AHMAD BAKSH Versus KHURSHID AKBAR KHAN

ZAFFAR HUSSAIN MIRZA, J.‑‑This appeal by the Agricultural Development Bank of Pakistan, D.I. Khan, arises out of the order of a learned Single Judge of the Peshawar High Court, Peshawar, dated 24th April, 1975, dismissing the second appeal in limine filed by the appellant against the judgment of the District Judge, D .I . Khan.

2. The background of the case is that one Sanaullah Khan, respondent No. 1 instituted a suit against the appellant and respondents 2 to 4 seeking a declaration that his father was not liable to pay any amount to the appellant on account of any loan payable by him and that the appellant had no legal right to demand repayment of any debt. Respondent No. 1 (the plaintiff) also prayed for the grant of a permanent injunction to restrain the defendants from recovering any amount from the plaintiff or the other successors in‑interest of his father on account of any alleged loan. In the alternative the plaintiff prayed for a decree for rendition of accounts.

3. The appellant and other defendants contested the suit and filed a written statement pleading therein that the deceased father of the plaintiff was advanced a loan of Rs.2,000 with 5$ per annum interest and in order to secure the loan he had mortgaged his land with the appellant‑bank. It was further averred by the defendants that the plaintiff had paid on 9th March, 1964, an amount of Rs.220.50 as part payment of the loan which was reflected in the statement of account annexed with the written statement. As regards other charges the defendants submitted that it was agreed that simple interest at 5$ per annum and 2% recovery charges were payable by the debtor. Issue No. 3 framed by the trial Court on the pleadings of the parties which is material for the decision of this appeal reads as under:‑‑

"Was Khan Saadullah Khan deceased father of the plaintiff indebted to the defendant Bank and as such his legal representatives including the plaintiff are liable to pay the entire debt and other charges? OPD"

4. The trial Court held that the appellant‑Bank had advanced a loan of Rs.2,000 to the father of the plaintiff at the rate of 5% interest per annum. As the trial Court on other issues found that compound interest was being illegally charged at the rate of 7% per annum, it decreed the suit of the plaintiff in terms of the alternate prayer and passed a preliminary decree, In 20th March, 1973, for rendition of accounts by the defendants.

5. Being dissatisfied with the aforesaid judgment and decree passed by the trial Court, the appellant filed an appeal before the District Judge and respondent No. 1, also filed cross‑objections challenging the findings of the Court against him on certain issues including issue No. 3. The learned District Judge vide judgment dated 1st

April, 1974, dismissed the appeal of the appellant herein and accepted the cross‑objections filed by respondent No. 1 and as a result granted a declaratory decree as prayed for against the appellant.

6. The appellant then approached the Peshawar High Court by filing a second appeal, which was treated as a revision, in order to challenge the judgment and decree passed in first appeal but this revision was dismissed by the impugned order in this appeal. In support of the petition for leave to appeal, the appellant referred to the fact that respondent No. 1 had admitted the signature of his father on document Exh. P.W. 1/D.1 purporting to be the registered deed of hypothecation by which his late father had hypothecated with the appellant‑Bank some of his land. The main contentions on which leave was granted were as under:‑‑

(i) Once it was admitted by respondent No. 1 that his father had executed in favour of the bank a registered hypothecation bond, the presumption would be that it was for consideration and that the principal sum of Rs.2,000 had been received by him.

(11) In part satisfaction of the said loan respondent No. 1 had himself deposited with the bank a sum of Rs.220.50 which appeared in the statement of the amount, although he had denied having done so.

(iii) The aforesaid two pieces of evidence were erroneously brushed aside without considering the presumption of truth attaching to the documentary evidence produced in support thereof.

7. We have heard the learned counsel for the appellant and he has re‑urged the aforesaid contentions on which leave was granted to the appellant.

