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PETITIONER: DIRECTOR OF INDUSTRIES, U.P. AND ORS.

       Vs.

RESPONDENT: DEEP CHAND AGGARWAL

DATE OF JUDGMENT06/02/1980

BENCH: VENKATARAMIAH, E.S. (J) BENCH: VENKATARAMIAH, E.S. (J) DESAI, D.A.

CITATION:  1980 AIR  801            1980 SCR  (2)1015  1980 SCC  (2) 332

ACT:      Public Moneys  (Recovery of  Dues) Act,  1965 (U.P. Act No. XXV of 1965) Section 3-Whether offends Article 14 of the Constitution.

HEADNOTE:      A sum  of Rs. 15000/- was advanced to the Respondent by the appellant for the purpose of setting up a panel pins and wire nails  industry in  Hardoi on  the former hypothecating under the mortgage deed his house by way of security for the loan. The  respondent committed  default in repayment of the loan. The  State Government  was compelled  to take coercive measures to  recover the  balance  of  the  amount  due  and payable under  the deed  as if  it were  an arrear  of  land revenue by  resorting to  section 3  of  the  Public  Moneys (Recovery of  Dues) Act,  1965 read with sections 279/281 of the U.P. Zamindari Abolition and Land Reforms Act, 1950. The respondent, therefore, filed a petition under Article 226 of the Constitution  on the file of the High Court of Allahabad (Lucknow Bench)  questioning the  competence of  the revenue authorities to  recover the  balance of the amount due under the deed  as if  it were  an arrear  of land  revenue on the ground of  violation of  Article  14  of  the  Constitution. Following the  decision of  this Court  in  Northern  Indian Caterers P.  Ltd. and  Anr. v.  State of  Punjab  and  Anr., [1967] 3  SCR 399  (which held  the field  at that  time and since overruled)  the High  Court declared that Section 3 of the Act  violated Article 14 of the Constitution and quashed the  recovery   proceedings   initiated   by   the   revenue authorities.      Allowing the appeal by certificate, the Court ^      HELD: Section 3 of the Public Moneys (Recovery of Dues) Act 1965  which enables  the State Government to recover the sums advanced  under the circumstances mentioned therein, as if these  were arrears  of land revenue cannot be held to be discriminatory  and   violative  of   Article  14   of   the Constitution. [1023D-E]      (a) Section  3(1)(c) of the Act provides that where any person is  a party to any agreement providing that any money payable  thereunder   to  the   State  Government  shall  be recoverable as  arrear of land revenue and such person makes

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any default  in repayment  of the  loan or  advance  or  any instalment thereof  then the  arrear due  and payable by him may be  recovered as if it were an arrear of land revenue by issuing a  certificate to  the Collector.  The remedy of the State Government to recover the amount by instituting a suit also remains unaffected by the Act. [1019G-H]      (b) There  is reasonable  basis for  the classification made by  the statute and that the classification does have a reasonable relation to the object of the statute. The Act is passed with the object of providing a speedier remedy to the State Government  to realize  the loans advanced by it or by the  Uttar   Pradesh  Financial   Corporation.   The   State Government while advancing loans does not act as an ordinary banker with a view to earning interest. 1016 Ordinarily it  advances loans  in order to assist the people financially in  establishing an industry in the State or for the development  of agriculture,  animal husbandry  and  for such other  purposes which  would advance the economic well- being of  the people.  The amounts so advanced are repayable in easy  instalments with interest which would ordinarily be lower than the rate of interest payable on loans advanced by banking institutions  which are run on commercial lines. The loans are  advanced from  out of  the funds  of the State in which all  the people  of the  State are vitally interested. Moneys advanced  by the  State Government  have  got  to  be recovered expeditiously  so that  fresh advances may be made to others  who have  not yet  received financial  assistance from the  State Government.  If the  State Government should resort to a remedy by way of a suit on the mortgage deeds or bonds executed in its favour, the realization of the amounts due to  the Government  is bound  to be delayed resulting in non-availability of  sufficient funds  in the  hands of  the State Government  for advancing  fresh loans. It is with the object of  avoiding the usual delay involved in the disposal of suits  in civil  Courts and  providing for an expeditious remedy, the  Act has  been enacted. In the instant case, the mortgage deed  provided that the amount due thereunder could be realised  as if  it were  an arrear  of land revenue: and [1020B-G]      (c) The mere fact that there is no express provision in the Act  containing guidelines  to the authorities concerned regarding the circumstances under which the amounts could be realized  by  resorting  to  the  procedure  prescribed  for recovering  arrears   of  land   revenue,  however,  in  the circumstance of  the case  is not  sufficient to  hold  that section 3 of the impugned Act confers arbitrary power on the State Government and makes a hostile discrimination. The Act which is  passed with  the object  of providing  a  speedier remedy itself  provides sufficient  guidance to  the officer concerned as to when he should resort to the remedy provided for. [1021A-C]      Shri Mannalal and Anr. v. Collector of Jhalwar and Ors, [1961] 2  SCR 962;  Lachhman Das on behalf of Firm Tilak Ram Bux v. State of Punjab & Ors., [1963] 2 SCR 353 and Maganlal Chhagganlal (P)  Ltd. v.  Municipal Corporation  of  Greater Bombay and Ors., [1975] 1 SCR 1 followed.

