Holding

A debt is excluded under clause (1) of Section 2(4) of the Kerala Agriculturists' Debt Relief Act only if it was incurred from a banking company before the Act’s commencement and was due to a banking company at the commencement; otherwise the debt is not excluded and the agriculturist is entitled to the Act’s relief.

Summary

The respondent, an agriculturist, owed an overdraft of over Rs. 3,000 to Kottayam Orient Bank Ltd., which was amalgamated into the State Bank of Travancore (a subsidiary bank) in 1961. After a decree for recovery was obtained by the bank, the respondent sought relief under the Kerala Agriculturists' Debt Relief Act, 1970, claiming scaling down of his debt. The Subordinate Judge held the debt excluded because it was owed to a banking company, but the Kerala High Court reversed that decision. The Supreme Court examined whether the debt fell within the exclusion of Section 2(4) of the Act, considering the bank’s status as a subsidiary bank and the effect of the transfer by operation of law after July 1, 1957. It held that the exclusion applies only if the debt was due to a banking company at the commencement of the Act and was incurred before that date; since the debt was not due to a banking company at that time, the exclusion did not apply and the respondent was entitled to the Act’s benefits, including scaling down. The appeal was dismissed and costs awarded to the respondent.

Issues considered

Whether a debt owed to a subsidiary bank, arising from a transfer by operation of law after July 1, 1957, falls within the exclusion of Section 2(4) of the Kerala Agriculturists' Debt Relief Act, 1970.
Whether the debt must be due to a banking company at the commencement of the Act as well as incurred before that date for the exclusion to apply.
Whether the respondent, as an agriculturist, is entitled to scaling down of the debt under the Act.

Legislation cited

Banking Regulation Act, 1949s. 45(4), s. 5(c)
Kerala Agriculturists Debt Relief Act, 1970s. 2(1), s. 2(4), s. 4, s. 5, s. 8
State Bank of India (Subsidiary Banks) Act, 1959s. 2(k)

Subjects

Agriculturist debt reliefScaling down of debtBanking companySubsidiary bankSection 2(4) exclusionKerala Agriculturists' Debt Relief ActAmalgamationTransfer by operation of lawArticle 14 equality

Judgment

A 338

STATE BANK OF TRAV ANCORE

v.
B
MOHAMMED MOHAMMED KHAN

August 21, 1981 J

[Y.V. CHANDRACHUD, C.J., A.P. SEN AND
V. BALAKRISHNA ERADI, JJ.]
c
Kera/a Agricutturaists' Debt Relief Act (Act 11) 1970-Whether a debt owed
by an agriculturist falls within the purview of section 2(4).

The respondent had an overdraft account with the Erattupetta Branch of J
the Kottayam Orient Bank Ltd. at the foot of which he owed a sun1 of over
D Rs. 3000/· to the Bank. The said Bank which was a 'Banking Company' as
defined in the Banking Regulation Act, 1949, was amalgamated with the appel-
lant Bank with effect from .Tune 17, 1961. The appellant Bank filed a suit (O,S,
28 of 1963) in the Sub·Court, Meenachil, against the respondent for recovery of
the amount due from [him in the Overdraft Account with the Kottayam Orient
Bank, the right to recover which had come to be vested in the appellant as a
result of the scheme of amalgamation. The suit was decreed in favour of the
E appellant but when it took out execution proceedings in the Sub-Court, Kotta-
yam, the respondent filed an application under section 8 of the Kerala Agricultu- /
rists' Debt Relief Act claiming that being an agriculturist within the meaning of
that Act, he was entitled to the benefit of its provisions including those relating
to the scaling down of debts. The learned Subordinate Judge dismissed the

F
application holding : (i) that the respondent was not entitled to the benefit of
the provisions regarding scaling down of the debt because the debt, having
been once owed by him to the Kottayam Orient Bank Ltd. which was a Banking
Company as defined in the Banking Regulation Act, 1949, was outside the pur-
view of section 5 of the Act which provided for the scaling down of debts owed
-
by agriculturists; and (ii) that he was only entitled to the benefit of t:te proviso to
section 2(4) (1) of the Act under which the amount could be repaid in eight half- ,
yearly instalments.

