Himachal Pradesh High Court
Himachal Pradesh Financial vs Anil Garg And on 23 September, 2022
Author: Jyotsna Rewal Dua
Bench: Jyotsna Rewal Dua
REPORTABLE
IN THE HIGH COURT OF HIMACHAL PRADESH AT SHIMLA
ON THE 23rd DAY OF SEPTEMBER, 2022
.
BEFORE
HON'BLE MS. JUSTICE JYOTSNA REWAL DUA
REGULAR SECOND APPEAL No.4 of 2009
Between:-
HIMACHAL PRADESH FINANCIAL
CORPORATION, NEW HIMRUS
BUILDING, CIRCULAR ROAD,
SHIMLA-1 THROUGH ITS
MANAGING DIRECTOR.
.....APPELLANT
(BY MR. ATHARV SHARMA, ADVOCATE)
AND
1. NARENDER NARAIN SHARMA,
S/O SH. OM PRAKASH SHARMA,
RESIDENT OF PREM BHAWAN,
SOLAN, H.P.
.....RESPONDENT
2. PROFESSOR KRISHAN KUMAR SHARMA,
S/O LATE SH. OM PRAKASH SHARMA
R/O DHINGRA COTTAGE,
TILAK NAGAR, SHIMLA, H.P.
..... PROFORMA RESPONDENT
(BY MR. V.S. CHAUHAN, SENIOR ADVOCATE,
WITH MR. RIJUL CHAUHAN,
ADVOCATE, FOR R-1)
_______________________________________________________________
This appeal coming on for hearing this day, the
Court passed the following:
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2
JUDGMENT
A civil suit was filed by respondent No.1 for permanent prohibitory injunction and declaration that right of .
appellant to recover loan amount due to it from him had become time bared and in the facts of the case, recovery proceedings initiated by the appellant were otherwise also illegal. The civil suit was dismissed by the learned Trial Court. The appeal filed by the plaintiff was allowed by the learned First Appellate Court, giving cause of action to defendant No.1 to institute the present Regular Second Appeal. For convenience, the parties are referred to as per their status before the learned Trial Court.
2. Facts of the case are as under: -
2(i) The plaintiff (respondent No.1) instituted a civil suit for declaration and permanent prohibitory injunction against defendant No.1 (appellant). The case put forth by the plaintiff was that:-
2(i)(a). Defendant No.1 (appellant) had sanctioned and advanced a term loan of Rs.1,71,000/- to the plaintiff on 08.12.1982 for purchase of a truck. The loan amount was to be repaid in 20 quarterly installments commencing from 10.03.1983 and payable by 06.12.1987. The plaintiff defaulted in repaying the loan amount. Vide notice dated 19.03.1988, the plaintiff was called upon to pay the entire loan amount to the tune of Rs.2,31,394/-. The plaintiff, on 12.04.1988, though ::: Downloaded on - 28/09/2022 20:01:57 :::CIS 3 deposited Rs.80,000/-, however, defendant No.1 instituted civil suit No.115 of 1989 in this Court for recovery of a sum of Rs.2,71,394/- alongwith interest.
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2(i)(b). During pendency of the civil suit in this Court, the defendant agreed to receive a sum of Rs.74,699.38/- inclusive of interest up to 17.12.1991. Statement of account to this effect (Ex. DX) was also placed on record. The plaintiff even deposited a sum of Rs.20,000/- on 31.12.1991 with the defendant No.1 vide receipt Ex. DY.
2(i)(c). On account of change in the pecuniary jurisdiction, the civil suit was transferred to the Court of learned District Judge. The parties were directed to appear there on 12.04.1995. The civil suit was assigned to the Court of learned Additional District Judge.
2(i)(d). On 21.12.1995, defendant No.1 moved an application under Order 23 Rule 1, Order 13 Rule 7 read with Section 151 of Code of Civil Procedure for withdrawing the civil suit. The said application was allowed by the learned Court on 15.01.1996 (Ex. PW-2/A) in absence of the plaintiff.