JUDGMENT:      CIVIL APPELLATE  JURISDICTION: Civil  Appeal No. 576 of 1970.      From the  Judgment and  Order dated  18-8-1969  of  the Allahabad High Court in Writ Petition No. 334 of 1963.

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    G. N. Dixit and O. P. Rana for the Appellants.      H. K. Puri for the Respondent.      The Judgment of the Court was delivered by      VENKATARAMIAH, J.-This  appeal by  certificate involves the  question   whether  section  3  of  the  Public  Moneys (Recovery of  Dues) Act,  1965 (U.P.  Act No.  XXV of  1965) (hereinafter referred to as ’the Act’) offends Article 14 of the  Constitution   and   it   arises   in   the   following circumstances.      The respondent  is a resident of Railwayganj, Hardoi in the State  of Uttar Pradesh. He applied to the Government of Uttar Pradesh 1017 for a  loan of  Rs. 15,000/  for the purpose of setting up a panel pins  and wire  nails industry  in Hardoi.  The  State Government  which   was   interested   in   the   industrial development of  the State  accordingly advanced  the loan of Rs. 15,000  to the  respondent under  a mortgage  deed dated March 10,  1960. The  respondent was  permitted to repay the loan in  ten half-yearly  instalments commencing from May 1, 1962 together  with interest  at the  rate of 3 per cent per annum calculated  from March  25, 1960.  The  mortgage  deed provided that  the respondent  should spend Rs. 7,000 out of the  loan  advanced  on  the  purchase  of  machineries  for manufacturing panel  pins and  wire nails and the balance of Rs. 8,000  on the construction of a building for the purpose of  the   said  industry  and  for  no  other  purpose.  The respondent also  agreed to  observe truly  the Uttar Pradesh Rules  for  the  Advance  of  Loan  for  Developing  Cottage Industries in  the  Rural  Area  promulgated  by  the  State Government and  also to  permit the  Director of Industries, U.P. or  any official deputed by him to inspect his accounts for the purpose of verifying whether the amount borrowed had been utilised  for the  specified  purpose.  The  respondent hypothecated under the deed his house by way of security for the loan.  Clause (8)  of the  mortgage deed, however, inter alia provided  that if any of the instalments payable by the respondent as  mentioned in  the deed  was not  paid on  the stipulated date  then the  entire amount  due under the deed could be  recovered by  the State  Government as  arrears of land revenue.  The mortgage  deed was signed by the Director of Industries,  U.P. on  behalf  of  and  acting  under  the authority  of   the  Governor   of  Uttar  Pradesh  and  the respondent. The respondent committed default in repayment of the loan.  The State Government was, therefore, compelled to take coercive  measures to recover the balance of the amount due and  payable under  the deed  as if it were an arrear of land revenue, by resorting to section 3 of the Act read with sections 279/281  of the  U.P. Zamindari  Abolition and Land Reforms Act,  1950.  At  the  request  of  the  Director  of Industries, U.P.,  the Collector  Hardoi initiated  steps to recover the  balance of  the amount due under the deed as an arrear of  land  revenue.  Pursuant  to  the  order  of  the Collector, the  Tahsildar  of  Hardoi  issued  an  order  of attachment  dated  March  12,  1968  of  the  house  of  the respondent and  also issued  a  warrant  of  arrest  of  the respondent  to  recover  the  amount  under  the  provisions governing  the   procedure  prescribed  for  realising  land revenue. Immediately  thereafter,  the  respondent  filed  a petition under  Article 226  of the Constitution on the file of the  High Court  of Allahabad  (Lucknow  Bench)  in  writ petition No.  334 of  1968 questioning the competence of the revenue authorities to recover the 1018 the balance  of the  amount due under the deed as if it were

