Case: Bank of India Vs. Messrs Vijay Transport and Others

2. The appellant-Bank filed a suit being O.S. No. 12 of 1979 in the Sub-Court, Eluru, on February 10, 1975 against the respondents including the respondent firm and its partners to recover a sum of Rs. 18, 14, 817.91 being the balance (inclusive of interest) of three principal amounts of Rs. 3, 00, 000, Rs. 7, 00, 000 and Rs. 80, 000 severally advanced by the Bank to the firm under cash credit account on November 28, 1967, April 3, 1968 and February 17, July 7, 1969 under the Banking Companies (Acquisition and Transfer of Undertakings) Act 5 of 1970, hereinafter referred to as the Banking Companies Act. The sum of Rs. 80, 000 was admittedly advanced by way of loan by the Bank after itsThe respondent firm owns certain motor vehicles which are mentioned in A and B Schedules to the plaint of the said suit. The firm was carrying on its business at Madras as fleet owners and gasolene carriers. It had two partners, namely, one S. Doranna Choudhury, since deceased, the father of respondent 3 and respondent 2, Sunkavali Rajlaxmi. The case of the Bank was that in addition to the hypothecation of the A and B Schedule properties made in its favour to secure the repayment of the aforesaid amounts of loan, the other partner, respondent 2, created an equitable mortgage in favour of the Bank on December 22, 1969 in respect of C Schedule properties of the plaint. S. Doranna Choudhury, since deceased, also created an equitable mortgage in favour of the Bank on February 28, 1979 in respect of D Schedule properties of the plaint. Respondent 3 also created another equitable mortgage on September 6, 1974 in respect of E Schedule properties of the plant. Respondents 4 to 12 are alienees of the mortgaged properties. In the suit the Bank prayed for the sale of the said properties for the recovery of the amounts claimed by it an account of the loan together with interest dueThe respondents including the firm contested the suit by filing written statements, inter alia, denying the creation of any equitable mortgage by the deceased partner and respondents 2 and 3 in favour of the Bank. Respondents 4 to 12, the alienees, while denying the creation of the mortgages contended that they were bona fide purchasers for valuable consideration and the Bank was bound by the alienations and transfers made in their favour of the properties alleged to be under mortgage. The firm and its partners, namely, the said S. Doranna and respondent 2 also filed a counter-claim against the Bank for a sum of Rs. 34, 48, 799. It is not necessary for us to state in detail the respective cases of the parties including the case of the firm and its partners in making the counter-claim against the Bank, inasmuch as the scope of this appeal is limited to the consideration of the question as to whether the High Court was justified in decreeing the Banks claim only after the scaling down of the debt in accordance with the provisions of theBe that as it may, the learned Subordinate Judge held that no equitable mortgage was created in favour of the Bank and, accordingly, dismissed the suit against respondents 4 to 12 and refused to direct sale of the properties alleged to have been mortgaged to the Bank. The learned Subordinate Judge also found that the claim of the Bank, except to the extent of Rs. 1, 00, 418.55, was barred by limitation. The counter-claim of the firm and its partners for the sum of Rs. 34, 48, 799 was decreed and the Bank was directed to pay the same to the firm and itsBeing dissatisfied with the judgment and decree of the learned Subordinate Judge, the Bank preferred an appeal to the High Court. The High Court, after elaborately considering the facts and circumstances of the case and the evidence adduced by the parties, set aside the judgment and decree of the learned Subordinate Judge including the decree allowing the counter-claim of the firm and its partners and decreed the suit instituted by the Bank. In decreeing the suit, the High Court held that the Bank was entitled to recover the amount claimed by it only after the scaling down of the debt in accordance with the provisions of the Act. Hence this appeal

Court's reasoning:
11. We are unable to accept the contention. It may be that in interpreting the words of the provision of a statute, the setting in which such words are placed may be taken into consideration, but that does not mean that even though the words which are to be interpreted convey a clear meaning, still a different interpretation or meaning should be given to them because of the setting. In other words, while the setting of the words may sometimes be necessary for the interpretation of the words of the statute, but that has not been ruled by this Court to be the only and the surest method of interpretation. In the instant case, the expression special Indian law has a clear and unambiguous meaning and there is no need for its interpretation. There is no reasonable justification to think that the expression special Indian law must be an enactment of the British Parliament. If, on the date the Act was passed, there was no Indian legislature, such an interpretation might be justified, but when there were in existence Indian legislatures including a legislature at the Centre, it would be quite unreasonable to think that special Indian law must be a law enacted by the British Parliament. In this connection, we may refer to Section 3(27)(a) ofthe General Clauses Act, 1897, which defined Indian law as meaning any Indian law enacted by the Indian legislature. In view of the said definition, the expression special Indian law means a special Indian law enacted by the Indian legislature. In the face of the provision of Section 3(27)(a) of the General Clauses Act, as it stood on the day the Act was passed, we do not think that there is any justification for laying down that the expression special Indian law in Section 4(e) of the Act means a law enacted by the British Parliament specially for India. We are, therefore, unable to accept the view of the Andhra Pradesh High Court in Krishna Murthys case (AIR 1983 AP 347 : (1983) 1 APLJ (HC) 371), and also the contention of the respondents made in that