Uttarakhand High Court
Rattandeep Singh vs State Of Uttarakhand And Others on 27 November, 2017
Equivalent citations: AIR 2018 UTTARAKHAND 33, (2018) 2 UC 799
Bench: K.M. Joseph, V.K. Bist
IN THE HIGH COURT OF UTTARAKHAND AT NAINITAL
Special Appeal No. 728 of 2017
Rattandeep Singh. ........Appellant
Versus
State of Uttarakhand & others. .......Respondents
Mr. Neeraj Garg, Advocate for the appellant.
Mr. Vikas Pandey, Standing Counsel for the State of Uttarakhand.
Mr. V.K. Kohli, Senior Advocate, assisted by Ms. Rajni Supyal, Advocate, holding brief
of Mr. I.P. Kohli, Advocate for respondent nos. 3 to 5.
Dated: November 27, 2017
Coram: Hon'ble K.M. Joseph, C.J.
Hon'ble V.K. Bist, J.
K.M. Joseph, C.J. (Oral) Appellant is the writ petitioner. Appellant availed a loan for the purpose of opening a dairy farm and purchase of milk cattle in order to open this dairy farm. Consequent upon there being default in repayment of the loan, proceedings were initiated by the bank against the appellant for recovery of the amount outstanding. Before the learned Single Judge, we notice from the judgment, the argument of the appellant was that the loan was a commercial term loan and, therefore, it could not be recovered as arrears of land revenue.
2. On the other hand, the respondent Bank took shelter under the provision of Section 11-A of the Uttar Pradesh (Uttarakhand) Agricultural Credit Act, 1973. The said provision reads as follows:
2"11.A. Recovery in the case of personal security. - (1) Where any amount of financial assistance is granted by a bank to an agriculturist and the agriculturist fails to pay the amount together with interest on the due date, then without prejudice to the provisions of Section 10-B and 11, the local principal officer of the bank by whatever name called may forward to the Collector a certificate in the manner prescribed specifying the amount due from the agriculturist.
(2) The certificate referred to in sub-
section (1) may be forwarded to the Collector within three years from the date when the amount specified in the certificate fell due.
(3) On receipt of the certificate, the Collector shall proceed to recover the agriculturist the amount specified therein together with expenses of recovery as arrears of land revenue, and the amount due to the bank shall be paid after deducting the expenses of recovery and satisfying any Government dues or other prior charges, if any.
Explanation. - For the purposes of this section, the expression "Collector" means the Collector of the district in which the agriculturist ordinarily resides or carries on the activities referred to in clause (a) of Section 2 or where any movable or immovable property of the agriculturist is situate, and includes any officer, authorised by him in that behalf."
3. The learned Single Judge appears to have upheld the contention of the respondent-Bank that the recovery initiated could be sustained under Section
11.A. As regards the second argument of the appellant, 3 namely, that the charge has not been created is concerned; it was found that it could not stand as per the record. The learned Single Judge found merit in the contention of the respondent-Bank that Annexure No. 2 to the writ petition would show that the cattle, which were immovable property, were hypothecated to the Bank and such a charge has also been created against other immovable property. It was found that the loan taken by the appellant is covered by the Uttar Pradesh (Uttarakhand) Agricultural Credit Act (hereinafter referred to as "the Act"). It is found that there is no anomaly and, therefore, the writ petition was dismissed. Feeling aggrieved, the appellant is before us.
4. We heard Mr. Neerag Garg, learned counsel appearing for the appellant, Mr. V.K. Kohli, Senior Advocate, assisted by Ms. Rajni Supyal, learned counsel appearing for the respondent-Bank and also Mr. Vikas Pande, learned Standing Counsel for the State of Uttarakhand.
5. In the Appeal, the only argument, which is raised and pressed before us, is that having regard to enactment of the Recovery of Debts due to Banks and Financial Institutions Act, 1993 (hereinafter referred to as the "1993 Act") by the Parliament, the recovery under the Act cannot be sustained. In this regard, the learned counsel relied on the judgment of the Hon'ble Apex Court in the matter of Unique Butyle Tube Industries (P) Ltd. Vs. U.P. Financial Corporation and 4 others, reported in (2003) 2 SCC 455. In the said judgment, the Court was dealing with the following facts:
A Certificate was issued under the Uttar Pradesh Public Moneys (Recovery of Dues) Act, 1972. The Hon'ble Apex Court referred to Section 34 of the 1993 Act. It reads as follows:
"34. Act to have overriding effect.-(1) Save as provided under sub-section (2), the provisions of this Act shall have effect notwithstanding anything inconsistent therewith contained in any other law for the time being in force or in any instrument having effect by virtue of any law other than this Act.
