Pratap Kumar Budhwar vs Colony Bank Ltd. (In Liquidation)

This order will dispose of Letters Patent Appeals Nos. 214 and 333 of 1969. Both these appeals are directed against the order of the learned single judge passed u/s 45B of the Banking Companies Act, 1949 (10 of 1949), Excepting one point, the other points are common to both the appeals. It is not necessary to set out the facts in both the appeals. We confine ourselves to the facts in L.P.A. No. 214 of 1969.

On the 27th of June, 1946, Manohar Lal Budhwar mortgaged the cotton and ginning factory, Jhang, with the Colony Bank Ltd. to secure an advance of Rs. 1,10,000. Soon after came the partition of India and Jhang fell in what is now West Pakistan. At the date of partition, 15th August, 1947, the bank''s claim against M.L. Budhwar amounted to Rs. 1,14,905. M.L. Budhwar died in 1951, leaving behind four sons, Pratap Kumar Budhwar and three others. His claim regarding the cotton and ginning factory was settled at Rs. 5,26,951 by the Settlement Commissioner under the Displaced Persons (Claims) Supplementary Act, 1954. On the 29th August, 1956, the legal representatives of Budhwar received the compensation. The amount of compensation was paid partly in cash and partly by allotment of a plot at Allahabad. On the 18th of February, 1957, the banking company''s claim was verified. The intimation of this verification was sent to the rehabilitation authorities on 31st March, 1964. The representative of the displaced banking company approached the rehabilitation authorities for payment of the proportionate share of the compensation, which u/s 6 of the Displaced Persons (Compensation and Rehabilitation) Act, 1954, had to be paid to the descendants of Budhwar, to discharge the liability of Budhwar to the banking company. This representation was not accepted because it was stated that in the meantime the compensation had been paid partly in cash and partly by sale of a plot. On the 6th November, 1964, an application was filed in this court under the Banking Companies Act for realisation of the banking company''s share. This petition was returned on the 15th of October, 1965, on the short ground that this court had no jurisdiction because the banking company was not wound up. On the 22nd April, 1966, the winding-up order of the banking company was made by this court and on the 28th of February, 1967, the present petition was filed. This petition was contested by the appellant, one of the sons of Budhwar, alone.

The learned single judge, after hearing the parties, passed the impugned order wherein he held that the claim was within limitation and the same can be recovered out of the immovable property, No. 6-A, Stretchy Road, Allahabad. Pratap Kumar Budhwar being dissatisfied with this order had preferred an appeal under Clause 10 of the Letters Patent.

Mr. H.L. Soni, learned counsel for the appellant, contended that the order of the rehabilitation authorities, exhibit P-1, whereby they refused to entertain the bank''s claim had become final and, therefore, no application lay u/s 45B of the Banking Companies Act. He referred to Section 36 of the Act. In our opinion, this contention is not sound. The matter would have been different if the rehabilitation authorities had kept cash amount out of compensation payable to the appellant for payment to the banking company. That was not done. The compensation was paid partly in cash and partly by transfer of property, that is, the plot. The amount due to the bank by operation of law becomes a charge on the plot. There is nothing in the Displaced Persons (Compensation and Rehabilitation) Act which provides a machinery how the charge is to be enforced. The only provisions to which reference has been made at the Bar are Sections 6 and 7. The relevant part of Section 6, for our purpose, is quoted below :

"6. (1) Where a debt due to a banking company is secured by a mortgage, charge or lien on any immovable property belonging to a displaced person in West Pakistan in respect of which compensation is payable under this Act and such mortgage, charge or lien was subsisting at the date when the claim of the banking company was registered under the Displaced Persons (Claims) Act, 1950 (XLIV of 1950), the banking company shall be entitled to relief in accordance with the provisions of this section.

(2) Where the displaced person is entitled to receive compensation in respect of any such property as is referred to in Sub-section (1), the banking company shall be entitled,--.........

(b) if the compensation to the displaced person is payable in the form of transfer of any property from the compensation pool, then subject to a prior charge under Sub-section (3) of Section 20 to a second charge on such property for the amount which would have been, payable to the banking company under Clause (a) if the displaced person had been paid compensation in cash;........"

It will be clear from Clause (b) of Sub-section (2) of Section 6 that it is open to the rehabilitation authorities to make the amount payable to the banking company a charge on the property that is transferred to the displaced person in satisfaction of his claim. Section 7 merely provides for the determination of the amount of compensation and enumerates what amounts have to be deducted before the compensation is determined. If the amount had been deducted in furtherance of the communication of the banking company''s claim u/s 7, as already observed, the banking company would have no claim against the appellant, but this did not happen u/s 7. Instead, the amount due to the displaced banking company became a charge on the property that was transferred. Therefore, Section 7 does not in any manner alter the position. There is no bar in the Displaced Persons (Compensation and Rehabilitation) Act to the recovery of the charge from the property on which it falls. In the case of a banking company which is being wound up, the remedy is u/s 45B of the Banking Companies Act. In this view of the matter, the learned single judge was right in coming to the conclusion that the debt could be recovered from the plot that had been transferred to the appellant.

So far as the question of limitation is concerned, the matter is set at rest by the provisions of Sub-section (1) of Section 6. The terminus a quo would be the date on which the claim of the banking company was registered. In the present case, the claim was registered on 18th of February, 1957, and the present application was made on 28th of February, 1967. Therefore, the present application is within limitation. The article of the Limitation Act which would be applicable is Article 62 and the period to enforce the charge would be 12 years.

Mr. Soni, learned counsel for the appellant, further contended that there was no evidence on the record that the plot had been transferred out of the compensation pool. It was not indicated in the pleadings that the plot had been purchased by the appellant from outside the compensation pool. In fact, the letter of the department (exhibit P-1) makes it clear that the plot was transferred to the appellant out of the compensation pool. It is only qua property transferred out of compensation pool that the authority would have jurisdiction to adjust the amount of compensation and this is inherent in that letter.

No other contention has been advanced.

For the reasons recorded above, L.P.A. No. 214 of 1969 fails and is dismissed.

So far as L.P.A. No. 333 of 1969 is concerned, other matters are settled by our decision in L.P.A. No. 214 of 1969. The only additional contention that has been pressed is that the learned single judge should have decided issue No. 4. There is controversy on facts on issue No. 4, It is, therefore, proper that the learned single judge should have proceeded to decide issue No. 4. We say so with the utmost respect to the learned single judge.

For the reasons recorded above, we allow L.P.A. No. 333 of 1969, and direct issue No. 4 to be decided on the merits.

In the circumstances, we make no order as to costs in both the appeals.