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Tandon Sugar Works, Shahjahanpur Vs. Uttar Pradesh Financial Corporation, Kanpur and ors. - Court Judgment

LegalCrystal Citation
SubjectCivil
CourtAllahabad High Court
Decided On
Case NumberCivil Misc. Writ No. 4370 of 1966
Judge
Reported inAIR1969All419
ActsConstitution of India - Article 14; Uttar Pradesh Public Moneys (Recovery of Dues) Act, 1965 - Sections 31(1)
AppellantTandon Sugar Works, Shahjahanpur
RespondentUttar Pradesh Financial Corporation, Kanpur and ors.
Appellant AdvocateS.C. Kahre, Adv.
Respondent AdvocateS.N. Kacker, ;Sridhar, ;S.K. Suri, Advs. and ;S.C.
DispositionPetition dismissed
Excerpt:
.....14 of constitution of india - procedure under section 3 (1) provides for recovery as arrears of land revenue against such debtors who agree for such recovery - general remedy by way of suit or otherwise as provided under u. p. financial corporation act are available against everybody - held, provisions are not discriminatory. - - after considering the cause shown, the collector, if satisfied that the public premises are in unauthorised occupation, could, under section 5, make an order of eviction and then forthwith recover possession. it did not disapprove the decision in that case. it will, therefore, be unsafe to extend the ratio of the majority opinion to statutes providing for speedier methods and procedure for recovery of state revenues. the northern india caterers' case..........mentioning the sum due and requesting that such sum be recovered as if it were arrears of land revenue. this power comes into operation, if the debtor makes default in payment of the loan. section 3 applies to three classes of persons only, sub-section (1) of section 3 states:'where any person is party - (a) to any agreement relating to a loan advance or grant given to him by the state government or the corporation by way of financial assistance, or (b) to any agreement relating to a guarantee given by the state government or the corporation in respect of a loan raised by cm industrial concern, or (c) to any agreement providing that any money payable thereunder to the state government shall be recoverable as arrears of land revenue, ......' the section further makes it clear.....
Judgment:
ORDER

Satish Chandra, J.

1. This petition under Article 226 of the Constitution questions the constitutional validity of the Public Moneys (Recovery of Dues) Act, 1965.

2, The petitioner is a partnership concern carrying an the business of manufacture and sale of Khandsari suyar. Under a registered deed of agreement dated 8th September, 1961, the petitioner borrowed a sum of Rs. 1,00,000.00 from the U. P. State Financial Corporation. The loan was repayable in annual instalments of Rs. 10,00.00 beginning with 31st March, 1963. The petitioner paid the first instalment due on 31st March, 1953, but thereafter be defaulted in payment. On 13th June, 1966 the Financial Corporationserved a notice on the petitioner requiring it to make the payment of the due instalments within fifteen days of the serviceof the notice. In spite of the notice the petitioner did not make any payment. The Corporation then issued a recovery certificate under the provisions of the impugned Act, to the Collector, Saharanpur,requesting him for realisation of the balance of the loan which came to Rs. 86,794.50. Thereupon the petitioner came to this Court.

3. On December 4, 19G5 the State Legislature enacted the Public Moneys (Recovery of Dues) Act, 1965, to provide for speedy recovery of, inter alia, State dues. Section 3 of this Act authorises the Managing Director of the U. P. Financial Corporation to send a certificate to the Collector mentioning the sum due and requesting that such sum be recovered as if it were arrears of land revenue. This power comes into operation, if the debtor makes default in payment of the loan. Section 3 applies to three classes of persons only, Sub-section (1) of Section 3 states:

'Where any person is party -

(a) to any agreement relating to a loan advance or grant given to him by the State Government or the Corporation by way of financial assistance, or

(b) to any agreement relating to a guarantee given by the State Government or the Corporation in respect of a loan raised by cm industrial concern, or

(c) to any agreement providing that any money payable thereunder to the State Government shall be recoverable as arrears of land revenue, ......'

The section further makes it clear that the remedy provided therein was without prejudice to any other mode of recovery under any other law for the time being in force.

