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2005 Supreme(All) 1825
ALLAHABAD HIGH COURT
State of Uttar Pradesh through the Chief Secretary to U.P. Govt. and The
Versus
Raza Buland Sugar Company Limited through its Secretary Sri S.K. Kaul, Shri
First Appeal 459 of 1977
Decided On : 26 September 2005
First Appeal 459 Of 1977
A.N.Verma, DINESH KOCHAR, R.C.SRIVASTAV, S.N.Verma, V.SVARUP,
The acts of a receiver, even with an invalid appointment, remain binding, and compliance with government orders validates loan transactions.
Headnote:
Receiver - Loan Transactions - U.P. Land Revenue Act, Constitution of India, Specific Relief Act - The court held that the acts done by the receiver, despite an invalid appointment, remain binding upon the parties. The loan transactions were held to be valid as they were executed in accordance with the terms and conditions mentioned in the government orders. The plaintiff was held liable to pay interest on the loan amount as agreed upon, and the suit for declaration was dismissed.
Fact of the Case:
The plaintiff, a public limited company, filed a suit against the State of Uttar Pradesh and others, challenging the appointment of receivers and seeking a declaration to receive a deposit amount along with interest.
Finding of the Court:
The court found that the appointment of the receiver, though invalid, bound the parties, and the loan transactions were valid as they were executed in accordance with government orders. The plaintiff was held liable to pay interest on the loan amount, and the suit for declaration was dismissed.
Issues: Validity of receiver appointments, loan transaction compliance with the Constitution of India, entitlement to the deposit amount, and interest payment.
Ratio Decidendi: The acts done by the receiver, despite an invalid appointment, remain binding upon the parties. The loan transactions were held to be valid as they were executed in accordance with the terms and conditions mentioned in the government orders.
Final Decision: The appeal was allowed, the judgment and decree of the trial court were set aside, and the plaintiff's suit was dismissed.
( 1 ) THIS is an appeal against judgment and decree dated 7. 11. 1977 passed by Sri K. G. Rastogi, then II Addl. District Judge, Rampur in original suit No. 37 of 1973, Raza Buland Sugar company Ltd. v. The State of Uttar Pradesh and Ors. .
( 2 ) THE facts giving rise to this appeal are that the plaintiff respondent No. 1 filed the aforesaid suit against the defendant appelants and respondent No. 2 and 3 with these allegations that the plaintiff is a public limited company and it runs sugar factory named Raza Buland Sugar factory. Previously there were two sugar factories, namely, Raza Sugar Factory and Buland sugar Factory, but they were amalgamated in the name and style raza Buland Sugar Factory. The Company suffered loss due to amalgamation of these two factories and so it could not pay prices of sugarcane to the farmers and commission to societies of cane growers as well as the purchase tax in time. Hence, a recovery certificate was issued by the Cane Commissioner to the collector, Rampur for recovery of the above amount as arrears of land revenue. The Collector attached movable and immovable property of the Company. Then its president Sri P. C. Jhunjhunwala had negotiations with the Government and an arrangement was made for making payment, but all of a sudden on 14. 11. 1968 the Collector, Rampur appointed Sri P. C. Bhatia as receiver Under Section 146 of the U. P. Land Revenue Act. The above order was passed without jurisdiction. No opportunity was provided to the Company to show cause against the proposed action. The losses were enhanced in the tenure of the Receiver and the arrears were increased to rs. 12. 20 Lakhs, then he was removed by the Collector on 6. 5. 1969 and Sri G. C. Pant was appointed as! Receiver in his place. The Company filed writ petition No. 377 of 1970 before the high Court (Lucknow Bench) challenging the above appointments. There was mismanagement in the tenure of Sri G. C. Pant also and so on 10. 6. 1969 the management of the factory was again given to Sri P. C. Jhunjhunwala appointing him as Receiver. Sri Jhunjhunwala was trying to manage the factory at his level best but again on 2. 3. 1970 a radiogram was issued to several collectors of U. P. including the Collector, Rampur to appoint Receivers of sugar factories in those districts and so again Sri G. C. Pant was appointed as Receiver on 3. 3. 1970. Sri Pant was removed from the above post on 24. 3. 1970 and in his place Sri Man Singh was appointed as receiver. These appointments were also invalid. The Companys writ petition No. 377 of 1970 filed before Lucknow Bench of Allahabad High Court was transferred to Allahabad and was registered there as Writ Petition no. 2586 of 1972, This writ petition was dismissed as infructuous on 10. 1. 1973 as the orders appointing Receivers had been withdrawn by that time. Sri Man Singh borrowed a loan of Rs. 75 Lakhs from the Government to run the factory after pledging the bags of sugar. There was no necessity to borrow this amount. This amount has, however, been repaid to the Government. Vide an interim order passed by the High Court in the aforesaid writ petition it was provided that a sum of Rs. 7 Lakhs which was obtained by sale of sugar shall remain in deposit in the Bank in the name of the plaintiff. This amount was being claimed by the government as interest on the above amount of Rs. 75 Lakhs. The government has got no legal claim for this amount because Sri Man Singh, defendant No. 3, was illegally appointed as Receiver and he had no authority to borrow any amount on behalf of the Company and so the Company was not liable to repay any amount. The contract was bad and unenforcible and no interest was payable on the above transaction. The plaintiff gave notices Under Section 80 C. P. C. to the defendants which were served upon them and thereafter it filed this suit for declaration that it is entitled to receive the amount of Rs. 7 Lakhs along with interest which might have accrued u