8. So far as the first contention is concerned the learned Single Judge has pointed out in his order that the so‑called hypothecation deed was executed on 28th July, 1960 and the contents of the document clearly exclude the loan amount having been paid before or at the time of execution thereof. Besides the case of the appellant‑bank itself was that the amount was advanced to late Saadullah Khan on 29th July, 1960, i.e. a day later. As no receipt or any other evidence was produced to prove the actual payment of the loan amount the learned Judge reached the conclusion that the appellant‑bank had failed to prove the payment of the amount. Learned counsel for the appellant was unable to advance any argument to question this conclusion and we find no reason to disagree with the view taken by the learned Single Judge. There is no law nor was any provision of law pointed out to us which has the effect of raising a presumption that the proof of a hypothecation deed or a mortgage deed itself raises A the presumption of consideration having been paid, as in the case of promissory note. This being essentially a question of fact, we are not inclined to go into it at this stage or up set the finding recorded by the Courts below particularly in absence of the evidence led at B` the trial which has not been placed on the record. It may further be added that rule 13 of the Agricultural Development Bank Rules, 1961, framed under section 38 of the Agricultural Development Bank Ordinance, 1961, under which the appellant‑bank was established, mortgage security of immovable property can be taken for grant of a loan to an agriculturalist and it is common knowledge that these formalities are to be completed before the actual payment of the amount sanctioned. Therefore, nothing turns on the mere admission of respondent No. 1 that the hypothecation deed bears the signature of his father.

9. As regards the second contention, as already stated respondent No. 1 denied having deposited the amount of Rs.220.50 towards part satisfaction of the outstanding loan of his father. The trial Court, without referring to any evidence as to the person who had deposited this amount, merely observed that, "it proves existence of the loan against the plaintiff at least by implication". This is a wholly conjectural inference unsustainable in the absence of positive evidence C to prove that respondent No. 1 himself deposited the amount, in order to bind him down with the acknowledgement of the loan as an admission in law. In any case, as .discussed below this piece of evidence does not prove that the amount of Rs.3,399.78 demanded from respondent No. 1 as arrears of land revenue was due and payable by his father, much less by him personally as will be discussed later on.

10. We are, therefore, unable to see the force of the argument that the presumption of law arises from the aforesaid evidence that the father of respondent No. 1 had received any amount by way of loan from the appellant‑bank.

11. However, it seems that an important aspect of this case has been totally ignored and overlooked by the Courts below, which in our opinion has a decisive bearing upon the central controversy between the parties. In this connection we may state that the admitted position of this case is that the loan was advanced to Saadullah Khan the father of respondent No. 1, who had died before the recovery proceedings were initiated against the said respondent. The loans granted by the appellant‑bank are regulated by the provisions of the Agricultural Development Bank Ordinance, 1961, and the Rules framed thereunder (hereinafter referred to as the Ordinance and the Rules). According to section 19 of the Ordinance the bank is required to provide credit in cash or in kind and extend other credit facilities to "agriculturalist". The loans are advanced as is clear from sections 24 and 25 of the Ordinance under the terms of written agreement dealing with Pepayment and other matters. Essentially, therefore, subject to the provisions of the Ordinance the loans advanced and the liabilities incurred therefor are created as a result of contract between the parties. Ordinarily the promises contained in the contract bind the representatives of the promisor in case of death of such promisor before performance unless a contrary intention appears from the contract or the performance is dispensed with or excused under the provisions of any law (See section 37 of the Contract Act). However, the extent to which contractual obligation is binding on the legal representative of a party to such contract has been elucidated in the following extract by Keith in his book on Elements of Law of Contract:

"Generally a contractual obligation undertaken by deceased promisor would be binding on his legal representatives to the extent of the estate of the deceased promisor in their hands as this obligation of the legal representative is not personal. However, there is one exception to this rule in case of contracts which involve personal elements, and if personal skill is the l essence of the contract, the obligation under the contract can be discharged only by that party whose personal skill is involved. The legal representatives of the deceased promisor cannot be required to perform, nor can they render performance of contract involving personal skill and action. On the death of a person, on principle, the benefits and burdens of his contracts pass to the legal representatives as part of his estate."