4. Mr. S.C. Khare, appearing for the petitioner, submitted that this Act violated the equality guaranteed by Article 14 of the Constitution. The remedy provided by this Act was supplemental and not substitutive. It was more drastic than the normal remedy of recovering loan by a suit in the ordinary civil courts, in so far as the debtor or a defendant was concerned, The authority was conferred an unguided and an absolute power to pick and choose between its various debtors for applying this Act. The conferment of such a drastic and more prejudicial remedy coupled with an unguided discretion manifestly violated the right of equality under Article 14.

5. For this submission learned counsel placed reliance on the decision, of the Supreme Court in Northern India Caterers (P) Ltd. v. State of Punjab : [1967]3SCR399 . In that case the majority held that the Punjab Public Premises and Land (Eviction and Rent Recovery) Act (31 of 1959) violated Article 14. That Act sought to provide a speedier remedy for evictionof unauthorised occupants from public premises. Under Section 4 of that Act, the Collector, if he was of the opinion that any person was in unauthorised occupation of public premises, and that he should be evicted, was entitled , to issue a notice requiring him to show cause why an order of eviction should not be passed. After considering the cause shown, the Collector, if satisfied that the public premises are in unauthorised occupation, could, under Section 5, make an order of eviction and then forthwith recover possession. The majority held Section 5 did not lay down any guiding principle or policy under which the Collector had to decide in which cases he should apply the remedy under the Act and in what cases he should proceed by way of a suit in the ordinary civil court. The Act thus conferred an arbitrary and unguided discretion on the Collector. They also held that the remedy under the Act was more drastic because a person in possession was liable to eviction on the mere opinion and satisfaction of the Collector. Further, under the Act the person was liable to pay such arrears and damages which the Collector would chose to assess in respect of the premises, as arrears of land revenue.

6. The majority opinion considered the case of Banarasi Das v. Cane Commissioner, Uttar Pradesh, AIR 1903 SC 1417 and distinguished it. It did not disapprove the decision in that case. As that case would be manorial and relevant for deciding the present case, its facts and decision may be noticed. Under Rule 23 of the U. P. Sugar Factories Rules, 1938, a dispute could be decided by the Commissioner or if he so permitted, it could go to arbitration. The rule was impeached on the ground that it provided two different procedures either of which could be followed by the Cane Commissioner. Raghubar Dayal J. held that the rule was discriminatory and violated Article 14 of the Constitution. Hidayatullah J., however, speaking for the majority, held otherwise. His decision in the words of the majority opinion in Northern India Caterer's case : [1967]3SCR399 was as follows:--

'He, however, construed the rule to mean that the parties, instead of leaving the dispute to the decision of the Commissioner, could go to arbitration with his permission. On this construction, he held that, where there are two procedures, one for every one and the other, if the disputants voluntarily agree to follow it, there would be no discrimination because discrimination can only be found to exist if the election is with someone else who can exercise his will arbitrarily.'

Then Shelat J. speaking for the Majority, enunciated the principle as follows:--

'The principle which emerges from these decisions is that discrimination would result if there are two available procedures one more drastic or prejudicial to the party concerned than the other and which can be applied at the arbitrary will of the authority.'

7. In my opinion the principle enunciated in the case of Banarsi Das : AIR1963SC1417 would be applicable to Clause (c) of Sub-section (1) of Section 3 of the Public Moneys (Recovery of Dues) Act, 1965. Under that clause where any person is party to any agreement providing that any money payable thereunder to the State Government shall be recoverable as arrears of land revenue and such person makes default in payment, the money could be recovered as arrears of land revenue. Thus, the procedure provided in Clause (c) is available only against such debtors who have agreed that the money payable may be recovered as arrears of, land revenue. The other general remedy by way of a suit or other remedies specifically provided in the U. P. Financial Corporation Act are available against everybody, but this special remedy would be available only as against debtors with whom there is an express agreement. The election that the loan may be recovered as arrears of land revenue under this Act is not dependent upon the: will or whim of the Corporation but would be available only if the parties have voluntarily agreed to it. One of the two factors which according to the Supreme Court had to co-exist, namely that the authority has been conferred an arbitrary power to pick and choose, will not be there. Clause (c) would not be discriminatory or within the purview of the abovementioned principle enunciated by the majority opinion of the Supreme Court. If the proceedings for recovery in the present case fall within Clause (c) they would be valid and justified thereunder. It will hence not be necessary to consider whether Clauses (a) and (b) of section 3(1) violate Article 14. No opinion need be expressed on those Clauses.

