Holding

The period spent in the Debt Settlement Board proceedings is excluded under Section 14 of the Limitation Act, 1963, making the suit filed on 10 February 1970 timely.

Summary

The State Bank of Hyderabad sued the Joint Family of Mis. Mukundas Raja Bhagwan Das for recovery of a promissory note dated 20 May 1953. The respondents had applied in March 1960 under Section 11 of the Andhra Pradesh Jagirdar Debt Settlement Act, 1952 for scaling down the debt, and the Debt Settlement Board later held it had no jurisdiction to entertain the claim. The Bank filed a suit on 10 February 1970; the trial court and the High Court dismissed it as barred by limitation. The Supreme Court examined whether the period spent in the Board proceedings should be excluded under Section 14 of the Limitation Act, 1963, and whether Section 25 of the Jagirdar Act barred the suit. It held that the time spent in the Board proceedings is excluded under Section 14, and that the suit was filed within the limitation period. Consequently, the appeal was allowed and the suit was ordered to proceed.

Issues considered

Whether the suit filed by the bank is barred by limitation in view of the time spent in proceedings under the Andhra Pradesh Jagirdar Debt Settlement Act, 1952.
Whether Section 14 of the Limitation Act, 1963 applies to exclude the period of the Board proceedings.
Whether Section 25 of the Jagirdar Debt Settlement Act, 1952 bars the creditor from instituting a suit while an application under the Act is pending.
Whether Section 57 of the Jagirdar Act can be invoked to save the suit.

Legislation cited

Limitation Act, 1963s. 14, s. 18, s. 19

Subjects

limitationSection 14Jagirdar Debt Settlement Actscaling down of debtpromissory notedebt recoverycivil suitexclusion of time

Judgment

STATE BANK OF HYDERABAD A
v.
THE JOINT FAMILY OF MIS. MUKUNDAS
RAJA BHAGWAN DAS AND ORS.

MARCH 22, 1995
B
(K. RAMASWAMY ANDS. SAGHIR AHMAD, JJ.]

A.P. Jagirdar Debt Settlement Act, 1952/Limitation Act, 1963: Sections
3, 11, 22, 25, 30, 57/Section 14--Scaling down of debt-Time taken in tlte
proceedings--Whether gets excluded under s.14 of the Limitation Act and the C
suit filed was within the limitation period-Held: Yes.

Respondents had executed a promissory note on 20.5.1953 for a sum
of Rs. 37,000 in favour of the appellant-Bank with a letter to transfer the
demand loan. Thereafter certain amounts were paid from time to time upto
3.9.1953 in a sum of Rs. 37,000 in favour of the appellant with a letter to D
transfer the demand loan. Even thereafter certain amounts were paid upto
3.9.1959.

In March 1960, Respondents made an application under Section 11
of the A.P. Jagirdar Debt Settlement Act, 1952 for scaling down the debts. E
The Debt Settlement Board issued notice to the appellant-Bank to submit
the statement of account and the Bank submitted the same stating that a
sum of Rs. 74,062.05 with interest at 9% was due from the Respondents.
However, the Board held that it had no jurisdiction to entertain the claim
for scaling down in view of the-Full Court Judgment of A.P. High Court in
ft. Family of Mukund Das Raja Bhawan Dass & Sons etc. v. Strite Bank of F
Hyderabad, (1963) 2 AWR 147.

The appellant-Bank filed a suit for recovery of the amount due from
the Respondents. The trial Court dismissed the suit on the ground that it
was barred by limitation. The High Court confirmed it. Hence this appeal G
by the Bank. ·

Allowing the appeal, this Court.

HELD : 1. It is true that the benefit of s.14 of the Limitation Act
would be extended only to the plaintiff who has instituted the suit in a H
947
.948 SUPREME COURT REPORTS (1995] 2 S.C.R.

