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TMI Blog1963 (11) TMI 74X X X X Extracts X X X X X X X X Extracts X X X X ..... on which this Act comes into force in any local area, any displaced creditor claiming a debt from any other person who is not a displaced person may make an application, in such form as may be prescribed, to the Tribunal within the local limits of whose jurisdiction he or the respondent or, if there are more respondents than one, any of such respondents, actually and voluntarily resides, or carries on business or personal works for gain, together with a statement of the debt owing to him with full particulars thereof " The respondents in each of these 13 appeals, which have been consolidated for hearing are "displaced creditors" and the point arising for decision in them is whether they could make a claim under this provision against the State of Punjab. A petition claiming such relief was filed by the respondent in Civil Appeal 439 of 1961 before the Subordinate Judge, Amritsar who was the Tribunal created under the Act for the purpose of receiving claims under s. 13 and, similarly, the contesting respondents in the other 12 appeals 440-451 of 1961 made similar claims before the Subordinate Judge, Hissar. Immediately the claims were filed and notices issued to the State of Punj ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . These two matters being put aside,, the submission of the appellant in brief is two fold: (1) that what is claimed in the applications filed against the State is not "a debt" within the definition of the term in the Act to be presently referred to and (2) that even if it be held that the sum claimed is a "debt" the same is not being claimed from a person of whom it could be said that he or it "actually and voluntarily resides or carries on business or personally works for gain. Both these arguments stem from a single postulate and that is that the State is not within the scope of the enactment, not being named expressly or by necessary implication, and hence is not bound in respect of the liabilities, if any which the respondents might have against it by the provisions of the Act, and therefore is not subject to the jurisdiction of the tribunals created by the Act. It is the further contention that far from the intention of the enactment being to bind the State, the language that it employs and the provisions that it enacts, both from the point of view of the positive provisions as well as the omissions, tend strongly to establish that the State was outside the Act. These submiss ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... /9/- together with interest at 6% from the 15th August, 1947 till the date of the application. We might mention that it was not in dispute that under the relevant constitutional instruments to which we shall refer later, if the claim were true, it would be enforceable by suit against the appellant-State. As stated earlier, nothing turns in these appeals on the merits of the claim or about the defence to it on the merits by the State, but we are only concerned with the preliminary objection to the maintainability of the application based upon the provisions of the Act on the ground that what is claimed from the Government of the State is not a "debt" within the Act and that the State of Punjab is not a "person" against whom an application under s. 13 of the Act could be made. As a step leading to the consideration of these submissions it would be necessary to advert to and read certain of the provisions of the Act which have a bearing on the matter in controversy. Section 2 contains the definitions of the terms used in the Act and it enacts: "2. Definitions.-In this Act, unless the context otherwise requires.-- (6) debt means any pecuniary liability, whether payable present ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sdiction under this Act;" There are, however, some substantive provisions which have a bearing on the proper construction of S. 13, but we hall defer reference to them at this stage. On the terms of S. 13 of the Act set out earlier, the matters in controversy may be stated thus: Starting from the premise, as to which there is no contest, that the respondent is "a displaced person", the questions to be considered are: (1) Is he a displaced creditor? This would, having regard to the definition of the term displaced creditor in S. 2(8), depend upon (2) whether the claim made by him is a "debt" which Would be the second point for con- sideration viz., is the sum claimed as due from the State a "debt" within the meaning of s. 2(6) (c) and lastly (3) Would the State be any other person within s. 13? Now, what is invoked by the learned Advocate General is the well-known rule of construction which in the phraseology which is apt to the constitutional set up in the U.K. is expressed in the proposition that "the Crown is not bound by a statute unless it appears that it is brought within it by express words or by necessary intendment." We shall in due course consider the scope of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ded Punjab. This was effected by the Indian Independence (Rights, Property Liabilities) Order, 1947 which in its 8th paragraph dealt with contracts entered into by the Governor-General before the 15th August, 1947 (the appointed day) as well as by the undivided province of the Punjab. Paragraph 8(3) ran: "8. (3) Any contract made on behalf of the Province of the Punjab before the appointed day shall, as from that day,- (a)if the contract is for purposes which as from that day are exclusively purposes of the Province of East Punjab, be deemed to have been made on behalf of that Province instead of the Province of the Punjab; and (b)in any other case be deemed to have been made on behalf of the Province of West Punjab instead of the Province of the Punjab; and all rights and liabilities which have accrued or may accrue under any such contract shall, to the extent to which they would have been rights or liabilities of the Province of the Punjab, be rights or liabilities of the Province of East Punjab or the Province of West Punjab, as the case may be" it was not disputed that in regard to the claims which were the subject of the applications from which the appeals before us ar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erty." At the time when this enactment lapsed on the expiry of the period of 3 years which was its life, came the Act which was a comprehensive piece of legislation designed to redress not merely the procedural difficulties to obviate which