Karnataka High Court
Karnataka Bank Ltd. vs S. Narayana Bhatta And Others on 4 April, 1986
Equivalent citations: [1990]69COMPCAS178(KAR)
Author: M.N. Venkatachaliah
Bench: M.N. Venkatachaliah
JUDGMENT Venkatachaliah, J.
1. This appeal by the Karnataka Bank, the unsuccessful plaintiff, directed against the judgment and decree dated September 12, 1983, passed in O.S. No.13 of 1981 on the file of the Civil Judge, Srirangapatna, dismissing its suit for recovery of money advanced on the security of a contract vehicle, raises certain interesting questions qouching on the extent of the bar of civil court's jurisdiction under the Karnataka Contract Carriages (Acquisition) Act, 1976.
2. The plaintiff, Karnataka Bank Ltd., on August 1, 1972, agreed to advance a sum of Rs. 1,08,000 to S. Narayana Bhatta, the first defendant, to enable him to purchase a new Ashok Leyland bus to be used as a contract carriage. The first defendant's father was a surety. His legal representatives are defendants NOs. 2 to 8. The state Governement is defendant No.9.
3. Out of the sactioned loan of Rs. 1,08,000, Rs. 74,112.33 was released on August 1, 1972, for payment to the supplier of the chassis at Ananthapur. Two sums of Rs. 24,000 and Rs. 9,887.67 were released by the plaintiff on August 4, 1972, and September 30, 1972m respectively, directly to the body-builder. On November 22, 1972, the bus was registered orginally as APA 4625, but later assigned a fresh identification mark, MYM 6370. The loan was to carry interest at 6 1/2% above the bank rate with quarterly rests.
4. On January 30, 1976, the Karnataka Contract Carriages (Acquistion) Ordinance, 1976 (Karnataka Ordinance NO. 7 of 1976), was promulgated. By section 4 of the Ordinance, every contract carriage owned by a contract carriage operator along with the permit stood vested in the State Government absolutely free from all encumbrances. The first defendant's vehicel, accordinagly, was acquired by, and stood vested in, the State Government. The vehicle was also seized by the Government on January 31, 1976. The Ordinance was later replaced by the Karnataka Contract Carriages (Acquisition) Act, 1976 ("the Act", for short).
5. On May 14, 1976, and March 9, 1978, the plaintiff is stated to have lodged and reiterated its cliam before the Authorised Officer under the Act. According to the plaintiff, a sum of Rs. 60,932.18 stood due as on January 30, 1976, and it was entitled to interest subsequent thereto at rates agreed to by the borrowers. As on March 9, 1978, the plaintiff claimed in all Rs. 88,228.33.
7. It is stated that the Authorised Officer offered a sum of Rs. 1,05,000 as the amount payable for the acquisition of the contract carriage. Apparently, the first defendant did not accept this offer. The matter was referred to arbitration under the Act. Before the arbitrator gave the award, the Government made two payments to the plaintiff. On january 17, 1980, it paid the plaintiff a sum of Rs. 60,932.18 which was the amount due as on Januar 30, 1976. On June 10. 1980 a further sum of Rs. 14,486.15 was paid. This was by way of interest at 6% on the sadi sum of Rs. 60,932.18. In all the plaintiff was paid Rs. 75,418.33.
8. The arbitrator made an award on January 30,1980, determining a sum of Rs. 1,16,500 as the amount payable for the acquisition of the vehicle. The amount so awarded, less Rs. 60,932.18 paid to the plaintiff, was paid over to the first defendant. The plaintiff and the first defendant were both paid interest from January 30,1976, till date of payment at 6% on the respective sums paid to them.
9. After receiving these sums aggregating to Rs.75,418.33, as aforesaid, the plaintiff brought the present suit on June 11,1981, for recovery of a sum of Rs.64,386 stated to be the balance still due at the foot of the account. This was because even after January 30,1976, the bank continued to charge compound interest at the agreed rates with agreed periodicity of rests while the amount of Rs. 60,932.18 due as on January 30,1976, was paid only on January 17,1980. The suit claim represented the debt of Rs.60,932.18 as on January 30,1976, with compound interest at agteed rates less the sum of Rs. 75,418.33 paid by the Government.
10. In the suit, the first defendant and the ninth defendant filed their written statements. There were some contentions raised by the first defendant denying the due execution of the loan documents relied upon by the plaintiff Having to the point on which the suit to be dismissed, the trial court did not go into the merits of those defences. They are, therefore, not material in this appeal. These contentions are left open.
11. The defences which assume materiality in the context of the controversy required to be resolved in this appeal pertain to the effect of the acquisition of the hypothecation on the obligations of the borrowers. The specific contention was that after the acquisition of the hypothecation, all liability arising out of the transaction stood transferred, and confined, to the amount payable under the Act for the acquisition and that having regard to the provisions of the Act for the adjudication and satisfaction of the claims of the secured creditors and to the express bar of suits under section 26 of the Act, a suit in a civil court was barred.
12. The ninth defendant, the State, in its written statement, virtually subscribed to the same defence :
"4... The plaintiff bank as a secured creditor is entitled only to 6 per cent. interest on the loan due. The plaintiff bank cannot claim interest exceeding 6 per cent. The plaintiff is entitled for the rate of interest as provided under the Act and even subsequent notification is also issued in that regard clarifying the rate of interest. The bank is entitled to interest in respect of the loan borrowed by the ex-operator of the contract carriages at the rate payable to them the Government....
10. The plaintiff's suit is not maintainable before this court under section 10(4) read with section 26 of the Karnataka Contract Carriages (Acquistion) Act, 1976. The plaintiff should have preferred the claim before the arbitrator. The right of the plaintiff cannot be enforced in a civil court. This court has no jurisdiction to try the suit and it is liable to be dismissed......."
13. The court below framed the necessary and relevant issues stemming from these pleadings, Issues Nos. 6 and 9 pertain to the question of the bar of the civil court's jurisdiction. The other issues bear on the merits and extent of the bank's claim and of the defences urged against it. Issues Nos. 6 and 9 are :
"6. Whether this court has no jurisdiction to entertain the suit?
