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2001 DIGILAW 856 (ALL)

SHARDA DEVI v. STATE OF U. P

2001-08-27

A.K.YOG, G.P.MATHUR, S.K.SEN

body2001
G. P. MATHUR, J. ( 1 ) THIS matter has come before us on a reference made by a Bench as in its opinion there was conflict of opinion in two Division Bench decisions of this Court rendered in Anupam Sari Centre v. Collector , 1999 (1) AWC 237 and M/s. Lal and Kumar v. State of U. P. , AIR 1998 All 156 : (1998 All LJ 987) and also Writ Petition No. 22507 of 1988 (M/s. R. K. Brothers v. Collector, Kanpur ). ( 2 ) THE case set up by the petitioner is that she is carrying on business of selling and supplying lubricating oil, mobil, grease and break oil in retail and whole-sale basis in the name and style of M/s. Sharda Automobiles Ltd. which is a sole proprietorship concern. In order to meet her capital requirements, the petitioner approached Union Bank of India, Pandeypur Varanasi, for financial assistance, which sanctioned to her a cash credit (Hypothecation) Limit facility up to Rs. 25,000 on 23/06/1992 and the limit was enhanced to Rs. 2 lakhs on 16/08/1995. The amount advanced from time to time was repayable with interest @ 14 per cent per annum with quarterly rests or such other rate of rates which may be fixed and notified as per the guidelines issued by the Reserve Bank of India. The mode of operation of the account was that the petitioner could take advance from the bank on credit basis from time to time in cash as per the sanctioned limit and deposit the amount as per schedule and on late payment, was liable to pay interest on the outstanding amount. The petitioner failed to keep her credit account regular and was accordingly served with a notice dated 28/10/1997 intimating that a sum of Rs. 2,01,337. 30 along with further interest thereon from 26/09/1995 was due and outstanding against her and she was called upon to pay the said amount within 15 days of the receipt of the notice. Due to certain unavoidable financial contingencies, the petitioner could not make timely payments and vide lettrer dated 21/11/1998 requested the bank to encash in Fixed Deposit Receipts of her husband, who was the guarantor for the payment of loan, before maturity time and adjust the same in her account. The bank encashed the Fixed Deposit Receipts of her husband and adjusted Rs. The bank encashed the Fixed Deposit Receipts of her husband and adjusted Rs. 1,14,500 towards the said cash credit account. However, on 4/02/2000 the bank forwarded a Recovery Certificate under the provisions of U. P. Public Money (Recovery of Dues) Act, 1972 (hereinafter referred to as the Act) for recovering Rs. 2,22,543 from the petitioner. She came to know about the certificate when one of the guarantors Babban Singh was arrested by Tehsil authorities. The petitioner contends that the money advanced to her by the bank under the cash credit limit facility cannot be recovered as arrears of land revenue under the provisions of the Act and the entire proceedings initiated against her under the said Act including the recovery certificate are illegal and wholly without jurisdiction and are liable to be quashed. The relief claimed in the writ petition is that the recovery certificate dated 4/02/2000 issued by the bank be quashed and a writ of mandamus be issued commanding the respondents (State of U. P. and Tehsildar, respondents Nos. 1 and 2) not to recover the amount in question from the petitioner as arrears of land revenue. ( 3 ) IN Anupam Sari Centre v. Collector, 1999 (1) AWC 237 , it was held that where the bank had advanced money under a State Sponsored Scheme, it can be recovered by the Collector as arrears of land revenue on a certificate being sent by the concerned officer of the bank under S. 3 (1) (b) of the Act but any amount taken as loan under a cash credit limit facility cannot be recovered under the provisions of the Act. However, in Krishna Rice Mills v. State of UP, 2000 (3) ACW 2583 : ( AIR 2000 All 343 ), it was held that money taken as loan under the cash credit facility could also be recovered under the provisions of the Act in addition to those which had been advanced under the State Sponsored Scheme. In M/s. Lal and Kumar v. State of U. P. , AIR 1998 All 156 : (1998 All LJ 987), a Division Bench dismissed the writ petition challenging recovery proceedings initiated against the writ petitioner who had been granted cash credit limit facility up to Rs. 15 lakhs with the observation that neither equity nor law was in his favour. In M/s. Lal and Kumar v. State of U. P. , AIR 1998 All 156 : (1998 All LJ 987), a Division Bench dismissed the writ petition challenging recovery proceedings initiated against the writ petitioner who had been granted cash credit limit facility up to Rs. 15 lakhs with the observation that neither equity nor law was in his favour. ( 4 ) THE principal question which requires consideration here is what is the scope of S. 3 (1) (b) of U. P. Public Moneys (Recovery of Dues) Act, 1972 and whether any money advanced by a banking company, which is not under a State Sponsored scheme, can also be recovered by taking