regard, which istheoretically, there may be a distinction between the words in pursuance of and the words by or under, but by using the expression in pursuance of in Section 4(e) the legislature, in our opinion, has not meant that the corporation in question should be formed by a third party in pursuance of the law and not by the law itself in order to come within the purview of Section 4(e) of the Act. The intention of the legislature is very clear in that the provision of Section 4(e) would apply to a corporation which is the creature of a special Indian law. There is no difference or distinction whatsoever between the corporation formed in pursuance of a special Indian law and a corporation formed by or under a special Indian law. It will be highly unreasonable and illogical to think that as a corporation has been formed by a under a special Indian law and not in pursuance of such a law, it will not come within the purview of Section 4(e) of the Act. Accordingly, we hold that the Banking Companies Act is a special Indian law and the provision of Section 4(e) is applicable to the appellantThe learned counsel for the respondents has been our attention to the fact that the Banking Companies Act was first formed or created by the Ordinance 8 of 1969 promulgated on July 19, 1969. The Ordinance was replaced by an Act of Parliament being Act 22 of 1969 with certain modifications. This Court, however in R. C. Cooper v. Union of India (AIR 1970 SC 564 : (1970) 1 SCC 248 ), struck down the Act 22 of 1969 as unconstitutional. Thereafter, a fresh Ordinance being Ordinance 3 of 1970 was promulgated on February 14, 1970 with certain further modifications and, thereafter, replaced by the present Banking Companies Act. It is submitted that as the appellant Bank was nationalised and/ or created under the Ordinance 8 of 1969 promulgated on July 19, 1969 and the present Banking Companies Act only ratifies the already created Bank under the said Ordinance, the appellant Bank was not, therefore, formed or created under any special Indian law. This contention is devoid of any merit and fit to be rejected on the face of it. Even assuming that the Bank was created under the Ordinance 8 of 1969 and not under the Banking Companies Act, still it must be held that it was created under a special Indian law, for an ordinance is as much a law as an enactment of Parliament or legislature. In this connection, it may also be pointed out that under sub-section (2) of Section 1 of the Banking Companies Act, the provisions of the Banking Companies Act (except Section 21 which shall come into force on the commencement of the Banking Companies Act, there shall be constituted such corresponding new banks as are specified in the First Schedule. Therefore, it is manifestly clear that the appellant Bank, which is mentioned in the First Schedule, has been created under the provisions of the Banking Companies Act with effect from July 19, 1969. The contention of the respondents that the Bank has been nationalised or formed under the Ordinance 8 of 1969 is without any substance whatsoever and isIn the instant case, the amounts of loan were advanced by the Bank to the firm under the cash credit account opened in favour of the firm. Normally, the advances that are made from the cash credit account are repaid and, therefore, fresh advances are made. It is not known what was the actual balance on the date of Bank was nationalised. It is true that in the judgment of the High Court it has been stated that the principle amounts of Rs. 3, 00, 000, Rs. 7, 00, 000 and Rs. 80, 000 were severally advanced by the Bank to the firm under the cash credit account on November 28, 1967, April 3, 1968 and February 17, 1972 respectively. But, there is no further statement whether the first two amounts were repaid by the firm and, thereafter, fresh advances were taken out of the cash credit account. The respondents did not advance any such contention either in their written statements or in the arguments before the trial court and the High Court. It is for the first time before this Court that such a plea is raised in the argument of the learned counsel for the respondents. The contention involves a question of fact which has to be pleaded and proved. In the absence of any such pleading, we are unable to allow the respondents to raise such a contention for the first time in argument before thisThe reasons given by the Division Bench of the Andhra Pradesh High Court in Krishna Murthys case (AIR 1983 AP 347 : (1983) 1 APLJ (HC) 371), for holding the latter part of Section 4(e) of the Act as void, are that Section 4(e) of the Act was enacted to protect the British economic interests and although such a law could permissibly be enacted under the Constitutional Scheme of the 1935 Government of India Act, that law after the inauguration of our Sovereign Democratic Republic cannot but be held to have become void as making invidious discrimination in favour of the British Corporation offending against the equality clause under Article 14 of the Constitution. Before declaring the same as void, the Division Bench took the view that the words any special Indian law could not have been intended to refer to any law made by any legislature of our country, but to a law made by the British Imperial Parliament as a piece of special legislation application to India. It has already been discussed by us that the words any special Indian law refers and relates to a law made by the Indian legislature and not by the British Parliament. In that view of the matter, the reasons given by the Division Bench for holding the latter part of Section 4(e) to be void as making a discrimination in favour of corporations created by British Parliament, will not apply to corporations formed or created by any special Indian law which, in the instant case, is the Banking Companies Act. In our opinion, therefore, the Banking Companies Act is quite legal and valid. No other point has been urged by either party in this appeal.17. In view of the discussion made above, we hold that the provisions of the Act are not applicable to the appellant Bank and, therefore, there is no question of scaling down the debt due to the Bank by the respondents