was the main object of the temporary Act of 1948, but the enactment of substantive provisions to alleviate the hardships of those who after suffering, in most cases, grievous loss of property in Pakistan were forced to migrate to the Punjab. Pausing here, we might mention, and there was no dispute as to this, that so far as private individuals i.e., all parties other than the Government of the Union or of the State, were concerned, the enactments of 1948 and 1951 effected the necessary alterations in the procedural law as to the forum to which displaced persons could resort in which proceedings should be instituted to overcome the difficulties consequent on the entire cause of action having arisen in Pakistan. The contention of the appellant-State before us was that as regards causes of action against the State, the matter was left where it was. The judgment of the Full Bench of the High Court negativing this contention is an elaborate one, bu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ruling and a strong indication that Parliament intended the same result. (3) Lastly, the hardship which might be caused in cases where claimants might be left without remedy in case the construction for which he contended was accepted, must in the nature of things be in a few marginal cases at the most, and even if they were more widespread, would not by itself be a factor which could weigh either to rebut the presumptive rule that statutes do not bind the State, or the other argument arising from legislative confirmation of previous judicial construction, particularly when according to him no ambiguity existed in the construction of the Act or the language employed in its various relevant provisions. We shall now proceed to deal with the submissions in the order in which we have set them out. The learned Advocate- General is right when he says that this Court in Director of Rationing and Distribution v. The Corporation of Calcutta and Ors.( [1961] 1 S.C.R. 158 ) has accepted the continued applicability of the principle of construction of statutes laid down by the Privy Council in Province of Bombay v. Municipal Corporation of the City of Bombay.( [1946] L.R. 73 I.A. 271) In the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ts or interests. For it would be of most mischievous consequence to the public, if the strength of the executive power were liable to be curtailed without its own express consent by constructions and implication of the subject. Yet, when an act of Parliament is expressly made for the preservation of public rights and the suppression of public wrongs, and does not interfere with the established rights of the crown, it is said to be binding as well upon the king as upon the subject; and, likewise, the king may take the benefit of any particular act, though he be not specially named". (Quoted at p. 355 of Holdsworth, A History of English Law, Vol.X) (italics ours). Based on this passage, particularly the words italicised, his submission was that the Act now for interpretation is one enacted for the public good and that consequently the presumption would be that the executive government was bound by it. We consider that the passage extracted is not capable of that construction. It has to be read not in vacuo and divorced from the rest of the judgment but in conjunction with the express approval of the rule of construction as explained by the Privy Council in Province of Bombay V. Munic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... esent case the High Court disposed of the submission by a finding that, on the material before them, it was not shown to be for the public good that the Crown should be bound by the Municipal Act. This is, perhaps, not a wholly satisfactory way of dealing with the respondents contention, which was, not that the court must consider whether it is for the public good that the Crown should be bound by a particular Act, but that wherever an Act is for the public good it must be taken to bind the Crown. Their Lordships prefer to say that the apparent purpose of the statute is one element, and may be an important element, to be considered when an intention to bind the Crown is alleged. If it can be affirmed that, at the time when the statute was passed and received the royal sanction, it was apparent from its terms that its beneficent purpose must be wholly frustrated unless the Crown were bound, then it may be inferred that the Crown has agreed to be bound" In the view we take of the construction of the provisions of the Act before us, in the light of the principles of construction formulated by Lord du Parcq, we do not consider it necessary to examine whether there are any further ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... words used or by reason of the same being necessitated by the policy, purpose or provisions of the Act. As regards the phraseology used in the enactment, the submission of the learned Advocate-General was simple. Assuming that on the merits the claims made by the contesting respondents in the several appeals were enforceable against the State of Punjab he submitted that the earlier legislation referred to by the learned Judges of the Full Bench could not and did not materially assist in the construction of the Act. Under s. 8 of the Indian Independence (Rights, Property Liabilities) Order, 1947, the right of the respondents would, reading it along with Art. 300 of the Constitution, be merely a right to institute a suit and that could be no justification for holding that the respondents were conferred rights to file applications under s. 13 of the Act unless its terms were satisfied. In order that a claim may fall within s. 13 it should satisfy the requirements of the section relating to the nature of the claim: (1) it must be to a displaced creditor (that, of course, was satisfied in the sense that he was a displaced person to whom amounts were due; (2) such a person must be cl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as brought up in appeal to the High Court and the learned Judges dismissed the appeal. The reasoning adopted for their conclusion was exactly identical with the submissions made to us on the construction of s. 13 we have summarised a little while before which laid stress on the definition of "debt" in s. 2(6)(c) being inappropriate to a debt owed by a State having regard to the description of the person by whom it was payable. The question whether the Union of India would be "a person ordinarily residing in the territory of India to which the Act extends" was, in this context, examined