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Judgment
The Hon''ble Mr. Justice Chennakesav Reddy
What is the relationship between a depositor and dep site? Is it that of a creditor and debtor of that of a trustee and beneficiary? are the simple but interesting questions of some importance that arise in this revision petition. The facts essential for the decision are not complicated and lie in a narrow compass. The petitioner is the judgment--debtor and the 5th defendant in the suit. The respondent is the plaintiff-decree holder. The plaintiff deposited a sum of Rs. 10,000/- in fixed deposit on 10-4-1974 with the 1st defendant Sri Rama Finance Corporation B. Kothakota (hereinafter referred to as the corporation'') the deposit was for a period of one year and was repayable with interest at 12% per annum after the expiry of the term of deposit. The corporation paid to the plaintiff certain amounts and for the failure to pay the balance he instituted a suit on the file of the Principal District Munsif''s Court, Madanapalle against the Corporation and defendants 2 to 5 its partners on 6-7-1977 for recovery of a sum of Rs. 7775-80 being the balance due out of the fixed deposit amount. All the defendents remained absent. They were set ex parte and the suit was decreed as prayed for on 20-1-1978 with costs. The decree holder then filed an execution petition out of which this revision petition arises, against only one of the partners viz. the petitioner--5th defendant. In the affidavit filed in support of the E.P., the decree holder stated that the judgment--debtor is having 15 acres of dry and 5 acres of wet land in the revenue village B. Kothakota, that be gets an annual income of Rs. 15,000/- from out of his lands besides the income from the 1st defendant-Corporation as one of its partners and that he is having enough amount to pay the decree debt but that he has been wilfully evading to pay the same. It was further averred that since the suit was filed on the basis of fixed deposit. The judgment--debtor was not entitled to the benefits of the provisions of the A.P. Agricultural Indebtedness Relief Act, 1977 (hereinafter referred to as ''the Act''.)
The petitioner filed his counter objecting to the execution on the ground that he is entitled to the benefits of the Act According to him, he owns only 5 acres of land, and was personally cultivating the same and the decree-holder filed the application knowing pretty well that the respondent was entitled to the protection of the Act.
No evidence was adduced before the learned District Munsif either by the decree-holder or the 5th judgment-debtor. The only question that was argued before the court below was whether the amount deposited under the fixed deposit receipts by the plaintiff with the 1st respondent-Corporation is not a debt as defined u/s 3 (1) of the Act. It was contended on behalf of the respondent that a person who makes a fixed deposit in a Bank or Corporation for a fixed term carrying interest is not a creditor and the transaction is not a debt and the relationship is not that of a creditor and debtor. The learned District Munsif held that the liability under the fixed deposit arises out of breach of trust reposed by the depositor in the deposited and as such, Exemption V of section 3 (1) of the Act applied to the deposit in question. Therefore, the 1st defendant Corporation which was doing money lending business or the other partners of the firm cannot claim any protection under the Act. He therefore held that the decree debt fell outside the purview of the Act and therefore, the decree holder was entitled to proceed in execution against the 5th defendant judgment--debtor. This in brief is the genesis of this revision petition by the judgment-debtor.
The principal question and the question that was debated in detail before me by the learned Counsel for the parties is whether a sum deposited under the fixed deposit receipts in a Bank or Finance Corporation is a debt within the meaning of Section 3 (1) of the Act or is in the nature of a trust as defined in the Indian Trust Act, 1982. At the outset, it would be useful to read the relevant provisions of the Act.
''Debt'' is defined in section 3 (1) as follows:
''debt'' includes any liability owing to a creditor in cash or in kind whether secured or unsecured payable under a decree or order of a Civil Court or otherwise and subsisting at the commencement of this Act, but does not include--
(i) a debt due to the Central Government or any State Government or any local authority or a Co-operative Society or a bank, including arrears of taxes due to the Central Government or a State Government or a local authority.
