The main legal point established in the judgment is that the provisions of the Agriculturists Debt Relief Act contemplate a comprehensive settlement of debts, including property subject to mortgage or charge, and that secured creditors have a preferential right to payment over unsecured creditors.

1. The case has been referred to a Full Bench as it was felt that the Division Bench ruling in Soolapani Wariyar v. Padmavathy Amma 1966 KLR 512 contained certain observations which may require re-consideration.

2.The question arises on a petition filed by way of objection to the report of the receiver in connection with an application under S.15 of the Agriculturists Debt Relief Act for settlement of debts. The objection filed by Revision petitioner, a usufructuary mortgagee from the debtor, was that he cannot immediately be dispossessed, nor possession taken from him, and that the properties subject to the usufructuary mortgage, taken possession of by the receiver should be restored to him. The court below dismissed the application.

3. S 15 of Act 11 of 1970 provides for applications by persons unable to pay their debts. S.15 (3) lists the particulars to be contained in the application. Clauses (d) and (e) of the same which are particularly important read as follows:

"15. (3) An application under sub-section (1) shall contain the following particulars, namely: (a) xx xx xx xx

(d) the particulars of all his property including claims due to him together with a specification of the value of such property and the place or places at which any such property is to be found and the details of any mortgage, lien or charges thereon;

(e) a statement that he unconditionally leaves all his assets in the control of the Court;".

Clause 7, on which some reliance is sought to be placed by counsel for the revision-petitioner and which has been referred to also in the order of reference made to the Full Bench, enacts that the procedure prescribed in the Insolvency Act, 1955 shall, mutatis mutandis, be applicable to the proceedings under the section. S.16 (1) of the Act may also be usefully quoted:

"16. Settlement of liabilities by court: (1) The court shall, after determination of the admissibility and the amount of each claim under sub-section (6) of S.15, settle the liabilities of the debtor in the manner mentioned thereunder, namely:

(a) one-fourth of the entire assets, not exceeding six thousand five hundred rupees in value shall be allotted and given over to the debtor subject only to such liabilities by way of public revenue due on land or any tax, cess, fee, rent, jenmikaram or such other dues chargeable thereon by virtue of any enactment for the time being in force:

Provided that in such allotment, the homestead in which the debtor lives shall, on his application, be allotted to his share

(b) after payment of all liabilities by way of public revenue due on land or any tax, cess, fee. rent, jenmikaram or such other dues chargeable by virtue of any enactment for the time being in force, all the remaining assets shall be distributed and made over to the creditors;

Provided that secured creditors shall, in the order of mutual priority, be paid in preference to unsecured creditors, and after payment of all debts due to the Government or to any local authority, the balance of the assets shall be distributed amongst unsecured creditors in proportion to the debts due to them".

Reading S.15 (3) in the light of S.16 (1) it appears to us that what is contemplated by S.15 is a complete and effective settlement of debts and for that purpose, 'debts' are understood in a wide and comprehensive sense as including even property which is the subject-matter of a mortgage or charge. S. i 5 (3) (d) proceeds on that footing. It is also clear from the provisions of S.16 that secured creditors do not stand outside the scheme of settlement, that they have to look for satisfaction of their secured debts to the balance of the assets, and rank as unsecured creditors in proportion to the debts due to them. They have only a preferential right to payment over the unsecured creditors. That the scheme of the settlement and the scope of the section are such as we have understood, was the view taken with respect to the almost identical provisions of the Travancore Debt