# Mohal Goel v. Pradeshiya Industrial and

- **Citation:** (2011) 1 ILRA 292
- **Court:** High Court of Judicature at Allahabad
- **Decided:** 2011-02-18
- **Source:** https://unisonlegal.in/judgment/allahabad-high-court/mohal-goel-v-pradeshiya-industrial-and-41876
- **Pages:** 12

## Headnote

Act
1972-Recover
certificate
against
guarantor
issued
on
26.03.02-while
company notified under Act 1993 on
34.01.04-moreover Recovery Certificate
has been issued against company-cannot
be held to be barred under the provision
of 1993 Act.

Held: Para 14 and 27

Thus when the recovery proceedings
have been initiated prior to notification
of PICUP, the said proceedings could be
continued even after the 1993 Act and
the said proceedings cannot be held to
be barred under the provisions of the
1993 Act.

In
view
of
the
above
discussions,
following the judgment of the Apex
Court in Kailash Nath Agarwal's case
(supra), it is clear that the recovery
against the guarantor is not prohibited
by Section 22(1) of the 1985 although
recovery against the industry concerned
is prohibited by virtue of Section 22(1) of
the 1985 Act. From a perusal of the
recovery certificate (Annexure-3 to the
writ petition), it is clear that recovery
certificate has not been issued against
petitioner
No.1,
rather
recovery
certificate has been issued against the
guarantors, who have given personal
guarantee, which fact is mentioned in
paragraph 5 of the recovery certificate.
Case law discussed:
A.I.R 2003 S.C. 2103; A.I.R. 2005 (Alld.) 320;
JT 2006(1) SC 380; (2004) 6 S.C.C. 758; (M/s
Rafat Paper Mills Pvt. Limited and others vs.
The
Pradeshiya
Industrial
&
Investment
Corporation of U.P. Limited and others)
decided on 22nd April, 2009; (2003)4 S.C.C.
1 All] M/S Nutech Pakcaging Limited And Another V. State of U.P. And Others
293
159; Writ Petition No.28924 of 2005 (Man
Mohal Goel vs. Pradeshiya Industrial and
Investment Corporation of U.P. Ltd.) decided
on 13th April, 2005 ; 1992 (3) S.C.C. 159;
2009(9) SCC 478; Writ Petition No.15796 of
2010 (J.C. Deewan and others vs. State of
U.P.) decided on 26th May, 2010.; S.L.P.(C)
No. 14065 OF 2006 (Sobran Singh vs. State of
U.P. and others); S.L.P. (C) No.9692 of 2005
(R.K. Dewan (Dead) by Lrs & others vs. State
of U.P. and others).

## Text

292 INDIAN LAW REPORTS ALLAHABAD SERIES [2011

"53-B. Limitation. - The provisions of
Section 5 of the Limitation Act, 1963, shall
apply to the applications, appeals, revisions
and other proceedings under this Act or the
rules made thereunder."

6. It is therefore obvious that the
provisions of Section 5 of Limitation Act
with all its necessary accessories can be
invoked
in
proceedings
before
the
Consolidation Authorities provided there is
a plausible and valid explanation attributed
for having arrived at a delayed point of
time. The affidavit which has been filed by
the petitioners in support of the delay
condonation
application
is
absolutely
casual, cryptic and without any details. The
Deputy Director of Consolidation has
therefore rightly recorded a finding that in
the absence of any plausible explanation or
any cogent reason having been offered in
not having arrived before the Court in time,
there was no occasion to condone the delay.

7. There is no reason to take a liberal
view in the matter keeping in view the fact
that the appeal was filed after 13 years.

8. I do not find any merit in the
submissions raised. The writ petition is
accordingly dismissed.
---------
ORIGINAL JURISDICTION
CIVIL SIDE
DATED: ALLAHABAD 18.02.2011

BEFORE
THE HON'BLE ASHOK BHUSHAN,J.
THE HON'BLE SHYAM SHANKAR TIWARI,J.

Civil Misc. Writ Petition No. - 1952 of 2011

M/S Nutech Pakcaging Limited And
Another

 ...Petitioner
Versus
State Of U.P. And Others ...Respondents

Counsel for the Petitioner:
Sri S.M.G. Asghar
Sri V.M. Zaidi

Counsel for the Respondents:
Sri Nripendra Mishra
Sri Anurag Khanna
C.S.C.

U.P. Public Money (Recovery of Does)
Act
1972-Recover
certificate
against
guarantor
issued
on
26.03.02-while
company notified under Act 1993 on
34.01.04-moreover Recovery Certificate
has been issued against company-cannot
be held to be barred under the provision
of 1993 Act.

Held: Para 14 and 27

Thus when the recovery proceedings
have been initiated prior to notification
of PICUP, the said proceedings could be
continued even after the 1993 Act and
the said proceedings cannot be held to
be barred under the provisions of the
1993 Act.

