STATE OF GUJARATversusVORA SAIYEDBHAI KADARBHAI AND ORS.

A                       STATE OF GUJARAT
                                v.
               VORA SAIYEDBHAI KADARBHAI AND ORS.

                                 MARCH 2, 1995

B                 [N. VENKATACHALA AND S.C. SEN, JJ.)

          Gujarat Rural Debtors Relief Act, 1976: Constitutionai validity of.

          Section 14(2)--Expression 'Or an order reducing his debt is made'-
C Held not violative of Articles 19(1)(!) and (g).
           Constitution of India, 1950: Article 19(1)(f) and (g)--Fundamental
    Rights-Restrictions ott-Reasonableness of Restrictions-Factors to be taken
    into account-Debt Relief Act-Provision enabling debtors to get back proper-
    ty given as security to creditors-Held not unreasonable restrictions.
D
         With a view to protecting weaker sections of the society against ·
  exploitation by non-institutional creditors, the State of Gujarat enacted
                                                                                      ').._
  the Gujarat Rural Debtors Relief Act, 1976. Section 14(2) of the Act                        I
  provides that where a certificate of discharge of any debt is granted to a
  debtor or an order reducing his debt is made under section 8, every
E property pledged or mortgaged by such debtor as a security of such debt
  shall stand released in favour of such debtor and the creditor shall
  forthwith return such property to the debtor. The Constitutional validity
  of the Act was challenged by some creditors before the High Court of
  Gujarat which upheld the same except that the expression 'or an order
F reducing his debt is made' used in sub-section (2) of Section 14 was ultra
  vires Articles 19(1) (f) and 19(1) (g) of the Constitution. In striking down
  the said expression the High Court held that (i) if the Legislature has
  thought fit that at least in some cases a part of the debt should be repaid ·
  by the debtor to his creditor, that part at least much remain'!iecured until
  it is repaid. To deprive a small money-lender of his cover of protection
G after telling him that he is entitled to recover some amount form his
  debtor, is, no reasonable restriction within the meaning of Article 19(1) (f)
  and Article 19(1)(g) of the Constitution; and (ii) it is more reasonable to
  think that the security given by a debtor to his creditor should remain
  intact in the hand of bis creditor until the debtor pays up bis scaled down
~ debt. To hold otherwise is to render the adjudicated debt of the creditor

                                         470




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     I
     J



                           STATE OF GUJ. v. V.S. KADARBHAI                       471

         insecure and to expose him, for all intents and purposes, to the danger of A
         losing it over a period of time during which it has been made repayable in
         instalments. Against the decision of the High Court, State of Gujarat
         preferred appeals in this Court.

              Allowing the appeals and setting aside the impugned judgment, this
         Court                                                                          B

               HELD : 1. The High Court was wholly wrong in its view that the
         provision in sub-section (2) of Section 14 of the Act to the extent it made
         th~ creditors who were entitled to get the scaled down debts from certain
         debtors would have the effect of depriving the creditors of security for the   C
         debt, was an unreasonable restriction under Articles 19(1) (0 and 19(1) (g)
         of the Constitution. [480-H]

                2. The reason given by the High Court for the striking down the
         expression "or an order reducing his debt is made" in sub-section (2) of
         Section 14 of the Act, as unconstitutional, as that necessary to help the D
         creditors to realise the scaled down debts of debtors from their properties
         retained as security, has made this Court think that the High Court has
         not only overlooked the fact that the Legislation, the constitutional validity
         of which was questioned before it was intended to help the debtors from
         the strangle hold of the creditors and not to help the creditors in keeping E
         the debtors under their stranglehold, but also has totally ignored the
         guidance given to courts by this Court in the approach to be made for
         meeting the challenge to constitutionality of such legislation intended for
         the benefit of debtors. [477-F-G]
,/
              Fatehchand Himmatlal v. State of Maharashtra, [1977) 2 SCC 670 and        F
         Pathumma and Ors. v. State of Kerala and Ors., [1978) 2 SCC 1, relied on.

               Vora Saiyedbhai Kadarbhai v. Saiyed lntajam Bussen Sedumia and
         Ors., AIR (1981) Guj. 154, partly overruled.

