Rajasthan High Court - Jodhpur
Smt.Harwinder Kaur vs State Bank Of India & Ors on 10 February, 2014
Bench: Amitava Roy, Vijay Bishnoi
D.B.CIVIL WRIT PETITION NO.3871/2001
Smt.Harwinder Kaur
Vs.
The State Bank of India & Ors.
1
IN THE HIGH COURT OF JUDICATURE FOR RAJASTHAN
AT JODHPUR
O R D E R
D.B.CIVIL WRIT PETITION NO.3871/2001
Smt.Harwinder Kaur
Vs.
The State Bank of India & Ors.
Date of order : 10th February, 2014
PRESENT
HON'BLE THE CHIEF JUSTICE MR AMITAVA ROY
HON'BLE MR JUSTICE VIJAY BISHNOI
Mr Vijay Aggarwal, for the petitioner
Mr J.K.Chanda, for the respondents
BY THE COURT: (PER HON'BLE BISHNOI,J.)
Reportable The petitioner has filed this writ petition while praying for following reliefs:
"(a) That an appropriate writ, order or direction may be issued declaring Sections 13 and 14 of the Rajasthan Agriculture Credit Operations (Removal of Difficulties) Act, 1974 unconstitutional as violative of Articles 14 and 21 of the Constitution of India.
(b) That it is submitted that the provisions of the enactments of Sections 12, 13, 14, 27 to 30 are inseparable from the rest of the act because if these provisions are taken D.B.CIVIL WRIT PETITION NO.3871/2001 Smt.Harwinder Kaur Vs. The State Bank of India & Ors.2
away, the rest of the Act
becomes otiose. Hence, these
provisions being inseparable
the entire Act is liable to be declared unconstitutional.
(c) That an appropriate writ,
direction or order may be
issued to the respondents
restraining them to sell the mortgaged property of the petitioner unless and until the dues of the petitioner are recalculated on the basis of 6% simple interest as applicable for mortgaged suits.
(d) That the respondent Bank may be directed to recalculate the dues of the petitioner on the basis of 6% simple interest as applicable to the mortgaged suits and outstanding amount thus recalculated may be directed to be paid to the Bank in reasonable time and the notice vide Annex.8 may be quashed.
(e) That any other order which this Hon'ble Court deems fit in favour of the petitioner may also kindly be passed in the interest of justice.
(f) That the cost of the litigation may also be awarded to the petitioner.
Brief facts giving rise to this D.B.CIVIL WRIT PETITION NO.3871/2001 Smt.Harwinder Kaur Vs. The State Bank of India & Ors. 3 petition are that the petitioner took loan of Rs.1,65,000/- from the respondent-Bank on 12.03.1996 for purchasing a tractor. When the petitioner failed to repay the loan as per terms and conditions of the loan agreement, the respondent-Bank moved an application on 21.08.2000 for recovery of loan amount before the Sub-Divisional Officer, Raisinghnagar (for short 'the SDO' hereinafter) under section 13 of the Rajasthan Agricultural Credit Operations (Removal of Difficulties) Act, 1974 (for short 'the Act of 1974' hereinafter). The SDO had issued notice of the application moved by the respondent-Bank to the petitioner, however, despite due service, the petitioner failed to respond to the said notice and, therefore, exparte proceedings were initiated against her. The SDO had directed to issue attach warrant and in pursuance thereof, the tractor in question was attached and put to auction. Ultimately, the tractor was auctioned at the price of Rs.70,000/-. However, when the whole due amount was not recovered from the said auction of the tractor, another notice dated D.B.CIVIL WRIT PETITION NO.3871/2001 Smt.Harwinder Kaur Vs. The State Bank of India & Ors. 4 16.07.2001 was issued to the petitioner, asking her to deposit an amount of Rs.1,60,713/- by 31.07.2001. Being aggrieved with the same, the petitioner has preferred this writ petition, while praying for aforesaid reliefs.