In
view
of
the
above
discussions,
following the judgment of the Apex
Court in Kailash Nath Agarwal's case
(supra), it is clear that the recovery
against the guarantor is not prohibited
by Section 22(1) of the 1985 although
recovery against the industry concerned
is prohibited by virtue of Section 22(1) of
the 1985 Act. From a perusal of the
recovery certificate (Annexure-3 to the
writ petition), it is clear that recovery
certificate has not been issued against
petitioner
No.1,
rather
recovery
certificate has been issued against the
guarantors, who have given personal
guarantee, which fact is mentioned in
paragraph 5 of the recovery certificate.
Case law discussed:
A.I.R 2003 S.C. 2103; A.I.R. 2005 (Alld.) 320;
JT 2006(1) SC 380; (2004) 6 S.C.C. 758; (M/s
Rafat Paper Mills Pvt. Limited and others vs.
The
Pradeshiya
Industrial
&
Investment
Corporation of U.P. Limited and others)
decided on 22nd April, 2009; (2003)4 S.C.C.
1 All] M/S Nutech Pakcaging Limited And Another V. State of U.P. And Others
293
159; Writ Petition No.28924 of 2005 (Man
Mohal Goel vs. Pradeshiya Industrial and
Investment Corporation of U.P. Ltd.) decided
on 13th April, 2005 ; 1992 (3) S.C.C. 159;
2009(9) SCC 478; Writ Petition No.15796 of
2010 (J.C. Deewan and others vs. State of
U.P.) decided on 26th May, 2010.; S.L.P.(C)
No. 14065 OF 2006 (Sobran Singh vs. State of
U.P. and others); S.L.P. (C) No.9692 of 2005
(R.K. Dewan (Dead) by Lrs & others vs. State
of U.P. and others).

(Delivered by Hon'ble Ashok Bhushan, J.)

1. Heard Sri V.M. Zaidi, learned
Senior Advocate, assisted by Sri S.M.G.
Asghar, for the petitioners, Sri Anurag
Khanna appearing for respondent No.4
and learned Standing Counsel for the
State-respondents.

2. These two writ petitions, raising
common question of facts and law, have
been heard together and are being decided
by this common judgment.

3. The Writ Petition No.1952 of
2011 is treated as leading writ petition
and for deciding the issues raised, it is
sufficient to refer to the pleadings in the
leading writ petition.

4. By this writ petition, the petitioners
have prayed for quashing the recovery
certificate dated 26nd March, 2002/22nd
July, 2010 sent by respondent No.4 to the
Collector, Ghaziabad for recovery of an
amount of Rs.5,43,57,761.68. A writ of
mandamus
has
also
been
sought
commanding the respondents not to make
recovery of the amount in dispute from the
petitioners and its guarantors by adopting
coercive method.

5. Counter and rejoinder affidavits
have been exchanged between the parties
and by consent of the learned counsel for
the parties, both the writ petitions are
being finally decided.

6. Brief facts, which emerge from
pleadings of the parties, are; petitioner
No.1 is a registered company, which
established its factory for manufacture of
goods at district Ghaziabad. The company
took loan from the respondent No.4
(Pickup,
the
Pradeshiya
Industrial
Investment Corporation Limited, U.P.)
and other financial institutions. The
company had approached the respondent
No.4 for grant of term loan of Rs.4 crores
for manufacture of flexible laminated
packaging and co-excluded multilayer
films in two phases. The loan of
Rs.2,32,00,000/-
was
disbursed. The
petitioner No.1 submitted an application
before the Board for Industrial and
Financial
Reconstruction
(hereinafter
referred to as the B.I.F.R) under Section
15 of the Sick Industrial Companies
(Special
Provisions)
Act,
1985
(hereinafter referred to as the 1985 Act).
The reference was received in the Board
on 6th December, 2001. The recovery
certificate dated 26th March, 2002 was
sent by the respondent No.4 to the
Collector, Ghaziabad for recovery of an
amount of Rs.5,43,57,761.68 from the
guarantors of the loan, namely, Manish
Goel (petitioner No.2), Piyush Goel son
of S.C. Goel, Ritu Goel wife of Manish
Goel, S.C. Goel son of late Raman Lal
Goel and Vijay Goel wife of S.C. Goel.
The petitioners' company was declared as
sick unit under the 1985 Act. The I.D.B.I.
was appointed as operating agency by
order
dated
25th
August,
2005.
Petitioners' case is that the proceedings
before the B.I.F.R. are still pending.

7.

The
Collector
vide
his
endorsement dated 22nd July, 2010
294 INDIAN LAW REPORTS ALLAHABAD SERIES [2011
forwarded the recovery certificate to
Tahsildar, Ghaziabad for recovering the
same as arrears of land revenue. The writ
petition has been filed challenging the
recovery certificate dated 26th March,
2002/22nd July, 2010.

8.

Learned
counsel
for
the
petitioners, in support of the writ petition,
made following submissions:-

(i) The recovery certificate issued for
recovery under the provisions U.P. Public
Moneys (Recovery of Dues) Act, 1972
(hereinafter referred to as the 1972 Act) is
without
jurisdiction
since
after
the
enforcement of the Recovery of Debts due
to Banks and Financial Institutions Act,
1993 (hereinafter referred to as the 1993
Act), the recovery of dues of a financial
institution
can
be
made
only
in
accordance with the 1993 Act as Section
18 of the 1993 Act bars any other
proceeding for recovery.

