assessment orders were void as they were passed without holding an inquiry as required by section 25A (I) of the Act.
The only question was whether in the absence of an order under section 25A (1), any personal liability can be enforced against the members of the joint family.
Strong reliance is, however, placed on behalf of the assessee on the decision of the Andhra Pradesh High Court in Karri Ramakrishna Reddy vs Tax Recovery officer, Vijayawada( ') which involved the interpretation of section 171 of the Income tax Act, 1961, which, in so far as the question involved in these appeals is concerned, contains similar provisions.
In that case a person who was a member of a Hindu undivided family questioned in a proceeding under Article 226 of the Constitution an assessment made against the Hindu undivided family after it had been partitioned without holding an inquiry as required by section 1.71 (2) of the Income tax Act, 1961 even when a claim of partition had been made by his father in the assessment proceedings.
The petitioner therein con tended that such an order would not be binding upon the other members of the family.
The High Court accepted the contention of the petitioner therein and held that the assessment order could not be enforced against him.
This again is a case where the validity of the assessment order had been questioned not in an appeal filed against it but in a separate proceeding.
The observations made therein may not, therefore, be of much assistance to the assessee because we are concerned in these appeals with the powers of the appellate authority where appeals are filed against the assessment orders themselves contending that there has been non compliance with section 25A(I).
Moreover it appears that certain observations made in that case in respect of the decision of this Court in Additional Income tax officer, Cuddapah vs A. Thimmayya & Anr.(2) and the Full Bench decision of the Andhra Pradesh High Court in Commissioner of Income tax vs Tatavarthy Narayanamurthy (3) need further examination.
We refrain from expressing any opinion on 517 the correctness of this decision which does not even appear to have been cited before the High Court when the reference out of which these appeals arise was argued.
From a fair reading of section 25A of the Act it appears that the Income tax officer is bound to hold an inquiry into the claim of partition if it is made by or on behalf of any member of the Hindu undivided family which is being assessed hitherto as such and record a finding thereon If no such finding is recorded, sub section (3) of section 2SA of the Act becomes clearly attracted.
When a claim is made in time and the assessment is made on the Hindu undivided family without holding an inquiry as contemplated by section 25A (1), the assessment is liable to be set aside in appeal as it is in clear violation of the procedure prescribed for that purpose.
The Tribunal was, therefore, right in holding that the assessments in question were liable to be set aside as there was no compliance with section 25A (l) of the Act.
It is, however, difficult to agree with the submission made on behalf of the assessee that the duty of the Tribunal ends with making a declaration that the assessments are illegal and it has no duty to issue any further direction.
It is well known that an appellate authority has the jurisdiction as well as the duty to correct all errors in the proceedings under appeal and to issue, if necessary, appropriate directions to the authority against whose decision the appeal is preferred to dispose of the whole or any part of the matter afresh unless forbidden from doing so by the statute.
The statute does not say that such a direction cannot be issued by the appellate authority in a case of this nature.
In interpreting section 25A (l) we cannot also be oblivious to cases where there is a possibility of claims of partition being made almost at the end of the period within which assessments can be completed making it impossible for the Income tax officer to hold an inquiry as required by section 25A (1) of the Act by following the procedure prescribed therefor.
We, however, do not propose to express any opinion on the consequence that may ensue in a case where the claim of partition is made at a very late stage where it may not be reasonably possible at all to complete the inquiry before the last date before which the assessment must be completed.
In the instant case, however, since it is not established that the claim was a belated one the proper order to be passed is to set aside the assessments and to direct the Income tax officer to make fresh assessments in accordance with the procedure prescribed by law.
The Tribunal, therefore, erred in merely cancelling the assessment orders and in not issuing further directions as stated above.
518 We do not, however, agree with the orders made by the High Court by which it upheld the assessments and directed the Income tax officer to make appropriate modifications.
Such an order is clearly unwarranted in the circumstances of this case.
The order of the High Court is, therefore, set aside.
The question referred by the Tribunal to the High Court does not appear to be comprehensive enough to decide the matter satisfactorily.
The question may have to be read as including a further question regarding the nature of the orders to be passed by the Tribunal if the orders of assessments are held to be contrary to law.
In the light of the above, we hold that the orders of assessments are liable to be set aside but the Tribunal should direct the Income tax officer to make fresh assessments in accordance with law.