9 Whether the suit before this court is not maintainable under section 10(4) read with section 26 of the Karnataka Contract Carriages (Acquisition) Act, 1976 ?"
14. The court below dealt with issues Nos. 6 and 9 as preliminary issues and recorded its findings thereon. The court below persuaded itself to the view that, having regard to the provisions in the Act and the express bar contained in section 26 of the Act, the jurisdiction of the civil court stood barred and dismissed the suit. The correctness of this view is assiled in this appeal.
15. We have heard Sri. B.P.Holla, learned counsel for the appeallantplaintiff; Sri. S.P.Shankar, learned counsel for the first respondent; Sri B.M.Chandrashekharaiah for respondent No 12 and Sri. Kothawale, learned Government Pleader for the State, the ninth respondent. Defendents Nos. 3 to 8 were unrepresented at the hearing.
16. Sri B.P.Holla contended that the view of the trial court as to the lack of jurisdiction in the civil courts to entertain a secured creditor's suit to recover a debt, respecting which a contract carriage had been offered as secutiry, is wholly misconceived and proceeds on a fundamentally erroneous view as to the scope and effect of the provisions of teh Act. Sri Holla urged that the Act is intended to "provide for the acquisition of contract carriage and for matters incidental, ancillary or subservient thereto" and is not a debt relief measure intended to scale down the debts of a certain class of debtors, such as "contract carriage operators". Sri Holla submitted that the exclusionary sweep of section 26 must correspond to the scope and finality of adjudication permissible under the Act and that in so far as the Act does not provide for the resolution of disputes inter se between creditors and debtors touching on the transaction of loan and the extent of the liability thereunder even where the debt or a part of it is secured by a contract carriage vehicle, the creditor's suit for enforcement of the personal liability is not barred. Learned counsel says that the adjudication that the Act envisages, as between a secured creditor and a debtor, is a limited enquiry as to the apportionment of the amount which represents the value of the security. Even if the benefit of the subsituted security is lost to the creditor, the debt and the right to enforce its recovery, otherwise than through the security, are not lost to the creditor.
17. Sri S.P.Shankar, learned counsel for the contesting defendants, sought to support the conclusion of the court below and submitted that the provisions of the Act went further than merely determining the amount payable for the acquisition of a contract czarriage and actually incorporated provisions which brought within the statutory purview the adjudication of the rights inter se as between the contract carriage operator on the one hand and the secured creditor on the other, and made provisions for the payment to the secured creditor of what was found, on such statutory adjudication, to be due. He submitted that the scheme of the law, as manifest by its provisions, properly construed, would irresistibly yield the conclusion that the statue was not merely one enabling the acquisition of contract carriage but also one providing a machinery for the adjudication and satisfaction of the rights of the secured creditors as well.
18. Learned counsel urged that, having regard to section 26 of the Act which expressly excluded the jurisdiction of the civil courts respecting all matters which the Authorised Officer or the State Government or the arbitrator were empowered by or under the Act to determine, and having regard to section 29, which imparted an overriding effect to the provisions of the Act, the view as to the bar of civil courts' jurisdiction taken by the court below was proper.
19. Alternatively, Sri Shankar urged that, at all events, to the extent a secured creditor participated in the proceedings under the statute for determination of the extent and value of his security, that adjudication would be conclusive and that the sums so apportioned in favour of the secured creditor out of the amount would constitute, pro tanto, a statutory discharge to the debtor of his debt.
20. The submissions made by Sri Kothavale, learned Government Pleader, were confined to the point of maintainability of a suit by a creditor against the State. It is to be recalled that in its written statement, the State Government took the stand that the suit by the secured creditor against the debtor for enforcement of the personal liability was also barred and that the only right of the secured creditor was to work out his remedies under the Act. Sir Kothavale submitted that this expansive stand was unnecessary for the Government to take and that, whatever be the right of the creditor against the debtor, the suit by the creditor against the State which had acquired the security under statutory was not maintainable as the State had no concern with, or liability for, the debt due by the operator to the creditor. The State was liable to pay the amount as determined and as apportioned, the State had discharged this obligation on the part of the State survived.
21. On the contentions urged at the hearing, the following contentions fall for consideration in this appeal :
(a) Whether, after the acquisition of a contract carriage vehicle, the debtor is discharged of his liability and the only remedy of the secured creditor is to look to the amount payable for the acquisition :
(b) Whether, at all events, upon the acquisition of the contract carriage, the remedy of the secured creditor is confined to those afforded under the statute and whether a suit for recovery of the debt is barred by sections 26 and 29 of the Ac ;
(c) Whether, alternatively, where a secured creditor makes a claim before the authorities under the Act and the amount payable towards his security is determined, the amount so determined would, pro tanto, constitute a statutory discharge to the debtor, substituting the liability of the debtor by that of the State ; and, accordingly, whether the debtor would cease to be liable to the extent of the sum so determined and the interest thereon subsequent to the vesting date ;
(d) Whether, having regard to the circumstances that the plaintiff's claim was Rs. 60,932.18 as on January 30, 1976, that the amount determined by the arbitrator was Rs. 1,16,500 and that the plaintiff elected to work out his remedies under the Act, the operator stood discharged of his personal liability.
22. To appreciate these contentions in their true perspective, it is necessary to refer to the relevant provisions of the Act.
23. The legislation, as its preamble makes manifest, was enacted to enable the State Government to acquire "contract carriages" owned and operated by private operators. The preamble says that such contract carriages were being operated in a manner detrimental to public interest and that with a view to preventing such misuse and also to provide better facilities for the transport of passengers by road, the acquisition of contract carriages had become necessary.
