Punjab-Haryana High Court
Deepak Prakash Maghan vs Haryana State Industrial Development ... on 8 April, 2004
Equivalent citations: I(2006)BC405, (2005)141PLR549
Author: Nirmal Singh
Bench: Nirmal Singh
JUDGMENT G.S. Singhvi, J.
1. In this petition, the petitioner has prayed for quashing recovery certificate issued by Managing Director of Haryana State Industrial Development Corporation Ltd. (for short, the Corporation) and for grant of a declaration that Clause 24 of the Assisted Sector Agreement dated 1.10.1993 does not entitle the Corporation to recover the amount under Haryana Public Money (Recovery of Dues) Act, 1979 (for short, the 1979 Act).
2. Petitioner-Deepak Prakash Maghan and Sarv Shri Naresh Kumar Garg, L.J. Jindal, Yashpal Garg and Vinod Maghan got incorporated a company in November, 1986 under the same and style of New Era Medicare Ltd. for manufacture, distribution and sale of Medical equipments including disposable syringes. After one month, the petitioner and Naresh Kumar Garg signed a Memorandum of Understanding (Annexure P.1) with the Corporation on 9.12.1986 for implementation of the project of manufacturing disposable syringes. The parties also executed Assisted Sector Agreement on 7.7.1998 (Annexure P.2) which not only contemplated the percentage share of voting power between the parties but also contained the conditions regarding appointment of Directors. It was also contemplated that the Managing Director of the Company will be appointed on the recommendations of the collaborators after its approval by the. Corporation. It was also agreed between the parties that authorised share capital of the company shall be Rs. 4.00 crores divided into 40 lacs equity shares of Rs. 10/- each. The Corporation was to subscribe to and pay for equity shares of the Company upto 15% of the total issued equity capital, while the petitioner and other collaborators were to subscribe the balance equity share capital.
3. In the course of time, several disputes arose between the Corporation and promoters/collaborators. The Corporation issued show cause notice dated 27.4.1994 (Annexure P.3) to one of the promoters, namely, N.K. Garg in the matter of alleged violation of the Assisted Sector Agreement. The petitioner and N.K. Garg sent joint reply dated 17.5.1994 (Annexure P.4). However, the dispute continued between the parties. The Corporation suo-motu referred the dispute of buy back, shares to the arbitration of Shri N.K. Jain Special Secretary, Department of Finance. Subsequently, Hon'ble Mr. Justice D.V. Sehgal (Retired) was appointed as Arbitrator.
4. During the pendency or arbitration proceedings, Managing Director or the Corporation sent recovery certificate dated 3.1.2001 (Annexure P.11) to Deputy Commissioner-cum-Collector, Sangrur for recovery of Rs. 125.51 lacs from the petitioner and 7 others under Section 3 of the 1979 Act as arrears of land revenue. On coming to know of this development, the petitioner addressed letter dated 12.2.2001 (Annexure P.12) to the Managing Director of the Corporation requesting him to withdraw the proceedings of recovery initiated by him. A separate application was submitted to Deputy Commissioner-cum-Collector, Sangrur to reject the recovery certificate sent by the Managing Director of the Corporation.
5. Although, the petitioner has challenged the recovery certificate (Annexure P. 11) and Clause 24 of the Assisted Sector Agreement (Annexure P.2) on several grounds, we do not consider it necessary to deal with the same because at the hearing, learned Counsel for the petitioner gave out that for the time being, his client will feel satisfied if the proceedings of recovery are quashed on the ground of violation of the rules of natural justice. He relied on order dated 6.9.1999 passed in C.W.P. No. 16803 of 1998 - Nirmal Singh Kandola v. State of Punjab and Ors. and submitted that the recovery certificate (Annexure P. 11) issued by the Managing Director of the Corporation is liable to be quashed because he did not give action - oriented notice and opportunity of hearing before determining the liability of the petitioner and other promoters/collaborators.
6. Shri Dheeraj Chawla, learned Counsel for the Corporation referred to show cause notice dated 4.10.2000 (Annexure R.1) issued by the Managing Director of the Corporation and submitted that even though, there is no indication about the proposed determination of the liability of the petitioner, the recovery proceedings may not be quashed because no prejudice has been caused to him.
7. We have given serious thought to the arguments of the learned Counsel. In Nirmal Singh Kandola's case (supra), a Division Bench of this Court considered the legality of the recovery certificate issued under Section 32G of the State Financial Corporation Act, 1951 as well as appointment of Managing Director of Punjab Financial Corporation as the Specified Authority and while upholding the appointment of the Managing Director of Punjab Financial Corporation as the Specified Authority, the Court quashed the recovery certificate. The relevant portion of the order passed in that case is reproduced below:
"The first question which needs consideration by the Court is as to whether the recovery certificate issued by the Specified Authority is liable to be nullified on the ground of violation of the principles of natural justice. Determination of this issues does not require detailed scrutiny of the facts or elucidation of law because during the course of hearing. Shri Ajay Tiwari conceded that before issuing the impugned certificate, the Managing Director of the Corporation did not give notice or opportunity of hearing to the petitioner, In S.K. Bhargava v. Collector, Chandigarh, 1988(2) R.C.R. 526, their Lordships of the Supreme Court have held that the recovery certificate issued under Section 32G of the Act without complying with the basic rule that no man can be condemned unheard is liable to be declared as nullity. This is also the view taken by a Division Bench of this Court in C.W.P. No. 16814 of 1996 - Vipin K. Singal and Ors v. Haryana Financial Corporation and Ors., decided on 24,8.1999 and in view of this factual and legal position, certificate Annexure P.1 and other consequential actions taken by the respondents to recover the amount from the petitioner are liable to be nullified on the ground of violation of the rule of audi alteram partem."
8. By applying the above noted proposition to the facts of this case, we hold that the recovery certificate (Annexure P. 11) issued by the Managing Director of the Corporation are liable to be quashed.
9. In the result, the writ petition is partly allowed. Recovery certificate dated 3.1.2001 (Annexure P.11) issued by the Managing Director of the Corporation is declared illegal and quashed. However, keeping in view the fact that more than Rs. one crore are said to be due to the petitioner and other promoters/collaborators of the company, we direct the competent authority to make determination of the amount due after giving notice and opportunity of hearing to the petitioner and those, who may be found liable to pay the amount. The needful be done within 6 weeks from the date of submission/receipt of certified copy of this order. The petitioner is directed to appear before the Managing Director of the Corporation on 26.4.2004 who shall give him opportunity to represent against the proposed determination of his liability. The other affected persons may be issued notice requiring them to submit their defence against the proposed determination of their liability.
10. While disposing of the writ petition in the manner indicated above, we have refrained from expressing any opinion on the legality or otherwise of Clause 24 of the Assisted Sector Agreement dated 1.10.1993 and make it clear that it will be open to the petitioner and/or any other aggrieved person to challenge the same in separate proceedings.
11. Copies of the order be given dasti on payment of the fee prescribed for urgent applications.