Case: Indian &amp; General Investment Trust Ltd Vs. Shri Purna Chandra Mardaraj &amp; Co

1. This appeal, on certificate, is directed against the judgment of the Orissa High Court, dated January 4, 1963, and rendered in Miscellaneous Appeals Nos. 94 and 95 of 19602. The circumstances, under which this appeal arises, may be briefly stated. The predecessor-in-title, of the respondents, had executed three mortgages in favour of the appellant-company, which is registered in London. The first mortgage was executed on October 23, 1903, securing a sum of ? 1,35,000. Inasmuch as, according to both parties, this mortgage has been completely redeemed in 1935, it is not necessary to make any further reference to this transaction. The second mortgage was executed on December 18, 1906, under which a sum ?77,500 was borrowed by the mortgagor. Even according to the appellant, in respect of this mortgage, the respondents had paid a total sum of ? 1,77,349, by way of interest which is more than twice the principal amount covered by the mortgage. The third mortgage was executed on October 21, 1935, under which a sum of ? 65,00 was borrowed by the mortgagor3. The appellant demanded the repayment of the amounts due under these mortgages but the mortgagor, so far as the mortgage of 1906 was concerned, repudiated the same on the ground that the entire transaction had been wiped off, by virtue of S. 10 of the Orissa Money-Lenders Act, 1939. (Orissa Act III of 1939) (hereinafter called the Money-Lenders Act), inasmuch as he had paid more than double the original principal amount, as admitted by the mortgagee4. The appellant, however, did not accept this repudiation and, in consequence, the company took legal proceedings in London and obtained an ex parte decree. But attempts to execute the decree in India did not succeed, as will be seen from the decision of the Calcutta High Court in Indian and General Investment Trust v. Raja of Khalikote, AIR 1952 Cal 508 . The High Court held that the decree obtained by the appellant in London was not executable in India5. In the meanwhile, the mortgaged properties vested in the State of Orissa, under the Orissa Estates Abolition Act, 1951 (Act I of 1952) (hereinafter called the Abolition Act), on June 1, 1953, the virtue of the notification issued by the State Government under S. 3 thereof. Inasmuch as the appellant had not realised the dues under the two later mortgages, they filed a claim petition before the Claims Officer, under S. 18 of the Abolition Act6. Under S. 18 (1) (a) of the Abolition Act, every creditor, whose debt is secured by the mortgage of or is a charge on, any estate or part thereof, which has vested in the State Government under S. 3, has to file a claim within the period mentioned therein, to the Claims Officer, for the purpose of determining the amount of debt legally and justly payable to each such creditor in respect of his claim. Though the Claim included the third mortgage dated October 21, 1935, also, there does not appear to have been much of a serious contest about the liability under that mortgage and, there both the Claims Officer, as well as the High Court, on appeal, have substantially accepted the claim of the appellant. Therefore, the rights of the parties under that mortgage do not also arise for consideration, in this appeal.

Court's reasoning:
We do, no doubt, see force in the contention of the learned counsel, for the appellant, that there is no specific provision in the Abolition Act making any reference to the Money-Lenders Act. We are also conscious that the Abolition Act does lay down some principles in Cls. (a) to (f) of sub-s. (2) of S. 20, as to how exactly the calculation has to be made. There is a1so a slight difference in the method of calculation adopted by the Money-Lenders Act and the Abolition Act. But notwithstanding these circumstances, we are of opinion that, in order to determine the principal amount legally and justly due to each creditor as laid down in S. 20 (1) of the Abolition Act, it is the duty of the Claims Officer to find out whether, in respect of a Claim that is made by a creditor, there is a legal impediment for recognising the same, i.e., whether the claim is such which will be recognised by a Judicial TribunalWe are not inclined to accept this large contention of the learned counsel for the appellant. For instance, if a plea of discharge is raised by debtor in a claim proceeding, or, if a plea is raised by a debtor that the claim is barred by the law of Limitation, no provision is made in Cls. (a) to (f) of S. 20 (2) giving jurisdiction to the Claims Officer either to entertain such objection or to investigate the same. Acceptance of the contentions of the learned counse1 for the appellant will lead to this conclusion that when a claim is made under the Abolition Act, the Claims Officer will have, straightway to determine the principal amount and interest under sub-s. (2) of S. 20 without considering the question as to whether the claim is true or whether it is barred by any other law, or whether the claim is still subsisting. These are all matters which, in our opinion, properly arise for consideration when a Claims Officer has to determine the principal amount under S. 20 (1) of the Abolition Act. The expression legally and justly due, occurring in S. 20 (1), clearly indicates that the first and initial duty of the Claims Officer is to find out whether any principal amount is at all due to the creditor which he is entitled to recover either in law or justly. It may be that, after arriving on this aspect, at a conclusion, one way or the other, and depending upon that decision, the Claims Officer will have to adjudicate upon the rights of the parties, having due regard to the various matters mentioned in Cls. (a) to (f) of sub-s. (2) of S. 20.We are, therefore, satisfied that the Board is correct when it held that the provisions of the Money-Lenders Act can be taken into account by the Claims Officer, under S. 20 (1) of the Abolition Act. If the provisions of the Money-Lenders Act apply, as they have been applied by the Board, there is no controversy that the claim under the mortgage of December 18, 1906, must be considered to have been extinguished and that no further amounts will be due, as held by the Board6. Under S. 18 (1) (a) of the Abolition Act, every creditor, whose debt is secured by the mortgage of or is a charge on, any estate or part thereof, which has vested in the State Government under S. 3, has to file a claim within the period mentioned therein, to the Claims Officer, for the purpose of determining the amount of debt legally and justly payable to each such creditor in respect of his claim. Though the Claim included the third mortgage dated October 21, 1935, also, there does not appear to have been much of a serious contest about the liability under that mortgage and, there both the Claims Officer, as well as the High Court, on appeal, have substantially accepted the claim of the appellant. Therefore, the rights of the parties under that mortgage do not also arise for consideration, in this appeal17. Though, in this Court, on beha1f of the. Mr. G. L. Sanghi, learned counsel, has challenged the correctness of the decision of the Board about they of S. 17 of thes Act, we do not think it necessary to go into that aspect, because we are accepting his contention that the Board was justified in holding that the mortgage has been extinguished under Ss. 10 and 11 of the