Holding

A civil court has jurisdiction to entertain a suit for recovery of a commercial loan even when secured by a mortgage, as the suit does not arise under the Rajasthan Tenancy Act.

Summary

The Bank of Baroda granted a demand loan of Rs.36,000 to Moti Bhai, secured by a promissory note, a hypothecation of standing crops and a mortgage deed, with two guarantors. When the loan defaulted, the Bank sued the borrowers in a civil court for recovery of the principal, interest and, in case of non‑payment, sale of the mortgaged property. The respondents contended that the suit was essentially for enforcing a mortgage and therefore fell within the exclusive jurisdiction of the revenue court under Sections 207 and 256 of the Rajasthan Tenancy Act, 1955, invoking the residuary Entry 35 of the Third Schedule. The Supreme Court examined the nature of the transaction and held that the loan was a commercial transaction, not a matter arising under the Tenancy Act, and the mortgage was not executed under Section 43 of that Act. Consequently, the suit did not fall within the general entry of the Third Schedule and the civil court possessed jurisdiction to entertain it. The Court set aside the High Court’s decision, restored the trial court’s judgment, and allowed the appeal.

Issues considered

Whether a suit for recovery of a commercial loan secured by a mortgage falls within the jurisdiction of a revenue court under Sections 207 and 256 of the Rajasthan Tenancy Act, 1955.
Whether the suit is covered by the residuary Entry 35 of the Third Schedule of the Rajasthan Tenancy Act.

Legislation cited

Rajasthan Tenancy Act, 1955s. 207, s. 256, s. 43

Subjects

jurisdictioncivil courtrevenue courtRajasthan Tenancy Actmortgageloan recoveryThird Schedulecommercial transactionpromissory noteguarantor

Judgment

A \..
BANK OF BARODA

v,
MOTi BHAI AND ORS.
B 29th January, 1985

[Y. V. CHANDRACHUD, C.J. AND V. BALA KRISHNA ERADI, J .)
Bar to jurisdlctiofi·of •~ivil court's-Suit for recovery of a demand loan
sanctioned to agrlculturist by a Bank under a pro1nissory note duly covered by
hypothecating the standing crop of his lands and supported with two guarantors
C ; ·f(Jr the repayment of the loan- Maintainability of the Sult-Raja,han Tenancy
Act (Act 3 to 1955) seetions 43, 207 and 256 read with Entrty 35 of Third
Schedule, scope of.

The appellant Bank filed a suit for the recovery of the amount of Joan
together with interest thereon granted to Respondent No. J who had not
only executed a promissory note but al110 a bond hypothecaling the standing
D crop of bis lands siluated at Khandu and Surjipada in Rajasthan. Respondents
2 and 3 being guarantors for the repayment of the loan were also proceed~·d
against. The Trial Court overruled the preliminary objection raised by the
Respondents as to the maintability of the Sui 1, in view of sections 207 and
256 of the Raiasthao Tenancy Act, 1955. But the High Court, while
allowing the Civil Revision Application set asid·~ the judgment of the Trial
Court and dismissed the suit,
E
Hence the appeal by special leave of the Court.

Allowing the appeal, the Court,

HELD: 1.1 A combined reading of sections 207 and 256 of the
Rajaslhao Tenancy A,,;t, 1955 wvuld ~how that the jurisdiction of the civil
F courts is barred only in respect of suits and applications of the oalure
specified in the Third S~·hedule to the Act and in respect of suits or applica.
tions based on a cause or action in respect of which any relief could be
obtained by means of a suit or application of the nature specified in the
Third Schedule. The civil COU!t has no jurisdiction to entertain a suit or
proceeding with respect to any matter arising under the Act or the Rules
made thereunder, provided that a remedy by way of a suit. application or
G
appeal or otherwise is provided in the Act. the long title of which shows
that it was passed in order "to consolidate" and amend the law relating to
tenancies of agricultural lands and to provide for certain measures of land
reforms and matters connected therewith. [787C-D; 788A]

1.2. Entry 3S is described in the Third Schedule as a "General"
H entry, that is to say, not relatable to any particular section of the Act. The
B\NKi OF B.\~ODA '· Mor( BfHI (ChanJracl1uJ, 01.) 785
•
A
suit filed by the Bank cannot fall under this ''General'' or "residuary"
entry. A loan given by a Bank to an agriculturist, which is in the nature of
a commercial transaction, is outside the contemplation of the Act and cannot
be said to be in respect of any matter arising under the Act.
[787G; 788A·B)
1.3. The business of the Bank, in so far as lending transactions are
concerned, is not to lend moneys on mortgages but the business i9 to lend B
moneys. In this particular case, the Bank lent a certain sum of money to
respondent 1 in the u~ual course of its commercial business and nothing
could be further removed from the contemplation of the Act than such a
transaction. It is only by way of a collateral security that the Bank obtained
a bypothecation bond and a deed of mortg1ge from respondent 1 and a
letter of guarantee from respondents 2 and 3. The assumption that the
mortgage was executed in pursuance of section 43 of the Act and, therefore, c
residuary Entry 35 of the Third Schedule is attracted, is not correct.
[788G-H; 789A]
2. On the question uf jurisdiction, one must always have regard to
the substance of the matter and not to the form of the suit. Approaching
the matter from that point of view, primarily and basically the suit filed by
the Bank is one for recovering the amount which is due to it from the
respondents on the basis of the promissory note executed by respondent
No. 1 and the guarantee given by respondents 2 and 3. The reliefs sought D
for also make it clear that the suit is not one to enforce the mortgage and,
even assuming that it is, the mortgage not having been executed under
section 43 of the Act, nor being one rclatable to that section, the residuary
Entry 35 can have no application. lf that entry is out of way, there is no
other provision in the Act which \\oould apply to the instant suit and
therefore, the civil court has jurisdiction to entertain the suit filed by the
appellant Bank. [789C·B) E
CIVIL APPELLATE JURISDICTION: Civil Appeal No. 1321 of 1980.

