1960 (4) TMI 99 - SC - Indian Laws

Summary

Issues Involved:
1. Whether the liability created under a mortgage is a debt within the meaning of Section 2(6) of the Displaced Persons (Debts Adjustment) Act, 1951.

Detailed Analysis:

1. Definition of Debt under Section 2(6):
The primary issue was whether the liability created under a mortgage qualifies as a "debt" under Section 2(6) of the Displaced Persons (Debts Adjustment) Act, 1951. The relevant part of Section 2(6) defines "debt" as any pecuniary liability, whether payable presently or in the future, or under a decree or order of a civil or revenue court or otherwise, or whether ascertained or to be ascertained.

The appellant contended that a mortgage liability is not a pecuniary liability and thus does not fall within the definition of "debt" under the Act. However, the court held that the words "pecuniary liability" cover any liability of a monetary nature. The definition of a mortgage under Section 58 of the Transfer of Property Act, 1882, indicates that a mortgage is created to secure the payment of money advanced by way of loan or to secure an existing or future debt. Therefore, a mortgage debt creates a pecuniary liability upon the mortgagor and is covered by the definition of "debt" in Section 2(6).

2. Sub-clauses of Section 2(6):
The court examined the three sub-clauses of Section 2(6). Sub-clauses (a) and (b) refer to debts owed by a displaced person, while sub-clause (c) refers to debts due to a displaced person from any other person residing in the territories to which the Act extends. The court noted that sub-clause (c) should be taken independently of sub-clauses (a) and (b). Therefore, under sub-clause (c), a displaced person who is a creditor can recover the debt due to him from any other person, whether a displaced person or not.

3. Scheme of the Act:
The appellant argued that the scheme of the Act shows that mortgages in relation to properties situated in India are not covered by the Act. The court rejected this argument, stating that the Act is comprehensive and deals with all kinds of pecuniary liabilities. The court noted that sub-clause (b) of Section 2(6) specifically deals with mortgage debts secured on immovable property in West Pakistan, but this does not exclude mortgage debts on properties in India from the definition of "debt."

4. Special Provisions and Apportionment:
The court addressed the appellant's argument regarding the special provision in sub-clause (b) of Section 2(6) and the apportionment of liabilities between properties in India and West Pakistan. The court explained that this special provision is related to Section 16, which creates a charge on compensation for properties in Pakistan. This does not restrict the broad definition of "pecuniary liability" in sub-clause (c).

5. Right of Election under Section 16(5):
The appellant argued that Section 16(5) requires a creditor to elect to be treated as an unsecured creditor to benefit from the Act. The court clarified that Section 16(5) deals with mortgages on properties in West Pakistan and does not apply to properties in India.

6. Section 17 and Movable Properties:
The court noted that Section 17 deals with debts secured on movable properties and is concerned with displaced debtors. This section does not affect the broad definition of "debt" in Section 2(6)(c).

7. Scaling Down Debts under Section 21:
The court examined Section 21, which provides for scaling down debts. The court found nothing in this section to suggest that the word "debt" excludes mortgage debts.

8. Enforcement of Creditors' Rights:
The appellant argued that there is no machinery for enforcing creditors' rights for mortgage debts on properties in India. The court pointed to Sections 10, 11, 13, and 14, which provide mechanisms for displaced creditors to claim and enforce debts, including mortgage debts.

9. Hardship to Prior or Subsequent Mortgagees:
The appellant contended that allowing displaced creditors to proceed under the Act for mortgage debts could cause hardship to prior or subsequent mortgagees. The court dismissed this argument, stating that the rights of prior and subsequent mortgagees would not be affected by a decree under Section 13 of the Act.

Conclusion:
The court concluded that the liability created under a mortgage is indeed a debt within the meaning of Section 2(6) of the Act. The appeal was dismissed with costs. The court found no force in the appellant's arguments and upheld the comprehensive nature of the Act in dealing with all kinds of pecuniary liabilities, including mortgage debts. The appeal was dismissed, confirming that mortgage debts are covered by the Act, and displaced creditors can enforce such debts under its provisions.