G The Revision Application preferred by the respondent was referred to the
Full Bench of the High Court. It was contended on behalf of the appellant
Bank that the debt owed to it by the respondent was excluded from the
operation of the Act by reason of section 2 (4) (a) (ii) and section 2 (4) (I) of
the Act. By its judgment dated. February 1, 1978 the High Court rejected that
contention, allowed the Revision Application and held that the respondent was
H entitled to all the relevant benefits of the Act, including the benefit of scaling
down of the debt and hence the appeal by special leave.
STATE BANK OF TRAVANCORE V. M.M. KHAN 339

Dismissing_the appeal, the Court A
'
HELD: I : I. The appellant Bank will not be entitled to the benefit of
the exclusion contained in section 2 (4) (a) (ii) of the Kerala Agriculturists' Debt
Relief Act, 1970 in view of clause (B) of the proviso to the section and the respon-
dent's claim to the benefits of the Act wilt remain unaffected by that provi-
sion. [345H, 346 A]

1 : 2. The respondent is admittedly an agriculturist and he owes a sum of
B
money to the appellant Bank under a decree passed in its favour by the Sub.
Court, Meenachil, in 0. S. No. 28 of 1963. The liability which the respondent
\ owes to the appellant Bank is, therefore a "debt" within the meaning of section
2 (4) of the Act. [344 F-G]

However, since the appellant Bar.k, namely, the State Bank of Travancore,
is a subsidiary bank within the meaning of section 2 (k) of the State Bank of c
India (Subsidiary Banks) Act, 1959 and also as contemplated by sub·clause (ii) of
clause (a) of section 2(4) of the Act, the decretal amount payable by the respon-
dent to the appellant Bank will not be a debt within the meaning of section 2(4)
of the Act. [345 C-D]

1 : 3. By reason of clause (B) of the proviso to section 2 (4) (a) (ii) of the D
Act, which proviso is in the nature of an exception to the exceptions contained
in the said section the amount payable to a subsidiary bank 1s not to be regar-
ded as a debt whhin the meaning of the Act, only if the right of the subsidiary
bank to recover the the amount did not arise by reason of any transfer effected
by operation of law subsequent to July l, 1957. Here, the notification con-
taining the scheme of amalgamation was published on May 16. 1961. Thus,
the right of the appellant Bank, though is a subsidiary Bank, to recover the E
amount from the respondent arose by reason of a transfer effected by operation
' of law, namely, the scheme of amalgamation, which came into effect after July
1, 1957. [345 D-E, G]

'.l : 1. The State Bank of Travancore, is not a 'company' properly so called.
It is a subsidiary bank. It was established by the Central Government in accor~
- dance with the Act of 1959 and is not a 'company and, therefore not a banking
company. Therefore, the decretal debt which the respondent is liable to pay to
the appellant is. not owed to a "banking company". It was indeed not owed to
F

any "banking company" at all on July 14, 1970 being the date on which the Act
came into force. [346 G-H, 347 A]

3 : 1. The exclusion provided for in clause (I) of section 2 (4) of the Act can
be availed of, if the debt is due to a banking company at the time of the comnien- G
cement of the Act. [352 D-E]

3 : 2. The object of the Act is to relieve agricultural indebtedness. In order
to achieve that object, the legislature conferred certain benefits on
agricultural debtors but, while doing so, it excluded a class of debts from
the operation of the Act, namely, debts of the description mentioned
in clauses (a) to (n) of section 2 (4). One class of debts taken out from H
the operation of the Act is debts owed to banking companies, as specified in
clause (I). The reason for this exception being that, unlike money lenders who
340 SUPREME COURT REPORTS [1982) 1 s.c.11.

A exploit needy agriculturists and impose upon them harsh and onerous terms
while granting loans to them, representative institutions, like banks and banking
companies, are governed by their rules and regulations which do not change
from debtor to debtor and which, if anything, are intended to benefit the weaker
sections of society. [348 A·CJ

3 : 3. Relief to agricultural debtors who have suffered the oppression
B of private money-lenders, has to be the guiding star which must illumine and
inform the interpretation of the beneficient provisions of the Act. When clause
(1) speaks of a debt due Hbefore the commencement" of the Act to a banking
company, it does undoubtedly mean what it says, namely, that the debt must I
have been due to a banking company before the commencement of the Act. But
it means something more : that the debt must also be due to a banking company
at the commencement of the Act. Reading into the clause the word "at'" which
c is not there, is the only rational manner by which meaning and content could
be given to it, so as to further the object of the Act. [349 B·E]

Further clause (I) speaks of a debt due before the commencen1ent
of the Act, what it truly means to convey is not that the debt should
have been due to a banking company at some point of time before the )
commencement of the Act, but that it must be a debt which was incurred fnJ•m a
D banking company before the commencement of the Act. [349 E·F]