From the Judgment and Order dated the 15th February, 1976
of the High Court of Rajasthan at Jodhpur in S. B. Civil Revision
No. 320 of 1978.

.. p. G. Gokhale and Mr. B. R. Agarwala for the Appellant .
F

Va/veer Bhandari for the Respondents.

The Judgment of the Court was delivered by
G
CHANDRACl!UD, CJ. The appellant, the Bank of Baroda, agreed
through its Banswara Branch to sanction a demand loan facility in
the sum of Rs.36,000 in favour of respondent L In consideration
thereof, respondent I executed a demand promisory note in favour
of the Bank on June 18, 1973. He also executed a bond hypothe-
catinng the standing crop of his lands situated at Khandu and H
786 SUPRBMB COURT RBPORTS [1985] 2 s.c.a.
'
A Surjipada in Rajasthan. Respondents 2 and 3 are the guarantors
for the repayment of the loan. In order to further secure the repay-
ment of the loan, respondent 1 executed a deed of simple mortgage
in favour of the Bank, in respect of the lands at Khandu and Surji-
pada.
D The respondents having failed to repay the loan, the appellant
filed against them a suit in the court of the learned District Judge,
)r '
Banswara, for recovering a sum of Rs. 52,000 and odd which was due
•
on the loan trnnsactton. Respondents raised a preliminary objection
to the maintainability of the suit on the ground that the claim in the
suit was e>sentially one for enforcing the mortgage executed by them
c in favour of the Bank and, therefore, the Revenue court had the
exclusive jurisdiction to entertain the suit, by reason of the provisions
contained 1n the Rajasthan Tenancy Act 3 of 1955, (hereinafter called
"the Act"). That objection was overruled by the learned District
Judge but, in a civil revision application filed by the 1espondents,
D the High Court upheld it. According to the High Court, "the execu-
tion of the mortgage deed by defendant No. 1 in favour of the
plaintiff in respe:t of his tenancy rights in agricultural land also
forms the essential part of the cause of action of the plaintiff and as
such, the suit is triable by a revenue court". The correctness of this
view is questioned by the plaintiff in this appeal by special leave.
\
E Section 207 of the Act reads thus ;

207. Suit and applications cognizable by revenue court
only.-(1) All suits and applications of the nature specified .'
in the Third Schedule shall be heard and determined by a
revenue ~ourt.
F (2) No court other than a revenue court shall take
cognizance of any such suit or application or of any suit or
application based on a cause of action in respect of which
~ny relief could be obtained by means of any such suit or
application.

Explanation:- If the cause of action is one iu respect of
G
which relief might be granted by the revenue court, it is
immaterial that the relief asked for from the civil court is
greater than, or additional to, or is not identical with, that
which the revenue court could have granted.

Section 256 of the Act, which is complementary to section
B 207, reads thus;
BANK: OF BARODA v. MOTi BHAI (Chandrachud, CJ.) 787

"256. Bar to Jurisdiction of civil courts.-(1) Save as A
otherwise provided specifically by or under this Act, no
suit or proceding shall lie in any civil court with respect
to any matter arising under this Act or the Rules made
thereunder, for which a remedy by way of suit, application,
appeal or otherwise is provided therein. B

(2) Save as aforesaid, no order passed by the State
Government or by any revenue .court or officer in exercise
of the powers confrrred by this Act or the Rules made thrre-
under shall be liable to be questioned in any civil court".
c
A combined reading of these two ~ections would show that the
Jurisdiction of civil courts is barred only in respect of suits and
applications of the nature specified in the Third Schedule to the Act
and in respect of suits or applications based on a cause of action in
respect of which any relief could ·be obtained by means of a suit or
application of the nature specified in the Third Schedule. The civil D
court has no jurisdiction to entertain a suit or proceeding with respect
to any matter arising under the Act or the Rules made thereunder
provided that a remedy by way of a suit, application or appeal or
otherwise is provided in the Act.

