BANK OF INDIA v. KALPTARU VANIKA, BHOPAL — 1998 DIGILAW 638 (MP)

S. P. SRIVASTAVA, J. ( 1 ) HEARD the learned counsel for the petitioner as well as the learned counsel representing the contesting respondents. ( 2 ) THE petitioner-Bank had issued a recovery-certificate contemplated under Section 3 of the Madhya Pradesh Lok Dhan (Shodhya Rashiyon Ki Vasuli) Adhiniyam, 1987, against (1) M/s. Kalptaru Vanika, a Partnership Firm as well as (2) Mrs. Praveen Malik, Partner, (3) Mrs. Reeni Malik, (4) Mrs. Sarita Tondon, and (4) Mr. Ramakant Ram, who were its partners, for the recovery of an amount of Rs. 22,80,797/- along with an interest calculated at the rate of 18. 25 per cent. In the aforesaid recovery-certificate it had also been indicated that Mr. Subhash Malik, the present respondent No. 6, was the guarantor for securing the payment due to the Bank. The aforesaid recovery certificate was issued on 8-10-1996. ( 3 ) PURSUANT to the recovery-certificate indicated hereinabove, proceedings for the recovery of the amount mentioned therein were initiated under the provisions of the Madhya Pradesh Lok Dhan (Shodhya Rashiyon Ki. Vasuli) Adhiniyam, 1987. The Scheme underlying the provision of the aforesaid Act clearly indicates the recovery-certificate has to be issued by the 'creditor authority' as contemplated under Section 3 (1) (D) (c) of the Act. This recovery certificate has to be executed for the amount determined to be due which has to be recovered by the 'recovery Authority' contemplated under Section 3 (2) of the Act. ( 4 ) UNDER the impugned order passed by the Board of Revenue, directions have been issued requiring the Recovery Authority to ensure that the mortgaged properties are proceeded with first for the recovery of the amount in dispute and in case the amount recovered falls deficient in that even the proceedings for recovery of the amount from the partnership firm's other properties situate in other district be initiated. The Board of Revenue has further provided that the debtors may raise their objections in regard to damages, Damduppat and penal rate of interest etc. which objections shall be disposed of in accordance with law. ( 5 ) FEELING aggrieved by the aforesaid directions the Banking Company which had advanced the amount of loan to the debtor-respondents and at whose instance the 'creditor authority' had issued the recovery certificate has now approached this Court seeking redress praying for the quashing of the order passed by the Board of Revenue. ( 5 ) FEELING aggrieved by the aforesaid directions the Banking Company which had advanced the amount of loan to the debtor-respondents and at whose instance the 'creditor authority' had issued the recovery certificate has now approached this Court seeking redress praying for the quashing of the order passed by the Board of Revenue. ( 6 ) LEARNED counsel for the petitioner has strenuously urged that the Board of Revenue has erred in issuing the directions, referred to herein above, which were wholly unwarranted. What has been contended is that the mortgaged property is not sufficient to satisfy the claim of the petitioner and since a certificate had been issued in this connection by the Collector before, there was no justification for issuing the direction for first exhausting the mortgaged property for raising the amount to satisfy the claim and the Recovery Authority could straightway proceed to recover the amount in dispute from the other properties belonging to the debtors. ( 7 ) THE evidence and materials which have been brought on record do not indicate that the Recovery Authority had in fact taken effective steps to get sold the immoveable properties mortgaged with the Bank securing the payment of the amount found due. There is nothing on the record which could lead to an inference that the amount fetched from the sale of the immoveable properties which stood mortgaged with the petitioner was deficient in any manner. In fact, this stage has not reached as yet. In the aforesaid connection it may be noticed that as provided under Section 4 (2) (b) of the Adhiniyam of 1987 aforesaid, in every case of mortgage, charge, pledge or other encumbrance on immovable property, such property or as the case may be the interest of the defaulter therein has to be sold first in the proceedings for recovery of the sum due from that person as arrears of land revenue and any other proceedings may be taken thereafter only if the Collector certifies that there is no prospect of realisation of the sum due through the first mentioned process within a reasonable time. In the present case, there is nothing to indicate that the mortgaged property had in fact been put to auction or had been sold and the amount recovered therefrom stood ascertained certifying that there was no prospect of realisation of the entire sum due through the sale of the mortgaged properties. The Recovery authority has, therefore, to take effective measures to sell the mortgaged property first. It is only in case, after exhausting the mortgaged property, it comes to the conclusion that the amount fetched is not sufficient to discharge the liability that it has to take recourse to the other methods including the method to proceed against the guarantor to recover the balance amount remaining due. ( 8 ) IT may further be noticed that considering the facts and circumstances of the present case since the loan had been advanced to a partnership firm and the liability of payment of the aforesaid amount stood fastened upon the partners of the firm also and in case the Recovery Authority found that the property in the name of the firm was not sufficient to satisfy the claim it could very well proceed against the properties of its partners in view of the provisions contained in the Partnership Act treating them as the persons who are also liable to discharge the liability. It is in this view of the matter that the names of the partners as well as the guarantor had also been specifically mentioned in the Recover-certificate. ( 9 ) THE direction of the Board of Revenue, therefore, requiring the Recovery Authority to proceed first against the mortgaged property for the recovery of the amount mentioned in the Recovery certificate does not suffer from any such legal infirmity which may justify an interference therein by this Court. ( 10 ) HOWEVER, the second direction issued by the Board of Revenue is to the effect that in case the mortgaged property is not found to be sufficient to discharge the liability indicated in the recovery certificate, in that case the recovery authority could proceed against the property of the firm situate in other districts. This direction appears to be misleading. According to the aforesaid