Judgment

DUTT, J. :- This appeal by special leave is at the instance of the appellant, the Bank of India, a nationalised Bank, and is directed against the judgment and decree of the Andhra Pradesh High Court in so far as they direct that the appellant is entitled to recover the amounts claimed by it against the respondent firm only after the scaling down of the debt in accordance with the provisions of the Madras Agriculturists Relief Act IV of 1938 which, after the creation of the State of Andhra Pradesh, was made applicable to that State as the Andhra Pradesh (Andhra Areas) Agriculturists Relief Act IV of 1938, hereinafter referred to as the Act.

2. The appellant Bank filed a suit being 0. S. No. 12 of 1979 in the Sub-Court, Eluru, on February 10, 1975 against the respondents including the respondent firm and its partners to recover a sum of Rs. 18,14,817.91 being the balance (inclusive of interest) of three principal amounts of Rs. 3,00,000/-, Rs. 7,00,000/- and Rs. 80,000/- severally advanced by the Bank to the firm under cash credit account on 28-11-1967, 3-4-1968 and 17-2-1972 respectively. It may be noticed here that the Bank was nationalised on July 7, 1969 under the Banking Companies (Acquisition and Transfer of Undertakings) Act V of 1970), hereinafter referred to as the Banking Companies Act. The sum of Rs. 80,000/- was admittedly advanced by way of loan by the Bank after its nationalisation.

3. The respondent firm owns certain motor vehicles which are mentioned in A and B Schedules to the plaint of the said suit. The firm was carrying on its business at Madras as fleet owners and gasolene carriers. It had two partners, namely, one S. Doranna Choudhury, since deceased, the father of respondent 3 and respondent 2, Sunakavali Rajlaxmi. The case of the Bank was that in addition to the hypothecation of the A and B Schedule properties made in its favour to secure the repayment of the aforesaid amounts of loan, the other partner, respondent 2, created an equitable mortgage in favour of the Bank on December 22, 1969 in respect of C Schedule properties of the plaint. S. Doranna Choudhury, since deceased, also created an equitable mortgage in favour of the Bank on February 28, 1970 in respect of D-Schedule properties of the plaint. Respondent 3 also created another equitable mortgage on September 6, 1974 in respect of E-Schedule properties of the plaint. Respondents 4 to 12 are alienees of the mortgaged properties. In the suit the Bank prayed for the sale of the said properties for the recovery of the amounts claimed by it on account of the loan together with interest due thereon.

4. The respondents including the firm contested the suit by filing written statements, inter alia, denying the creation of any equitable mortgage by the deceased partner and respondents 2 and 3 in favour of the Bank. Respondents 4 to 12, the alienees, while denying the creation of the mortgages contended that they were bona fide purchasers for valuable consideration and the Bank was bound by the alienations and transfers made in their favour of the properties alleged to be under mortgage. The firm and its partners, namely, the said S. Doranna and respondent 2 also filed a counter-claim against the Bank for a sum of Rs. 34,48,799/-.It is not necessary for us to state in details the respective cases of the parties including the case of the firm and its partners in making the counter-claim against the Bank, inasmuch as the scope of this appeal is limited to the consideration of the question as to whether the High Court was justified in decreeing the Banks claim only after the scaling down of the debt in accordance with the provisions of the Act.

5. Be that as it may, the learned Subordinate Judge held that no equitable mortgage was created in favour of the Bank and, accordingly, dismissed the suit against respondents 4 to 12 and refused to direct sale of the properties alleged to have been mortgaged to the Bank. The learned Subordinate Judge also found tha