http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 1 of 6

CASE NO.:

Appeal (civil) 13382-83 of 1996

PETITIONER:

BHAVSINGH (DEAD) BY LRS.

RESPONDENT:

KESHAR SINGH AND ORS.

DATE OF JUDGMENT: 10/09/2003

BENCH:

M.B. SHAH & DR. AR. LAKSHMANAN

JUDGMENT:

JUDGMENT

2003 Supp(3) SCR 607

The Judgment of the Court was delivered by

SHAH, J. : These appeals are filed against the judgment and order dated

11.9.1993 and order dated 21.3.1994 passed by the High Court of Madhya

Pradesh, Jabalpur Bench at Indore, in M.P. No. 274 of 1987 and in review

petition bearing MCC No. 550 of 1993. By the impugned judgment and orders,

the High Court allowed the writ petition filed by respondent No. 1

(deceased) and his son, respondent no. 2, namely, Narendra Kumar and set

aside the order dated 11.2.1986 passed by the competent authority - SDO

holding that the appellant was entitled for a declaration that the sale

transaction in question was prohibited transaction of loan as contemplated

under Section 2(0 of the Madhya Pradesh Samaj Ke Kamjor Vargon Ke Krishi-

Bhumi Dharakon Ka Udhar Dene Walon Ke Bhumi Hadapane Sambandhi Kuchakron Se

Paritran Tatha Mukti Adhiniyam, 1976 (M.P. Act No. 3 of 1977) (hereinafter

referred to so 'the Act of 1977') and was null and void under Section 7(2)

of the Act. The order for handing over possession of the land in question

admeasuring 9.71 acres situated in village Kanadia to the appellant Bhav

Singh son of Bheraji was also set aside.

The aforesaid order was passed on an application filed by the appellant

claiming relief under Section 5 of the Act of 1977 contending that the

transfer of the land by registered sale deed dated 20.7.1960 for a sum of

Rs. 2500 was a mortgage transaction as said transfer was for the loan

amount. R was his contention that at the time of said transaction, it was

agreed upon by the parties that whenever the appellant re-pays the amount

of Rs. 2500 possession of the land in question would be redelivered to the

appellant. It was his case that despite the fact that full amount had been

repaid, the respondent has not restored the possession of the land

mortgaged by him. That application was allowed by the S.D.O. by order dated

29th January 1982.

Being aggrieved by the said order, respondents preferred appeal before the

Collector, Indore, which was dismissed on 8th December, 1982. That order

was challenged by filing Misc. Petition No. 724 of 1982 before the High

Court of Madhya Pradesh at Indore. The High Court allowed the said petition

and set aside the order of the SDO and remanded the matter directing that

the case be disposed of on merits after holding fresh enquiry.

During the fresh enquiry, as stated in the order, witnesses were examined

on behalf of the parties and written arguments were also submitted before

the SDO. After considering the written submissions made by the parties and

appreciating the evidence which was led before him, the SDO rejected the

contention that the present proceedings were barred by the principles of

res-judicata on the ground that in the previous proceedings initiated by

the appellant under the provisions of the M.P. Anusuchit Jan Jati Rini

Sahayata Adhiniyam, 1967 (hereinafter referred to as 'Debit Relief Act'),

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 2 of 6

it was held that the transfer deed was not a mortgage and was not covered

by the Debt Relief Act. The contention that application was time barred was

rejected taking into consideration relevant facts. No contention was raised

that proper opportunity of leading evidence or cross-examining the

witnesses was not given. SDO further held that there was a money lending

transaction between the appellant and deceased respondent and that the

aforesaid instrument was executed as a sale-deed but deceased - respondent

No. 1 had assured the appellant that after the amount of loan is repaid,

the land in question would be restored to him. He considered the evidence

on record indicating that the appellant was to repay a sum of Rs. 2000 on

account of the debt incurred by him from the respondent but because there

was emergent need, he further took a loan of Rs. 500. Thus, the appellant

owed a total sum of Rs. 2500, upon which the respondent was charging

interest @ 1.5% per month. He also arrived at the conclusion that the

market value of the land at the relevant time was much higher than Rs.

7000. Thereafter, the S.D.O. passed the impugned order holding that the

transaction was null and void under Section 7(2) of the Act of 1977. That

order was confirmed in appeal by the Additional Collector, Indore (MP) by

judgment and order dated 27th February, 1987. He also negatived the

contention that the proceedings were barred by the principles of res-

judicata as both the Acts are different. He also negatived the contention

that S.D.O. has not made proper enquiry and, therefore, the entire

proceedings were unconstitutional.

That judgment and order was challenged by filing the writ petition before

the High Court. The High Court arrived at the conclusion that previous

application filed by the appellant under the Debt Relief Act was decided

against the appellant and it was held that the transaction was of sale and

not of a mortgage. In such a situation, the principles of res-judicata

would be attracted otherwise there would be no finality in the matter and

the purchaser of the land would be subject to harassment all the time.

Learned counsel Mr. Jain appearing on behalf of the appellant submitted

that the aforesaid findings recorded by the High Court are, on the face of

it, illegal and erroneous. He pointed out that the amplitude of the

'prohibited transaction' under the Act is much wider than what is provided

under the Debt Relief Act. As against this, learned senior counsel Mr.

