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1960 Supreme(SC) 333
SUPREME COURT OF INDIA
7th December, 1960
B.P. SINHA, C.J.I., S.K. DAS, A.K. SARKAR, N. RAJAGOPALA AYYANGAR AND J.R. MUDHOLKAR, JJ.
Manna Lal and another, Appellants
Versus
Collector of Jhalawar and others, Respondents.
Civil Appeal No. 88 of 1957.
Advocates appeared
M/s. S. K. Kapur and Ganpat Rai, Advocates, for Appellants; Mr. N. S. Bindra, Senior Advocates, (Mr. D. Gupta, Advocate with him), for Respondents.
D.GUTPA, GANPAT RAI, N.S.BINDRA, S.K.KAPOOR
Loans due to a state-owned bank are "public demands" if the bank's assets vest in the government. Such dues remain government debts even if recovery is delegated to a limited company, and loan applications constitute the necessary written instruments for recovery.
Headnote:(A) Public Demands Recovery Act - Section 6 - Definition of "public demand" - Recovery of loans - Whether money due to a state-owned bank constitutes a public demand - If the bank was an asset of a former ruling state which subsequently merged into a successor state, its assets and liabilities vest in that successor state - Dues of such a bank are payable to the government and thus qualify as public demands. (Paras 2, 3, 6)
(B) Transfer of Assets - Notification regarding transfer of state banks to a limited company - If the notification authorizes the limited company to recover dues "on behalf of the State" and preserves the government's inherent right to make recoveries, the debts remain dues of the government and are not transferred to the limited company in its own right. (Para 8)
(C) Written Instrument - Loan applications and receipts signed by the borrower and bank officers constitute a written agreement for the purpose of recovery under the Act. (Para 9)
(D) Procedural Defect - Requirement to specify the period for which a demand is due in a certificate - This requirement applies to claims for revenue or rent and does not apply to the recovery of loans. (Para 10) (E) Constitution of India - Article 14 - Equality before law - Recovery of government dues from trading activities - The government, even as a banker, can be placed in a separate class as its dues are for the benefit of the people of the state; hence, special recovery facilities do not violate the right to equality. (Para 11)
Facts of the case:
Traders were served a notice for the recovery of loans taken from a state-owned bank. The borrowers challenged the proceedings, contending that the dues were not "public demands" because the bank was not state property, the dues had been transferred to a limited company, there was no written agreement, the recovery certificate was defective, and the recovery law was unconstitutional.
Findings of Court:
The bank was an asset of the former ruling state and thus vested in the successor state. The notifications regarding the limited company only appointed it as an agent for recovery. Loan applications and receipts served as written instruments. The omission of the "period" in the certificate was not a defect for loans. The Act does not violate the right to equality.
Issues: Whether loans due to a state-owned bank constitute a "public demand" under the recovery act; whether the transfer of the bank to a limited company removed the "public demand" status; whether loan applications constitute written instruments; and whether the recovery process violates Article 14.
Ratio Decidendi: Assets of a state-owned bank vest in the successor state upon integration. Dues remain government debts even if recovery is delegated to a limited company. Loan applications and receipts satisfy the requirement of a written instrument. Procedural requirements for specifying a "period" in recovery certificates apply to periodic dues like rent, not to lump-sum loans. Government dues are distinct and can be recovered via special procedures without violating Article 14.
Result: Appeal dismissed.
SARKAR, J. : The appellants are traders of Jhalawar. Respondent No. 1, the Collector of Jhalawar, served on the appellants a notice under S. 6 of the Rajasthan Public Demands Recovery Act, 1952, hereafter called the Act, for the recovery from them as a public demand, of Rs. 2,24,607/6/6 said to be due on account of loans taken by them from the Jhalawar State Bank. The appellants filed a petition under S. 8 of the Act contending, among other things, that the amount sought to be recovered from them was not a public demand. Respondent No. 1 appears to have called upon the appellants to prove that it was not a public demand. The appellants without proceeding further before respondent No. 1, filed a petition in the High Court of Rajasthan for the issue of a writ quashing the proceedings under the Public Demands Recovery Act. The High Court dismissed the petition but granted a certificate that the case was fit for an appeal to this Court. Hence the present appeal.
2. The only question raised in this appeal is whether any loan due to the Jhalawar State Bank could be recovered as a public demands. A "public demand" within the meaning of the Act is "any money payable to the Government or to a department or an officer of Government under or in pursuance of a written instrument or agreement". The Government here means that Government of Rajasthan for the Act was passed in 1952 by the Rajasthan State Legislature. The question then is whether money due to the Jhalawar State Bank, is money payable to the Government of Rajasthan.
3. Now, the Jhalawar State Bank was started in 1932. At that time Jhalawar was a ruling State. Sometime in or about April, 1948 the State of Jhalawar, along with nine other ruling States of Rajputana, integrated and formed the United State of Rajasthan under a convenant executed by the Rulers of these States. One of the articles of this convenant provided, "All the assets and liabilities of the covenanting States shall be the assets and liabilities of the Unites State." Subsequently, on March 30, 1949, the States of Bikaner, Jaipur, Jaisalmer and Jodhpur joined the United State of Rajasthan. On the promulgation of the Constitution of India, the United State of Rajasthan became a Part B State in the Indian Union. The assets of the previous ruling State of Jhalawar which had earlier vested in the United State of Rajasthan, thereupon passed to and devolved upon the State of Rajasthan in the Indian Union.
4. The proceedings under the Act against the appellants were started by the filing of a requisition with respondent No. 1 by respondents Nos. 2 and 3 being respectively the Treasury Officer. Jhalawar, and the Recovery Officer, Jhalawar State Bank, under S. 3 of the Act stating that the amount earlier mentioned was due from the appellants to the Government of Rajasthan in respect of the claims of the Jhalawar State Bank against them. This was done presumably shortly prior to June 16, 1953, on which date respondent No. 1 signed a certificate specifying the amount of the demand and certain other particulars and filed it in his own office under S. 4 of the Act. A notice of the signing and filing of the certificate was served upon the appellants under S. 6 of the Act. This notice and the subsequent proceedings have been referred to in the beginning of this judgment.
5. The claim thus is in respect of moneys due to the Jhalawar State Bank. If that Bank was not the property of the Jhalawar State, then its dues cannot of course be said to have merged in the present State of Rajasthan. The appellants first contended that the Jhalawar State Bank was not the property of the State of Jhalawar. The only material to which we have been referred by the appellants to support of this contention is certain rules framed by the Ruler of Jhalawar in respect of the Bank. It was pointed out that the rules showed that the Bank was like any other commercial enterprise. We are unable to agree that for this reason it could not be an instituti
