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PETITIONER: STATE OF PUNJAB & ORS.

       Vs.

RESPONDENT: S. DHRAM SINGH (DEAD) BY SUCCESSOR DESA SINGH & ANR.

DATE OF JUDGMENT29/08/1985

BENCH: MISRA, R.B. (J) BENCH: MISRA, R.B. (J) VENKATARAMIAH, E.S. (J)

CITATION:  1985 AIR 1751            1985 SCR  Supl. (2) 705  1985 SCC  (4) 465        1985 SCALE  (2)604

ACT:      Punjab Land  Revenue Act,  section 67(b),  scope  of  - Arrest and detention of the borrowers’ person to realise the loan amount  when can  be resorted  to under  clause (b)  of section 67  of Punjab  Land   Revenue Act - Whether could be resorted to by-passing the contractual remedy open under the loan Agreement.

HEADNOTE:      Respondent No.2  a registered  House  Building  Society with  32   members  entered   into  an  agreement  with  the Government of  Punjab where  under the  Government agreed to advance a  loan of  Rs. 1,02,000  to its  members under  the lower  income  group  housing  scheme  for  the  purpose  of constructing residential  houses in  Dera Baba Nanak. As per the written  agreement the loan advance was payable in three instalments. The  first instalment  of Rs.  20400 was  to be paid by the Govt. On the execution of the deed of agreement, the second  instalment of  Rs.  51000  to  be  paid  on  the completion of  the houses  to the  plinth level and the last instalment of  Rs. 30,600  on the completion of the house to the roof  level. The  society  on  the  other  hand  had  to mortgage the sites together with the houses erected or to be erected thereon  to the  govt. as security for the repayment of loan  and the  amount of  loan was  to be  paid  back  in several  instalments.   Pursuant  to   the   agreement   the Government issued  a cheque for Rs. 71,400 towards the first and SECOND  instalments. The  third instalment  was not paid for failure  to furnish  the required  certificate that  the houses had  reached the  roof  level.  The  members  of  the society also  failed to  repay the  loan in the situation, a notice   was issued  by the Collector of the District to the members of the society to deposit the overdue instalments of loan and to appear before the Deputy commissioner, Gurdaspur on August  24, 1964  to show  cause why  the  entire  amount should not  be recovered  from them  by means  of arrest and DETENTION. The  society challenged  the notice  by filing  a writ petition  in the  Court. Its  stand  was  that  in  the absence of  any such  stipulation in  the loan agreement the amount could  not be  recovered by  arrest of the members of the 706

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society in  the first  instance. The  writ petition remained pending for  more than six years but no instalments had been paid by  the members of the society to the government during that period.      The Writ  Petition was  allowed by  the learned  Single Judge by  his judgment  dated 17th  March, 1971 holding that the government  must resort  to the contractual remedy which it  reserved   to  itself   while  entering  into  the  loan agreement. The State preferred a letters patent appeal which was summarily dismissed. Hence the appeal by special leave.      Dismissing the appeal, the Court, ^      HELD: A bare reading of clause 4 of the agreement makes it evidently  clear that the Government has first to proceed against the property ¯ mortgaged and sell the property. Only in case  the entire  amount could  not be  realised that the Government could  proceed against  the borrower  personally. The government  is as  much bound  by the  agreement as  the borrower and, therefore, the Government has first to proceed against the  mortgaged    property.   In  other  words,  the government must  resort to  the contractual  remedy which it reserved to  itself when  entering into  the loan  agreement before resorting  to clause  (b) of section 67 of the Punjab Land Revenue Act. [709 B-C, 706 H, 710] Ram Narayan  Agarwal etc.  v. State  of U.P. & Ors. [1983] 3 S.C.R 684 explained and distinguished.

