LACHHMAN DASS ON BEHALF OF FIRM TILAK RAM RAM BUX NAND RAM TULSI RAM TILAK RAM RAM BUX Vs. STATE OF PUNJAB:STATE BANK OF INDIA

JUDGEMENT

(1.) The appellants are a joint Hindu family firm which has been carrying on business since 1911 in grains, dal, cereals, cotton ginning and pressing, oil manufacture and the like, at a place called Lehragaga in what was once the State of Patiala. The firm had an account called the Cash Credit Account in the Patiala State Bank which had a branch at Lehragaga and used to borrow money in this account on a pledge of its stocks. In 1951-52 there was a heavy slumps in the prices of the commodities with the result that the amounts advanced by the Bank on the security of the goods were very much in excess of the market prices thereof. To cover this shortfall which came to Rs.2,32,000/- the firm catered into an arrangement with the Bank on May 23, 1953, and it is this that forms the source of the present litigation. The Bank sanctioned a loan of Rs.4,50,000/- on what is called "Demand Loan Account." The firm deposited title deeds of the properties belonging to them as security for the amounts that may become payable on that account and the adult members of the family executed a promissory note for that amount and also a memorandum evidencing the deposit office of the title deeds.

(2.) It should be mentioned that in 1951 a firm called Yogiraj Neelkumar was started at Lehragaga of which the partners were Rhagirathlal one of the senior members of the joint Hindu family of the appellant firm and two other strangers Shri Kishore Chand and Shri Banwarilal. That firm did business as Commission Agents and had a Cash Credit Account in the Patiala State Bank at Lehragaga under which it borrowed money for the purpose of its business. That firm also sustained heavy losses during the period of the slump and on May 23, 1953, it owed to the Bank a sum of Rs. 2,17,957-12-6 on account of shortfall. Now what the Bank did under the arrangement dated May 23, 1953, was to adjust the loan of Rs.4,50,000/- towards the shortfalls due to on both from the appellant's firm and the firm of Yogiraj NeelKumar. The complaint of the appellants is that they had nothing to do with the firm of Yogiraj Neelkumar, that Bhagirathlal started it along with strangers as his own separate concern and accordingly the properties of the joint Hindu family of the appellants are not liable for the sum of Rs.2,17,957-12-6 due to the Bank from that firm.

(3.) The amount payable under the demand loan account not having been paid by the appellants, the Bank took steps to realise the same in accordance with the provisions of the Patiala Recovery of State Dues Act, hereinafter referred to as ' the Act' and the rules framed thereunder. It will be convenient at this stage to refer to these provisions and rules in so far as they are material, as it is their vires and constitutionally that form the principal target of attack in these proceedings. Section 3(1) of the Act defines "State Dues" as including debts due to the Patiala State Bank. "Department" is defined in S.3 (2) as including the Patiala State Bank, and "Head of department" in S.3 (6) as meaning the Managing Director in the case of the Patiala State Bank. Section 4(1) authorises the Head of department to determine the exact amount of State dues recoverable from the defaulter in the manner prescribed under the rules. Section 5(1) (a) enacts that State dues may be recovered by the department through the Nazim as if these were arrears of land revenue. Then comes S.6 which is as follows:-