               3. The Legislature of Gujarat which had a human problem of saying G
         the poverty stricken debtors from the clutches of non-institutional
         creditors, relieving them of their debts to the extent found necessary and
         getting return of their properties from the creditors given as security for
         their debts to eke out their livelihood it was very much justified in intro·
         ducing the provision in sub-section (2) of Section 14 of the Act, which H
    472                   SUPREME COURT REPORTS                  (1995) 2 S.C.R.

A en~led the debtors to get back their properties given as security, from the
    creditors for making use of them in their own way to eke out their
    livelihood, inasmuch as such provision cannot be considered as that not
    made in social interest by the Legislature for promoting social and moral.
    progress of the community as a whole. [480-F-G]

B         4. Even if social legislations such as Debt Relief Legislation enacted
    by a Legislature are to make a few creditors victims of such legislation in
    one way or the others, the same cannot be regarded as an unreasonable                  ,
    restriction which cannot be imposed in respect of the rights exercisable by
    the citizens under Article 19(1)(f) and Article 19(1)(g) of the Constitution.   ',,,.- -
C                                                                        [481-B]
         Jyoti Pershad v. The Administrator for the Union Territory of Delhi,
    [19621 2 SCR 125 and Mohd. Hanif Quareshi and Ors. v. The State of Bihar,
    [1959] SCR 6Z9, referred to.

          CIVIL APPELLATE JURISDICTION: Civil Appeal No. 8439 of
D 1983 etc.
         From the Judgment and Order dated 16.12.80 & 17.12.80 of the
    Gujarat High Court in S.C.A. No. 2279 of 1979.
                                                                                       '
                                                                                           ...
          Anip Sachthey, and Ms. Meenakshi Arora for the Appellants.
E
          G. Vishwanath Iyer for the Respondent.

          The Judgment of the Court was delivered by

           VENKATACHALA, J. Was the High Court of Gujarat justified in
F   striking down the expression "or an order reducing his debt is made" used
    in sub-section (2) of Section 14 of the Gujarat Rural Debtors Relief Act,
    1976 - "the Act" on the ground that it is ultra vires Article 19 (l)(t) and
    Article 19(1)(g) of the Constitution by its judgment in Vora Saiyedbhai
    Kadarbhai v. Saiyed Intajam Bussen Sedumiya and Ors., AIR (1980) Guj.
G   154, is the only question which arises for our consideration and decision in
    these Civil Appeals, by special leave since the special leave in them is
    granted by this Court confined to that question.

          The striking down of the said expression in sub-section (2) of Section
    14 of the Act as unconstitutional by the High Court, enables a creditor to
H   retain the property pledged or mortgaged with him by the debtor as
              STATEOFGUJ. v. V.S.KADARBHAI[VENKATACHAI.A,J.)                   473

      security for his debt where such debt is merely scaled down and not fully A
      wiped off, under the provision of the Act. But, the said expression, if had
      not been struck down by the High Court, a property pleadged or
      mortgaged with the creditor as security by the debtor for his debt, would
      have stood released from the security ~nd returned by the creditor to the
      debtor forthwith, notwithstanding the fact that the debt payable by the B
      debtor to the creditor stood merely scaled down or reduced and did not
      stand fully discharged or wiped off, as becomes obvious from a reading of
      sub-sectio~ (2) of Section 14 of the Act, which runs thus :

              S.14. (1) ........

                  (2). Where a certificate of discharge of any debt is granted to
                                                                                       c
              a debtor or an order reducing his debt is made under section 8,
              every property pleadged or mortgaged by such debtor as a security
              of such debt shall stand released in favour of such debtor and the
              creditor shall forthwith return such property to the debtor."
                                                                                       D
                                                              (underlining is ours)

             No doubt, the Act where the above sub-section finds its place, was,
      as a whole, challenged before the High Court, as that which was ultra vires
      the Constitution. However, the High Court, as seen from its judgment
      adverted to at the outset, relying upon the judgments of the Constitution        E
      Benches of this Court in Fatehchand. Himmatlal v. State of Maharashtra,
      [1977) 2 S.C.C. 670, and Pathumma and Ors. v. State of Kera/a and Ors.,
      (1978) 2 SCC 11, where Debtors Relief Acts similar to the Act had been
      found to be constitutional, upheld the constitutionality of the Act, as such,
,.I   but for its view that the aforesaid expression in sub-section (2) of Section     F
      14 of the Act, was ultra vires Articles 19(1){f) and 19(1){g) of the Constitu-
      tion and ,of striking down the same as stated earlier.

