BANK OF INDIA versus VIJAY TRANSPORT AND OTHERS

Citation: [1988] 1 S.C.R. 961 · Decided: 11-11-1987 · Supreme Court of India · Bench: M.M. DUTT · Disposal: Appeal(s) allowed

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Judgment (excerpt)

BANK OF INDIA 
A 
v. 
VIJAY TRANSPORT AND OTHERS 
NOVEMBER 11, 1987 
[MURARI MOHON DUTT AND M.H. KANIA, JJ.] 
B 
Andhra Pradesh (Andhra Area) Agriculturists Relief Act, 1938: 
Sec. 4(e)-'Debt'-Due to Bank-Scaling down of debt-Whether 
permissible. 
st 
Banking Companies Act: Validity of-Act whether a special C 
Indian law. 
Statutory Interpretation: Duty of court-To look at the setting in 
which words are used and circumstances in which the law came to be 
passed. 
The appellant-Bank filed a suit against respondents including res-
pondent firm and its partners, who were agriculturists, for recovery of 
a sum of Rs.18,14,817.91 being balance of three principal amounts 
severally advanced by the Bank to the firm under cash-credit account 
on three different dates. The last loan was advanced by the Bank after 
its nationalisation on July 7, 1969. The Bank alleged that, to secure 
. repayment of the aforesaid amount of loan, in addition to bypothecation 
made in its favour of the properties in 'A' and 'B' Schedules of the 
plaint, equitable mortgage of properties in Schedule 'C', 'D' and 'E' 
was also created in its favour by respondent No. 2, respondent No. 3 
and bis deceased father. The appellant-Bank prayed for the sale of the 
said properties for the recovery of the amounts claimed_by it. 
The respondents, including the firm, and Respondents No. 4 to 
12, who were alienees, denied creation of any equitable mortgage in 
favour of the appellant-Bank. The respondent firm and its partners, 
namely, third respondent'~ deceased father and the second respondent 
also filed counter claim against the appellant-Bank. 
DiSmissing the suit against respondent Nos. 4· 12, the Subordinate 
Judge held that no equitable mortgage was created in favour of the 
appellant-Bank and that the clailll of the appellant-Bank, except to the 
extent of Rs.1,00,418.55, was barred by limitation. The counter claim 
against the Bank was decreed. 
· 
961 
D 
E 
F 
G 
H 
A 
B 
c 
0 
IE 
F 
962 
SliPREME COURT REPORTS 
[1988] I S.C.R. 
Setting aside the Judgment and decrees of the Subordinate Judge, 
the High Court, in appeal, decreed the suit instituted by the appellant, 
but held that the Bank was entitled to recover the amount claimed by it, 
only after scaling down the debt in accordance with the provisions of the 
Andhra Pradesh (Andhra Area) Agriculturists Relief Act IV of 1938. 
In the appeal by special leave, it was submitted on behalf of the 
appellant-Bank that in view ofs. 4(e) of the Act, the provisions of the Act 
were not 11pplicable to the appellant-Bank and as such, it was entitled to 
recover the entire amount without the same being scaled down as pro-
vided in s. 13 of the Act, and that the words "special Indian Law" in 
s. 4{e) referred to and related to law made by an Indian Legislature. 
On behalf of the respondents, it was contended that the words 
"special Indian law" meant a special Indian Law enacted by the Parlia-
ment of the United Kingdom, that even assuming that the expression 
"special Indian law" meant a law enacted by the Indian Legislature 
and that the Banking Act was such a law, still the provision of s. 4{e) of 
the Act did not apply inasmuch as the appellant-Bank was not formed in 
pursuance· of "special Indian law", but by or under "special Indian 
law", that is, the Banking Companies Act, and as such, it was not a 
Corporation within the meaning of s. 4(e) of the Act, that as the 
appellant-Bank was nationalised and/or created under Ordinance VUI 
of 1969 promulgated on July 19, 1969 and the Banking Companies Act 
only ratified the already created bank under the said Ordinance, it was 
not formed or created under any 'special Indian Law' and that since a · 
major part of the loan was contracted before the nationalisation of the 
appellant Bank, the provision of s. 4(e) was not applicable, 
Allowing the appeal, 
HELD: 1. The provisions of the Act are not applicable, to the 
appellant Bank, and there is no question of scaling down the debt due to 
the Bank by the respondents. [972E] 
G 
In the instant case, the amounts of loan were advanced by the 
Bank to the firm under the cash-credit account opened in favour of the 
firm. Normally, the advances that are made from the cash-credit 
account are repaid and thereafter fresh advances are made. It is not 
known what was the actual balance on the date the Bank was nationali-
sed, and whether the first two amounts were repaid by the firm and, 
H thereafter fresh advances

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