Thus, the application of clause (I) is subject to these conditions : (i) The
debt must have been incurred from a banking company; (ii) the debt must have
been so incurred before the commencement of the Act; and (iii) the debt must be
due to a banking company on the date of the commencement of the Act. These
are cumulative conditions and unless each one of them is satisfied, clause (1) will
not be attracted and the exclusion provided for therein will not be available as
E an answer to the relief sought by the debtor in terms of the Act. [349G·H, 350 A) /

3 : 4. Section 2 (4) which defines a "debt" had to provide that debt means
a liability due from or incurred by an agriculturist "on or before the commence-
ment" of the Act. It could not be that liabilities incurred before the commence-
ment of the Act would be "debts" even though they are not due on the date of
F commencement of the Act. The word~ "on or before the commencement'' of the
the Act are used in the context 01 liabilities "due from or incurred" by an agri-
culturist. For similar reasonsi clause (j) had to use the expression "at the
commencement" of the Act, the subject matter of that clause being debts due
to widows. The benefit of the exclusion provided for in clause (j) could only be
given to widows to whom debts were due "at the commencement" of the Act.
The legislature could not have given that benefit in respect of debts which were
G due before but not at the comn1encement of the Act. Thus, the language used
in the two provisions is suited to the particular subject matter with which those
provisions deal and is apposite to the context in which that language is used.
[350 C.F]

3:5. The object of the Act being to confer certain benefits on agricultural deb-
H tors, the legislature would be under an obligation, while excepting a certain
category of debts from the operation of the Act, to make a classification which
will answer the test of article 14. Debts incurred from banking companies and
STATE BANK OF TRAVANCORE v. M.M. KHAN (Chandrachud, C.J.) 341

' due to such companies at the commencement of the Act would fall into a sepa-
rate and distinct class, the classification bearing a nexus with the object of the
A
Act. If debts incurred from private money-lenders are brought within the
terms of clause (I) on the theory that the right to recover the debt had passed
on to a banking company sometime before the commencement of the Act, the
clause would be unconstitutional for the reason that it accords a different treat-
ment to a category of debts without a valid basis and without the classification
having a nexus with the object of the Act. [350G-H, 357A-B]
B
State of Rajasthan v. Mukanchand[1964] 6 SCR 903; Fatehchand Himmatlal
v. State of Maharashtra, [1977] 2 SCR 828, applied.

- 1978.
CIVIL APPELLATE JURISDICTION: Civil Appeal No. 1376 of

(Appeal by special leave from the judgment and order dated
c
the !st February, 1978 of the Kerala High Court in M.F.A. No. 53
of 1977)

L.N. Sinha, Attorney General, J. M. Joseph, K. John and
Shri Narain for the Appellant.
D
C.S. Vaidyanathan, (A.C.), for the Respondent.

The Judgment of the Court was delivered by

CHANDRACHUD, C.J. The question which arises in this appeal
by special leave is whether a debt owed by the respondent, an agri- E
culturist, to the appellant-The State Bank of Travancore-falls
within the purview of the Kerala Agriculturists' Debt Relief Act, 11
of 1970, hereinafter called 'the Act'.

The respondent had an Overdraft Account with the Erattu-
petta Branch of the Kottayam Orient Bank Ltd., at the foot of
F
which he owed a sum of over Rs. 3000/- to the Bank. The said
Bank which was a 'Banking Company' as defined in the Banking
Regulation Act, 1949, was amalgamated with the appellant Bank
with effect from June 17, 1961 in pursuance of a scheme of amal-
gamation prepared by the Resreve Bank of India in exercise of the G
powers conferred by section 45 (4) of the Banking Regulation Act
and sanctioned by the Central Government under sub-section (7) of
section 45. Upon the amalgamation, all assets and liabilities of the
Kottayam Orient Bank stood transferred to the appellant Bank.
The notification containing the scheme of amalgamation was
H
342 SUPREME COURT REPORTS fl 982] I S.C.R.
A published in the Gazette of India Extra-ordinary dated May 16, I
1961.

