# Central Bank Of India Khatauli, Muzaffarnagar v. State of U.P. & Ors - **Citation:** (2026) 4 ILRA 1424 - **Court:** High Court of Judicature at Allahabad - **Decided:** 2026-04-07 - **Case number:** Writ C No. 23348 of 2008 - **Bench:** Ajit Kumar, Indrajeet Shukla - **Source:** https://unisonlegal.in/judgment/allahabad-high-court/central-bank-of-india-khatauli-muzaffarnagar-v-state-of-u-p-ors-54338 - **Pages:** 6 ## Text 1424 INDIAN LAW REPORTS ALLAHABAD SERIES cancellation as well as in the appeal filed by the petitioner, therefore, the order dated 4.6.2011, passed by the respondent No.2 as well as order dated 29.9.2011, passed by the respondent No.3 are arbitrary, perverse and not based on cogent reasons. 11. In the light of the reasons recorded hereinabove as also the fact that the petitioner has been acquitted in both the cases, the writ petition is allowed and the impugned orders dated 4.6.2016 and 23.9.2011 are hereby set aside. 12. No order as to costs. ---------- (2026) 4 ILRA 1424 ORIGINAL JURISDICTION CIVIL SIDE DATED: ALLAHABAD 07.04.2026 BEFORE THE HON'BLE AJIT KUMAR, J. THE HON'BLE INDRAJEET SHUKLA, J. Writ C No. 23348 of 2008 Central Bank Of India Khatauli, Muzaffarnagar ...Petitioner Versus State of U.P. & Ors. ...Respondents ISSUE FOR CONSIDERATION Whether the State authorities are legally entitled to levy collection charges upon the petitioner-Bank when no recovery was effected pursuant to the recovery certificate? HEADNOTES Civil Law - Constitution of India - Article 226, - Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 - Section 13(2), 13(4) : - Writ Petition under Article 226 - questioning the correctness of recovery citation and demand of 10% collection charges - petitioner Bank had lent loan to borrowers whose accounts turned NPA - statutory notices issued under Sections 13(2) and 13(4) of the SARFAESI Act - recovery proceedings initiated against borrowers - borrowers challenged before DRT - dismissed by tribunal with direction to resolve dispute amicably - meanwhile, district revenue authorities initiated recovery proceedings on request of Bank - subsequently, loan dues had already been liquidated by borrowers - petitioner Bank requested to State Authorities to return the recovery certificate, asserting no recovery was effected by State authorities - State relied on Board's order dated 14.08.2007 prohibiting direct acceptance of dues by Bank - petitioner argued order cannot operate retrospectively - whether collection charges can be levied without actual recovery - Court finds that no recovery was made, recovery certificate not returned, and demand of charges amounts to unjust enrichment contrary to law - held, impugned recovery certificate for collection charges without sanction of law would be against the fundamental principles of justice, equity and fair-play - hence, impugned recovery certificate is quashed and writ petition is allowed. (Para - 13, 15, 16, 17) WP Allowed. (E-11) CASE LAW CITED Maharajwa & Ors. v. State of U.P. & Ors., 2013 SCC OnLine All 14291 (Full Bench). 4 All. Central Bank of India Khatauli, Muzaffarnagar Vs. State of U.P. & Ors. 1425 Mafatlal Industries Ltd. & Ors. v. Union of India & Ors., (1997) 5 SCC 536. Indian Council for Enviro-Legal Action v. Union of India, (2011) 8 SCC 161. LIST OF ACTS Banking Companies (Acquisition and Transfer of Undertakings) Act, 1970. Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (SARFAESI Act). U.P. Zamindari Abolition & Land Reforms Act, 1952. LIST OF KEYWORDS Writ Petition - Certiorari - SARFAESI Act - Loan - Recovery Certificate - Collection Charges - Doctrine of Unjust Enrichment - Equity - fair-play - Banking Recovery - Tehsildar - Liquidation of Loan - amicably - impugned recovery certificate - without sanction of law - fundamental principles of justice - quashed - allowed. CASE ARISING FROM Recovery citation dated 18.03.2008 issued by Tehsildar, Tehsil Jansath (now Khatauli), District Muzaffarnagar. APPEARANCE OF PARTIES Counsel for Appellant(s): - Shri Krishna Raj Singh Jadaun. Counsel for Respondent(s): - Shri Chandra Prakash Yadav, C.S.C. (Delivered by Hon'ble Indrajeet Shukla, J.) Ref: Civil Misc. Delay Condonation Application No.02 of 2026 1. Cause shown for delay in filing the restoration application is sufficient. Delay in filing the restoration application is condoned. 2. The delay condonation application is accordingly allowed. Ref: Civil Misc. Restoration Application No.03 of 2026 1. Cause shown is sufficient. The Restoration Application is allowed. 