            None of the creditors who had impugned the provi&ions of the Act
      as unconstitutional before the High Court,, have come to this Court ques-
      tioning the correctness of the judgment of the High Court, upholding the G
      provisions as a whole as constitutional. The debtors who will not get back
      their properties pledged or mortgaged as security for the debts, because
      of the striking down of the expression "or an order reducing his debt is
      made" in sub- section {2) of Section 14 of the Act by the High Court,
      though could have questioned the correctness of such striking down in this H
    474                  SUPREME COURT REPORTS                   [1995] 2 S.C.R.

A Court, it is obvious that their financial inability has prevented them from
    doing so. Be that as it may, the State has questioned the correctness of the
    said striking down by the High Court by filing the present appeals against
    the judgment of the High Court and, very rig~ly.

          We heard Shri Anip Sachthey, learned '2ounsel appearing for the
B appellants and Shri G. Vishwanatha Iyer, learned senior counsel, who was
    requested<-by us to appear on behalf of the respondents herein who were
    unrepresented.

          Sub-section (2) of Section 14 which we have already reproduced, as
C is seen, was intended to release the debtors' properties with the creditors
    as security for their debts and make the creditors return tho.se properties
    to the debtors whether they are debtors whose debts had stood fully
    discharged or they are debtors whose debts were scaled down, enabling
    them to pay the same in small instalments spread-over a period of 10 years
    or more, without interest.
D
          As to who are those debtors whose debts are scaled down to Rs. 1400
    or a lesser amount and how such amounts were payable by them to the
    creditors without interest in easy instalments, is stated by the High Court,
    thus:

E           "Section 9 which provides for pa}ment of the debt determined by
            the Debt Settlement Officer lays down that a debt found due by
            the Debt Settlement Officer shall be paid by the debtor to the
            creditor in ten equal annual instalments without any interest.
            Therefore, where the debt of a "small farmer" or a "rural artisan"
F           is scaled down to Rs. 1,400, it is not going to bear interest for the
            next ten years. Secondly, its recovery has been spread over a period
            of ten years. It has been made payable in very easy instalments.
            Added to it is the provision made by Section 10. The liability to
            pay the scaled down debt in ten annual instalments is also not
            absolute. Section 10 provides that whenever the State Government
G           suspends or remits the payment of one-half or more of the land-
            revenue, the payment of whole of the instalment due for that year
            and the full amount of instalment due for each subsequent year
            under Section 9 shall be postponed for one year. In other words,        .r
            if, during a period of ten years, there is a suspension or remission
H           of one-half or more of the land-revenue payable to the State, the
              STATEOFGUJ. v. V.S.KADARBHAI[VENKATACHAIA,J.]                    475

            -' annual instalments otherwise payable over a period of ten years A
               under Section 9 become payable over a period of eleven years. If
               the payment of one-half or more of the land-revenue is suspended
               or remitted more than once during the period of ten years con-
               templated by Section 9, then, as many years are added for payment
               of annual instalments under Section 9. Section 10 further provides B
               that in case the State Government suspends or remits less than
               one-half of the land-revenue during any particular year, one-half
               of the amount of instalment for that year and full amount during
               subsequent year under Section 9 shall be postponed for a period
               of one year."
                                                                                     c
             As seen from the judgment of the High Court, an examination made
      by it of the scheme of debt reduction and payment of the reduced debt as
      above, has made it conclude, thus" :

              "33. The analysis of the scheme of debt reduction and its payment
              which we have made clearly shows that whilst a large number of D
              debtors are wholly discharged, others are required to pay only a
              small amount in a very easy manner. Its payability has been spread
              over a period of time and may be interrupted by the circumstances
              contemplated by Section 10. This scheme, in our opinion, makes
              little difference between those money-lenders whose debts have E
              been fully wiped off and those whose debts have been partially
              wiped off. The later class is unlikely to recover substantial amount
              of capital advanced by them to their debtors".

