Allowed

M/S Chanda Construction and Traders and Another v. State of U P and 3 Others

Allahabad HC3 Nov 2022WRIC/26755/2022

Case brief

AI extract

What is this about?

This court quashed a recovery citation issued under the U.P. Public Moneys (Recovery of Dues) Act, 1972. Relying on Sharda Devi, the court held that commercial loans not granted under a State Sponsored Scheme cannot be recovered as arrears of land revenue. The writ petition was allowed, directing the bank to pursue other statutory remedies.

What did the court decide?

The recovery citation dated 05.08.2022 was quashed. The writ petition was allowed.

M/S Chanda Construction and Traders and Another Vs… — Banking and Recovery | Allahabad HC (2022)

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Court No. - 39 Case :- WRIT - C No. - 26755 of 2022 Petitioner :- M/S Chanda Construction And Traders And Another

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Respondent :- State Of U P And 3 Others Counsel for Petitioner :- Arif Ikbal Counsel for Respondent :- C.S.C.,Krishna Mohan Asthana

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Hon'ble Mrs. Sunita Agarwal,J. Hon'ble Vipin Chandra Dixit,J.

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The recovery citation dated 05.08.2022 has been issued for recovery of the outstanding loan, which is a commercial loan, as arrears of land revenue.

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The submission of Ms. Trisha Tripathi, learned Advocate holding brief of Sri Arif Ikbal, learned counsel for the petitioners is that the issue raised herein is squarely covered by the decision of the Full Bench in Sharda Devi vs. State of UP; 2001 (45) ALR 156 wherein taking note of the definition of 'financial assistance' it was held that commercial loan given by the bank during the course of its business would not be recovered under the U.P. Public Moneys (Recovery of Dues) Act, 1972.

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Sri K.M. Asthana, learned Advocate has put in appearance on behalf of the respondent- bank. Upon instructions, he informs that the loan in question is a commercial loan given by the bank during the course of its business and the bank has proceeded for recovery of the said amount by initiating proceedings under the SARFAESI Act, 2002 as also under the Recovery of Debt and Bankruptcy Act, 1993.

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Taking note of the above fact and keeping in mind the decision of the Full Bench in the case of Sharda Devi ( supra ) wherein the question about the recovery certificate issued by the bank under the provisions of U.P. Public Moneys (Recovery of Dues) Act, 1972 was discussed, we find that the issue in Sharda Devi ( supra ) was about the recovery certificate issued by the Bank under the provisions of the U.P. Public Moneys (Recovery of Dues) Act, 1972. Section 3(1)(b) of the Act of 1972 was considered by the Full Bench and it was noticed that Section 3 provides for recovery of certain dues as arrears of land revenue. It was held in Paragraph-19 that a reading of sub-section (1) of Section 3 would show that clauses (a), (b) and (c) relate to different types of loans, advances or credits. Clause (a) relates to loans, advances or credits given by way of financial assistance. Financial assistance has a special meaning and has been defined in sub-section (b) of Section 2. Clause (c) relates

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to loans raised by industrial concern. Here again "industrial concern" has a special meaning under the Act and it has been defined in sub-section (d) of Section 2. Clause (b) relates to loans or advances or credits given by a banking company or a Government Company, as the case may be, under a State Sponsored Scheme, which has been defined in sub-section (g) of Section 2. The words "under a state sponsored scheme" are conspicuous by their absence in clauses (a) (b) and (c), identify the type of loans, advances or credits and, therefore, they have been separately provided.

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It was decided that for the recovery of loan under the U.P. Public Moneys (Recovery of Dues) Act, 1972, what is decisive is whether the loan or advance or credit was given under a State Sponsored Scheme. It was opined that clause (b) applies to only such categories of loans or advances or credits which have been given under a State Sponsored Scheme by a banking company or a Government company and not to all kinds of loans or advances.

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It was, thus, concluded that a banking company can recover its dues by taking recourse to Section 3 of the U.P. Public Moneys (Recovery of Dues) Act, 1972 only where the loan or advance or grant or credit has been given by it to a borrower under a State Sponsored Scheme and not otherwise. Any money advanced under cash credit limit facility by itself is not determinative of the matter as there is no prohibition under the Act for the State Government to notify such a facility as a State Sponsored Scheme. The real test is whether the banking company has made the advance, etc. under a State Sponsored Scheme.

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For the law laid down by the Full Bench in Sharda Devi ( supra ), the recovery citation issued by the bank dated 05.08.2022 is liable to be quashed, inasmuch as, the recovery of outstanding commercial loan cannot be made as arrears of land revenue by invoking the provisions of U.P. Public Moneys (Recovery of Dues) Act, 1972.

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While quashing the recovery citation dated 05.08.2022, the writ petition is allowed.

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It goes without saying that the respondent bank may pursue the proceedings initiated under the SARFAESI Act, 2002 as also under the Recovery of Debt and Bankruptcy Act, 1993 for realisation of his outstanding dues.

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Order Date :- 3.11.2022 P Kesari

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Digitally signed by PRACHI KESARWANI Date: 2022.11.09 10:37:22 IST Reason: Location: High Court of Judicature at Allahabad

M/S Chanda Construction and Traders and Another v. State of U P and 3 Others

Case brief

What is this about?

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M/S Chanda Construction and Traders and Another v. State of U P and 3 Others

Case brief

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