Case: Ram Prasad Narayan Sahi And Another Vs. The State Of Bihar And Others

2. The facts are that on 28-10-1936 Rama Krishna Narain and others submitted an application under S.4. U P. Encumbered Estates Act, 1934 to the sub-divisional officer, Tilhar, Shahjahanpur, proving that the provisions of the said Act be applied to them. This application was eventually transferred by the sub-divisional officer to the court of the special judge, first grade, Shahjahanpur. The landlords on 26-8-1938 submitted a written statement to the special judge under S. 8 of the Act and therein stated inter alia that they had a proprietary interest to the extent of ten annas share in 52 items of taluqdari Villages which formed part of taluka Bharawan. A notice of this application was published as required by S. 11(1) of the Act in the U. P. Gazette dated 13-5-1939.On 30-11-1939, Raja Dev Singh, who Subsequently became a ward of the Court of Wards, filed a claim petition under S. 11(2) of the Act and alleged therein that he was the proprietor of 6 1/2 pies share in 47 items of property mentioned in schedule (A) of the landlords written Statement. This claim was disallowed by the Special judge by an order dated 24-8-1940, and it was held that Raja Dev Singh was not the owner of the property claimed by him in his objection petition. The Deputy Commissioner of Hardoi who is the Court of Wards of Bharawan estate filed an appeal against this decision of the special judge to the High Court. All the applicant-landlords were impleaded as respondents in the appeal along with the Unao Commercial Bank Ltd., one of the creditors who had taken part in the proceedings before the special judge at that stage.It does not appear from the record that the other creditors had either filed written Statements under section 10 or had made any allegation that the landlords had secreted any property. Their names were not mentioned in the memorandum of parties annexed to the memo of costs, and in these circumstances they were not impleaded as respondents in the appeal. Subsequently the appellant made an application for impleading them as respondents in the appeal and Prayed that he be given the benefit of S. 5, Limitation Act. This application was rejected, and eventually the appeal was dismissed on the ground that it was defective and could not be entertained in the absence of all the creditors as respondents in the appeal. The cross-objection filed by the Unao Commercial Bank with respect to costs was allowed.3. The appellant on 21-11-1944 filed a petition for leave to appeal to His Majesty in Council. It was alleged in this application that the valuation of the subject-matter of the appeal in the trial court, in the High Court. and before His Majesty in Council was over Rs. 10,000/- and that though in the result the judgment and decree of the High Court affirmed the judgment and decree of the trial court, a substantial question of law affecting not only the parties but of general interest was involved.The High Court without deciding whether the appeal raised a substantial question of law granted leave to the appellant under S. 110, Civil P. C. on the ground that the judgment of the High Court being one of variance, and the value of the subject matter in dispute in the trial court as well as in the appeal to His Majesty in Council being over Rs. 10,000/-, the case fulfilled the requirements of that section.

Reasoning:
It is no doubt true that costs are not taken into consideration and are treated as extraneous to the subject-matter of a suit, and variation in the matter of costs does not make the decree of the appellate court a decree of variance; but as already stated the appellant did not pray for the certificate on that ground. He had expressly alleged that the decree being one of affirmance he was entitled to a certificate, because the subject of the suit as well as of the appeal was a sum of over Rs. 10,000 and the case involved a substantial question of law. It is obvious that the ground on which the appeal was dismissed by the High Court raises a question of law of importance to the parties and that being so, on that ground alone the appellant was entitled to a certificate under S. 110, C. P. C. The certificate therefore is good, though the ground on which it was granted is erroneous. It is always open to an appellant to support the Certificate on grounds other than those on which it has been actually ordered to be given. The preliminary objection thereforelaw was enacted for giving relief to encumbered estates in the U. P. Section 4 provides that any landlord who is subject to or whose immoveable property or any part thereof is encumbered with private debts, may make an application in writing to the Collector of the district, stating the amount of such private debts and also of his public debts both decreed and undeterred and requesting that the provisions of this Act be applied to him. The section gives an option to the landlord who is subject to private debts to make, an application for obtaining relief under the provisions of the Act. The Collector then transmits the application to the special judge appointed under the Act.The direct consequence of the acceptance of such an application by the collector is that the creditors are deprived of their rights of proceeding against such a landlord in civil or revenue courts in respect of their debts and all attachments made in execution of decrees become null and void and no process in execution can issue after that date. The provisions of the Act are clearly detrimental to the contractual rights of the creditors and to their remedies in civil law and such a statute can by no stretch of imagination be described to have been enacted for the benefit of creditors. Section 8 of the Act confers power on the special judge of calling upon the applicant to submit to him within a period to be fixed by him in this behalf, a written statement containing full particulars respecting the public and private debts to which he is subject or with which his immoveable property is