24. Section 3 (g) and (h) defines the words "contract carriage" and "contract carriage operator" respectively. Section 3 (n) defines "person interested". The definition includes, amongst others, a "secured creditor" also Section 4(1) provides :
"4. Vesting of contract carriages, etc.- (1) On and from such date as may be specified by the State Government in this behalf by notification in respect of any contract carriage operator,
(a) every contract carriage owned or operated by such contract carriage operator along with the permit or the certificate of registration or both as the case may be shall vest in the State Government absolutely free from all encumbrances ;
(b) such contract carriage shall be freed and discharged from any turst, obligation, mortgage, charge, line, hire purchase agreement or otherwise and all other encumbrances or transactions affecting such contract carriages ;
(c) any attachment, injunction or decree or order of nay court restricting the use of such contract carriage in any manner shall be deemed to have been withdrawn ;
(d) any person interested shall have no claim to or any relation to such contract carriage except a claim to the amount payable in respect of such contract carriage under this Act."
Section 5 requires every contract carriage operator to furnish, within the time to be specified, "complete particulars of the liability and obligations incurred on the security of the acquired property and subsisting on the notified date".
25. Section 6 pertains to the determination of the amount. It reads :
"6. Determination of the amount. -(1) For the vesting of the acquired property under section 4, every person interested shall be entitled to receive such amount as may be determined in the manner hereinafter set out and as specified in the Schedule, that is to say,-
(a) where the amount can be fixed by agreement it shall be determined in accordance with such agreement ;
(b) where no such agreement can be reached, the State Government shall appoint as arbitrator a person who is an officer not below the rank of a Divisional Commissioner or a District Judge ;
(e) the arbitrator shall, after hearing the dispute, make an award determining the amount which appears to him just and reasonable and also specifying the person or persons to whom the amount shall be paid ; and in making the award he shall have regard to the circumstances of each case and the provisions of the Schedule so far as they are applicable ;...."
26. Section 7 contemplates service of notice to persons interested in the matter of the determination of the amount. Section 8(1) enables any "person interested" to prefer claims before the "authorised officer". Section 8(2) requires the Authorised Officer to forward all such claims to the State Government for payment in the manner specified in section 11.
27. Section 9 reads :
"9. Amount to be substituted security in certain cases.- Any debt, mortgage, charge or other encumbrance or line, trust or similar obligation or any attachment, decree or order of any court attaching to the acquired property shall attach to the amount in substitution for the acquired property".
28. Section 10(1) refers to the amount liable to be deducted from the amount determined in certain cases. The Employees' Provident Fund Commissioner or the Employees' State Insurance Corporation may send and certify certain dues recoverable from the contract carriage operator. Sub-sections (3) and (4) of section 10 assume some materiality and may be set out :
"(3) Subject to the provisions of sub-section (4), the State Government shall be entitled to deduct in priority from the amount payable to the contract carriage operator under this Act...
(iii) the amount due towards the claim fo secured creditors.
(4) The claims made under sub-section (1) or sub-section (2) and any dispute regarding the sum to be deducted under sub-section (3) shall be decided by the arbitrator who shall follow such procedure as may be prescribed."
29. Section 12 refers to the right of appeal. Section 13 refers to the powers of the "arbitrator" and "authorised officer." A detailed reference to section 14, 15, 16, 17, and 18 is not relevant for the present purpose.
30. Section 19 provides :
"19. Transfer of acquired property to the corporation.- (1) The State Government shall, as soon as may be after the vesting of the acquired property under section 4, by order transfer the whole of the said property in favour of the corporation ;....
(6) (a) All sums deducted by the State Government under sub- section (3) of section 10 shall stand transferred to the corporation referred to in sub-section (1).
(b) The corporation shall credit the sums transferred to the appropriate funds or if any part of the sums is payable to the employee directly, such part shall be paid to him directly."
31. Sections 26 and 29 are material for the purpose of the present investigation Section 26 provides :
"26. Bar of jurisdiction of civil courts.-Save as otherwise expressly provided in this Act, no civil court shall have jurisdiction in respect of any matter which the State Government or an arbitrator or authorised officer is empowered by or under this Act to determine, and no injunction shall be granted by any court or other authority in respect of any action taken or to be taken in pursuance of any power conferred by or under this Act."
32. Section 29 provides :
"29. Overriding effect.- Save as otherwise provided in this Act, the provisions of this Act, shall have effect notwithstanding anything inconsistent therewith contained in the Motor Vehicles Act or in any other law for the time being in force. Any proceeding under Chapter IVA of the Motor Vehicles Act which is pending on the date of commencement of this Act shall abate."
33. In the matter of a proper understanding of the provisions of the statute, it will be relevant to note that the provisions themselves will have to be read in the light of the construction placed on them by the Supreme Court. In State of Karnataka v. Ranganatha Reddy, , the Supreme Court had occasion to examine some of the material provisions of the statute, particularly bearing on the question of the rights of secured creditors and the extent to which the statute had provided the machinery for adjudication and satisfaction of those rights. It is relevant to note here that the expression "person interested" takes within its sweep not only the contract carriage operator but also a "secured creditor" or a "financier" under a hire purchase agreement or "any other person who is affected by the vesting of the acquired property and claiming or entitled to claim an interest over the amount."
34. Then section 8(1) of the Act says that "any person interested" who claims any amount determined under section 6 may, within sixty days from the date of receipt of any notice given under section 7, prefer a claim before the Authorised Officer.
35. Section 10(2) (iii) of the Act provides that the State Government shall, inter alia, be entitled to deduction, in priority, from the amount payable to the contract carriage, operator the "amount due towards the claims of secured creditors". Sub-section (4) of section 10 provides that if there is any dispute regarding the sums to be deducted under sub-section 10 provides that if there is any dispute regarding the sums to be deducted under sub- section (3) which includes sums to be deducted towards the claims of secured creditors, that dispute shall be decided by the arbitrator.
36. Section 11(1), on its plain words, did not contain an express obligation on the part of the Government to pay the amount deducted under section 10(3)(iii) to the secured creditor on whose account and for whose benefit the deduction was made. There was a lacuna here. The Supreme Court noticed that (at page 227) :
"25. Another apparent conflict writ large on the phraseology of sub-section (2) of section 8 and the provisions contained in sections 10 and 11. Section 10 provides for the deductions of the various amounts at the outset from the amount determined by the arbitrator payable in respect of the acquired properties, including those due to the secured creditors which, undoubtedly, would include the financiers of the hire-purchase agreements. The amount payable under section 11 and the manner of its payments is, after deducting all the amounts, provided in section 10."
