Padmanabhan, J.

Pursuant to an Order of Reference dt. 24th August, 1982 made by Natarajan, J. this petition coming on for hearing before the Division Bench, the Court made the following

1. A question of considerable importance arises for consideration in this civil revision petition pursuant to an Order of Reference made by Natarajan, J. The learned Judge has referred the matter for decision by a Bench as he disagreed with the ratio of Ratnavel Pandian, J. in K.P Kesava Mudaliar v. P.T Sengoda Mudaliar, by partner A. Raja Devan . 1981 T.L.N.J 149-C.R.P 2583 of 1980., order dated 10th October, 1980. The question is whether a decree for money passed by a court outside the State of Tamil Nadu and transferred for execution to a court within the State of Tamil Nadu, within whose jurisdiction the judgment-debtor has properties, can be declared to have been discharged; under S. 4(1) of the Tamil Nadu Debt Relief Act, 1970 (for short, the Act) and whether the execution petition filed by the decree-holder can be said to have abated under S. 4 (c) of the Act. Ratnavel Pandian, J. held in the negative on the ground that the cause of action arose outside the State of Tamil Nadu.

2. To appreciate the question of law that falls for decision, it is necessary to state a few facts. The judgment-debtor is the revision petitioner. The respondent is the assignee-decree-holder. The original decree-holder obtained a decree against the petitioner in A.S 89 of 1967 on the file of the City Civil Court, Bombay and had that decree transferred to the file of the Sub-Court, Chingleput, for the purpose of execution. The revision petitioner filed E.A 32 of 1981 and claimed the benefits of the Act and prayed that the execution petition should be dismissed as having abated. The executing court held that since the decree has been passed by the City Civil Court, Bombay, the provisions of the Act would not apply. In view of this finding, the executing court did not consider the question whether the revision petitioner was a debtor within the meaning of the Act.

3. Before we consider the contention of Mr. Raghavan, it is necessary to refer to some of the provisions of the Act. The Act is intended to provide relief to certain indebted persons in the State of Tamil Nadu. The Preamble states:

“Whereas it is expedient to provide relief to certain indebted persons in the State of Tamil Nadu from the usurious practices of pawn brokers, money lenders and other non-institutional sources of credit and to give relief from the debts due to such pawn brokers, money lenders and other non-institutional sources of credit.”

S. 3(c) defines a debt thus:

“Debt means any liability in cash or in kind, whether secured or unsecured and whether decreed or not, but does not include arrears of taxes due to the Central Government or a State Government or a local authority.

S. 3(d) defines a debtor thus:

“Debtor means any person from whom any debt is due and whose annual household income does not exceed four thousand and eight hundred rupees.”

The proviso states that a person shall not be deemed to be a debtor under certain circumstances. S. 4 of the Act reads as follows:

“4. Relief from indebtedness: (1) Notwithstanding anything contained in the Tamil Nadu Agriculturists Relief Act, 1938…or in any other law for the time being in force or in any contract or instrument having force by virtue of any such law and save as otherwise expressly provided in this Act, and in particular, sub-S. (2) with effect on and from the commencement of this Act—

(a) every debt advanced or incurred before the first day of January, 1980 (including interest, if any) and payable by the debtor to the creditor shall be deemed to be wholly discharged;

(b) No civil court shall entertain any suit or other proceeding against the debtor for the recovery of any amount of such debt (including interest, if any);

Provided. …

(c) all suits and other proceedings (including appeals, revisions, attachments or execution proceedings) pending at the commencement of this Act against any debtor for the recovery of any, such debt (including interest, if any, shall abate;

Provided. … … …”

Since S. 4 provides that every debt advanced or incurred before the first day of January, 1980 and payable by the debtor to the creditor shall be deemed to be wholly discharged and all suits and other proceedings pending at the commencement of the Act against any debtor for the recovery of any such debt, shall abate, it is clear that it enacts a substantive provision of law.

4. The contention of Mr. Raghavan, the learned counsel for the petitioner is that the definition of the debt does not make a distinction between a debt incurred within the State of Tamil Nadu and outside and also between a debt decreed by a court within the State of Tamil Nadu or outside. Further, according to the learned counsel the definition of debtor only refers to a person from whom any debt is due and no emphasis is made on the person to whom it is due. It is the submission of Mr. Raghavan that all laws are territorial and consequently that the Act will be applicable to all debtors within the State of Tamil Nadu from whom a debt is due.

