# Sftaorji Vatlabhdas & Co v. Commissioner of lucome-laxf Excess Profits T1,x, Bombay

- **Citation:** [1960] 3 S.C.R. 570
- **Court:** Supreme Court of India
- **Decided:** 1958-10-06
- **Case number:** Civil Appeal No. 38 of 1960
- **Bench:** P. B. Gajexdragadkar, K. N. \VAl'\CHOO, K. c. DAS GUPTA
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/sftaorji-vatlabhdas-co-v-commissioner-of-lucome-laxf-excess-profits-t1-x-bombay-1750
- **Pages:** 9

## Headnote

Mortgage-Whether a "pecuniary liability"-The
Displaced
Persons (Debts Adjustment) Act (LX X of 1951), ss. 2(6), sub-els.
(a) (b) (c) 13, 15, 16(5), 17, 21.
The appellant
executed
two
usufructuary
mortgages in
favour of the respondents in 1946 with respect to two properties
'
. -
situated in Ferozepur city and herself took the properties on lease
.....
on the same date.
1~he respondents filed an application- under
s. 13 of the Displaced Persons (Debts Adjustment) Act, LXX of
1951, for recovery of the principal sum due and also the arrears
of rent.
The appellant contested the application on the ground,
1'"7·~
inter alia, that the liability was not a debt under the Act as it
"'
was not a pecuniary liability and that mortgages in relation to
properties situated now in India were not covered by it.
The
Tribunal allowed the application and passed a preliminary decree
for sale.
The appellant's appeal to the High Court and another
under the Letters Patent were both
dismissed.
On appeal by
special leave:
Held, that a mortgage debt would create a pecuniary liability upon the 1nortgagor and would be covered bv, the definition
of the word "debt" in s. 2(6) of the Act.
There is nothing in any provision of the Act which would
cut down the plain meaning of the words "pecuniary liability"
as used in s. 2(6) read with sub-cl. (c) thereof or restrict those
wide words to liability other than that secured by a mortgage.
Under sub-cl. (c) o[ s. 2(6) a displaced
person to whom a
mortgage debt is due f rorn any or her person, whether a displaced
,.
person or not, ordinarily residing in the territories to which the
Act extends can take the benefit of this Act.
- '
_>
3 S.C.R.
SUPREME COURT REPORTS
571
The interest of the prior mortgagee or the subsequent mortgagee if any would not be affected by a decree passed on an
application under s. 13 of the Act.

## Text

1960
Sftaorji Vatlabhdas
& Co.
v.
Commissioner of
lucome-laxf
Excess Profits T1,x,
Bombay
S . .K. Das J.
1960
A.fHif 20
570
SUPREME COURT REPORTS
[1960]
India.
As
to t.hc
t.hir<l
mauaged company whose
business was stevedoring and t.rading and t.hc remuneration was payable at
2:"i
per cent. of the net
profits, there can be no doubt that the remuneration
accrued at Bombay.
Therefore, the High Court of
Bombay correctly answerc<l the question against. the
appellant.
The appeal accordingly fails and is dismissed with
cusr.s.
A j1j1eal dismissed.
R/\JK!;f\JARI KAUSHALYA DE\11
v.
BAWA PRJJ":'.JA SINGH AND ANOTHER.
(P. B. GAJEXDRAGADKAR, K. N. \VAl'\CHOO and
K. c. DAS GUPTA, JJ.)
Mortgage-Whether a "pecuniary liability"-The
Displaced
Persons (Debts Adjustment) Act (LX X of 1951), ss. 2(6), sub-els.
(a) (b) (c) 13, 15, 16(5), 17, 21.
The appellant
executed
two
usufructuary
mortgages in
favour of the respondents in 1946 with respect to two properties
'
. -
situated in Ferozepur city and herself took the properties on lease
.....
on the same date.
1~he respondents filed an application- under
s. 13 of the Displaced Persons (Debts Adjustment) Act, LXX of
1951, for recovery of the principal sum due and also the arrears
of rent.
The appellant contested the application on the ground,
1'"7·~
inter alia, that the liability was not a debt under the Act as it
"'
was not a pecuniary liability and that mortgages in relation to
properties situated now in India were not covered by it.
The
Tribunal allowed the application and passed a preliminary decree
for sale.
The appellant's appeal to the High Court and another
under the Letters Patent were both
dismissed.
On appeal by
special leave:
Held, that a mortgage debt would create a pecuniary liability upon the 1nortgagor and would be covered bv, the definition
of the word "debt" in s. 2(6) of the Act.