37. The Supreme Court, after a harmonious construction, held that the obligation to pay the amount so deducted was implicit in the scheme and observed (at page 228) :
"To that extent, for the purpose of harmonious construction, sub- section (2) of section 8 must mean tha payments of the amounts as mentioned in section 10 and the balance to the operator in the manner specified under section 11."
38. In para 37 (at page 231) of the judgment, it is observed :
"37. At the end we may also indicate, that under sub-section (6) of section 19, all sums deducted by the State Government under sub-section (3) of section 10 which include the sums payable to the secured creditors stand transferred to the corporation which is obliged to credit the sums transferred to the appropriate funds. The said provision would take within its ambit the liability of the corporation to pay forthwith the sum found due to the secured creditors."
39. It is in the light of these provisions that the contentions have to be examined.
40. Re : contention (a):- This contention is whether, upon the vesting of the contract carriage in the Government under section 4 of the Act, the contract carriage operator is absolved of all his liabilities under the transaction of loan with his secured who had advanced money on the security of the vehicles and whether the remedy of such a secured creditor is only to look to the "amount"payabel for the acquisition and that he has no other subsisting or surviving rights against the debtor.
41. The trial court has, virtually, accpted this contention. After referring to the observations of the Supreme Court in para 37, the trial court proceeded to hold :
"This goes to show the interest of the secured creditor has been amply protected which has been accepted by the Supreme Court. The plaintiff in this court, has asserted the security and, therefore, has become the secured creditor. The plaintiff has never relinquished its right over the pledged vehicle. The amount of compensation awarded for the acquired property is a substituted security for the secured creditor. Therefore, when the interest of the secured creditor is protected under the Act itself, and the Act is a self-contained Act, and specifically the jurisdiction of the civil court is taken away, it has to be held this court has no jurisdiction to entertain the suit."
42. There are, in our opinion, many fallacies of assumption and inference in this conclusion. The first i;s that the statute is not a debt relief measure. It provides for acquisition of contract carriages and matters 'incidental, ancillary or subservient thereto". There are no provisions in the statute-we refer to the position without reckoning the amendment proposed in L.A.Bill No.31 of 1981 which has not yet become law-which scale down either the principal or interest or both, either wholly or in part. There is no moratorium for recovery of the debt. The premise on which the trial court has proceeded, if accepted, would lead to startling results. The court below found that, in the present case, the debt of the secured creditor, as on the date of vesting, i.e., January 30, 1976, was Rs. 60,932.18. This was, obviously, very much less than Rs. 1,05,000 at which even the Authorised Officer valued the acquired vehicle. The arbitrator determined the amount at Rs. 1,16,500. The trial court thought that this was a case in which the amount awarded was higher than the claim of the secured creditor and that, therefore, the interest of the secured creditor was amply protected. This apparent adequacy of the amount to meet the claims of the secured creditor contributed to the trial court's inference as to the sufficiency of the provisions of the Act toprotect the interest of the secured creditor. The particularities of the facts of the case appear to have influenced or contributed to the trial court's view as to jurisdiction. The trial court imparted universality to a proposition which was influenced by the special facts of the present case. It did not pause to consider the other dimensions of the proposition.
43. What would be tha position if the debt owing to the creditor was, say, Rs. 5 laklhs and the amount determined was only Rs. 1 lakh ? Was the secured creditor to look to this amount alone for satisfaction of his entire debt ? Quite obviously, this is not the intendment of the statute nor the actual effect of its provisions. Such a view would ignore that a creditor, who had security in the form of a contract carriage for his loan or a part of his loan, would be in a very much worse position than a similar creditor who had no security at all for his debt. If we accept the view of the trial court, it would lead to the absured position that a creditor to whom, say, Rs. 5 lakhs were due on the security of a contract carriage would have his whole debt scaled down to the "amount" actually awarded for the acquisition of the vehicle, while a corresponding unsecured creditor who ahad advanced money for the purchase-but not on the actual security- of such a vehicle would be entitled to recover the whole amount personally form the debtor. This kind of anomaly is neither the intendment of the stature nor brought about by its provisions.
44. We accordingly hold that by reason alone of the acquisition of the vehicle which is held as security for the debt, the debt is not scaled down to the amount payable under the Act for the acquisition. Contention(a) is answered in the negative and in favour of the appellant-plaintiff.
45. Re : contention (b) :Section 26 of the Act provides that no civil court shall have jurisdiction in respect of any matter which the "State Government " or any "arbitrator" or "Authorised Officer" is empowered by and under this Act to determine. The legislative technique of exclusion of jurisdiction of courts follows the familiar pattern. Legislature has two favourite techniques to exclude, or reduce, interference by courts. One is the indirect method of conferring powers couched in wide and subjective language so that even if the courts have jurisdiction, there is not much scope for interference. The direct method is by enacting express exclusion of the civil court's jurisdiction. But the courts, it is said, are not to be disarmed so easily.
46. The present enquiry is as to matters over which the Act confers exclusive jurisdiction on the authorities under the Act and, correspondingly, takes away he jurisidiction of the civil court. To ascertain the area of operation of this perclusive clause, the scope of the Tribunal's statutory jurisdiction must first precisly be identified and the Tribunal confined within the limits of its own powers. What is excluded for the civil courts' purview must necessarily correspond to what falls within the Tribunals' exclusive jurisdiction. But courts have always the jurisdiction to examine whether what purports to be a statutory decision, to which finility is statutorily intended, is after all no decision at all and is a nullity. No amount of legislative fortifictions of the authority and finality of Tribunal decisions can protect a nullity. The finality of a statutory decision or adjudication can also be unsettled in a civil court if the Tribunal had not followed the fundamental principles of judicial procedure or if the decision is otherwise vitiated by factors which in law render the decision infirm.