5. As rightly pointed out by Mr. Raghavan, all legislations are territorial in operation. Art. 215 of the Constitution of India which adumberates this principle states—

“(1) Subject to the provisions of this Constitution, Parliament may make laws for the whole or any part of the territory of India, and the legislature of a State may make laws for the whole or any part of the State;

(2) No law made by Parliament shall be deemed to be invalid on the ground that it would have extraterritorial operation.”

In other words, all Acts of Tamil Nadu State Legislature can have only territorial operation. It cannot and will not apply to persons out side the State or affect events that take place outside. Extra-territorial application of a legislation will arise only where there is a nexus between the legislation and the person or thing placed outside the territories. Consequently, there is no difficulty in holding that the Act will apply to all persons and debts within the State of Tamil Nadu.

6. But from the above legal position it does not follow that a debt which had ripened into a decree in a court outside the State of Tamil Nadu will get discharged and execution proceedings will abate in respect of the said decree which stands transferred for execution to a court in Tamil Nadu. In this connection, it is necessary to refer to certain provisions of the Code of Civil Procedure.

7. S. 38, C.P.C, states that a decree may be executed by the court which passed the decree, or by the court to which it is sent for execution. S. 39 deals with the procedure for the transfer of a decree. S. 40 states that where a decree is sent for execution to another State it shall be sent to such court and executed in such manner as may be prescribed by rules in force in that State. S. 41 states that the court to which a decree is sent for execution shall certify to the court which passed it the fact of such execution, or where the former court fails to execute the same the circumstances attending such failure. S. 42 which deals with powers of court in executing a transferred decree reads thus:

“42(1). The Court executing a decree sent to it shall have the same powers in executing such decree as if it had been passed by itself. All persons disobeying or obstructing the execution of the decree shall be punishable by such court in the same manner as if it had passed the decree. And its order in executing such decree shall be subject to the same rules in respect of appeal as if the decree had been passed by itself;

(2) Without prejudice to the generality of the provisions of sub-S. (1) the powers of the court under that sub-section shall include the following powers of the court which passed the decree, namely—

(a) power to send the decree for execution to another court under S. 39;

(b) power to execute the decree against the legal representatives of the deceased judgment-debtor under S. 50;

(c) power to order attachment of a decree;

(3) A court passing an order in execution of the powers specified in sub-S. (2) shall send a copy thereof to the court which passed the decree.”

Thus, it is clear that Ss. 40 and 42 of the C.P.C, are procedural and do not deal with substantive law, ‘In such manner as may be prescribed by rules in force in that State’ occurring in S. 40, C.P.C, refers to the procedure under which the execution should be had and not to the right of execution. Similarly, the power that is conferred on the transferee court under S. 42, C.P.C, is the power for the purpose of execution of the decree. It should be remembered that notwithstanding the transfer of the decree to another court for execution the transferor court retains control over the decree. For instance, S. 46 entitles the court passing a decree to issue a precept to any other court competent to execute the decree to attach any property belonging to the judgment-debtor which the latter court is bound too bey. S. 41 requires the Court to which a decree is transmitted for execution to certify to the court which passed it ‘the fact of such execution, or where the former court fails to execute the same the circumstances atteding such failure’. These provisions seem clearly to show that though the execution may be actually carried out by a different court, the court passing the decree has a large measure of control over the execution. In other words, S. 42, C.P.C does not have the effect of converting the decree into a decree passed by it for all purposes. S. 42 does not warrant any such assumption except for the limited purpose of execution. The other point to be remembered is that the Act does not provide for execution of decree or the procedure relating thereto. There may be provisions in the Act by which the debtors for whose benefit the Act has been passed are given relief in execution proceedings. To that extent, the Act provides remedies to arrest in execution proceedings and not for carrying on of the execution. In the circumstances, we have to turn to the general law for an answer.

8. A decree is only a step in the course of the realisation of a debt, as pointed out by Lord Macmillan in Raja Raghunandan Prasad Singh v. The Commissioner of Income tax, Bihar and Orissa. It is not for all practical purposes different from the decree into which it has ripened. Regarded as a judgment debt the decrees sought to be executed are choses in action. Choses in action are situate in the country where judgments have been obtained. In Attorney General v. Bouwans and others . Masson and Welsby's Report, dage 171 it is stated thus:

“As to the locality of many description of effects, household and movable goods, for instance, there never could be any dispute; but to prevent conflicting jurisdictions between different ordinaries, with respect to choses in action and titles to property, it was established as law, that judgment debts were assets, for the purposes of jurisdiction, where the judgment is recorded.”