Learned counsel for the petitioner has argued that sections 13 and 14 of the Act of 1974 give unfettered right to the Bank and the prescribed authority to acquire the land and to attach the same without determination of the debt in accordance with due process of law. It has also been argued that there is no provision for determination of the debt and it does not even provide proper opportunity to confront the demand raised by the loanee bank. It has been contended that any provision, which deprives agriculturists of their land or immovable property without established procedure of giving due hearing for determination of debt, is simply draconian and violative of Article 14 of the Constitution of India. It has also been contended that sections 13 and 14 of the Act of 1974 virtually presume that the D.B.CIVIL WRIT PETITION NO.3871/2001 Smt.Harwinder Kaur Vs. The State Bank of India & Ors. 5 certificate of the Bank and its complaint to be true and correct account and in the event of non-payment of the amount as determined by the Bank, the property of the agriculturists is attached without any enquiry into the fact whether the amount of parties have been properly debited and credited and whether the interest has been charged at reasonable rates in accordance with law. The learned counsel for the petitioner has also contended that the prescribed authority under sections 13 and 14 of the Act of 1974 are the persons, who have no experience in the field of law and therefore, they cannot be the proper authorities for determining the demand raised by the loanee bank.
In support of this contention, the learned counsel for the petitioner has placed reliance on a decision of Hon'ble Supreme Court in Namit Sharma vss Union of India, 2012 AIR SCW 5523 and argued that a person exercising quasi-judicial power is expected to possess requisite qualification and experience in the field of law so as to inspire confidence in the public D.B.CIVIL WRIT PETITION NO.3871/2001 Smt.Harwinder Kaur Vs. The State Bank of India & Ors. 6 mind and for the fair treatment to the poor agriculturists.
The learned counsel for the petitioner has also argued that though the Hon'ble Supreme Court in Corporation Bank vs. D.S.Gowda & Anr., (1994) 5 SCC 213, has held that in case of agricultural loan, interest can be determined on yearly rest, whereas in the present case, the Bank has charged interest on half yearly rest and, therefore, the demand raised by the SDO, vide notice dated 16.07.2001, is liable to be quashed and set aside.
Per contra, the learned counsel for the respondent-Bank has argued that there is no illegality in the demand raised vide impugned notice dated 16.07.2001 as the same has been raised after complying with due process of law. It has been urged that the challenge of the petitioner to the provisions of the Act of 1974 is without any merit as the provisions of the Act of 1974 are squarely in conformity with the constitutional provisions.
The learned counsel for the D.B.CIVIL WRIT PETITION NO.3871/2001 Smt.Harwinder Kaur Vs. The State Bank of India & Ors. 7 respondent-Bank has placed reliance on a decision of this Court in Asuram vs. Tehsildar, Sanchore, AIR 2000 Raj. 345.
We have heard learned counsel for the parties.
For the proper adjudication of the points raised, it may be useful to notice the preamble, statement of objects and reasons necessitated for enacting the Act and the Scheme of the Act of 1974.
The Act of 1974 came into force on 21.09.1974 and the preamble of the Act reads as under:
"An Act to make provisions to facilitate adequate flow of credit for agricultural production and development through banks and other institutional credit agencies and for matters connected therewith and/or incidental thereto."
The statement of objects and reasons reads as follows:
"One of the main objectives of the legislation relating to social control of banks in 1968 and the nationalization of fourteen major Indian commercial Banks in 1969 was to ensure that adequate proportion of commercial Bank credit goes to D.B.CIVIL WRIT PETITION NO.3871/2001 Smt.Harwinder Kaur Vs. The State Bank of India & Ors.8
the agricultural sector and other priority sectors. An examination of State Laws has shown that there certain provisions therein which inhibit the entry of commercial Banks into the field of financing of agriculture. It will, therefore, be necessary to modify these laws for the purpose of enabling commercial banks to undertake financing of agriculture on a large scale. An expert group constituted by the Reserve Bank of India to study the enactments have a hearing on commercial Banks lending to agriculture suggested the modification of certain provisions in the State laws to facilitate the smooth and efficient operation of commercial banks in the sphere of agriculture credit. The expert group also suggested that instead of amending the various State laws, it would be preferable if a single consolidated legislation incorporating the various amendments suggested by it is enacted. This approach not only facilitates expeditious action but also provides for laying down a clear and unambigious frame work for the agricultural credit business of commercial Banks. Further, facilities available to the cooperative and or Land Development Banks could be extended to other D.B.CIVIL WRIT PETITION NO.3871/2001 Smt.Harwinder Kaur Vs. The State Bank of India & Ors.9
institutional credit agencies too through a separate legislation. The proposed bill is therefore being enacted to enable commercial banks and other institutional credit agencies to serve expeditiously as an effective instrument of national policy."
