- The objective for enacting the Act
This Act was mainly enacted to give relief to the displaced debtors in respect of liabilities incurred by them before their displacement. A thorough examination of the various problems involved had to be made to afford displaced persons adequate and reasonable relief in the matter of their indebtedness, consistently with the needs of their rehabilitation. The previous Acts, Act 47 of 1948 and Act 25 of 1949 were not adequate to provide them relief. Thus, this Act came into existence to provide remedy and relief to the already devastated displaced persons in the wake of 1947.
This Act applies to the whole of India.
- Displaced Bank [Section 2(7)]
Displaced bank means a bank which is so declared by the Central Government by notification in the Official Gazette. These are the banks which carried on business in the area now forming part of Pakistan before 15th August 1947.
- Displaced Person [Section 2(10)]
A person who after the setting up of India and Pakistan as two different countries, had to flee his actual residence in Pakistan and come to India and for that reason which has no control over his immovable property situated in Pakistan, is called a displaced person.
- Displaced Creditor [Section 2(8)]
A displaced creditor is a displaced person to whom a debt is due from any person who may or may not be a displaced person.
- Displaced Debtor [Section 2(9)]
A displaced debtor is a displaced person from whom a debt is due or is being claimed.
- Overriding Effect (Section 3)
The provisions of the Act and the rules and orders made thereunder shall affect, except as otherwise provided in this Act, notwithstanding anything inconsistent in addition to that contained in any other law for the time being in force, or in any decree or order of a Court, or any contract between the parties.
- Competent Tribunals (Section 4)
The State Government will by notification in the Official Gazette specify the civil court or class of civil court which will have jurisdiction under this Act and the areas of its jurisdiction.
- Application by a Displaced Debtor (Section 5)
This section allows a displaced debtor to make an application to the Tribunal within whose jurisdiction he resides or carries on business to adjust his debts. Every such application should contain his place of residence, his occupation present and past, his average annual income in India for the last three years and any income or super tax if any. He also has to submit the schedules of all the debts with the names of co-debtors and creditors and also the schedules of all movable and immovable property whether liable to be attached or not.
- Proceedings on Respondents (Section 9)
Suppose there is any dispute regarding the authenticity of the claims or the application. In that case, the Tribunal will decide that first on the evidence adduced and then will go on to make an order regarding the adjustment of debts. And if there is no such dispute then, and if the respondents do not appear, the Tribunal will pass such order as it thinks appropriate.
- Procedures When Creditors Apply (Section 11)
Where any displaced creditor makes an application for a claim against any displaced debtor, the Tribunal will serve notice upon the debtor to show cause against the application. Suppose any reply is solicited from the debtor. In that case, the Tribunal will proceed as if the debtor himself makes the application and act accordingly and where no such reply is received, it will proceed based on evidence put in front of the Tribunal.
- Consequences of Application by a Displaced Debtor (Section 15)
All proceedings pending in any civil court to which the debtor is subject, other than an appeal, review or revision against any decree against the debtor, will be stayed. Furthermore, any attachments, injunctions, orders appointing receiver will cease to affect. No fresh suit shall be instituted apart from the review, appeal or revision. And any immovable property liable to be attached can be transferred except under the authority of the Tribunal. All the above restrictions will be in action till the disposal of this application.
- Debts Secured on Immovable Property (Section 16)
It provides the creditor who is secured by a mortgage, charge or lien upon a property in Pakistan, to choose if he wants to remain a secured creditor or become an unsecured creditor. Suppose he chooses to be a secured creditor, by applying to the Tribunal as such. In that case, he will get it as a first charge where the debtor gets any cash compensation regarding his property, and if the debtor gets property in exchange, then he will get back the debt as the first charge. If he chooses to be an unsecured creditor, then he will be treated as such.
- Apportionment of Joint Debts (Section 22)
Whenever a debt is due to a displaced person jointly with another person, the Tribunal will apportion the liability.
- If the liability is defined, then according to it.
- If the debt was for any trade, then according to the share in trade.
- In all other cases, it will be divided proportionately between all the debtors.
- In case, the debt is secured by a mortgage of both movable and immovable property then the debt will be divided among the properties in the proportion in which each of its value has added to the total value of both the properties.