(ii) A debt due to any Government Company within the meaning of Section 617 of the Companies Act, 1956;
(iii) a debt due to the Life Insurance Corporation of India established under the Life Insurance Corporation Act, 1956, or to any other Corporation established by or under any law for the time being in force and owned or controlled by the Central Government or any State Government;
(iv) any rent due in respect of any property including an agricultural land let out to a debtor:
(v) any liability arising out of breach of trust or any tortious liability:
(vi) any liability in respect of wages or remuneration due as salary or otherwise for services rendered;
(vii) any liability in respect of maintenance whether under a decree of a Civil Court or otherwise.
(vii) any debt which represents the price of any goods or property whether movable or immovable purchased by a debtor or any amount due under a hire purchase agreement,
(ix) any advance of money given to a debtor by a person as the price of goods or property to be sold later on by the debtor;
(x) any sum recoverable as arrears of land revenue;
(ix) any sum payable to any religious, charitable or educational institution including wakf, of a public nature:
(xii) any debt contracted by a doctor from a person who is an agricultural labourer, a rural artisan or a small farmer.
"Creditor" and "debtor" are defined Section 3 (b) and (j) as follows:
(h) "Creditor" means a person from or in respect of whom the debtor has borrowed or incurred a debt and includes his heirs, legal representatives and assigns:
(j) "debtor" means an agricultural labourer, a rural artisan or a small farmer, who has borrowed or incurred any debt before the commencement of this Act.
''Debt'' is defined u/s 3 (1) of the Act to include any liability owing to a creditor in cash or in kind. The definition is an inclusive definition and thereby enlarges the meaning of the word "Debt". The definition makes it include matters which the ordinary meaning ''Debt'' will not include. The interpretation clause which thus widens the sweep of the word retains its ordinary meaning. In Roger vs. Harrison 1893 (I) QBD 161 Lord Esher construing the word "include" in the definition of "assurance" observed at page 167;
"Therefore, Assurance", for the the purposes of the Act, includes that which is a coveyance either in the ordinary sense of the term, or in the enlarged meaning given to the term by the act. The meaning of the word includes in such a definition as is given in this Act seems to be this. The word interpreted has its ordinary meaning. That meaning it still has in the Act. But then there are other meanings that the legislature wishes it to have in the Act. So the definition is used to enlarge the meaning of the term beyond its ordinary meaning and make it include matters which the ordinary meaning would not include.
The ordinary meaning of "debt" in Webster''s Dictionary is "something owed by one person to another or others, obligation or liability to pay or return something". According to Law Lexicon by P.R. Aiyar the meaning of ''debt'' is:
A sum of money due under an express or implied agreement (as) a bond or bill or note; amount due or payable from one person to another in return for money, Services, goods, or other obligation. A debt is a sum payable in respect of a money demand recoverable by action. In common parlance it is a sum of money due from one person to another.
Thus in common parlance debt is understood to mean a sum of money due from one person to another. The definition under the Act retains the meaning of the word ''debt'' as understood in common parlance. Therefore, the fixed deposit made by the decree holder with the Corporation bearing interest at 12% per annum and repayable after one year with interest is undoubtedly a debt.
Let me now turn to the text on banking law to ascertain the relationship of the depositor and the banker. Banking Law and Practice in India by M.L. Tandan, 10th Edition under Chapter V beaded ''Bankers as Borrowers'' contains the following passage at page 126;
Forms of borrowing: Bankers borrow money by issuing bank notes, receiving deposits, drawing bills of exchange, issuing bonds, debentures and cash certificates.
It is thus evident that receiving of deposits by a Bank is a form of borrowing by the Bank. Again at page 129 the author says under the heading ''Legal position''.
The legal position of the banker in connection with fixed deposits is one of a debtor who is not bound to repay the amount before its due date..................The banker continues to be a debtor, even though the period fixed for the deposit has expired and the deposit is not withdrawn and although the banker may not allow interest after the deposit has matured for payment, he does not become a trustee for the customer of the funds so lying with him.
It is thus clear that in case of fixed deposits with a Bank the relationship between the banker and the customer is not of debtor and creditor. The amount is not in the nature of a trust and the relationship between them is not that of a trustee and beneficiary.
Again in Paget''s Law of Banking, 8th Edition at page 158 in chapter 6 dealing with the relationship of banker and customer, the author says;
Money paid into a deposit account is a loan to the banker, not a specific fund held by him in a fiduciary capacity.
