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1979 Supreme(AP) 180
Andhra Pradesh High Court
Judges : CHENNAKESAVA REDDY
Duvvari Nanja Reddy - Appellant
Versus
Desu Anjaneyulu - Respondent
Decided On : 04-18-79
The statutory bar under Section 4(2) of the A. P. Agricultural Indebtedness Relief Act, 1977, which prohibits entertainment of any suit or proceeding against a debtor under the Act, overrides the principles of constructive res judicata, allowing debtors to raise the defense of protection under the Act even if they failed to do so in the original suit.
Headnote:
DEPOSITOR-DEPOSITEE RELATIONSHIP - TRUST OR DEBT - A. P. AGRICULTURAL INDEBTEDNESS RELIEF ACT, 1977 - SECTIONS 3(I), 3(J), 4(2) - INTERPRETATION - FIXED DEPOSIT IN BANK OR FINANCE CORPORATION - NATURE OF RELATIONSHIP - DISTINCTION BETWEEN TRUST AND DEBT - RELEVANCE OF PAYMENT OF INTEREST - APPLICABILITY OF CONSTRUCTIVE RES JUDICATA - STATUTORY BAR UNDER SECTION 4(2) OF THE ACT - SCOPE AND EFFECT - DETERMINATION OF DEBTOR'S STATUS AS SMALL FARMER - PROCEDURE.
Fact of the Case:
A fixed deposit was made with a Finance Corporation for a period of one year at 12% interest. The Corporation failed to repay the balance amount after the expiry of the term, leading to a suit for recovery by the depositor. The Corporation and its partners remained absent, resulting in an ex-parte decree. The decree holder filed an execution petition against one of the partners, who claimed protection under the A. P. Agricultural Indebtedness Relief Act, 1977 (the Act). The District Munsif held that the liability under the fixed deposit arose out of breach of trust and thus fell outside the purview of the Act. The judgment debtor challenged this decision in a revision petition.
Finding of the Court:
The court held that the relationship between a depositor and a bank or finance corporation in the case of a fixed deposit is that of a debtor and creditor, not a trustee and beneficiary. The fixed deposit amount is a debt within the meaning of Section 3(i) of the Act. The court distinguished between a trust and a debt, emphasizing that in a trust, the trustee is bound to hold the property for the benefit of the beneficiary and is liable to account for it, while in a debt, the debtor has full right to spend the amount as they wish without being liable to render accounts to the creditor.
Issues: 1. Whether the relationship between a depositor and a depositee in the case of a fixed deposit is that of a creditor and debtor or that of a trustee and beneficiary? 2. Whether the fixed deposit amount is a debt within the meaning of Section 3(i) of the A. P. Agricultural Indebtedness Relief Act, 1977? 3. Whether the principles of constructive res judicata apply to bar the judgment debtor from raising the defense of protection under the Act in execution proceedings? 4. Whether the statutory bar under Section 4(2) of the Act against entertainment of suits or proceedings against a debtor under the Act overrides the principles of constructive res judicata? 5. Whether the petitioner is a "small farmer" within the meaning of Section 3(t) of the Act?
Ratio Decidendi: 1. The court relied on the definition of "debt" under Section 3(i) of the Act, which includes any liability owing to a creditor in cash or in kind, whether secured or unsecured, payable under a decree or order of a Civil Court or otherwise. The court also considered the legal position of a banker in connection with fixed deposits, as stated in banking law texts, which establishes that the relationship is that of a debtor and creditor. 2. The court held that the fixed deposit amount is a debt within the meaning of Section 3(i) of the Act, as it is a liability owing to the depositor by the Corporation, payable after the expiry of the term with interest. 3. The court acknowledged the principle of constructive res judicata, which deems matters that could and should have been raised in a former suit as directly and substantially in issue in that suit. However, the court held that the statutory bar under Section 4(2) of the Act, which prohibits entertainment of any suit or proceeding against a debtor under the Act, overrides the principles of constructive res judicata. 4. The court emphasized the object and purpose of the Act, which is to provide relief from indebtedness to agricultural laborers, artisans, and small farmers. The court interpreted the provisions of the Act in a manner that advances the remedy and removes the evil of indebtedness, rather than allowing technicalities to defeat the legislative intent. 5. The court directed the District Munsif to proceed with the execution petition and allow both parties to adduce evidence to establish or rebut the petitioner's status as a "small farmer" within the meaning of Section 3(t) of the Act.