The appellant filed a suit (O.S. No. 28 of 1963) in the Sub-
Court, Meenachil, against the respondent for recovery of the amount
due from him in the Overdraft Account with the Kottayam Orient
B Bank, the right to recover which had come to be vested in the
appellant as a result of the aforesaid scheme of amalgamation. That
suit was decreed in favour of the appellant, but when it took out I
execution proceedings in the Sub-Court, Kottayam, the respondent
filed a petition under section 8 of the Act seeking amendment of the
..
decree in terms of the provisions of the Act. The respondent claimed
c that he was an agriculturist within the meaning of the Act and was
therefore entitled to the benefi• of its provisions, including those
relating to the scaling down of debts. The learned Subordinate
Judge assumed, what was evidently not controverted, that the res-
pondent was an agriculturist. But the learned Judge held that the J
respondent was not entitled to the benefit of the provision regarding
D scaling down of the debt because the debt, having been once owed
by him to the Kottayam Orient Bank Ltd., which was a 'Banking
Company• as defined in the Banking Regulation Act, 1949, was
outside the purview of section 5 of the Act which provided for the
scaling down of debts owed by agriculturists. According to the
learned Judge, the respondent was only entitled to the benefit of the
E proviso to section 2 (4) (1) of the Act under which the amount could
be repaid in eight half-yearly instalments. Since the relief which
the respondent had asked for was that his debt should be scaled
down and since he was held not entitled to that relief, his applica-
tion was dismissed by the learned Judge.

F The respondent preferred an appeal to the High Court of
Kerala, the maintainability of which was challenged by the appellant
on the ground that no appeal lay against the order passed by the
Subordinate Judge on the application filed by the respondent under
section 8 of the Act. The High Court accepted the preliminary
objection but granted permission to the respondent to convert the
G
appeal into a Civil Revision Application and dealt with it as such.
In view of the general importance of the questions involved in the
matter, the revision application was referred by a Division Bench
to the Full Bench.
H
It was contended in the High Court on behalf of the appellant,
Bank that the debt owed to it by the respondent was excluded
STATE BANK OF TRAVANCORE v. M.M. KHAN (Chandrachud, C.J.) 343

' from the operation of the Act by reason of section 2 (4) (a) (ii) and A
section 2 (4) (I) of the Act. By its judgment dated February l, 1978
the High Court rejected that contention, allowed the Revision Appli-
cation and held that the respondent was entitled to all the relevant
benefits of the Act, including the benefit scaling down of the debt.
The Bank questions the correctness of that judgment in this appeal.
B
Section 8 of the Act provides, in so far as is material, that
where, before the commencement of the Act, a court has passed a
' decree for the repayment of a debt, it shali, on the application of a
judgment·debtor, who is an agriculturist, apply the provisions of the
Act to such a decree and shall amend the decree accordingly. It
is in pursuance of this section that the respondent applied to the
c
executing Court for amendment of the decree. Section 4(1) of the Act
provides that notwithstanding anything contained in any law or
contract or in a decree of any court, but subject to the provisions
of sub-section (5), an agriculturist may discharge his debts in the
manner specified in sub-sections (2) and (3). Sub·section (2) of sec·
D
tion 4 provides that if any debt is repaid in seventeen equal half·
yearly instalments together with interest at the rates specified in
section 5, the whole debt shall be deemed to be discharged. Sub-
section'.(3) specifies the period within which the instalments have to be
paid. The respondent claims the benefit of the provision contained
in section 4 (1) of the Act.
E
In order to decide whether the respondent is entitled to the
relief claimed by him, it would be neeessary to consider the
provisions of sections 2 (I) and 2 (4) of the Act. The short title of
the Act shows that it was passed in order to give relief to indebted
agriculturists in the State of Kerala. The State Legislature felt the F
necessity of passing the Act because, the Kerala Agriculturists'
Debt Relief Act, 31 of 1958, conferred benefits on agricultural
debtors in respect of debts incurred by them before July 14, 1958
only. The Statement of Objects aad Reasons of the Act shows
that the agricultural indebtedness amongst ti1e poorer sections of the
community showed an upward trend after July 14, 1958 owing to
various economic factors. A more comprehensive legislation was
therefore introduced by the State Legislature in the shape of the
present Act in substitution of the Act of 1958. The Act came into
force on July 14, 1970.
'· H
Section 2 (I) of the Act which defines an "agriculturist" need
not be reproduced because it was common ground at all stages bet·
----~

344 SUPREME COURT REPORTS [1982] I S.C.R.

A ween the parties that the respondent is an agriculturist within the )

meaning of the definition in section 2 (I).

Section 2 (4) of the Act, in so far as is material for our pur-
poses, reads thus :

B "Section 2 (4) : "debt" means any liability in cash or kind, whether
secured or unsecured, due from or incurred by an
agriculturist on or before the commencement of this ;
Act, whether payable under a contract, or under a
decree or order of any court, or otherwise, but
does not include :-
c
(a) any sum payable to:-

(i) the Government of Kerala or the Government of
India or the Government of any other State or )
Union territory or any local authority; or
D
(ii) the Reserve Bank of India or the State Bank of India
or any subsidiary bank within the meaning of clause
(k) of section 2 of the State Bank of India (Subsidiary
Act, 1959, or the Travancore Credit Bank (in liquida-
tion) constituted under the Travancore Credit Bank
E Act, IV of 1113 :

Provided that the right of the bank to recover the sum
did not arise by reason of:-

(A) ·any assignment made or
F
(B) any transfer effected by operation of law, subsequent to
the !st day of July, 1957".

