Chapter III PROCEDURE FOR SETTLEMENT OF DEBTS

(1) Any Jagirdar ordinarily residing in any part of the area to which this Act extends or his creditor may make an application to a Board of competent jurisdiction on or before such date as the Government may notify in the Official Gazette for settlement of debts due by the Jagirdar.

(2) Every application made under sub-section (1) shall be in writing in the prescribed form and shall be signed, verified and presented in the prescribed manner.

(3) Notwithstanding anything contained in section 3, an application made under this section shall contain also the amounts and particulars of all debts specified in that section due by the debtor.

(1) Notwithstanding the fact that no application has been filed under section 11-

(a) every creditor, on being required to do so by notice in writing by any of his debtors, shall, within one month from the date of the receipt of such notice, file before the Board concerned a true and correct statement of all his claims against such debtor, and shall at the same time send a copy thereof to such debtor, and

(b) every debtor, on being required to do so by notice in writing by any of his creditors, shall, within one month from the date of the receipt of such notice, file before the Board a true and correct statement-

(i) of all the debts owed by such debtor; and

(ii) of his income in the year preceding the date of the notice;

the debtor shall at the same time send a copy of such statement to such creditor:

Provided that the Board may, for sufficient cause, extend, from time to time, the period within which the creditor or the debtor, as the case may be, may file such statement.

(2) Every debtor or creditor giving a notice under sub-section (1) shall at the same time send a copy thereof to the Board concerned.

(3) In awarding the costs of any proceedings in respect of any application made under section 11 the Board may, on being satisfied that the statement required to be filed under sub-scction (1) was, without sufficient cause, not filed within the time specified therein or within the extended period under the proviso to that sub-section or incorrectly filed, direct the party in default to bear the whole or any portion of the costs of such proceeding.

(1) If the payment of a debt due by a debtor is guranteed by a surety or if a debtor is otherwise jointly and severally liable for any debt along with any other person and if the surety or such other person is not a debtor, the debtor may make an application under section 11 for relief in respect of such debt and the Board may after consideration of the facts and circumstances of the case proceed with the settlement of debts under this Act in so far as such applicant is concerned.

(2) Whenever the debts due by a debtor which are guaranteed by a surety are settled under sub-section (1), the surety shall be discharged from liability in respect of the debts or portion of the debts of such debtor which are extinguished under sub-section (1) of section 22, sub-section (5) of section 30, section 38 or clause (2) of section 39; and the surety shall not be entitled to proceed against the debtor in respect of such debts or portion.

No application shall lie under section 11 for settlement of any debts due from a debtor to whom such debt has been transferred or assigned after the 1st January, 1941 by any person who is not himself a debtor.

Notwithstanding anything contained in the preceding sections, if during the pendency of proceedings before the Board or the Court in appeal, as the case may be, a settlement is arrived at between a debtor and all his creditors and if such Board or Court is satisfied that the settlement has been made by the debtor voluntarily and is for his benefit, such Board or Court may make an award in terms of such settlement.

Every settlement by consent of a debt due from a debtor to any creditor, which is not certified by the Board under section 15, or in terms of which no award has been made under section 16, shall be void and shall not be recognised by any Court or Tribunal for any purpose whatsoever.

No application under section 11 or 15 shall be entertained by the Board on behalf of or in respect of any debtor, unless the total amount of debts due from him on the date of the application is not less than Rs. 5,000.

An application for settlement of debts under section 11 or an application for recording a settlement under section 15 shall not be withdrawn without the leave of the Board.

Where two or more applications for settlement of debts under section 11 are presented by or against the same debtor, all such applications shall be consolidated. Where such separate applications are presented against joint debtors, all such applications shall be heard together.

On receipt of an application for settlement of debts, the Board shall- (a) give notice to the debtor (unless the debtor is himself an applicant) and to every creditor (other than the creditor who is himself an applicant) whose name and address are given in the application, and (b) publish a general notice, requiring the debtor and all creditors to submit a statement in the prescribed form within one month from the date of the service of the notice or the publication of the general notice, whichever is later: Provided that if the Board is satisfied that the debtor or any other creditor is for good and sufficient cause unable to comply with the notice within the time specified therein it may extend the period for the submission of the statement.