47. In Anisminic Ltd. v. Foreign Compensation Commission [1969] 2 AC 147 (HL), the effect of the words in section 4(4) of the Foreign Compensation Act, 1950, to the effect that the "determination" by the Commission constituted under the said Act "shall not be called in question in any court of law" was examined by the House of Lords. Lord Reid, in his leading opinion, said (at pages 170 171):
"Statutory provisions which seek to limit the ordinary jurisdiction of the court have a long history.......But there are many cases where, although the Tribunal had jurisdiction to enter on the enquiry, it has done or failed to do something in the course of the enquiry which is of such a nature that its decision is a nullity. It may have given its decision in bad faith. It may have made a decision which it had no powere to make. It may have failed in the course of the enquiry to comply with the requirements of natural justice. It may in perfect good faith have misconstrued the provisions giving it power to act so that it failed to deal with the question remitted to it and decided some question which was not remitted to it. It may have refused to take into account something which it was required to take into account. Or it may have based its decision on some matter which, under the provisions setting it up, it had no right to take into account. I do not intedn this list to be exhaustive."
48. The are of exclusiveness of a tribunal's jurisdiction depends on the true scope of the statute and not on the tribunal's own erroneous understanding of its own powers. Lord Pearce, in Anisminic's case [1969] 2 AC 147 (HL) observed (at page 194):
"My Lords, the courts have a general jurisdiction over the administration of justice in this country. From time to time Parliament sets up special tribunals to deal with special matters and gives them jurisdiction to decide these matters without any apear to the courts. when this happens, the courts cannot hear appeals from such a tribunal or substitute their own views on any matters which have been specifically committed by Parliament to the tribunal.
Such tribunals must, howeverm confine themselves within the powers specially committed to them on a true construction of the relevant Acts of Parliament....
If, for instance, Parliament were to crave out an area of inquiry within which an inferior domestic tribunal could give certain relief to wives against their husbands, it would not lie within the power of the tribunal to extend the area of inquiry and decision, that is, jurisdiction, thus committed to by constructing `wives' as including all women who have, without marriage, cohabiatated with a man for a substantial period, or by misconstruing the limits of that into which they were to inquire."
49. Adverting to some aspects of anisminic's case [1969] 2 AC 147 (HL), Prof. Wade said (see LQR 198 at page 200):
"For three centuries, however, the courts have been refusing to enforce statues which attempt to give public authorities uncontrolled power. If a ministry or Tribunal can be made a law unto itself, it is made a potential dictator; and for this there can be no place in a constitution founded on the rule of law. It is curious that Parliament shows no consciousness ofthis principle. But the judges, acutely conscious of it, have succeeded in preventing Parliament from violating constitutional fundamentals. In effect they have stablished a kind of entrenched provision which the Legistrature, whatever it says, it compelled to respect. The essence of this provision is that no executive body or tribunal should be allowed to be the final judge of the extent of its own powers. But while entrenching this principle for sound constitutional reasons, the judges have naturally dislaimed any intention of rebelling against the Legislature. They have prudently concealed the consititutional asepct in a haze of technicality about jurisdiction and nullity." (emphasis* supplied.)
50. The majority view in Ansminic's case [1969] 2 AC 147 (HL) reduces the difference between the concept of "error of jurisdiction" and "error in jurisdiction" to almost a vanishing point.
51. Ending this digression, we may turn to the point in the case. The question whether the cognisance by the civil courts of a suit of the kind concerned in the present case is barred, depends on over what matters the statute vests an exclusive jurisdiction on the authotrities constituted under it.
52. What then are matters over which the authorities under the Act have jurisdiction? To ascertain the extent of the bar of courts` jurisdiction, even where the bar is an express one, an examination of the scheme of the Act becomes necessary. The question as to the adequacy and sufficiency of the remedies provided is relevant though not conclusive. Lord Thankerton said in Secretary of State v. Mask and Co., AIR 1940 PC 105, "it is settled law that the exclusion of the jurisdiction of the civil court is not to be readily inferred; but that such exclusion must either be explicitly expressed or clearly impleid". If a right not pre-existent in common law is, for the first time, created by the statuate and a statutory remedy provided therefor, uno flatu, then, with the imparting of a finality to the proceeding envisaged for the enforcement of that right, the civil courts' jurisdiction stand impliedly barred. In the case, however, of an express bar of jurisdiction of civil courts where the right is not created by, but exists independently of, the statute, the adequacy and suffciency of the statutory remedy becomes a relevant consideration. In the present case, both the right and remedy of the secured creditor to sue on the personal convenant were pre-existing in commom law and are not the creation of the statute itself. The extent of the bar of civil courts' jurisdiction would, therefore, require an examination of the nature of the dispute, the scheme of the Act and of the question whether the statutory authorities can do what the civil courts could, themselves have done on the particular dispute.
53. In words "empowered by or under the Act" are construed to mean what is done according, as well as with reference, to the provisions of the Act and not what is done outside the provisions of the Act within the jurisdiction and not to acts which ar ultra vires and to acts done pursuant to provisions which are themselves not valid.
54. In Bharat Kala Bhandar Pvt Ltd. v. Muncipal Committe, Dhamangaon, , the Supreme Court departing from the principle in Raleigth Investment Co's case [1947] 15 ITR 332; 74 IA 50 ; AIR 1947 PC 78 observed (at page 260):
"When, however, the authority travels beyond the valid provisions, it must be regarded as acting in excess of its jurisdiction. To give too wide a construction to the expression `under the Act' may lead to the serious consequence of attributing to the Legislature, which owes its existence itself to the Constitution, the intention of affording protection to unconstitutional activities by limiting challange to them only by resort to the special machinery provided by it in place of the normal remedies available under the Code of Civil Procedure, that is, to a machinery which cannot be as efficacious as the one provided by the general law. Such a construction might necessitate the consideration of the very constitutionality ofthe provision which contains this expression. This aspect of the matter does not appear to have been considered in Raleigh Investment Co.' case [1947] 15 ITR 332; 74IA 50; 1947 PC 78."