There is nothing in any provision of the Act which would
cut down the plain meaning of the words "pecuniary liability"
as used in s. 2(6) read with sub-cl. (c) thereof or restrict those
wide words to liability other than that secured by a mortgage.
Under sub-cl. (c) o[ s. 2(6) a displaced
person to whom a
mortgage debt is due f rorn any or her person, whether a displaced
,.
person or not, ordinarily residing in the territories to which the
Act extends can take the benefit of this Act.
- '
_>
3 S.C.R.
SUPREME COURT REPORTS
571
The interest of the prior mortgagee or the subsequent mortgagee if any would not be affected by a decree passed on an
application under s. 13 of the Act.
CIVIL APPELLATE JURISDICTION: Civil Appeal No.
38 of 1960.
Appeal by special leave
from the
judgment and
order dated October 6, 1958, of the Punjab High Court
in Letters Patent Appeal No. 52 of l C)i)4,
arising out
of the judgment and order
elated June Fi, 1954, of
the said High Court· in First Appeal from Order
No. 149 of 1953.
Y. Kumar, for the appellant.
Bakshi Man Singh and Sardar
Singh,
for
the
respondents.
1960. April 20.
The Judgment of the Court was
delivered by
\VANCHOO, J.-This is an appeal by special leave
against the judgment of the Punjab High Court.
The
brief facts necessary for
present purposes
are these.
The appellant had executed two usufructuary mortgages with respect to two properties situate in Ferozepore citv in favour of the respondents in J 946.
She
also took both properties on lease on the same date.
An application was
filed by the
respondents under
s. 13 of the
Displaced
Persons
(Debts Adjustment)
Act, >Jo. LXX of J 951 (hereinafter called the Act), for
recovery of the principal sum due as well as the rent
which was said to be in- arrears.
The application was
resisted by the appellant on various grounds, one of
which was that no snch application lay as the liability
was not a debt under the Act.
The tribunal negatived
the contention of the appellant and passed a preliminary decree for sale.
Six month's
time was allowed
to the appellant to pay the decretal amount,
failing
which the respondents were at liberty to get a final
decree prepared and bring the properties to sale.
The
appellant went in appeal to the High Court but the
appeal
was
dismissed.
Then
there
was a Letters
Patent Appeal, which was also dismissed.
The appellant then applied for and was granted special leave
bv this Court, and that is how the matter has come
UJJ before us.
The only point for our consideration is whether t.he
liability created under a mortgage is a debt ·within
1960
Rtefkumari
Kausha/..yadevi
v.
Bawa Prifma
Singh
Wmzchoo ].
1960
Raj/,-umnri
Kausha~radeui
v.
Bawa Prilmn
Si11gh
Jf'anchnn J.
572
SUPREME COURT REPORTS
[19601
the meaning of s. '.2(G) of the Act.
The rclev;mt part
of that provision rum as follows:-
" 'Debt' meam any pecuniary liability,
whether
payable presently or in future, or under a decree or
order of
civil or revenue court or otherwise, or
whether ascertained or to be ascertained, which-
(a) in the case of a displaced person who has left
or been displaced from his place of residence in any
area now forming part of West
Pakistan, was incurred before
he came to reside
111 any area now
lorming part of India;
(b) in the case of a displaced person who, before
and after the
l.~th day of August, 1947, has been
residing in any area now forming part of India, was
incurred before the said date on the security of any
immovable property situate in the territories now
forming part of 'Vest Pakistan:
Provided that where any such liability was incrn red on the
security of
immovable
properties
situate both
in India and in
'Nest Pakistan, the
liability shall be so apportioned between
the said
properties that the liability in relation
to each of
the said properties bears the same proportion to the
tutal amount of the debts as the value of each of
the properties
as at the
date of the
transaction
hears to the total value of the properties furnished
as security,
and the liability,
for the purposes of
this clause, shall be the liability which is relatable
to the property in vVest Pakistan;
(c) is due to a displaced
person from
any other
person (whether
a displaced person or not)
ordinarily residing in the territories to which this Act
extends;
x
x
x
x
The contention
011 behalf of the appellant is that
the liability
1111<10 a mortgage
is not a
pecuniary
liability and therefore s. 2(6) will not apply to a mort-
. gage debt.
It is further urged that the scheme of the
Act shows that
mortgages in relation to
properties
situate in what is now India are not covered by the
Act at all.
•
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"" r •
3 S.C.R.
SUPREME COURT REPORTS
573
nebt is defined in s. 2(6) as meaning any pecuniary
1iability and has
been restricted
by the
three subclauses _in the sub-~ection with reference to the person
who might be o-wrng the debt 01~ to whom the debt
might be owed. Sub-els. (a) and (b) refer to the debts
owed by a displaced person as defined in the Act while
sub-cl. (c) refers to a debt due to a displaced person.