encumbered; of the nature and extent of his proprietary rights in land; of the nature and extent of his property which is liable to attachment and sale; and lastly, of the names and addresses of the creditors, so far as can be ascertained by him.It is apparent from the provisions of the Act cited above that the U. P. Encumbered Estates Act is no more, nor less than, a code for the administration of the assets of the landlord-debtor and for giving relief to him in a number of ways against the contractual rights of his creditors. It clearly deprives the creditors of any remedies that they would ordinarily have in ordinary civil courts and extinguishes the mortgages held by them. Section 11 (2) deals with claims of third parties to the property alleged by the landlord is belonging to him and the judge is required to determine whether such property is liable to attachment or sale.It isapparent that strictly speaking the provisions of these rules cannot be applied to the proceedings contemplated by the U. P. Encumbered Estates Act. These proceedings cannot be described as suits. It was conceded at the Bar that an inquiry into third party claims under Section 11 (2) cannot be described as a suit. Neither Section 8 nor Section 11 provides that the creditors have to be impleaded as parties respondents in such an objection application. As already said, the section provides that the applicant has to give information about the names of the creditors and the amounts due to them. Till the time that a decree is passed under Section 14 in favour of any of the creditors it cannot be said that any one of them is entitled to share in the property of the debtor.It is only when a claim has been made under S. 10 by a creditor and it has ripened into a decree that he is entitled to share in the assets of the landlord. But it be commits a default in submitting a written statement of the claim under Section 10, the claim stands discharged under SectionIn this particular case it is not clear whether any of the creditors except the Unao Commercial Bank had Trade a claim underIt is also not clear whether any decree under Section 14 has been passed in favour of any of the creditors. An inquiry for the determination of the quantum of the debts of the landlord can only be made after third party claims have been settled under the provisions of Section 11 (2).In view of these provisions it seems difficult to hold that the technical and strict rules as to impleading of parties can have application to proceedings under Section 11, U. P. Encumbered Estates Act. It is true that the creditors must be given notice and opportunity to say whether the landlord has secreted any property, but if they do not do so and are content with the disclosures made by the landlord they cannot be said to have any further interest in the quantum of the property which the landlord has mentioned under the provisions of section 8 in his written statement.In that situation, if a third party claims any item of property mentioned by the landlord in the written statement, the controversy at that stage lies only between the landlord and the claimant, though in the result the creditors may either be benefited or deprived of some of the assets which the landlord discloses in the application as liable to attachment and sale towards payment of decrees that may be passed in favour of the creditors.We are fully conscious of the fact that the view that we have expressed above is not in conformity with a number of decisions of the Oudh Chief Court and the Allahabad Highcreditors are allowed to prove their debts and obtain decrees from the special judge according to the provisions of and to the extent allowed by the Act and they lose all their rights on securities held by them. Coming to the application of the rests laid down by the learned Judge, it is not possible to hold that any right of relief exists in an objector under section 11 as against the creditors. It is also difficult to see how an effective decree cannot be passed as regards title to the property in the absence ofOrder 21 Rule 63, it is only the attaching creditor who has the right to file a suit or of being impleaded as defendant in a suit by the judgment-debtor. All the creditors of the judgment debtor who have not attached the property are not necessary parties in a suit under Order 21 Rule 63, though after the decision is that suit they may be entitled to share in the rateable distribution of the property if they make an application for that purpose. In a way it is true to say that in all suits by a creditor against a debtor where the debtor owes to a number of creditors, every other creditor is interested in seeing that that creditors suit is dismissed or his debt is considerably cut down; but from that it does not follow that in a suit on a promissory note by a creditor against the debtor all the other creditors are necessaryhave therefore no hesitation in saying that Mr. Justice Braund, though he ultimately abandoned his view, was right in thinking that in these administrative proceedings technical rules of the First Schedule of the Code of Civil Procedure regarding impleading of parties should not be invoked and that the matter should be viewed in a more liberal way, regard always being had to the fact that there is no collusion between the debtor and the claimant and that there are persons who are bona fide litigating in respect of the title of the claimant under Section 11, and if there has been such a bona fide fight which results in a decree, in an appeal against that decree it is sufficient that those who took an active part in the proceedings under Section 11 are impleaded. It is not necessary to implead each and every creditor who either did not appear or put forward a written statement under Section 10 or took no active part in the proceedings under Section 11 (2).In the view that we have taken it is not necessary to decide the question whether the High Court was right in not exercising powers under Order 41 Rule 20 in impleading the creditors as respondents to the appeal.