Pradeep Tyagi vs Delhi Financial Corporation & Ors
2011 Latest Caselaw 3077 Del

            *IN THE HIGH COURT OF DELHI AT NEW DELHI

                                              Date of decision: 4th July, 2011
+                               W.P.(C) 2950/2008

PRADEEP TYAGI                                               ..... Petitioner
                            Through:      Mr. Ashim Vachher & Mr. Aman
                                          Shanker, Advocate

                                     Versus

DELHI FINANCIAL CORPORATION & ORS             ..... Respondents
                 Through: Mr. V. Srivastava, Advocate
CORAM :-
HON'BLE MR. JUSTICE RAJIV SAHAI ENDLAW
1.       Whether reporters of Local papers may                    No
         be allowed to see the judgment?

2.       To be referred to the reporter or not?              No

3.       Whether the judgment should be reported             No
         in the Digest?

RAJIV SAHAI ENDLAW, J.

1. The petition impugns the action of the respondent no.1 Delhi

Financial Corporation (DFC) of having got issued, in exercise of powers

under Section 32G of the State Financial Corporations (SFC) Act, 1951, to

the respondent no.3 Collector, Ghaziabad, a certificate for recovery as

arrears of land revenue, the dues of `16,47,320/- owed by the petitioner to

the respondent no.1 DFC; the petition further seeks to restrain the

respondents from, in pursuance to the said certificate, causing arrest of the

petitioner. Notice of the petition was issued and vide order dated 11 th April,

2008 which continues to be in force, arrest of the petitioner was stayed.

2. It is the case of the petitioner that the respondent no.1 DFC had in

August, 1996 sanctioned a loan of `10 lacs in favour of the petitioner;

however only a sum of `9,31,000/- was disbursed to the petitioner; that

even though the petitioner had by October, 1998 re-paid a sum of

`4,20,212/- to the respondent no.1 DFC but the loan was illegally re-called

vide notice dated 25th September, 1998 and the balance amount then due of

`8,48,201/- demanded from the petitioner; that the action of the respondent

no.1 DFC was illegal in as much as the entire sanctioned loan also had not

been disbursed to the petitioner causing loss to the petitioner; that in

November, 1999 the respondent no.1 DFC issued notice under Section 29

of the SFC Act then demanding a sum of `9,13,303.10 from the petitioner;

that the petitioner thereafter issued four cheques in favour of the

respondent no.1 DFC but of which only two were presented and the

remaining two not even presented; that the petitioner owing to ill health

and bad phase in business could not re-pay the entire amount; that in

February, 2001 another notice under Section 29 of the SFC Act was issued

then demanding a sum of `4,78,000/- from the petitioner; that the

petitioner deposited a further sum of `2,04,000/- with the respondent no.1

DFC but could not pay the balance amount owing to closure of his

business premises under directions of the Supreme Court on account of a

"non-conforming user"; that the petitioner thereafter shifted his business to

Sahibabad, Uttar Pradesh but remained unable to re-pay the entire amount

due to the respondent no.1 DFC; that the respondent no.1 DFC thereafter in

April, 2002 issued notice under Section 406 of the Indian Penal Code; that

owing to failure of the efforts of the petitioner to revive his unit, he could

not re-pay the amount due to the respondent no.1 DFC; though the

petitioner applied under the OTS Proposal scheme but the same was not

accepted; that in March, 2007 the respondent no.1 DFC filed an application

under Section 32G of the SFC Act before the Competent Authority

(respondent no.2) for issuance of Recovery Certificate for an amount of

`16,47,320/- without disclosing as to how the said amount was due; that

the Competent Authority issued notice dated 30 th May, 2007 to the

petitioner of the said application of the respondent no.1 DFC; that the

petitioner filed his reply before the Competent Authority but the

Competent Authority nevertheless issued Recovery Certificate for

`16,47,320/- and since the petitioner was residing at Ghaziabad, forwarded

the same to the respondent no.3 Collector, Ghaziabad for implementation.