in great detail, on the assumption that the Union of India might be "a person i.e., an artificial or a juristic "person" within the Act. Chagla, C.J. then referred to a long catena of cases in which it had been held that it could not be predicated that the Government resided in any place or that it carried on any business in any particular place. It was, therefore, held that the claim made was not a debt under s. 2(6)(c) and therefore the application was not maintainable. We see force in the submission of the learned Advocate- General and if the matter bad to be decided solely on the basis of the ex ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed associations or to corporations, the submission being that if these bodies could be included there was no reason why the concept of notional residence could not be extended to a juristic entity like a State. The learned Advocate-General submitted to us an elaborate and erudite argument as to whether the State was a corporation in any sense, the conclusion which he desired us to draw being that though the State was a body politic, it had not the characteristics of a corporation. In this connection he referred us to various writers on Public International Law and on Political Science and to certain decisions of the American Courts. We do not, however, feel called upon to examine these submissions and pronounce upon their correctness in view of the conclusion we have reached on a construction of the provisions of the Act. We would, however, make two observations: (1) that the mere fact that certain artificial entities like corporations are brought within the scope of the Act, would not by itself rebut the presumptive rule of construction that the State is not bound by a statute unless it is brought within its scope expressly or by necessary implication, (2) it would not be correc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or the displaced debtor and to the displaced creditor were an integrated scheme; the one running into the other. Chapter 11 in which s. 13 occurs is headed Debt Adjustment Proceedings . It opens with s.5 which deals with applications by displaced debtors for the adjustment of their debts. That section runs, to quote only the material words: "A displaced debtor may make an application for the adjustment of his debts, to the Tribunal within the local limits of whose jurisdiction he actually and voluntarily resides, or carries on business or personally works for gain." Sub-section (2) specifies what the application shall contain and among the matters to be included in the application are: (1) a schedule containing full particulars of all his debts, whether owed jointly or individually, with the names and addresses of his creditors and his jointdebtors.................. (2) a schedule of all his properties, both movable and immovable, including claims due to him. The purpose of these schedules would be apparent from s. 32 which deals with the manner in which the debts of a displaced debtor are to be scaled down and to which we shall draw attention later. Sections 6 to 9 lay ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ce are the provisions in Ch. III in which s. 32 occurs which is headed ]Reliefs . Section 29 which is the first of the sections in this Chapter and those following it set out the reliefs which shall be available to displaced debtors. They include s. 29-Cesser of accrual of interest, s. 30--Exemption from arrest or imprisonment for the recovery of any debt, and s. 31 --- an enlargement of the scope s. 60 of the Civil Procedure Code as regards property which shall not be liable to attachment in the case of " displaced debtors. Next, we come to s. 32. This section runs: "32. Scaling down of debts.-(1) Where, on the application of a displaced debtor under section 5 or sub-section (2) of section 11, the Tribunal has determined the amount due in respect of each debt in accordance with the provisions of this Act, it shall proceed to determine the paying capacity of the debtor. (2) If the paying capacity of the debtor is equal to or exceeds the aggregate sum of all the debts so determined (exclusive of any debt in respect of which the creditor has elected to retain the security in accordance with the provisions of section 16), the Tribunal shall pass a decree for the aggregate sum so d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... payable from the compensation in accordance with sub-section (6) shall be distributed rateably amongst the decree-holders, if more persons than one are entitled thereto: Provided that the secured creditor who has not elected to be treated as an unsecured creditor under section 16 shall be entitled to a prior charge on the amount payable from the compensation. (8) Where a displaced person receives compensation by way of exchange of property, then, subject to the prior charge, if any, of a creditor under section 16, the aggregate sum payable in respect of the second part of the decree shall be a second charge upon the property received by way of exchange bears to the value of the original property verified and valued under the Displaced Persons (Claims) Act, 1950 (XLIV of 1950). (9) Where a displaced person makes a default in the payment of any instalment fixed in respect of the first part of the decree or does not pay the amount determined in accordance with subsection (4) of section 16 or sub-section (8) of this section for which the first or the second charge may have been created upon the property received by way of exchange the creditor may apply for the execution of the de ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the requirement of s. 32(1) that the Tribunal shall take into account that asset also for determining "the paying capacity" of the "debtor". So far as the Explanation to s. 32 is concerned, it could not be the contention that the expression "attachable assets in India belonging to the displaced debtor" should be exclusive of the amounts in regard to which the State is indebted to the displaced debtor. The expression "attachable assets" would bring in s. 60 of the Civil Procedure Code, and whatever be the limitations on the execution of decrees against Government under s. 82 of the Civil Procedure Code, debts due by the State to a judgmentdebtor are certainly attachable. The contrary construction of the words in s. 32 viz., that debts due by the State are not assets" besides being inconsistent with the express terms of the Explanation, would also render the entire scheme of scaling down provided for in sub-ss. (2) to (10) infructuous and unworkable. The