The legal position on the question of jurisdiction which is E
stated above requires examination of the various entries in the Third
Schedule. That Schedule is divided into three parts, the first of which
is called "Suits", the second is called" Applications", and the third
i1 called "Appeals". We are concerned in this appeal with the 35
entries which are comprehended in the first part which deals with
suits. It is common ground, and the High Court has not held to the F
contrary, that none of the specific entries 1 to 34 is applicable to the
suit filed by the appellant Bank. The argument is that the residuary
Entry 35 would govern the suit and, therefore, by reason of sections
207 and 256 of the Act, the Revenue court alone could entertain it.
Entry 35 is described in the Thin~ Schedule as a "General" entry,
that is to say, not relatable to any particular section of the Act. The G
description of the entry as "General" is given in Column 2 of the
Third Schedule which is headed "Section of Act." the third column
of the Schedule carries the heading "Description of suit, application
or appeal". Under th;\t column, the relevant description runs thus :

"Any other suit in respect of any matter arising under
this Act, not specifically provided . for elsewhere in this
Schedule", H
788 SUPRBMB COURT RBPORTS (1985) 2 S.C.ll.

. We are unable to appreciate how the suit filed by the Bank can
-
'

fall under this "General" or residuary entry. The suit of the Bank to
recover the loan is not in respect of any matter arising under the
Act. The long title of the Act shows that it was passed in order "to
consolidate and amend the law relating to tenancies of agricultural
lands, and to provide for certain measures of land reforms and
8 matters connected therewith". A loan given by a Bank to an agricul-
turist, which is in the nature of a commercial transaction, is outside
the contemplation, of the Act and can, by no stretch of imagination •
be said to be in respect of any matter arising under the Act.

The High Court has relied on section 43 of the Act in order
c to come to the conclusion that the deed of mortgage was executed
by respondent I in favour of the Bank in accordance with that
section and, therefore, the suit for the sale of the tenancy rights
of the mortgagee by enforcement of the mortgage is a suit in respect
of a matter arising under the Act. The High Court holds that silch
a suit would attract the residuary entry since the matter to which it
D relates has not been specifically provided for el sewhere in the Third
Schedule. With respect, we are unable to accept this line ofreasoning.
Section 43 (I) of the Act, which is relevant for this purppose, reads
thus:

"43. Mortgage:-(!) Khateder tenant, or, with the
E general or special permission of the State Government or
any officer authorised by it in this behalf, a Ghair Khatedar
tenant, may hypothecate or mortgage his interest in the
whole or part of his holding for the purpose of obtaining
loan from the State Goverment or a Land Development
Bank as defined in the Rajasthan Co·operative Societies
F
Act, 1965 (Act 13 of 1965) or a Co-operative Society
registered or deemed to be registered as such under the
said Act or any Scheduled Bank or any other institution
notified by the State Government in that behalf" ......

The High Court is in error in saying that 'it cannot be dispu-
ted' that the mortgage was executed by respondent 1 in pursuance of
G
section 43. The business of the Bank, in so far as lending transactions
are concerned, is not to lend moneys on mortgages but the business
is to lend moneys. In this particular case, the Bank lent a certain
sum of money to respondent I in the usual course of its commercial
business and nothing could be further removed from the contempla-
tion of the Act than such a transaction. It is only by way of a
H collateral security that the Bank obtained a hypothecation, 1¥.lnd. ancl
BANI: OF BARODA v. llOTI BHAI <e:Jcandrackud. CJ.) 789

a deed of mortgage from respondent l and a letter of guarantee from
respondents 2 and 3. The entire judgment of the High Court is based
on the assumption that the mortgage was executed in pursuance of
section 43 of the Act and, therefore, residuary Entry 35 of the Third
Schedule is attracted. Once it is appreciated that the mortgage exe-
cuted by respondent I is outside the scope of the Act, the reasoning
of the High Court has to be rejected.

On the question of jurisdiction, one must always have regard
to the substance of the matter and not to the form of the suit. If the
matter is approached from that point of view, it would be clear that
primarily and basically, the suit filed by the Bank is one for recover-
ing the amount which is due to it from the respondents on the basis
of the promisory note executed by respondent I and the guarantee
given by respondents 2 and 3. The relief sought by the Bank is that
the suit should be decreed for the repayment of the amount due
from the respondents. By the second prayer, the Bank has asked
that "in case of non-payment of the decretal amount" the mortgaged
property should be brought to sale and if the proceeds of that sale D
are not enough to meet the decretal liability, th~ otlwt moveable and
immovable properties of the respondents should. b. ~ put at sale. The
suit is not one to enforce the mortgage and, even assuming for the
purpose of argument that it is, the mortgage not having been execu-
ted under section 43 of the Act, nor being one relstablc to that

'
. '. section, the residuary Entry 35 can have no appl\ca_tio.n. If that entry
is out of way, there is no other provision in the Act, which would
apply to the instant suit. The civil court has therefore, jurisdiction
to entertain the suit filed by the appellant Bank.•

For these reasons, we set aside the judgment of the High Court
and restore that of the District Court. The suit sh111l be disposed of
expeditiously. The appellant will be entitled to its costs of this F
appeal from the respondents.

S.R. Apptal allo~d.