(ii) The petitioners' company having
been declared as sick unit under the 1985
Act, recovery proceedings under the 1972
Act are barred by virtue of Section 34 of
the 1985 Act. The respondents being
participating in the proceedings before the
B.I.F.R.
where
the
preparation
of
rehabilitation scheme is under process, the
respondent No.4 has no jurisdiction to
resort to recovery proceedings under the
1972 Act.

(iii) The proceedings before the
B.I.F.R. being pending, the recovery both
against petitioner No.1, i.e., the company,
as well as guarantors of the loan is barred.

Learned counsel for the petitioners
has placed reliance on the judgment of the
Apex Court in the case of M/s. Unique
Butyle Tube Industries Pvt. Ltd. vs. U.P.
Financial
Corporation
and
others
reported in A.I.R. 2003 S.C. 2103, Full
Bench judgment of this Court in the case
of Suresh Chandra Gupta and another
vs. The Collector, Kanpur Nagar and
others reported in A.I.R. 2005 (Alld) 320
and judgments of the Apex Court in the
cases of Iqbal Naseer Usmani vs. Central
Bank of India and others reported in JT
2006(1) SC 380 and M/s. A.P.T. Ispat
Pvt. Ltd. vs. U.P. Small Industrial
Corporation Ltd. and another reported in
A.I.R. 2010 S.C. 2095.

9. Sri Anurag Khanna, learned
counsel appearing for respondent No.4,
refuting the submissions of learned
counsel for the petitioners, contends that
the recovery proceedings under the 1972
Act are not barred in view of the fact that
recovery proceedings were initiated in the
year 2002 whereas the respondent No.4
was notified under the 1993 Act on 24th
January, 2004 only. It is submitted that in
view of the law laid down by the Apex
Court in the case of Pawan Kumar Jain
vs. Pradeshiya Industrial and Investment
Corporation of U.P. Limited and others
reported in (2004)6 S.C.C. 758 the
recovery proceedings, which have been
initiated under the 1972 Act before the
date of notification of respondent No.4
under the 1993 Act can continue and are
not barred by the 1993 Act. Reliance has
been placed by learned counsel for the
respondent No.4 on the Division Bench
judgment of this Court in 18435 of 2009
(M/s Rafat Paper Mills Pvt. Limited and
others vs. The Pradeshiya Industrial &
Investment Corporation of U.P. Limited
and others) decided on 22nd April, 2009.
Sri Khanna further submits that petitioner
No.2 and other guarantors are bound by
there bond of guarantee in which it was
1 All] M/S Nutech Pakcaging Limited And Another V. State of U.P. And Others
295
clearly undertaken by the guarantors that
any amount due from them to the
Corporation shall be recoverable under
the 1972 Act as arrears of land revenue
and further it shall not be necessary for
the
Corporation
to
sue
the
Company/Borrower
before
suing
guarantors for the amount due. Sri
Khanna submits that in view of the
pendency of proceedings before the
B.I.F.R., the recovery against the industry
concerned, i.e., petitioner No.1 is barred
by Section 34 of the 1993 Act but the said
bar
is
not
applicable
against
the
guarantors and the respondent No.4 can
proceed to recover the amount from the
guarantors in view of the law laid down
by the Apex Court in the case of Kailash
Nath Agarwal and others vs. Pradeshiya
Industrial and Investment Corporation
of U.P. Ltd. and another reported in
(2003)4 S.C.C. 305. Learned counsel for
the respondent No.4 has further placed
reliance on a Division Bench judgment of
this Court in Writ Petition No.28924 of
2005 (Man Mohal Goel vs. Pradeshiya
Industrial and Investment Corporation
of U.P. Ltd.) decided on 13th April, 2005
and further on the judgment of the Apex
Court in the cases of S.B.I. vs. Ind.
Export (regd). reported in 1992(3) S.C.C.
159 and Industrial Investment Bank of
India
Limited
vs.
Vishwanath
Jhunjhunwala reported in 2009(9) SCC
478. Reliance has also been placed on the
Division Bench judgment in Writ Petition
No.15796 of 2010 (J.C. Deewan and
others vs. State of U.P.) decided on 26th
May, 2010.

10. Learned Standing Counsel
appearing for the State-respondents, has
adopted the submissions made by Sri
Anurag Khanna and submitted that the
recovery under the 1972 Act is not barred
and there is no illegality in the recovery
proceedings against the guarantors.