55. So, the answer to the present contention turns on the question whether the Act authorised a determination of the rights and obligations inter se between the secured creditor and the debtor in regard to the extent of the debt and the mode of its recovery. The Act, as stated earlier, was one to provide for acquisition of contract carriages and matters "incidental, ancillary or subservient" thereto. It does not concern itself with debts and liabilities of the contract carriage operators vis-a-vis their creditors. The provision of section 10(3) (iii) and 10(4) which contemplate the arbitrability of disputes as to the extent of the deductibility of sums towards secured debts from the amount payable for the acquisition, are merely incidental an ancillary to the determination and disbursement of the amount. These provisions are built in for the benefit of the secured creditors and not to place any restrictions on their right to sue for and recover their debts in the ordinary course.
56. Sri Shankar, however, urged that section 10(4) requires that a dispute regarding the sum to be deducted towards the claim of the secured creditor to resolved by statutory arbitration and that section 26 makes this exclusive, denuding the civil court of the corresponding jurisdiction. It is, accordingly, urged that the secured creditors' remedy is confined to the proceeding under the Act. In our opinion, one does not necessairly follow from the other. This argument also ignores the basic limitations on the power of the authorities under the Act inherent in the purpose and the scheme of the Act itself. The statutory finality in this context means nothing more than this, namely, that a secured creditor who does not invoke the special jurisdiction under the Act and seek an apportionment of the amount towards his security cannot reagitate the same question in a civil court. What he cannot do in a civil court is the determination or the redetermination of the amount deductible from the amount towards his security. If he fails to file a cliam for approtionment and seek a statutory deduction from the amount, he may be preculded from seeking the determination of that very question in a civil court. Sections 6,8,9,10(3), (4)and 11 envisage an integrated scheme not only for determination of the amount but also payments to the secured creditor, of course, within the upper limit of the amount so determined as payable for the acquisition. If the secured creditor opts to invoke the special procedure, he will be enabled to realise the value of his security, either fully or in part, depending upon the extent of the amount available. If he does not do so, he might, subject to whatever right he may have against the amount in the hands of the debtor under section 9 which is analogous to section 73(3) of the Transfer of Property Act, lose his right to be paid under the Act; but the benefit of the personal convenant against the debtor, which can only be enforced and effectuated in a civil court, cannot be said to be lost. It is erroneous to construe the scheme of the Act as supplanting the jurisdiction of the civil courts to adjudicate this claim personally against the debtor. This matter is clearly outside the scope of the Act. the proceedings before the arbitrator only concern the question as to what part of the amount the secured creditor is entitled to be paid.
57. If the security is acquired, compensation awarded therefor becomes substituted security. Section 73(2) of the Transfer of Property Act incorporates the same principle in cases of compulsory acquisition of land. For instance, if a member of a coparcenary mortagages his undivided share and if, at a subsequent partition, some specific item is alloted to the mortgagorcoparcener, the item so alloted becomes substitued security (See Mohammad Afzal Khan v. Abdul Rahmen, AIR 1932 PC 235). The position of the plaintiff here is analgous to that of a mortgagee, as a person interested, obtains apportionment of the compensation amount which constitutes substituted security. He is entitled to sue on the personal convenant for the shortfall, if any. The mortgagee is not bound to be satisfied with whatever is apportioned to him, irrespective of whether it satisfies his debt or not. A loan, prima facie, involves a personal liability; but the nature and tenor of the security may, in certain circumstance,s negative any personal liability. Even so, the personal covenant may be contingent, arising upon the happening or non-happening of another event. In the present case, there is nothing on the basis of which it can be held that the benefit of the personal covenant, if it otherwise exists, is denied to the secured creditor. The acquisition of the mortgaged property under the Land Acquistion Act has been held to be equivalent to the extinction or impairment of the security so as to entitle the mortgagee to sue on the convenant. What amounts to an impairment of security so as to entitle the secured creditor to sue on the convenant is, of course, a question of fact.
58. The conclusion we reach is supported by the converse implications illustrated in the pronouncement of the Supreme Court in Krishna Prasad v. Gouri Kumari Devi, . The appellant there was the mortgage. During the pendency of the execution proceedings, the mortgaged properties vested in the State under the Bihar Land Reforms Act, 1950, and the mortgagee sought to enforce the personal convenant and to realise the decree by sale of properties other than the mortgaged properties. The mortgagor contended that the only remedy of the mortgagee was to follow the compensation money which awardable by the State. The executing court rejected this defence; but the High Court upheld it, principally on the import of section 4(d) and section 16 of the Bihar Land Reforms Act, 1950. The said section 4(d) provided that no suit shall lie in any civil court for the recovery of any money due from the proprietor of the zamindari, the payment of which was secured by a mortgage of, or is a charge on, such estate and that all suits and proceedings fro the recovery of any such money which may be pending as on the date of vesting shall be dropped. Chapter IV of the said Act required all claims based on mortgages relating to the estate to be submitted to the claims officer and the amounts due to the creditors were to be determined in accordance with the principles laid down by the Act, Section 16 of the Act envisaged, and gave power for, the scaling-down of the debts due by the proprietors of the estate. One of the objects of the Act was to give some redress to the debtors whose estates were taken away. The Supreme Court upheld the view of the High Court against the mortgagee, observing (at page 1470):
"The scheme of the relevant provisions of the Act to which we have already referred unambiguously suggests that where the whole of the mortgaged property is an estate, certain consequences follow. The decree holder from out of the compensation money payable to the judgment debtor. Having regard to the said scheme, it is difficult to confine the application of section 4(d) only to execution proceedings in which the decree holder seeks to proceed against the estate the debtor...That being so, we are satisfied that, on the facts of this case, the High Court was right in holding that the application made by the appellants to execute the decree against the respondent by proceedings against her non-mortgaged properties is incompetent at the present stage. The amount due to the appellents under the decree in question has been already determined by the claims officer and the appellents must first seek to recover that amount as provide by the relevant provisions of the Act before they proceed to execute the personal decree."
