Smt. Sushila Devi vs State Of U.P. And 4 Others
2017 Latest Caselaw 5237 ALL

HIGH COURT OF JUDICATURE AT ALLAHABAD
 
 

Court No. - 37
 
AFR
 
RESERVED
 

 
Case :- WRIT - C No. - 27296 of 2017
 

 
Petitioner :- Smt. Sushila Devi
 
Respondent :- State Of U.P. And 4 Others
 
Counsel for Petitioner :- Udit Chandra
 
Counsel for Respondent :- C.S.C.,K.K. Tewari
 

 
Hon'ble Amreshwar Pratap Sahi,J.

Hon'ble Rajiv Lochan Mehrotra,J.

The writ petition questions the validity of the recovery proceedings initiated against the petitioner against a loan advanced by the respondent no. 4-bank to the petitioner for setting up a Dairy under the Mini Kamdhenu Dairy Scheme promulgated by the State Government in terms of the Government Order dated 14.11.2013 read with Government Order dated 17.08.2015.

Affidavits have been exchanged between the parties and a supplementary affidavit has been filed by the petitioner. The writ petition was entertained and initially an interim relief was granted standing coercive steps being taken against the petitioner.

Under the abovementioned scheme the petitioner applied on 10th October, 2014 and she entered into an undertaking described as the Implementation Schedule dated 17th November, 2014. The loan was a Term Loan sanctioned by the IDBI bank for a sum of Rs.39,26,000/-. The disbursement of the loan commenced on 9th January, 2015 and continued till 31st May, 2016. The petitioner has disclosed these facts in paragraph 13 that have been explained in para 20 of the counter affidavit of the respondent-bank indicating delay on the part of the petitioner. The petitioner in turn is alleging disbursement not in accordance with the implementation schedule. In terms of the Government order of 2015 a tripartite agreement was entered into between the parties on 6th June, 2016. The petitioner has stated facts relating to the status of the account including repayments and the counter affidavit indicates default in the repayment of the loan amount.

The result of this dispute between the petitioner and the bank led to the filing of a consumer claim before the District Consumer Forum by the petitioner being Case No. 71 of 2016 which according to paragraph 31 of the writ petition is pending, wherein, a stay application was filed on 25th May, 2017 that was rejected.

The bank after default proceeded to take action by issuing a notice to the petitioner on 31st January, 2017 for initiating action under the SARFAESI Act, 2002 and also stated therein that the balance of the loan amount of Rs.2,26,000/- would stand cancelled. The petitioner was called upon to repay the entire loan together with the Principal amount and interest thereon.

A second demand was raised on 20th February, 2017 by the bank whereafter, the same was followed by a legal notice given by the bank to the petitioner on 2nd March, 2017. On failure of deposit, the impugned certificate of recovery has been issued by the authorized officer of the bank on 20th April, 2017 invoking the provisions of Section 11-A of the U.P. Agricultural Credit Act, 1973. The petitioner has also narrated that on 5th May, 2017, the petitioner was communicated that the bank account of the petitioner was declared as a non-performing asset. The bank in its counter affidavit has, however, stated that the account was classified as a non-performing asset on 30.10.2016, itself. A prayer, therefore, has been made to quash the certificate of recovery dated 20.04.2017 and the notice dated 05.05.2017 and for a mandamus to reschedule the repayment of the outstanding amount in easy instalments.

Sri Udit Chandra, learned counsel for the petitioner has advanced his submissions on merits and has urged that the bank without following the relevant Government orders and guidelines for disbursement of loan within time defaulted in releasing the amount timely. The Principal amount of loan was repayable in five years yet the bank started recovering the same from 1st April, 2015, itself. The tripartite agreement had to be executed, immediately, after the sanction of loan and it is on the strength of such action that the project was to be completed within eight months. The bank did not comply with the said conditions that resulted in default in payment as the project was delayed even though the disbursement of the amount is not disputed as indicated above.

Sri Chandra, then contends that the request of the petitioner to reschedule the loan was illegally turned down and the certificate of recovery was issued under the 1973, Act which is impermissible in law. He has invited the averments made in the supplementary affidavit dated 2nd July, 2017 to urge that the 1973, Act read with the Rules would not apply as this is a state sponsored scheme where the bank could have treated the petitioner to be a defaulter under the U.P. Public Money (Recovery of Dues) Act, 1972 but no recovery could be made thereunder. The bank has not invoked the said provisions and, even otherwise, in view of the provisions of the Recovery of Debts Due to Banks and Financial Institution Act, 1993, no other mode of recovery is permissible, keeping in view, the bar contained in Section 34 of the said Act.