11. We have considered the
submissions of learned counsel for the
parties and have perused the record.

The
first
issue,
which
needs
consideration, is as to whether the
recovery proceedings under the 1972 Act
can be resorted to in view of the
provisions of 1993 Act. The judgment of
the Apex Court relied by the learned
counsel for the petitioners in M/s. Unique
Butyle's case (supra) had occasion to
consider the provisions of the 1993 Act in
context of the provisions of the State
Financial Corporation Act, 1951 and U.P.
Public Moneys (Recovery of Dues) Act,
1972. Section 34 of the 1993 Act was
interpreted by the Apex Court and it was
laid down that jurisdiction of the Tribunal
in regard to adjudication of dues of
financial institution is exclusive and the
1972 Act does not find place in SubSection (2) of Section 34 of the 1993 Act,
hence proceedings under the 1972 Act
cannot be resorted to in view of the
provisions of the 1993 Act. Following
was laid down by the Apex Court in
paragraph 9 of the judgment in M/s.
Unique Butyle's case (supra):-

"9. Section 34 of the Act consists of
two parts. Sub- section (1) deals with the
over-riding
effect
of
the
Act
notwithstanding
anything
inconsistent
therewith contained in any other law for
the time being in force or in any
instrument having effect by virtue of any
law other than the Act. Sub-section (1)
itself makes an exception as regards
matters covered by sub-section (2). The
U.P. Act is not mentioned therein. The
mode of recovery of debt under the U.P.
296 INDIAN LAW REPORTS ALLAHABAD SERIES [2011
Act is not saved under the said provision
i.e. sub- section (2) which is of
considerable importance so far as the
present case is concerned. Even a bare
reading therein makes it clear that it is
intended to be in addition to and not in
derogation of certain statutes; one of
which is the Financial Act. In other
words, a Bank or Financial institution has
the option or choice to proceed either
under the Act or under the modes of
recovery permissible under the Financial
Act. To that extent, the High Court's
conclusions quoted above were correct.
Where the High Court went wrong is by
holding that proceedings under the U.P.
Act were permissible. U.P. Act deals with
separate modes of recovery and such
proceedings
are
not
relatable
to
proceedings under the Financial Act."

12. The same view was taken by the
Apex Court in M/s A.P.T. Ispat's case
(supra) relied by the learned counsel for
the petitioners. In the said case challenge
was made to the recovery proceedings
initiated under the 1972 Act for payment
of goods which was received by the
A.P.T. Private Limited. Payment of goods
having not been made, the Corporation
issued recovery certificate. The High
Court dismissed the writ petition. The
judgment
of
the
High
Court
was
overruled. The Apex Court took the view
that there was no financial assistance
given by the Corporation in the facts of
the aforesaid case. The dues do not relate
to any financial assistance hence could
not be recovered and further in view of
the judgment of the Apex Court in
Unique Butyle's case (supra) after the
1993 Act recourse cannot be taken to the
1972 Act. Following was laid down by
the Apex Court in paragraphs 15 and 18
of the said judgment:-

"15. In the present case it is evident
that the dues of which recovery is sought
by the impugned certificates do not
pertain to any loan, advance or grant
given to the appellant or to any credit
concerning any hire purchase of goods
sold to the appellant by the Corporation
under any agreement, express or implied.
The dues do not relate to any financial
assistance.

18. There is another point and
though it was not raised before the High
Court, we think proper to mention it since
it is crucial to the proceeding under
section 3 of the U.P. Public Moneys
(Recovery of Dues) Act, 1972. In a
decision by this court in Unique Butyle
Tube Industries (P) Ltd. vs. U.P.
Financial
Corporation
and
Others,
(2003) 2 SCC 455, it was held that after
the coming into force of the Recovery of
Debts Due to Banks and Financial
Institutions Act, 1993, recourse cannot be
taken for recovery of dues to the
provisions
of
U.P.
Public
Moneys
(Recovery of Dues) Act, 1972 because the
U.P. Act does not find mention in section
34(2) of the Recovery of Debts Due to
Banks and Financial Institutions Act,
1993."

13. Thus there cannot be any dispute
to the proposition that in view of the
provisions of the 1993 Act for recovery
the provisions of the 1972 Act cannot be
resorted to, but the distinguishing feature
in the present case is the fact that in the
present case the recovery proceedings
were initiated by sending the recovery
certificate by respondent No.4 dated 26th
March, 2002 whereas respondent No.4
was notified under the 1993 Act on 24th
January, 2004. Thus when the recovery
proceedings under the 1972 Act were
1 All] M/S Nutech Pakcaging Limited And Another V. State of U.P. And Others
297
initiated the respondent No.4 was not
notified under the 1993 Act and the 1993
Act was not applicable. The similar issue
came for consideration in Pawan Kumar
Jain's case (supra) in which case also the
financial assistance was extended by the
respondent
No.4.
The
recovery
proceedings under the 1972 Act were
challenged by means of the writ petition.
The writ petition was dismissed by the
order dated 1.9.1997. The writ petitioner
filed special leave petition in the Apex
Court in which relying on the judgment of
the Apex Court in Unique Butyle's case
(supra) it was submitted that after the
1993 Act the recovery proceedings cannot
be initiated by PICUP under the 1972 Act.
The said submission was considered and
was rejected by the Apex Court laying
down following in paragraphs 3 and 4 of
the said judgment:-

"3. Mr. Mohta submitted that the
Central
Government
has
issued
a
Notification specifying 1st RespondentCorporation as a Financial Institution
within the meaning of the term as defined
in Section 2(h) of the Recovery of Debts
Due to Banks and Financial Institutions
Act, 1993 (hereinafter referred to as the
"Debt Recovery Act"). He submitted that
such an Institution can only proceed in
the manner laid down in the Debt
Recovery Act. He submitted that it is not
open to give a go-by to the provision of
the Debt Recovery Act and use the
machinery under the U.P. Public Moneys
(Recovery of Dues) Act, 1972 (hereinafter
called the "U.P. Act"). For this reason the
Notice is bad and requires to be quashed.
In support of his submission, he relied
upon the case in Unique Butyle Tube
Industries (P) Ltd. Vs. U. P. Financial
Corporation & Ors. [(2003) 2 SCC 455].
In this case, it has been held that a
Financial Institution within the meaning
of that term in the Debt Recovery Act
cannot proceed under the U. P. Act.