Final Decision: The revision petition was allowed. The District Munsif was directed to proceed with the execution petition in light of the observations made by the court, including the opportunity for both parties to present evidence regarding the petitioner's status as a small farmer.
( 1 ) WHAT is the relationship between a depositor and depositee? is it that of a creditor and debtor or that of a trustee and beneficiary? are the simple but interesting questions of some importance that arise in this revision petition.
( 2 ) THE facts essential for the decision are not complicated and lie in a narrow compass. The petitioner is the judgment-debtor and the 5th defendant in the suit. The respondent is the plaintiff-decree holder. The plaintiff deposited a sum of Rs. 10,000/- in fixed deposit on 10-4-1974 with the 1st defendant Sri Rama Finance Corporation, B. Kothakota (hereinafter referred to as the Corporation ). The deposit was for a period of one year and was repayable with interest at 12% per annum after the expiry of the term of deposit. The Corporation paid to the plaintiff certain amounts and on the failure to pay the balance, he instituted a suit on the file of the Principal District Munsifs Court, madanapalle against the Corporation and defendants 2 to 5 its partners on 6-7-1977 for recovery of a sum of Rs. 7,775-80 being the balance due out of the fixed deposit amount. All the defendants remained absent. They were set ex-parte and the suit was decreed as prayed for on 20 -. 1-78 with costs. The decree holder then filed on execution petition out of which this revision petition arises, against only one of the partners viz. , the petitioner-5th defendant. In the affidavit filed in support of the E. P. , the decree holder stated that the judgment-debtor is having 15 acres of dry and 5 acres of wet land in the revenue village B. Kothakota, that he gets an annual income of Rs. 15,000/- from out of his lands besides the income from the 1st defendant Corporation as one of its partners and that he is having enough amount to pay the decree debt but that he has been wilfully evading to pay the same. It was further averred that since the suit was filed on the basis of fixed deposit, the judgment-debtor was not entitled to the benefits of the provisions of the A. P. Agricultural Indebtedness Relief Act, 1977 (hereinafter referred to as the Act ).
( 3 ) THE Petitioner filed his counter objecting to the execution on the ground that he is entitled to the benefits of the Act. According to him he owns only 5 acres of land, and was personally cultivating the same and the decree-holder filed the application knowing pretty well that the respondent was entitled to the protection of the Act.
( 4 ) NO evidence was adduced before the learned District Munsif either by the decree holder or the 5th judgment-debtor. The only question that was argued before the court below was whether the amount deposited under the fixed deposit receipts by the plaintiff with the 1st respondent - corporation is not a debt as defined under section 3 (i) ef the Act. It was contended on behalf of the respondent that a person who makes a fixed deposit in a Bank or Corporation for a fixed term carrying interest is not a creditor and the transaction is not a debt and the relationship is not that of a creditor and debtor. The learned District Munsif held that the liabi. lity under the fixed deposit arise out of breach of trust reposed by the depositor in the depositee and as such. Exception V of section 3 (1) of the Act applied to the deposit in question. Therefore, the 1st defendant corporation which was doing money lending business or the other partners of the firm cannot claim any protection under the Act. He therefore held that the decree debt fell outside the purview of the Act and therefore, the decree holder was entitled to proceed in execution against the 5th defendant judgment debtor. This in brief is the genesis of this revision petition by the judgment-debtor.
( 5 ) THE principal question and the question that was debated in detail before me by the learned counsel for the parties is whether a sum deposited under the fixed deposit receipts in a Bank or Finance Corporation is a debt within the meaning of section 3 (i) of
