Man Mohan Rai vs U.P. Financial Corporation And ...
2014 Latest Caselaw 3254 ALL

HIGH COURT OF JUDICATURE AT ALLAHABAD
 
 

Reserved
 
Court No. - 39
 

 
Case :- WRIT - C No. - 64875 of 2011
 

 
Petitioner :- Man Mohan Rai
 
Respondent :- U.P. Financial Corporation And Others
 
Counsel for Petitioner :- A.K. Malviya,N.L. Pandey
 
Counsel for Respondent :- C.S.C.,A.A. Khan
 

 
Hon'ble Krishna Murari,J.

Hon'ble Ashwani Kumar Mishra,J.

(Per Hon. Ashwani Kumar Mishra, J.)

1.The present writ petition has been filed challenging the recovery certificate dated 14.10.2010 issued by the Assistant Collector II- Grade Jagadhri under the provisions of U.P. Public Moneys (Recovery of Dues) Act, 1972.

2.The crux of the submission is that the recovery since is of more than Rs.10 lacs, therefore, in view of the law laid down by the Apex Court in Unique Butyle Tube Industries (P) Ltd. vs. U.P. Financial Corporation and others reported in (2003) 2 SCC 455, the recovery initiated under the U.P. Public Moneys (Recovery of Dues) Act, 1972 (hereinafter referred to as 1972 Act) is without jurisdiction and the dues could only be recovered by resorting to provisions of the State Financial Corporations Act, 1951 (hereinafter referred to as 1951 Act) or the Recovery of Debts Due to Banks and Financial Institutions Act, 1993 (hereinafter referred to as 1993 Act).

3.The petitioner was a partner in a firm, which availed of a term loan of Rs.9 lacs from the U.P. Financial Corporation on 9.10.1996. It is claimed that petitioner along with his family met with a serious accident, in which some of his family members died and petitioner also remain hospitalized for long periods, as a result whereof the petitioner could not pay the dues of the Corporation. The recovery proceedings were initiated and various litigations ensued at the instance of the firm and its partners, which need not be enumerated in detail. Suffice it to say that the factory premises of the firm was sold for a sum of Rs.5,40,000/- for the dues of the Corporation. The petitioner also claims to have deposited a sum of Rs.1,90,065/-. Petitioner's residential house was also auctioned for the dues of the Corporation for a sum of Rs.32.50 lacs and the same was adjusted for the dues of the Corporation. The recovery in question under the Act of 1972 has now been issued on 14.10.2010 for a sum of Rs.2,00,24,720/-. The recovery impugned under the 1972 Act has been challenged by the petitioner on the ground that the same is wholly unauthorized in view of law laid down in Unique Butyle Tube Industries (P) Ltd. (supra) and the only course available to proceed for any dues is by resorting to the 1951 Act or 1993 Act.

4.We have heard Sri N.L. Pandey, learned counsel for the petitioner, Sri Atiq Ahmad Khan, learned counsel for the U.P. Financial Corporation and learned Standing Counsel for the respondent-state.

5.Learned counsel for the petitioner has placed reliance upon the judgment in Unique Butyle Tube Industries (P) Ltd. (supra) and also upon a Full Bench judgment of this court in Suresh Chandra Gupta vs. Collector, Kanpur Nagar reported in 2005 AIR (All) 320 to contend that the impugned recovery proceedings are wholly without jurisdiction.

6.Per contra, Sri Khan, learned counsel for the Corporation has placed reliance upon a Division Bench judgment of this court dated 18.8.2004 in Writ Petition No.33035 of 2004 'Ajit Kumar vs. State of U.P. and others' and another judgment dated 22.8.2008 delivered in Writ Petition No.36803 of 2007 'M/s Mak Plastic (P) Ltd. and others vs. U.P. Financial Corporation and others'. Sri Khan has also relied upon an order of the Apex Court dated 21.9.2005 in Paliwal Glass Works and others vs. State of U.P. and others, referring the matter to a larger bench for reconsideration of the decision rendered in Unique Butyle Tube Industries (P) Ltd. (supra).