The Act of 1974 has undergone certain important amendments under the Rajasthan Agricultural Credit Operations (Removal of Difficulties) Amendment Act, 1985 with additional statement of objects and reasons which reads as follows:
"In order to facilitate adequate flow of credit by commercial banks to the agriculturists, Rajasthan Agricultural Credit Operation (Removal of Difficulties) Act, 1974 was enacted by the State Legislature on the basis of recommendations of the Talwar Committee constituted by the Central Government. In the definitions of terms "Agriculture" and "Agriculturist", as given in clauses (a) and (b) of sec. 2 of the said Act, landless labourers and rural artisans have been included on account of which a difficulty is being faced in getting the loans sanctioned to these categories of persons. There is also no provision at present in Sec. 13 D.B.CIVIL WRIT PETITION NO.3871/2001 Smt.Harwinder Kaur Vs. The State Bank of India & Ors.10
of the Act, for the recovery of loans by the banks from the guarantors of agriculturist and through sale of his movable or immovable properties which are not charged or mortgaged. It is causing difficulty in recovering the loans. Further, there is a provision in Sec.16 of the Act for giving loans by the commercial banks through co- operative societies, which causes obstruction to some extent in the process of giving loans by the banks.
In order to overcome the above difficulties, it was felt necessary to amend the Act."
Scheme of the Act of 1974 As per section 1 of the Act of 1974, the Act applies to whole State of Rajasthan. Section 2 defines agriculture, agriculture purpose, agriculturists, agro-industries corporation and Bank. Section 3 allows an agriculturist to alienate land or any interest therein in favour of a bank by creating charge or mortgage for the purpose of obtaining financial assistance. As per Section 4, State Government can vest agriculturists with alienable rights in respect of lands for which those rights are D.B.CIVIL WRIT PETITION NO.3871/2001 Smt.Harwinder Kaur Vs. The State Bank of India & Ors. 11 not available. Section 5 enables an agriculturist to create a charge on the movable property or on the crops or other produce from land cultivated by him, in favour of Bank. Section 6 is in respect of declaration by the agriculturist regarding creation of charge in favour of Bank. Section 7 speaks about removal of disabilities in creation of charges and mortgages where the land is already charged or mortgaged to a co- operative society. As per Section 8, the Bank, which provides financial assistance to agriculturists shall have priority over other charges made by an agriculturist in respect of same property. Provision regarding deemed registration of charge under Registration Act, 1908 incorporated in Section 9 and Section 10 provides that Tehsildar or other revenue official shall make a note of particular of charge or mortgage in the revenue record. Section 11 prohibits an agriculturist from leasing out or creating tenancy right in favour of other but with prior permission of the Bank. As per Section 12, the Bank can get the charged D.B.CIVIL WRIT PETITION NO.3871/2001 Smt.Harwinder Kaur Vs. The State Bank of India & Ors. 12 property sold or attached through a civil court. Sections 13 and 14 of the Act of 1974 prescribe two different modes of recovery of bank dues from an agriculturist. As per section 15, the banks are exempted from the application of ceiling laws on the holding of land acquired by them in terms of Section 14. Chapter V of the Act of 1974, which contains Sections 17 to 26 is in respect of providing finance to the co-operative societies by the Banks. Section 27 exempts application of legislations dealing with money lending or agriculturists debt relief to financial assistance available of by an agriculturist from a Bank. As per Section 28, a mortgage executed by a manager of joint Hindu family in favour of Bank is binding an every member of such joint Hindu family. Section 29 of the Act speaks about modified application of Section of Hindu Minority and Guardianship Act, 1956 and Section 30 empowers State Government to frame Rules for all matters with purpose to give effect to the provision of the Act of 1974. Section 31 pertains to repeal of Ordinance 1974 with saving clause.
D.B.CIVIL WRIT PETITION NO.3871/2001 Smt.Harwinder Kaur Vs. The State Bank of India & Ors. 13 While exercising the powers as conferred by Section 30 of the Act of 1974, the State Government has framed Rajasthan Agricultural Credit Operations (Removal of Difficulties) Rules, 1976 (for short 'the Rules of 1976').