4. This authority would have been
binding upon us. However, in reply Mr.
Bhalla pointed out that in respect of the
1st
Respondent-
Institution
the
Notification by the Central Government
has only been issued on 24.01.2004,
whereas the Recovery Certificate is of a
much earlier date. He submitted that,
therefore, in this case the proceedings
under the U. P. Act are not barred. He
pointed out that under Section 31 of the
Debt Recovery Act, it is only suit or
proceeding pending before any Court,
which stand transferred to the Tribunal
established under that Act. In our view,
Mr. Bhalla is right. As the action was
initiated prior to the Notification being
issued by the Central Government, the
action would not be barred and would not
stand transferred to the Tribunal."

14. Thus when the recovery
proceedings have been initiated prior to
notification
of
PICUP,
the
said
proceedings could be continued even after
the 1993 Act and the said proceedings
cannot be held to be barred under the
provisions of the 1993 Act.

15. Sri Zaidi has further submitted
that, in fact, the recovery certificate,
which was issued on 26th March, 2002,
was not proceeded with on account of the
objection raised by the petitioners that the
matter is pending before the B.I.F.R. and
the endorsement of the Collector on the
recovery certificate on 22nd July, 2010 is
initiation of fresh recovery proceedings,
which is not permissible.
298 INDIAN LAW REPORTS ALLAHABAD SERIES [2011

16. Copy of the recovery certificate
has been filed as Annexure-3 to the writ
petition which indicates that on the same
recovery certificate, which was issued on
26nd March, 2002, the Collector has made
endorsement. The Collector has initially
made endorsement on 22nd March, 2002
to the Tahsildar, Ghaziabad for recovery as
arrears of land revenue and again
endorsement was made on 22nd July, 2010
to the Tahsildar, Ghaziabad for recovery as
arrears of land revenue. The recovery
certificate dated 26th March, 2002 was not
satisfied and the certificate remained
pending and it has been only again directed
to be implemented on 22nd July, 2010.
The endorsement of the Collector dated
22nd March, 2010 cannot be said to be
initiation of fresh recovery proceedings
since recovery certificate is the same
(dated 26th March, 2002) which was sent
for recovery of Rs.5,43,57,761.68. Thus
the endorsement of the District Magistrate
on 22nd July, 2010 cannot be said to be
initiation of fresh recovery proceedings
and the recovery proceedings have to be
treated to have been initiated by recovery
certificate dated 26th March, 2002 itself
when
the
Collector
made
earlier
endorsement on 22nd March, 2002 to the
Tahsildar, Ghaziabad. Thus from the above
discussion, it is clear that although for a
financial institution, which is covered
under the 1993 Act no fresh recovery
proceedings can be initiated under the
1972 Act after applicability of the 1993
Act, but recovery proceedings initiated
before applicability of the 1993 Act by a
financial institution can continue and shall
not be barred in view of the clear
pronouncement of the Apex Court in
Pawan Kumar Jain's case (supra).

17. The Full Bench of this Court in
Suresh Chandra Gupta's case (supra)
had occasion to consider the provisions of
the 1972 Act, the 1993 Act and the State
Financial
Corporation
Act,
1951.
Considering Section 32-G of the State
Financial Corporation , 1951 and the
provisions of the 1972 Act, the Full
Bench opined that there is no conflict
between the recovery under Section 32-G
of the 1951 and the 1972 Act. The Full
Bench, however, after considering the
provisions of the 1993 Act came to the
conclusion that recovery proceedings can
neither be initiated against the principal
borrower nor against the guarantors under
the 1972 Act and it can be initiated only
under the 1993 Act. Following was laid
down by the Full Bench in paragraph 19
of the said judgment:-

"19. In the Unique Butyle case, the
recovery was against the principal
borrower. While deciding point-IV, we
have held that recovery against the
guarantor can be initiated under the 1993
Act. Same reasoning as applicable to the
principal borrower will apply to a
recovery against the guarantor. In view of
the
UniqueButyle
case,
recovery
proceedings can neither be initiated
against the principal borrower nor
against the guarantor under the 1972 Act
if the debt is more than 10 lakhs: recovery
proceedings can only be initiated under
the 1993 Act."

