Case: M/s. A.P.T. Ispat Pvt. Ltd Vs. U.P. Small Industrial Corporation Ltd. &amp; Another

and, therefore, the provisions of section 3 of the Act are not applicable. There is no dispute about the fact that there is no written agreement between the petitioner and respondent Company for supply of raw materials to the petitioner. It is, however, admitted that respondent company had been supplying raw materials to the petitioner-company for carrying all its business. In writ petition no.Nil of 1987, in re: R.K. & Sons, Bhadoi vs. The Collector, Varanasi and Others, decided on 12.3.1987, it has been held by a Division Bench of this Court that although there was no agreement executed in writing as such, an agreement may be said to have come into being as a result of mutual contact of the parties accompanied with delivery of goods which were admittedly on credit and this was to enable the petitioner to run the industrial unit held by him. In this manner his case is covered under Section 3(1) (a) read with Section 2(b) of the Act. In the instant case also as a result of mutual contract between the parties delivery of goods were made to the petitioner by respondent company. The petitioner obtained huge quantity of raw materials without making payment and thus, the respondent company is claiming the price of the goods sold to the petitioner by way of financial assistance. The case of the petitioner is therefore, also covered under Section 3(1)(a) read with Section 2(b) of the Act." (emphasis added) 13. We are completely unable to accept the view taken by the High Court. If the appellant company was purchasing wire rods as raw material from the Corporation we fail to see how the sale of the goods would become financial assistance rendered to the appellant unless it is shown that the supply of the goods was as a loan or grant or by way of hire purchase in terms of some agreement. We are, therefore, unable to follow the observation by the High court that "Thus the raw materials, that is, wire rods, were sold, to the petitioner by the respondent company by way of financial assistance". We also find no basis for the observation made by the High Court that "it is, however, admitted that respondent company (sic Corporation) had been supplying raw materials to the petitioner-company for carrying all its business" and further that the goods supplied "were admittedly on credit". There is no such admission by the appellant. On the contrary the case of the appellant is that it used to purchase wire rods from the Corporation on payment of price and it made payment for all the purchases from the Corporation.14. We think that the High Court has stretched the meaning of "financial assistance" as defined in section 2 and the scope of section 3 of the Act beyond reasonable limits. From a bare reading of section 3 it is evident that the dues must arise from an agreement to which the person from whom recovery is to be made is a party. Sub clause (a) of sub-section 1 then enumerates the kinds of agreement under which the transaction should have taken place. It needs also to be borne in mind that in the scheme of the Act there is no provision for any adjudication. Once there is any default under an agreement, the designated authority is authorized to issue a recovery certificate and send it to the Collector who is obliged to recover the certificate amount together with interest from the certificate debtor as arrears of land revenue. At no stage the certificate debtor is given an opportunity to put up his case. Such being the legal position, the recovery certificate must be based on a tangible agreement and it should even prima facie appear that the dues arise from a breach of the terms of the agreement. A proceeding under section 3 of the Act cannot be sustained by piling up assumptions in favour of the certificate holder and against the judgment debtor.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.16. We also cannot overlook the fact that in this case the so called supplies were not even made in the normal course of business. A reference to the FIR makes it clear that according to the Corporation the goods were taken away by the appellant in a criminal action constituting a number of offences under the Penal Code. The U.P. Public Moneys (Recovery of Dues) Act, 1972 was clearly not intended to recover the goods or the monetary value of goods taken away in course of theft or dacoity or lost as a result of dishonest appropriation or any other alleged criminal action.17. For the reasons discussed above, we are of the view that in the facts of this case the two impugned recovery certificates are quite illegal and untenable and we are unable to sustain the High Court order coming under appeal.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.

Decision (1 = appeal accepted, 0 = rejected): 1

Explanation:
1[ds]13. We are completely unable to accept the view taken by the High Court. If the appellant company was purchasing wire rods as raw material from the Corporation we fail to see how the sale of the goods would become financial assistance rendered to the appellant unless it is shown that the supply of the goods was as a loan or grant or by way of hire purchase in terms of some agreement. We are, therefore, unable to follow the observation by the High court that "Thus the raw materials, that is, wire rods, were sold, to the petitioner by the respondent company by way of financial assistance". We also find no basis for the observation made by the High Court that "it is, however, admitted that respondent company (sic Corporation) had been supplying raw materials to the petitioner-company for carrying all its business" and further that the goods supplied "were admittedly on credit". There is no such admission by the appellant. On the contrary the case of the appellant is that it used to purchase wire rods from the Corporation on payment of price and it made payment for all the purchases from the Corporation.14. We think that the High Court has stretched the meaning of "financial assistance" as defined in section 2 and the scope of section 3 of the Act beyond reasonable limits. From a bare reading of section 3 it is evident that the dues must arise from an agreement to which the person from whom recovery is to be made is a party. Sub clause (a) of sub-section 1 then enumerates the kinds of agreement under which the transaction should have taken place. It needs also to be borne in mind that in the scheme of the Act there is no provision for any adjudication. Once there is any default under an agreement, the designated authority is authorized to issue a recovery certificate and send it to the Collector who is obliged to recover the certificate amount together with interest from the certificate debtor as arrears of land revenue. At no stage the certificate debtor is given an opportunity to put up his case. Such being the legal position, the recovery certificate must be based on a tangible agreement and it should even prima facie appear that the dues arise from a breach of the terms of the agreement. A proceeding under section 3 of the Act cannot be sustained by piling up assumptions in favour of the certificate holder and against the judgment debtor.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.16. We also cannot overlook the fact that in this case the so called supplies were not even made in the normal course of business. A reference to the FIR makes it clear that according to the Corporation the goods were taken away by the appellant in a criminal action constituting a number of offences under the Penal Code. The U.P. Public Moneys (Recovery of Dues) Act, 1972 was clearly not intended to recover the goods or the monetary value of goods taken away in course of theft or dacoity or lost as a result of dishonest appropriation or any other alleged criminal action.17. For the reasons discussed above, we are of the view that in the facts of this case the two impugned recovery certificates are quite illegal and untenable and we are unable to sustain the High Court order coming under appeal.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.