Case: Lazarus D'Souza Vs. National Small Scale Industries Co-Operation Limited &amp; Others

application filed or in the certificate issued by the respondent no.1, as the liability of the petitioner/guarantor would arise only on failure to recover the amount from the borrower. This position is further made clear from the terms of the personal guaranty purported to have been executed by the petitioner in favour of the respondent no.1 on 10/08/1985. The relevant paragraph reads thus;"Now it is hereby agreed and declared as follows :That in the event of failure by Shri Marshall DSouza to pay the dues of all denominations to the owners for all losses and damages sustained by the owners. ......"8.Record reveals that during the pendency of the proceedings before the Deputy Collector/ respondent no.3, notices came to be issued to the proprietor Mr. Marshall DSouza, but the notice was returned back by the Talathi by stating that Mr. Marshall DSouza was not residing at the given address. It was also informed that the borrower has now shifted his place of residence to Madhya Pradesh. Para 3 of the impugned order observes that during the course of hearing it was brought to the notice by the applicant (respondent no.1 herein) that one Lazarous DSouza (the present petitioner) has executed personal guaranty securing the loan advanced in favour of Marshall DSouza on 10/08/1985. It was then informed by the applicant that the guarantor is the brother of Marshall DSouza. In view of this disclosure made by the applicant before the respondent no.3 notices came to be issued and served on the present petitioner. The petitioner had objected to the proceedings being taken against him for recovery of the arrears of higher purchase loan amount. The impugned order records the reasons for rejection of the petitioners objection in paragraph 5 and 12. The reasons are:(1) That the petitioner is the brother of the borrower,(2) That the petitioner has failed to provide and furnish details of the movable and/or immovable property of the borrower,(3) That the petitioner has not co-operated in the proceedings. For the reasons stated herein above, the respondent No.3 has held the petitioner liable to pay the amount and directed recovery of the same from the petitioner as arrears of land revenue.9.In this fact situation, the learned Counsel for the petitioner has submitted that the Collector has no jurisdiction to proceed against any person unless and until a certificate is furnished by the State Government or the Corporation duly signed by the authorised officer indicating the name of the person from whom the amount is to be recovered with other details and particulars thereof. It is contended that what is capable of being executed is the recovery certificate issued by the Authorised officer naming a given person and stipulating the amount to be recovered from such a person. It is also contended that the scope of inquiry contemplated by sub-section 2 of Section 3 is limited and cannot extend beyond the particulars required to be stated in the certificate. Thus, the submission is that in the absence of a certificate being issued by the Authorised officer it is impermissible for the Collector and it would be beyond his power and authority to proceed against the petitioner and hold him liable to pay a given sum of money and direct the recovery of that amount as arrears of land revenue. The submission is well merited. The learned Counsel appearing for respondent no.1 has tried to contend that even in the absence of the certificate being issued by the Authorised officer of the State Government or the Corporation it would be open for the Collector to make an inquiry with a view to find out as to who others, in addition to the borrower, are liable for the payment of the amount due and if the Collector pursuant to such an inquiry reaches a conclusion that a given sum of money is due and recoverable either from the Guarantor or such other person, he can proceed to recover the amount from them as arrears of land revenue. We are afraid we cannot subscribe to this view. In the scheme of the Act, the Collector has been named as a recovery officer with a limited jurisdiction and the jurisdiction to initiate inquiry would be dependent upon the existence of validly issued certificate by an Authorised officer, furnishing the particulars as required under the rules in the form prescribed. In the absence of a certificate being issued against a given person, stipulating a definite sum of amount due, the Collector in the midst of an inquiry against the borrower cannot proceed against third party which is not named in the certificate and in regard to whom no particulars are furnished to the Collector. Absence of the particulars to be furnished in the certificate would not even enable the Collector to make a proper inquiry. The application of mind by a responsible officer is only at one stage i.e. when a certificate is issued by the authorised officer of the State Government or the Corporation. There are hardly any safeguards for the borrower or the Guarantors in the scheme of the Act. The only safeguard against a drastic power of recovery is application of mind by the Authorised officer while issuing the certificate. If this be the position, we have no hesitation in holding that the requirement for issuing a certificate of recovery by the Authorised officer is sine qua non for initiation of the inquiry by the Collector under Section 3(2) of the Act. In the absence of a certificate as contemplated by Section 3, sub-section 1, the Collector would have no jurisdiction to make an inquiry. The respondent no.3 cannot fasten any liability on the petitioner and direct the recovery of a sum purportedly due from him in the absence of a certificate issued by the Authorised officer.10.In the result, in our view, the impugned order passed by the Collector dated 25/02/2002 in case No.DRO (N)/3(92)/98/NSIC-PNJ/206 is wholly unsustainable in law being without jurisdiction and thus deserves to be quashed and set aside.