(1) Every debt due from a debtor in respect of which no application has been made under section 11 within the period specified in the said section 11 or in respect of which no application for recording a settlement is made under section 15 within the period specified in the said section 15 or in respect of which an application made to the Board is withdrawn under section 19 and no fresh application is made under section 11 and every debt due from such debtor in respect of which a statement is not submitted to the Board by the creditor in compliance with the provisions of section 21 shall be extinguished. (2) Nothing contained in sub-section (1) shall apply- (a) to any debt in respect of which the debtor and creditor agree in writing before the Board that the said sub-section shall not apply thereto, or (b) to any debt due from any person who has by his declaration, act or omission intentionally caused or permitted his creditor to believe that he is not a debtor for the purposes of this Act or that no application under section 11 can be entertained in respect of any debt owed by such person to such creditor by reason of the provisions of section 18.

(1) All suits, appeals, applications for execution and proceedings other than revisional in respect of any debt pending in any civil or revenue court shall, if they involve the questions whether the person from whom such debt is due is a debtor and whether the total amount of debts due from him on the date of the application is less than Rs. 5,000 be transferred to the Board. (2) When an application for adjustment of debts made to a Board under section 11 or a statement submitted to a Board under section 21 includes a debt in respect of which a suit, appeal, application for execution or proceeding other than revisional is pending before a civil or revenue court, the Board shall give notice thereof to such other court. On receipt of such notice, such other court shall transfer the suit, appeal, application or proceeding, as the case may be, to the Board. (3) When any suit, appeal, application or proceeding is transferred to the Board under sub-section (1) or sub-section (2), the Board shall proceed as if an application under section 11 had been made to it. (4) If the Board, to which any suit, appeal, application or proceeding is transferred under sub-section (1) or sub-section (2), decides the preliminary issue mentioned in clause (a) of sub-section (1) of section 24 in the negative or that mentioned in clause (b) of the said sub-section (1) in the negative, it shall retransfer the suit, appeal, application or proceeding to the court from which it had been transferred to itself after the disposal and subject to the result of the appeal where an appeal is filed, and after the expiry of the period prescribed for an appeal where no appeal is filed. (5) When any suit, appeal, application or proceeding is retransferred to the court under sub-section (4), the said court shall proceed with the same.

If the Board finds that the person making an application under section 11 or the person against whom an application is made under the said section 11 to be a person- (a) who is a debtor, and (b) the total amount of debts due from whom on the date of the application is not less than Rs. 5,000 the Board shall proceed to take accounts in the manner hereinafter provided.

In an application for the settlement of debts if the amount of the creditor’s claim is disputed the Board shall, when taking accounts, examine both the creditor and the debtor as witnesses, unless for reasons to be recorded the Board deems it unnecessary so to do.