conclusion that for the purpose of s. 32 a debt due by the State is within the Explanation and that it has to be taken into account for deter- mining the paying capacity would appear to be reinforced by s. 47 which runs in these ter ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... elief open to the displaced person who might be a debtor or a creditor have to be worked out conjointly. No doubt, s. 13 is concerned with claims by displaced creditors against debtors who are not displaced persons as contrasted with s. 10 under which claims may be made against debtors who are displaced persons. But this cannot make any difference. It is not possible by any principle of construction to hold that the debt due by the State to a displaced debtor is within the Act for the purpose of ascertaining the paying capacity of the debtor notwithstanding the definition of "debt" in s. 2(6)(c) but that the State is not within the scope of s. 13 for the purpose of the same liability being ascertained. This is so because for the very purpose of determining paying capacity under s. 32 the genuineness and the quantum of the alleged debt due by the State is the subject of enquiry and adjudication by the identical tribunal which would be conducting the enquiry and make the decision if the claim were made under s. 13. Adopting, therefore, the very principle for which the learned Advocate-General contends we consider that the test formulated by Lord du Parcq in Province of Bombay v. Mu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o awry and the balance and harmony which are intended to be brought in would be nullified and on the other hand disharmony brought into the working of the Act if the contention which the learned Advocate-General supports were accepted. Before concluding, it is necessary to add that before holding that the presumptive rule of the State not being bound by the provisions of any statute has been overborne by necessary implication arising from an examination of its purpose and provisions.we have taken due account of the language used in the Act both in s. 13 as well as in the definition of debt and have arrived at the conclusion that that language is not intractable nor such as to create any insuperable obstacle in the way of such a construction. Undoubtedly if s. 13 stood by itself read in conjunction with the definition of debt in s. 2 (6), the submission that a debt due by Government was not within them might have weight. But there is nothing in s. 13 which would negative the construction at which we have arrived after considering the scheme and purpose of the Act. Taking first the terms of s. 13, the contention that debts due by the Government are not within the scope of the p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gument and if it stood alone its effect could be overwhelming, but as against it, it must be noticed that it is really a part of the definition which has to be applied in the absence of anything to the contrary in the context and if on a consideration of s. 13 and the other relevant provisions to which we have referred it was the intention of the enactment not to exclude the State from its operation, the definition clause could not per se negative such a construction. The definition would, in the context of the other pro- visions, be read as applying the test of "residence" or "of carrying on business" exclusively to natural or artificial persons to whom such conditions would be apt. The second point urged by the learned Advocate-General was about the legislative confirmation of the meaning of the word "person" as excluding the State. We have already referred to the Displaced Persons (Institution of Suits) Act, 1948 and the circumstances in which it was enacted and the terms of its s. 4. It is the interpretation which this section received in M/s Nagi Bros. v. The Dominion of India(I.L.R. 4 Punjab 358) a decision of the High Court of Punjab that forms the basis of the contention no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . 176 of the Government of India Act, or Art. 300 of the Constitution, as the case may be, a liability was cast on the Government of the State and the Union to make good a claim. This result might be unfortunate but if it was designed, there was no escape from that conclusion. The argument of the learned Advocate-General was that when this enactment of 1948 lapsed by efflux of time in 1951, its place was taken by the Act and that as the same word "person" with the qualifying expressions indicating his or its residence or place of business were repeated in the Act without any specific provision for claims against the State, Parliament must be taken to have affirmed this decision, adopting its reasoning and that consequently, in any event, the general rule of interpretation about the State not being bound by an enactment in which it is not named expressly or by necessary implication was doubly attracted and reinforced. We are clearly of the view that this argument does not deserve to be accepted. In the first place, we, are concerned solely with the interpretation of the Act of 1951 and unless there was an. ambiguity it would be impermissible to refer to any previous legislation fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... with the Government of the Province of Punjab was concluded and it is possible that no part of the cause of action might arise in India so as to permit a suit against the Government of the Punjab or of the Union if the provisions of the Civil Procedure determined the forum therefor. In our judgment nothing turns on the exact proportion of the cases where the party would be without a remedy. If the terms of the enactment were ambiguous and had to be interpreted in the light of the circumstance whether the one construction or the other would leave parties without a remedy, then in that event something might depend on whether it was only a marginal case that was beyond the provisions of the Act or the bulk of the cases. That, however, is not the position here. We have arrived at the construction of the provisions of the Act, without reference to the hardship which the opposite view might cause to particular displaced creditors. It is for this reason that we say that the question of the relative number of creditors who would suffer hardship is not strictly material for the decision. We have, therefore, thought it unnecessary to examine the precise circumstances in which displaced credi ..... X X X X Extracts X X X X X X X X Extracts X X X X
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