From this a general principle has arisen that a pecuniary obligation arising out of the contract by a deceased party will bind his legal F representative to the extent of the estate of the deceased coming to his hands. This principle has been statutorily recognised in section 50 of the Civil Procedure Code which lays down the extent to which a decree passed against a judgment‑debtor who dies before the decree has been fully satisfied, against his legal representative.

Subsection (2) of section 50 provides as under:‑‑

"Where the decree is executed against such legal representative, he shall be liable only to the extent of the property of the deceased which has come to his hands and has not been duly disposed of; and, for the purpose of ascertaining such liability, the Court executing the decree may, of its own motion or on the application of the decree‑holder, compel such legal representative to produce such accounts as it thinks fit."

Similarly in case of money decree the liability of the legal representatives of a party who has died after the passing of the decree extends under section 52 of the C . P . C . to such property of the deceased as is proved to have come into their possession or to the extent of the property of the deceased in respect of which such G legal representatives have failed to satisfy the Court that they have duly applied such property of the deceased which came to their possession. In this context of the law, without proving that any property has come into the hands of the son and to what extent in value compared with the pecuniary liability of the deceased father, it cannot be recovered from the son. This aspect was completely over‑looked by the trial Court and the first appellate Court and no such inquiry was made or any proof furnished by the appellant‑bank so as to make respondent No. 1 liable for the debts of his deceased father.

This brings us to the crucial point that arises in this case. From the facts it appears that the appellant‑bank had set into motion the process for the recovery of the alleged outstanding dues of H Saadullah Khan, the deceased father of respondent No. 1 under section 25 of the Ordinance, the relevant part of which lays down as under:

"(1) Where any agriculturist who is under liability to the Bank under agreement makes default in repayment or otherwise fails to comply with the terms of his agreement with the Bank, such default or failure not being due to natural calamity, the Bank may, subject to any rules made in this behalf, take over the management of the concern of the agriculturist and sell or realise any property pledged, mortgaged, hypothecated or assigned by the agriculturist to secure his liability to the Bank.

(2) All sums due to the Bank shall be recoverable as arrears of land revenue.

(4) Sums due from a co‑operative society and recoverable under subsection (1) may be recovered in accordance with the provisions of law for the time being in force relating to the recovery of such sums due from a co‑operative society to Government."

It is important to note that the recovery can be effected under subsection (1) of section 25 from an "agriculturalist" or defaulter in I the repayment of any liability to the bank and such sums which are due to the bank are recoverable as arrears of land revenue. It is an admitted position that demand was made on respondent No. 1 by means of notice by the Naib‑Tehsildar, D.I. Khan, for recovery of Rs.3,399.78 as arrears of land revenue, being the due outstanding against Saadullah Khan deceased (vide judgment of the trial Paragraph 1) . Now section 2(c) defines the "agriculturalist" inter alia to mean any individual engaged in agriculture or in the development of agriculture or agricultural products, who satisfies the bank that the loan to be taken shall be spent on agriculture or the development of agriculture or agricultural products etc. Section 19 of the Ordinance provides for providing credit in cash or in kind and credit facilities, to agriculturalists for the purpose of agriculture etc. Reading these provisions of law together it is plain that the powers conferred underi section 25 to recover the sums due to the bank as arrears of land revenue are exercisable against the agriculturalist who had secured the loan or credit facilities from the bank. This is the foundational basis of the jurisdiction to exercise the extraordinary powers of J recovering the dues of the bank. It, therefore, follows that the power of coercive recovery cannot be invoked against a person who did not secure the loan as a agriculturalist himself. Admittedly respondent No. 1 did not obtain the credit facilities or secure the loan which is being recovered from him. The proceedings for the recovery of the dues from him, therefore, by the means adopted was illegal.

