1. This is a petition by one of the money-lenders carrying on that trade in a scheduled area challenging the vires of most of the provisions in a body of regulations made by the Governor of Madhya Pradesh in exercise or the powers in Paragraph 5(2) of the Fifth Schedule to the Constitution and entitled the "Madhya Pradesh Scheduled Tribes Debt Relief Regulations 1962". They came into force on 15-8-1983 and have been subsequently amended by the amending regulations of 1963 (actually numbered 1 of 1964). There is also a body of rules made under the Regulation No 26 of 1962. Both the original and this amending regulations have received the assent of the President; but the petitioner challenges the vires on the general grounds and besides has questioned their vires on grounds relatable to some of the more important regulations.
2. Generally the argument is twofold; first, that these regulations having been made under Para 5(2)(c) of Fifth Schedule to the Constitution by way of regulating the business of money-lending and not under Para 5(2) generally for the peace and good Govt. of the area, these provisions could not have been made because they are so drastic as to shut out the business of money-lending altogether and not merely to limit or to control certain aspects of the conduct of that business. Secondly, the regulation being in effect restricted to claims existent on the day of the commencement, that is, 15th August 1963 and at the same time the money-lenders being categorically barred from moving the civil Courts, they are left without any remedy whatsoever in respect of claims arising after the commencement. In particular, several of the provisions are also challenged as being repugnant to some one or other of the provisions of the Constitution or to the principles of natural justice.
3. It is convenient to examine the two general grounds before setting out the broad objections regulationwise and examining them for what they are worth.
4. The first general ground is that these regulations are not relatable to the regulating of money-lending in the manner set out in Paragraph 5(2)(c) of the Fifth Schedule to the Constitution. One attack is that these go far beyond the mere regulating and extends to the prohibition altogether of the carrying on of the business of private money-lenders. Another attack is that while this is ostensibly for the regulating of the business of money-lending, the provisions are so wide as to come under the purpose, "for the maintenance of peace and good government" in that area. This is based on some misunderstanding. The main purport of Paragraph 5 (2) is the making of regulations for peace and good government while the sub-heading which mentions the business of money-lending is only by way of illustration. The phrase "peace and good government" is so wide that it can justify a course of action by which certain lines of business are altogether forbidden provided of course it is done on the face of it for the protection of the scheduled tribes in the area and for the promotion of their welfare. As they are situated, the tribes are particularly easy victims to what are reputed to be the devices of private money-lenders and at the same time liable to outbursts of temper and violence when they begin to realise that they are being cheated or victimised by exorbitant terms and conditions. In what manner and to what extent this danger should be guarded against is a question of policy; but the measures taken in that regard would certainly come under the purpose of peace and good government and at the same time the regulation of the carrying on of the business of money-lending. This, therefore, need not be further expanded.
The other attack is that while claiming to regulate the business of money-lending the measures taken are really calculated to give relief from the past indebtedness of the tribals. In effect, the regulation operates, as it were, retrospectively. It is difficult to see why this cannot be done. That a regulation can act towards future is obvious; but it can also work towards the relieving or the scaling down of the burden of accumulated debts. There is nothing in the Constitution to bar any retrospective measure other than purely penal one. All that can be said is that the regulation proposed to a very considerable extent, is calculated to reopen transaction ostensibly concluded in the past; but that is constitutionally unexceptionable.
5. The second general ground is that on the face of it those regulations as they stand leave the money-lender altogether without any remedy for the realisation of the claims arising after 15-8-1963 the date on which these came into force. Regulation No. 5 calls upon every creditor to file a separate application in respect of each of his debtors so that there could be a determination of the debts by the Debt Relief Court. This is of course with reference to the debt outstanding on the day of its coming into force. Paragraph 6(3) expressly provides that every claim which is not submitted within the time specified in the previous sub-paragraph shall be deemed to have been discharged. The question posed by the petitioner is what he has to do in regard to claims arising on account of money-lending transactions after the coming into force of these regulations. Frankly, as they stand the regulations leave the creditor without any remedy for such claims. This would certainly put them on risk in practising their business because they would have no means ot realising their dues.
6. We were at the first instance inclined to feel that there was some inadvertency in this regard but the return given by Government shows that the entire problem is being investigated and these regulations are, as it were, only the first instalment.
"The making of provisions regulating the money-lending business in such areas is under consideration of the Government and is likely to be finalised within a short time."
It is therefore expected that when the full picture emerges the creditors will not be without means of registering and realising through home tribunals claims arising after the coming into force of these regulations. The immediate effect, therefore, is of something like a moratorium in regard to the claims relating to the earlier period. When a new machinery is created or the disposal of the claims after that particular date there will be time to consider whether that will shut the business out altogether or put limitations that are unconstitutional or basically unreasonable. But as far as these regulations go, considering the limited nature of their scope that problem does not arise before us. Thus on purely general grounds there is no objection to these regulations; they could be made within the powers given to the Governor by Paragraph 5(2) of the Fifth Schedule to the Constitution.
