Appeal No 216 of 1954
Appeal from the judgment and decree dated September 261946 of the former Chief Court of Avadh at Lucknow in First Appeal No 7 of 1940
Naunit Lal for the appellant
section N Andley Rameshwar Nath J B Dadachanji and P L Vohra for respondent No 1 1960
August 5
The Judgment of the Court was delivered by DAS GUPTA J
This appeal raises the question of interpretation of section 15 of the United Provinces Encumbered Estates Act 1934
On March 1 1924 Sardar Nihal Singh the predecessor of the appellant before us borrowed a sum of rupees one lakh from Raja Durga Narain Singh predecessor of the respondents on mortgage of a house in Butlergunj Lucknow and also the entire Zamindari interest in a village Parsera
Interest was 8 per cent
per annum compound with six monthly rests
In 1932 Raja Durga Narain Singh brought a suit for recovery of Rs 183791 5 9 on account of principal and interest due on the mortgage by sale of the mortgaged property
In this suit the Subordinate Judge Lucknow made a preliminary decree declaring the amount due to the plaintiff on the mortgage calculated up to March 29 1935 to be Rs 183791 5 9 up to the date of the suit Rs 49280 2 6 as the amount due on account of interest thereupon from March 19 1932 the date of the suit to March 29 1935 the date fixed for payment
A sum of Rs 4314 2 9 was awarded as the cost of the suit
The defendant was ordered to pay this total sum of Rs 237385 11 0 before the 29th day of March 1935 with future interest at 6 per cent
per annum simple on the principal sum of rupees one lakh
The amount not having been paid on that date the Court on an application made by the mortgagee decree
holder made a final decree on May 9 1935 directing sale of the property for recovery of the sum of Rs 237503 5 6 with future interest as in the preliminary decreethis sum being the total of Rs 237305 11 0 120 of the preliminary decree Rs 116 10 1 the interest from March 30 1935 and rupee one the cost of the final decree
An application for revision under section 115 of the Code of Civil Procedure in connection with this decree was rejected by the Chief Court of Oudh on April 201937
Before this on October 26 1936 an application had been made by Sardar Nihal Singh under section 4 of the U P Encumbered Estates Act requesting the provisions of the Act to be applied to him
After this application came before the Special Judge in accordance with the provisions of section 6 the mortgagee decreeholder Raja Durga Narain Singh filed a written state ment of his claim on September 301937 and stated that the amount due to him on the basis of his decree was Rs 251904 8 6 including Rs 14300 as interest subsequent to the final decree till September 30 1937 and a sum of Rs 51 3 0 the decree for costs in his favour by the Oudh Chief Court when rejecting the mortgagor s application for revision
He prayed that a decree for Rs 251904 8 6 be passed in his favour against the applicant Sardar Nihal Singh and his property
The applicant contested this claim pleading that the principal amount borrowed from the claimant being rupees one lakh the claimant was not entitled to recover any sum as interest thereupon in excess of the principal amount under section 14 of the Encumbered Estates Act
This plea was rejected by the Special Judge who held that the claimant was entitled to Rs 237503 5 6 for which the final decree was passed and also Rs 51 3 0 as costs in the matter of revision application and further to 6 per cent
per annum interest on rupees one lakh from May 29 1935 the date of the final decree till the date of the application under the Encumbered Estates Act ie October 26 1936
Accordingly he gave the claimant a simple money decree for Rs 246338 8 6 with proportionate costs and future interest at the rate of 4 per cent
per annum simple from the date of application till realisation
On appeal the Cheief Court of Oudh rejected the appellant s contention that the Special Judge was bound by section 14 of the Act to limit the decree to a sum 121 of rupees two lakhs only and held that in so far as the preliminary decree found Rs 183791 5 9 as the amount due on the mortgage on March 29 1932 it was not inconsistent with section 14 of the Encumbered Estates Act and so the Special Judge was bound to accept this finding under section 15
It held however that in so far as this decree allowed interest pendente lite on the above amount from March 19 1932 to March 29 1935 at 8 per annum it was inconsistent with sub section 7 of section 14
The Chief Court accordingly held that this interest pendente lite must be reduced to 4 14 simple
After saying that a sum of Rs 4314 2 9 would be added on account of costs rupee one should be added on account of the costs of the final decree and Rs 51 3 0 as costs of a revision application the Court held that the principal amount of Rs 100000 shall carry interest from March 29 1935 till the date of application under section 4 of the Encumbered Estates Act viz October 26 1936 and that the aggregate of these figures shall carry interest from October 27 1936 till realisation at 4 per cent
per annum
It directed a decree for the sum thus found to be substi tuted for that passed by the Subordinate Judge
An application for leave to appeal to the Privy Council against this decree was made on January 13 1947
This application was disposed of on April 14 1953