2(i)(e). The defendant No.1 thereafter initiated proceedings under the Himachal Pradesh Public Moneys (Recovery of Dues) Act, 2000 (Act in short) against the plaintiff. Demand Notice was issued to the plaintiff on 22.02.1997, wherein a sum of Rs.4,41,404/- was shown as due and payable by the plaintiff to ::: Downloaded on - 28/09/2022 20:01:57 :::CIS 4 defendant No.1. The Assistant Collector First Grade also issued notice to the plaintiff for making payment of loan amount.
The plaintiff contended that the act of defendant .
No.1 initiating the recovery proceedings against him under the Act was illegal, invalid and arbitrary. It was also urged that the defendant No.1 had agreed before this Court to receive a sum of Rs.74,699.38/- in lump sum as full and final settlement of its claim. Plaintiff had even deposited a sum of Rs.20,000/- with defendant No.1. hence, defendant No.1 had no right to recovery any amount rfrom the plaintiff under the Act. Another submission of the plaintiff was that recovery of loan amount had become time barred.
2(ii). Defendant No.1 besides taking preliminary objections qua maintainability, jurisdiction, valuation, estoppel etc. contended that the plaintiff had failed to repay the loan amount necessitating defendant No.1 to institute the civil suit for recovery of outstanding amount to the tune of Rs.2,71,394/-
in this Court in the year 1989. Defendant was directed by the Court in that suit to calculate the loan amount by charging simple interest @ 14.5%. The orders were complied with by the defendant. The outstanding amount, as per directions of the Court, was calculated in the sum of Rs.74,699.38/- The defendant denied that it had agreed to recover only the amount of Rs.74,699.38/- from the plaintiff. According to the defendant, ::: Downloaded on - 28/09/2022 20:01:57 :::CIS 5 plaintiff was liable to pay compound interest in terms of the provision in the Hypothecation Deed (Ex. DA). Further case of the defendant was that after transfer of the case to the learned .
District Judge Shimla, the suit was withdrawn by the defendant on 15.01.1996 with a view to initiate recovery proceedings against the plaintiff under the provisions of the Act. This reason was clearly stated in the application seeking to withdraw the suit. After withdrawal of the suit, a demand notice, Ex. PW-2/B for a sum of Rs.4,41,404/- was sent by the defendant-
Corporation to the plaintiff. According to the defendant, certificate for recovery of outstanding loan amount was justly issued in terms of the Act. The defendant denied that recovery of loan amount had become barred by time and that it was estopped to recover the loan amount.
2(iii). The parties led evidence on the issues framed in the civil suit. On consideration of the pleadings, the evidence and the arguments, learned Trial Court dismissed the suit. Learned Trial Court held that the defendant-Corporation is an instrumentality of the State that deals with public money, therefore, a public oriented approach had to be adopted in the matter. Defendant Corporation can effectively operate if there is regular realization of the installments. In case the repayments are not received as per the scheduled time frame, it will disturb the equilibrium of financial arrangements of the Corporation.
::: Downloaded on - 28/09/2022 20:01:57 :::CIS 6Since the plaintiff had admittedly failed to repay the loan as per schedule of Hypothecation Deed (Ex.DA) and had not paid any amount towards the loan since the year 1991, therefore, the .
recovery proceedings initiated by the defendant against the plaintiff under the Act were held to be legal and valid. Learned Trial Court also held that immediately after withdrawing its civil suit, the defendant resorted to recovery proceedings under the Act within the prescribed limitation period. Defendant's claim was not barred by limitation.
2(iv). Learned First Appellant Court allowed the appeal preferred by the plaintiff and held that cause of action arose in favour of the defendant Corporation to institute the suit for recovery of loan amount lastly on 06.12.1987. Defendant Corporation accordingly instituted the civil suit for recovery of the amount within limitation period i.e. within three years from the date of cause of action. The defendant-Corporation did not opt to recover the amount under the Act. The Appellate Court further held that after withdrawal of the suit on 15.01.1996, the defendant Corporation has not been able to prove a fresh cause of action enabling it to initiate proceedings for recovery under the Act within three years from the date of fresh cause of action.