In this petition the petitioner has challenged the validity of Sections 13 and 14 mainly on the ground that procedure provided for recovery of due loan do not provide fair opportunity to the agriculturists to raise objection against the demand raised by the Bank illegally. To appreciate the challenge of the petitioner, it is necessary to examine the provision of sections 13 and 14 and the procedure to give effect the said provisions under the Rules. Section 13 reads as under:
"13. Recovery of dues of a bank through a prescribed authority.-(1) Notwithstanding anything contained in any law for the time being in force, an official of the State Government notified by the State Government as the prescribed authority for the purpose of this section may, on the application of a bank, make an order on or any agriculturist or his heir or legal representative or his guarantor, D.B.CIVIL WRIT PETITION NO.3871/2001 Smt.Harwinder Kaur Vs. The State Bank of India & Ors.14
directing the payment of any sum due to the bank on account of financial assistance availed of by the agriculturist, by the sale of any land or interest therein or any other immovable property, upon which the payment of such money is charged or mortgaged or any other property in his possession:
Provided that no order shall be made by the prescribed authority under this sub-section for the sale of any land or any interest therein or any other immovable property upon which the payment of money is charged or mortgaged or any other property in his possession, as the case may be, unless the agriculturist or the heir or legal representative or his guarantor of the agriculturist, as the case may be, has been given an opportunity of being heard or has been served with a notice by the prescribed authority calling upon him to pay the amount due and default has been made in payment thereof for three months after determination of liabilities by such authority.
(2) Every order passed by the prescribed authority in term of sub-
sec.(1) shall be deemed to be a decree of a civil court and shall be executed by him in the same manner as a decree of such court.
Explanation.- For the purpose of D.B.CIVIL WRIT PETITION NO.3871/2001 Smt.Harwinder Kaur Vs. The State Bank of India & Ors. 15 exercising powers conferred by this sub-section. The prescribed authority shall be deemed to be a civil court.
(3) Nothing in this section shall debar a bank from seeking to enforce its rights in any other manner under any other law for the time being in force."
Section 14 of the Act of 1974 vests a right of a bank to acquire and dispose of immovable property to satisfy the money due to it, which reads as follows:
"14. Right of a bank to acquire and dispose of immovable property.-(1) Notwithstanding anything contained in any law for the time being in force, a bank shall have power to itself acquire agricultural land or interest therein or any other immovable property which has been charged or mortgaged to it by an agriculturist in respect of any financial assistance availed of by him, provided the said land or interest therein or any other immovable property has been sought to be sold by public auction and no person has offered to purchase it for a price which is sufficient to pay to the bank the money due to it. (2) A bank which acquires land or interest therein or any other immovable property in exercise of D.B.CIVIL WRIT PETITION NO.3871/2001 Smt.Harwinder Kaur Vs. The State Bank of India & Ors.16
the power vested in it under sub- sec. (1) shall dispose it of by sale, within a period to be specified by the State Government in this behalf.
(3) If the bank has to lease out any land acquired by it under sub-sec. (1) pending sale thereof as indicated in sub-sec. (2), the period of lease shall not exceed one year at a time and the lessee shall not acquire any interest in that property notwithstanding any provisions to the contrary in any other law for the time being in force.
(4) A sale by a bank of land or interest therein in terms of sub- sec. (2) shall be in favour of persons as may be prescribed by the State Government under Sec.30 of this Act and shall be subject to any provisions of any law in force which may place restrictions on purchase of land by non-agriculturists or ceiling for acquisition of land or by a person not belonging to a scheduled caste or scheduled tribe or fragmentation of land."