direction the Recovery Authority could proceed only against that property which stood recorded in the name of the firm. This direction appears to be misleading. According to the aforesaid direction the Recovery Authority could proceed only against that property which stood recorded in the name of the firm. There can be no justification for limiting the jurisdiction of the Recovery Authority so as to confine it to the properties recorded in the name of the firm alone. The liability of the firm had to be discharged either by the sale of the properties standing in the name of the firm or if that was not sufficient or no such property was available then by proceeding against the property belonging to the partners. The Recovery Authority could proceed against the guarantor also since the liability of the principal debtor and the guarantor has to be treated as joint and several. ( 11 ) THE aforesaid direction is, therefore, modified clarifying that it will be open to the Recovery Authority to proceed for the recovery of the amount in dispute not only against the property recorded or belonging to the Partnership Firm but also from the properties belonging to the partners of the firm or to proceed against the properties belonging to the guarantor. ( 12 ) SO far as the third direction issued by the Board of Revenue under the impugned order is concerned it is to the effect that the debtor could raise the objections relating to damages,damdupatand penal rate of interest etc. before the Recovery Authority which could be disposed of by it in accordance with law. ( 13 ) IN the aforesaid connection it may be noticed that under the provisions of the Act of 1987 the Recovery certificate has to be issued by the Competent Authority of the Banking Company, which in the present case is the Authority contemplated under Section 3 (1) (D) (iii) (c) of the Act. The Collector of the district, which is the recovery authority, is only an authority which executes the recovery certificate. The Collector or the Officer subordinate to it cannot go behind the recovery certificate and find fault with it. The scope of the Authority which issues the recovery-certificate and the authority which executes the same to recover the amount mentioned therein has been explained in detail in the case of, New Laxmi Oil Mills v. Bank of India, reported in 1998 (I) MPJR 135 : (AIR 1998 Madh Pra 161 at P. 168 ). The scope of the Authority which issues the recovery-certificate and the authority which executes the same to recover the amount mentioned therein has been explained in detail in the case of, New Laxmi Oil Mills v. Bank of India, reported in 1998 (I) MPJR 135 : (AIR 1998 Madh Pra 161 at P. 168 ). It has been observed that the Act of 1987 no where restrains or bars raising a dispute either before the Officer empowered to issue the recovery certificate or before the Recovery Officer with regard to the validity of demand or its maintainability, clarifying that the officer empowered to issue the recovery certificate and the 'recovery Officer,' both, discharge functions under the Statute and cannot invade the rights of the citizen without adherence to the basic principle of permitting the persons likely to be affected to represent against the intended action. ( 14 ) IN the present case, however, there is no dispute that the Recovery Authority is proceeding against the persons who are in fact the debtors and who stand fastened with the liability to pay the amount in dispute. The Recovery Authority in fact acts as an Executing Authority and an objection which can legally be raised in such proceedings have to be of a limited nature. The Recovery Authority, as has already been indicated above, cannot go behind the Recovery certificate or determine the question in regard to the liability fixed therein. However, the Recovery authority can go into the questions relating to inherent lack of jurisdiction or the like in the matter relating to either the issuance of the recovery certificate or the lack of jurisdiction to proceed against the property sought to be utilised for the discharge of the liability. There may be a case were the authority issuing the recovery certificate lacks jurisdiction to do so. There may also be a case where the property being proceeded with does not belong to the debtors and cannot be utilised to satisfy the demand. There may yet be a case where the procedure adopted for recovering the amount due is vitiated in law and suffers from any procedural irregularity going to the root of the matter resulting in material prejudice to the debtors. Only such types of objections can be entertained and determined by the Recovery Authority. There may yet be a case where the procedure adopted for recovering the amount due is vitiated in law and suffers from any procedural irregularity going to the root of the matter resulting in material prejudice to the debtors. Only such types of objections can be entertained and determined by the Recovery Authority. But, it cannot sit in appeal over the decision of the competent authority, who had issued the recovery certificate. The debtors, however, can raise their grievance against the determination of the extent of liability before the competent authority vested with the jurisdiction to issue the recovery certificate. ( 15 ) IN the aforesaid view of the matter the direction No. 3 issued by the Board of Revenue under the impugned order is also modified to the effect that the objections which can be raised by the debtors and entertainable by the Recovery Authority shall be limited in scope as indicated hereinabove. ( 16 ) THE Recovery certificate in the present case had been issued in the year 1986. The amount of loan, as has already been noticed hereinabove, is over Rs. 22 lacs. The liability as initially determined is increasing day by day with the addition of the amount of interest. ( 17 ) IT must not go unnoticed that it is the public money which is sought to be recovered. The manner in which the recovery authority is proceeding to execute the recovery certificate is highly unsatisfactory. The result of the delay in recovery of the amount is that the utilisation of the public money to satisfy the genuine requirement of the needy stands blocked. Such a situation has to be avoided and the recovery authority must ensure that the public money is recovered from the defaulters like the debtors in the present case at the earliest. ( 18 ) CONSIDERING the facts and circumstances brought on record this petition is disposed of with the observations and directions indicated hereinabove requiring the respondents No. 8 and 9 to ensure that the proceedings for the recovery of the amount in dispute are completed expeditiously. Order accordingly. .