8. Clause (c) applies where an agreement provides that any money payable thereunder to the State Government shall be recoverable as arrears of land revenue, The question is whether the agreement executed by the petitioner is one such. The Financial Corporation in its affidavit has stated that under Section 25(d) of the U. P. State Financial Corporation Act (No. 63 of 1951) the Corporation could act as an agent of the State Government in transactions of business with an industrial concern in respect of loans or advances. The loan advanced to the petitioner was advanced by the Corporation as an agent of the State Government. The money advanced belonged to the State Government. The principal money andthe interest realised by the Corporation is paid over to the State Government. The deed of agreement states that the borrowers, namely the petitioners applied to the Director of Industries as represented by the Government's accredited agent, namely the State Financial Corporation, for the advance of a loan of rupees one lakh for the purpose of a khandsari industry. It has also been stated in the affidavit that where the Corporation acts as the agent of the Government under Section 25 (d) of the Act, a much lower rate of interest is charged than on loans advanced by the Corporation from its own funds. In the case of the petitioners the lower rate of interest has been charged. It has also been stated that under the provisions, if the loan advanced on behalf of the Government is not recovered the State Government shares the loss with the Central Government. The Corporation does not have to bear any part of it. Clause (15) of paragraph 6 of the deed of agreement provides that all dues in connection with this loan advanced by and on behalf of the Government shall at the option of the creditor be also realisable as arrears of land revenue. Further, Clause (9) of Annexure I of the deed states that 'all dues in connection with this loan shall also be realisable as arrears of land revenue at the option of the Corporation over and above the remedies available under the State Financial Corporations Act.'

The deed confirms the statement of facts made by the respondents that the loan has been advanced by and on behalf of the Government. The Corporation was acting only as the agent of the Government in the transaction of the loan with petitioner. It is further clear that the loan was under the agreement repayable to the State Government through the agency of the Corporation. The petitioner had expressly agreed that dues in connection with the loan shall be realisable as arrears of land revenue. On facts, therefore, the present case falls squarely within the purview of Clause (c) of subsection (1) of Section 3 of the Act. This clause is, as seen above, valid. The proceedings initiated by the respondents for recovery of the loans hence could not be characterised as invalid.

9. I may in passing notice another aspect of the matter. Bachawat J. speaking for the minority in the case of Northern India Caterers : [1967]3SCR399 observed:--

'It is settled by our previous decisions that the Revenue Recovery Acts and other Acts creating special tribunals and procedure for the expeditious recovery of revenue and State dues are in the public interest and do not violate Article 14, see Manna Lal v. Collector of Jhalawar : [1961]2SCR962 , : [1962]2SCR324 . Collector of Malabar v. Erimmal Ebrahim : 1957CriLJ1030 , Purshottam Govindji Halai v. B.M. Dusai : 1956CriLJ129 and Lachhman Das. v. State of Punjab : [1963]2SCR353 '.

His Lordship then observed that if a quick recovery of revenue is in, public interest, expedition? recovery of Slate property from which revenue is derived is a fortiori in the public interest. The minority opinion nowhere referred to these decisions relating to Revenue Recovery Act and other similar Acts. The reason seema obvious. The majority apparently did not share the opinion that recovery of State revenues could be equated with the recovery of State property. Else they would undoubtedly have referred to these previous decisions of that Court itself wherein those Acts were affirmatively declared to be valid and not violative of Article 14. The various Acts considered in these decisions suffered from the same defect, namely the proceedings thereunder were supplemental and not substitutive of the ordinary remedy by way of a suit in the civil courts to recover the amount. From that point of view they were on a par with the Punjab Public Premises and Land (Eviction and Rent Recovery) Act (31 of 1959) which was involved in the case of Northern India Caterers. In spite of this similarity the majority did not even refer to these earlier decisions. It will, therefore, be unsafe to extend the ratio of the majority opinion to statutes providing for speedier methods and procedure for recovery of State revenues. The Northern India Caterers' case : [1967]3SCR399 could well be confined to statutes relating to recovery of possession of public properties. From this point of view the validity of Clauses (a) and (b) of Sub-section (1) of Section 3 of the impugned Act would be liable to be upheld in view of the decisions of the Supreme Court mentioned by Bachawat J.

10. In the result the petition fails andis dismissed. I would make no order asto costs.


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