Gambhir submitted that the High Court rightly arrived at the conclusion

that the present proceedings are barred by the principles of res-judicata

in view of the previous decision whereby the application filed by the

appellant was rejected and it was held that the transaction between the

parties was not a mortgage but outright sale.

For appreciating the contention raised by the parties, we would first refer

to Preamble as well as Section 2(f) of the Act 1977, which are as under :

"An Act to better economic condition of holders of agricultural land in the

weaker sections of the people by providing further relief from agricultural

indebtedness by nullifying the land grabbing designs resorted to in many a

form by lenders of money while and after extending credit to them and

matters connected therewith.

Whereas a holder of agricultural land in the weaker sections of the people

is quite often compelled to seek loan from private money lending agencies

to meet his various obligations of urgent nature;

And whereas such private agencies seldom if ever advance loan to him

without security of land, his only wherewithal;

And whereas due to ignorance of niceties of law or urgency of financial

need or both, he falls an easy prey to them scarcely realizing the legal

consequences arising out of the documents which he executes or which they

get executed from him seemingly by way of security for the loan;

And whereas it is necessary to relieve the holders of agricultural land in

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 3 of 6

the weaker sections of the people from such exploitation by nullifying such

past transactions of loan as also to put a stop to such transactions".

2. Definitions. - In this Act, unless the context otherwise requires, -

(f) "prohibited transaction of loan" means a transaction in which a lender

of money advances loan to a holder of agricultural land against security of

his interest in land, whether at the time of advancing the loan or at any

time thereafter during the currency of the loan in any of the following

modes, namely :

(i) agreement to sell land with or without delivery of possession;

(ii) outright sale of land with or without delevery of possession

accompanied by separate agreement to re-sell it;

(iii) outright sale of land with or without delivery of possession with a

distinct oral understanding that the sale shall not be acted upon if the

loan is re-paid;

(iv) outright sale of land with or without delivery of possesion with a

condition incorporated in the sale deed to re-sell it on re-payment of the

loan;

(v) transaction in any modes other than those specified in clauses (i) to

(iv) affecting interest in land including a fraudulent transaction or a

transaction designed to defeat the provisions of any law regulating money

lending or interest, for the time being in force, and includes all those

transactions in which a lender of money has, after the appointed day but on

or before the date of publication of this Act in the Gazette, obtained

possession of land of the holder of agricultural land through court or by

force or otherwise or obtained a decree for such possession towards

satisfaction of loan."

From the aforequoted preamble of the Act, it is amply clear that the object

of the Act is to provide further relief to the weaker sections of the

people agriculturists from agricultural indebtedness by nullifying the land

grabbing designs resorted to by the money lenders while and after extending

credit to them. Section 2(f) defines the phrase "prohibited transaction of

loan" and inter alia declares that a transaction of outright sale of land

would also be covered by the phrase "prohibited transaction of loan" if

there was a distinct oral understanding that the sale shall not be acted

upon if the loan is repaid. Further, Section 6 provides for enquiry to be

carried out by Sub-Divisional Officer on an application which may be filed

by an holder of agricultural land who belongs to weaker section of the

people. Sub-section (4) of Section 6 provides that, in that enquiry, for

the purpose of ascertaining the true nature of transaction of loan, SDO

shall collect, as far as may be, information with respect to the following

facts, namely :

(i) the amount of principal money,

(ii) the market value of the land at the time of transaction;

(iii) adequacy of the amount of principal money as consideration for sale

in the context of then market value under clause (ii);

(iv) whether the consideration shown in the document was paid in whole or

in part privately or before the Sub-Registrar.

(v) whether possession of the land was actually delivered to the lender of

money as per recitals in the said document. If not, when and in what manner

the lender of money obtained possession of the land;

(vi) what were the terms of the actual agreement between the lender of

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 4 of 6

money and the holder of agricultural land including the rate of interest;

(vii) the extent of urgency for the loan and the availability of other

sources to the holder of agricultural land to obtain the same;

(viii) payment, if any, made by the holder of agricultural land to the

lender of money towards the loan;

(ix) whether the lender of money is registered money lender or not;

(x) any other surrounding circumstances which the Sub-Divisional Officer

may deem fit to consider.

Thereafter, Section 7 inter alia provides that if after enquiry, the SDO is

satisfied that the transaction of loan in substance is a prohibited

transaction of loan, he shall declare such transaction to be void and pass

an order setting aside the transfer of land to the lender of money

consequently restoring the possession of land to the holder of the

agricultural land.

After following the aforesaid procedure, the authorities below arrived at

the conclusion that during currency of loan transaction, sale deed was

executed by the appellant in favour of respondent No. 2. The SDO also

arrived at the conclusion that there was a distinct oral understanding that

the sale shall not be acted upon if the loan is repaid. For this purpose,

SDO took into consideration that the appellant was indebted for a sum of

Rs. 2000/- and thereafter he took further loan of Rs. 500 and for the said

amount sale deed was executed. It is stated in the sale-deed that appellant

was agriculturist and the sale consideration was Rs. 2500 but it is not

mentioned that amount of Rs. 2500 was paid in cash. He arrived at the

conclusion that market value of the land at the relevant time was more than

Rs. 7000/-. Admittedly, the appellant belongs to Bagri community which is a

Schedule Tribe. He was entitled to get the benefit under the Act, if the

transfer was for the loan amount with distinct oral understandings as

stated above.