7.The Apex Court in Unique Butyle Tube Industries (P) Ltd. (supra) took note of the relevant provisions of the 1951 Act, 1972 Act and 1993 Act. Para 7 of the said judgment, which refers to the relevant provisions, is reproduced herein below:-

"7. In order to appreciate the rival submissions a few provisions throwing light on the controversy need to be noted.

Act

"34. Act to have overriding effect.- (1) Save as provided under sub- section (2), the provisions of this Act shall have effect notwithstanding anything inconsistent therewith contained in any other law for the time being in force or in any instrument having effect by virtue of any law other than this Act.

(2). The provisions of this Act or the rules made thereunder shall be in addition to, and not in derogation of, the Industrial Finance Corporation Act, 1948 (15 of 1948), the State Financial Corporations Act, 1951 (63 of 1951), the Unit Trust of India Act, 1963 (52 of 1963), the Industrial Companies (Special Provisions) Act, 1985 (1 of 1986) and the Small Industries Development Bank of India Act, 1989 (39 of 1989)."

Financial Act

"32-G. Recovery of amounts due to the Financial Corporation as an arrear of land revenue.- Where any amount is due to the Financial Corporation in respect of any accommodation granted by it to any industrial concern, the Financial Corporation or any person authorized by it in writing in this behalf, may, without prejudice to any other mode of recovery, make an application to the State Government for the recovery of the amount due to it, and if the State Government or such authority, as that Government may specify in this behalf, is satisfied, after following such procedure as may be prescribed, that any amount is so due, it may issue a certificate for that amount to the Collector, and the Collector shall proceed to recover that amount in the same manner as an arrear of land revenue."

U.P. Public Moneys (Recovery of Dues) Act, 1972

"3. Recovery of certain dues as arrears of land revenue. - (1) Where any person is party-

(a)-(b) ---------

(c) to any agreement relating to a guarantee given by the State Government or the Corporation in respect of a loan raised by an industrial concern; or

(d) to any agreement providing that any money payable thereunder to the State Government or the Corporation shall be recoverable as arrears of land revenue; and such person-

(i) makes any default in repayment of the loan or advance or any installments thereof; or

(ii) having become liable under the conditions of the grant to refund the grant or any portion thereof, makes any default in the refund of such grant of portion or any installment thereof; or

-------------

(2) The Collector on receiving the certificate shall proceed to recover the amount stated therein as an arrear or land revenue.

(3) No suit for the recovery of any sum due as aforesaid shall lie in the civil court against any person referred to in sub-section (1).

(4) In the case of any agreement referred to in sub-section (1) between any person referred to in that sub-section and the State Government or the Corporation, no arbitration proceedings shall lie at the instance of either party for recovery of any sum claimed to be due under the said sub-section or for disputing the correctness of such claim:

Provided that whenever proceedings are taken against any person for the recovery of any such sum he may pay the amount claimed under protest to the officer taking such proceedings, and upon such payment the proceedings shall be stayed and the person against whom such proceedings were taken may make a reference under or otherwise enforce an arbitration agreement in respect of the amount so paid, and the provisions of Section 183 of the Uttar Pradesh Land Revenue Act, 1901, or Section 287-A of the Uttar Pradesh Zamindari Abolition and Land Reforms Act, 1950, as the case may be, shall mutatis mutandis apply in relation to such reference or endorsement as they apply in relation to any suit in the civil court."

8.After noticing the provisions aforesaid, the Apex Court held that recovery of money under the 1972 Act was not a mode protected under sub-section (2) of section 34 of the 1993 Act and relying upon the principles of casus omissus and reading of the statute as a whole, came to the conclusion that once the 1993 Act had come into being, realization of debt covered therein had to be regulated by the provisions of 1993 Act, or under the enactments which have been specifically protected therein, including State Financial Corporation Act, 1951. It was, therefore, held that since the provisions of the Act of 1972 were not protected as such the recovery initiated under the 1972 Act was without jurisdiction.