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an arrear  of land revenue. In that petition, the respondent contended  that   the  Act   was  discriminatory   and  was, therefore, violative  of Article  14 of  the Constitution on the ground  that  the  State  Government  had  two  remedies available to  it in law-one by way of a suit for recovery of the  mortgage   money  and   another  under  the  Act  which authorised it  to recover  the amounts  due as  if they were arrears of  land revenue,  that the remedy under the Act was more onerous  than a  suit so  far  as  the  respondent  was concerned and that there were no guidelines in law as to the circumstances in  which the State Government could resort to the provisions  of the Act. The Director of Industries, U.P. and  the   revenue  authorities   who  were   impleaded   as respondents  in   the  writ   petition  contended  that  the provisions of  the Act  did not  offend Article  14  of  the Constitution.      Following the  decision of this Court in Northern India Caterers Private  Ltd., &  Anr. v. State of Punjab & Anr.(1) the High  court declared  that section 3 of the Act violated Article 14  of the  Constitution by  providing an additional remedy to  the State Government over and above the remedy by way of  a suit, leaving it to the unguided discretion of the State Government  to resort to one or the other and that the remedy  available   under  the   Act  was  more  drastic  or prejudicial  to   the  party   concerned  than   the   suit. Accordingly the  High Court quashed the recovery proceedings initiated by  the  revenue  authorities.  Aggrieved  by  the decision of the High Court, the Director of Industries, U.P. and the  revenue authorities  have come up in appeal to this Court.      The impugned Act was passed in the year 1965 to provide for speedy  recovery of  certain classes  of dues payable to the State or to the Uttar Pradesh Financial Corporation. The Act contains  three sections.  The first  section deals with the title of the Act and extent of its operation. The second section is  the definition  clause Section  2 (b) of the Act defines  the   expression  ’financial   assistance’  as  any financial assistance  (i)  for  establishing,  expanding  or running any  industrial undertaking; or (ii) for purposes of vocational training;  or (iii) for the development of animal husbandry; or (iv) for purposes of any other kind of planned development; or  (v) for  relief against distress. Section 3 of the  Act  with  which  we  are  now  concerned  reads  as follows:-           "3. Recovery  of certain  dues as  arrears of land      revenue- 1019           (1) Where any person is party-           (a)   to any agreement relating to a loan, advance                or grant given to him by the State Government                or  the   Corporation  by  way  of  financial                assistance, or           (b)   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           (c)   to any  agreement providing  that any  money                payable thereunder  to the  State  Government                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 repayment  of