18. One of the questions, which was
also framed for consideration before the
Full Bench of this Court in Suresh
Chandra Gupta's case (supra) was as to
whether the Corporation was bound to
exhaust its remedy under the 1951 Act
before initiating recovery proceedings
against the sureties/guarantors. The said
question was not decided.
1 All] M/S Nutech Pakcaging Limited And Another V. State of U.P. And Others
299

19. In the case before the Full Bench
the loan was granted on 18th October,
1996. The Corporation issued notice on
23rd November, 2000 for recovery and
possession was taken by the Corporation
of the premises on 2nd March, 2001. The
proceedings were initiated under the 1972
Act by issuing citation on 25th January,
2002, which was challenged. The Central
Government
had
notified
the
State
Financial Corporation by notification
dated 28th March, 1995. Thus when the
loan was sanctioned and proceedings
were initiated by the State Financial
Corporation for recovery under the 1972
Act, the Corporation had already been
notified and in view of the judgment of
the Apex Court in Unique Butyle's case
(supra), the proceedings under the 1972
Act were barred. The distinguishing fact
of the present case with the case of
Suresh Chandra Gupta is the fact that in
the present case the recovery proceedings
were initiated in the year 2002, i.e. before
the respondent No.4 was notified under
the 1993 Act. There cannot be any dispute
to the proposition as laid down by the Full
Bench in Suresh Chandra Gupta's case
(supra), however, the said case is
distinguishable in view of the fact that
respondent No.4 was not notified under
the
1993
Act
when
the
recovery
proceedings were initiated under the 1972
Act and the ratio of the judgment in
Pawan Kumar Jain's case (supra) is fully
attracted in facts of the present case.

20. The second and third submission
of the learned counsel for the petitioners
is based on the provisions of the 1985
Act. There is no dispute that petitioner
No.1 has been declared as sick unit under
the 1985 Act. Under Section 22 of the
1985 Act, no proceedings for the winding
up of the industrial company or for
execution, distress or the like against any
of the properties of the industrial
company or for the appointment of a
receiver in respect thereof and no suit for
the recovery of money or for the
enforcement of any security against the
industrial company or of any guarantee in
respect of any loans or advance granted to
the industrial company shall lie. Section
22(1) of the 1985 Act is quoted below:-

"22.
Suspension
of
legal
proceedings, contracts, etc. (1) Where in
respect of an industrial company, an
inquiry under section 16 is pending or
any scheme referred to under section 17
is under preparation or consideration or
a
sanctioned
scheme
is
under
implementation or where an appeal under
section 25 relating to an industrial
company
is
pending,
then,
notwithstanding anything contained in the
Companies Act, 1956 (1 of 1956) or any
other law or the memorandum and
articles of association of the industrial
company or any other instrument having
effect under the said Act or other law, no
proceedings for the winding up of the
industrial company or for execution,
distress or the like against any of the
properties of the industrial company or
for the appointment of a receiver in
respect thereof and no suit for the
recovery of money or for the enforcement
of any security against the industrial
company or of any guarantee in respect of
any loans or advance granted to the
industrial company shall lie or be
proceeded with further, except with the
consent of the Board or, as the case may
be, the Appellate Authority."

21. The provisions of Section 22 of
the 1985 Act qua the provisions of the
1972 Act were considered by the Apex
300 INDIAN LAW REPORTS ALLAHABAD SERIES [2011
Court in Kailash Nath Agarwal's case
(supra). The Apex Court in the said
judgment took the view that Section 22(1)
of the 1985 Act prohibits recovery against
the industrial company but there is no
protection afforded to the guarantors
against recovery proceedings under the
U.P. Act. Following was laid down in
paragraph 35 of the said judgment:-

"35. Finally, the phrase introduced
by the 1994 amendment relates to the predecretal
stage
because
recovery
proceedings by way of execution is
already covered under the first half of
sub-section (1) of Section 22. If the
procedure under the U.P. Act is covered
under the word 'proceeding' in the first
limb of Section 22(1) of SICA, which it is
according to Maharashtra Tubes, it is not
a 'suit' for recovery under the second limb
of that Section. As rightly contended by
learned counsel appearing for PICUP,
the proceedings under the U.P. Act are
really recovery proceedings within the
meaning of the word 'proceeding' as
defined in Maharashtra Tubes. Since
Section 22(1) only prohibits recovery
against the industrial company, there is
no protection afforded to guarantors
against recovery proceedings under the
U.P. Act."

22. The Division Bench judgment
relied
by
learned
counsel
for
the
respondents in M/s. Rafat Paper Mills'
case (supra) of which one of us (Justice
Ashok Bhushan) was a member, is fully
applicable in the facts of the present case.
In the said case recovery citation was
issued in the year 1998 which was
challenged in the writ petition and due to
interim order the recovery could not be
proceeded with. Subsequently the said
recovery proceedings were reactivated in
the year 2009 which were challenged on
the ground that after the 1993 Act the
recovery proceedings cannot be initiated
under
the
1972
Act.
The
same
submissions were pressed before the
Division
Bench
which
have
been
submitted in the present case. The
Division
Bench
dismissed
the
writ
petition holding the recovery permissible
under the 1972 Act since it was initiated
prior to notification of PICUP under the
1993 Act. The ratio of Pawan Kumar
Jain's
case
(supra)
was
followed.
Following was laid down by the Division
Bench in the said judgment:-