recourse to the provisions of the Act by the Collector as arrears of land revenue if a certificate has been sent to him by local agent of the bank mentioning the amount and requesting him to recover the same as if it was an arrears of land revenue. The preamble of the Act reads as follows :-an Act to provide, with retrospective effect, for the speedy recovery of certain classes of dues payable to the State Government or to the Uttar Preadesh Financial Corporation or any other corporation notified by the State Government in that behalf of to any nationalised or other Scheduled Bank or to a Government Company, and to validate certain acts done and proceedings taken in the past, and to provide for matters connected therewith. ( 5 ) SUB-SECTIONS (b), (f) and (g) of S. 2 and sub-sections (1), (2) and (3) of S. 3 which are relevant for deciding the controversy in hand are being reproduced below :- (b) financial assistance" means any financial assistance - (i) for establishing, expanding moderning renovating or running any industrial undertaking; or (ii) for purposes of vocational training; or (iii) for the development of agriculture, horticulture, animal husbandry or agro-industry; or (iv) for purposes of any other kind of planned development; or (v) for relief against distress; (f) banking company" means the State Bank of India, constituted under the State Bank of India Act, 1955, a subsidiary bank as defined in the State Bank of India (Subsidiary Banks) Act, 1959, a corresponding new bank constituted under the Banking Companies (Acquisition and Transfer of Undertakings) Act, 1970, or a banking company as defined in the Banking Regulation Act, 1949, (or a financing bank or Central Bank as defined in the Uttar Pradesh Co-operative Societies Act, 1965 not being a land development bank;) (g) State sponsored scheme" means a scheme sponsored by way of financial assistance by the State Government under which the State Government either advances money to a banking company or a Government company for the purpose of disbursing loans, advances or grants or for purpose of sale of goods on credit hire-purchase or guarantees or agrees to guarantee the repayment of a loan, advance or grant or the payment of the price of goods sold on credit or hirepurchase (and includes any other scheme of financial assistance, by a banking company or a Government company, which is declared to be a State sponsored scheme by the State Government by notification in the Gazette.)3. Recovery of certain dues as arrears of land revenue - (1) Where any person is party - (a) to any agreement relating to a loan, advance or grant given to him or relating to credit in respect of, or relating to hire-purchase of, goods sold to him by the State Government or the Corporation, by way financial assistance; or (b) to any agreement relating to a loan, advance or grant given to him or relating to credit in respect of, or relating to hire-purchase of goods sold to him, by a banking company or a Government company, as the case may be, under a State-sponsored scheme; or (c) to any agreement relating to a guarantee given by the State Government or the Corporation in respect of a loan raised by an industrial concern; or (d) to any agreement providing that any money payable thereunder to the State Government (or the Corporation) shall be recoverable as arrears of land revenue; and such person - (i) makes any default in repayment of the loan or advance or any instalment thereof; or (II) having become liable under the conditions of the grant to refund the grant or any portion thereof, makes any default in the refund of such grant or portion or any instalment thereof; or (III) otherwise fails to comply with the terms of the agreement, then, in the case of State Government, such officer as may be authorised in that behalf by the State Government by notification in the Official Gazette, and in the case of the Corporation or a Government company the Managing Director (or where there is no Managing Director then the Chairman of the corporation, by whatever name called) thereof, and in the case of a banking company, the local agent thereof, by whatever name called, may send a certificate to the Collector, mentioning the sum due from such person and requesting that such sum together with costs of the proceedings be recovered as if it were an arrear of land revenue. (2) The Collector on receiving the certificate shall proceed to recover the amount stated therein as an arrear of land revenue. (3) No suit for the recovery or any sum due as aforesaid shall lie in the civil Court against any person referred to in sub-section (1 ). (2) The Collector on receiving the certificate shall proceed to recover the amount stated therein as an arrear of land revenue. (3) No suit for the recovery or any sum due as aforesaid shall lie in the civil Court against any person referred to in sub-section (1 ). " ( 6 ) THE preamble shows the Act has been enacted for speedy recovery of certain classes of dues. While examining the constitutional validity of the Act the Supreme Court in Director of Industries v. Deep Chand Agrawal, AIR 1980 SC 801 observed