Holding that the valuation of the suit was well over Rs 20000 and the value of the appeal to the Supreme Court was Rs 41971 2 9 the Chief Court gave in view of the modification made by it in the lower court s decree a certificate that the case fulfils the requirements of section 110 of the Code of Civil Procedure and that the applicant had a right to appeal to the Supreme Court
On the strength of that certificate the present appeal was filed When the appeal came up for hearing before a Bench of four judges of this Court Mr Andley on behalf of the respondents stated that in this case he was raising a constitutional point
Thereupon the Court directed that the matter be posted before the Constitution Bench
That is how the appeal has come up for hearing and final disposal before us
16 122 Mr Andley stated before us that the Constitutional point which he had wanted to raise was whether the judgment of the Chief Court was one of affirmance under article 1331 of the Constitution but that be did not wish to pursue this point
As Mr Andley does not press his constitutional point no further discussion of this is necessary
The real controversy in the case between the parties is as already indicated as regards the interpretation of section 15 of the Encumbered Estates Act
The relevant portion of section 15 is in these words In determining the amount due on the basis of a loan which has been the subject of a decree the Special Judge shall accept the findings of the Court which passed the decree except in so far as they are inconsistent with the provisions of section 14
 A later amendment by which after the words and figures  section 14  the words  or section 4 of the U P Zamindars Debts Reduction Act 1952  were added is not relevant for our purpose
Section 14 runs as follows  14
1 The Special Judge shall by an order in writing fix a date for enquiring into the claims made in pursuance of the notice published in accordance with section 9 and give notice of such date to all the claimants and the person who made the application under section 4
2 The Special Judge shall examine each claim and after hearing such parties as desired to be heard and considering the evidence if any produced by them shall determine the amount if any due from the landlord to the claimant on the date of the application under section 4
3 All evidence recorded in any suit or proceeding which is stayed under sub section 1 of section 7 may be taken by the Special Judge as evidence recorded before himself
4 In examining each claim the Special Judge shall have and exercise all the powers of the Court in which a suit for the recovery of the money due would lie and shall decide the questions in issue on the principles as those on which such court would decide them subject to the following provisions namely 123 a the amount of interest held to be due on the date of the application shall not exceed that portion of the principal which may still be found to be due on the date of the application b the provisions of the United Provinces Agriculturists Relief Act 1934 shall not be applicable to proceedings tinder this Act
5 For the purpose of ascertaining the principal under clause a of subsection 4 the Special Judge shall treat as principal any accumulated interest which has been converted into principal at any statement or settlement of account or by any contract made in the course of the transaction on or before December 31 1916
Explanation Interest which on or before December 31 1916 became part of the principal under the express terms of original contract shall for the purposes of this section be deemed to be principal
6 For the purposes of ascertaining the principal under clause a of sub section 4 the Special Judge shall not treat as principal any accumulated interest which has been converted into principal at any statement or settlement of accounts or by any contract made in the course of the transactions after December 31 1916
7 If the Special Judge finds that any amount is due to the claimant he shall pass a simple money decree for such amount together with any costs which he may allow in respect of proceedings in his court and of proceedings in any civil court stayed under the provisions of this Act together with pendente lite and future interest at a rate not greater than the rate specified in section 27 and if he finds that no amount is due he may pass a decree for costs in favour of the landlord
Such decree shall be deemed to be a decree of a civil court of competent jurisdiction but no decree against the landlord shall be executable within Uttar Pradesh except under the provisions of the Act Provided that no pendente lite interest shall be allowed in the case of any debt where the creditor was in possession of any portion of the debtor s property in lieu of interest payable on such debt
 124 Obviously there can be no question of any inconsistency in a finding of a court which has passed a decree on the basis of a loan with the provisions mentioned in sub sections 1 2  3 of section 14 nor is there any question of any inconsistency with the provisions of sub section 7 of section 14 as those provisions apply only after the Special Judge has found the amount due to the claimant and the question of inconsistency of any finding in the decree with the provisions of section 14 arise under section 15 at the stage when the amount due is being determined
Sub sections 4 5 and 6 of section 14 however require careful consideration of the Special Judge when examining a decree of a Civil Court to  find whether any of the findings of the court is inconsistent with those provisions
If they are inconsistent with any of those provisions he has to reject the findings to the extent of such inconsistency