Rule 4 of the Rules of 1976 reads as under:
"4. Distraint and sale of crop or other movable property.- (1) The District Collector / Additional Collector of the district/Sub- Divisional Officer of the Sub-
D.B.CIVIL WRIT PETITION NO.3871/2001 Smt.Harwinder Kaur Vs. The State Bank of India & Ors.17
division/Assistant Collector, within whose jurisdiction the bank or its branch which disbursed the loan is situated, shall be the official designated by the State Government for exercising powers for the purpose of Sec. 5(3). However, in case of standing crop, other produce or other movable property attached to or installed on the land, the collector/Additional Collector of the district/sub-divisional officer of the Sub-division/Assistant Collector, where the property is situated shall be the designated official, in case the bank or its branch is not located in that district/sub-division. (2) For the purpose of distraint and sale in the event of failure of the cultivator to pay an overdue loan, Branch manager/Agent of the bank shall make an application to the Collector/ Additional Collector/Sub-divisional Officer/ Assistant Collector, concerned giving the following particulars:-
(i) Name of the cultivator his heir or legal representative,as the case may be;
(ii) Certified copy of loan agreement;
(iii) Certified statement of account;
(iv) Amount overdue towards D.B.CIVIL WRIT PETITION NO.3871/2001 Smt.Harwinder Kaur Vs. The State Bank of India & Ors.18
principal and toward interest with date on which it became overdue;
(v)Description of crop/other movable property charged, including location and details of defaulters interest or share thereof;
(vi) Description of property required to be distrained and sold;
(vii) Detail of efforts made by the Bank to affect recovery, if any; and
(viii) Reasons if known to the bank for non-payment.
(3) On receipt of application, along with the necessary documents and information, if the Collector/ Additional Collector/Sub-Divisional Officer/ Assistant Collector concerned is satisfied that-
(a) The cultivator has taken a loan from the bank against a charge on the property sought to be distrained;
(b) the charge has been properly affected;
(c) the loan or an instalment of it is overdue;
(d) the Bank has issued a demand notice by registered post with acknowledgement due asking the cultivator to pay the overdue amount and a period of one month has elapsed without payment being made, he shall make an order for distraint of the said property.
D.B.CIVIL WRIT PETITION NO.3871/2001 Smt.Harwinder Kaur Vs. The State Bank of India & Ors. 19 (4) The Collector / Additional Collector / Sub-Divisional Officer Assistant Collector concerned shall also issue a show cause notice to the defaulter asking him to make payment within 15 days or to explain why the distrained property may not be put to sale in case of default. Copy of this notice should also be sent to the Branch Manager/Agent of the Bank.
(5) After the period of show cause notice has expired, if the defaulter has not made payment or has not entered into any satisfactory arrangements with the Bank authorized representative for payment or where the cause shown is considered to be insufficient the Collector/Additional Collector / Sub-Divisional Officer /Assistant Collector concerned shall order sale of the property distrained. (6) The proceeds of the sale shall be appropriated to payment, of all dues outstanding including cost of recovery, to the Bank and the surplus, if any, shall be paid back to the cultivator."
Rule 5 of the Rules of 1976 reads as under:
"5. Recovery of dues of the Banks by sale of immovable property.-(1) The District Collector/Additional Collector/Sub-Divisional Officer/ Assistant Collector having D.B.CIVIL WRIT PETITION NO.3871/2001 Smt.Harwinder Kaur Vs. The State Bank of India & Ors.20
jurisdiction in the area wherein the immovable property is situated shall exercise the powers of the prescribed authority under Section 13(1) of this Act.
(2) The Branch Manager/Agent of the Bank concerned shall for the purposes of this section make an application to the Collector/ Additional Collector/Sub Divisional Officer/ Assistant Collector concerned, giving the following particulars with respect to the loan sought to be recovered-
(i) Name of the cultivator his heir or legal representative, as the case may be;
(ii) Certified copy of loan agreement;
(iii) Certified statement of account;
(iv) Amount overdue towards principal and towards interest and date on which it became overdue;
(v) Certified copy of documents creating mortgage or charge with evidence regarding its registration; and
(vi) Other details of the immovable property sought to be sold such as valuation, details of co-owners etc., which may be available with the Bank;
(vii) Detail of any other efforts made by the Bank to
D.B.CIVIL WRIT PETITION NO.3871/2001 Smt.Harwinder Kaur Vs. The State Bank of India & Ors.21
affect recovery;
(viii) Reasons, if known to the Bank for non-payment.