The Court was also of the view that by unconditionally withdrawing its civil suit on 15.1.1996, the defendant in terms of provisions of Order 23 Rule 4(9) CPC was precluded from ::: Downloaded on - 28/09/2022 20:01:57 :::CIS 7 instituting fresh suit in respect of such matter or part of such claim. The Court observed that the defendant had withdrawn the civil suit without seeking permission of the Court either to .
file fresh suit or to initiate recovery proceedings under the Act for same cause of action. The Court concluded that the defendant-Corporation was neither entitled to institute fresh suit nor the recovery proceedings under the Act on the same cause of action and in respect of same subject matter. Learned First Appellate Court also noticed objection of the plaintiff against the merits of defendant's recovery claim under the provisions of the Act. On the basis of this view, the decree for declaration was passed in favour of the plaintiff to the effect that right of defendant No.1 to recover the loan amount due from the plaintiff, had become time barred and as such was not recoverable under the Act. It was further ordered that recovery proceedings started under the Act were illegal. Decree for permanent prohibitory injunction, restraining the defendant Corporation from recovering the loan amount from the plaintiff under the Act was also passed.
3. It is in the above background that the plaintiff Corporation has filed the instant Regular Second Appeal. This appeal was admitted on 01.11.2010 on following substantial questions of law:-
::: Downloaded on - 28/09/2022 20:01:57 :::CIS 8"1. Whether the first Appellate Court below committed illegalities in non-suiting the appellant/defendant on the ground of limitation thereby vitiating the impugned judgment and decree?
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2. Whether after withdrawal of a suit being prosecuted as per provisions of the Code of Civil Procedure, another remedy if available in law can be stated to be abolished as has been observed by learned First Appellate Court below, if not, impugned judgment and decree stands vitiated in law?
3. Whether as per clauses of the hypothecation deed, when recall notice Ex.PW-2/B is issued thereby demanding the amount due in full is the starting point of limitation and Court below having misread the same, vitiated the impugned judgment and decree?"
4. I have heard learned counsel for the appellant (defendant No.1) and learned senior counsel for the plaintiff (respondent No.1) and with their assistance, have seen the relevant record.
The substantial questions of law are covered by a decision of the Hon'ble Apex Court in (2017) 14 SCC 634, titled Himachal Pradesh Financial Corporation Vs. Anil Garg and others. The High Court in this case had held that civil suit was unconditionally withdrawn for inexplicable reasons and without any liberty for initiating appropriate legal proceedings. It amounted to abandonment of claim for recovery of loan. The High Court also concluded that initiation of fresh proceedings for recovery of loan under the Act would be against public policy ::: Downloaded on - 28/09/2022 20:01:57 :::CIS 9 and will amount to abuse of process of law. Doctrine of election was also invoked against the Corporation. Recovery was also held to be time barred as no action was taken for recovery of .
loan from 1996 to 2002.
The appellant Corporation's submissions before the Hon'ble Apex Court were that the civil suit for recovery was withdrawn by it from the Court to initiate fresh proceedings under the Himachal Public Moneys (Recovery of Dues) Act, 1973 as being a special law, it provided for more speedier and effective remedy. Absence of any liberty in the withdrawal order was not relevant. There was no bar under the Act to the proceedings.
The remedy under Section 3(1)(d)(iv) of the Act was independent and without prejudice to any other mode of recovery under any law for the time being in force, which will include a suit. The High Court had wrongly applied the principle of "public policy"
to restrain recovery of public loan. It was also contended that the doctrine of election had no application to the facts of the case.
The Hon'ble Apex Court held that proceedings in civil suit for recovery are essentially different from the recovery proceedings under the Act. The application for withdrawal stated that it was being done to pursue remedies under the Act.
Section 3(1)(d)(iv) of the Act provided that the remedy under it was without prejudice to any other remedy available under any ::: Downloaded on - 28/09/2022 20:01:57 :::CIS 10 other law. Appellant-Corporation did not intend to abandon its money claim by withdrawing the suit. There had been no abandonment of the claim by the appellant Corporation. The .
language of withdrawal order cannot be determinative without considering the background facts. Withdrawal of the civil suit was no bar to proceedings under the Act. It would be contrary to public policy to prevent the Corporation from recovering the loan. The recovery proceedings were not time barred. It was also observed that the Act provides for recovery of certain dues as arrears of land revenue by sending a certificate to the Collector, mentioning dues with the request that the sum together with cost may be recovered. The proceedings in a recovery suit and recovery under the Act as arrears of land revenue are under different laws governed by different procedures. It will be appropriate to extract relevant paras of the judgment.
