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HIGH COURT OF ALLAHABAD
B.D. AGARWAL, R.S. DHAVAN, JJ.
Aziz Haider - Appellant
Versus
State Of U. P. - Respondent
Civil Misc. Writ Petition No. 1987 of 1987
Decided on : Feb 11, 1987
U. P. AGRICULTURAL CREDIT ACT, 1973 - SECTION 11-A - RECOVERY OF LOANS - ATTACHMENT OF TRACTOR - VALIDITY OF SECTION 11-A - APPLICABILITY TO PERSONAL SECURITY - OPPORTUNITY OF HEARING - CITATION - EXPENSES OF RECOVERY - LIMITATION PERIOD - RECOVERY AGAINST LEGAL REPRESENTATIVES - INTEREST RATE - COMPOUND INTEREST - NATURAL JUSTICE - INTERPRETATION OF STATUTORY PROVISIONS.
Fact of the Case:
The petitioners, as successors-in-interest of Imdad Husain, took a loan from the State Bank of India for purchasing a tractor. Despite making partial payments, they defaulted on the loan. The bank issued a Certificate of Recovery under Section 11-A of the U. P. Agricultural Credit Act, 1973, leading to the attachment of the tractor. The petitioners challenged the validity of Section 11-A and the recovery proceedings.
Finding of the Court:
The court upheld the validity of Section 11-A, holding that it applies to cases involving both personal and non-personal security. It also found that the bank was not required to provide a hearing opportunity before issuing the Certificate of Recovery and that the attachment of the tractor was permissible under the law. The court rejected the petitioners' arguments regarding the limitation period, recovery against legal representatives, interest rate, and compound interest.
Issues: 1. Whether Section 11-A of the U. P. Agricultural Credit Act, 1973, is valid and applicable to cases involving personal security? 2. Whether the bank was required to provide a hearing opportunity before issuing the Certificate of Recovery? 3. Whether the attachment of the tractor was permissible under the law? 4. Whether the limitation period under Section 11-A(2) was violated? 5. Whether recovery could be made against the legal representatives of the deceased borrower? 6. Whether the bank could charge interest at the rate of 14.5% after April 1983? 7. Whether the bank could charge compound interest with monthly, quarterly, or half-yearly rests?
Ratio Decidendi: 1. Section 11-A of the U. P. Agricultural Credit Act, 1973, is not limited to cases involving personal security but applies to all cases where financial assistance is granted to an agriculturist and there is a default in repayment. 2. The bank is not required to provide a hearing opportunity before issuing the Certificate of Recovery, as the entries in the bank's books of account and the passbook given to the agriculturist are sufficient evidence of the amount due. 3. The attachment of the tractor was permissible under Section 279(c) of the U. P. Zamindari Abolition and Land Reforms Act, 1950, which allows for the attachment and sale of movable property in cases of recovery of arrears of land revenue. 4. The limitation period under Section 11-A(2) was not violated as the certificate was issued within three years from the date when the last installment became due. 5. Recovery could be made against the legal representatives of the deceased borrower to the extent of the assets in their hands derived from the borrower. 6. The bank could charge interest at the rate of 14.5% after April 1983, as the agreement between the bank and the borrower provided for such interest in case of default. 7. The bank could not charge compound interest with monthly, quarterly, or half-yearly rests, as this is prohibited by the directives of the Reserve Bank of India.
Final Decision: The court dismissed the petition, upholding the validity of Section 11-A of the U. P. Agricultural Credit Act, 1973, and the recovery proceedings initiated by the bank.
B. D. Agrawal, J.
1. On February 5, 1975, Imdad Husain, the predecessor-in-interest of the petitioners took on loan a sum of Rs. 38,000/- from the State Bank of India, Agricultural Development, Branch Chakiya, district Varanasi, repayable in instalments with interest. The loan taken was for the purpose of purchase of a tractor. The borrower did make purchase of a tractor from the money advanced to him. The tractor was hypothecated with the Bank in addition to the security furnished by mortgage of 13.22 acres of land. A sum of Rs. 1500/- only was paid back by him to the Bank on May 25, 1975. Imdad Husain died on January 16, 1976. The petitioners claim to have made payment of a sum of Rs. 18,155/- during the period of February 24, 1977 to January 1981. In view of the default incurred the State Bank issued Certificate of Recovery under Section 11-A of the U. P. Agricultural Credit Act, 1973 to the Collector district Varanasi. Subsequent to this a sum of Rs. 6000/- was allegedly paid by the petitioners in three instalments of Rs 2000/- each during March 31, 1986, to September 3, 1986. For the balance remaining unpaid, there was attachment made of the tractor aforementioned on January 9, 1987. Aggrieved against the recovery being proceeded against, the petitioners have preferred this petition under Art. 226 of the Constitution.
2. We have heard Sri Ram Niwas Singh learned counsel appearing for the petitioners.
In so far as the vires of Section 11-A of the U. P. Agricultural Credit Act, 1973 is concerned, the same was raised in issue on the footing of Article 14 of the Constitution recently in Trijugi Narain Tewari v. Gorakhpur Kshettriya Gramin Bank, AIR 1986 Alld. 115 before a Division Bench. Upon a review of the case law on the subject and a detailed consideration the Bench concluded that the provision aforementioned is not arbitrary and is not hit by Article 14. In paragraph 19 it was observed : -
"To recapitulate, the object was early recovery of moneys given to agriculturists by way of financial assistance. This procedure was provided as experience had shown that despite Sec. 11, moneys were being held up. Consequently Sec. 11-A was inserted which provided for various modes of recovery by the Collector as arrears of land revenue. Recovery of dues as arrears of land revenue is speedier way or method to recover the amount claimable from the persons from whom recoveries are being made. A citizen has a right of equal treatment, but he in the grab of equal treatment cannot be permitted not to pay the government dues or public money. A defaulter has no right to prolong the proceedings of recovery which, in fact, appears to be the purpose of the argument advanced for declaring Sec. 11-A to be void on the ground of Art. 14 of the Constitution".
3. Learned counsel does not challenge the validity of the statutory provisions before us but contends that this could not be made applicable to the facts hereof since, it is submitted, Section 11-A applies to recovery in case of personal security. The submission is devoid of merit. The heading which Section 11-A bears is no doubt " Recovery in case of Personal Security ". But a perusal of the contents shows that there is nothing absolutely to confine the same to a case of personal security. The provision on its terms applies where any amount of financial assistance is granted by a bank to a agriculturist and the agriculturist fails to pay the amount together with interest on the due date. It is not in dispute that the loan advanced to Imdad Husain, an agriculturist, was for the agricultural purpose, namely, the purchase of tractor and this constitutes financial assistance within the meaning of Section 2 (e) of this Act. It is not in dispute either before us that there is default in repayment of the amount due under the transaction. Section 11-A moreover applies, without prejudice to the provisions of Sections 10-B and 11 meaning thereby as also upheld in the case of Trijugi Narain Tewari
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