(3) If upon receipt of this application alongwith the information detailed above, Collector/ Additional Collector/ Sub-Divisional Officer/Assistant Collector is satisfied,-
(a) that the loan has been duly received and the loan amount or an instalment is overdue;
(b) that the bank has issued a demand notice by registered post with acknowledgement due, asking the cultivator to pay the overdue amount, and more than one month has elapsed;
(c) that the property sought to be sold has been mortgaged/charged to the bank against the overdue loan;
he may issue a notice to the cultivator informing him, -
(i) that an application for recovery of the loan due alongwith the necessary
documents has been filed by the concerned Bank for action under Sec.13(1);
(ii) that if the cultivator wishes to deny liability for payment of the amount determined as due, he should within 30 days of the receipt of this notice, file a D.B.CIVIL WRIT PETITION NO.3871/2001 Smt.Harwinder Kaur Vs. The State Bank of India & Ors. 22 petition denying liability and produce documentary and other proof to support his claim;
(iii) that the notice should state that if the cultivator does not deny liability or make payment, proceedings will be taken to effect recovery of the amount determined as overdue, through a sale of the immovable property specified in the notice.
(4) If the cultivator denies his liability the Collector/ Additional Collector/Sub Divisional Officer/ Assistant Collector shall after hearing him decide his petition within a further period of 2 months.
(5) If the Cultivator does not deny liability or cannot show sufficient cause for non-payment, the Collector/Additional Collector/ Sub-Divisional Officer/Assistant Collector shall order sale of the immovable property as per the application made by the Bank. (6) The proceeds of the sale of such property shall be appropriated for payment of the dues of the Bank and the cost of recovery and the balance amount, if any, shall be paid to the cultivator.
(7) For all distraints and all sales effected under sub-sec. (3) of Sec. 5 or sub-sec. (1) of D.B.CIVIL WRIT PETITION NO.3871/2001 Smt.Harwinder Kaur Vs. The State Bank of India & Ors. 23 Sec.13 the procedure followed shall be similar to that prescribed for attachment and sale of movable or immovable property for recovery of arrears of land revenue under the Rajasthan Land Revenue Act, 1956, and rules framed thereunder. (8) When land or other immovable property is offered for sale by public auction in pursuance of an order for sale under Section 13 for recovery of a loan due to the Bank, an no one offers to purchase it, for a price sufficient to pay to the Bank the money due to it, the Bank may instead of waiting for resale, close the recovery proceedings by acquiring the land or interest thereunder or other immovable property charged or mortgaged to it, in exercise of the powers vested in it under Section 14.
(9) For this purpose the Bank Manager or Agent concerned may apply to the Collector informing him of the intention of the Bank to exercise this right.
(10) The Collector shall thereupon stop all recovery proceedings and pass an order directing that necessary entries be made by the Sub-Registrar and Tehsildar concerned, in their books and record of rights, vesting the rights to the property which belonged to the defaulting D.B.CIVIL WRIT PETITION NO.3871/2001 Smt.Harwinder Kaur Vs. The State Bank of India & Ors. 24 cultivator, in the name of Bank in discharge of all liabilities of the cultivator for the amount of loan, for which the property was charged. (11) The Collector/ Additional Collector/ Sub Divisional Officer/ Assistant Collector shall also if so requested take steps to hand over the possession of such land or other immovable property to the Branch Manager/Agent of the Bank concerned.
(12) The Bank shall in such cases sell the property, so acquired by it within a period of five years from the date of taking over possession.
(13) It may during this period lease out the property as per provisions of Sec. 14(3).
(14) Any sale of such property shall be subject to the following restrictions, -
(1) The buyer must be an agriculturist as defined in the Act;
(2) Land acquired from a person who is a member of a Scheduled Caste or Scheduled Tribe shall not be sold to persons who are not members of Scheduled Castes or Scheduled Tribes.
(3) The buyer should not, on acquisition of such land by sale, exceed the ceiling limit applicable to him under the law D.B.CIVIL WRIT PETITION NO.3871/2001 Smt.Harwinder Kaur Vs. The State Bank of India & Ors. 25
relating to ceilings on agricultural holdings."
After careful examination of the above quoted provisions of Act and Rules, we find that under the Act of 1974, Sections 13 and 14 prescribe two different modes for recovery of bank dues from an agriculturist, who fails to repay the advance borrowed. As per Section 13, an application is to be preferred by the bank to the prescribed authority, and then prescribed authority may, by an order, direct the agriculturist or his heir or legal representative or his guarantor for making payment of sum due, by sale of land or interest therein the charged or mortgaged immovable property or any other property in his possession. The order passed by the prescribed authority is having force of a decree given by civil court and, thus, it can be executed as a decree granted by civil court. However, a sale under section 14 of the Act of 1974 takes place in the event where the bank being of a opinion that proper market price is not being achieved/obtained in the sale executed under section 13 of the Act and in that situation, D.B.CIVIL WRIT PETITION NO.3871/2001 Smt.Harwinder Kaur Vs. The State Bank of India & Ors. 26 it can acquire the land itself and, thereafter, it can dispose of the land of the debtor.