On abandonment of claim due to withdrawal of the case and institution of fresh proceedings, it was observed as under: -
"13. The question whether there has been an abandonment of the claim by withdrawal of the Suit is a mixed question of law and fact as held in Ramesh Chandra Sankla vs. Vikram Cement, (2008) 14 SCC 58. The language of the order for withdrawal will not always be determinative. The background facts will necessarily have to be examined for a proper and just decision. Sarguja Transport Service (supra) cannot be applied as an abstract proposition or the ratio applied sans the ::: Downloaded on - 28/09/2022 20:01:57 :::CIS 11 facts of a case. The extract below is considered relevant observing as follows (Vikram Cement case):- "62..... '9......While the withdrawal of a writ petition filed in a High Court without permission to file a fresh writ .
petition may not bar other remedies like a suit........"
14. The application for withdrawal stated that it was being done to pursue remedies under the Act. Undoubtedly the proceedings under the Act are more expeditious for recovery as compared to a Suit, which after decree is required to be followed by Execution proceedings. Section 3(1)(d)(iv) of the Act provided that the remedy under it was without prejudice to any other remedy available under any other law. The Appellant, therefore, never intended to abandon its claim by withdrawing the Suit. The language of the withdrawal order cannot be determinative without considering the background facts.
15. The bar under Order 23 Rule 1 would apply only to a fresh Suit and not proceedings under the Act. In Sarva Shramik Sanghatana vs. State of Maharashtra, (2008) 1 SCC 494, the application under Section 25-O of the Industrial Disputes Act, 1947 for closure of undertaking was withdrawn as attempts were made for settlement of the matter. Settlement not having been possible, the Management filed a fresh application. It was opposed as barred under Order 23 of the Code of Civil Procedure since the earlier application was withdrawn unconditionally with no liberty granted, relying on Sarguja Transport Service (supra). The argument was repelled holding that the proceedings under the Industrial Disputes Act were not a Suit and that withdrawal was bonafide to explore amicable settlement. It was not a withdrawal made malafide or for Bench hunting holding as follows:-
"22. No doubt, Order 23 Rule 1(4) CPC states that where the plaintiff withdraws a suit without permission of the court, he is precluded from instituting any fresh ::: Downloaded on - 28/09/2022 20:01:57 :::CIS 12 suit in respect of the same subject-matter. However, in our opinion, this provision will apply only to suits. An application under Section 25-O(1) is not a suit, and hence, the said provision will not apply to such an application."
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16. In Vikram Cement the earlier petition was dismissed as not pressed and the second application was opposed as not maintainable. Dismissing the objection it was observed as follows: (SCC p.80, para 65) "65. It is thus clear that it was not a case of abandonment or giving up of claim by the Company. But, in view of the office objection, practical difficulty and logistical problems, the petitioner Company did not proceed with an "omnibus" and composite petition against several workmen and filed separate petitions r as suggested by the Registry of the High Court."
Following observations were made regarding difference between suit for recovery and recovery proceedings instituted under the H.P. Public Moneys (Recovery of Dues) Act:-
"17. The Act provides for recovery of certain dues as arrears of land revenue by sending a certificate to the Collector, mentioning the sum due requesting that the sum together with costs may be recovered. The High Court erred in holding that the H.P. Public Moneys (Recovery of Dues) Act, 2000 repealing the earlier Act did not contain any provision that the remedy was without prejudice to the rights under any other law. The proceedings in a Suit and recovery under the Act as arrears of land revenue are under different laws governed by different procedures. A Suit is instituted in a Court of law and is governed by the Code of Civil ::: Downloaded on - 28/09/2022 20:01:57 :::CIS 13 Procedure while the proceedings under the Act are before the executive statutorily empowered. In C.C.E. vs. Ramdev Tobacco Company, (1991)(2)SCC 119, the distinction was noticed as follows :-
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"6.......There can be no doubt that 'suit' or 'prosecution' are those judicial or legal proceedings which are lodged in a court of law and not before any executive authority, even if a statutory one......"