In Dicey & Morris, The Conflict of Laws, 10th Edn. page 532, it is stated:

“Judgment debts are situate in the country where the judgment is recorded.”

In Cheshire's Private International Law, 8th Edn. at page 380 it is stated—

“For the purposes of jurisdiction to make a grant of probate or administration, however, it has long been settled with respect to choses in action and titles to property that judgment debts are assets where the judgment is recorded.”

What then is a judgment debt? The judgment debt is the result of a contract entered into between the debtor and the creditor inside the State, e.g in this case in Bombay, outside the State of Tamil Nadu. How such a contract, the debt resulting therefrom and the decree evidencing the debt can be solved is a matter of substantive law. What will be the substantive law that ought to be applied in such cases will have to be determined by the application of the principles of Private International Law. Dicey in his ‘Conflict of Laws’, 10th Edn., states in, R. 146 at page 775—

“The formation of a contract is governed by that law which would be the proper law of the contract if the contract was validly concluded”.

In R. 145 at page 747 it is stated—

“The term ‘proper law of a contractor’ means the system of law by which the parties intended the contract to be governed or, where their intention is neither expressed nor to be inferred from the circumstances, the system of law with which the transaction has its element and most real connection.”

Dicey has further observed as follows at page 748 as follows—

“Subject to a number of exceptions the formation and validity of the contract, its interpretation and its discharge are all governed by the same law which thus applies to the ‘creation’ as well as to the ‘performance’ of the contract. This law, and, exceptions apart, this law alone, can by its legislation affect the contractual obligation and thus e.g, modify, discharge or annul a debt based upon the contract.”

R. 152 (at page 811) states:—

“The discharge of a contract normally depends upon the proper law of the contract.

(1) A discharge in accordance with the proper law of the contract is valid and effective in England.

(2) A discharge not in accordance with the proper law of the contract is not valid or effective in England.”

Dicey proceeds to state further—

“The proper law of the contract determines whether or not a contractual obligation has been validly discharged, e.g, whether or not an act on the part of the promisor or debtor constitutes performance and thus extinguishes the obligation. There is no doubt that a debtor liability arising in any country may be discharged by the laws of that country, and that such a discharge, if it extinguishes the debtor's liability and does not merely interfere with the remedies or course of procedure to enforce it, will be an effectual answer to the claim, not only in the courts of that country, but in every other country.”

At page 819 it is stated as follows—

“In Jacobs v. Credit Lyonnis, English law was the proper law, but French law was the lex loci solutionis and the court held the question of impossibility of performance to be governed by English Law, In Mount Albert Borough Council v. Australasian, etc., Assurance Society Ltd., the contract was governed by the law of New England, but the debt was payable in the State of Victoria, and the Privy Council decided in accordance with the law of New England and not in accordance with the law of Victoria whether the debt was discharged by the payment of interest at a particular rate. We may therefore conclude that a contractual obligation which has been discharged by the proper law will not be enforced in England, whether or not it has been discharged according to the law of the place where if was to be performed. We may also conclude that a contractual obligation which has not been discharged by the proper law may be enforced in England, though by the lex loci solutionis, it would have been discharged. The law of the place where the promisor or debtor resides or carries on business is not, as such, relevant to the issue. A contractual debt may, and normally will, be regarded as ‘situate’ at the debtor's place of residence, but the discharge of a debt, whether by performance or through other events, is a matter subject not to the lex situs of the debt but to the proper law of the contract from which it arises.… The courts have applied this principle in many cases in which it was alleged that a contractual liability had been discharged by legislation. The power of legislation to effect a contract by modifying or annulling some term thereof is a question of discharge of the contract, which, in general, is governed by the proper law. … Conversely, a debtor is not entitled to rely, as a discharge of bis debt, on legislation which is enacted in the country of the locus solutionis but not in that of the proper law. Nor can he for this purpose rely on the legislation of a country in which he resides or carries on business of which he is a national if the contract is governed by another law. This principle also applies to these various kinds of legislation which bear the name of ‘Moratoria’. It appears now to be established that a moratoria enures for the benefit of a debtor's if the relevant legislation is enacted in the country of the proper law of the contract, irrespective of the place of payment.”

The above principles have been followed in Shankar Vishnu v. Maneklal Haridas . A.I.R 1940 Bom. 362..