7. Several of the individual regulations have been attacked as being unconstitutional or unreasonable or dicrimmatory. It will be proper to go through them one-by-one.
8. Regulation No. 3--There is nothing wrong in the constitution of special tribunals in this case called Debt Relief Courts. It is not correct to allege that no qualifications are laid down. As a matter of fact these Debt Relief Courts would be presided over by revenue officers not below the rank of Deputy Collectors. Not only is the qualification for the tribunal expressly laid down, but also it is clear that the officers that are to preside over these tribunals are persons of special training and at least some experience. The suggestion made at the bar is that these persons are not men of what is called 'judicial training'. It is not correct. Deputy Collectors have as part of their training and probation to undertake a course of study in the law and procedure. In addition a good deal of their work is what can be truly described as "judicial work". There is, therefore, no objection to this provision.
9. It is of interest to note that the decisions of the Debt Relief Court are not altogether final but are subject to a revision before the District Court in the manner provided in Regulation No. 21. Thus there is nothing unconstitutional or unreasonable in the creation of the Debt Relief Courts.
10. Regulation No. 4--This regulation contains a number of exemptions. Certain claims will continue to be cognizable by other Courts and tribunals as before instead oi going under the Debt Relief Courts. Some of the exceptions are of the nature of rents and taxes payable to Government or some local authority which are of course understandable because they stand as a class by themselves; others again are of special nature like liabilities arising out of breach of trust or maintenance decrees or liability of guardian on account of misapplication or misappropriation of the ward's property. A special feature, however, is the exemption of claims payable to cooperative societies and regular banks. The question naturally is whether this classification is reasonable and proper having regard to the purpose for which the regulations are being made. On behalf of the petitioner attention is drawn to the decision of the Rajasthan High Court in ILR (1959) 9 Raj 547 which went up in appeal to the Supreme Court and has been disposed of by that Court's judgment in State of Rajasthan v. Mukan Chand, AIR 1964 SC 1633. The legislation concerned was the Rajasthan Jagirdars Debt Reduction Act, the purpose of which was generally to reduce the burden of debt on the Jagirdars in that State. One of the provisions was for the classification of the debts and providing that certain of them could be scaled down while others could not be. This came in for criticism in certain respects from the Rajasthan High Court and more elaborately from the Supreme Court:--
"The fact that the debts are owed to a Government or local authority or other bodies mentioned in the impugned part of Section 2(e) has no rational relationship with the object sought to be achieved by the Act, namely to reduce the debts secured on jagir lands which had been resumed under the provisions of the Rajasthan Land Reforms and Resumption of Jagirs Act. Further, no intelligible principle underlies the exempted categories of debts. The reason why a debt advanced on behalf of a person by the Court of Wards is clubbed with a debt due to a State or a scheduled bank and why a debt due to a non-scheduled bank is not excluded from the purview of the Act is not discernible."
Accordingly, while approving of the Act generally as being in the interest of general public, the Supreme Court all the same in part agreement with the High Court ruled out the exemption of certain debts. The key to the decision is that the purpose of the legislation was just to scale down the Jagirdars' burden of debt and it was immaterial from this viewpoint to whom the debt was payable.
11. The instant regulations, however, stand altogether on a different footing. Their purpose is not generally to reduce the burden of debt on the members of the scheduled tribe; certainly that burden would be reduced; but that is not the main or the only purpose which is to protect them from being exploited or victimised by the superior intelligence and devices of certain classes of people who do the money-lending business among them. Looked at that way a non-profit making concern like a cooperative society is certainly entitled to exemption because by its very nature it is presumed not to exploit the ignorance of the tribals. Again, from this point taxes, rents or similar dues payable to Government or local authority would certainly mil for exemption because they will never include an element of improper or unjustifiable profit gained by taking advantage of the weaknesses of the debtors. Certainly, banks properly so-called have also been excepted. This can be justified on the principle that though a bank is a profit making institution the manner of its management and the control exercised by the Reserve Bank in certain cases, and the applicability of the special banking laws assure that it will not indulge in the illegitimate profit making to which private money-lenders are tempted. Thus the principles laid down in regard to the Rajasthan Jagirdars Reduction of Debts Act are not applicable to the instant regulations.
12. Regulation No. 5 (et. seq.) This regulation is consequential to the constitution of the Debt Relief Courts and takes out all litigation in regard to claims against members of the tribe in the area from the purview of the civil Courts. Regulation 6 has been discussed while 7 to 20 are procedural. In essence they provide for the reopening of accounts and the grant of instalments and a second chance in certain circumstances to defaulters. They also free certain properties from the bond of security. They also protect certain properties from attachment and sale and further enable the application of the realisations in a manner that the Governor considers equitable and fair. In effect some of the regulations form a short code in insolvency. AH this is in restriction of the right of the member of the tribe to deal freely with his property and to enter into transactions without any restriction. But Article 19(5) of the Constitution is meant expressly for the protection of the tribals for their own impecuniosity.