18. That the proceedings in a Suit could not be equated with a certificate proceeding was further noticed in ESI Corpn. vs. C.C. Santhakumar observing :-
"25.......Therefore, it cannot be said that a proceeding for recovery as arrears of land revenue by issuing a certificate could be equated to either a suit, appeal or r application in the court......"
On public policy vis-à-vis doctrine of election, the Hon'ble Apex Court held as under: -
"19. The phrase 'public policy' is not capable of precise definition. In P.Rathinam v. Union Of India, (1994) 3 SCC 394, it was observed:-
"92. The concept of public policy is, however, illusive, varying and uncertain. It has also been described as "untrustworthy guide", "unruly horse" etc...."
Broadly it will mean what is in the larger interest of the society involving questions of righteousness, good conscience and equity upholding the law and not a retrograde interpretation. It cannot be invoked to facilitate a loanee to avoid legal obligation for repayment of a loan. The loanee has a pious duty to abide by his promise and repay. Timely repayment ensures facilitation of the loan to others who may be needy. Public policy cannot be invoked to effectively prevent a loanee from repayment unjustifiably abusing ::: Downloaded on - 28/09/2022 20:01:57 :::CIS 14 the law. Invocation of the principle of doctrine of election in the facts of the case was completely misconceived."
On point of limitation, it was held as follows:-
"20. The High Court factually erred in holding that the truck .
loan was time-barred because the appellant took no steps for recovery of the dues from 1996 till 2002 overlooking the certificate dated 3-9-1994."
Hon'ble Supreme Court concluded as under : -
"21. In conclusion, it is held that the proceedings in a Suit are essentially different from proceedings under the Act.
The withdrawal of the Suit was no bar to proceedings under the Act. There was no bar under the Act to the proceedings. There had been no abandonment of claim by the Appellant. It would be contrary to public policy to prevent the Appellant from recovering the loan. The recovery proceedings were not time barred. The order of the High Court is held to be unsustainable and is set aside. The auction notice dated 13.01.2005/15.01.2005 under Section 85 of the Act shall now proceed in accordance with law and be concluded at the earliest expeditiously."
In the instant case, the appellant Corporation in its application (Mark DB) seeking withdrawal of the suit stated the reason for withdrawing the suit as 'the plaintiff corporation has decided to initiate recovery proceedings under the H.P. Public Moneys (Recovery of Dues) Act, 1973 or the State Financial Corporations Act, 1951 against the defendants. Therefore, the plaintiff corporation has decided to withdraw the present suit pending in this Court.' The appellant Corporation was permitted ::: Downloaded on - 28/09/2022 20:01:57 :::CIS 15 to withdraw the suit for recovery of loan amount on 15.01.1996.
The Corporation thereafter resorted to recovery proceedings under the Himachal Pradesh Public Moneys (Recovery of Dues) .
Act. The demand notice was issued to the plaintiff on 22.02.1997. These recovery proceedings were questioned by the plaintiff in the civil suit.
In light of the legal position settled by the Hon'ble Apex Court in the aforesaid judgment, the findings of the learned First Appellate Court about preclusion of the appellant Corporation's loan recovery claim in light of its withdrawing the civil suit, the abandonment of the appellant Corporation's loan claim, there being no fresh cause of action for initiating recovery proceedings under the Act and the recovery proceedings under the Act having been instituted beyond the period of limitation etc. are not proper. These findings need to be relooked into in light of facts of the case to be examined viz-a-viz the legal positon settled by the Hon'ble Apex Court. Hence, this appeal is allowed. The judgment and decree passed by learned First Appellate Court on 26.08.2008 in Civil Appeal No.22-S/123 of 2008 is set aside. The matter is remanded to the learned First Appellate Court for fresh decision in accordance with law.
Parties through their learned counsel are directed to appear before the learned First Appellate Court on 04.11.2022. Record be returned forthwith.
::: Downloaded on - 28/09/2022 20:01:57 :::CIS 16The pending miscellaneous application(s), if any., also stand disposed of.
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Jyotsna Rewal Dua
Judge
September 23, 2022
R.Atal
r to
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