9. The power of the transferee court under S. 42, C.P.C, and the substantive law that is applicable to execution proceedings have now been considered in a series of cases. In Tirucowris Dawn v. Derendra Nath Mookerjee,4 Willson, J., held—

“Having regard to the provisions of Ss. 227 and 228 of the C.P.C, the period of limitation applicable to the execution of a decree, transmitted by one court to another for execution, depends on the character of the court which passed the decree and not on the character of the court executing it.”

A similar question arose for consideration before this Court in Sree Krishna Das v. Alumbi Ammal . I.L.R 1913 36 Mad. 108.. The question that arose for consideration was whether the law of limitation applicable for execution of a decree transferred from another court was the law of limitation applicable to the court which passed the decree or the law of limitation that was applicable to the court to which the decree was transferred for execution. The learned Judges did not accept the argument that the law of limitation was merely procedural. The learned Judges then observed as follows:

“O. 21, R. 28 provides that any order of the Court by which the decree is passed in relation to the execution of such decree shall be binding upon the court to which the decree is sent for execution. S. 46 of the present Code entitles the court passing a decree to issue a precept to any other court competent to execute the decree to attach any property belonging to the judgment-debtor which the latter court is bound to obey. S. 41 requires the court to which a decree is transmitted for execution to certify to the court which passed it ‘the fact of such execution or where the former court fails to execute the same, the circumstances attending on such failure. These provisions seem clearly to show that though the execution may be actually carried on by a different court, the court passing the decree has a large measure of control over the execution. Besides, to hold that the court executing the decree may apply a rule of limitation differing from that applicable to a decree of the court transmitting it when the latter itself is executing it would lead to anamolous consequences.”

11. In Ranganadham v. Ponancharama, a Bench of the Patna High Court held:

“S. 42 deals with the manner of execution and leaves the matter of limitation to be governed by the Limitation Act. When a decree passed by one court is sent to another court for execution the period of limitation applicable to the execution of the decree depends on the character of the court which passed the decree and not on the character of the court executing it.”

12. In Inderchand Kajriwal v. Banoropan Sahu, a decree was obtained on the original side of the Calcutta High Court and it was transferred for execution to the Shehabad Court in the Province of Bihar. In execution proceedings, the judgment-debtor raised an objection that the property sought to be proceeded against should be valued under the provisions of the Bihar Money Lenders Act, 1939 and that only a portion of the property should be sold in accordance with the provisions of the Act. It was contended that since the decree was passed by the Calcutta High Court on its original side, it would be executed by the Shehabad court only in accordance with the provisions of the Bengal Money Lenders Act, 1940, and not in accordance with the Bihar Money Lenders Act, 1939. Sinha, J. observed as follows:

“The first question to be determined in this appeal is whether the Shehabad Court in executing the decree is to execute it in accordance with the provisions of the law as it prevails in Bengal. Under S. 40, C.P.C, which was added for the first time to the Code by the Act of 1908, the decree has to be executed in such manner as may be prescribed by the rules in force in Bihar. Now, what is the significance of the rules referred to in that section? In my opinion, have not the larger significance of rules of law inclusive both of adjectival as also substantive law. It may also be contended that S. 42, C.P.C, confers upon the transferee court, that is the Shehabad Court in this case, the same powers in executing the decree as if it had been passed by itself. But the powers referred to in this section refer to the powers of the executing court in relation to the procedure to be followed, and not in relation to the substantive law to be administered in executing the decree. In this connection reference may be made to the decision of a Division Bench of this Court in Ranganadham v. Ponaneharama in which the Division Bench laid it down that S. 42, C.P.C, deals with the manner of execution and leaves the matter of limitation to be governed by the Limitation Act, and that the period of limitation applicable to the execution of the decree depended upon the character of the court which passed the decree, and not on that of the court executing it on transfer. In this connections reliance was placed upon a decision of the Calcutta High Court in Thirucowri's Dawn v. Derendra Nath Mookergee. To the same effect is the decision of a Division Bench of the Madras High Court in Sree Krishna Das v. Alumbi Ammal. Hence, it may be said that the preponderance of judicial authority appears to be in favour of the view that the transferee court in executing has to do so in accordance with the law of procedure obtaining in that Court but has to determine the rights and liabilities of the parties in accordance with the substantive law obtaining in the court which passed the decree, that is to say, the transferor court. That being so, it must be held that the Bengal Act X of 1940, which regulates the transactions of money lending in Bengal, must be referred to in order to determine the rights and liabilities of the parties before us.”