Thus if for example the provisions of the  would be beneficial to the applicant landlord and have not been taken into consideration by the court which passed the decree the Special Judge will have to give effect to section 144b of the Act to modify the finding of the Court as regards the amount due after applying the provisions of the Usurious Loans Act
On the other hand if the provisions of the U P Agriculturists Relief Act 1934 have been applied by the Civil Court the finding as regards the amount due in so far as the same was based on those provisions cannot in view of its inconsistency with sub section 4c of section 14 be accepted by the Civil Court and he will have to modify the same leaving out the provisions of the U P Agriculturists Relief Act
Similarly if in arriving at the amount due the Court which passed the decree has acted inconsistently with sub sections 5 and 6 of section 14 the finding will have to be modified by the Special Judge by applying the provisions of sub sections 5 and 6
So also if the finding of the Court which passed the decree is  inconsistent with  the provisions of sub section 4a of section 14 of the Encumbered Estates Act the finding will have to be rejected in so far as it is inconsistent
The question that has arisen in this case and may as well arise in other cases is whether when in ascertaining 125 the amount due on the basis of a loan at the date of the suit the Court which passed the decree did not allow interest exceeding the portion of the principal which was still due at the date of the suit the finding as regards the amount due is inconsistent with section 144 a because the consequence of that finding as regards the amount due together with interest allowed thereupon is that on the date of the application the amount of interest due exceeds the portion of the principal remaining unpaid on the date of the application
On behalf of the decree holder claimant it is contended that all that is necessary to save inconsistency with sub section 144a is that the principle that the amount of interest shall not exceed the amount of the unpaid principal has been followed in passing the decree and the fact that the result of the finding would be that on the date of the application section 4 of the Act the interest due would exceed the portion of the principal unpaid on such date is of no consequence
This contention cannot in our opinion be accepted
The requirement of sub section 4a of section 14 is that  the amount of interest held to be due on the date of the application shall not exceed that portion of the principal which may still be found to be due on the date of the application
 The words  on the date of the application  cannot be ignored
There can be no doubt that these words  on the date of the application  were deliberately used in the sub section for the purpose of benefiting the landlord applicant to this extent that whatever interest due on the contract may amount to it will be limited to the amount of the principal found still remaining due on the date of the application
When the Legislature goes further and provides that if prior to the application a decree has been made on the basis of the loan the findings of the Court which passed the decree shall be accepted but forbids such acceptance if such finding is inconsistent with the provisions of section 14 the intention clearly is that the fact that there has been a decree will not make any difference as regards the duty of the Special Judge to give the applicant the benefit of the provisions of section 14
When the Court passed the decree there was 126 no application under the Encumbered Estates Act and so there could be no question of the Court then complying with the provisions of section 144a
Even so when the Special Judge has to reject such of the findings as are  inconsistent  with section 14 he must find out the effect of the several findings of the court to ascertain whether there is such inconsistency
Where the consequence of the finding of the court which passed the decree is that the provisions of section 144a about the amount of interest due on the date of the application not exceeding the unpaid principal on that date are contravened the finding should be held to be inconsistent with these provisions
In saying that if in the decree the court did not allow interest as on the date of the suit to exceed the principal then remaining due there is no inconsistency with section 144a the respondent s counsel is in effect asking us to read for the words  in so far as they are inconsistent with the provisions of section 14  the words  in so far as they would have been inconsistent with the provisions of section 14 if the date of the institution of the suit be deemed to be the date of the application under section 4
 For this we cannot find any justification
Not only would this defeat the beneficial purpose of the legislation under section 144a but this will also not be the natural meaning of the words  in so far as they are inconsistent with the provisions of section 14 The Chief Court s view that the Special Judge has merely to see whether the Civil Court that passed the decree could have passed the decree which it did pass if that court had had to apply the provisions of section 14 treating the date of the institution of the suit as the date of the application cannot therefore be accepted as correct
The same view had been taken by the Chief Court of Oudh in an earlier decision of Pandit Ramsagar Prasad vs Mst
