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CASE NO.: Appeal (civil)  2675 of 2007

PETITIONER: Ram Kripal Singh

RESPONDENT: State of U.P. & Ors

DATE OF JUDGMENT: 16/05/2007

BENCH: Dr. ARIJIT PASAYAT & LOKESHWAR SINGH PANTA

JUDGMENT: J U D G M E N T  

CIVIL  APPEAL NO. 2675 OF 2007 (Arising out of SLP (C) No. 19548 of 2005)  

Dr. ARIJIT PASAYAT, J.

        1.      Leave granted.

2.      Challenge in this appeal is to the order passed by a  Division Bench of the Allahabad High Court dismissing the  writ petition filed by the appellant.  Challenge in the writ  petition was to the recovery proceedings initiated against him  under Uttar Pradesh Public Money’s recovery of Dues Act,  1972 (in short the ’Act’).  Prayer was to quash the citation  issued by the Tehsildar principally on the ground that the  proceedings are without jurisdiction as the respondent cannot  proceed against the appellant as a guarantor unless and until  the property of the principal debtor is sold.  Since the recovery  proceedings were initiated in the year 1993, recovery citation   during the pendency of the earlier writ petition was illegal and  therefore the appellant was entitled to get protection in view of  what has been stated by this Court in Pawan Kumar Jain v.  Pradeshiya Industrial and Investment Corporation of U.P.  [2004 (6) SCC 758]. 3.      Respondents on the other hand supported the action  taken relying on a decision of this Court in Kailash Nath  Agrawal v. Pradeshiya Industrial and Investment Corporation  of U.P.  [2003 (4) SCC 305].  It was also pointed out that the  decision in Pawan Kumar’s case (supra) is not applicable as  the company had been wound up and the official liquidator  has been appointed.   4.      Accordingly the High Court dismissed the writ petition  holding that since that the company has been wound up and   the proceedings against the guarantor i.e. appellant were  perfectly in order. 5.      Stands taken before the High Court were reiterated by  the parties in this appeal.  At first glance the appellants stand  appears to be in terra firma because of what has been stated  by this court in Pawan Kumar’s case (supra).   6.      On a closure scrutiny the finding of the High Court  appears to be in order.  Though it was urged that the recovery  citation was issued after 24.1.2004 i.e. on 18th September,  2004, it is to be noted that the first recovery citation was  issued on 3.9.1993. It is true that the same was under

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challenge in another writ petition.  But the basic features are  distinguishable. The present case is different from that of  Pawan Kumar’s case (supra) as principal debtors Company  has already been wound up and official liquidator has been   appointed.  The company was declared as sick industry on  17.11.1994 by the Board for Industrial and Financial  Reconstruction (in short the ’BIFR’) where after the company  has undergone winding up proceedings before the High Court.   The BIFR submitted its recommendation for winding up and  against the order of BIFR appellant had preferred an appeal  before the appellate authority which was rejected on 9.1.1997.   The company had filed a writ petition questioning orders of the  BIFR and the appellate authority.  By order dated 26.2.2003  the Writ Petition No. 14172 of 1997 was dismissed and in the  winding up proceedings, Company Court has permitted official  liquidator to proceed with the winding up. 7.      It appears that proposal for one time settlement was  made and nothing concrete has been done by the appellant.   In International Coach Builders Ltd. v. Karnataka State  Financial Corporation [2003(10) SCC 482] it has been held  that the position would be different in the company is under  liquidation.   8.      It appears to be a classic case where the efforts for  recovery of the amounts have been frustrated on some pretext  or other. In Orissa State Financial Corporation and Anr. v.  Hotel Jogendra [1996(5) SCC 357] it was held that a  recalcitrant defaulters’ case deserves to be dealt with sternly. 9.      The right of State Financial Corporation (in short ’SFC’)   unilaterally exercisable under Section 29 of the State Financial  Corporation Act, 1951 (in short ’SFC Act’) is available against  a debtor, if a company, only so long as there is no order of  winding up. 10.     SFCs cannot unilaterally act to realize the mortgaged  properties without the consent of the official liquidator. 11.     If the official liquidator does not consent, SFCs have to  move the Company Court for appropriate directions to the  official liquidator. In any event, the official liquidator cannot  act without seeking directions from the Company Court and  under its supervision. 12.     The inevitable result is that the appeal is without merit  deserves dismissal, which we direct. Costs made easy.