12. Be that as it may it is now well‑settled that all provisions of law which authorised any statutory authority to recover any amount _ as arrears of land revenue can be invoked only after determination " of the amount of dues as affixed, ascertained and determined sum of money. This principle of law has been laid down by this Court in the case of Abdul Latif v. The Government of West Pakistan and others P L D 1962 S C 384. In that case their Lordships interpreted the word "defaulter" as it occurred in the Punjab 'Revenue Act, 1887 and the Revenue Recovery Act, 1890. Then they proceeded to examine the provisions of‑ section 66 of the Punjab Land Revenue Act and observed as under:‑‑

"Here we may observe that the object and reason of the Punjab Land Revenue Act together with the policy underlying it is all too apparent from the Act itself. There are provisions in the Act with respect to the making and maintenance of records of rights in land, and other matters relating to land and liabilities incidental thereto. There are several classes of Revenue Officers under the control of the Board of Revenue. There is elaborate procedure for reconsideration of assessment and the assessee has a right of appeal. The order of the Revenue Officer is also open to revision. From these provisions it seems perfectly clear that the Act does not give absolute power to the Revenue Officers to fix the liability at their sweet‑will. When the land revenue has been determined after following an elaborate procedure, preparation of a statement of account becomes more or less a mechanical job. In the above context it is laid down in section 66 that' a statement of account certified by a Revenue Officer shall be conclusive proof of the existence of an arrear of land revenue, of its amount and of the person who is the defaulter'. It must be remembered that a right construction of the Act can only be attained if its whole scope and object, together with an analysis of its wording and the circumstances in which it is . enacted are . taken into consideration. From an examination of the Land Revenue Act, it is apparent that it provides first a procedure for determination of land revenue and then comes the machinery for realisation of such revenue.

It is, therefore, manifest that before the operation of the machinery section for realisation of the arrears, the authority concerned must decide whether there is an arrear due or not."

Having found that the Deputy Commissioner had served the defaulting party with an order not for the purpose of further investigation, nor for hearing what he had to say in the matter but simply to carry out the order, the action taken by the officer was held to be invalid as violative of the Rules of natural justice. The position appears to be similar in the present case. In the West Pakistan Land Revenue Act, 1967, as applicable in the province of N.‑W.F.P. at the relevant time, section 79 lays down as under:‑‑

"A statement of account certified by a Revenue Officer shall be conclusive proof of the existence of an arrear of land revenue of its amount and of person who is the defaulter."

It will be seen that the provisions of section 79 are in pari materia with section 66 of the Punjab Land Revenue Act on which the cited decision is based. Section 115 of the West Pakistan Land Revenue Act, 1967, expressly makes Chapter VIII of the Act applicable to the recovery of a sum as an arrear of land revenue. As section 79 falls under Chapter VIII it is clearly attracted in such a case. On parity of reaso.1ing, therefore, the machinery provisions for the realisation of amount as arrears of land revenue under section 25 of the Ordinance could only be invoked after the procedure for determination of arrears due is adopted and duly certified. In absence of such a certificate L the person concerned, without being given an opportunity of hearing, will not be a defaulter within the meaning of the law. Otherwise a mere claim could be recovered by one of the parties to the contract by the coercive procedure provided in the Ordinance. Such unjust and arbitrary power could not be attributed to have been conferred on the functionary by the legislature. The Board of Revenue has taken care to frame rules called the West Pakistan Land Revenue Rules, 1968, in which Rules 57 and 58 lay down detailed procedure for adjudication of the amount due as arrears of land revenue and the person from whom it is due as the defaulter before proceedings for recovery of the same are initiated. In view of the aforesaid the matter is beyond controversy, and therefore, the procedure adopted in this case was totally unwarranted and contrary to law.

13. The result is that this appeal is dismissed with no order as to costs.

M.B.A./A‑130/S Appeal dismissed.