2. The order dated 16.09.2025 is recalled. 3. The Writ Petition is restored to its original number and status. Ref: Writ Petition 1. Heard Shri Krishna Raj Singh Jadaun, learned counsel for the petitioner and Shri Chandra Prakash Yadav, learned Standing Counsel for the State respondents. 2. By means of instant writ petition, the petitioner has questioned the correctness of recovery citation dated 18.03.2008 issued by 4th respondent/Tehsildar, Tehsil Jansath now Khatauli, District Muzaffarnagar contained as Annexure No.10 to the writ petition. 1426 INDIAN LAW REPORTS ALLAHABAD SERIES 3. The factual matrix giving rise to instant writ petition is, the petitioner is Nationalized Bank registered under the Banking Companies (Acquisition and Transfer of Undertakings) Act, 1970. The petitioner-Bank lent a loan to M/s Deep Chand Sushil Kumar, Shri Sushil Kumar Jain, Neeraj Kumar Jain, Surendra Kumar Jain and Dhanendra Kumar Jain ((hereinafter referred to as "borrowers" for the sake of brevity) but their accounts turned Non-Performing Assets, as such statutory notice under Section 13(2) of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (hereinafter referred to as "SARFAESI Act" for the sake of brevity), was issued, which was followed by a notice for possession as envisaged under Section 13(4) of SARFAESI Act. 4. The recovery proceedings under SARFAESI Act were challenged by borrowers by means of a Securitisation Application No.33 of 2004 before the Debt Recovery Tribunal, Lucknow (herein after referred as "DRT"), and thereafter, a writ petition bearing Writ Petition No.2640 of 2004 was instituted before this Court at Lucknow. This Court directed the DRT, Lucknow to decide the interim relief application filed in Securitisation Application No.33 of 2004 but the DRT, Lucknow vide order dated 17.01.2005 dismissed the Securitisation Application No.33 of 2004 itself and directed the borrower and the bank to resolve their dispute amicably. They were in fact, directed to dispose of the immovable properties as detailed in the bank's notice under Section 13(2) & 13(4) of the SARFAESI Act dated 11.06.2003 and 26.08.2003 respectively, in all possible manner and strictly as per rules and regulations to get the reasonable fair price according to the present market rate at the earliest, so that claim of the respondent bank is satisfied properly. 5. The loan was liquidated by the borrower and this outstanding dues were satisfied, as such vide letter dated 17.03.2005 the petitioner-Bank requested the District Magistrate to return the recovery certificate so issued. 6. The letter dated 17.03.2005 issued by the bank was replied by the 4th respondent/Tehsildar concerned stating therein that return of recovery certificate is not feasible owing to recovery process set into motion through State machinery. Several reminders were also sent by the bank for return of recovery certificate but they remained of no avail. 7. Based on the report of Collection Amin, impugned recovery certificate dated 18.03.2008 was issued. The impugned recovery certificate is for realization of 10% demand raised by the bank, which is being termed as collection charges. 8. Submission advanced by learned counsel for the petitioner-bank is that the State authorities have not acted upon the recovery certificate issued against the original borrower and they have not effected the recovery as such and hence, they have no authority in law to ask for collection charges. Any demand of collection charges without effecting the recovery would be unlawful and arbitrary. The impugned recovery certificate asking for collection charges before any actual recovery had taken place at the end of State authorities, either through some coercive measure or through sale of property as stipulated under the rules framed under U.P.Z.A. & L.R. Act, 1952 is without authority of law. 4 All. Central Bank of India Khatauli, Muzaffarnagar Vs. State of U.P. & Ors. 1427 9. Learned counsel for the petitioner in order to assail the recovery certificate asking for collection charges from the petitioner-Bank has relied upon the Full Bench decision of this Court rendered in the case of Maharajwa and others Versus State of U.P. and others reported in 2013 SCC OnLine All 14291. The Hon'ble Full Bench was faced with following question of law:- "Whether decision in Mange Ram v. State of U.P. in so far as it takes the view that there is no provision under any of the Acts for levying any collection charges for mere issuance of citation or sale proclamation is correct; or, the decision in Chinta Mani v. State of U.P., holding that provisions of subjection (2) of section 279 do not contain any provision for an absolute waiver of recovery charges where the citation has been issued under sub-section (1) and the charging section empowers the Collector to raise such demand subject to the rules and provision of Revenue Recovery Act (U.P. Act No. 37 of 2001); is correct." 