9.The Apex Court, however, in a subsequent order dated 21.9.2005 passed in Civil Appeal No.5933 of 2005: Paliwal Glass Works vs. State of U.P. and others, referred the matter to a larger Bench on the ground that while deciding the issue in Unique Butyle Tube Industries (P) Ltd. (supra), the implication of section 32G of the Act 1951 and its impact on section 34(2) of the Act 1993 had not been considered. The operative portion of the referring order dated 21.9.2005 in Paliwal Glass Works and others (supra) is reproduced herein below:-

" We are of the view that the submissions made on behalf of the parties need to be considered. The respondents are correct that the scope of section 32G of the State Financial Corporation Act, 1951 and its impact on Section 34(2) of the 1993 Act has not been considered by the decision in Unique Butyle (supra). We are therefore of the view that the question of the scope of Section 34 of the 1993 Act as determined in Unique Butyle requires reconsideration. Let the matters be placed before the Hon'ble the Chief Justice of India for passing such appreciate orders as the Hon'ble the Chief Justice may thinks fit."

10.We have been informed at the bar that Civil Appeal No.5933 of 2005, wherein referring order had been passed has been finally decided on 26.9.2013. It transpires that appeal was decided by the larger Bench of the Apex Court on the facts noticed in the judgment dated 26.9.2013. It seems that larger Bench did not consider, in view of the facts and circumstances noticed in the judgment dated 26.9.2013, to answer the reference, and instead proceeded to decide the matter on merits. The judgment in Unique Butyle Tube Industries (P) Ltd. (supra), therefore, continues to hold the field.

11.In a subsequent judgment of the Apex Court in A.P.T. Ispat (P) Ltd. vs. U.P. Small Industries Corporation Ltd. reported in (2010) 5 SCC 761, another Division Bench reiterated the view expressed in Unique Butyle (supra). Para 22 of the said judgment is reproduced:-

"22. There is another point and though it was not raised before the High Court, we think it proper to mention it since it is crucial to the proceedings under Section 3 of the U.P. Public Moneys (Recovery of Dues) Act, 1972. In a decision by this Court in Unique Butyle Tube Industries (P) Ltd. v. U.P. Financial Corpn. it was held that after the coming into force of the Recovery of Debts Due to Banks and Financial Institutions Act, 1993, recourse cannot be taken for recovery of dues to the provisions of the U.P. Public Moneys (Recovery of Dues) Act, 1972 because the U.P. Act does not find mention in Section 34(2) of the Recovery of Debts Due to Banks and Financial Institutions Act, 1993."

12.We have otherwise considered the submission of Sri Khan that the provisions of section 32G incorporated under the 1951 Act permits the recovery to be resorted under the 1972 Act. Section 32G of the 1951 Act permits the Financial Corporation or any person authorized by it, in writing in this behalf, without prejudice to any other mode of recovery, to make an application to State Government for the recovery of the amount due to it, and if the State Government or its authority, specified by the State in this behalf, is satisfied, after following such procedure as may be prescribed regarding the amount due, it may issue a certificate for that amount to the Collector, who may then recover it as arrears of land revenue. From the materials brought on record, we do not find that any course contemplated under section 32G had been resorted to by the Corporation in the present case, inasmuch as no application appears to have been addressed to the State Government for recovery of the amount due to the Corporation nor any certificate thereunder has been issued to the Collector. Requirement of following the procedure, as may be prescribed, to ascertain the dues does not appear to have taken place. In such circumstances, necessary ingredients attracting provisions of Section 32G of the 1951 Act are completely missing and the Corporation cannot rely upon Section 32G, to justify the recovery resorted herein under the 1972 Act. Section 32G permits recovery by Corporation in addition to any other mode of recovery which may be available to the Corporation in accordance with law, and as it has not been invoked by the Corporation in the present case, reference of it has no relevance in the facts of the present case. Even otherwise, the authoritative pronouncement in Unique Butyle Tube Industries (P) Ltd. (supra) continues to hold the field and the recovery under the Act 1972 cannot be proceeded with.