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

Explanation:
1[ds]The proviso to2(a) lays down that where the Collector is of the opinion that it is necessary so to do for safeguarding the recovery of the sum due to the State Government, Corporation, Government Company or Bank, as the case may be, he may, for reasons to be recorded direct proceedings to be taken for the recovery of the sum due as if it were an arrear of land revenue before or at the same time the proceedings are taken for sale of the goodsthe only provisions which relate to the recovery are contained in Section 3 and Section 4 of the Act. Section 4 is aimed at protecting the interest of the State Government, Corporation, etc. and the only limited protection that is available to the borrower or to the guarantor is comprised inion (2) of Sectionis only one stage at which the Authorised officer is obliged to apply his mind in regard to the person from whom the amount is to be recovered and the exact sum due to be recovered from the person named in the certificate. The Collector on receipt of the certificate is invested with a limited power to make an inquiry touching the contents of the certificate. The Collector who is expected to recover the sum due as arrears of land revenue is not empowered to travel beyond the particulars furnished in theview of this disclosure made by the applicant before the respondent no.3 notices came to be issued and served on the present petitioner. The petitioner had objected to the proceedings being taken against him for recovery of the arrears of higher purchase loan amount. The impugned order records the reasons for rejection of the petitioners objection in paragraph 5 and 12. The reasons are:(1) That the petitioner is the brother of the borrower,(2) That the petitioner has failed to provide and furnish details of the movable and/or immovable property of the borrower,(3) That the petitioner has notin the proceedings. For the reasons stated herein above, the respondent No.3 has held the petitioner liable to pay the amount and directed recovery of the same from the petitioner as arrears of landthe submission is that in the absence of a certificate being issued by the Authorised officer it is impermissible for the Collector and it would be beyond his power and authority to proceed against the petitioner and hold him liable to pay a given sum of money and direct the recovery of that amount as arrears of land revenue. The submission is well merited. The learned Counsel appearing for respondent no.1 has tried to contend that even in the absence of the certificate being issued by the Authorised officer of the State Government or the Corporation it would be open for the Collector to make an inquiry with a view to find out as to who others, in addition to the borrower, are liable for the payment of the amount due and if the Collector pursuant to such an inquiry reaches a conclusion that a given sum of money is due and recoverable either from the Guarantor or such other person, he can proceed to recover the amount from them as arrears of land revenue. We are afraid we cannot subscribe to thisthe scheme of the Act, the Collector has been named as a recovery officer with a limited jurisdiction and the jurisdiction to initiate inquiry would be dependent upon the existence of validly issued certificate by an Authorised officer, furnishing the particulars as required under the rules in the form prescribed. In the absence of a certificate being issued against a given person, stipulating a definite sum of amount due, the Collector in the midst of an inquiry against the borrower cannot proceed against third party which is not named in the certificate and in regard to whom no particulars are furnished to the Collector. Absence of the particulars to be furnished in the certificate would not even enable the Collector to make a proper inquiry. The application of mind by a responsible officer is only at one stage i.e. when a certificate is issued by the authorised officer of the State Government or the Corporation. There are hardly any safeguards for the borrower or the Guarantors in the scheme of the Act. The only safeguard against a drastic power of recovery is application of mind by the Authorised officer while issuing the certificate. If this be the position, we have no hesitation in holding that the requirement for issuing a certificate of recovery by the Authorised officer is sine qua non for initiation of the inquiry by the Collector under Section 3(2) of the Act. In the absence of a certificate as contemplated by Section 3,1, the Collector would have no jurisdiction to make an inquiry. The respondent no.3 cannot fasten any liability on the petitioner and direct the recovery of a sum purportedly due from him in the absence of a certificate issued by the Authorised officer.10.In the result, in our view, the impugned order passed by the Collector dated 25/02/2002 in case No.DROis wholly unsustainable in law being without jurisdiction and thus deserves to be quashed and set aside.