He has relied on the Apex Court judgment in the case of Unique Butyle Tube Industries (P) Ltd. Vs. U.P. Financial Corporation & Another (2003) 2 SCC 455, to urge that in view of the said decision even the U.P. Public Money Dues Act, 1972 would not apply and the only recourse open would be that the bank could approach the Debt Recovery Tribunal under the SARFAESI Act, 2002 read with 1993, Act or file a suit. Thus, according to him and relying on the said judgment as well as the decision in the case of Suresh Chandra Gupta & Another Vs. Collector 2005 (3) UPLBEC 2210, it is urged that the proceedings initiated by the respondent-bank are invalid.

Sri Chandra has then referred to the judgment in the case of Jujhar Singh Vs. State of U.P. & Others 2007(2) UPLBEC 1571 to contend that the said judgment squarely deals with the present issue involved, wherein, it has been held that the 1993, Act by virtue of Section 34 therein has an overriding effect and, therefore, no recovery can be made under the State Act of 1973, Act presently involved. The certificate of recovery, therefore, has to be quashed.

He has further submitted that the respondent themselves having initiated enquiry about the illegalities committed by the bank in the disbursement of the loan and in such circumstances the invoking of the provisions of the 1973, Act is misplaced and the certificate of recovery as well as any consequential action deserves to be quashed.

Replying to the said submissions, Sri Tiwari, learned counsel for the respondent no-4 Bank has urged that the loan having being admitted and the petitioner having defaulted, it is open to the bank to proceed to make recovery by all legal methods and this being an agricultural loan as envisaged under the 1973, Act, there is no infirmity in the issuance of the certificate of recovery. He has taken the Court through the contents of the counter affidavit to demonstrate that the disbursement of loan and also the manner in which the default has been committed resulted in the account being declared to be a non-profitable account and consequential initiation of recovery. He contends that the bar of Section 34 of the 1993, Act would not apply inasmuch as, even otherwise, the petitioner has shown no intention to repay the loan inspite of the fact that the petitioner alleges that she has established and is running the dairy.

In the absence of any such intention, the writ petition does not deserves to be entertain and the recovery should be allowed to be continued.

Having heard learned counsel for the parties and having considered the submissions raised it is undisputed that the loan has been taken by the petitioner and the petitioner has defaulted in repayment. The petitioner however seeks to justify the default on various allegations. What we find is that from the repayment schedule and the implementation schedule read together, there is no bar or any condition that may deprive the bank from proceeding to initiate recovery proceedings after a default has been made and the term loan account of the petitioner has been declared to be a non-profitable account on 20.10.2016 as communicated to the petitioner.

The petitioner has claimed damages against the bank before the District Consumer Forum. The aforesaid proceedings therefore do not in any way preclude the bank from proceedings to recover the amount from the petitioner.

The petitioner was put to notice under the SARFAESI Act, 2002 on 31.01.2017. A demand was also raised and ultimately the certificate of recovery has been issued under Section 11-A of the U.P. Agricultural Credit Act, 1973.

The defence taken by the petitioner is of the applicability of the provisions under which the recovery can be made. For this the judgments which have been relied on by the learned counsel for the petitioner and as noted above, it would be apt to refer to the Division Bench judgment in the case of Sanjay Gupta Vs. State of U.P. and others, 2011 (8) ADJ, 647 where the Court was considering the applicability of the provisions of the 1993 Act as against the 1972 Act and it came to the conclusion that in view of the fact that the loan had been rendered to a Society sponsored by the State through the U.P. Khadi and Village Industries Commission, the loan would be recoverable as arrears of land revenue under the U.P. Public Money (Recovery of Dues) Act, 1972. We therefore applying the ratio of the said decision, which has considered all the decisions that have been referred to by the learned counsel for the petitioner, has rightly come to the conclusion that the contention on behalf of the petitioner that the 1972, Act will not apply does not appear to be correct.