10. The Hon'ble Full Bench replied the question so posed vide paragraph no.37, which is reproduced as under:- "From the aforesaid decisions, it is absolutely clear that it has to be seen as to under what Act the recovery has been initiated. Whether it is under 1890 Act, 1950 Act or 1973 Act. If the recovery proceedings have been initiated under 1890 Act then in that event if the recovery is being made under section 3 of the Act then cost of recovery would be 10% of the amount stated in the certificate. However, if recovery certificate has been issued but no recovery had been made by the State authorities, who had issued the recovery certificate as for example the defaulter directly deposits the amount or the recovery certificate is withdrawn or cancelled for any reason whatsoever then in that event there is no question of charging any costs of recovery. At best the fee for the process mentioned in 1952 Rules can be levied. However, if the recovery certificate has been issued under section 5 of 1890 Act then there is no question of any cost of recovery being realised as the State Government has not yet issued any notification specifying any rate. If the recovery has been issued under 1973 Act then in that case realisation of recovery, charges by the State authorities can be made from the defaulter only where the entire amount had been recovered by the authorities of the State. If the recovery as arrears of land revenue is being made by invoking the provisions of 1950 Act then in that event the fee prescribed under 1952 Rules for various process for realisation of arrears of land revenue while selling moveable and immovable properties and also where properties are not sold alone is payable. It appears that this aspect of the matter was not brought to the notice of the Hon'ble Judges who decided the case of Chinta Mani (supra). We are, therefore, in respectful agreement with the view taken by this Court in the case of Mange Ram (supra) and hold that the decision in the case of Chinta Mani (supra) does not lay down the correct law. Before parting with the case, we may mention here that we have not gone into the question as to whether recovery charges of 10% fixed under section 3 of 1890 Act or the fee of 10% to be deposited by the bank while making an application under Rules 12 and 23 of 1975 Rules or the costs of recover @ 10% specified in 1975 Rules bears any correlation with the expenditure incurred by the State Government in recovering the dues as arrears of land revenue as there is no pleadings on this issue in the writ petition." 11. Countering the submissions advanced by counsel for the petitioner-Bank, learned Standing Counsel submits that after issuance of recovery certificate at the end of State authorities 1428 INDIAN LAW REPORTS ALLAHABAD SERIES the Bank cannot accept the defaulted outstanding amount from the borrower directly and it can only be accepted through State machinery. The deposition of defaulted outstanding amount directly to the bank was hit by the Board's order dated 14.08.2007 issued by the Commissioner and Secretary Board of U.P. Anubhag-II, Lucknow, which is contained as Annexure No.1 to the counter affidavit. 12. Responding to the submissions advanced by State counsel with respect to Board's Order dated 14.08.2007, it has been submitted by counsel for the petitioner that the Board's order dated 14.08.2007 cannot be permitted to operate retrospectively as the loan amount was liquidated way back in the year 2005 and a request for return of recovery certificate itself was made on 17.03.2005, which was deliberately been not responded to by State authorities and without deciding the request of bank for return of recovery certificate, levying any collection charge upon bank was clearly untenable. 