Notwithstanding any agreement between the parties or the persons (if any) through whom they claim, as to allowing compound interest or setting of the profits of mortgaged property without an account in lieu of interest, or otherwise determining the manner of taking the account, and notwithstanding any statement or settlement of account, or any contract purporting to close previous dealings and create a new obligation, the Board shall enquire into the history and merits of the case and take account between the parties from the commencement of the transactions subsisting between the parties and the persons (if any) through whom they claim, out of which the claim has arisen and determine the amount due to each of the creditors at the date of the application made under section 11, according to the following rules, namely:- (1)(a) Separate accounts of principal and interest shall be taken. (b) In the account of principal there shall be debited to the debtor only such amount whether paid in cash or kind as may from time to time have been actually received by him or on his account from the creditor. (c) In the accounts of principal and interest there shall also be debited the amount, if any, respectively due for principal (including costs) and interest under any decree or order passed by a competent court in respect of any debt: Provided that if such decree or order does not specify the amount of principal and interest separately or does not contain any material for determining the same two-third and one-third of the amount awarded by such decree or order shall for purposes of this clause, be deemed to be the amount awarded on account of principal (including costs) and interest, respectively. (2) In the case of transactions which commenced before the 1st January 1934 the Board shall take the account up to the date of the institution of the application and in the account of interest there shall be debited to the debtor, simple interest on the balance of principal for the time being outstanding at the rate agreed upon between the parties or at the rate allowed under any decree passed between the parties, or at a rate not exceeding 12 per cent per annum whichever is the lowest. The amount found due in respect of principal as well as in respect of interest shall, each separately, be reduced to such extent not exceeding 40 percent as to the Board, having regard to all the circumstances of the case, appears fair and reasonable, notwithstanding that a decree or order of a civil court was passed in respect of any such amount or portion thereof. The amounts so reduced shall be taken to represent the amounts due in respect of principal and interest on the date of the institution of the application. (3) In the case of transactions which commenced on or after the 1st January 1934 but before the 1st January 1943 in the account of interest there shall be debited to the debtor, simple interest on the balance of principal for the time being outstanding at the rate agreed upon between the parties, or at the rate allowed under any decree passed between the parties, or at a rate not exceeding 9 per cent per annum, whichever is the lowest. The amount found due on the date of the institution of the application in respect of principal as well as interest shall each separately be reduced to such extent not exceeding 30 per cent as to the Board, having regard to all the circumstances of the case appears fair and reasonable, notwithstanding that a decree or order of a civil court was passed in respect of any such amount or portion thereof. The amounts so reduced shall be taken to represent In the case of transactions which commenced on or after the 1st January 1943, in the account of interest there shall be debited to the debtor simple interest on the balance of principal for the time being outstanding at the rate agreed upon between the parties, or at the rate allowed under any decree passed between the parties, or at a rate not exceeding 6 per cent per annum whichever is the lowest. All money paid by or on account of the debtor to the creditor or on his account and all profits, services or other advantages of every description received by the creditor in the course of the transactions (estimated, if necessary, at such money value as the Board in its discretion may determine) shall be credited first in the account of interest, and when any payment is more than sufficient to discharge the balance of interest due at the rate specified in sub-sections (2), (3) or (4) as the case may be the residue of such payment shall be credited to the debtor in the account of principal. The accounts of principal and interest shall be made up to the date of the institution of the application, and the aggregate of the balance. if any, appearing due on both such accounts against the debtor on that date shall be deemed to be the amount due at that date except when the balance appearing due on the interest account exceeds that appearing on the principal account, in which case double the latter balance shall be deemed to be the amount then due: Provided that where transactions between the parties have commenced more than 30 years before the 30th January 1943, any settlement of accounts which has been last arrived at between the parties before the said period of 30 years and which is in writing and bears the signature of the debtor or the person through whom the liability is derived shall be accepted as binding between the parties and no enquiry into the history and merits of the case shall be made prior to the date of such settlement.

Where any mortgaged property is in the possession of the mortgagee or his tenants other than the mortgagor and the Board is unable to determine what profits have actually been received, it may fix a fair rent for such property and charge to the mortgagee such rent as profits for the purpose of section 28.

(1) On receipt of an application for settlement of debts, the Board shall give notice to the Jagir Administrator requiring him to state to the Board within such time as may be fixed by it the amount of the debt due by the debtor to Government. (2) The Board shall also give similar notice to any local authority, co-operative society or scheduled bank to which any debt may be due by the debtor and also to any person who is entitled to maintenance from the debtor, under a decree or order passed by a competent court. In the case of any debt due to a co-operative society, the Board shall also give notice to the Registrar of Co-operative Societies or to such officer as the Registrar may nominate in this behalf. (3) On receipt of such notice, the Jagir Administrator, the local authority, the co-operative society or the scheduled bank, or the person entitled to maintenance, as the case may be, shall, within such time as, may, from time to time, be fixed by the Board, submit a statement to the Board showing the total amount of the debt due by the debtor as also any recurring liability against such debtor in respect of the liability for maintenance under the decree or order. (4) The Jagir Administrator, the Co-operative Society and the scheduled bank shall also furnish a statement to the Board showing the amount of remission which the Government, the co-operative society or the scheduled bank, as the case may be, is willing to give in respect of the debt. (5) The portion of any debt remitted under sub-section (4), and unless the Board otherwise directs any debt other than a debt due to Government or portion thereof in respect of which no statement is submitted under sub-section (3), shall be extinguished.