13. In Basheer Ahamed v. Padmanabha, a decree passed by the Madras High Court was transferred to the Court of the District Judge, Bangalore for execution. The judgment-debtor raised an objection pleading that he was an agriculturist within the meaning of S. 2 of the Mysore Agriculturists Relief Act; that he should therefore be permitted to pay the decree amount by annual instalments as provided by S. 12, Agriculturists Relief Act and that his immovable properties could not be attached or sold except under conditions contained in S. 14 of that Act. Thus he wanted his status as an agriculturist to be determined before execution was proceeded with. The District Judge overruled the objections holding that the transferee executing court cannot consider the questions and the judgment-debtor appealed to the High Court. It was contended before the High Court on behalf of the decree-holder that in cases like the one on hand the transferee court should execute the decree in accordance with the law of procedure obtained in the place of the transferee court and cannot seek to determine the rights of the parties according to any substantive law of that place and apply the incidents of such law to the decree in the course of execution proceedings. Reliance was placed before the learned Judges on the decision in Inderchand Kajriwal v. Barutupam Sahu. The learned Judges agree with the reasoning of the Patna High Court and dismissed the appeal.

14. In Ramavtar v. Pep Singh, a money decree has been passed by the Calcutta High Court on the Original Side. The decree was transferred for execution to the Court of the Subordinate Judge of Balasore in the State of Orissa. The judgmeut-debtor filed an application for being allowed to pay the decree debt in instalments under S. 13 of the Orissa Money Lenders Act. The application was dismissed by the executing court as well as by the learned single Judge of the High Court. The learned Judges observed as follows:—

“The only question for consideration is whether a transferee court in Orissa in executing such a decree passed in a court in Bengal would have to follow the provisions of the Bengal Money Lenders Act or that of the Orissa Act. Mr. A.K Rao submits that as the decree is pending execution in a court in Orissa the provisions of the Orissa Act would apply and can be followed by the transferee court in this case. Mr. Rao contends that on the provisions of Ss. 40 and 42 of the C.P.C, the transferee court in Orissa has to follow the law for such transactions in force in this State and as such could grant instalments under the Orissa Act.

S. 40, C.P.C, lays down that a decree which is sent for execution to a court in another State shall be executed in such manner as is prescribed by rules in force in that State. It therefore states that the transferee court has to execute the decree in following the procedure prescribed by rules in its own State. S. 42 lays down the powers of a court in executing a decree transferred to it.

Now, it is well settled that the powers referred to in S. 42, C.P.C, purport only to mean the powers of the executing court in relation to the procedure to be followed and not in relation to the substantive law applicable in execution of the said decree. So, therefore, the provisions of Ss. 40 and 42, C.P.C, are purely procedural, laying down only the adjective law for the execution of the decree and cannot therefore regulate the substantive rights and liabilities of the concerned patties which were settled and determined in the court which transferred the decree in accordance with the substantive law in force in that State and as such cannot again be subjected to and/or regulated by the law of the State to which the decree is sent only for execution.”

15. To sum up, the legal position is this. The discharge of a decree debt will have to be determined by the law of the State where the contract arises resulting in the creation of the debt and where it gets ripened into a judgment or a decree debt and not by the law governing the place where it is sent for execution. The transferee court under S. 42, C.P.C, has the powers of the transferor court only for the limited purpose of execution in respect of which the law of that court will apply. The law which determines the question whether a judgment debt stands discharged or satisfied will have to be determined by the proper law of contract, viz, the substantive law of the place where the debt arises and where the decree is passed. The Act, as already stated, is a substantive law which by S. 4 states that all debts shall stand discharged and all execution proceedings shall abate. A debt which ripened into a decree in Bombay cannot be declared to have been discharged by the law of Tamil Nadu State which is only the place of lex loci solutionis. We have therefore no hesitation in holding that the Act will not be applicable to decrees passed outside the State of Tamil Nadu, and which have been transferred to the State of Tamil Nadu for execution.

16. In the result, we dismiss the revision petition. There will be no order as to costs.

17. The Hon'ble the Chief Justice.—After the judgment has been delivered an oral prayer for a certificate has been made by the learned counsel for the petitioner. We are not satisfied that there is any substantial question of law of general importance in this case, which, in our opinion, needs to be decided by the Supreme Court. Hence, the prayer is rejected.

VCS.