Now ''trust'' is defined under the Trust Act as follows:
A ''trust'' is an obligation annexed to the ownership of property, and arising out of a confidence reposed in and accepted by the owner or declared and accepted by him, for the benefit of another, or of another and the owner;
The person who reposes or declares the confidence is called the ''author of the trust'': the person who accepts the confidence is called the ''trustee'' the subject matter of the trust is called ''trust property ''or'' trust money'': the ''beneficial interest'' or ''interest of the beneficiary is his right against the trustee as owner of the trust property; and the instrument, if any by which the trust is declared is called the ''Instrument of trust'';
A breach of any duty imposed on a trustee, as such by any law for the time being in force, is called a ''breach of trust.........''
A trust is one of the several juridical devices by which a person or institution has in effect given a gift of property or interest in the properly through the intervention of another who is enabled to deal with the property No trustee can use the trust property for his own benefit. He is bound to hold the property for the benefit of the beneficiary. He is liable to account to the beneficiary for it. The test to determine whether the amount deposited is a loan or a trust has been laid down by Chakravarti, C.J. in Ganesh Export and Import Co. Vs. Mahadeolal Nathmal, as follows;
Where money is paid merely on condition of repayment and payment of interest till then, there is only a loan: but where the condition on which money paid shows that the corpus of the fund is being handed over in confidence to be held for the benefit of some person or object, the provision for payment of interest is only a provision for an increase or improvement of the fund and there is no loan but a trust, despite such provision which does not in any way negative a trust.
In Official Assignee, Madras vs. G. Smith ILR 32 Mad 68 the Madras High court bad to consider the nature of the relationship between the banker and the customer in cases of fixed deposit in the bank. The learned judges held that in the ordinary course of his trade a banker is entitled to use moneys paid into his bank as his own in the absence of any specific directions by the depositor and that the ordinary relationship between a banker and a customer in respect of the money paid by the latter to the former, is that of a debtor and creditor and no fiduciary relationship will be created in respect of the sums so paid. It was further held that a trust will only exist when a banker is to collect and remit but not where he is to use and repay.
In M/s Rai Bahadur Seth Jess Aram Fatehchand vs. C.M. Narain Tankha AIR 1967 SC 1163 the Supreme Court had occasion to consider whether the security deposit made for due performance of a contract was in the nature of a debt or trust. K.N. Wanchoo, J., speaking for the court observed at page 1165.
It is true that where there is a clear trust and the trust deed if any provides that the trustee may use the trust property as he likes, the fact that the trustee can mix the trust property with his own may not make any difference. But where there is no clear indication that a security deposit was impressed with trust, absence of segregation would be a circumstance against there being a trust.
Another circumstance which may have to be taken into account in a case where the agreement does not indicate clearly that the security deposit is impressed with a trust is the payment of interest. Where there is no payment of interest provided for an inference may be readily drawn that the deposit was in the nature of a trust. But where the person with whom the deposit is made is to pay interest it may be possible to infer that payment of interest is a pointer towards there being no trust. Further any other provision in the agreement and in other circumstances as to manner in which the deposit was dealt with may also have to be taken into account in coming to the conclusion whether the security deposit in a particular case was impressed with a trust or not.
In that case, since the facts established that that there was no segregation of the security deposit and the mills could mix the security deposit with its own money and use it for its own purpose, it had to pay interest. It was held that the security deposit was a debt and not a trust and the relationship was that of a debtor and creditor. The essential distinction between a ''trust'' and ''debt'' is that: in a debt the amount altogether ceases to be the money of the creditor. It is the money of the debtor and he has full right to spend it in any manner be likes without being liable to render accounts to the creditor.
The Creditor does not require from the debtor the very notes of coins that were given to him. On other hand, in a trust the trustee has to spend and utilise amount only for the specific purpose for which the trust was created. He cannot spend it in any manner he likes and he is liable to the testator. Further, the payment of interest is a paramount consideration for determining whether or not a particular advances is a debt or trust.