as follows in para 6 of the reports : -. . . . . . . . . IN order to decide this question, it is necessary to determine the object of the Act. . . . . . . The Act is passed with the object of providing a speedier remedy to the State Government to realise the loans advanced by it or by the Uttar Pradesh Financial Corporation. The State Government while advancing loans does not act as an ordinary banker with a view to earning interest. Ordinarily it advances loans in order to assist the people financially in establishing the industry in the State or for the development of agriculture, animal husbandry and for such other purposes which would advance the economic well-being of the people. The amounts so advanced are repayable in easy instalments with interest which would ordinarily be lower than the rate of interest payable on loans advanced by banking institutions which are run on commercial lines. The loans are advanced from out of the funds of the State in which all the people of the State are vitally interested. Moneys advanced by the State Government have got to be recovered expeditiously so that fresh advances may be made to others who have not received financial assistance from the State Government. . . . . . . . . . . . . . . " ( 7 ) THIS judgment was rendered prior to the amendment of the Act by U. P. Act No. 17 of 1975 when the words by a banking company were not there in clause (b), sub-section (1) of S. 3. . . . . . . . . . . . . . . " ( 7 ) THIS judgment was rendered prior to the amendment of the Act by U. P. Act No. 17 of 1975 when the words by a banking company were not there in clause (b), sub-section (1) of S. 3. However as pointed out by the Apex Court, the object of the Act is to provide a speedier remedy to the State Government or the Financial Corporation to recover the loans as they were advanced on easy instalments with interest which would ordinarily be lower than the rate of interest payable on loans advanced by banking institutions which are run on commercial lines so that fresh advanced may be made to others. ( 8 ) SUB-SECTION (g) of S. 2 defines a State Sponsored Scheme and it means as follows:- (1) A scheme sponsored by way of financial assistance by the State Government under which the State Government advances money to a banking company or a Government company for the purposes of disbursing loans, advances or grants or for the purpose of sale of goods on credit or hire-purchase. (2) A scheme sponsored by way of financial assistance by the State Government under which the State Government guarantees or agrees to guarantee the repayment of a loan, advance or grant or the payment of the price of goods sold in credit or hire-purchase. (3) Any other scheme of financial assistance by a banking company or a Government company which is declared to be a State-sponsored scheme by the State Government by notification in the Gazette. ( 9 ) THE last part of sub-section (g) of S. 2 shows that that any scheme of financial assistance by a banking company or a Govenment company can be declared to be a State-sponsored scheme by issuing a notification in the Gazette. ( 10 ) SRI A. C. Tripathi, learned counsel for the petitioner has produced before us copies of several such schemes and a reference to one such scheme will be helpful in understanding the provisions of the Act in question. ( 10 ) SRI A. C. Tripathi, learned counsel for the petitioner has produced before us copies of several such schemes and a reference to one such scheme will be helpful in understanding the provisions of the Act in question. The State Government notified a scheme vide notification No. SR (IF)-3438/x-86-46-RD-86, dated 14/08/1986 which was published in U. P. Gazette Part-1 dated 17/01/1997 pages 117-120 (1987 Lucknow Law Times Part (V) page 207) and it reads as follows :-in exercise of powers under clause (g) of S. 2 of the Uttar Pradesh Public Moneys (Recovery of Dues) Act, 1972 (U. P. Act 23 of 1972), as amended by the Uttar Pradesh Public Money (Recovery of Dues) Amendment Act, 1975 (U. P. Act 17 of 1975), the Governor is pleased to declare that the following scheme mentioned in the schedule annexed to this notification shall be a State Sponsored Scheme within the meaning of the said clause : schedule scheme For Financing Under Self-Employment Programme for Urban Poor (Sepup) by Public Sector Banks. 1. Objective the objective of the scheme is to enable identified families living below the subsistence legal in Metropolitan areas, cities and towns with population exceeding, 10,000 according to 1981census, to undertake self-employment ventures with the help of subsidy and bank credit. 