As stated above, the respondent is admittedly an agriculturist and
he owes a sum of money to the appellant Bank under a decree
G passed in its favour by the Sub-Court, Meenacil, in O.S. No. 28 of
1963. The liability which the respondent owes to the appellant
Bank is therefore a "debt'" within the meaning of section 2 (4) of the
Act. But certain liabilities are excluded from the ambit of the
definition of "Debt". The liabilities which are thus excluded from
H the definition of debt are specified in clauses (a) to (n) of section 2
(4). We are concerned in this appeal with the liabilities specified in
clause (a) (ii) and clause(!) of section 2 (4), which are excluded from
STATE BANK OF TRAVANCORE v. M.M. KHAN (Chandrachud, C.J.) 345

the operation of clause 2 (4). W@ will first consider the implications A
of the exclusion provided for in sub-clause (ii) of clause (a) of sec-
tion 2 (4). Under the aforesaid sub-clause, any sum payable to a
subsidiary bank within the meaning of section 2 (k) of the State
Bank oflndia (Subsidiary Banks) Act, 1959, is excluded from the
definition of "debt". Section 2 (k) of the Act of 1959 defines a
"subsidiary bank" to mean any new bank, including the Hyderabad B
Bank and the Saurashtra Bank. The expression "new bank" is
defined in section 2 (f) of the Act of 1959 to mean any of the banks
constituted under section 3. Section 3 provides that with effect
from such date, as the Central Government may specify, there shall
be constituted the new banks specified in the section. Clause (f) of
section 3 mentions the State Bank of Travancore amongst the new c
banks which may be constituted under section 3. It is thus clear
that the appellant Bank, namely, the State Bank of Travancore, is a
subsidiary bank as contemplated by sub-clause (ii) of clause (a)
\ of section 2 (4) of the Act. If the matter were to rest there, the
decretal amount payable by the respondent to the appellant Bank
will not be a debt within the meaning of section 2 (4) of the Act, 0
since the appellant is a subsidiary bank within the meaning of sec-
tion 2 (k) of the State Bank of India (Sub;idiary Banks) Act, 1959.
But by reason of clause (B) of the proviso to se~tion 2 (4) (a) (ii) of
the Act, the amount payable to a subsidiary bank is not to be
regarded as a debt within the meaning of the Act, only if the right
of the subsidiary bank to recover the amount did not arise by reason E
' of any transfer effected by operation of law subsequent to July I,
1957. The proviso is thus in the nature of an exception to
the exceptions contained in section 2 (4) (a) (ii) of the Act.

The respondent initially owed a sum exceeding Rs. 3000/- to
the Erattupetta Branch of the Kottayam Orient Bank Ltd. which
F
was amalgamated with the appellant Bank with effect from June 17,
1961 pursuant to an amalgamation scheme prepared by the Reserve
Bank of India. All the rights, assets and liabilities of the Kottayam
Orient Bank were transferred to the appellant Bank as a result of
the amalgamation. The notification containing the scheme of G
amalgamation was published on May 16, 1961. Thus, the right
of the appellant Bank, though it is a subsidiary Bank, to recover the
amount from the respondent arose by reason of a transfer effected
by operation of law, namely, the scheme of amalgamation, which
came into effect after July 1, 1957. Since clause (B) of the proviso
'· to section 2 (4) (a) (ii) is attracted, the appellant Bank will not be
H
entitled to the benefit of the exclusion contained in section 2 (4) (a)
346 SUPREME COURT REPORTS [ 1982] I s.c.R.

A (ii) of the Act and the respondenfs claim to the benefits of the Act
will remain unaffected by that provision.

That makes it necessary to consider the question whether the
appellant Bank can get the advantage of any of the other exlcusionary F
clauses (a) to (n) of section 2 (4) of the Act. The only other clause '
B of section 2 (4) which is relied upon by the appellant in this behalf is
clause (1), according to which the word 'debt' as defined in
section 2 (4) will not include :-
J

"any debt exceeding three thousand rupees borrowed
under a single transaction and due before the commencement
0 of this Act to any banking company; (emphasis supplied)

Provided that in the case of any debt exceeding three
thousand rupees borrowed under a single transaction and
due before the commencement of this Act to any banking j
company, any agriculturist debtor shall be entitled to repay
D such debt in eight equal half·yearly instalments as provided
in sub·section (3) of section 4, but the provisions of sec-
tion 5 shall not apply to such debt."