Now let me look at the facts of this case and apply the above test. The facts in this clearly show that the plaintiff-respondent deposited a sum of Rs. 10,000/- under fixed deposit with the first defendant Corporation. The deposit was for one year and the amount was repayable at 12% interest after the expirty of the period. The Corporation itself was doing money lending business. It is obvious that the money deposited by the plaintiff became a part of the assests of the first defendant-Corporation. The Corporation was at liberty to use and was freely using the money deposited by the plaintiff and lending it to its customers. There was also a stipulation for the payment of interest on the amount deposited by the plaintiff. Therefore, it is clearly a case of debt and not a trust. The learned District Munsiff was in error in holding that the money deposited was in the nature of a ''trust'' and therefore fell within the exception (v) of Section 3 (1) of the Act.
The learned Counsel for the respondent however raises an objection that the judgment-debtor suffered the decree after the act came into force on 29-12-1976, that no objection was taken to the maintainability of the suit in view of the provisions of the Act and that the suit itself was filed on 6-7-1977 after the Act came into force and therefore the petitioner, having failed to take a defence that was available to him in the suit is barred by the principles of constructive res judicata from his taking the same defence in the execution proceedings. He submits, under explanation IV to Section 11 C.P.C. any matter which might and ought to have been made ground of defence or attack in such former suit shall be deemed to have been a matter directly and substantially in issue in such suit, and that the 5th defendant having failed to plead the defence the protection of the provisions of the Act is barred from doing so in the execution. In support of his submission, he placed strong reliance on a Bench decisions of this Court in Government of A.P. vs. Sri Anantha Padmanabha Swamy Varu of Padmanabham 1973(1) An. WR. 322 Comunidade de moira vs. Vassudeva Ramachandra Aladonkara 2 AIR 1973, Goa, 29 and Tuljarama Ramachandra, Ghodke vs. Nijagunappa Basalingappa Mosangadi AIR 1975 Kar 25. In the first of the cases, Ekbote, C.J., speaking for the court observed at page 324 ; ....What we have to examine is whether a point which might and ought to have been raised before the Tribunal but has not been raised would operate as res judicata in regard to such matters.
The learned Judges held that even a decision given by the Estates Abolition Tribunal before whom a ground of at attack or defence which might and ought to have been raised in any enquiry u/s 9 of the Act was not raised would be deemed to have been directly and substantially in issue and the decision would operate even in regard to such matters as constructive res judicata.
In the second of the decisions, a defence was taken during the course of Execution proceedings on the basis of a decree for eviction that the defendant was entitled to the protection against the eviction u/s 9 of the Agricultural Tenancy Act. But the said defence was not taken in the suit itself. The learned Judge observed.
The respondent could raise and ought to have raised the issue that he was an agricultural labourer. When an issue could and should be raised, it is deemed when an issue could and should be raised. It is deemed under law to have been raised and decided and the bar of res judicata applies. In the absence of an averment or contention, issue in the suit, as to whether the respondent was an agricultural labourer or not, it is not possible to hold that the provisions of S. 3 (b) of the Act are attracted.
To the same effect is the decision of the Karnataka High Court But the learned counsel for the petitioner submits that the defence open to a small farmer could be taken at any stage of the proceedings in view of the express provision contained in Section 4 (2) of the Act. u/s 4 (2) the defence of protection of the act could be raised at any stage of the proceedings by a debtor under the Act. A "debtor" as already noticed, has been defined u/s 3 (j) to mean an agricultural labourer, a rural artisan or a small farmer, who has borrowed or incurred any debt before the commencement of the Act, Section 4 (2) reads:
4 (2) (a) No Civil Court shall entertain any suit or other proceeding against the debtor for the recovery of any amount of the debt including interest, if any, which is deemed to be discharged under Sub-Section (1).
Provided that where any suit or other proceeding is instituted jointly against the debtor and any other person, nothing in this sub-section shall apply to the maintainability of such suit or proceeding in so far as it relates to such other person.