2. Title the scheme will be known as Self-Employment Programme for Urban Poor. " ( 11 ) THEREAFTER the detailed provisions of the scheme are given. The scheme is applicable to borrowers desirous of undertaking activity listed in Appendix-I and other similar activities and fulfilling the conditions enumerated therein. In para 8, it is mentioned that assistance up to Rs. 5000 depending on unit cost will be admissible to a beneficiary for undertaking activities indicated in Appendix-I or similar activities. Subsidy at the rate of 25 per cent of the total assistance will be provided by Government of India through the Reserve Bank of India which shall be kept as term deposit with the financing bank office to be adjusted against the loan after 75 per cent of the assistance given is repaid by the borrower. Another important feature mentioned in this paragraph is that loan under the scheme would carry interest at the rate of 10 per cent annum. Another important feature mentioned in this paragraph is that loan under the scheme would carry interest at the rate of 10 per cent annum. Appendix I contains long list of 33 trades or occupation like rickshaw pulling, shoe repairers (cobblers), carpentry, book-binders, vegetable vendors, launders and press workers, blacksmith, plumber, caning of chairs, newspaper boys, shoeshine boys, beedi rollers, etc. ( 12 ) SOME other similar schemes notified under S. 2 (g) of the Act as a State Sponsored Scheme are as follows :-2. Scheme for providing self-Employment to Educated Unemployed Youth in the State of U. P. by Commercial Banks issued by Notification No. S. R. (IF) 4421/x-85-37 (5) RD-83, dated 17/10/1985 published in U. P. Gazette, Part 1-Ka dated 19/07/1986, page 2609 (also published in 1986 LLT Part V-301) ( 13 ) THIS scheme is applicable to unemployed youth who are matriculate and above within the age group of 18 to 35 years and the banks are to provide to each entrepreneur a composite loan not exceeding Rs. 25,000 without requiring collateral guarantee or owners contribution as margin. The rate of interest is 10 per cent per annum in backward areas and 12 per cent per annum in other areas and the repayment is to be made in instalments over 3-7 years with an initial moratorium between 6 and 18 months. 3. Scheme for Financing Ex-service men and their widows for Self-Employment in U. P. by Commercial Banks issued by Notification No. S. R. (IF)-4819/x-85-46 (2) RD-85 dated 18/11/1985 published in U. P. Gazette, Part VI dated 11/10/1986, page 1749 (also published in 1987 LLT Part V, page 118 ). ( 14 ) THE maximum limit for loan under this scheme is Rs. 50,000 per borrower and rate of interest is 11 per cent per annum. It also provided for interest subsidy. 4. Scheme for Financing for Purchase of Horse-cart/tonga/ekka/kharkhara in the district of U. P. by Regional Rural Banks. Published in Gazette on 13th February, 1988 (1988 LLT Part V 74 ). ( 15 ) LOAN to the extent of Rs. 5000 per borrower which included Rs. 2900 for horse/pony, Rs. 1900 for cart and Rs. 200 for reins. ( 16 ) THE purpose of the schemes is to help weaker and under privileged strata of society to earn their livelihood by carrying on their trade, occupation or business. ( 15 ) LOAN to the extent of Rs. 5000 per borrower which included Rs. 2900 for horse/pony, Rs. 1900 for cart and Rs. 200 for reins. ( 16 ) THE purpose of the schemes is to help weaker and under privileged strata of society to earn their livelihood by carrying on their trade, occupation or business. The loan advanced is for a very small amount, carrying low rate of interest with a long period of repayment of loan. The banks in the course of their normal banking activity do not provide such small amount of loans nor at such low rate of interest. However, under such schemes which were notified as a State Sponsored Schemes, the banks were put under an obligation to give small amount of loan to persons belonging to under privilege and weaker (class) of society and to charge low rate of interest which may not have been commercially profitable to them. It is also noteworthy that the banks had no discretion in the matter and all the terms and conditions of the transaction of loan under a notified State Sponsored Scheme was controlled by the State Government. Such disbursement of loans by the banks was clearly different from their normal banking business. ( 17 ) SECTION 3 provides for recovery of certain dues as arrears of land revenue. It may be noticed that the heading of the section mentions the words certain dues and this clearly shows the intention of the Legislature that the provision is applicable only to such type of category of dues which have been enumerated in the section and not to all kind of dues. We are concerned here with a loan advanced by a bank which falls within the ambit of clause (b) of sub-section (1) of Section 3 of the Act as a banking company" is not mentioned in any other clause. We are concerned here with a loan advanced by a bank which falls within the ambit of clause (b) of sub-section (1) of Section 3 of the Act as a banking company" is not mentioned in any other clause. A plain reading of this clause would show that its provisions would be applicable if either of the following conditions are satisfied, (1) any person is party to an agreement relating to a loan, advance or grant given to him or relating to credit in respect of or relating to hire purchase of goods sold to him by a banking company under a State Sponsored Scheme; or (2) any person is party to any agreement relating to a loan advance of grant given to him or relating to credit in respect of or relating