The question for consideration is whether the amount which
the respondent is liable to pay under the decree was "due before the
E
commencement of the Act to any Banking Company" - /

Turning first to the question whether the appellant Bank is a
banking company, the learned Subordinate Judge assumed that it is,
but no attempt was made to sustain that finding in the High Court.
Shri Abdul Khader, who appears on behalfofthe appellant conceded
F
before us that it is not a banking company. The concession is rightly
made, since according to section 2(2) of the Act, 'Banking Company'
means a banking company as defined in the Banking Regulation Act,
1949. Section 5(c) of the Act of 1949 defines a banking company
to mean any company which transacts the business of banking in
G India (subject to the provision contained in the Explanation to the
section). Thus, in order that a bank may be a banking company,
it is in the first place necessary that it must be a "company". The
State Bank of Travancore, which is the appellant before us, is not a
'company' rproperly so called. It is a subsidiary bank which falls
H within the definition of section 2(k) of the State Bank of India (Subsi-
diary Banks) Act, 1959. It was established by the Ce'ltral Govern-
ment in accordance with the Act of 1959 and is not a 'company' and
STATE BANK OF TRAVANCORE v. M.M. KHAN (Chandrachud, C.J.) 347

' therefore, not a banking company. It must follow that the decretal A
debt which the respondent is liable to pay to the appellant is not
owed to a banking company. It was indeed not owed to any banking
company at all on July 14, 1970, being the date on which the Act
came into force. It may be recalled that the respondent owed a
certain sum exceeding three thousand rupees to the Kottayam Orient
Bank Ltd., a banking company, on an overdraft account. That B
Bank was amalgamated with the appellant Bank with effect from
May 16, 1961, as a result of which the latter acquired the right to
recover the amount from the respondent. It filed Suit No. 28 of

-
1963 to recover that amount and obtained a decree against the
respondent.
c
It is precisely this small conspectus of facts, namely, that the
amount was at one time owed to a banking company but was not
owed to a banking company at the commencement of the Act, which
raises the question as regards the true interpretation of clause (1) of
section 2 (4).
D
The fact that the amount which the respondent owes to the
appellant was not owed to a banking company on the date on which
the Act came into force, the appellant not being a banking company,
does not provide a final solution to the problem under consideration.
The reason for this is that clause (I) of section 2(4) speaks of a
debt "due before the commencement" of the Act to any banking E
' company, thereby purporting to make the state of affairs existing
before the commencement of the Act decisive of the application of
that clause. The contention of the learned Attorney General, who
led the argument on behalf of the appellant, is that the respondent
owed the debt before the commencement of the Act to a banking
company and, therefore, the appellant is entitled to claim the benefit F
of the exclusion provided for in clause (1). The argument is that,
for the purposes of clause (I), it does not matter to whom the debt is
owed on the date of the commencement of the Act : what matters
is to whom the debt was owed before the commencement of the
Act.
G
The learned Attorney General is apparently justified in making
this submission which rests on the plain language of clause ( 1) of
section 2(4), the plain, grammatical meaning of the words of the
statute being generally a safe guide to their interpretation. But
H
having con>idered the submission in its diverse implications, we find
ourselves unable to accept it.
~'
-
348 SUPREME COURT REPORTS (1982) I S.C.R

A In order to judge the validity of the submission made by the
Attorney General. one must of necessity have regard to the object
and purpose of the Act. The object of the Act is to relieve agricul-
tural indebtedness. In order to achieve that object, the legislature
conferred certain benefits on agricultural debtors but, while doing so,
it excluded a class of debts from the operation of the Act, namely,
B debts of the description mentioned in clauses (a) to (n) of section2(4).
One class of debts taken out from the operation of the Act is debts
owed to banking companies, as specified in clause (1). The reason
for this exception is obvious. It is notorious that money lenders