After taking accounts under section 28 the Board shall in the manner hereinafter provided determine- (1) the particulars of the property belonging to the debtor, (2) the value ,of the said property, (3) the particulars of any encumbrances on the said property, and (4) the paying capacity of the debtor.

(1) If in the course of the hearing of an application under section 11, the Board finds that the debtor has made an alienation of property or created any encumbrances thereon with intent to defeat or delay any of his creditors, the Board shall by notice, summon the debtor and the person in whose favour the alienation or encumbrance is made or created to appear before it on a day to be specified in the notice. (2) On the day specified in the notice or such other day to which the hearing may be adjourned the Board shall hear the parties and if it is satisfied that the alienation was made or the encumbrance was created with intent to defeat or delay any of the creditors of the debtors, the Board shall declare the alienation or encumbrance to be void. (3) Nothing in this section shall impair the rights of an alienee or the holder of an encumbrance in good faith and for valuable consideration.

(1) Subject to the provisions of sub-sections (2), (3) and (4), the value of the property and other assets of a debtor for the purposes of ascertaning the paying capacity of the debtor under section 31 shall be determined by the Board in the prescribed manner. (2) The property or assets which are exempt from attachment in execution of a decree of a civil court under the Code of Civil Procedure, 1908, shall not be taken into account. (3) The amount of the debts mentioned in section 3 shall be deducted. (4) The market value of the lands, which under any law for the time being in force, are not transferable or alienable except with the previous sanction of the Collector or the Government, shall be calculated in such manner as may be prescribed

The paying capacity of the debtor shall, for the purposes of this Act, be deemed to be sixty per cent of the value of all the property of the debtor: Provided that when any portion of such property yields income but the market value of such portion cannot be determined, the value of such portion shall be the amount of the income capitalized at six per cent per annum.

Where the amount of debts of the debtor as scaled down under section 35 exceeds half the value of the debtor’s immovable property as determined by the Board, the Board shall intimate to the creditors the amount of the said debts of the debtor and the said value of the debtor’s immovable property and call upon them to state in writing within a specified period not exceeding one month whether they agree to the further scaling down of the said debts so as to reduce them to a sum not exceeding half the said value of the immovable property of the debtor. If all the creditors agree to the further scaling down of the debts, the Board shall make an award directing the debtor to pay the amount of such debts so agreed upon within a period of one month from the date of the award.

The amount of debts scaled down under section 35 or further scaled down under section 37 shall for the purposes of this Act be the amount due by the debtor in respect of the said debts and the portion of the debts in excess of this amount shall be extinguished.

If the Board making an award under section 36 is at any stage of the proceeding satisfied-

(1) that the debtor had in collusion with any creditor furnished in such proceeding incorrect information in respect of the debt due by him to such creditor with a view to defeat the lawful claims of any other creditor, the Board may refuse to scale down any of the debts of such debtor in the manner provided in section 35 and may make an award for the full amount of the debts due from such debtor;

(2) that any claim by a creditor in such proceeding had been put forward in collusion between the debtor and such creditor with a view to defeat the lawful claims of any other creditor, the Board shall order that the debt due by the debtor to such creditor shall be extinguished and such debt shall not be recoverable.

(1) Notwithstanding that the person for the settlement of whose debts an application has been made under section 11 or any of his creditors does not appear on the date fixed for the hearing of the application or on any date to which it may be adjourned, the Board shall proceed ex parte to hear the application, beside the preliminary issues and, if necessary, make the award, on the evidence available.

(2) When an application made under section 11 is heard and disposed of ex parte under sub-section (1) the decision on the preliminary issues or the award shall not except for sufficient reasons, be reopened merely on the ground that any of the parties thereto did not appear at the hearing.

If, after an award is made under section 36, the Board finds on an application made to it by any party or otherwise, that the debtor has other property which was not disclosed to the Board when the award was made, or that any property included in the award did not belong to the debtor, the Board may, notwithstanding anything contained in this Act, reopen the award and resettle the debts in accordance with the provisions of this Act:

Provided that where the Board is satisfied that the non-disclosure of such property was in consequence of any fraud on the part of the debtor, the Board revising the award shall not give the debtor the benefit of section 35.