to hire purchae of goods sold to him by a Government company under a State Sponsored Scheme. ( 18 ) LEARNED counsel for the bank has submitted that the expression under a State Sponsored Scheme qualified the later part viz. a Government company" and does not qualify the earlier part viz. by a banking company. The contention is that if any person is party to any agreement relating to a loan, advance or grant given to him or relating to credit. . . . . . . etc. by a banking company, the provisions of clause (b) would be applicable and it will be open to the banking company to send a certificate to the Collector mentioning the sum due from such person and the Collector can thereafter recover the amount as an arrears of land revenue. In our opinion, the contention raised cannot be accepted as it omits to take into consideration the words as the case may by occurring before the expression under a State Sponsored Scheme. If this was the intention of the Liegislature, the last part of the clause would have been by a banking company or a Government company under a State Sponsored Scheme" and there was no necessity of using the words as the case may be after the expression by a banking company or a Government company and before the expression under a State Sponsored Scheme. It is well settled principle of interpretation of statute that effort should be made to give meaning to each and every words used by the Legislature. It is well settled principle of interpretation of statute that effort should be made to give meaning to each and every words used by the Legislature. The Legislature is deemed not to waste its words or to say anything in vain and a construction which attributes redundancy to the legislature will not be accepted except for compelling reasons. In Aswini Kumar Gosh v. Arvinda Gosh, AIR 1952 SC 369 , the Court ruled that it is not a sound principle of construction to brush aside words in a statute as being inapposite surplusage, if they can have the appropriate application in circumstances conceivable within the contemplation of the statute. In Rao Shiv Bahadur Singh v. State of Vindhya Pradesh, AIR 1953 SC 394 : (1953 Cri LJ 1480), it was held that it is incumbent upon the Court to avoid the construction, if reasonably permissible, on the language, which render a part of the State devoid of any meaning or application. ( 19 ) A reading of sub-section (1) of S. 3 would show that clauses (a), (b) and (c) relate to different types of loans, advances or credits. Clause (a) relates to loans, advances or credits given by way of financial assistance. Financial assistance has a special meaning and has been defined in sub-section (b) of S. 2. Clause (c) relates to loans raised by industrial concern. Here again industrial concern has a special meaning under the Act and it has been defined in sub-section (d) of S. 2. Clause (b) relates to loans or advances or credits given by a banking company or a Government Company, as the case may be, under a State Sponsored Scheme, which has been defined in sub-section (g) of S. 2. The words under a state sponsored scheme" are conspicuous by their absence in clauses (a) and (c ). These three clauses namely, (a), (b) and (c) identify the type of loans, advances or credits and, therefore, they have been separately provided. If the intention of the Legislature was that any loan, advance or credit given by a banking company which was not under a State sponsored scheme could also be recovered under the provisions of the Act if an agreement had been executed by the borrower with the bank, a separate provision similar to clause (d) would have been enacted. If the intention of the Legislature was that any loan, advance or credit given by a banking company which was not under a State sponsored scheme could also be recovered under the provisions of the Act if an agreement had been executed by the borrower with the bank, a separate provision similar to clause (d) would have been enacted. It is noteworthy that any money, advance or credit given by the State Government or a corporation which is not of the type covered by clauses (a), (b) and (c) viz. it is not by way of financial assistance or under a State Sponsored Scheme or is in respect of a loan raised by an industrial concern, cannot be recovered under the provisions of the Act unless there is a specific agreement between the borrower and the State Government or the Corporation to the effect that it shall be recoverable as arrears of land revenue. Clause (d) which deals with such a situation clearly contemplates existence of an agreement specifically providing for recovery of the loan as arrears of land revenue. Therefore the contention that in clause (b) of sub-section (1) of S. 3, the expression under a State Sponsored Scheme" do not qualify a loan, advance or credit given by a banking company cannot be accepted. With profound respects we are unable to accept the view taken in Krishna Rice Mills (supra), to the effect that the words to any agreement relating to a loan, advance or grant given to him" is a clause sufficient to include the petitioner and, therefore, the proposition or