c
exploit needy agriculturists and impose upon them harsh and
onerous terms while granting loans to them. But that charge does
not hold true in the case of representative institutions, like banks and
banking companies. They are governed by their rules and regula-
-
tions which do not change from debtor to debtor and which, if any-
thing, are intended to benefit the weaker sections of society. It is
for this reason that debts owing to such creditors are excepted from
i
the operation of the Act.
n
A necessary implication and an inevitable consequence of the
Attorney General's argument is that in order to attract the applica-
tion ol clause (I) of sectio.i 2 (4), it is enough to show that the debt
was, at some time before the commencement of the Act, owed to a
banking company ; it does not matter whether it was in it. inception
E owed to a private money-lender and, equally so, whether it was I
owed to such a money-lender on the date of the commence-
ment of the Act. This argument, if accepted, will defeat the
very object of the Act. The sole test which assumes relevance
according to that argument is whether the debt was owed, at any
time before the commencement of the Act, to a banking company. I
I' •
It means that it is enough for the purpose of attracting clause (1)
that, at some time in the past, may be in a chain of transfers,
the right to recover the debt was vested in a banking
company. A simple illustration will elucidate the point. If
a private money-lender had initially granted a loan to an agricultu-
ral debtor on usurious terms but the right to recover that debt came
G
to be vested in a banking company some time before the commence-
ment of the Act, the debtor will not be able to avail himself of the
benefit of the provisions of the Act because, at some point of time.
before the commencement of the Act, the debt was owed to a bank-
t. ing company. And this would be so irrespective of whether the I
banking company continues to be entitled to recover the debt on
the date of the commencement of the Act. Even if it assigns its
STATE BANK OF TRAVANCORE v. M.M. KHAN (Chandrachud, C.J.) 349

right to a private individual, the debtor will he debarred from claim-
' ing the benefit of the Act because, what is of decisive importance,
according to the Attorney General's argument is the fact whether,
some time before the commencement of the Act, the debt was due
to a banking company. We do not think the Legislature could have
intended to 'produce such a startling result.

The plain language of the clause, if interpreted so plainly, will B
frustrate rather than further the object of the Act. Relief to agri-
cultural debtors, who have suffered the oppression of private money- (
lenders, has to be the guiding star which must illumine and inform
. the interpretation of the beneficent provisions of the Act. When
clause (I) speaks of a debt due "before the commencement" of the
Act to a banking company, it does undoubtedly mean what it says, c
namely, that the debt must have been due to a banking company
before the commencement of the Act. But it means some-
thing more : that the debt must also be due to a banking
company at the commencement of the Act. We quite see that we
are reading into the clause the word "at" which is not there because,
whereas it speaks of a debt due "before" the commencement of the D
Act, we are reading the clause as relating to a debt which was due/
"at" and "before" the commencement of the Act to any banking
company. We wonld have normally hesitated to fashion the clause
by so restructuring it but we see no escape from that course, since
that is the only rational manner by which we can give meaning and
content to it, so as to further the object of the Act. E

There is one more aspect of the matter which needs to be
amplified ond it is this: When clause (I) speaks of a debt due
before the commencement of the Act, what it truly means to convey
is not that the debt should have been due to a banking company at
• some point of time before the commencement of the Act, but that F
it mnst be a debt which was incurred from a banking company
before the commencement of the Act.!'

Thus, the application of clause (1) is subject to these condi-
tions : (i) The debt must have been incurred from a banking G
company; (ii) the debt must have been so incurred before the
commencement of the Act, and (iii) the debt must be due to a bank-
ing company on tpe date of the commencement of the Act. These
are cumnlative conditions and unless each one of them is satisfied
clause (I) will not be attracted and the exclusion provided for there: H
'·
350 SUPREME COURT REPORTS (1982] I S.C.R.

A in will not be available as an answer to the relief sought by the
debtor in terms of the Act.

Our attention was drawn by the Attorney General to the pro·
visions of sections 2 (4) and 2 (4) (j) of the Act the former using the(
expression "on or before the commencement" of the Act and the
B latter "at the commencement" of the Act. Relying upon the diffe-
rent phraseology used in these two provisions and in clause (I)
inter se, he urged that the legislature has chosen its words carefully )
and that when it intended to make the state of affairs existing "at '

c
the commencement of the Act relevant, it has said so. We are not
impressed by this submission. Section 2 (4) which defines a "debt"
had to provide that debt means a liability due from or incurred by
an agriculturist "on or before the commencement" of the Act. It
could not be that liabilities incurred before the commencement of
-
the Act would be "debts" even though they are not due on the date (
of commencement of the Act. The words "on or before the commen- }
cement" of the Act are used in the context of liabilities "due from or
D incurred" by an agriculturist. For similar reasons, clause (j) had to
use the expression "at the commencement" of the Act, the subject
matter of that clause being debts due to widows. The benefit of the
exclusion provided for in clause (j) could only be given to widows to
whom debts were due "at the commencement" of the Act. The
legislature could not have given that benefit in respect of debts which
E were due before but not at the commencement of the Act. Thus,
the language used in the two provisious on which the learned Attor-
ney General relies is suited to the particular subject matter withv
which those provisions deal and' is apposite to the context in which
that language is used. We have given to the provision of clause (l}
an interpretation which, while giving effect to the intention of the
F legislature in the light of the object of the Act, brings out the true
meaning of the provision contained in that clause. The Ii teral
construction will create an anomalous situation and lead to absurdi-
dities and injustice. That construction has therefore to be avoided.