A wrong form;. and had prosecuted the proceedings in good faith in that
co.urt which ultimately found to have defect of jurisdiction or other cause
of a like nature. The period during which such proceedings were
prosecuted, would be excluded in computing limitation. The Scheme of the
Act would indicate that all claims relating to a debt involving a Jagirdar
B are to be considered and adjudicated upon by the authorities including the
Board constituted under the Act. When a Jagirdar files ~n application for
scaling down the debt. and the creditors file their claims, the position of
the latter, namely, the creditors is that of the plaintiff, as their claim would
be considered and appropriate orders for payment of the amount, though
not necessarily the full amount due from the Jagirdar, would be paid. But
C this does not change their status and for purpose of Section 14 of the
Limitation Act, they would, notwithstanding that the proceedings were
initiated under the Act on an application made by the Jagirdar would be
that of a plaintiff in a civil suit. [952-E-F)

2. When the Jagirdar himself made an application under s.11
D together with an application under s.30 read with s.22 of the A.P. Jagirdar
Debt Settlement Act, 1952 until the proceedings are determined the
creditor bas no right to lay the suit by operation of s.25 of the Act. The
necessary implication is that the jurisdiction of the civil court under s.9
of the CPC stands excluded. Consequently, the appellant could lay the suit
E in 1962 tho,ugb it was partly paid by the respondents. Since the application
was held to be not maintainable by the Board on October 25, 1967, the suit
was clearly within limitation when it was laid on February 10, 1970. The
High Court, therefore, was not right in its conclusion that there should be
a finding recorded by the Board that the respondent is not a debtor to get
the benefit of s.57. That view does not help the respondents. In the light of
F the scheme of the Act, the time ta)cen in the proceedings under the Ac't,
gets excluded under s.14 of the Limitation Act. [952-G-H, 953-A)

CIVIL APPELLATE JURISDICTION : Civil Appeal No. 772 of
1979.
G
From the Judgment and Order dated 3.11.78 of the Andhra Pradesh "r
High Court in C.C.CA No. 82 of 1974.

C.Sitramiah, A Ranganadhan and AV. Rangam with him for the
H Appellant.
J
STATE BANK v. MUKANDAS R.BHAGWAN DAS 949

S. Markandeya, Ajay Singh, H.P. Sharma and Ms. C. Markandeya A
for the Respondents.

The following Order of the Court was delivered :

This appeal by special leave is filed against the judgment of the B
Division Bench of the Andhra Pradesh High Court made in C.C.C.A. No.
82174 dated November 3, 1977. The appellant-Bank laid the suit on
February 10, 1970 in the City Civil Court to recover a sum of Rs. 35,000
from the respondents on the foot of a Promissory note and against the
security of 133 shares of Nizam State Railway with a face value of Rs. 250
each at 5% interest thereon. The trial Court and the High Court recorded C
a finding that the suit is barred by limitation. Thus the suit stood dismissed.
The question, therefore, is whether the suit is barred by limitation. The
facts, in nutshell, are that the respondents had executed a promissory note,
Ex.A-2 dated May 20, 1953 for a sum of Rs. 37,000 in favour of the
appellant with a letter to transfer the demand loan. Thereafter certain D
amounts were paid from time to time upto September 3, 1953 for a sum of
Rs. 37000 in favour of the appellant with a letter to transfer the demand
loan. Thereafter certain amounts were paid from time to time upto Sep-
tember 3, 1959 under ExA-7. AP. Jagirdar Debt Settlement Act, 1952 for
short to Act prescribed procedure for making the applications by the
Jagirdars or the creditors to scale down the debt liability incurred by the E
Jagirdars and the procedure in that behalf has been prescribed thereunder.
The respondents made an application in March, 1960 under section 11 of
the Act for scaling down the debts. The Board issued notice to the
appellant to submit the statement of the account. Ultimately the Bank has
submitted the account on September 15, 1967, ExA-12 stating that the F
respondents were due of a sum of Rs. 74,062.05 with interest at 9% from
July 1, 1967. The Board by order dated October 25, 1967, ExA-11 held
that it has no jurisdiction to entertain the claim for scaling down in view
. -+- of the judgment of the Full Bench of the Andhra Pradesh High Court in
It. Family of Mukund Das Raja Bhawan Dass & SonS' etc. v. State Bank of
Hyderabad, reported in [1963) 2 AWR 147. The suit, therefore, came to be G
filed as stated earlier on February 10, 1970.

