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High Court Of Madhya Pradesh
A. K. MATHUR, S. K. KULSHRESTHA
NEW LAXMI OIL MILLS, BARWAHA - Appellant
Versus
BANK OF INDIA, BARWAHA - Respondents
M. P. 1601 Of 1993
Decided On : 05/08/1997
MADHYA PRADESH LOK DHAN (SHODHYA RASHIYON KI VASULI) ADHINIYAM, 1987 - Validity and Applicability - Speedy Recovery of Dues - Interpretation of Provisions - Finality of Certificates - Limitation for Recovery - Retrospective Application - Waiver of Debt - Arbitration Proceedings - Objections to Maintainability of Action.
Fact of the Case:
Multiple petitions challenging the validity and applicability of the Madhya Pradesh Lok Dhan (Shodhya Rashiyon Ki Vasuli) Adhiniyam, 1987 (Act 1 of 1988), known as the Madhya Pradesh Public Moneys (Recovery of Dues) Act, 1987, and the proceedings taken thereunder. The petitions raised common controversies based on similar challenges to the vires of the Act and the actions taken thereunder.
Finding of the Court:
The Court upheld the validity of the Act and the proceedings taken thereunder, finding that the State Legislature was competent to enact the law, and that the provisions for speedy recovery and restrictions on legal challenges were reasonable and necessary to achieve the Act's objectives.
Issues: 1. Whether the State Legislature was competent to enact the Act, considering the subject matter falls under Entry 35 "Public Debt" and Entry 45 "Banking" in List 1 of the Seventh Schedule to the Constitution of India? 2. Whether the provisions of Section 3(4) and (5) of the Act, which create inroads into the fundamental rights of the petitioners, especially as they are violative of Article 14, are valid? 3. Whether the Act has retrospective application and can cover transactions that took place prior to its enforcement? 4. Whether recovery is permissible only if the transaction relates to a State Sponsored Scheme or a socially desirable scheme, and whether debt waived by the State can be recovered?
Ratio Decidendi: 1. The State Legislature is competent to enact the Act as it falls within the legislative powers granted under Entry 11-A of List III of the Seventh Schedule to the Constitution of India, which includes "administration of justice" and "constitutional and organization of all Courts". 2. The provisions of Section 3(4) and (5) of the Act, which bar arbitration proceedings and attach finality to the recovery certificates, are valid as they are necessary to achieve the Act's objective of speedy recovery of dues and to prevent dilatory tactics that would frustrate the recovery process. 3. The Act does not have retrospective application, and recovery can only be initiated within the period prescribed for a suit for recovery in a Civil Court. 4. Recovery is permissible only if the transaction relates to a State Sponsored Scheme or a socially desirable scheme, and debt waived by the State cannot be recovered.
Final Decision: The petitions challenging the validity and applicability of the Madhya Pradesh Lok Dhan (Shodhya Rashiyon Ki Vasuli) Adhiniyam, 1987, were dismissed. The Court directed that in all cases where objections have been raised to the maintainability of the action under the Act, the Recovery Officer shall first decide the same before proceeding to enforce the recovery.
( 1 ) THIS petition and the connected petitions M. P. 2784/93 (Munusigh v. State of M. P. and others), M. P. No. 2128/93 (Sabu Singh and another v. State of M. P. and others), M. P. No. 825/93 (Amulya Biswas and others v. State and others), W. P. No. 1562/95 (Gopal Jhunjhunwala v. State of M. P. and others), W. P. No. 880/1997 (Mohammad Younus Farooqui v. State of M. P. and others), M. P. No. 1788/1993 (Gajanan Oil Mill v. Bank of India and others) and M. P. No. 3731/91 (Dinesh Chandra Mohabe v. State of M. P. and others) challenge the validity and applicability of the Madhya Pradesh Lok Dhan (Shodhya Rashiyon Ki Vasuli) Adhiniyam, 1987 (No. 1 of 1988) known in English as the Madhya Pradesh Public Moneys (Recovery of Dues) Act, 1987 (hereinafter referred to as the 'act') and the proceedings taken thereunder. Since the petitions raise common controversy based on similar challenge to the vires of the said Act and the action taken thereunder, the petitions were heard together and are being, therefore, disposed of by this common order.
( 2 ) THE Madhya Pradesh Lok Dhan (Shodhya Rashiyon Ki Vasuli) Adhiniyam, 1981 was enacted to provide for the speedy recovery of certain classes of dues payable to the State Government or to the Madhya Pradesh Financial Corporation or any other Corporation or to a Banking Company or to any Government Company or for matters connected therewith. The said Act had received the assent of the Governor on 19-5-1981 which was first published in the Madhya Pradesh Gazette (Extraordinary) dated 23-5-1981. This Act was repealedby the said Adhiniyam, 1987 (No. 1 of 1988) which received the assent of the President on the 18th December, 1987 which was published in the Madhya Pradesh Gazette (Extraordinary) dated the 2nd January, 1988. Section 7 of this Act provides for the Repeal and Validation of the earlier Act of 1981 (No. 27 of 1981) and lays down that any proceedings instituted for the recovery of any sum under the repealed Act and pending on the date of such repeal, shall be deemed to have been instituted under this Act and shall continue in accordance with the provisions of this Act. It further validates the judgment, decree or order of any Court and the action taken under the repealed Act as if the same were under the corresponding provisions of the Act notwithstanding that the repealed Act had not been reserved for the assent of the President and was not assented to by the President.
( 3 ) THE Act No. 1 of 1988 has also been enacted for the very purpose for which the Act No. 27 of 1981 had been enacted. Section 3 of the Act provides for recovery of certain dues as arrears of land revenue in cases, inter alia, where any person is a party to any agreement relating to a loan, advance or grant given to him or relating to payment of price of goods sold to him on credit or relating to hire-purchase of goods sold to him by a Banking Company or a Government Company under a State sponsored scheme or as the case may be, under a socially desirable scheme. "banking Company" has been defined in Section 2 (b) of the Act while the "state sponsored Scheme" in Section 2 (h) and "socially Desirable Scheme" in Section 2 (i) thereof. Since the petitioner challenges mainly the validity of the procedure prescribed and the restrictions contained in Section 3 of the Act, the section is reproduced hereunder for ready reference :-5. 3 Recovery of certain dues as arrears of land revenue.- (1) where any person is a party,- (A) to any agreement relating to a loan, advance or grant given to him or relating to payment of price of goods sold to him on credit or relating to hire-purchases of goods sold to him by the State Government or a Corporation by way of financial assistance; or (B) to any agreement relating to loan advance or grant given to him or relating to payment of price of goods sold to him on credit or relating to hire-purchase of goods sold to him by a banking company or a Government Company under a S
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