Any other interpretation of clause (I) will make it vulnerable
G to a constitutional challenge on the ground of infraction of the
guarantee of equality. The object of the Act being to confer certain
benefits on agricultural debt.:>rs, the legislature would be under an
obligation, while excepting a certain category of debts from the
operation of the Act, to make a classification which will answer the
H test of article 14. Debts incurred from banking companies and due
to such companies at the commencement of the Act would fall into
STATE BANK OF TRAVANCORE v. M.M. KHAN (Chandrachud, C.J.) 351

' a separate and distinct class, the classification bearing a nexus with A
the object of the Act. If debts incurred from private money-lenders
are brought within the terms of clause (I} on the theory that the
right to recover the debt had passed on to a banking company some-
time before the commencement of the Act, the clause would be un-
constitutional for the reason that it accords a different treatment to
a category of debts without a valid basis and without the classifica- B
tion having a nexus with the object of the Act.
\
In State of Rajasthan v. Mukanchand(') section 2 (e) of
Jagirdar's Debt Reduction Act, 1937 was held invalid on the ground
that it infringed Article 14 of the Constitution. The object of that
Act was to reduce the debts secured on jagir lands which had been c
resumed under the provisions of the Rajasthan Land Reforms and
Resumption of Jagirs Act. The Jagirdar's capacity to pay debts had
been reduced by the resumption of his lands and the object of the
Act was to ameliorate his condition. It was held that no intelligible
principle underlies the exempted category of debts mentioned in
section 2(e) since the fact that the debts were owed to a government or D
to a local anthority or similar other bodies, had no real relationship
with the object sought to be achieved by the Act. In Fatechand
Himmat/a/ v. State of Maharashtra,(') in which the constitutionality
of the Maharashtra Debt Relief Act, 1976 was challenged, it was
held by this Court that the exemption granted by the statute to
credit institutions and banks was reasonable because liabilities due to E
'
Government, local authorities and other credit institutions were not
tainted by the vice of the debtor's exploitation. Fatehchand would
be an authority for the proposition that clause ( l), in the manner
interpreted by us, does not violate Article 14 of the Constitution.

Shri Vaidyanathan, who appears on behalf of the respondent,
F
contended that the claim made by the appellant Bank falls squarely
under section 2 (4) (a) (ii) of the Act and that if the appellant is not
\
entitled to the benefit of the specific provision contained therein, it
is impermissible to consider whether it can claim the benefit of some
other exclusionary clause like clause (1). Counsel is right to the
G
extent that the appellant is not entitled to claim the benefit of the
provision contained in section 2 (4)(a)(ii) because of Proviso B to that

(I) [1964) 6 SCR 903.
... (2) [19771 2 SCR 828.
H
352 SUPREME COURT REPORTS [1982] I S.C.R.

section. The simple reason in support of this conclusion is that )
the right of the appellant to recover the debt arose by reason of a
transfer effected by operation of law subsequent to July I, 1957. We
have already dealt with that aspect of the matter. But we are not
inclined to accept the submission that if a particular case falls under
a specific clause of section 2 (4) which is found to be inapplicable,
B the creditor is debarred from claiming the benefit of any of the other
clauses (a) to (n). The object of the exclusionary clauses is to take
category of debts from out of the operation of the Act and there is
J
no reason why, if a specific clause is inapplicable, the creditor cannot
seek the benefit of the other clauses. The exclusionary
clauses, together, are certainly exhaustive of the categories
c of excepted debts but to make those clauses mutually exclu-
sive will be to impair unduly the efficacy of the very object of
taking away a certain class of debts from the operation of the Act.
We are not therefore, inclined to accept the submission made by the
learned counsel that section 2 (4) (a) (ii) is exhaustive of all circum- }
stances in which a subsidiary bank can claim the benefit of the
D exceptions to section 2 (4).

For these reasons we affirm the view of the High Court that
the exclusion provided for in clause ( 1) of section 2 (4) of the Act
can be availed of if the debt is due to a banking company at the time
of the commencement of the Act. We have already indicated that
E the other condition which must be satisfied in order that clause (I)
I
may apply is that the debt must have been incurred from a banking
company before the commencement of the Act.

For these reasons we dismiss the appeal. Appellant will pay
F the costs of the respondent throughout.

S.R. Appeal dismissed.