Hon'ble Rakesh Srivastava, J.
Petitioner, who is the sole proprietor of the firm namely, M/s. Ram Murti Jaiswal Trading Co., and running a rice mill, has approached this Court challenging the notice dated 30-06-2013 issued by the respondent no. 1 Corporation to deposit a sum of Rs.40,94,142/- failing which the same shall be recovered as arrears of land revenue as also the recovery citation dated 31-01-2014. The recovery certificate has been issued by the respondent Corporation purporting to be in exercise of powers conferred by Section 3 of the U.P. Public Moneys (Recovery of Dues) Act, 1972 (in short the 'Act'). The aforesaid amount was sought to be recovered from the petitioner as price of 2126.88 Qtls. CMR (hulled rice) outstanding against the firm, which was not returned back.
It is contended by learned counsel for the petitioners that the terms of the agreement contains an arbitration clause and accordingly the dispute was referred to arbitration and the petitioner received a notice dated 15-02-2014 from the Regional Food Controller to appear before the Special Secretary, Food & civil Supplies, Govt. of U.P., who was appointed as arbitrator and even before the arbitration proceedings could be concluded the recovery certificate has been issued. It is further submitted that under the provisions of Section 3 of the Act the amount could only be realised as arrears of land revenue if there was an agreement between the parties in that regard. For ready reference Section 3 of the Act is quoted below :
"3. Recovery of certain dues as arrears of land revenue. - (1) Where any person is a party -
(a) to any agreement relating to a loan, advance or grant given to him or relating to credit in respect of, or relating to hire-purchase of goods sold to him, by the State Government or the Corporation, by way of financial assistance, or
(b) to any agreement relating to a loan, advance or grant given to him or relating to credit in respect of, or relating to hire-purchase of goods sold to him, by a banking company or a Government company, as the case may be, under a State sponsored scheme; or
(c) to any agreement relating to a guarantee given by the State Government or the Corporation in respect of a loan raised by an industrial concern; or
(d) to any agreement providing that any money payable thereunder to the State Government [or the Corporation] shall be recoverable as arrears of land revenue; and such person -
(i) makes any default in repayment of the loan or advance or any instalment thereof; or
(ii) having become liable under the conditions of the grant to refund the grant or any portion thereof makes any default in the refund of such grant or portion or any instalment thereof; or
(iii) otherwise fails to comply with the terms of agreement.
then, in the case of the State Government, such officer as may be authorised in that behalf by the State Government by notification in the official gazette and in the case of Corporation or a Government company the Managing Director or where there is no Managing Director then the Chairman of the Corporation, by whatever name called for such officer of the Corporation or Government company, as may be authorized in that behalf by the Managing Director or the Chairman thereof, and in the case of a banking company, the local agent thereof, by whatever name called, may send a certificate to the Collector, mentioning the sum due from such person and requesting that such sum together with costs of the proceedings be recovered as if it were an arrear of land revenue.
(2) The Collector on receiving the certificate shall proceed to recover the amount stated therein as an arrear of land revenue"
Relying upon the provisions of Section 3 of the Act, learned counsel for the petitioner further contended that the amount sought to be recovered from the petitioner was neither a loan, advance or grant nor it was given by way of financial assistance nor there was any agreement between the parties that any outstanding amount shall be recoverable as arrears of land revenue. Reliance in support of the contention has been placed on a judgment of the Hon'ble Apex Court in M/s.A.P.T. Ispat Pvt. Ltd. v. U.P. Small Industrial Corporation Limited, AIR 2010 SCW 3001.
A counter affidavit has been filed on behalf of the respondent no. 1. Though in reply to paragraph 21 of the writ petition, it has been stated in paragraph 11 of the counter affidavit that in view of the agreement entered into between the parties recovery of the amount in question was permissible as arrears of land revenue but either copy of the agreement has been produced nor the averments made in the paragraph inspire any confidence. The petitioner has clearly stated in the writ petition that the amount sought to be recovered from him was neither a loan, advance or grant or relating to credit in respect of, or relating to hire purchase of goods sold to him, by the State Government or Corporation, by way of financial assistance, nor there was any agreement between the parties that any amount due to the State Government or the Corporation shall be recoverable as arrears of land revenue. There is no denial of the aforesaid averments in the counter affidavit. The Hon'ble Apex Court in the case of M/s. A.P.T. Ispat Pvt. Ltd. v. U.P. Small Industrial Corporation Ltd., & another, 2010 AIR SCW 3001 while interpreting the provisions of Section 3 of the Act has clearly held in paragraphs 14, 15, 16 & 17 as under :
"14. We think that the High Court has stretched the meaning of "financial assistance" as defined in Section 2 and the scope of section 3 of the Act beyond reasonable limits. From a bare reading of Section 3 it is evident that the dues must arise from an agreement to which the person from whom recovery is to be made is a party. Sub-clause (a) of sub-section (1) then enumerates the kinds of agreement under which the transaction should have taken place. It needs also to be borne in mind that in the scheme of the Act there is no provision for any adjudication. Once there is any default under an agreement, the designated authority is authorized to issue a recovery certificate and send it to the Collector who is obliged to recover the certificate amount together with interest from the certificate debtor as arrears of land revenue. At no stage the certificate debtor is given an opportunity to put up his case. Such being the legal position, the recovery certificate must be based on a tangible agreement and it should even prima facie appear that the dues arise from a breach of the terms of the agreement. A proceeding under Section 3 of the Act cannot be sustained by piling up assumptions in favour of the certificate holder and against the judgment debtor.
15. In the present case it is evident that the dues of which recovery is sought by the impugned certificates do not pertain to any loan, advance or grant given to the appellant or to any credit concerning any hire purchase og goods sold to the appellant by the Corporation under any agreement, express or implied. The dues do not relate to any financial assistance.
16. We also cannot overlook the fact that in this case the so called supplies were not even made in the normal course of business. A reference to the FIR makes it clear that according to the Corporation the goods were taken away by the appellant in a criminal action constituting a number of offences under the Penal Code. The U.P. Public Moneys (Recovery of Dues) Act, 1972 was clearly not intended to recover the goods or the monetary value of goods taken away in course of theft or dacoity or lost as a result of dishonest appropriation or any other alleged criminal action.
17. For the reasons discussed above, we are of the view that in the facts of this case the two impugned recovery certificates are quite illegal and untenable and we are unable to sustain the High Court order coming under appeal."
In the case in hand, it is evident from the facts that dues of which recovery was being effected against the petitioner through impugned citation do not pertain to any loan, advance or grant given to the petitioner or to credit concerning any hire purchase of goods sold to the petitioner. The dues were also not in respect of any financial assistance nor the respondents have been able to demonstrate that the amount due is recoverable as arrears of land revenue.
For the reasons discussed above, we are of the considered view that the recovery citation impugned in this petition is illegal and unsustainable and thus hereby stands quashed.
Writ petition stands allowed.
It is being made clear that this order shall not have any effect either in the arbitral proceedings or execution and implementation of any order passed in the said proceedings.
Order Date :- 9.12.2014/nd