(2) The provisions of this Act or the rules made thereunder shall be in addition to, and not in derogation of, the Industrial Finance Corporation Act, 1948 (15 of 1948), the State Financial Corporations Act, 1951 (63 of 1951), the Unit Trust of India Act, 1963 (52 of 1963), the Industrial Reconstruction Bank of India Act, 1984 (62 of 1984), the Sick Industrial Companies (Special Provisions) Act, 1985 (1 of 1986) and the Small Industries Development Bank of India Act, 1989 (39 of 1989)."
6. The Court also referred to Section 32-G, which reads as follows:
"32-G. Recovery of amounts due to the Financial Corporation as an arrear of land revenue.- Where any amount is due to the Financial Corporation in respect of any accommodation granted by it to any industrial concern, the Financial Corporation or any person authorized 5 by it in writing in this behalf, may, without prejudice to any other mode of recovery, make an application to the State Government for the recovery of the amount due to it, and if the State Government or such authority, as that Government may specific in this behalf, is satisfied, after following such procedure as may be prescribed, that any amount is so due, it may issue a certificate for that amount to the Collector, and the Collector shall proceed to recover that amount in the same manner as an arrear of land revenue."
7. The Court also adverted to Sections 17 & 18 of the 1993 Act. They being relevant, we advert to the same:
"17. Jurisdiction, powers and authority of Tribunals.- (1) A Tribunal shall exercise, on and from the appointed day, the jurisdiction, powers and authority to entertain and decide applications from the banks and financial institutions for recovery of debts due to such banks and financial institutions.
(2) An Appellate Tribunal shall exercise, on and from the appointed day, the jurisdiction, powers and authority to entertain appeals against any order made, or deemed to have been made, by a Tribunal under this Act.
18. Bar of jurisdiction.- On and from the appointed day, no court or other authority shall have, or be entitled to exercise, any jurisdiction, powers or authority (except the Supreme Court, and a High Court exercising jurisdiction under Articles 226 and 227 of the 6 Constitution) in relation to the matters specified in Section 17."
8. We finally notice paragraph no. 9. It reads as follows:
"9. Section 34 of the Act consists of two parts. Sub-section (1) deals with the over-riding effect of the Act notwithstanding anything inconsistent therewith contained in any other law for the time being in force or in any instrument having effect by virtue of any law other than the Act. Sub-section (1) itself makes an exception as regards matters covered by sub-section (2). The U.P. Act is not mentioned therein. The mode of recovery of debt under the U.P. Act is not saved under the said provision i.e. sub-section (2) which is of considerable importance so far as the present case is concerned. Even a bare reading therein makes it clear that it is intended to be in addition to and not in derogation of certain statutes; one of which is the Financial Act. In other words, a Bank or a Financial institution has the option or choice to proceed either under the Act or under the modes of recovery permissible under the Financial Act. To that extent, the High Court's conclusions quoted above were correct. Where the High Court went wrong is by holding that the proceedings under the U.P. Act were permissible. The U.P. Act deals with separate modes of recovery and such proceedings are not relatable to proceedings under the Financial Act."
9. Therefore, he would submit that the recovery under the Act is clearly illegal.
710. Per contra, learned Senior Counsel appearing for the respondent-Bank would submit that the Court may bear in mind the fact that, in the distribution of the legislative power, the subject entry 14 would stand in the way of the contention of the appellant being accepted. Entry 14 of List II to the Seventh Schedule of the Constitution of India reads as follows:
"14. Agriculture, including agricultural education and research, protection against pests and prevention of plant diseases."
11. He would submit that since the loan, which was given, was for an agricultural purpose and the land, against which recovery proceedings have been initiated, is the agricultural land, the argument of the appellant may not be accepted. In this regard, he also sought to draw support from the provisions of Section 31(i) of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002. It reads as follows:
"31. Provisions of this Act not to apply in certain cases.- The provisions of this Act shall not apply to-
(i) any security interest created in agricultural land;"
12. Therefore, he would submit that, under the constitutional scheme of distribution of legislative powers, recovery may be barred against the agricultural land.