The petitioner impugns the said action by contending:-

i. that the respondent no.1 DFC having availed the remedy

under Section 29 is not entitled to proceed under Section 32G

of the SFC Act;

ii. because Punjab Land Revenue Act, 1887 under which the

respondent no.3 is exercising the powers of detention is not

applicable to National Capital Territory of Delhi;

iii. that the National Capital Territory of Delhi is governed by the

Delhi Land Revenue Act, 1954 (sic for Delhi Land Reforms

Act, 1954), Section 2 whereof repeals the inconsistent

provisions of Punjab Land Revenue Act, 1887;

iv. because action for detention against a defaulter can be taken

only if it will compel payment of whole or substantial part of

the arrears. Reliance in this regard is placed on Ram Narayan

Agarwal v. State of Uttar Pradesh (1983) 4 SCC 276;

v. Rule 251 of the U.P. Zamindari Abolition and Land Reforms

Rules, 1952 requires an inquiry into the question whether the

detention of the defaulter would compel him to pay the

arrears;

vi. the calculation of the amount due of ` 16,47,320/- is

challenged;

vii. it is contended that no action of detention can be taken

without enforcing the guarantee furnished for the grant of

loan.

3. The respondent no.1 DFC in its counter affidavit has pleaded that as

on that date a sum of `21,43,760/- was recoverable from the petitioner; that

though the loan of `10 lac was sanctioned, a sum of `9,31,000/- only was

disbursed in reference to the terms and conditions of Mortgage Deed/ Deed

of Hypothecation executed by the petitioner; that the loan was re-called on

account of default of the terms and conditions of re-payment by the

petitioner; that of the four cheques issued by the petitioner two could not

be presented/realized through the bank; that the amount of `4,78,000/-

demanded in the second notice under Section 29 of the SFC Act did not

represent the entire amount due but only the amount due on that date; that

the petitioner inspite of sufficient opportunities defaulted in payment and

inspection of the unit of the petitioner also showed part of the machinery

hypothecated missing and/or dismantled; that the balance machinery of

which possession was taken could fetch `2 lac only of which credit has

been given to the petitioner; that the petitioner himself did not accept the

OTS Proposal; the computation of the amount due has been given in the

counter affidavit; that the petitioner had defrauded the respondent no.1

DFC in the matter of furnishing of guarantee also; the property of which

guarantee was given had already been sold prior to the execution of the

Bond of Guarantee.

4. The petitioner has filed a rejoinder controverting the contents of the

counter affidavit.

5. The counsel for the petitioner has placed reliance on:-

a) Jolly George Varghese v. The Bank of Cochin (1980) 2 SCC

360;

b) Judgment dated 8th January, 2010 of this Court in W.P.(C)

199/2004 titled Suresh Jindal v. Delhi Financial

Corporation & ;

c) Ram Narayan Agarwal (supra).

6. Though notice as aforesaid was issued to the respondent no.3

Collector, Ghaziabad also but the petitioner did not take steps for service

of the respondent no.3; a perusal of the order sheet shows that the same

appears to have escaped the attention of the Court also and the matter was

being listed for the last several dates, for hearing. Though the respondent

no.1 DFC has not taken any objection as to the maintainability of the writ

petition in this High Court with respect to the action of the respondent no.3

i.e. the Collector, Ghaziabad but in my opinion, in so far as the challenge if

any to the action of the Collector, Ghaziabad against the petitioner in

pursuance to the Recovery Certificate is concerned, this Court would not

have territorial jurisdiction over the same. Be that as it may, since no

arguments also were addressed on this aspect, it is deemed expedient to

proceed with the decision of the writ petition on merits also.

7. The judgment of this Court in Suresh Jindal (supra) forms the

backbone of the case of the counsel for the petitioner; on the basis thereof

it is contended that threat of arrest of petitioner without recording

satisfaction that the same will compel payment, is bad in law. This Court in

Suresh Jindal held on the basis of Ram Narayan Agarwal (supra) that

Section 51 of the CPC (laying down that execution of money decree by

detention in prison shall not be ordered unless the judgment debtor has

dishonestly transferred, concealed or removed his property or committed

any other acts of bad faith in relation to his property) is applicable to

recoveries of land revenue also. Attention of the counsel for the petitioner

was invited to the judgment dated 14th March, 2011 in W.P.(C) 1598/2011

titled P.C. Aggarwal v. Govt. of NCT of Delhi where it has been held that

Suresh Jindal notices the judgment in Ram Narayan Agarwal only till

paragraph 10 and does not notice the subsequent paragraphs particularly

para 16 expressly laying down that Section 51 of CPC does not apply to

recovery of monies as arrears of land revenue. Need is thus not felt to

reiterate the judgment in P.C. Aggarwal (supra) herein. Thus no benefit

can be derived by the petitioner of the judgment in Suresh Jindal.

