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1976 Supreme(All) 346
Allahbad High Court
YASHODANANDAN,B.N.SAPRU
The New Bank of India Ltd. - Appellant
Versus
The State of U.P. - Respondent
Decided On : 10/13/1976
D.K. Sinha, for Petitioner; Standing Counsel, for Respondents.
A bank holding land mortgaged to it by a tenure-holder is not a tenure-holder itself and is not entitled to exemption from the ceiling limit under Section 5 (2) (d) of the U. P. Imposition of Ceiling on Land Holdings Act, 1960.
Headnote:
CEILING ACT - U. P. IMPOSITION OF CEILING ON LAND HOLDINGS ACT, 1960 - SECTION 5 (2) (D) - BANK - MORTGAGE - TENURE-HOLDER - INTERPRETATION - APPLICABILITY - LAND HELD BY BANK EXEMPT FROM CEILING - MORTGAGE OF LAND TO BANK NOT EXEMPT FROM CEILING - BANK NOT A TENURE-HOLDER - BANK'S RIGHT TO FILE STATEMENT INDICATING CHOICE OF SURPLUS LAND NOT CONFERRED - PROTECTION OF BANK'S INTERESTS THROUGH COMPENSATION AND PRIORITY OF CHARGES.
Fact of the Case:
The petitioner bank, New Bank of India Ltd., challenged the order of the Prescribed Authority under the U. P. Imposition of Ceiling on Land Holdings Act, 1960 (Ceiling Act), rejecting its application to be impleaded as a party in proceedings to determine surplus land held by respondents 3 to 6, who had mortgaged their land to the bank as security for cash credit loans.
Finding of the Court:
The court held that the petitioner bank was not a tenure-holder as defined under the Ceiling Act and, therefore, could not claim exemption from the ceiling limit under Section 5 (2) (d) of the Act, which exempts land held by a bank. The court further held that the mortgage of the land in favor of the bank did not operate as a transfer of an interest in the land, and hence the land was not held by the bank for the purpose of Section 5 (2) (d).
Issues: 1. Whether the petitioner bank was a tenure-holder under the Ceiling Act and entitled to exemption from the ceiling limit under Section 5 (2) (d) of the Act. 2. Whether the mortgage of the land in favor of the bank operated as a transfer of an interest in the land, thereby bringing it within the exemption under Section 5 (2) (d). 3. Whether the bank had the right to file a statement indicating the choice of surplus land to be retained, as provided under Section 12-A of the Ceiling Act.
Ratio Decidendi: 1. The court interpreted the definition of 'tenure-holder' under Section 2 (17) of the Ceiling Act and held that the petitioner bank, not being a bhumidhar, sirdar, asami, or other specified landholder, did not fall within the definition and was not a tenure-holder. 2. The court examined the provisions of Section 58 of the Transfer of Property Act and held that a mortgage, while creating a charge on the land, did not operate as a transfer of an interest in the land. Therefore, the land mortgaged to the bank was not held by the bank for the purpose of Section 5 (2) (d) of the Ceiling Act. 3. The court analyzed Section 12-A of the Ceiling Act and held that only tenure-holders had the right to indicate the choice of surplus land to be retained, and this right was not conferred on banks.
Final Decision: The court dismissed the writ petition filed by the petitioner bank, upholding the order of the Prescribed Authority rejecting the bank's application to be impleaded as a party in the proceedings to determine surplus land.
B. N. SAPRU, J. :- The petitioner, the New Bank of India Ltd., is a banking company carrying on its business in India. The respondents Nos. 3 to 6 applied to the petitioner bank for cash credits and offered 2535 acres of their bhumidhari land situated in village Meeduwala, Pargana and Tehsil Najibabad, district Bijnor as security. Apart from offering their land as security, they also offered certain movable properties as security. This was some time in the year 1969. This offer was accepted by the Bank and a mortgage of the aforesaid land was executed in favour of the bank and accordingly a cash credit account No. 127 was opened by the Bank in their favour. According to the Bank, a sum of Rs. 7,50,557.55 P. was outstanding in the aforesaid current account as on September 8, 1976 excluding interest from 1st July, 1976. Respondents Nos. 3 to 6 again requested the petitioner Bank to grant another cash credit limit of six lakhs. This offer was again accepted and a cash credit account No. 129 was opened on 8th October, 1969, in the name of Seth Mohan Lal, Hindu undivided family, to be operated by Seth Mohan Lal as karta of the family. As security for the aforesaid amount Respondents Nos. 3 to 6 executed a fresh mortgage of the agricultural holding comprising of 2535 acres of bhumidhari land situated in village Meeduwala Pargana and Tehsil Najibabad, district Bijnor including the buildings standing thereon. The creation of the aforesaid mortgage was affirmed by respondents Nos. 3 to 6 by two letters dated 8-10-1969. When the cash credit account No. 129 was opened, a number of documents were executed in favour of the petitioner Bank. It is stated that on July 24, 1976, a sum of Rs. 1,95,781.65 was outstanding towards the petitioner Bank, excluding interest accrued after 24th June, 1976.
2. It is stated in the petition that the Accountant of the petitioner Bank received a notice from the Prescribed Authority under the U. P. Imposition of Ceiling on Land Holdings Act, 1960 to bring a statement of accounts Nos. 127 and 129 of respondents Nos. 3 to 6. It is stated that it is only when this notice was received that the petitioner Bank discovered that proceedings were going on for the determination of surplus land held by respondents Nos. 3 to 6 as 'Bhumidhars'.
3. The petitioner states that after coming to know that the mortgaged land was likely to be declared surplus in proceedings under the U. P. Imposition of Ceiling on Land Holdings Act, 1960 (hereinafter referred to as the Ceiling Act), it moved an application under Order 1, Rule 10, C. P. C. for getting itself impleaded as a party in the aforesaid proceedings before the Prescribed Authority.
4. The main contention of the petitioner Bank in the application was that it was a mortgage of the bhumidhari land of respondents Nos. 3 to 6 and under the provisions of Section 5 (2) (d) of the Ceiling Act the Land sought to be declared surplus, could not be declared surplus as it was held by the petitioner Bank, because the petitioner was a Bank as defined in clause (c) of Section 2 of the U. P. Agricultural Credit Act, 1973 (hereinafter referred to as the Credit Act). It was further the case of the petitioner Bank that the mortgage operated as a transfer of an interest in an immovable property, i.e., the mortgaged land, in favour of the Bank and, as such the land was held by the Bank and could not be declared surplus in view of Section 5 (2) (d) of the U. P. Ceiling Act, which excludes land held by a Bank from the operation of the Act. In this connection it was stressed that under Section 58 of the Transfer of Property Act a mortgage being a transfer of an interest in the immovable property the petitioner Bank after the creation of the mortgage had an interest in the land. In this connection it was submitted that respondents Nos. 3 to 6 had only an equity of redemption in the land.
5. The Prescribed Authority by its order dated 28-8-1976 rejected the application of the Bank. It found tha