appearing thereafter creates another contingency which is relating to the credit in respect of, or relating to hire-purchase of goods sold to him by a banking company. . . . . . . under a State Sponsored Scheme, and the second clause is independent of the first clause. What is relevant to be seen here is whether the expression under a State Sponsored Scheme" would also qualify the words by a banking company or they qualify the words government company alone. The agreement may relate to eiteither a loan or advance or credit in respect of or relating to hire-purchase of goods sold. The purpose for which the money is given namely, it is a loan simpliciter or is relating to hire-purchase of goods sold to him is not at all relevant for deciding the controversy. The agreement may relate to eiteither a loan or advance or credit in respect of or relating to hire-purchase of goods sold. The purpose for which the money is given namely, it is a loan simpliciter or is relating to hire-purchase of goods sold to him is not at all relevant for deciding the controversy. What is decisive is whether the loan or advance or credit was given under a State Sponsored Scheme. In our opinion, clause (b) applies to only such categories of loans or advances or credits which have been given under a State Sponsored Scheme by a banking company or a Government company and not to all kinds of loans or advances. ( 20 ) IN a matter relating to repayment of loan by instalments there can be a serious and bona fide dispute regarding the exact amount which has accrued as interest and also about the total amount outstanding against a borrower. Under the scheme of the Act, power has been conferred upon the bank to send a certificate to the Collector mentioning the amount due from a borrower and thereafter the amount is recovered as arrears of land revenue. The bank is empowered to take a unilateral decision regarding the quantum of the amount which is due from the borrower as neither a notice nor an opportunity of hearing to the borrower at the time of taking of such a decision is provided under the Act. Under sub-section (5) of S. 3, the certificate sent to the Collector is final and cannot be questioned in any suit or in any reference to arbitration proceedings. No civil Court or any other authority can grant an injunction in respect of any action taken or intended to be taken in pursuance of any power conferred by or under the Act. The only remedy available to the person from whom recovery is sought to be made is to pay the amount under protest, whereupon the recovery proceeding shall be stayed and thereafter make a reference under or otherwise enforce an arbitration agreement in respect of amount so paid or file a suit against the State Government in the Civil Court for the amount so paid where he will have a right to give evidence of the amount, if any, which he alleges to be due from him in accordance S. 287-A, U. P. Zamindari and Land Reforms Act. Filing of a suit for recovery of the amount after the money has already been paid is rather a harsh remedy for a borrower who disputes the correctness of the amount mentioned in the recovery certificate. This shows that the provisions of the Act are very stringent. The Act may be constitutionally valid as under the State Spondored Schemes credit is conveniently available to weaker section of society without furnishing collateral security and at a rate of interest which is lower than the market rate, and the repayment has to be made in easy instalments over a long period. The moneys advanced by the State Government have got to be recovered expeditiously so that fresh advances may be made to others who have not yet received financial assistance as pointed out in Director of Industries v. Deep Chand, AIR 1980 SC 801 . But the Act may in a given case cause untold hardship on the borrower as the bank is empowered to take a unilateral decision by itself regarding the quantum of the amount which is due from a borrower. In view of these salient features of the Act, it is necessary to give it a strict meaning and should be held applicable only to those cases which clearly and squarely fall within its ambit. ( 21 ) THERE are some additional and important reasons for holding that loans or advances or credits given by a banking company under a State Sponsored Scheme alone can be recovered under the provisions of the Act. Entry No. 45 of Union list of Seventh Schedule is banking" and in view of Art. 246 of the Constitution, the Parliament alone has the power to make laws with respect to banking. Banking means the business of a banker and in legal parlance it is wide enough to embrace any transaction coming within the legitimate business of a banker e. g. taking deposits or lending money on security of goods or documents and charging interest thereon. When a bank gives loan or advances or grants credit under a State Sponsored Scheme, the transaction is governed by the provisions of the scheme which has been framed by the State Government in exercise of power conferred by S. 2 (g) of the Act and the bank has no choice or discretion in the matter. When a bank gives