13. In view of what has been said in the return, the argument that the regulation has the effect of shutting out the business of money-lending in this area by any money-lender except a cooperative society or a regular registered bank is not quite sound. What exactly would be the framework within which the private money-lender will be allowed to do business would depend on the regulations that might be made in future. Even supposing that the worst fears of the petitioner materialise & this class of money-lenders is in effect prohibited altogether from carrying on the business still we are act prepared to hold that there is any contravention either of paragraph 5 of the Fifth Schedule or of Article 14 of the Constitution. As already indicated this is a case of classification appropriate to the regulation of business of money-lending. The Governor has taken the view that non-profit making organisations like cooperative societies on the one hand and on the other profit-making bodies like regular banks which are, however, working under the supervision of bigger banks and ultimately of the Reserve Bank and are further controlled by statute are not exposed to the same temptations as individual private money-lenders to take advantage of the ignorance and recklessness of the tribal people. On this view even if the Governor decided that the financing of the agricultural and industries in the area should be only by the first two sets of agencies and not by private money-lenders, still it would be proper regulation. Money-lending as such is not being banned; what as feared by the petitioner is going to be banned is only the money-lending by an agency which is on the one hand a profit-maker and on the other not subject to such checks and supervisions as regular banks. That way also Regulation No. 6 neither directly nor by implication is ultra vires.
14. The rest of the regulation is procedural. So also all the following ones right down to No. 20. As already indicated these involve reopening of accounts, scaling down, instalments, grace periods and a simpler insolvency code suited to these areas. There is nothing abnormal about this and they are found in the legislative measures in force in different States. The peculiarity here is, most of them are found together which is not the usual case.
15. There is one aspect of the matter to which the petitioner has made reference. In certain circumstances the secured debts are to be treated as unsecured; in other words, the creditor is just deprived of the mortgage, or charge as the case may be, on the debtors property. Assuming that this is also property, it is certainly a case of deprivation. But we do not agree that this deprivation is repugnant to Article 31. Whatever might have been the position originally, after the enactment of the amended Sub-article 31(2-A) there is altogether no doubt that a law can deprive somebody of his property and can still be valid without any provision of compensation if there is no transfer of the ownership or right to possession of that property to the State or to a State owned or State-controlled Corporation. By now it is so well established that it is unnecessary to cite case law.
16. Regulation No. 21 deals with revision, No. 22 with court-fee, No. 23 bans other legal proceedings, No. 24 takes away jurisdiction of civil courts over certain causes and No. 25 provides new rules of limitation. There is altogether nothing objectionable in these.
17. By a subsequent amendment Regulation 25-A is made :--
"25-A. (1) No creditor shall accept any payment against any claim for a debt which as been discharged or deemed to have been discharged under these regulations . . .."
By sub-regulation (2) this is made as criminal offence. The provision is certainly drastic. But it is a direct corollary of the axiom that in every dealing between the money-lender and the tribesmen the latter is likely to be influenced unless he is protected. What may appear to be a voluntary payment might really be a forced one. Anyway, we are not concerned with the policy. The only question is whether it has the effect of ex-post-facto penal law; that certainly it is not. There may be payments accepted by the creditor after commencement of the original regulations but before this amendment. Such payments would certainly be taken into account by the Debt Relief Court and adjustments ordered. But as long as the payment and acceptance are not proved to have happened after the amendment the penal provision will not operate. There is in fact nothing in the wording of Regulation 25-A to suggest that any payment accepted by the creditor before the date of the amendment might still become the subject-matter of a criminal charge. So there is no question of repugnancy to Article 20.
18. The new regulation No. 25-B provides that the offence of accepting payment from the debtor after he is deemed to nave been discharged under these regulations would be a cognizable offence. Whether or not such a drastic provision should have been made is entirely the look out of the Governor acting as usal subject to the President's assent. But this is a provision which he is competent to make.
19. It is suggested that there is a Jhabua Debt Relief Act parts of which are still in force and there is a conflict between the regulations and that enactment. It is not clear on what provisions there is conflict. Anyway the petitioner has been doing business at Petlawad which at all events was not part of the Jhabua State but was originally part of the Holkar State. So whether or not (in that part) any old Jhabua law is still in force it is not operative in Petlawad. So it is unnecessary to examine this problem any further.
20. The result of the examination is that there is nothing in these regulations that can be called invalid for repugnancy to any provision in the Constitution. The petition is dismissed. The petitioner shall pay costs to the State and hearing fee of Rs. 1.00 (one hundred).