            Again, an examination made by the High Court of the objects in-
      tended to be achieved by the Act, has made it reach its conclusion in that     F
      regard, thus:
·~·
              "The Legislature wants to protect weaker sections of our society
              against exploitation by non-institutional creditors who behave in
              such manner as they think fit. The impugned provisions of the Act      G
              have, therefore, reasonable nexus with the object of relieving
              weaker sections of our society from the clutches of non-institution-
              al creditors which the impugned Act seeks to achieve."

            In the course of its judgment the High Court referring to the debtors
      including the small farmers and rural artisans who are sought to be relieved   H
    476                    SUPREME COURT REPORTS                  (1995) 2 S.C.R.

A of the indebtedness under the Act h&s concluded, thus:

             "The debtors under the provisions of the impugned Act comprising
             four categories are constituted into a class by itself and it is that
             class which is sought to be relieved of its indebtedness. They are
             poor rural agriculturists or poor persons living in the rural areas
B            of the State."

          Despite the aforesaid conclusions reached by the High Court as
   regards-(1) poverty striken debtors who had to be relieved of their indeb-
   tedness under the Act; (2) the exploitation of such debtors by the non-in-
·C stitutional creditors; (3) relief required for such debtors from the clutches
   of such creditors; it has found that the small farmers and rural artisans who
   had to repay their debts scaled down to an amount not exceeding Rs. 1,400
   without interest and in easy instalments, as those who are not entitled to
   obtain release of their properties from the ·creditors given to them as
 D security and seek return of them from them unless they discharge their
   debts, for, according to it, a provision which gives such relief to the debtors
   would go against the rights of the creditors conferred under Articles
   19(1)(t) and 19(1)(g) of the Constitution, inasmuch as such provisiOn would
   impose an unreasonable restriction. What the High Court has stated in this
   regard to put in its own words, is the following :
E
             "In the first instance, what a money-lender gets, in a case in which
             there is an order to pay him the scaled down debt, i~ a very ~mall
             amount of his debt and the repayability o('that small amo~t has
             been spread over at least a period of 10 years. Thirdly, sub-section
F            (2) of Section 14 renders the repayability of such a scaled down
             amount spread over such a long period of time, very uncertain and
             insecure.. If the Legislature has thought fit that at least in some
             cases a part of the debt should be repaid by the debtor to his
             creditor, that part at least must remain secured until it is repaid.
             To deprive a small money-lender of bis cover of protection after
G            telling him that he is entitled to recover some amount from bis
             debtor, is, in our opinion, no reasonable restriction within the
             meaning of Article 19(1)(t) and Article 19(1)(g) of the Constitu-
             tion. If the security remains with the money-lender, he cannot do
             anything with it because sub-se.ction (1) of Sec. 14 requires him
H            not to damage, destroy or tamper with it. Therefore, in our opinion,
f
             STATEOFGUJ. v. V.S.KADARBHAI[VENKATACHAIA,J.]                    477

           / it is more, reasonable to think that the security given by a debtor A
             to his creditor should remain intact in the hands of his creditor
             until the debtor pays up his scaled down debt. To hold otherwise
             is to render the adjudicated debt of the creditor insecure and to
             expose him, for all intents and purposes, to the danger of losing it
             over a period of time during which it has been made repayable in B
             instalments."

              The aforesaid reasons putforth by the High Court to hold that a small
      farmer or a rural artisan who is made liable by the Legislature to pay scaled
      down debt up to Rs. 1,400 without interest during a period of ten years
      and more, if is allowed the return of the property given as security for his C
      debt, would make the creditor lose such security for payment of such debt
      unreasonably and, therefore, such restriction would be no reasonable
      restriction within the meaning of Article 19(1)(f) and Article 19(1)(g) of
      the Constitution, is to say the least, would defeat and nullify the very objects
      of the Act of relieving poor debtors from their indebtedness and of D
      relieving them from the clutches of the creditors which the High Court
      itself had, as pointed out by us earlier, regarded as a reasonable restriction
      not offending Article 19(1)(f) and Article 19(1)(g) of the Constitution.
      Moreover, the reason given by the High Court for striking down the
      expression "or an order reducing his debt is made" in sub-section (2) of
      Section 14 of the Act as unconstitutiona~ as that necessary to help the E
    · creditors to realise the scaled down debts of debtors from their properties
      retained as security, has made us think that the High Court has not only ·
      overlooked the fact that the Legislation, the constitutional validity of which
      was questioned before it was · intended to help the debtors from the
      stranglehold of the creditors and not to help the creditors in keeping the
      debtors under their stranglehold, but also has totally ignored the guidance
                                                                                       F
      given to courts by this Court in the approach to be made for meeting the
      challenge to constitutionality of such legislation intended for the benefit of
      debtors which was very much found in the observations in Fatehchand
      (supra) and Pathumma (supra). Material observations of this Court in
      Fatehchand (supra) which, according to us, were ignored by the High Court G
      were these: ·