However, the issue raised here is that the certificate of recovery has been issued under the U.P. Agricultural Credit Act, 1973 and therefore the issue as to whether the provisions of the 1973 Act would not apply keeping in view the definition of the word "debt" under Section 2(g) of the U.P. Recovery of Debts due to Banks and Financial Institutions Act, 1993. The other question that would arise, is that if Section 34 of the 1993 Act bars the invoking of any other Act for recovery, then can the recovery be further pursued in terms of SARFAESI Act, 2002.

On this issue we find that learned counsel for the petitioner has cited the decision in the case of Jujhar Singh Vs. State of U.P. & Ors. (Supra) which holds that recovery under the U.P. Agricultural Credit Act, 1973 can not be resorted to in respect of a loan which is not less than Rs.10 lakhs and the 1993 Act would prevail keeping in view of provisions of Section 34 of the said Act the said judgment was delivered on 19.12.2006.

An issue as to whether the 1973 Act can be resorted to if the SARFAESI Act, 2002 is applicable came to be considered by a Division Bench in the case of M/s Alka Ice and Cold Storages Pvt. Ltd. & Ors. Vs. State of U.P. & Ors. 2012(7) ADJ, 520. The Court held that even if the outstanding amount is more than Rs.10 lakhs, the 1973 Act can be pressed into service. The said judgment has been rendered after taking into account all the judgments that have been referred to by the petitioner in support of this writ petition. The said Division Bench judgment was rendered on 29.05.2012 but it is correct that it does not notice the ratio of the Single Judge judgment in the case of Jujhar Singh Vs. State of U.P. & Ors. (Supra). Nonetheless M/s Alka Ice and Cold Storage (supra) is a Division Bench judgment and it has concluded in paragraph no.24 as follows :

"In the present case we are concerned with the recovery under the U.P. Act of 1973, which is a special Act, which not only provides for a specific modes of recovery from movable, immovable and the personal security, it also provides for an order to be passed for recovery after notice and an appeal to the appellate authority, serving the principle of natural justice. The U.P. Act of 1973 thus has all the attributes of the Act of 1993 to protect the interest of the borrower as well as the speedy recovery of the dues of the bank sponsored by the Central Government and State Government under its various schemes for the benefit of agriculturists or for agricultural purposes. The recovery of agricultural debt, even if the outstanding amount is more than Rs.10 lacs, can thus be pursued under the U.P. Act of 1973.

For the aforesaid reasons, we do not find any good ground to interfere with the recovery proceedings drawn by the Punjab National Bank under the U.P. Agricultural Credit Act, 1973.

The writ petition is accordingly dismissed."

There is yet another feature of the aforesaid judgment which deserves notice, namely that it was subjected to an appeal before the Apex Court where finally the following order was passed on 16.7.2012:-

"We are informed that the respondents are not taking steps for enforcing arrest of the petitioners-Directors of the Company and guarantors, but they are only taking steps to recover the amount due. This submission is recorded. Needless to say that the respondents can proceed against the mortgage property and recover the amount. The Special Leave Petition is disposed of."

The judgment of the High Court therefore in the case of M/s Alka Ice and Cold Storages Pvt. Ltd. & Ors. Vs. State of U.P. & Ors. (Supra) has not been interfered with by the Apex Court.

In view of what has been stated above, and the ratio of the decisions as noted above, we are unable to accept the contention raised on behalf of the petitioner that the recovery proceedings are vitiated on account of applicability of wrong provisions of law.

We may also put on record that throughout the hearing we had called upon Sri Udit Chandra to obtain instructions from the petitioner about the intention of the petitioner to repay the loan upon which Sri Chandra informed the Court that the petitioner is not in a position to make any such concession for repayment of the loan. We may put on record that this is public money that was given in the shape of a loan for a scheme for the benefit of public at large. The petitioner's attitude in not depositing the loan amount as agreed upon is a clear breach of the terms and conditions of the loan and before this Court the petitioner has declined to make any offer for any such deposit.

We are therefore not inclined to exercise our discretion in favour of the petitioner for fixing or rescheduling the loan or grant any indulgence to that effect as the petitioner now even does not intend to repay the loan. The petition therefore has been filed only with a view to avoid repayment and is not a bonafide effort to seek protection of law. We therefore dismiss the writ petition without prejudice to the rights of the bank to proceed with the recovery in accordance with law. The interim orders passed shall stand discharged.

Order Date :- 09.10.2017

R./