loan or advances or grants credit under a State Sponsored Scheme, the transaction is governed by the provisions of the scheme which has been framed by the State Government in exercise of power conferred by S. 2 (g) of the Act and the bank has no choice or discretion in the matter. The bank has to grant very small amount of loan which may be Rs. 5000 or even less, charge a concessional rate of interest, and grant easy schedule of instalments for repayment over a long period. The entire transaction is completely controlled by the State Government and is monitored by its officers. It is in clear contradistinction with the normal commercial business of a bank which may be called banking. If the expression under a State Sponsored Scheme is held to be not qualifying the words by a banking company, as suggested by learned counsel for the bank, it would mean that any kind of loan, advance or credit and for whatever amount given by a banking company can be recovered under the provisions of the Act. Such an interpretation will clearly make the Act unconstitutional as the State Legislature has no legislative competence to make any law on the subject of banking, it being in the Union list. A statute or any provision therein must be so construed so as to make it effective and operative on the principle expressed in maxim. utres magis valeat quam perat. " It is an application of this principle that Courts start with a presumption in favour of constitutionality and prefer a construction which keeps the statute within the competence of the Legislature. The principle was applied by Chief Justice Gwyer for upholding the validity of the Act while answering the reference made by the Governor General. In the matter of the Hindu Womens Right to Property Act, 1937, AIR 1941 FC 72. In RMD Chamarbaugwalla v. Union of India, AIR 1957 SC 628 , a Constitution Bench after referring to the aforesaid decision explained the principle as under in para 13 of the reports : in 1941 FCR 12 : AIR 1941 FC 72, the question arose with reference to Hindu Womens Rights to Property Act (18 of 1937 ). That was an Act passed by the Central Legislature, and had conferred on Hindu widows certain rights over properties which devolved by intestate succession and survivorship. That was an Act passed by the Central Legislature, and had conferred on Hindu widows certain rights over properties which devolved by intestate succession and survivorship. While the subject to devolution was within the competence of the Centre under Entry 7, List III, that was limited to property other than agricultural land, which was a subject within the exclusive competence of the Provinces under Entry 21 in list II. Act No. 18 of 1937 dealt generally with property, and the contention raised was that being admittedly ultra vires as regards agricultural lands, it was void in its entirety; it was held by the Federal Court that the Central Legislature must, on the principle laid down in Macleod v. Attorney General for New South Wales, 1891 AC 455 (k), be presumed to have known its own limitations and must be held to have intended to enact only laws within its competence, that accordingly the word property in Act No. 18 of 1937 must be construed as property other than agricultural land, and that, in that view, the legislation was wholly intra vires. . . . . . . . . . . . " ( 22 ) THE same view was taken by another Constitution Bench in State of Bihar v. Smt. Charusila Dasi, AIR 1959 SC 1002 (para 14) ( 23 ) THEREFORE in order to sustain the constitutional validity of the Act, clause (b) must be confined to only such loans, advances or credits which have been given by a banking company under a State Spondored Scheme. Any construction or interpretation of clause (b) which permits a banking company to recover a loan, advance or credit which has not been given under a State Sponsored Scheme by taking recourse to the provisions of the Act must be rejected otherwise the Act itself would become unconstitutional for want of legislative competence of State Legislature. ( 24 ) THE provisions of Recovery of Debts Due to Banks and Financial Institutions Act, 1993 (Act No. 51 of 1993) enacted by the Parliament have a bearing on the controversy and therefore they have to be examined. The object of this Act is to provide for the establishment of Tribunals for expeditious adjudication and recovery of debts due to banks and financial institutions and for matters connected therewith or incidental thereto. The object of this Act is to provide for the establishment of Tribunals for expeditious adjudication and recovery of debts due to banks and financial institutions and for matters connected therewith or incidental thereto. In view of sub-section (4) of S. 1, the provisions of this Act apply where the amount of debt due to any bank is ten lakh rupees or more. The definition of banks as given in sub-section (d) of S. 2 of this Act shall take within its fold all such banks which have been defined as banking company" in sub-section (f) of S. 2 of the U. P. Public Moneys (Recovery of Dues) Act except for such banks which are defined under the U. P. Co-operative Societies Act, 1965. Sub-section (g) of S. 2 of this Act defines debt and it means any liability (inclusive of interest) which is alleged as due from any person by a bank or a Financial Institution during the course of any business activity undertaken by the bank. Sections 17 and 18 of this Act read as under :17. Jurisdiction, powers and authority of Tribunals.