Sub-cl. (c) has therefore to be taken independently of
snb-cls. (a) and (b), for it refers to a creditor who is a
displaced person while the other two sub-clauses refer
to a debtor who is a displaced person.
Under subcl. (c) a displaced person who is a creditor can recover
the debt clue to him from any other person, ·whether a
. displaced person or not, who is residing in the territories to which the Act extends.
The main contention
of the appellant in this connection is that a mortgage
debt is not a pecunfary liability and therefore does not
fall within the definition of debt at all.
vVe are of
opinion that there is no force in this contention; The
words
"pecuniary liability" ·will cover any
liability
which is of a monetary. nature.
Now the definition of
a. mortgage in s. 58 of the Transfer of Property Act.
No. 4 of 1882, shows that though it is the transfer of
an interest in specific immovable property, the purpose
of the transfer is to secure the
payment of
money
advanced or to be advanced
by way of
loan or to
secure an existing or future debt or the performance
of an engagement which may give rise to a pecuniary
liability.
The money advanced by way
of loan, for
example, which is secured by a mortgage,
obviously
creates a pecuniary liability.
It is true that a mortgage in addition to creating the
pecuniary liability
also transfers interest in the specific immovable property to secure that liability;
none the less the loan
or debt to secure which the mortgage is created will
remain a pecuniary liability of the person creating the
mortgage .. Therefore a mortgage debt would create a
pecuniary liability upon the mortgagor arid would be
covered by the
definition of
the word
"debt" in
s. 2(6).
v\Te may in this connection refer to the Displaced Persons (Institution of Suits) Act, No. XL VII
of 1948, which has been
practically repealed by the
ll-6 SCI/ND/82
1960
Rajkumari
Kaushalyia Devi
v.
Bawa Pritma Singh
Wanchoo J.
1960
Rajkwnari
Ka11shaf.ya Devi
v.
Bawa Pritma Singh
JVm1rlwn J.
574
SUPREME COURT REPORTS
[ 19601
Act.
In LiiaL hw,
>11.ils relating·
Lo immO\';ible pro·
pcny "·c1-c specially excepted 1I11<le1· s. 'f, but there is
no such prmision in the Act.
,\g,,in s. 6 of the Displaced Persons (Legal Proceedings) Act, No. XXV of
I 'l·l'l, which has also ],.:·en repealed by the Act mentions decrees or orden for payment of money while in
s.
I :'i of the Act which deals with the same matter
!hose words "re omitted and the words "proreerlings
in respect of any debt" are used inste'ad.
There can
be no doubt in consequence that. the Act is a comprehensive law
dealing "'it.h
all kinds
of pecuniary
liability. 'Ve are therefore- of
opinion that s. 2(6)
dearly incllldes a mortgage debt and under sub-cl. (c)
thereof a displaced person to whom such a debt is clue
from any other person, whether a displaced person or
not, ordinarilv residing in the territories to which the
Act extends c~n take die benefit of this Act.
Let us now see whether there is anything in the
scheme of the Act which in any way militates against
the pbin words of s. 2(fi).
Learned counsel for the
appellant: in
the first
place refers to
sub-cl. (b) of
s. 2(ri) in this connection and points out that that subclanse specifically deals with mortgage debts secured
on arn· immovable property situate in the territories
forn1ing part of 'Vest Pakistan.
Tt is nrgcd that there
w:is a specific
provision with
respect to mortgage
debts in relation to immovable
properties in \\Test
P"kistan and that if it were intender[ that mortgage
of immovable properties situate in 'vhat is now India
would also be dealt with under the Act there woulcl
have been
a similar specific
pronston in
the Act.
Further it. is
pointed out th:it
the proviso to subcl. (b) lo s. 2(6) provides for apportioning the mortgage
debt in c;iscs where the property on which the clcb1·
is secured is both in \\Test Pakistan and in India and
restricts the application of sub-cl. (b) only to that part
of the clebt winch "·as secured on the property i 11
'\'est: Pakistan and thm excludes from the operation
of sub-cl. (h) th"t part: of the clebt which is secured on
property in India.
That is
undoubtedly so.
The
reason howc1'C1" for this speci;il provision is to be found
in the later prm·ision contained in s. 16 ll\· which a
ch;ll'g·e was created on com1,cnsation to be ,;.i,·en to a
'
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h
'
•
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J
3 S.C.R.
SUPRE1\1E COURT REPORTS
575
displaced person with respect to the
mortgage debt
1960
secured on immovable property in Pakistan or in the
alternative a charge vl'as
created on
property given
Rajkumari
in exchange for the property in
Pakistan on which
Kaushal;·a Devi
the debt was charged.