13. Upon consideration of the rival submissions it comes out that the State authorities had not acted upon recovery certificate and in nutshell no recovery was made and at the same time the recovery certificate was not returned despite request made by the petitioner-Bank. Thus, if collection charges in the form of recovery certificate are allowed to be recovered, it would attract the doctrine of 'unjust enrichment', which is based on a maxim "Nemo Debet Locupletari Ex Aliena Jactura" (no person should be enriched at the expense of another). Even the State authorities cannot be permitted to derive benefit for which they are not legally entitled. No recovery as a tool of oppression is permissible. Permitting the State authorities to proceed for levy of collection charges would amount to taxing the Bank-petitioner and it is constitutional mandate that no tax shall be levied or collected except by authority of law. In given factual backdrop the State respondents utterly failed to demonstrate any provision of law for levying the collection charge as demanded by them by virtue of impugned recovery certificate. The doctrine of 'unjust enrichment' was subject matter of consideration of Hon'ble Supreme Court in the case of Mafatlal Industries Ltd and Ors vs. Union of India (UOI) and Ors. reported in (1997) 5 SCC 536 wherein 'unjust enrichment' has been deprecated. 14. The Apex Court in Indian Council for Enviro Legal Action versus Union of India reported in 2011 (8) SCC 161 has defined the "Unjust Enrichment", as under:- "UNJUST ENRICHMENT" 152. 'Unjust enrichment' has been defined by the court as the unjust retention of a benefit to the loss of another, or the retention of money or property of another against the fundamental principles of justice or equity and good conscience. A person is enriched if he has received a benefit, and he is unjustly enriched if retention of the benefit would be unjust. Unjust enrichment of a person occurs when he has and retains money or benefits which in justice and equity belong to another. 153. Unjust enrichment is "the unjust retention of a benefit to the loss of another, or the retention of money or property of another against the fundamental principles of justice or equity and good conscience." A defendant may be liable "even when the defendant retaining the benefit is 4 All. Asgari Began Vs. State of U.P. & Ors. 1429 not a wrongdoer" and "even though he may have received [it] honestly in the first instance." (Schock v. Nash, A.2d, 232-33). 159. Unjust enrichment is basic to the subject of restitution, and is indeed approached as a fundamental principle thereof. They are usually linked together, and restitution is frequently based upon the theory of unjust enrichment. However, although unjust enrichment is often referred to or regarded as a ground for restitution, it is perhaps more accurate to regard it as a prerequisite, for usually there can be no restitution without unjust enrichment. It is defined as the unjust retention of a benefit to the loss of another or the retention of money or property of another against the fundamental principles of justice or equity and good conscience. A person is enriched if he has received a benefit, and he is unjustly enriched if retention of the benefit would be unjust. Unjust enrichment of a person occurs when he has and retains money or benefits which in justice and equity belong to another." 15. The State respondents did not attempt for realization of amount of recovery with promptitude and once same has been liquidated between borrower and the bank, asking for collection charges through impugned recovery certificate would be licensing, realization of an amount (collection charges) without sanction of law and same would be against the fundamental principles of justice, equity and fair-play. 16. Thus, if recovery certificate is issued but no recovery had been made by the State authorities, who had issued the recovery certificate and the defaulter directly deposits the amount and the recovery certificate is asked for withdrawal, withdrawn or even cancelled then in that event there is no question of charging any cost of recovery, permitting State authorities to realize cost of recovery/collection charges is clearly impermissible by doctrine of 'unjust enrichment'. 17. In view of the above, writ petition succeeds and is allowed. The impugned recovery certificate dated 18.03.2008 is quashed. No order as to cost. ---------- (2026) 4 ILRA 1429 ORIGINAL JURISDICTION CIVIL SIDE DATED: LUCKNOW 06.04.2026 BEFORE THE HON'BLE IRSHAD ALI, J. Writ C No. 30949 of 2017 Asgari Began ...Petitioner Versus State of U.P. & Ors. ...Respondents ISSUE FOR CONSIDERATION Whether cancellation of petitioner's fair-price shop licence was valid when reply was ignored.