JUDGMENT:      CIVIL APPELLATE  JURISDICTION: Civil  Appeal No. 625 of 1972.      From the  Judgment and  Order dated  13.9.1971  of  the Punjab & Haryana High Court in L.P.A. No. 254 of 1971.      S.K. Bagga, for the Appellants.       The Judgment of the Court was delivered by      MISRA, J.  The  present  appeal  by  special  leave  is directed against  the judgment  of a  Division Bench  of the High Court  of Punjab and Haryana dated 13th September, 1971 dismissing the letters patent appeal against the judgment of a learned  Single Judge  dated 17th March, 1971 allowing the writ petition filed by the respondents.      The short  question that falls for consideration in the present appeal is whether the amount of loan in question can be 707 recovered as arrears of land revenue by arrest and detention in view of cl. 4 of the loan agreement.      Dera Baba  Nanak Co-operative  House  Building  Society Ltd., respondent  No. 2, was a registered society. It had 32 members to start with. The society entered into an agreement with the  Government of  Panjab  whereunder  the  Government agreed to  advance a  loan of  Rs. 1,02,000  to its  members under the  lower income group housing scheme for the purpose of constructing residential houses on the site measuring 35, 100 sq.ft.  in Dera  Baba Nanak. The agreement was evidenced by a  written document. Under the terms of the agreement the Govt. was  to advance  the loan  in three  instalments - the first instalment  of Rs.  20,400  was  to  be  paid  by  the government on  the execution  of the  deed of agreement, the second instalment  of Rs.  51,000 was  to  be  paid  on  the completion of  the house  to the  plinth level  ant the last instalment of  Rs. 30,600  on the completion of the house to the roof level. The members of the society on the other hand had to  repay the  loan advanced  with  interest  in  thirty

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annual instalments,  the first  instalment was to become due twelve months  after  the  date  of  sanctioning  the  first instalment of  loan. It  was  further  stipulated  that  the society would   mortgage the said sites together with houses erected  or   to  be   erected  thereon  thereafter  to  the government as  security for  the repayment  of the said loan and interest.  The loan  agreement further contemplated that the government  would recover  the amount of loan first from the property  mortgaged   and if  there was a shortfall then the  government  shall  be  entitled  to  recover  the  same personally from the borrowers as well as from the movable or other immovable property belonging to the borrowers.      The society  pursuant to  the terms  of  the  agreement executed the mortgage. The government in their turn issued a cheque for  Rs. 71,400  as payment  towards  the  first  two instalments on 24th of March, 1956. The third’ instalment of Rs. 30,600  was, however,  not paid by the government to the society on the ground that it had not furnished the required certificates that the houses had reached the roof level. The members of  the society  also failed  to repay  the loan  as stipulated. In  the situation  a notice  was issued  by  the Collector of  the District  to the members of the society to deposit the overdue instalments of loan and to appear before the Deputy  Commissioner, Gurdaspur  on August  24, 1964  to show cause  why the  entire amount  should not  be recovered from them  by means  of arrest  and detention.  The  society challenged the notice by filling a writ petition in the High Court. Its  stand was 708 that  in  the  absence  of  any   such  stipulation  in  the loan    agreement     the      amount     could    not    be recovered by  arrest of  the members  of the  society in the first instance.  The writ petition remained pending for more than six  years   but no  instalments had  been paid  by the members of the society to the government during that period.      The claim  was   resisted by  the government.  In  writ petition was,  however, allowed  by the learned Single Judge by his  judgment dated  17th March,  1971 holding  that  the government must  resort to  the contractual  remedy which it reserved to  itself when entering into the loan agreement. m e  State   preferred  a  letters  patent  appeal  which  was summarily dismissed. The state has now approached this court by special leave.      The learned counsel appearing for the State relied upon cl. (b)  of 8.  67 of  the Punjab  Land  Revenue  Act.  This section provides  the process for the recovery of arrears of land revenue  and one  of the modes prescribed by cl. (b) of 8. 67  is by arrest sums detention of the borrower’s person. Reliance was  also placed  on s.  98 of  the said  Act which enumerates what  sums are  recoverable as  arrears  of  land revenue and  cl. (dd)  of s.  98 includes a loan advanced by the State  Government towards  the cost of the house or site under the  government sponsored housing scheme together with interest chargeable  thereon and  costs, if any in making or recovering the  same as  land revenue.  The counsel  for the respondents on  the other hand strenuously relies upon cl. 4 of the  agreement of  loan and  contends that in view of the agreement between  the parties the government has to proceed first against  the property  mortgaged  and  in  case  of  a shortfall other  methods could  be resorted  to. It  will be pertinent at  this stage  to refer  to cl.  4  of  the  loan agreement which reads:           "4.  For   the  consideration   aforesaid  and  as           security for  the repayment  to the  Government of           the said  loan and  interest, the  borrower hereby