8. As far as the reference by the petitioner to Jolly George Varghese

(supra) is concerned, Suresh Jindal itself holds that the same is not

applicable to payment of statutory dues of Financial Corporation.

9. The only other judgment cited by the counsel for the petitioner,

namely Ram Narayan Agarwal has also been exhaustively dealt with in

P.C. Aggarwal (supra) and need is thus not felt to reiterate the same also.

Ram Narayan Agarwal in fact deals with the recoveries as arrears of land

revenue in the State of Uttar Pradesh within which the District of

Ghaziabad also is situated and thus the position as in Ram Narayan

Agarwal and as discussed in P.C. Aggarwal squarely covers the position

herein also. Section 279 (1) (b) of the Uttar Pradesh Zamindari Abolition

and Land Reforms Act, 1950 and Rules, 1952 framed thereunder authorize

recovery of land revenue by arrest and detention of the person who has

committed the default and the procedure therefor is provided under Rules

247 to 253.

10. The counsel for the petitioner has else not urged any submissions or

any other error in the action of the respondent no.1 DFC in invoking

Section 32G. As far as the grounds taken in the petition are concerned, I do

not find any bar in the SFC Act to invocation of Section 32G after

invoking Section 29. While Section 29 can be resorted to for taking over

the management/possession of the industrial concern and/or for transfer of

the mortgaged/hypothecated property, Section 32G can be invoked for

recovery of the monies remaining due. The Supreme Court in Andhra

Pradesh State Financial Corporation v. GAR Re-Rolling Mills (1994) 2

SCC 647 has held that the doctrine of election would not apply to cases

where the ambit and scope of the two remedies is essentially different and

that to hold otherwise may lead to injustice. It was further held that the

State Financial Corporation must be held entitled and given full protection

by the Court to recover its dues and it cannot be bound down to adopt only

one of the two remedies provided under the Act. It is not the case of the

respondent no.1 DFC simultaneously pursuing the remedies under Section

29 and Section 32G. The respondent no.1 DFC is not found to be under

any disability to take recourse to the rights and remedies available to it

under Section 32G for recovery of the amounts remaining due after

recourse has been taken to Section 29. Moreover, Section 32G also uses

the expression "without prejudice to any other mode of recovery". To

denude the respondent no.1 DFC of its rights under Section 32G would

tantamount to rendering redundant above quoted expression in Section

32G.

11. The respondent no.1 DFC along with its counter affidavit has filed a

copy of the letter of the guarantor admitting sale of property of which

guarantee was given, prior to the execution of Bond of Guarantee.

Moreover there is no explanation as to why the petitioner and/or the

guarantor have even during the time when stay against the arrest was

obtained from this Court, not re-paid the dues.

12. The other grounds urged of impugning the amount due do not really

form the case of the petitioner in as much as the petitioner has not placed

any of his own computation before this Court. Moreover such disputed

questions of fact cannot be the subject matter of this writ petition as

aforesaid the writ petition was filed basing the case on Suresh Jindal only.

13. The Supreme Court in GAR Re-Rolling Mills (supra) has held that

time has come for the Court to stop granting any indulgence to such

persons. It was held that the aim of equity is to promote honesty and not to

frustrate the legitimate rights of Financial Corporations which after

advancing the loans take steps to recover their dues from the defaulting

party. The Full Bench of this Court as far back as in Digambar Prasad v.

S.L. Dhani 1969 ILR (Delhi) 1016 held that the grant of a writ is in the

discretion of the court and court will decline to exercise discretion where

conduct of the petitioner is such that it would be inequitable and unjust to

grant him the relief. This Court would be loath to exercise discretion in

favour of petitioner who inspite of opportunity has failed to repay the

public dues. Mention may also be made of S.P. Chengalvaraya Naidu v.

Jagannath AIR 1994 SC 853 where also the Apex Court noted that the

process of the court is being abused - bank loan dodgers and other

unscrupulous persons from all walks of life find the court process a

convenient lever to retain the illegal gains indefinitely.

14. There is thus no merit in the petition; the same is dismissed. Even

though the petitioner, having taken advantage of the interim order against

his arrest, ought to be directed to now surrender himself to the Collector,

Ghaziabad but since the Collector, Ghaziabad remained unserved, I refrain

from issuing any such directions. However, the petitioner is directed to pay

costs of ` 25,000/- of these proceedings to the respondent no.1 DFC within

four weeks of today, failing which the same shall incur interest @ 12% per

annum.

RAJIV SAHAI ENDLAW (JUDGE) 4th July, 2011 pp