The provisions of Rules 4 & 5 of the Rules of 1976 reveal that the District Collector/ Additional Collector/ Sub- Divisional Officer/Assistant Collector having jurisdiction in the area wherein the immovable property is situated, are declared as designated official or prescribed authority for the purpose of Section 5(3) and under Section 13(1) of the Act of 1974 respectively. It is noticed that complete procedure is provided under these Rules as to how and in what manner, the Bank will apply before the designated officer or prescribe authority with full details regarding receipt of loan by the debtor, over due of the same, issuance of demand notice by the Bank through registered post to the cultivator, status of the property being mortgaged or charged with the Bank against over due loan, etc. It is provided that the designated official or the prescribe authority, after being satisfied D.B.CIVIL WRIT PETITION NO.3871/2001 Smt.Harwinder Kaur Vs. The State Bank of India & Ors. 27 that the cultivator has taken a loan from the Bank against a charge and the same is overdue and Bank has served upon him a demand notice through registered post and one month's time has elapsed and payment is not made, shall make an order for distraint of the property and issue notice to the defaulter for sale of the property or for making payment, as the case may be. If any cultivator disputes the demand raised by the Bank, the designated officer is required to decide the same.
From the above, it is clear that a complete procedure is provided under the Rules enabling a cultivator to defend his case in sufficient manner and in our opinion, the procedure provided for the recovery of the loan cannot be said to be draconian as it provides reasonable opportunities to a creditor for presenting his defence against the demand raised by the Bank.
The provisions of the Act of 1974 and the Rules of 1976 have been framed to serve the cause of agriculturists to D.B.CIVIL WRIT PETITION NO.3871/2001 Smt.Harwinder Kaur Vs. The State Bank of India & Ors. 28 facilitate adequate flow of credits through the banks and as a necessary corollary, the provisions were required to be made for recovery of the dues of the bank, which advanced such credit facilities.
In the case in hand, it is not in dispute that the petitioner was issued notice by the prescribed authority and the same was duly served upon her but she failed to appear before the prescribed authority to oppose the demand raised by the respondents-Bank and in that event only, the SDO had proceeded against the petitioner. It has nowhere been pleaded or argued on behalf of the petitioner that the procedure prescribed under Rule 4 or 5 of the Rules of 1976 has not been followed by the prescribed authority before issuance of the notice dated 16.07.2001.
The another argument of the learned counsel for the petitioner that the prescribed authorities appointed under section 13 of the Act of 1974 are not the persons having knowledge and experience of law, is also not tenable in view of the fact D.B.CIVIL WRIT PETITION NO.3871/2001 Smt.Harwinder Kaur Vs. The State Bank of India & Ors. 29 that the District Collector, Additional Collector, S.D.O. and the Assistant Collector are the officers of the State Government, who are discharging judicial and quasi-judicial functions under the various powers conferred upon them under Rajasthan Tenancy Act, 1955, Rajasthan Land Revenue Act, 1956 and various other legislations.
It is also noticed that under the Act of 1974, there is no prohibition for any cultivator to avail remedy under civil law against the actions of the Bank.
In view of the above, we do not find any merit in the challenge of the petitioner to the validity of sections 13 and 14 and other provisions of Act of 1974 and the same is liable to rejected.
The argument of the learned counsel for the petitioner that the respondent-Bank has charged interest at half yearly rest instead of yearly rest has substance and is liable to be accepted.
From perusal of certified copy of ledger folio (Annexure-2) pertaining to the petitioner's account, it is clear that the D.B.CIVIL WRIT PETITION NO.3871/2001 Smt.Harwinder Kaur Vs. The State Bank of India & Ors. 30 Bank has charged interest on the due amount at half eyarly rest.