"From the above pronouncement, it
is clear that what has been laid down is
that if the action was initiated prior to the
notification dated 24.1.2004, the action
could not be barred and could not be
transferred to the Tribunal. In the present
case the action was initiated in the year
2000, which could not be proceeded with
against the guarantors due to interim
order of the High Court and respondent
No.1 has requested the respondent to
proceed with the recovery and further
informs that the amount which was earlier
mentioned in the certificate has increased
upto amount of Rs.13 crores and odd, as
such action initiated by the letter dated
5.3.2009 cannot be said to be initiation of
any fresh action. The increase of the
amount was consequence of passage of
time which cannot change the nature of
the action which remains same and by
virtue of para 4 of the judgment, such
action cannot be said to be barred. The
judgment of P.K. Jain (supra) fully
support the contention of learned counsel
for the respondents and the submission of
petitioners that action is barred cannot be
accepted....."
1 All] M/S Nutech Pakcaging Limited And Another V. State of U.P. And Others
301

23. The Division Bench judgment in
J.C. Dewan's case (supra) also fully
supports the submission of the learned
counsel for the respondents. The Division
Bench followed Kailash Nath Agarwal's
case and held that recovery against the
guarantors is not prohibited. Following
was laid down by the Division Bench in
the said judgment:-

"Submission is that the liability of the
guarantor and the borrower being coextensive, complaint by petitioners is
totally misconceived.

Lastly, it is submitted that in respect
to the recovery citation, issued against
similar class of petitioners of a private
limited company by interpreting the
personal guarantee deed about which,
there is no dispute, a Bench of this Court
by placing reliance on various decision
given by the Apex Court dismissed the
writ petition. Reference has been placed
on the decision given by this Court in the
case of Om Hari Agarwal Vs. State of
U.P. Reported in 2006(7) ADJ 390(DB).

On perusal of the judgment given by
this Court in the case of Om Hari
Agarwal (supra), it is clear that this was
the specific argument from the side of
respondents that in view of execution of
guarantee deed between the petitioners
and the Corporation, it was open for the
respondents to recover the amount as
arrears of land revenue against the
guarantors of the loan.

In fact, petitioners agreed and gave
an undertaking in respect to the payment
of loan amount and thus the guarantee
given by the petitioners will have to be
accepted
to
be
enforceable,
notwithstanding that any action has been
taken by the Corporation against the
Company/borrower or not.

In view of guarantee deed so
executed, the title deed of the immovable
property of the petitioners so agreed to be
proceeded may not be in a position of
being objected as and when, now it is
being proceeded.

In respect to the aspect that
guarantors do not have any protection so
far as proceeding of BIFR is concerned,
reference was given to the decision given
by the Apex Court in the case of Kailash
Nath Agrawal reported in 2003(4) SCC
305."

24. One more aspect of the case
need to be noticed. In Pawan Kumar
Jain's case (supra), the Apex Court
observed that action against guarantors
cannot be taken until the property of the
principle
debtor
is
first
sold
off.
Following was laid down in paragraph 8
of the judgment:-

"8. In our view, the above-set-out
provisions of the U.P. Act are very clear.
Action against the guarantor cannot be
taken until the property of the principal
debtor is first sold off. As the appellant
has not sold the property of the principal
debtor, the action against the appellant
cannot be sustained. We, therefore, set
aside the recovery notice."

25. It is relevant to note that in
Kailash Nath Agarwal's case (supra),
which is a judgment of coordinate Bench
of two Hon'ble Judges of the Apex Court,
this very issue as to whether in view of
the provisions of Section 22 of the 1985
Act recovery proceedings under the 1972
Act can be proceeded against the
302 INDIAN LAW REPORTS ALLAHABAD SERIES [2011
guarantor was examined and decided. In
paragraph 35 of the judgment in Kailash
Nath Agarwal's case (supra), as quoted
above, it was held that Section 22(1) of
the 1985 Act prohibits recovery only
against the industrial company and there
is no protection afforded to the guarantors
against the recovery proceeding. The
judgment in Kailash Nath Agarwal's case
(supra) was delivered on 14th February,
2003 whereas the judgment in Pawan
Kumar
Jain's
case
(supra)
was
subsequent in point of time delivered on
11th August, 2004, but has not noticed the
judgment of Kailash Nath Agarwal's case
(supra). It is further to be noticed that two
Benches of the Apex Court consisting of
two Hon'ble Judges have expressed doubt
over the above proposition laid down in
Pawan Kumar Jain's case and have
referred it for consideration by a larger
Bench. The correctness of the decision of
the Pawan Kumar Jain's case has been
doubted by two Judge Bench in S.L.P. (C)
No.14065 of 2006 (Sobran Singh vs.
State of U.P. and others) where following
observations were made:-