813. In response to the same, Mr. Neeraj Garg, learned counsel appearing for the appellant drew our attention to the judgment in the matter of Jujhar Singh Vs. State of U.P. and others, reported 2007 (2) ADJ
115. Therein also, the recovery was done under Section 11-A of the Act. The Court considered the effect of the interplay between the 1993 Act and the Act. The learned Single Judge held, inter alia, as follows:
"5. The question whether primacy is to be given to the R.D.B. Act or to the U.P. Agricultural Credit Act has to be decided in the light of the Constitutional provisions. Article 246 (1) of the Constitution provides that notwithstanding anything in Clauses (2) and (3), Parliament has exclusive power to make laws with respect to any of the matters enumerated in List I of the seventh Schedule. Article 246 (2) empowers the Parliament and subject to Clause (1) the State Legislature to make laws on subjects covered under List III. Article 246 (3) gives to the State legislature, subject to Clauses (1) and (2), exclusive power to make laws on subjects covered under List II. It is clear from the provisions of Article 246 that primacy has been given to the law made by Parliament and the power of legislation of the State Legislature to make laws on subjects enumerated in List II is subject to the power of Parliament. As regards legislation over subjects in List III (concurrent list) the power of the State legislature is subject to Clause (1). Article 254 (1) of the Constitution further provides in regard to matters covered under the concurrent list that if the State Law conflicts with the law made by Parliament the State law shall 9 to the extent of the inconsistency be repugnant and void. Exception to this rule is contained in Article 254(2), which provides that if the State Act is a later Act and has received the assent of the President the State law would prevail. There again if the Parliament makes a law after the State law it is again the Parliamentary legislation, which would prevail. In view of the language of Article 254 decided cases have held that the question of repugnancy is relevant only to the legislation under List III. The question of repugnancy under Article 254 is not relevant in regard to legislation made by Parliament on subjects under List I and by the State Legislature on subjects in List II in exercise of their respective powers under Article246 (1) and 246 (3) vide M/s. Krishna Utensils Rampur v. State Financial Corporation, AIR 1989 All 226 (FB)."
14. Paragraph nos. 15 & 16 of the aforesaid judgment read as follows:
"15. Reference may now be made to some of the cases upon the point cited by Sarvsri Pradeep Kumar and A.N. Shukla, learned Counsel for the respondents. The first is A.I.R. 2001 Raj. 170, Modern Syntax (I) Ltd. v. Debts Recovery Tribunal, Jaipur and Ors. The Rajasthan State Legislature had enacted the Rajasthan Relief Undertaking Act. That Act provides for suspension of recovery of debts dues from relief undertaking declared under that Act so long as the industry continues to be a relief undertaking. Recovery proceedings were initiated under the Recovery of Debts due to Banks Act and the question arose about the primacy of the 10 Recovery of Debts due to Banks Act viz- a-vis the Rajasthan Relief Undertaking Act. It was held by the Rajasthan High Court that the State Legislation under the Rajasthan Act covers a field different from that under the Recovery of Debts due to Banks Act. The Rajasthan Act applies in the field of social security and for relief against unemployment whereas the R.D.B. Act applies in field of Banking. The decision cited has no application to this case. As was held by the Rajasthan High Court itself the subject matter of the two legislations in pith and substance is different. The impact of the Rajasthan Relief Undertaking Act was to suspend the recovery so long as an undertaking continued to be a relief undertaking whereas the R.D.B. Act provides for the manner of recovery of debts "legally recoverable on the date of the application" vide definition of 'debt' in Section 2(g). If the debt itself is not recoverable the R.D.B. Act does not apply. In AIR 1983 SC 1019, M/s.
Hoechst Pharmaceuticals Ltd and Anr. v. State of Bihar and Ors. relied upon by Sri Pradeep Kumar the Court was called upon to consider the challenge to the validity of Section 5 (1) and (3) of the Bihar Finance Act on several grounds including the ground that it contravened the provisions of Para 21 of the Drugs Control Order issued under Section 3 of the Essential Commodities Act. Under Section 5 (1) of the Bihar Finance Act the dealer was required to pay surcharge at 10% and was prohibited under Section 5 (3) from passing on the liability upon the consumers. It was contended in that case that the Drugs Control order however permitted the liability to be passed on to the consumer. The Apex Court held that the subjects of the legislation were different. While Sub-
11section 3 of Section 5 of the Bihar Act is relatable to entry 54 of List II, which is a tax entry. Paragraph 21 of the Control order issued by the Central Government under Section 1(3) of the Essential Commodities Act is relatable to entry 33 of List III. It was held vide paragraphs 73 and 76 that there was under the constitution a complete separation of the taxing power of the Union and of the States under Article 246 and no intrusion by a law made by the Parliament under entry 33 of List III into the taxing power of the State to levy tax on sale or purchase under Entry 54 of List II is permissible and that there is no question of clash between the two laws and the question of repugnancy relevant to List III does not come into play. Incidental trenching of the State Act into the law made by Parliament it was observed was in consequential. The two legislations before us, the R.D.B. Act and the U.P. Agricultural Credit Act cannot however apply simultaneously; the reason being that Section 34 of the R.D.B. Act gives overriding effect to the provisions of the R.D.B. Act and Section 18 makes the jurisdiction of the tribunal in respect of matters for which relief can be granted under Section 17 of the Act, exclusive.