Under Sub-section (1) of section 4, "every debt, including interest if any, owing to any creditor by an agricultural labourer, a rural artisan or a small farmer shall be deemed to be wholly discharged, with effect on and from the commencement of the Act. It is the plea of the learned counsel that the petitioner debtor is a small farmer that the words'' other proceeding against the debtor for the recovery of the amount of the debt" include execution proceedings also and therefore in view of the statutory bar, principles of constructive res judicata are not applicable to the cases arising under the Act. He invited my attention to the decision of the Supreme Court in Mathura Prasad Bajoo Jaiswal and Others Vs. Dossibai N.B. Jeejeebhoy, In that case the question was whether the Civil Judge, Junior Division, Bonvli was competent to try an application for determination of standard rent u/s 11 of the Bombay Rents, Hotel and Lodging House Rates Control Act, 1947. The Civil Judge rejected the application holding that the provisions of the said Act did not apply to open land left for constructing buildings. The Supreme Court observed;
But the doctrine of res-judicata belongs to the domain of procedure, it cannot be exalted to the status of a legislative direction between the parties so as to determine the question relating to the interpretation of enactment affecting the jurisdiction of a Court finally between them, even though no question of fact and relating to the right in dispute between the parties has been determined thereby. A decision of a competent court on a matter in issue may be res-judicata in another proceeding between the same parties ; the ''matter in issue'' may be an issue of fact, an issue of law, or one of mixed law and fact. An issue of fact or an issue of mixed law and fact decided by a competent court is finally determined between the parties and cannot be reopened between them in another proceeding.
Again the Supreme Court observed at page 2359:
A question of jurisdiction of the Court, or of procedure, or a pure question of law unrelated to the right of the parties to a previous suit, is not res-judicata in the subsequent suit.
After referring to the several decisions, the Supreme Court referred to Charan Bhattacharjee''s case ILR 56 Cal 723 wherein was held :
The object of the doctrine of res-judicata is not a fasten upon parties special principles of law as applicable to them inter se, but to ascertain their rights and the facts upon which these rights directly and substantially depend: and to prevent this ascertainment from becoming nugatory by precluding the parties from reopening or recontesting that which has been finally decided.
There can be no dispute that the question whether the debtor is entitled to the protection of the Act is a pure question of jurisdiction. Moreover as observed by this Court in P. Varahalamma Vs. Repeti Ramanna and Others, "the object and the purpose of the Act is to provide relief from indebtedness to agricultural labourers, artisans, and small farmers in the State". The Court further observed:
The Legislation is apparently actuated with the State policy to wipe out the indebtedness of small farmers. It is a crusade against oppression and harassment of the weaker sections at the hands of the creditors. The import of the incidents of a Hindu joint family as could be gleaned from the texts of Hindu Law in the interpretation of the Special beneficial enactment would frustrate the very object and purpose of the Act.
Again this court observed :
It is one of the cardinal principles of construction of statutes that statutes adopted or intended to cure and existing evil should be construed as to advance the remedy and remove the evil.
Therefore, the provisions of the Act to be constructed are so as to remedy the evil and uplift the weaker sections of the Society. Otherwise, the very object of the enactment would be defeated. Moreover, it is further alleged by the learned counsel that the execution petition itself filed against one of the judgment-debtors namely the petitioner-debtor, leaving the other judgment-debtors is a collusive one. The decree itself was an ex-parte decree. In the absence of any evidence, it is not possible to say that the decree itself was obtained by any fraud or collusion in order to attract section 44 of the Evidence Act. The principles of constructive res-judicata cannot override the statutory bar enacted in Section 4 (2) of the Act against the entertainment of any suit or proceeding against a debtor under the Act. I am, therefore, unable to uphold the contention of the learned counsel for the respondent that the petitioner is barred from invoking the benefits of the Act by virtue of explanation IV of Section 11 C.P.C.
That does not however conclude the matter. The question that still remains is whether the petitioner is a "small farmer" within the meaning of Section 3 (t) of the Act. No evidence had been adduced by the respondent-plaintiff to show that the petitioner is not a small farmer, O feel it is proper, that an opportunity should be given to the respondent to adduce any evidence to establish the plea that the petitioner is not a small farmer. The petitioner is also at liberty to adduce evidence in rebuttal. The revision petition is accordingly allowed. The learned District Munsif is directed to proceed with the E. P. in the light of the observations made above.