"This Court in Pawan Kumar Jain
(spra) did not consider the effect of
Section 3(1)(D) of the Act. Under the
general law, namely, Section 128 of the
Indian Contract Act, the liability of a
borrower and that of the guarantor is coextensive. In our opinion if the State had
intended to make any provision contrary
or inconsistent with the said general
provision it should have specifically been
so stated in the Act. Furthermore, Section
4(2)(b) is an exception to Section 3
thereof. General power of recovery of
dues as arrears of land revenues is
provided for in Section 3. Section 4(2)(b),
however, in our opinion speaks of a
situation where the defaulter's immovable
property is mortgaged, charged or
otherwise encumbered and only in that
event the same is required to be sold first
and only in the event the entire amount is
not
recovered
thereby
any
other
proceeding may be initiated thereafter
subject to the conditions laid down
therein. We may, however, note that
Section 4(2)(b) of the Act covers the case
of a defaulter and not that of a guarantor.
Even otherwise, ordinarily the property of
a guarantor would not be subjected to any
mortgage,
charge,
pledge
or
other
encumbrance. Section 4(2)(b) of the Act,
therefore, being an exception to the
general provision, namely, Section 3
thereof, we are of the opinion that it may
not be correct to hold that a guarantor is
also covered by the said provision.

For the reasons aforementioned, we
are of the opinion that the ratio in Pawan
Kumar Jain (supra) case may ultimately
be found not to be correct. As we doubt
the correctness of the said decision, we
are of the opinion that the matter should
be referred to a larger Bench. We direct
accordingly."

26. Subsequently another two Judge
Bench in S.L.P. (C) No.9692 of 2005
(R.K. Dewan (Dead) by Lrs & others vs.
State of U.P. and others) by order dated
4th January, 2008 referred the judgment
of Pawan Kumar Jain's case (supra) for
consideration by Larger Bench.

27. In view of the above discussions,
following the judgment of the Apex Court
in Kailash Nath Agarwal's case (supra), it
is clear that the recovery against the
guarantor is not prohibited by Section 22(1)
of the 1985 although recovery against the
industry concerned is prohibited by virtue of
Section 22(1) of the 1985 Act. From a
1 All] Ravikant Mishra and another V. State of U.P. and others
303
perusal
of
the
recovery
certificate
(Annexure-3 to the writ), it is clear that
recovery certificate has not been issued
against petitioner No.1, rather recovery
certificate has been issued against the
guarantors, who have given personal
guarantee, which fact is mentioned in
paragraph 5 of the recovery certificate.

28. In view of the foregoing
discussions, none of the submissions
raised by learned counsel for the
petitioners can be accepted. The recovery
proceedings, which were initiated by
recovery certificate dated 26th March,
2002 against guarantors only, are not
barred and there is no error in the
recovery proceedings.

29. Both the writ petitions lack merit
and are dismissed.
---------
ORIGINAL JURISDICTION
CRIMINAL SIDE
DATED: LUCKNOW 23.03.2011

BEFORE
THE HON'BLE IMTIYAZ MURTAZA,J.
THE HON'BLE ASHWANI KUMAR SINGH,J.

Misc. Bench no. - 2218 of 2011

Ravikant Mishra and another ...Petitioner
Versus
State of U.P., Thru. Prin. Secy.,Home and
others

 ...Respondent

Counsel for the Petitioner:
Sri A.P. Mishra

Counsel for the Respondent:
G.A.

Constitution
of
India,
Article
226Quashing of FIR-offence under section
147,148,149,452,323, 504, 506 IPC-from
bare
perusal
of
content
of
FIR
Cognizable offence disclosed-No valid
ground for quashing FIR made outhowever in light of Lal Kamlendra Pratap
Singh
as
well
as
Amrawati
casenecessary guidelines issued, excluding
gravious offenses.

Case law discussed:
Criminal
Appeal
No.
539
of
2009
Lal
Kamlendra Pratap Singh v. State of U.P.;
Amrawati v. State of U.P. 2005 Cr.L.J. 755.

(Delivered by Hon'ble Imtiyaz Murtaza,J. )

1. Prayer in this petition is for
quashing of the F.I.R case crime no. 724-A
of 2010 under sections 147, 148, 149, 452,
323, 504, 506 I.P.C. and 3(i)X of S.C./S.T.
Act police station Ram Nagar district
Barabankiand also for stay of arrest during
pendency of writ petition.

2. From a punctilious reading of the
contents of the F.I.R, it cannot be said that
ex facie no cognizable offence is disclosed
or that there is any legal fetters operating as
an obstacle in the way of investigation and
by this reckoning, there is no discernible
valid ground for quashment of the F.I.R.

Our attention is adverted to a recent
decision of the Apex Court dated 23.3.2009
passed in Criminal Appeal No. 539 of 2009
Lal Kamlendra Pratap Singh v. State of
U.P.
wherein
the
Apex
Court
quintessentially observed that in appropriate
cases, the court may consider enlarging
accused
on
interim
bail
pending
consideration of his regular bail observing
further that arrest is not a must in each case
when a First Information Report of a
cognizable offence is lodged. The Apex
Court also relied upon with approval a
decision of Full Bench of Allahabad High
Court in Amrawati v. State of U.P. 2005
Cr.L.J. 755 wherein the observations made
were on similar lines.