Shayama 1
A Full Bench of the Allahabad High Court had in Rukun uddin vs Lachhmi Narain 2 to consider the question whether a finding in a decree made by a civil court that the creditor is entitled to interest only at the rates specified in U P Agriculturists Relief Act was inconsistent with the 1 AIR 1939 Oudh 75
2 ILR 1945 All 307
127 provisions of section 14 of the U P Encumbered Estates Act and was therefore not binding on the Special Judge hearing an application under the U P Encumbered
Estates Act
They held that such a finding must be held to be inconsistent with the provisions of section 14 and could therefore not be binding on the Special Judge
There can be no doubt about the correctness of this view for as has been pointed out above section 144c provides that the provisions of the U P Agriculturists Relief Act shall not be applicable to proceedings under the Encumbered Estates Act
One of the learned judges Mr Justice Verma referred with approval in the course of his judgment to the view taken in Ramsagar Prasad s Case 1
For the reasons mentioned earlier how ever we are of opinion that the view in Ramsagar Prasad s Case 1 which has been followed by the Chief Court in the present case is wrong
Our conclusion therefore is that the Special Judge is even where there has been a decree by a civil court in respect of a loan bound to follow the provisions of section 144a of the Act so that the amount of interest which he can hold to be due on the date of the application must not exceed the portion of the principal found to be due on the date of the application
Accordingly in the present case the Special Judge should have held the amount of interest due oil the date of the application ie October 26 1936 to amount to rupees one lakh only that being the principal which was still due on that date
Under the provisions of sub section 7 of section 14 the Special Judge has to pass a simple money decree for such amount together with any costs which he may allow in respect of proceedings in his court and of proceedings in any civil court stayed under the provisions of this Act together with pendente lite and future interest at a rate not greater than the rate specified in section 27
 It was in view of this provision that the special Judge and the High Court allowed interest at the rate of 4 per annum
The proper decree the Special Judge should have passed therefore was one for rupees two lakhs for the loan with permissible interest plus Rs 4314 2 9 Rs 51 3 0 and rupee 1 AIR 1939 Oudh 75
128 one on account of costs that is for a total sum of Rs 204366 5 9 with proportionate costs with interest pendente lite and future interest at the rate of 4 per cent per annum simple from the date of the application ie October 26 1936 till realisation
Accordingly we allow the appeal set aside the decree passed by the courts below and order that in place of the decree made by the Trial Court be substituted a money decree in the terms as mentioned above
The appellant will get his costs in the appeal
Appeal allowed


Summary:
The appellant was compulsorily retired from service by the Rajpramukh of Pepsu by an order dated August 18 1950 which was as follows His Highness the Rajpramukh is pleased to retire from 89 service Sardar Dalip Singh Inspector General of Police Pepsu on leave for administrative reasons with effect from the 18th August 1950 No charges Were framed against him and it was on his insist ence that certain charges were communicated to him
Rule 278 of the Patiala State Regulations 1931 which was then in force provided as follows   278
For all classes of pensions of person who desires to obtain the pension is required to submit his application before any pension is granted to him
The State reserves to itself the right to retire any of its employees on pension on political or on other reasons
 The question for determination in the appeal was whether the compulsory retirement of the appellant amounted to removal or dismissal from service within the meaning of article 3112 of the Constitution
The trial Court held in favour of the appellant and the High Court against him Held that the two tests laid down by this Court for deter mining whether an order of compulsory retirement amounted to removal or dismissal from service were 1 whether it was by way of punishment a charge or imputation against the officer being made the basis of the exercise of the power and 2 whether the officer was deprived of any benefit already earned as in a case of dismissal or removal
Shyamlal vs State of U P  and State of Bombay vs Subhagchand Doshi   referred to
So judged the order passed against the appellant could not amount to dismissal or removal from service within the meaning of article 3112 of the Constitution
The order was not one purported to have been made on any charge of misconduct or inefficient and the fact that any such considerations might have weighed with the Government in passing the order under Rule 278 did not amount to any imputation or charge against the officer and there could be no question of losing any benefit earned since the Rule itself provided for retirement on pension and the officer had in fact been allowed full pension
It would not be correct to say that since the Rule did not fix any age for compulsory retirement an order of compulsory retirement passed under it must necessarily be regarded as dismissal or removal within the meaning of article 3112 of the Constitution
State of Bombay vs Subhagchand Doshi   ex plained