The two Acts cannot operate simultaneously in the State of U.P. in respect of recovery of agricultural loans of not less than Rs. 10 lacs due to banks and that field has now been occupied by Parliament. The R.D.B. Act must therefore prevail in the field of recovery of Bank debts not less than ten lacs.
16. Sri Pradeep Kumar relied upon AIR 1981 SC 1863, Southern Pharmaceuticals and Chemicals, Trichur and Ors. v. State of Kerala and 12 Ors. It was held that the Kerala Abakari Act made by the State Legislature on the subject of Entry 8 List II 'intoxicating liquors' or entry 51 of List II for levying excise duty on alcoholic requirements for human consumption operates in a field different from the Central Act Medicinal and Toilet Preparation (Excise Duties) Act by Parliament on the subject of entry 84 List I and the fact that the Rules under the Central Act to some extent trench upon the field reserved for the State Legislature was merely incidental to the main purpose to levy duties of excise on Medicinal and toilet preparation containing alcohol. Similarly some of the provisions of the State legislation were similar to some of the provisions of the Central Rules, but that it was held did not imply that the State legislature had no competence to enact them. The contention that the legislation was in occupied field was repelled. Some cases have been cited by Sri Pradeep Kumar on the point of repugnancy between the State Law and the Central Law. As we have noticed the question of repugnancy is not relevant to a case where the legislation of Parliament and of the State Legislature fall under List I or List II. The question of repugnancy is relevant only in case of conflict between Central Legislation and the State Legislation in respect of matters covered under List III. It therefore is not necessary to examine the cases on the question of repugnancy."
15. We may notice that the Hon'ble Apex Court has dealt with the issue in the context of another enactment and the Act, in question, as such, was not before it. What is binding on the Courts is a law laid 13 down under Article 141 of the Constitution of India. It may not be open to the High Court to not follow the law laid down by the Hon'ble Apex Court on the basis that if another argument had been raised before it, the decision of the Hon'ble Apex Court would have been different. Secondly, we may notice that, unlike the SARFAESI Act, there is no provision, which taboos recovery of amount due to a bank covered by the 1993 Act as against agricultural land. No such prohibition has been brought to our notice by the counsel. Therefore, this would, in fact, allay apprehension to the Bank that any recovery attempted under the 1993 Act would, in the facts of this case, be futile and also we feel that this would assure us that, by following the judgment of the Hon'ble Apex Court, we would be acting as per the law laid down and the concern of prejudice to the respondent-Bank appears to be not sustainable.
16. That apart, we also may notice that when there is a conflict between legislation enacted by the State on the one hand and by the Central legislature on the other hand, every effort should be made to harmonize and reconcile the legislation. Another principle, which cannot be lost sight of in this area, is the principle of pith and substance. That is to say effort should be made to find, as to whether the legislation can be related to which entry. The legislation covered by the 1993 enactment apparently relates to entry 45 of the list 1 for which the Parliament alone has exclusive power to make laws. By 14 countenancing recovery of the loan taken from the bank against the agricultural land, we would think that it may only, incidentally, trench upon entry 14 of List II, as such; but, we do not wish to rest our decision on the said score.
17. Therefore, we find merit in the Appeal on the point, which was discussed by us as aforesaid and, on that ground alone, we allow the Appeal, set aside the judgment of the learned Single Judge and also allow the writ petition and, consequently, Annexure No. 1, which is a recovery citation, will stand quashed. We, however, make it crystal clear that it will not stand in the way by the respondent taking steps as per law in the light of the law which has been declared in (2003) 2 SCC 455.
(V.K. Bist, J.) (K.M. Joseph, C.J.) 27.11.2017 Arpan