OM HARI AGARWAL Vs. STATE OF U P

JUDGEMENT

(1.) THIS writ petition has been filed for quashing the recovery citation d- ed 20-9-2000 is sued by respondent No. 3, Annexure-1 to the writ petition. Further prayer is for issuing a writ in the nature of mandamus commanding the respondent-Corpora tion to act in accordance with the terms of the agreement and either to disburse the remaining term loan to the petitioner or to dispose of the unit of the petitioners.

(2.) THE facts arising out of the writ petition are that the petitioners No. 1 and 2 promoted a private limited company in the name of Jai Santoshi Chemical Industries Private limited which was incorporated under the Companies Act ,1956 with the Registrar of Companies, Kanpur and it was registered. THE land belongs to U. P state Industrial Development Corpora tion and was leased out to the company set up by the petitioners for a period of 90 years. Respondent No. 4 sanctioned a term loan of Rs. 65 lacs to the unit of the petitioners for the purpose of setting up an unit to manufacture I. P. Great Menthol Crystal, Menthol Flags and D. Menthol Oil. THE petitioners in pur suance of the aforesaid agreement had brought in the entire promoters quota of Rs. 55 lacs in January 1994. THE respondents disbursed an amount of Rs. 20 lacs out of the total sanction of Rs. 65 lacs. THE second installment of 4 Rs. 25 lacs was made to the petitioner on 8-8-1995. THE balance amount of Rs. 20 lacs was never disbursed to the petitioner by respondent No. 4. THE company to which the loan was granted specifically informed respondent No. 4 to either disburse the balance term loan or to dispose of the unit after adjusting the loan amount. But respondent No. 4 invokes the personal guarantee given by the petitioners. A copy of the same has been filed as Annexure-9 to the writ petition. THE petitioners submitted a reply requesting therein for releasing of the plots in favour of the company for the purpose of purchasing 18 machines but the request of the petitioners WE:, not acceded and on 20-9-2000 a recovery certificate was issued invoking the provisions of U. P Public Money (Recovery of Dues) Act, 1972.

(3.) IT has further been submitted on behalf of the petitioners that from the aforesaid provisions it is evident that the Collector cannot be permitted to proceed against the defaulter without first realizing the mortgaged property and, therefore, the Collector has to apply his mind for undertaking the proceeding against the mortgaged property. And if the amount realized is not sufficient then he is permitted to adopt the other modes available for the purpose of recovery as arrears of land revenue. In the facts of the present case it is clear from the record that no effort has been made by the Collector to proceed against the mortgaged assets. The Collector has also not issued any certificate to this effect that the sum due to the Corporation can be realized from the personal assets of the petitioners. However, till date the state. Govern ment, who is a relevant party, has not filed any counter-affidavit. In view of the aforesaid, it has been submitted that the recovery proceedings against the petitioners are contrary to the provisions contained under Section 4 of the U. P Public Money (Recovery of Dues) Act and as such the same is li able to be quashed. Reliance has been placed upon a judgment of the Apex Court reported in 2004 Vol. 6 Judgment today 305, Pawan Kumar Jain v. Pradeshiya Industrial and Investment Corporation of-U. P. Ltd and Ors. and reliance has been placed upon para 8 of the judgment which is quoted below: " (8) In our view, the above set out provisions of the U. P Act are very clear. Ac tion 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. "