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SUPREME COURT OF INDIA
16th December, 1963
P.B. GAJENDRAGADKAR, K. SUBBA RAO, K.N. WANCHOO, J.C. SHAH AND RAGHUBAR DAYAL, JJ.
State of Punjab, Appellant
Versus
Rattan Singh, Respondent.
Civil Appeal No. 6 of 1962.
Advocate appeared
M/s. S. V. Gupte, Additional Solicitor-General of India, (M/s. D. D. Chaudhuri and B. R. G. K. Achar, Advocates, with him), for Appellant; Mr. M. C. Setalvad Senior Advocate, (M/s. S. N. Andley, Rameshwar Nath and P. L. Vohra, Advocates, of M/s. Rajinder Narain and Co. with him), for Respondent. 1224
INSOLVENCY - Jurisdiction of Insolvency Court - Determination of liability of alleged debtor - Whether Insolvency Court can determine liability of alleged debtor for payment of debt for which creditor had obtained order under Patiala Recovery of State Dues Act, 2002 BK - Held, Insolvency Court has jurisdiction to determine liability of alleged debtor despite provisions of S. 11 of the Act.
Fact of the Case:
The State of Patiala filed a petition in the Court of the Sub-Judge, 1st Class (Insolvency Court) Patiala, praying for the adjudication of Rattan Singh, respondent, an insolvent on account of his transferring all his houses at Patiala and agricultural lands at Sunihal Heri and Patiala without consideration to his wife and two sons within three months of the petition with intent to defeat and delay his creditor-Bank having full knowledge of his liability towards the State.
Finding of the Court:
The Insolvency Court rejected the insolvency petition holding that the respondent had not executed the deed of guarantee. It, however, held that the Insolvency Court was competent to consider the question of the liability of the respondent to the State under the deed of guarantee, its jurisdiction being not ousted by the provisions of S. 11 of the Act which excluded the jurisdiction of the Civil Court in any matter which he head of the department was empowered by the Act or the rules made thereunder to dispose of or take cognizance of, as the head of the department could, under the Act, determine only the amount of the debt due from the alleged defaulter and not the question whether the alleged defaulter was really a defaulter in case this was disputed.
Issues: 1. Whether the head of a department can determine the objection of an alleged defaulter that he is really not a defaulter, i.e., no State dues are due from him as he is not liable for any dues to the State irrespective of the question whether what amount is due if he is liable for that debt to the State? 2. Whether the Insolvency Court can, in spite of the provisions of S. 11 of the Act and the jurisdiction which the head of the department has, under S. 4, as construed by the court, go into the question whether the alleged debtor sought to be adjudicated insolvent really owed the debt which has been determined or could be determined only by the head of department under S. 4 of the Act?
Ratio Decidendi: 1. The head of a department can determine the objection of an alleged defaulter that he is really not a defaulter, i.e., no State dues are due from him as he is not liable for any dues to the State irrespective of the question whether what amount is due if he is liable for that debt to the State. 2. The Insolvency Court can, in spite of the provisions of S. 11 of the Act and the jurisdiction which the head of the department has, under S. 4, as construed by the court, go into the question whether the alleged debtor sought to be adjudicated insolvent really owed the debt which has been determined or could be determined only by the head of department under S. 4 of the Act.
Final Decision: Appeal dismissed with costs.
Judgment
RAGHUBAR DAYAL, J.: This appeal, by special leave, raises mainly the question whether the Insolvency Court can, at the hearing of a petition by a creditor for declaring a debtor insolvent, determine the liability of the alleged debtor for the payment of the debt for the recovery of which the creditor had obtained an order under the Patiala Recovery of State Dues Act, 2002 BK (Act IV of 2002 BK), hereinafter called the Act. To appreciate how the question arises on the facts of the case, reference to the provisions of the Act is necessary and we set them out first.
2. The Act was enacted to consolidate and amend the law relating to the recovery of State dues. According to cl. (1) of S. 3 State dues included debts due to the Patiala State Bank. The expression department includes the Patiala State Bank, and the expression defaulter means a person from whom State dues are due and includes a person who is responsible as surety for the payment of any such dues. Head of Department means, among other things, the Managing Director in the case of the Patiala State Bank. Chapter II purported to deal with determination of State dues and modes of recovery thereof. Section 4 which falls in the Chapter provides that the head of Department shall determine in the prescribed manner the exact amount of State dues recoverable by his department from the defaulter. Section 5 lays down the modes for the recovery of State dues. Section 6 provides for the transmission of a certificate as to the amount of State dues recoverable from the defaulter to the Nazim and to the Accountant General and its sub-section (2) is:
"A certificate transmitted under the preceding sub-section shall be conclusive proof of the matters stated therein and the Nazim or the Accountant General shall not question the validity of the certificate or hear any objections of the defaulter as to the amount of State dues mentioned in the certificate or as to the liability of the defaulter to pay such dues.
3. Section 10 provides that no action shall be taken by the Nazim or the Accountant General on a certificate coming from the Managing Director, unless it is sent to him within the period of limitation specified in that Section. Section 11 reads:
"No Civil Court shall have jurisdiction in any matter which the head of department, or any authority or officer authorised by the head of department is empowered by this Act or the rules made thereunder to dispose of, or take cognizance of the manner in which any such head of department, or authority, or officer, exercises any powers vested in him or it by or under this Act or the rules made thereunder.
Section 12 empowers the Government of the State to make rules for the purpose of carrying out the provisions of the Act. Sub-section (2) thereof states that the rules may provide the manner in which the amount of State dues shall be determined by a head of department.
4. The Patiala Recovery of State Dues Rules, 2002 hereinafter called the rules, lay down the mode of determination of State dues in Rr. 3 to 7. Rule 3 requires the head of department to serve a notice on the defaulter specifying therein the amount of State dues and from whom such dues were recoverable and shall require the defaulter to pay such dues on or before a specified date or to appear before the authority specified therein (called the Inquiry Officer) and present a written statement of his defence. If the defaulter appears and pays the amount of State dues, the head of department issue a receipt to him, under R. 4 and the matter is closed. If he does not appear on the specified date and the Inquiry Officer be satisfied that the notice has been duly served, he may proceed ex parte and determine by order in writing the amount of State dues recoverable from him. The order is to be subject to confirmation by the head of department. If the Inquiry Officer is not so satisfied another notice is issued to the defaulter.
5. Rule 6 provides that where the defaulter appe
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