- Accrual of Interest Will Cease (Section 29)
No interest on the debt will accrue on and from 15th August 1947, on a debt of any displaced person. A secured debt by the pledge of shares, stocks, Government securities, the Tribunal shall allow, for the period commencing from 15th August 1947, and ending with the commencement of this Act, interest to the creditor at the rate mutually agreed upon or at which rate any dividend or interest has been paid or is payable, whichever is less. Under section 32, according to the paying capacity of the debtor, the Tribunal can order interest of 4% per annum.
- Immunity from Arrest (Section 30)
No displaced person can be arrested or imprisoned in execution of any decree for recovery of debt under this Act.
- Scaling Down of Debts (Section32)
Under this section, the paying capacity of the creditor is determined. If the paying capacity is equal to or exceeds the aggregate amount of all the debts, then, the Tribunal orders to pay it proportionately in instalments to all the creditors. But if the paying capacity of the debtor is less than the aggregate sum, then it will be divided into two parts. The first part will be realized from the assets of the debtor, and the second part will be realized if the debtor gets any compensation in future. Otherwise, the second part will be irrecoverable.
- Extension of Limitation Period (Section 36)
Any suit or other legal proceedings for which the limitation period is extended under section 8 of the Displaced Persons (Institution of Suits) Act, 1948, or any suit or proceeding claiming relief against an insurance company and whose cause of action had arisen in Pakistan. Any contract bars the institution of such suit can be instituted within one year from the commencement of this Act.
- Sale of Immovable Property in Execution of Decree (Section 38)
In executing a decree against a displaced debtor, when his property is sold, the Tribunal will determine the market value of the property and transfer it to the decree-holder if the value is equal to or less than the amount decreed along with any previous encumbrance. In case the market value is greater, then only that portion will be transferred, the value of which is equal to the amounts. If the Tribunal finds that the property cannot and should not be transferred to the decree-holder. Then it will be put to public auction, and the amount will be paid accordingly.
Where the displaced debtor and the creditor or creditors( in case of more than two, such number of creditors as constituting more than 2/3rd of the debts due), agree to a settlement, the Tribunal, after examining the terms of the agreement and after satisfying itself that it is a fair and legible agreement and after giving the other creditors notice, will pass a decree accordingly.
- Appellate Provisions (Sections 40-41)
A person aggrieved by any final decree or order of a Tribunal or any order made during the execution of any decree can appeal to the High Court under whose jurisdiction the Tribunal is situated under this section. [Section 40]
But if the subject matter of the appeal is the amount of debt and it is less than five thousand rupees, then it is not appealable. [Section 41]
- Bar of Further Jurisdiction (Section 44)
Subject to some provisions, in cases where an application made by a displaced debtor u/s five or u/s 11(2) or by a creditor u/s 13 is rejected, no further application for the same cause of action can be made.
- Failure by The Debtor to Disclose Facts (Section 47)
Suppose the displaced debtor omits to mention any debt due to him or any schedule of property, movable or immovable, held by him, after that. In that case, no provision of this Act will constrain the creditors from instituting any proceeding for the recovery of debt under any law for the time being in force, other than this Act, and from attaching his property.
- Procedure After Death of the Debtor (Section 48)
No proceeding against a debtor for recovery of debt will abate merely on the death of the debtor. A decree for recovery may still be passed with the same force and effect upon his legal representatives if any. The legal representatives of the deceased debtor will be added as parties to the proceeding on an application. A legal representative shall be liable to the debt proportionate to the asset of the deceased debtor that has devolved on him.
The provision of Limitation Act, 1908, shall apply to the institution of any proceeding under this Act but subject to the provisions of this Act.
- Power to Make Rules by the Central Government (Section 57)
The Central Government may make rules for the following
- the additional particulars, if any, which an application under section 5, should contain.
- The form in which notices under this Act may be issued.
- The form in which applications under section 10 or section 13 may be made.
- The registers which should be maintained under this Act.
- The authorities required to be prescribed under this Act.
- Power of State Government to Make Rules (Section 58)
The State Government is empowered under this section to make rules about the following.
- the distribution of business amongst the various Tribunals within the State;
- how copies of documents produced before the Tribunals should be certified;
- the returns to be made by the Tribunals and the authorities to which they may be so made.
This section repeals the Displaced Persons (Institution of Suits) Act, 1948 (47 of 1948) and the Displaced Persons (Legal Proceedings) Act, 1949 (25 of 1949), subject to section 36 of the Displaced Persons(Debts Adjustment) Act, 1951.