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              such grant  or portion or instalment thereof,                or            (iii) otherwise fails to comply with the terms of                the agreement,- then, in  the case  of the State Government, such officer as may be  authorised in this behalf by the State Government by notification in  the Official Gazette and in the case of the Corporation, the  Managing Director  thereof,  may,  without prejudice to  any other mode of recovery under any other law for the  time being  in force,  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."      It may  be seen  that  section  3(1)  (c)  of  the  Act provides that  where any  person is a party to any agreement providing that  any money  payable thereunder  to the  State Government shall  be recoverable  as arrears of land revenue and such  person makes  any default in repayment of the loan or advance  or any  instalment thereof  then the arrears due and payable  by him may be recovered as if it were an arrear of land  revenue by  issuing a certificate to the Collector. The remedy  of the State Government to recover the amount by instituting a suit also remains unaffected by the Act. 1020      At the outset, it has to be stated that the decision of this Court  in Northern  India Caterers Private Ltd., & Anr. (supra) is  overruled by  this Court in Maganlal Chhagganlal (P) Ltd.  v.  Municipal  Corporation  of  Greater  Bombay  & Ors.(1) The  question for  determination  in  this  case  is whether section 3 of the impugned Act violates Article 14 of the Constitution.  In order  to decide  this question, it is necessary to determine the object of the Act and whether the classification made  between the  State on  the one hand and others who  have also  advanced moneys  under mortgage deeds bears any  reasonable relation to the object of the statute. The Act  is passed  with the  object of providing a speedier remedy to the State Government to realize the loans advanced by it  or by  the Uttar  Pradesh Financial  Corporation. The State Government  while advancing  loans does  not act as an ordinary banker  with a view to earning interest. Ordinarily it advances  loans in order to assist the people financially in  establishing  an  industry  in  the  State  or  for  the development of  agriculture, animal  husbandry and  for such other purposes  which would  advance the economic well-being of the people. The amounts so advanced are repayable in easy instalments with  interest which  would ordinarily  be lower than the  rate of  interest payable  on  loans  advanced  by banking institutions  which are run on commercial lines. The loans are  advanced from  out of  the funds  of the State in which all  the people  of the  State are vitally interested. Moneys advanced  by the  State Government  have  got  to  be recovered expeditiously  so that  fresh advances may be made to others  who have  not yet  received financial  assistance from the  State Government.  If the  State Government should resort to a remedy by way of a suit on the mortgage deeds or bonds executed in its favour, the realization of the amounts due to  the Government  is bound  to be delayed resulting in non-availability of  sufficient funds  in the  hands of  the State Government  for advancing  fresh loans. It is with the object of  avoiding the usual delay involved in the disposal of suits  in civil  courts and  providing for an expeditious

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remedy, the  Act has  been enacted. In the instant case, the mortgage deed  provided that the amount due thereunder could be realised  as if  it were  an arrear  of land  revenue. It cannot, therefore, be said that there is no reasonable basis for the  classification made  by the  statute and  that  the classification does  not have  a reasonable  relation to the object of the statute.      It is  also argued  that  the  impugned  Act  does  not provide  any   guidelines  to   the  authorities   concerned regarding the circumstances under which the amounts could be realized by resorting to the pro- 1021 cedure prescribed for recovering arrears of land revenue. It is no  doubt true  that there is no express provision in the Act  containing  such  guidelines.  That,  however,  in  the circumstances of  the case  is not  sufficient to  hold that section 3 of the impugned Act confers arbitrary power on the State Government  and makes  a hostile discrimination. Under section 3  of the  Act, the Collector can proceed to realize the amount  due as arrears of land revenue only on the basis of a  certificate issued  by an officer as may be authorised in that  behalf by  the State  Government mentioning the sum due from  any person  referred to  therein. Such  officer is expected ordinarily  to avail himself of the speedier remedy provided under  the statute. We are of the view that the Act which is  passed with  the object  of providing  a  speedier remedy itself  provides sufficient  guidance to  the officer concerned as to when he should resort to the remedy provided by it.  As observed by this Court in Maganlal Chhgganlal (P) Ltd.’s case  (supra), one  expects the  officer concerned to avail himself of the procedure prescribed by the Act and not to resort  to the  dilatory procedure  of the ordinary civil court. In  that case,  the legality of the provisions of the Bombay Government  Premises (Eviction)  Act,  1955  and  the provisions contained  in Chapter  VA of the Bombay Municipal Corporation Act,  1888 which  provided a  speedier remedy to recover  possession  of  premises  belonging  to  the  State Government and  the Bombay  Municipal Corporation which were in unauthorised  occupation of  any person was questioned on the ground  that the remedies under the said provisions were more onerous than the remedy by way of a suit which was also available to the State Government and the Corporation. While upholding the  above provisions,  Alagiriswami, J. who spoke for the majority observed thus:      "The statute  itself in the two classes of cases before      us clearly  lays down  the purpose behind them, that is      premises  belonging   to  the   Corporation   and   the      Government should be subject to speedy procedure in the      matter of evicting unauthorized persons occupying them.      This is  a sufficient  guidance for  the authorities on      whom  the  power  has  been  conferred.  With  such  an      indication clearly  given in  the statutes  one expects      the officers  concerned  to  avail  themselves  of  the      procedures prescribed by the Acts and not resort to the      dilatory procedure  of the  ordinary Civil  Court. Even      normally one  cannot  imagine  an  officer  having  the      choice of  two procedures, one which enables him to get      possession of  the property quickly and the other which      would be  a prolonged  one, to  resort to  the  latter.      Administrative officers, no 1022      less than  the courts,  do not function in a vacuum. It      would   be   extremely   unreal   to   hold   that   an      administrative officer  would in taking proceedings for      eviction  of   unauthorised  occupants   of  Government