The Government may at any time on the ground of serious hardship to the debtor, if such hardship arose after the date of an award made under section 15, 16, 36 or 37 postpone by any period not exceeding one year, the payment of any instalment or instalments due under the award.

Notwithstanding any law or contract but subject to the provisions of section 45 no alienation of any property belonging to a debtor who is a party to any proceedings or award under this Act, made by him before all his debts are discharged shall be valid, except with the previous sanction of the Government.

If the Board or the Court, hearing an Appeal against the award is at any time satisfied that it is in the interest of a debtor that any part of his property should be sold in liquidation of his debt or part thereof such Board or Court may permit the debtor to sell such part of the property for such purpose within a specified period. If the debtor fails to sell it, such Board or Court may order an officer of the Board or Court to sell the same. The property ordered to be sold under this section shall be sold by such officer in the manner prescribed:

Provided that the part of the property ordered to be sold under this section shall not exceed the part liable to be sold under sub-section (2) of section 52.

Except in proceedings under section 32 no pleader shall be entitled to appear on behalf of any party in any proceeding before the Board or the Court in appeal under this Act:

Provided that if the Board after examining the parties to any proceeding before it or the Court in appeal is of opinion that any of the parties is not sufficiently competent to represent his case and that in the interest of justice it is necessary to allow such party the assistance of any pleader, it may allow the parties to be represented at their own cost by a pleader:

Provided further that pleader’s fees shall not be allowed as part of the costs for the appearance of a pleader in any proceedings under this Act.

Notwithstanding anything contained in any other law and save as otherwise provided in section 55,

(1) an appeal shall lie-

(i) from every order passed under sub-section (3) of section 15;

(ii) from every order passed under section 24;

(iii) from every order passed under section 32;

(iv) from every order passed under sub-section (2) of section 40;

(v) from every award made under this Act other than an award made in terms of a settlement under sub-section (4) of section 15 or under section 16 or section 37 or’ an award before the making of which neither the debtor nor any of the creditors produced evidence to enable the Board to determine the amount of debt due from the debtor;

(2) an appeal from the Board shall lie to the High Court and such appeal shall be filed within 60 days of the decision or award of the Board computed in the manner prescribed in the Indian Limitation Act, 1908, so far as applicable;

(3) no second appeal shall lie against any decision, order or award of the Board under this Act.

No decision or award of the Board shall be modified or set aside in appeal, except on any of the following grounds:-

(a) such decision or award was improperly procured,

(b) corruption or misconduct of the Board or any member thereof, in the conduct of the proceedings relating to such decision or award,

(c) any illegality or irregularity in the proceedings relating to such decision or award, which has occasioned failure of justice,

(1) Notwithstanding anything contained in the Hyderabad Court Fees Act, court-fees payable in respect of proceedings under this Act shall be at the following rates:-(i) on an application under sub-section (1) of section 11 or section 15 or on an award under sub-section (4) of section 15 or section 16 - Re.1. (ii) on an award other than an award specified in clause (iii)- Re.1 for every hundred rupees, or part thereof, of the amount of the award, subject to a maximum of Rs.50; (iii) on an appeal against a decision of the Board under sub-section (3) of section 15 or sub-section (2) of section 24 - Rs.2; (iv) on an appeal other than an appeal specified in clause (iii) Re.1 for every hundred rupees, or part thereof, of the amount of the award, subject to a maximum of Rs.50. (2) Notwithstanding anything contained in any law, the court-fees payable in respect of proceedings under this Act shall be a first charge on the property of the party ordered to pay the costs and shall be recoverable in such manner as may be prescribed.

Any notice required to be served under this Act shall be served in the manner provided in the Code of Civil Procedure, 1908; and when rules are made in that behalf in such manner as may be prescribed.

Save as otherwise expressly provided in this Act, the provisions of the Code of Civil Procedure, 1908 shall apply to all proceedings under this Chapter.