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         transfers  to   the  Government   the  said  sites           together with  houses now  erected or hereafter to           be erected  thereon, to  the intent  that the same           shall remain  and be charged by way of mortgage in           the manner following, namely, that for the purpose           of recovering  the said loan and interest, and any           other sum as may become due by the borrower to the           Government  by   virtue  of  these  presents,  the           Government may,  at its  option, either  sell  the           said sites  and the houses erected or hereafter to           be erected thereon or any part thereof 709           without the  intervention of  any Court or enforce           against the  said  property  all  or  any  of  the           remedies of  simple mortgage    and  in  case  the           realisation  from  the  property  mentioned  above           falls short  of the  amount due  to the Government           under these  presents,  the  Government  shall  be           entitled to  recover the  same personally from the           borrower as  well as  from the   movable  or other           immovable property belonging to the borrower.      A bare  reading of  c. 4  of  the  agreement  makes  it evidently clear  that the  Government has  first to  proceed against the  property mortgaged  and sell the property. Only in case  the entire  amount could  not be  realised that the Government could  proceed against  the borrower  personally. The government  is as  much bound  by the  agreement as  the borrower and, therefore, the government has first to proceed against the mortgaged property.      During the  course of argument reliance was placed upon Ram Narayan  Agarwal etc.  v. State  of U.P. & ors. [1983] 3 S.C.R. 684.  In that  case  the  petitioners  had  committed default in payment of the tax payable by them under the U.P. Sales Tax  Act, 1948.  The  amount  due  was  sought  to  be recovered as arrears of land revenue. The procedure for such a recovery  was provided  by ss.  279 and  281 of  the  U.P. Zamindari Abolition and Land Reforms Act, 1950 read with rr. 246, 247A,  247B and  251 of  the U.P.Z.A.  and L.R.  Rules, 1952. Clause  (b) of  sub s.  (1) of s. 279 of the U.P.Z.A.. and L.R.  Act contemlates  of recovery, of the amount due by resort to  arrest and detention of the person concerned. The procedure contained  in U.P.Z.A. and L.R.. Act and the rules made thereunder  was challenged  on the ground that they are violative of  Arts 14,  19(1) (g) and 21 of the Constitution but this contention was overruled and it was definitely held that the  impugned procedure  contained in  the U.P.Z.A. and L.R. Act and the rules made thereunder were not violative of Arts. 14,  19 (1)  (d) and  21 of the Constitution. The writ petitions were,  however, allowed  in the case on the ground that there  was non-compliance  with Rule  251 of  the Rules which obligates  an enquiry  to be  made by  the officer who issued the  warrant into  the question whether the detention of the  defaulter would  compel him  to pay  the arrear or a substantial portion  thereof and  admittedly no such enquiry was held in any of those cases and in these circumstances it was held that the petitioners could not be detained pursuant to any  warrants already issued. Such is not the position in this  case   and,  therefore.  that  case  is  not  of  much assistance. 710      For the  reasons given  above we  do not find any fault with the  judgment of  the learned Single Judge as confirmed by the  High Court in letters patent appeal. The appeal, is, therefore, dismissed.  There is,  however, no  order  as  to costs.

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S.R.                                       Appeal dismissed. 711