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    property or  Municipal property resort to the procedure      prescribed by  the two  Acts in  one case  and  to  the      ordinary Civil  Courts in  the other. The provisions of      these two  Acts cannot  be struck  down on the fanciful      theory  that  power  would  be  exercised  in  such  an      unrealistic  fashion.   In  considering   whether   the      officers would  be discriminating  between one  set  of      persons and  another, one  has got to take into account      normal human  behaviour  and  not  behaviour  which  is      abnormal.  It  is  not  every  fancied  possibility  of      discrimination but the real risk of discrimination that      we must  take into  account. This  is not  one of those      cases where discrimination is writ large on the face of      the statute. Discrimination may be possible but is very      improbable. And  if there  is discrimination  in actual      practice this  Court is not powerless. Furthermore, the      fact that  the Legislature considered that the ordinary      procedure is  insufficient or  ineffective in  evicting      unauthorised occupants  of Government  and  Corporation      property  and   provided  a  special  speedy  procedure      therefor  is  a  clear  guidance  for  the  authorities      charged  with   the  duty   of  evicting   unauthorised      occupants. We therefore, find ourselves unable to agree      with the majority in the Northern India Caterers’ case.      Certain provisions  similar to the Act impugned in this case enabling  a State Government to recover the amounts due to it  by resorting to a speedier remedy have been upheld by this Court  in two  cases-Shri Manna Lal & Anr. v. Collector of Jhalawar  & Ors.(1)  and Lachhman  Das on  behalf of firm Tilak Ram  Ram Bux v. State of Punjab & Ors.(2). In the case of Shri  Manna Lal  & Anr. (supra) the facts were these: The Jhalawar State  Bank was  originally a Bank belonging to the princely State of Jhalawar. Its assets, including moneys due to it,  became vested in the United State of Rajasthan under the convenient  executed by the Ruler of Jhalawar along with other Rulers  by which  the United  State of  Rajasthan  was formed. On  the promulgation  of the  Constitution of India, the United  State of Rajasthan became the State of Rajasthan in the  Indian  Union  and  all  its  assets  including  the Jhalawar State  Bank and  its dues  vested in  the State  of Rajasthan.  In  that  case  the  question  which  arose  for consideration was whether 1023 moneys which  had been  advanced by  the Jhalawar State Bank could be recovered by taking proceedings under the Rajasthan Public Demands  Recovery  Act.  This  Court  held  that  the amounts could  be recovered  by the State of Rajasthan after the Bank  had become  vested in  it as a public demand under the Rajasthan  Public Demands Recovery Act and that the said Act did  not offend  Article 14  of  the  Constitution  even though it provided a special facility to the Government as a banker  for   the  recovery  of  the  bank’s  dues  for  the Government could legitimately be put in a separate class for this purpose.  In the  latter case i.e. the case of Lachhman Das on  behalf of  Firm Tilak Ram Ram Bux (supra), the right of Patiala State Bank to recover the amounts due to it under the provisions of the Patiala Recovery of State Dues Act was questioned. This  Court held  that the Bank established by a State had  distinctive features which differentiated it from other Banks  and formed  a category in itself and the Act in setting  up   separate  authorities   for  determination  of disputes and  in  prescribing  a  special  procedure  to  be followed by  them for  the recovery  of the  dues by summary process could not be considered to be discriminatory.      We are,  therefore, of  the view  that section 3 of the

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Act which  enables the  State Government to recover the sums advanced under  the circumstances  mentioned therein  as  if they were  arrears of  land revenue  cannot be  held  to  be discriminatory  and   violative  of   Article  14   of   the Constitution.      For the  foregoing reasons,  we allow  the appeal,  set aside the  order passed  by the  High Court  and dismiss the writ petition.  Since the High Court disposed of the case on the basis  of the  decision of  this Court in Northern India Caterers Private  Ltd. &  Anr. (supra)  which has since been overruled, we make no order as to costs. V.D.K.                                       Appeal allowed. 1024