The High Court held that Ex.A-13 dated October 4, 1967 cannot be
used as an acknowledgment to save the limitation under s.19 of the Limita-
tion Act 21/63. Similarly, s.57 of the Act cannot be availed of since the Debt H
l
950 SUPREME COURT REPORTS [1995] 2 S.C.R.

A Settlement l3oard had not recorded any finding that the respondent is a
debtor and, therefore, the running of the limitation having begun in 1953, {
it had run out its full course, so the suit was barred by limitation. Dismissal :
of the suit by the trial court was held to be correct.

Admittedly, the respondents made an application under s.11 and also
B IA No. 77/64 on January 19, 1962 under s.30 read with s.22 on the ground
that the debts stand extinguished by reason of the fact that the appellant
.had not made an application under s.11. The Board by its order dated
August 5, 1964 held that:

"As already stated the statement filed within the time on 21.6.60 is
c sufficient compliance with the provisions in s.30(3) of the Act. I,
therefore, find that the debt due to the bank for which the Nizam's
Government Shares have been secured is not extinguished."

By order dated Oct-ober 27, 1967, Ex.A-11, the Board closed the Case
D No. 25/A of 1960 with a finding that:

"In view of the full bench decision State Bank of Hyderabad v.
Mukundas Raja Bhagwan Das, reported in (1963] 2 A.W.R. 147
(FB), the matter not having· been referred to this Board on or
before 30.6.1953, this Court has no jurisdiction to entertain this
E matter. Hence Item No. 1 will be returned to the party concerned
for presentation before proper court."

Thus it could be seen that proceedings before the Debt Settlement
Board came to a terminus with a fmding that the Board had no jurisdiction
F to entertain the matter. In view of the facts, the question is whether the
suit laid by the appellant has been barred by limitation. Under Article 35
of the Limitation Act on a bill of exchange or promissory note payable on
demand and not accompanied by any writing, restraining or postponing the
right to sue, the period of limitation is three years from the date of the bill
G or note. In Ex.A;S, dated 15.9.58, the respondents made part payment and
acknowledged the liability and in Ex.A-6 he made part payment in 1959
equally Ex.A-7 dated 3.9.59, he acknowledged the liability by making part
payment of Rs. 12,500. Thus the limitation of further period of three years
would ensure to the appellant under s.18 of the Limitation Act as an
acknowledgment in writing of the liability in respect of the amount lent to
H the respondents under the promissory note with a charge oii-the shares.
J
STATE BANK v. MUKANDAS R.BHAGWAN DAS 951

The question, therefore, is whether the suit is barred by limitation after the A
expiry of September 2, 1962. It is seen that in March 1960, the respondents
made an application under s.11 of the Act for scaling down the debts.
Similarly, an application under s.30 read with s.22 was filed for a declara-
tion that the debt was extinguished. On the application made under s.11 as
noted, the Board found that the debt was not extinguished. Thus, the B
liability for payment was subsisting as on March, 1960. A reading of the
relevant provisions of the Act would indicate that the Act provides a
complete machinery to settle the debts incurred by the J agirdars as defined
under s.2(t) of the Act and in relation to the liability of the debt as defined
- y under s.2(e) of the Act. The Board was constituted under s.4 of the Act
with the Additional Judge of the City Civil Court to be the Board for the C
purpose of the Act. The Board was enjoined to enquire into the liability
of the debts and in an appropriate case it would scale down the debts.
Chapter III relates to the procedure for settlement of debts. An application
for settlement of debts is required to be filed either by the Jagirdar or by
the creditors before the notified date as the Government may notify in the D
official gazette for settlement of the debts due by the Jagirdar. Section 22
postulates that any settlement or adjustment made by the J agirdar with the
Creditor without the order of the Board was declared to be void. Similarly
any settlement with the consent of the debtor and the creditor without it
was certified under s.15 or in terms of s.16 as the case may be was declared E
void. under s.25 all suits, appeals, applications for execution and proceed-
ings, other than revisional, in respect of any debt, pending in any civil or
revenue court shall, if they involve the questions whether the person from
whom such debt is due is a debtor and whether the total amount of debts
due from him on the date of the application is less than Rs. 5,000, be F
transferred to the Board. Similarly, any suit or appeal, application or
proceeding is transferred to the Board under Sub-s.(2) the Board shall
proceed as if an application under s.11 had been made to it. Section 13
gives power to the Board to issue notice to the Cooperative Society,
Scheduled Banks etc. requiring them to file the statement of claims within
the specified time and also the amount of debt due by the debtor to the G
Government or Scheduled Banks etc. Section 35 gives power to the Board
to scale down the debts, the details of whjch ware not material for the
purpose of the case. Even after determining the amount of debts scales
down in the manner provided under s.35, the Board shall save, as other-
wise, provided in s.36, make an award as enumerated with the conditions H
\