The special provision therev.
..
fore in sub-cl. (b) of s. 2(6) would not in these circum- Bawa Pntma Singh
stances cut down the plain meaning of the words used
--
Wanchoo J.
in sub-cl. ( c) or restrict
the, wide words
"pecuniary
liability"
to liability other than that secured by a
mortgage.
Incidentally 1Ne
may mention
that subcl. (b) itself shows that pecuniary liability includes a
mortgage debt, for it shO'ws that any liability which
was incurred on the security of any immovable property situate in \'Vest Pakistan would be a debt within
the meaning
of s. 2(6)
and therefore
a pecuniary
liability.
It is next urged that when the legislature excepted .
the property in
India which was
encumbered from
being dealt with under sub-cl. (b) so far as
displaced
debtors were concerned, there is
no reason
why it
should allow the displaced creditors to proceed under
the Act with respect to iportgage debts.
This argument, however, overlooks the provision in sub-cl. (a)
under which a displaced debtor can take the benefit
of the Act, once it is held that the words "pecuniary
liability"
also include
mortgage debt.
As we
have
said· before sub-cl. (b) was dealing with a· special situation which was worked out in s. 16 of the Act and the
general right of a displaced debtor to take advantage
of the Act is to be found in sub-cl. (a) and that subclause will cover a mortgage debt as it is a pecuniary
liability.
Reliance was then placed on s. 16(5), which gives a
right to the creditor to elect tq be treated as an unsecured creditor in rebtion to the debt, in which case
the provisions of the
Act would. apply accordingly.
It was
urged that this
sub-section requires
that a
creditor must make an electio'n before he can take the
benefit of this Act.
v\Te arc of opinion that this argument has no force,
for sub-s. (rl)
of s. Hi only deals
with , a situation which
arises where the
mortgage,
ch::irge or lien was on immovable property situate in
\i\'cst Pakistan.
It does
not deal at
all with cases
1960
576
SUPREl\1E COURT REPORTS
[1960]
where the morlgage, charge or lien is on immovable
property siluate outside \\'est Pakistan.
Rajkumari
Reference \vas Lhcn made to s. 17 of the Act.
lt
Kaushalya Devi
deals wi t:h debts secured on mm·a ble properties.
That
v.
section is again concerned with displaced debtors and
Bawa Pritma Singh
'd
]
· ·
'Jl ]
k \
b
Wanchoo J.
prov1 es 10\v equ1t1es vv1
Je \\·or cc out
et\veen a
displaced debtor and his creditor with respect to debts
secured on movable property.
\\'e see nothing in this
section which can
cut down
the amplitude
of the
words used in s. 2(6)(c).
Reference was then macle to s. 21 which provides
for scaling down debts.
That is however a general
provision dealing with debts of all kinds and there is
nothing in that section which shows that the word
"debt" as defined in s. 2(6) refers only to claims for
money and does not i 11clucle a mortgag·e debt.
Tims we sec nothing in any provision of the Act or
in its scheme which would cut down the meaning we
have given to the words "pecuniary liability" as used
in s. 2(6) read with sub-cl. (c) thereof.
le was also urged that if mortgage debts on property
situate in J ndia were covered by the Act, there is no
machinery (like s. )(i) for enforcemem of the creditors'
rights in respect. thereof.
This is not correct. Section 10
provides for the claim of a displaced creditor against
a displaced debtor and s. 1 :; provides for the claim of
a displaced creditor against any other person who is
not a displaced debtor.
Section 11 then provides how
an application under s. JU will be dealt: with and under
sub-s. (2) thereof ;i decree can be passed under certain
circumstances against the displaced debtor. Similarly
under s. 14(2) a tribunal can pass such decree in relation to an application
under s. IB as it
thinks fit.
These decrees are executable under s.
28 of the
Act.
Therefore
even when the debt
1s a mortgage
debt there is provision in the Act for enforcement of
that debt, though of course this provision is different
from the
provision contained
in s. 16,
which was
dealing with the special situation of properties under
mortgage situate in vV est Pakistan.
\Ve mav also
refer to
s. !l of the Act which bvs
down that the provisions of the Act and of t:lic Rules
·-
-·
3 S.C"R.
SUPREME COURT REPORTS
577
and Orders made thereunder shaU have effect notwith1960
standing anything
inconsistent therewith
contained
in any other law for the time
being in force.