The Hon'ble Supreme Court, in Corporation Bank vs. D.S.Gowda & Anr. (supra), has held as under:
"Insofar as Civil Appeal No. 544
of 1986 is concerned it relates to the Bank's right to charge compound interest i.e. interest with periodical rests on agricultural advances. We have already referred to the various circulars issued by the Reserve Bank from time to time in exercise of power conferred by section 21/35A of the Banking Regulation Act. We have pointed out that the said circulars/directives provide that agricultural advances should not be treated on a par with commercial loans insofar as the rate of interest thereon the concerned because the farmers do not have any regular source of income except sale proceeds of their crops which income they get once a year. The question of recovery of interest with quarterly or six monthly rests from farmers is, therefore, not feasible. The fact that the farmers are fluid at a given point of time every year has to be kept in mind in determining the point D.B.CIVIL WRIT PETITION NO.3871/2001 Smt.Harwinder Kaur Vs. The State Bank of India & Ors.31
of time when they should be expected to repay the loan or pay the instalment/interest on advances. Therefore, to allow the banks to charge interest on quarterly or half yearly rests from farmers would tantamount to virtually compelling them to pay compound interest, since they would not be able to pay the interest except once in a year i.e. when they receive the income from sale proceeds of their crops. The Reserve Bank has shown concern for the farmers by directing all banking institutions to so regulate the recovery of interest as to coincide with the point of time when the farmers are fluid. It has, therefore, been emphasised by the Reserve Bank that interest should be charged once a year to coincide with point of time when the farmer is fluid and interest on current dues should not be compounded although it may be done when the advance/instalment becomes overdue. Thus according to the circulars/directives, so far as loans for agricultural purposes are concerned, at best interest may be charged with yearly rests and may be compounded if the loan/instalment becomes overdue. In the present case, since interest was charged with six D.B.CIVIL WRIT PETITION NO.3871/2001 Smt.Harwinder Kaur Vs. The State Bank of India & Ors.32
monthly rests that was clearly in contravention of the Reserve Bank circulars/directives. Compounding of interest on current dues on agricultural advances having been discouraged, the Bank was not entitled to charge interest with shorter periodical rests and compound the same. The Bank could add interest outstanding to the principal and compound the interest when the crop loan or term loan becomes overdue having regard to the tenor of the circular dated March 14, 1972. The High Court was, therefore, fully justified in coming to the conclusion that the Bank was not entitled to charge interest with half yearly rest."
24..........
25..........In the case of agricultural loans/advances the position has been made amply clear by the circulars referred to earlier which do not permit Banks to Charge compound interest with quarterly rests. In such cases as observed earlier the interest can be fixed with annual rests coinciding with the time when the farmer is fluid and if thereafter the farmer fails to pay the interest it would be open to compound the interest On the crop loan or instalments upon the term D.B.CIVIL WRIT PETITION NO.3871/2001 Smt.Harwinder Kaur Vs. The State Bank of India & Ors.33
loans becoming overdue."
According to the above decision of Hon'ble Supreme Court, a bank is not entitled to charge interest with half-yearly rest on agriculture loans. The interest can be determined with annual rests, coinciding with the time when the farmer is fluid, and if thereafter the farmer fails to pay the interest, it is open to compound the interest upon the term loan becoming overdue. Obviously, the respondent-bank has not properly determined the interest and therefore, should re-determine the liability of loan by charging the interest as indicated by Hon'ble Apex court in the above case.
In view of the aforesaid discussions, the challenge of the petitioner to the provisions of the Act of 1974 particularly to sections 13 and 14 fails and to that extent, the writ petition is dismissed. However, as observed earlier, the respondent-bank has not properly determined the interest and, therefore, should re- determine the liability of loan by charging D.B.CIVIL WRIT PETITION NO.3871/2001 Smt.Harwinder Kaur Vs. The State Bank of India & Ors. 34 the interest at annual rests as indicated by the Hon'ble Supreme Court in the above referred decision. It is made clear that the Bank shall determine the amount after deducting the amount already paid by the petitioner, as mentioned in Annexure-2; the amount received from the sale of tractor in question; and the amount of Rs.80,000/- deposited by the petitioner in pursuance of the interim order passed by this Court on 05.10.2001. The respondent-Bank, after determining the due amount, as indicated above, may place it before the prescribed authority and the prescribed authority shall pass orders afresh, after giving an opportunity of hearing to all the parties concerned.
With these observations, the writ petition is disposed of. No order as to costs.
[VIJAY BISHNOI],J. (AMITAVA ROY), CJ. m.asif/-