V'
952 SUPREME COURT REPORTS (1995] 2 S.C.R.

A imposed in Sub-s.(2) thereof. Under s.42, the .award is required to .be
registered and also to be exe~uted in the manner laid down therein. Section .-{
47 gives right of appeal.

Thus, it could be seen that the debt due by a Jagirdar is required to
be adjudicated and be scaled down according to the procedure laid down
B under the Act. The scheme of the Act is a complete code for determination
of the liability of the debt due by a Jagirdar to the creditors. Despite saving
the liabilitY of a Scheduled Bank etc., s.3 and s.30 gives powers to the Board
to scale down the debt due to the Scheduled Bank. Since the claim was
not made within the prescribed time from the notified date, the Full Bench
C of the High Court held that the Board has no power to entertain the claims
for determination. That view was upheld by this court in Joint Family of
.Mukund Das Raja Bhagwan Dass & Sons etc. v. State Bank of Hyderabad,
(1971] 2 SCR 136. In that view of the matter, the question is whether s.14
of the Limitation Act stands attracted to the facts in this case.
I
D
It is true that the benefit of s.14 would be extended only to the
plaintiff who has instituted the ·suit ill a wrong forum and had prosecuted
the proceedings in good faith in that court.which ultimately found to have
)-
defect of jurisdiction or other cause of a like nature. The period during
which such proceedings were prosecuted, would be excluded in computing
E limitation. The Scheme of the Act would indicate that all claims relating
to a debt involving a J agirdar are to be considered and adjudicated upon
by the authorities including the Board constituted under the Act. When a
Jagirdar files an application for scaling down the debt and the creditors
file their claims, the position of the latter, namely, the creditors is that of
F the plaintiff, as their claim would be considered and appropriate orders
for payment of the amount, though not necessarily the full amount, due
from the J agirdar would be paid. But this does not change their status and
for purpose of Section 14 of the Limitation Act, they would, notwithstand-
ing that the proceedings were initiated under the Act on an application
made by the Jagirdar, would be that of a plaintiff. in a civil suit. As seen
G when the Jagirdar himself made an·application under s.11 together with an
application under s.30 read with s.22 of the Act, until the proceedings are
determined the creditor has no right to lay the suit by operation of s.25 of -
the Act. The necessary implication is that the jurisdiction of the civil court
under s.9 of the CPC stands excluded. Consequently, the appctllant could
H lay the suit in 1962 though it was partly paid by the respondents. Since the
.)
STATEBANK.v. MUKANDASR.BHAGWANDAS 953

application was held to be not maintainable by the· Board on October 25,' A
1967, the.suit was clearly within limitation when it was laid on February 10,
t-. 1970. The High Court, therefore, was not right in its conclusion that there
should be a finding recorded by the Board that the respondent is not a
debtor to get the benefit of s.57. That view does not help the respondents.
In the light of the scheme of the Act, the view taken in the proceedings
under the Act gets excluded under s.14 of the Limitation Act. Accordingly, B
we hold that the suit is within limitation and the civil court and the High
Court had committed grave error of law in taking the contrary view.

According, the appeal is allowed. In the circumstances of long pen-
dency, the trial court is directed to proceed with the trial of the suit C
according to law as expeditiously as possible preferably within six months
from the date of the receipt of this order. No costs.

G.N. Appeal allowed.

r--l