                 "The subiect-matter of the impugned legislation is indebted-
             ness, the beneficiaries are petty farmers, manual workers and allied
             categories steeped in debt, and bonded to the money-lending tribe.     H
                                                                                    iI
    478                  SUPREME COURT REPORTS                   [1995] 2 S.C.R.

A          So, in passing on its constitutionality, the principles of Develop-
           ment Jurisprudence must come into play ....

               A meaningful, yet minimal, analysis of the Debt Act, read in
           the; light of the times and circumstances which compelled its
           enactment, will bring out the .humane setting of the statute. The
B          bulk of the beneficiaries are rural indigents and the rest urban
           workers. These are weaker sections for whom constitutional con-
           cern is shown because institutional credit instrumentalities have
           ignored them. Money-lending may be ancillary to commercial
           activity and benignant in its effects, but money-lending may also
c          be ghastly when it facilitates no flow of trade, no movement of
           commerce, no promotion of intercourse, no servicing of business,
           but merely stagnates rural economy, strangulates the borrowing
           community and turns malignant in its repercussions. The former
           may surely be trade but the latter - the law may well say - is not
           trade. In this view, we are more inclined to the view that this
D          narrow, deleterious pattern of money-lending cannot be classed as
           'trade' ......................................."                              \.......
          The other significant observations of this Court in Fatehchand
    (supra) which the High Court has ignored, were these:
E
               "A pathetic picture of the money-lender being deprived of his
           loan assets while being forced to repay his lender was drawn but
           that cannot affect the reasonableness of the relief to the grass-roots
           borrower. Nor is it valid to attack the Act on the score that the



                                                                                    ....-
F          whole debt i.e., the very capital of the business, has been dissolved.
           More often than not, the money-lender would have, over the.
           long-lived debts and repeated renewals, realized more than the
           principal if economic studies tell the tale truly. The injustice of
           today is often the hangover of the injustice of yesterday, as spell
           out by history. The business of money-lending has not been
G          prohibited. The Act is a temporary measure limited to grimy levels
           of society. Existing debts of some classes of indigents along have
           been liquidated. If impossible burdens on huge human numbers
           are not lifted, social orderliness will be threatened and as a
           regulatory measure this limited step has been taken by the legis-
H          lature. Regulation, if the situation is necessitous, may reach the
            STATE OF GUJ. v. V.S. KADARBHAI [VENKATACHAIA,J.)               479

            limit of prohibition. Disorder may break out if the law does not A
            step in to grant some relief. Trade cannot ~ourish where social
            orderliness is not secure. If the tensions and unrests and violence
            spawned by the desperation of debtors are not dissolved by State
            action, no money-lending trade can survive. It follows that for the
            the very survival of Trade the regulatory measure of relief of B
            indebtedness is required. What form this relief should take is
            ordinarily for the legislature to decide. It is not ordinarily for the
            Court to play the role of Economic Adviser to the Administration.
            Here amelioratory measures have been iaid down by the Legisla-
            ture so that the socio-economic scene may become more con-
            tended, just and orderly. Obviously, this is regulatory in the interest C
            of Trade itself. This policy decision of the house cannot be struck
            down as perverse by the Court. The restrictions under the Debt Act
            are reasonable. Equally clearly, if the steps of liquidation of current
            debts and moratorium are regulatory, Article 301 does not hit
            them."
                                                                                    D
           Pathumma (supra) is a seven-Judge Bench judgment of this Court.
    There, while upholding the constitutionality of the Kerala Agriculturists
    (Debt. Relief) Act, 1970, which was similar to the Act under consideration,
    it was observed that the Courts cannot look at the restrictions imposed
    under a beneficial legislation only from the point of view of the citizen who   E
    is affected, for that cannot be a correct or safe approach inasmuch as the
    restriction is bound to be irksome and painful to the citizen even though
    it may be for the public goods, and hence, a just balance, must be struck
    in relation to the restriction and the public good that is done to the people
    at large. In that context, reliance was placed by this Court on the observa-
                                                                                    F
    tions made by this Court in Jyoti Pershad v. The Administrator for the Union
    Territory of Delh~ [1962) 2 SCR 125, which were of materiality and as
    follows:

               ~Where the Legislature fulfills its purpose and enacts laws,
            which in its wisdom, is considered necessary for the solution of G
            what after all is a very human problem the tests of 'reasonableness'



'
            have to be viewed in the context of the issues which faced the
            Legislature. In the construction of such laws and particularly in
            judging of their validity the Courts have necessarily to approach it
            from the point of view of furthering the social interest which it is H
    480                   SUPREME COURT REPORTS                   [1995] 2 S.C.R.

A             the purpose of the lt!gislation to promote, for the Courts are not,
            · in these matters, functioning as it were in vacuo, but as parts of a
              society which is trying, by enacted law, to solve its problems and
              achieve social concern and peaceful adjustment and thus furthering
              the moral and material progress of the community as a whole."

B       It was also observed therein that in judging reasonableness of restric-
  tions the Court would be fully entitled to take into consideration matters
  of common report, history of the times, matters of common knowledge and
  the circumstances existing at the time of legislation, relying upon the
  observations in Mohd. Hanif Quareshi and Ors. v. The State of Bihar, [1959)
C SCR 629, which were as follows:

                 "It must be borne in mind that the Legislature is free to
             recognise degrees of harm and may confine its restrictions to those
             cases where the need is deemed to be the clearest and finally that
             in order to sustain the presumption of constitutionality the Court
D
             may take into consideration matters of common knowledge, mat-
             ters of common report, the history of the times and may assure
             every state of facts which can be conceived existing at the time of
             legislation."

E          Therefore, when we look at the provision in sub-section (2) of
    Section 14 of the Act in the light of the observations of this Court made in
    Fatehchand (supra). and other decisions adverted to by us, we find that the
    Legislature of Gujarat, which had a human problem of saving the poverty
    striken debtors from the clutches of non-institutional creditors, relieving
F · them of their debts to the extent found necessary and getting return of their
    properties from, the creditors given as security for their debts to ekeout
    their livelihood it was very much justified in introducing the provision in
    sub-section (2) of Section ~4 of the Act, which epabled the debtors to get
    back their properties given as security, from the creditors for making use
    of them in their own way to ekeout their livelihood, in as much as such
G provision cannot be crinsidered as that not made in social interest by the
    Legislature for promoting social and moral-progress'~ty as
    a whole. Therefore, the High Court was wholly wrong in its view that the··
    provision in sub-section (2) of Section 14 of the Act to the extent it made
    the creditors who were entitled to get the scaled down debts from ~rtain
                                                                                     ,
H debtors would have the effect of depriving the creditors of securify for the
            STATEOFGUJ. v. V.S.KADARBHAl[VENKATACHAI.A,J.)                   481

    debt, was an unreasonable restriction under Articles 19(1)(f) and 19(1)(g) A
>   of the Constitution and that view called to be interfered with. As is
    observed by this Court in the judgments to whith we have adverted, even
    if social legislations such as Debt. Relief Legislation enacted by a Legisla-
    ture are to make a few creditors victims of such legislation in one way or
    the other, the same cannot be regarded as an unre~sonable restriction
    which cannot be imposed in respect of the rights exercisable by the citizens B
    under Article 19(1)(f) and Article 19(1)(g) of the Constitution.

'          For the foregoing reasons, we are constrained to uphold the con-
    stitutionality of sub-section (2) of Section 14 of the Act as a whole and set
~   aside the judgment under appeals insofar as it has held the words "or an        C
    order reducing his debt is made" therein as unconstitutional and struck
    them down on that account.

           Before parting with this case, we feel it our b9unden duty to place
    on record, our grateful thanks to Shri G. Vishwanatha Iyer who assisted
    us, as amicus curiae, at our request.                                      D
          In the result, we allow these appeals, however, with no oosts.
    tN.A..                                                    Appeals allowed.