Therefore, it cannot be said that the order passed by the SDO which was

confirmed in apeal by the Additional Collector was, in any way, erroneous

on facts.

The next question would be - whether the present proceedings are barred by

principles of res-judicata presuming that principles of res-judicata are

applicable to such proceedings.

For appreciating this contention, it would be necessary to refer to the

relevant provisions of the Debt Relief Act, under which previous

application was filed for relieving the appellant from the debt incurred by

him. Under the said Act, definition of the debt is given under Section

2(4), which reads as under :

"2. In this Act, unless the context otherwise requires : (4) "Debt"

includes;

(i) all liabilities owing to a creditor in cash, or kind, secured or

unsecured, payable under a decree or order of a Civil Court or otherwise,

and subsisting on the appointed date whether due or not due;

(ii) arrears of wages or salary subsisting on the appointed date."

Section 8 of Debt Relief Act provides for filing of an application by the

creditor and also the debtor. If the creditor has not filed his claim

application against the debtor, sub-section (4) of Section 8 provides that

debtor is discharged from his liability. Sub-section (3) empowers the

debtor also to apply to the Debt Relief Court. Section 14 provides that the

Court shall calculate the interest in accordance with the rate specified in

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 5 of 6

the First Schedule or such lower rate of interest as may have been agreed

between the parties. Section 14(4) also empowers the Debt Relief Court of

reduce the principal amount determined under sub-section (1) in accordance

with Second Schedule appended to the Act. Thereafter, the Act further

provides for preparation of a scheme of repayment of the debt.

Hence, it is apparent that the provisions of the Debt Relief Act and the

Act of 1977 operate in different fields. Debt Relief Act provides for

relief to the debtor, who belongs to Schedule Tribe by scaling down the

principal amount and the rate of interest as provided under the Schedule.

As against this, the Act of 1977 is of wider amplitude and even if there is

outright sale transaction by a debtor, it would be considered to be

prohibited transaction of 'loan' and that can be declared null and void

under the provisions of the Act. The Legislature has specifically stated in

the preamble that the Act was for providing further relief to the holders

of agricultural land from agricultural indebtedness by nullifying the land

grabbing designs resorted to by money lenders. Therefore, it provides not

only for nullifying of mortgage deeds but also outright sale of land if

conditions mentioned therein are satisfied.

Further, the relief which is required to be granted under the provisions of

the Act of 1977 is altogether different from the relief which is granted

under the Debt Relief Act. One provides for declaring the sale transaction

to be null and void while other provides only for scaling down the amount

of the debt and the interest. Therefore, even in the previous proceedings

if it is held that the transaction was not a mortgage but a sale, that

would not mean that in the present proceedings, the appellant can not prove

that the sale deed was executed for the loan amount with a specific

understanding that on refund of the amount, property was to be redelivered

to the transferor. In this view of the matter, even though in a previous

proceeding there was a specific finding that the deed was not a mortgage

deed (which is a fact), the present proceeding would not be barred by the

principles of res-judicata. The cause of action and reliefs in the first

and second proceedings are altogether different. This is also provided

under Section 3 of the Act of 1977 by giving over-riding effect to the

provisions of the Act. It inter alia provides that the provisions of the

Act and the Rules made thereunder shall have effect notwithstanding

anything inconsistent therewith contained in any other law for the time

being in force.

The learned counsel for the respondent submitted that enquiry held by the

SDO was defective. In our view, no such contention was raised before the

Additional Collector who heard the appeal. In any set of circumstances,

from the written submissions which are reproduced in the judgment and order

passed by the SDO, no such contention is appeared to have been taken.

Hence, this contention is without any substance.

Learned counsel for the respondents lastly submitted that these appeals

abate as the appellant has not brought on record all the heirs of the

deceased respondent no. 1 as party-respondents. In the present case, it is

admitted fact that the sale-deed were executed in favour of respondent No.

2. who is the son of deceased respondent No 1. The sale transaction was

between the appellant and respondent No. 2. No doubt, it was for a loan

given by respondent No. 1 but the question involved in this proceeding is

for declaration of sale deed executed in favour of respondent No. 2 to be

null and void and that can be granted even without bringing on record the

other heirs of respondent No. 1. In the alternative, from the facts of the

present case, it has been rightly pointed out by the learned counsel for

the appellant that the estate is fully represented by respondent No. 2.

Hence, there is no question of abatement of appeal. In this view of the

matter, we have thought it fit not to issue notice to remaining legal heirs

of respondent No. 1 on an application filed by the appellant.

In the result, the appeals are allowed. The impugned judgments and orders

passed by the High Court are set aside and quashed. The judgment and order

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 6 of 6

passed by the SDO is restored. There shall be no order as to costs.