13.Placing of reliance by Sri Khan, on the unreported judgment of the Division Bench in Ajit Kumar (supra) also has no applicability on the facts of the present case, inasmuch as the Division Bench of this court in Ajit Kumar (supra) after noticing the judgment in Unique Butyle Tube Industries (P) Ltd. (supra) refused to interfere in the matter, noticing the conduct of the petitioner, who had refused to pay even a part or fraction of the dues and was only insisting upon plea that recovery was not permissible, and as such this Court refused to exercise discretionary jurisdiction under Article 226 of the Constitution. The judgment delivered in Writ Petition No.33035 of 2004 'Ajit Kumar vs. State of U.P. and others' was delivered on the specific facts and circumstances of the case concerned, which cannot be treated to be a authority for a proposition contrary to Unique Butyle (supra), particularly in view of the facts of the present case which are quite different.

14.The other judgment of the Division Bench of this Court dated 22.8.2008, relied upon by Sri Khan in Writ Petition No.36803 of 2007 goes to show that the case was decided, while the reconsideration of Unique Butyle (supra) was pending before Hon'ble Supreme Court. The Division Bench in Writ Petition No.36803 of 2007 while noticing the judgment in Unique Butyle (supra) observed as under:-

"So far as this case i.e. Unique Butyle (supra) is concerned, the Division Bench of the Supreme court has categorically held that a Bank or a financial institution has the option or choice to proceed either under the State Act i.e. U.P. Act 1972 or under the modes of recovery permissible under the Corporation Act, 1951."

The observations made by the Division Bench of this court noted above, appears to be contrary to law laid down in para 16 of the Unique Butyle (supra), wherein the proceedings of recovery under the 1972 Act had been specifically quashed. The judgment in Writ Petition No.36803 of 2007 permitting the recovery proceedings under the 1972 Act to continue essentially proceeded on the premise that the matter is still subjudice before the Apex Court, pursuant to the referring order passed in M/s Paliwal Glass Works (supra) and thus, will have no relevance now, as the issue of reconsideration of Unique Butyle (supra) is no longer pending. The argument of Sri Khan based upon the judgment delivered in Writ Petition No.36803 of 2007, therefore, also cannot be accepted.

15.The judgment in Unique Butyle (supra) has also been a subject matter of consideration by the Full Bench of this court in Suresh Chandra Gupta (supra), the conclusions wherein have been laid down in para 23 and 24 of the said judgment, which are reproduced:-

"23. Our conclusions are as follows:

(a) In case of repugnancy or inconsistency between the Central Act under list-1 and the State Act under list-II-the Central Act shall prevail.

(b) The UP Public Moneys (Recovery of Dues) Act, 1972 is neither contrary to Section 32-G of the State Financial Corporation Act, 1951 nor is there any repugnancy between the two. It is not void.

(c) The guarantors are covered under the Recovery of Debt Due to Bank and Financial Institution Act, 1993 and recovery proceedings against them can be taken under this Act.

(d) Recovery proceedings can neither be initiated against the principal borrower nor against the guarantor under the UP Public Moneys (Recovery of Dues) Act, 1972 if the debt is more than 10 lakhs; recovery proceedings can only be initiated under the 1993 Act.

24. In view of our conclusion the writ petition is allowed. The recovery proceedings against the petitioner under UP Public Moneys (Recovery of Dues) Act, 1972 are quashed. It would be open to the respondents to initiate recovery proceedings in accordance with law. Petition allowed."

16.From the discussions aforesaid, it is clear that the recovery in the present case since is for an amount exceeding Rs.10 lacs, therefore, it could be resorted to only under the provisions of the Act 1993 or the enactment protected by virtue of section 34(2) therein, which includes the 1951 Act, but omits the 1972 Act. The impugned recovery certificate issued under the 1972 Act, therefore, is contrary to law and cannot be sustained. Consequently, the writ petition succeeds and is allowed. The impugned recovery proceedings pursuant to recovery citation dated 14.10.2010 initiated under the 1972 Act are set aside. However, it will be open for the respondent- corporation to proceed in accordance with law under the Act 1993 or State Financial Corporation Act, 1951, which may be available to it.

17.Subject to the aforesaid observations made, the writ petition is allowed. No order is passed as to costs.

Order Date :- 17.7.2014

Ashok Kr.