The appeals are accordingly disposed of.
There shall be no order as to costs.
S.R. Appeals allowed.

summary:
The assessee is a Hindu undivided family and the assessment years are 1955 56 and 1957 58 to 1961 62.
The assessee addressed on October 10, 1960 to the Income tax Officer in connection with a notice received under section 18A(1) of the Act in respect of the assessment year 1961 62 stating that all the movable and immovable properties of the assessee had been partitioned by metes and bounds under partition deeds and that the Hindu undivided family was no longer receiving any income as such and there was therefore no question of payment of any advance tax by it.
A specific request to record the factum of the partition for that purpose of the Act effective from July 10, 1960 was also prayed for.
This was followed by another letter on June 16, 1961 by M/s. S.G. Dastagir and Co.
On behalf of the assessee in connection with advance tax demanded for the assessment year 1962 63 with a similar request.
Before fresh assessments were completed for the years 1955 56, 1957 58 and 1958 59 as per the orders of the Appellate Assistant Commissioner dated February 24, 1962 a third letter dated March 11, 1962 was addressed to the same Income tax Officer with a similar request for recording the factum of partition.
Another letter dated March 21, 1962 was addressed by M/s. S.G. Dastagir & Co. reminding the Income tax Officer of the earlier letters of October 10, 1960 and June 16, 1961.
The assessment for the years 1955 56 to 1958 59 were, however, completed between August 21, 1962 and March 27, 1963 without holding any inquiry as contemplated by section 25A of the 1922 Act regarding the factum of partition.
The Income tax Officer thereafter started an inquiry under section 25A and by his order dated March 30, 1965 refused to record the partition.
On appeal against the refusal the Appellate Assistant Commissioner by his order dated November 8, 1967 set aside the said order and directed the Income tax Officer to record the partition under section 25A as on July 10, 1960.
That order became final as an appeal was filed against it by the Revenue.
In the appeals filed before the Assistant Appellate Commissioner against the assessment orders for the years in question, that is, 1955 56 and 1957 58 to 1961 62 the assessee con 506 tended that the assessments were liable to be set aside on the ground that the inquiry into the claim of partition which was a condition precedent for making an order of assessment on the Hindu undivided family had not been made as required by section 25A of the Act.
The Appellate Assistant Commissioner rejected the said contention, but the appeals preferred before the Tribunal were allowed.
The Tribunal cancelled the assessments without any directions to make fresh assessments.
At the instance of the Revenue a reference was made by the Tribunal to the High Court of Andhra Pradesh under section 66(1) of the Act.
The High Court answered the reference in favour of the Revenue and hence the appeals.
Allowing the appeals, the Court ^ HELD: (1) Under section 25A of the 1922 Act the Income tax Officer was bound to hold an inquiry into the claim of partition if it is made by or on behalf of any member of the Hindu undivided family which is being assessed hitherto as such and record a finding thereon.
If no such finding is recorded sub section (3) of section 25A of the Act becomes clearly attracted.
When a claim is made in time and the assessment is made on the Hindu undivided family without holding an inquiry as contemplated by section 25A(1), the assessment is liable to be set aside in appeal as it is in clear violation of the procedure prescribed for that purpose, [517 A C] Kalwa Devadattam and two Ors.
vs The Union of India and Ors., ; ; Additional Income tax Officer, Cuddapah vs A. Thimmayya & Anr., and Karri Ramkrishna Reddy vs Tax Recovery Officer, Vijayawada, , discussed and distinguished.
(2) The duty of the Tribunal does not end with making declaration that the assessments are illegal and it is duty bound to issue further directions.
The appellate authority has the jurisdiction as well as the duty to correct all errors in the proceedings under appeal and to issue, if necessary, appropriate directions to the authority against whose decision the appeal is preferred to dispose of the whole or any part of the matter afresh unless forbidden from doing so by the statute.
The statute does not say that such a direction cannot be issued by the appellate authority in a case of this nature.
[517 D E] In the instant case, however, since it is not established that the claim was a belated one the proper order to be passed is to set aside the assessments and to direct the Income tax Officer to make fresh assessments in accordance with the procedure prescribed by law.
The Tribunal, therefore, erred in merely cancelling the assessment orders and in not issuing further directions.
[517 G H]