Case: State Of Rajasthan Vs. Mukanchand And Others

secured debts. Section 6 provides that after reduction of the secured debt in accordance with the provisions of S. 4, the decree shall, to the extent of the reduction so effected, be deemed for all purposes and on all occasions to have been duly satisfied. Clause (1) of S. 7 provides for the execution of the decree against the compensation and rehabilitation grant payable in respect of the jagir lands of the judgment-debtor. Clause (2) of S. 7, which has been struck down by the High Court, prohibits the recovery of the reduced amount with respect to jagir property from any property other than the compensation and rehabilitation grant payable to a jagirdar. The effect of this provision is that the other properties of the jagirdar, existing or which he may acquire hereafter, are immune from being proceeded against in execution or otherwise.9. We think that the High Court was right in holding that the impugned part of S. 2 (e) infringes Art. 14 of the Constitution. It is now well settled that in order to pass the test of permissible classification, two conditions must be fulfilled, namely, (1) that the classification must be founded on an intelligible differentiation which distinguishes persons or things that are to be put together from others left out of the group and (2) that the differentia must have a rational relationship to the object sought to be achieved by the statute in question. In our opinion, condition No. 2 above has clearly not been satisfied in this case. The object sought to be achieved by the impugned 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 Jagirdars capacity to pay debts had been reduced by the resumption of his lands and the object of the Act was to ameliorate his condition. The fact that the debts are owed to a government or local authority or other bodies mentioned in the impugned part of S. 2 (e) has no rational relationship with the object sought to be achieved by the Act. Further, no intelligible principle underlies the exempted categories of debts. The reason why a debt advanced on behalf of a person by the Court of Wards is clubbed with a debt due to a State or a scheduled bank and why a debt due to a non-scheduled bank is not excluded from the purview of the Act is not discernible.10. In this connection, Mr. Kapur has relied on the decision of this Court in Manna Lal v. Collector of Jhalawar (1961) 2 SCR 962 : (AIR 1961 SC 828 ). This case is clearly distinguishable because there is (sic) a law giving special facility for the recovery of dues to a bank owned by the Government was held not to offend Art. 14 of the Constitution. It is clear that the Government can be legitimately put in a separate category for the purpose of laying down the procedure for the recovery of its dues. Mr. Kapur further relied on Nand Ram Chhotey Lal v. Kishori Raman Singh, AIR 1962 All 521 . The judgment of the High Court undoubtedly supports him, but, with respect, we are unable to agree with the ratio of the case. The High Court was concerned with the U. P. Zamindars Debt Reduction Act (U. P. Act XV of 1953), which is substantially similar to the impugned Act. The ratio of the High Court is :"It appears to us that the legislature had to make a distinction between debts due from the ex-zamindars to private individuals and the debts due to scheduled banks or to Government or semi-Government authorities. The obvious reason appears to be that the private money lenders were considered to be a bane to rural economy and perpetrating agricultural indebtedness. It was to save the cultivators from such unscrupulous money lenders that such laws had to be enacted the last in series being the Zamindars Debt Reduction Act."We consider there is no force in these observations. No such reason is apparent from the terms of the Act. Non-scheduled banks and all other private creditors cannot be said to be a bane to rural economy."11. The third case relied on by Mr. Kapur - Jamnalal Ramlal Kintee v. Kishandas and State of Hyderabad (S) AIR 1955 Hyd 194 does not contain any discussion. The High Court supported the exclusion on the ground that "exclusion of certain class of debts under S. 3 of the impugned Act also is not without substantial justification for public demands do not stand in the same position as ordinary demands". Apart from the fact that all the exempted categories are not public demands, the High Court does not seem to have considered whether the differentia had any rational relationship sought to be achieved by the Act.12. In conclusion, agreeing with the High Court, we hold that no reasonable classification is disclosed for the purpose of sustaining the impugned part of S. 2 (e).13. Now, coming to the question of the validity of S. 7 (2) we consider that this sub-section is valid as it imposes reasonable restrictions, in the interests of general public, on the rights of a secured creditor. A secured creditor when he advanced money on the security of jagir property, primarily looked to that property for the realisation of his dues. Further, this sub-section has been designed with the object of rehabilitating a jagirdar whose jagir properties have been taken over by the State for a public purpose at a low valuation. If this provision was not made, the jagirdar would find it difficult to start life afresh and look to other avocations, for not only his existing non-jagir property but his future income and acquired properties would be liable to attachment and sale for the purpose of satisfying the demands of such secured creditors. Accordingly, we hold that S. 7 (2) imposes reasonable restrictions in the interest of general public.14.

Decision (1 = appeal accepted, 0 = rejected): 1

Explanation:
1[ds]We think that the High Court was right in holding that the impugned part of S. 2 (e) infringes Art. 14 of the Constitution. It is now well settled that in order to pass the test of permissible classification, two conditions must be fulfilled, namely, (1) that the classification must be founded on an intelligible differentiation which distinguishes persons or things that are to be put together from others left out of the group and (2) that the differentia must have a rational relationship to the object sought to be achieved by the statute in question. In our opinion, condition No. 2 above has clearly not been satisfied in this case. The object sought to be achieved by the impugned 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 Jagirdars capacity to pay debts had been reduced by the resumption of his lands and the object of the Act was to ameliorate his condition. The fact that the debts are owed to a government or local authority or other bodies mentioned in the impugned part of S. 2 (e) has no rational relationship with the object sought to be achieved by the Act. Further, no intelligible principle underlies the exempted categories of debts. The reason why a debt advanced on behalf of a person by the Court of Wards is clubbed with a debt due to a State or a scheduled bank and why a debt due to a non-scheduled bank is not excluded from the purview of the Act is notHigh Court supported the exclusion on the ground that "exclusion of certain class of debts under S. 3 of the impugned Act also is not without substantial justification for public demands do not stand in the same position as ordinary demands". Apart from the fact that all the exempted categories are not public demands, the High Court does not seem to have considered whether the differentia had any rational relationship sought to be achieved by the Act.In conclusion, agreeing with the High Court, we hold that no reasonable classification is disclosed for the purpose of sustaining the impugned part of S. 2 (e).Now, coming to the question of the validity of S. 7 (2) we consider that this sub-section is valid as it imposes reasonable restrictions, in the interests of general public, on the rights of a secured creditor. A secured creditor when he advanced money on the security of jagir property, primarily looked to that property for the realisation of his dues. Further, this sub-section has been designed with the object of rehabilitating a jagirdar whose jagir properties have been taken over by the State for a public purpose at a low valuation. If this provision was not made, the jagirdar would find it difficult to start life afresh and look to other avocations, for not only his existing non-jagir property but his future income and acquired properties would be liable to attachment and sale for the purpose of satisfying the demands of such secured creditors. Accordingly, we hold that S. 7 (2) imposes reasonable restrictions in the interest of general public.