59. In Raj Kishore Prasad Narayan Singh v. Ram Pratap Pandey, , an interesting question arose under the same Bihar legislation where the mortgaged properties consisted of an estate vesting under the said law as also other properties not so vesting. The Supreme Court noticed the position thus (at page 805):
"What then is the position, when a mortgage comprises, not only properties which have vested in the State under the Act but also takes in other items of properties which are outside the purview of the Act? Under those circumstances, is the mortgagee still bound to apply to the claims officer and follow the procedure indicated by the Act? This raises the question left undecided in Krishna Prasad's case ."
"We are further of opinion that, while in respect of the estate, which has vested in the State under the Act, the mortgagee will be bound to have recourse to the procedure laid down in the Act, so far as his mortgage takes in other properties, his right to enforce his claim under the ordinary law, has not been, in any manner, infringed or taken away by the Act. If that is so, it follows that in this case that appellant, notwithstanding the fact that he had filed a claim under section 14 of the Act, with reference to properties which have vested in the State, is entitled to avail himself of any other remedy open to him in law, to enforece his claim as against the non-vested properties comprised in the mortgage."
60. The position in the present case is the converse of the one obtaining in Krishna Prasad's case, . There are no provisions in the present Act analogous to sections 4(d), 16, etc., of the Act considered in that case. The objects of the present Act, as it now stands, do not include the scaling down of the debts owing by the operators whose vehicles were acquired.
61. Indeed, the Karnataka Contract Carriages Acquisition Amendment Bill, 1981 (L.A.Bill NO. 31 of 1981), was introduced and was passed by both houses of the Legislature. The legislative measure, it would appear, is now reserved for the assent of the President of India. Sub-section (4) of section 10 which was proposed to be introduced provided:
"(4) The amount deducted under clause (iii) of section 10 shall be paid in cash in one lump sum to the secured creditors with interest at the rate of six per cent. Per annum from the date of vesting of the acquired property in the Government to the date of payment and on such payment, the secured creditor shall have no right to claim from the contract carriage operator any more amount by way of interest on such amount."(underlining* supplied)
62. This Bill has not yet become law. If this legislative measure becomes law, the distress of the first defendant and all those similarly circumstanced would be attenuated. But we have to examine the position of law as it now obtains without reckoning the amendment which has not yet become law.
63. The scope of enquiry by the authorities under the Act, is for the limited purposes of the Act. The general scope of such enquiry, unless the specific provisions envisage and expressly provide for a wider scope, is limited to the determination of questions as between the claimant and the State. Referring to the jurisidiction of the Compensation Officer under the State M.P.Abolition of Proprietary Rights (Estates, Mahals, Aliented Lands) Act, 1951, the Supreme Court in Dayaram v. Dawalatshah, observed:
"The Compensation Officer is entitled to decide a question only regarding the proprietary right in the property divested under section 3. He is not concerned with determi8nation of any question relating to a private dispute between two or more persons who make competing claims in the matter of compernsation, relying upon their respective titles..... We agree with the High Court that section 14 of Act I of 1951 does not invest the Compensation Officer with jurisdiction to determine competing claims of persons claiming properietary rights to the property vesting in the Government by the operation of section 3 of the Act. Section 14 is intended to determine only the proprietary rights in the land qua the State."
64. On a consideration of the matter, we hold that the Act does not deal with, much less set up and machinery for, the adjudication of disputes respecting the debt or the extent thereof as betweenthe secured creditor on the one hand and the debtor on the other. In so far as the secured creditor is concerned, the jurisdication of the authorities under the Act pertains to the limited question as to what part of the amount is to be set apart and deducted as representing subsistuted security in place of the orginal security, Viz., contract carriage. The adjudication does not touch upon or conclude such rights as the secured creditor may have against the debtor personally under law.
65. We hold and answer contention (b) also in the negative and infavour of the appellant-plaintiff.
Re: contention(c):
66. This pertains to the consequences that must be held to flow in cases where the secured creditor invokes the provisions of the Act for determination of what he is entitled to be paid out of the amount and obtains such a determination. The question, more specifically, is this: If a secured creditor invites as adjudication, and certain sums are determined as payable to him out of the amount, is the debtor discharged of this liability to that extent the moment such a determination is made? Or is his liability to that extent dischanged only upon actual payment being made to and received by the creditor? The contention rests on the assumption that the liability of the State. the obligation of the Government-so the argument proceeds is to pay such sum forthwith as made clear by the Supreme Court and should a substitute for the liability of the debtor. It is no doubt true that if Government deducts the amount payable to the secured creditor, it cannot retain that money. But the proposition urged is that the obligation on the part of the Government to pay this amount constitutes a statutory discharge to the debtor, the moment the obligation of Government arises. But Sri Holla says that there can be a discharge only when the amount is actually paid to, and received by, the creditor.
67. There are, however, cases where the mortgaged property had been acquired before the date fixed by the bond for repayment and the mortgagee claimed to be paid not only the principle sum but also the interest for the whole term even though the mortgage money was paid at an earlier date. This claim was of course negatived (see Prokash Chandra Ghose v. Hasan Banu Dibi [1915] ILR 42 Cal 1146). By implication, these cases indicate that the mortgagee is entitled to his interest under the bond till the date of payment.
68. The contention of the debtor faces certain constructional difficulties. The view that at some earlier point of time, even before the creditor is actually paid the sum, he should be deemed to have been paid by the debtor, has no support of any express provision in the Act. In the position of the law now obtaining, there is no support for this contention of debtor. Indeed, the very need to bring in a legislation on the lines of Bill 31 of 1981 would show that, but for that proposed change in the law, the debtor would be liable to pay interest at the agreed rates up to the date of actual payment. Even the proposed amendment does not envisage any deemed payment but only statutorily curtails and limits the interest to 6 per cent., up to the date of the actual payment.
69. We accordingly, hold and answer contention (c) in the negative and in favour of the appellant.
Re : contention (d) :
70. This is only the factual projection of the principle to be decided in contention (c). If contention (c) is answered in the negative, contention (d) must needs also be so answered. Contention (d) is also held in the negative and in favour of the appellant.