The
Rajkwnari
effect of this overriding provision .is to make a suit
!Caushalya Devi
like the ]Jresem maintainable in spite of the provisions B
Pv.
s· ,
.
.
.
awa
ritma rngrl
applymg to such sutts 111 other laws.
--
The last contention on behalf
of the appellant is
Wanchoo J.
that if s. 2(6)(c)
empowers a
displaced
creditor to
make an application under
s. 13 even with respect
to a mortgage debt,
there will be hardship to prior
mortgagees or subsequent
mortgagees
inasmuch as
these persons
cannot be dealt with under
the Act.
Section 13 empowers a displaced person claiming .a debt
from any other person who is not a displaced person
to apply within one year of the coming into force of
the Act in
any local area
to the tribunal
having
jurisdiction in the matter.
The provision is obviously
e.nacted to give relief for a short period only.
Section 25
of the Act provides for the regulation of all proceedings under the Act by the provisions contained in the
Code of Civil Procedure save as expressly provided in
the Act or in any rules made thereunder.
But assuming that in spite of this provision, 0. XXXJV, r. 1 of
the Code of Civil Procedure ·will not apply to proceedings under the Act and all -those having an interest in
the mortgage security cannot be joined as parties as
required by 0. XXXIV, r. I, the interest of prior or
puisne mortgagees cannot in any case
be affected by
the decree passed under the Act. The Explanation to
0. XXXIV, r. I, shows that a prior mortgagee need not
be made a party to a suit for sale by a puisne mortgagee.
So far .therefore as a prior mortgagee is concerned, his rights will not be affected by the decree
passed under s. 13 of the Act,
just as his rights are
not ;iffected by the decree passed under 0. XXXlV.
So far as mortgagees subsequent to the displaced creditor who applies under s. l ;3 ;ire concerned, their interests will also not be jeopardized by the deo:ee which
may be passed under s. I :l.
Even under 0. XXXlV,
which requires puisne or wbsequent mortgagees to be
joi 11ed as parties in a suit for sale, a <lecree obt;ii ned
in a suit lo which the s11bscg11cnt mottgagce was not
joined as a party cloes not affect
his rights
and Lhe
578
SUPREME COURT REPORTS
• [1960]
z96o ·
proceedings in such a. suit a.re not binding on him so
Rajkumarl.
as to affect his rights und.er the second mortgage. He
Kaushalya v.V; can thus follow the property by suing his mortgagor,
.
v.
even though it may have been sold under the decree
. ilawaPritmaSingliofa.U: earlier mortgagee in a. suit to which he was not
a.. pa.rty .• __ Therefore, .the interest of the prior mortWa,,.hoo' J • . · gagee or the subsequent mortgagee, if any, would not .
be affected by a decree passed on an application under
s. 13 and there is no reason therefore to cut down the
plain meaning of the words ·used in B. 2 (6}(c) on the
ground that the proc~edings: under the .Act would
prejudicially-. affect' the -rights• of: prior or puisne
r96o
April zo.
mortgagees>•·•
·' · · · . ., ·-·
_ • • r "'
• There is therefore no.· force· in this appeal and it is
hereby dismissed with costs."
....
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~-' •.. '.:;; -·
.. , • .Thika Tenancy..,-Decree for possession against tenant-Applicaiicln'f<W ·rdiefby lenant-,-Amendment. of Act with- retrospective
'operation~Effect-:.fnterpretation of Statute-Principles· of construction~Thika Tenancy• Act (W:B. z of r949f; s. 28-Thika. Tenancy
Amendment Act (W .B. 6 of r953). s.'I(z). ·.
·
-:: ··with a" view to i;ive protection to Thika' tenants against
eviction and in certain.other matters, the West Bengal -Legislature enacted -the Calcutta Thika Tenancy Acti 1949 .. That Act
. was amended by the Calcutta Thika Tenancy Amendment Act,
:i:g5j, which omitted s: 28 of the Act. The question for decision in
- the appeal was whether . the cappellant against whom proceedings
for' execution of a decree for ejectment was pending, who had appli~
__
. ed -for, relief under s; 28 when that section was in force, was - -
· entitled:to have his ;application ,disposed of in accordance with
the provisions of s. 28, which had ceased to exist retrospectively
though. it remained undisposed of 'on the date the Amendment
Act came into force:· • ·
· · · · ' -
. '. .
..
·: · ·
·· ·
",r; Held, thats, 1, 'sub-5: (2) Of the Calcutb. Thlka 'Tenanc{A.ct
t953,• clearly intended that no reilef under s.' 28 of the brigfnal
•