71. Before parting with the case we must advert to some other aspects of the case. One feature which arrests our attention is that if, out of the sum of Rs. 1,05,000 offered by the Authorised Officer or Rs. 1,16,500 which was determined as the amount payable for the acquisition, the sum of Rs. 60,932.18 claimed by the bank had been paid promptly and within a reasonable period defendants Nos. 1 to 8 would not have been in the present unfortunate position. The determination of the amount is as on January 30, 1976. But these defendants had to face a claim for Rs. 75,418.33 as against Rs. 60932.18 which was the sum owing to the plaintiff-bank as on January 30, 1976. These defendants have stood to suffer only because the sum opportioned to the secured creditor was not paid within a reasonable time. The sum so apportioned carried interest at only 6 per cent from vesting date while the plaintiff continued to charge compound interest at the contract rate. Every day's delay has meant an additional burden on the debtor operator by way of compound interest. The cumulative burden over the years has been telling. This case poignantly portrays the hardship occasioned by reason only of the inordinate delay that has occurred in the determination and disbursement of the amount payable for the acquisition.
72. It is with a veiw to rellieving this unfortunate predicament of the operators that the Legislature passed the L.A.No. Bill 31 of 1981. If that had become law, the operators would not have been adversely affected, whatever the time taken by the Government in making payments. Bill NO. 31 of 1981 proposes to scale down the interest, so far as the secured creditor is concerned, to 6 per cent. On the sum determined and deducted for payment to the secured creditor.
73. Learned counsel submitted that such hardship of the operators as the facts of the case make manifest is the result of deliberate delay and callous indifference on the part of the Government in settling the claims of secured creditors arising out of acquisition of contract carriages. It was submitted that even after the prouncement of the Supreme Court, Government took its own time, unmindful of the hardship and privation caused to the operators, even to oppoint the arbitrators. It was submitted that even the sums, admittedly, accepted by the Authorised Officer, were not released. With reference to the facts of the present case it was submitted that though a sum of Rs. 1,05,000 was determined by the Authorised Officer on December 19, 1977, and though there was no impediment to pay the claim of the secured creditor, payment was not so made. Counsel submitted that in these circumstances the court, in equity, can interfere with the contract and appropriately scale down the interest even up to the date of the suit supplanting the terms of the agreement relied upon by the bank. The court could, if further interest. It was submitted that in the face of such manifest injustice, courts are not helpless but have ample power to udo the injustice and that, accordingly, if the plaintiff is held entitled to the interest in terms of its bond, the debtors should in turn, be entitled to be compesated by Government by a counter-decree in the same proceedings as the loss to the debtors directly flowed from the acts of the Government which constitute an actionable brach of statutory obligations.
74. It was further argued for the debtors that after the contract carriage was acquired by statutory compulsion, the contract between the bank and the constituent was frustrated and the bank was not entitled to rely on the contract any more.
75. Sri Holla for the plaintiff submitted that it is now somewhat premature to examine these contendtions in this appeal as the suit from which the appeal arises has come to be dismissed on a short point as to maintainability and that parties had no opportunity of adducing any evidence on any point.
76. Since the suit is disposed of on the question of maintainability, it is not proper, at this stage, to pronounce on the merits of these contentions raised by the debtors. They are at liberty to raise these contentions in the suit. The trail court will examine and pronounce on them in accordance with law. If, in the meanwhile, L.A. Bill 31 of 1981 becomes law, then the debtor's difficulties and hardship will, perhaps, be ameliorated. But it does appear that serious hardship has been occasioned to the debtors by reason only of the tardy implementation of the law in the matter of determination and payment of the amounts to the secured creditors even in cases where there was no impediment to make the payment. How the parties could be saved from these consequences and how their pright could be mitigated are matters for the court to consider at the appropriate stage taking into account all the facts and circumstances.
77. It was also submitted at the hearing that Government paid to the plaintiff Rs. 14,486.15 by way of simple interest at 6% on the sum of Rs. 60,932.18 and that at that stage the plaintiff-bank was prepared to accept 3% more from the debtors in full satisfaction. It was submitted that if the first defendant had then paid the differnce of 3% which would have amounted to about Rs. 7,200 the matter would have rested there. It was submitted that the plaintiff bank had, as a matter of policy, settled claims on these terms with many other borrowers. Sri Holla, learned counsel for the plaintiff bank had, as a matter and that he does not know if such settlement had come to be made. Learned counsel for the first defendent asserted that there are a number of cases in which the bank had settled the claims on payment by the debtors of the difference of 3% simple interest from the date of vesting. Since Sri Holla is not possible for us to say anything in the matter. if the blank had, in similar cases and as a matter of policy, decided to accept in all 9% simple interest from the date of vesting, there is no reason why they should make an exception in the present case. This is also a matter for the court below to examine if appropriately raised and urged before it.
78. In the result, and in the view we have taken as to the maintainability of the suit, the decree of dismissal entered by the court below on the ground that it had no jurisdiction cannot be supported. The findings of the court below on the preliminary issues are set aside. The appeal is allowed and there will now be a remit of the suit to the court below for fresh disposal in accordance with law and in the light of the observations made in this judgment. Both the parties shall be at liberty to seek amendments of their pleadings and seek such further or additional reliefs as they consider themselves entitled to. All other contentions of all the parties are left open.
79. The parties are directed to appear before the court below on May 26, 1986, without the requirement of service of fresh notices on them on remand and the court below is directed to call this matter on May 26, 1986, for further proceedings in the suit. As the suit has remained pending for a long time, the court below is directed to dispose of the suit as expeditiously as possible. In this appear, the appellant shall be entitled to refund of the entire court fee paid on the memorandum of appeal. In the circumstances of the case, there will be no order as to costs. Copy of this judgment shall be sent to the court below before May 15, 1986.
80. At the conclusion of the pronouncement of this judgment by dictation learned counsel for respondent No. 1 made an oral application for grant of a certificate of fitness to appeal to the Supreme Court from the judgment just now pronounced
81. In our opinion, the appeal does not involve any substantial question or questions of law of general importance which needs to be decided by ths Supreme Court. Accordingly, the certificate is refused and the oral application rejected.