- (1) A Tribunal shall exercise on and from the appointed day, the jurisdiction, powers and authority to entertain and decide applications from the banks and financial institutions for recovery of debts due to such banks and financial institution. (2) An Appellate Tribunal shall exercise on and from the appointed day, the jurisdiction, powers and authority to entertain appeals against any order made, or deemed to have been made, by a Tribunal under this Act. 18. Bar of Jurisdiction.- On and from the appointed day, no Court or other authority shall have, or be entitled to exercise, any jurisdiction, powers or authority (except the Supreme Court, and a High Court exercising jurisdiction under Arts. 226 and 227 of the Constitution) in relation to the matters specified in. 17". ( 25 ) SECTIONS 17 and 18 of the 1993 Act confer exclusive jurisdiction on the Tribunals to decide applications from banks for recovery of debts. In view of Art. 254, the provisions of Recovery of Debts Due to Banks Act, 1993 shall prevail over U. P. Public Moneys (Recovery of Dues) Act, 1972 and if there is any repugnancy in the latter the same shall be void to the extent of repugnancy. In view of Art. 254, the provisions of Recovery of Debts Due to Banks Act, 1993 shall prevail over U. P. Public Moneys (Recovery of Dues) Act, 1972 and if there is any repugnancy in the latter the same shall be void to the extent of repugnancy. The effect of these provisions has been examined in considerable detail in Allahabad Bank v. Canara Bank, 2000 (4) JT (SC) 411, where in para 21 of the reports it was held as under : in our opinion, the jurisdiction of the Tribunal in regard to adjudication is exclusive. The RDB Act requires the Tribunal alone to decide applications for recovery of debts due to Banks or Financial Institutions. Once the Tribunal passes an order that the debt is due, the Tribunal has to issue a certificate under S. 19 (22) (formerly under S. 19 (7) to the Recovery Officer for recovery of the debt specified in the certificate. The question arises as to the meaning of the work recovery in S. 17 of the Act. It appears to us that basically the Tribunal is to adjudicate the liability of the defendant and then it has to issue a certificate under S. 19 (22 ). Under S. 18, the jurisdiction of any other Court or authority which would otherwise have had jurisdiction but for the provisions of the Act, is ousted and the power to adjudicate upon the liability is exclusively vested in the Tribunal. (This exclusion does not however apply to the jurisdiction of the Supreme Court or of a High Court exercising power under Art. 226 of the Constitution ). This is the effect of Ss. 17 and 18 of the act. " ( 26 ) THE view taken in Krishna Rice Mills (supra) will mean that where any person is party to any agreement relating to a loan, advance or grant given to him or relating to credit in respect of or relating to hire-purchase of goods sold to him by a banking company, the bank may send a certificate to the Collector mentioning the sum due from such person and the Collector shall proceed to recover the amount stated therein as arrears of land revenue. This would clearly come in conflict with the provisions of Recovery of Debts Due to Banks Act, 1993 where the Tribunal alone, to the exclusion of all other Courts or authorities, has been conferred jurisdiction to decide applications from the banks for recovery of debts due to them. Such an interpretation which makes the U. P. Act repugnant to the Central Act and, consequently, void in view of clause (1) of Art. 254 of the Constitution must be avoided in order to uphold the validity of the Act. There will be no repugnancy between the U. P. Act and 1993 Act passed by the Parliament if the loans, advances, grants or credits given by a banking company under a State Sponsored Scheme alone are held to be covered by clause (b) of S. 3 of the Act as such loans being for a very low amount are outside the purview of Recovery of Debts Due to Banks Act, 1993. The liability incurred by a borrower in such a case being not in the course of business activity of a bank" shall not be a debt as defined in S. 2 (g) of the 1993 Act and will not come within the ambit of Section 17. ( 27 ) SRI Sachendra Mohan, learned counsel for the bank in the connected writ petition has submitted that under Deposit Insurance and Credit Guarantee Corporation Act, 1961 (for short 1961 Act), the bank has deposited guarantee fee with the Deposit Insurance and Credit Guarantee Corporation established under the said Act and, as such, the case is covered by clause (c) of Section 3 of the Act and consequently the bank is entitled to recover the amount under the provisions of the Act. In our opinion, the argument raised is wholly fallacious. To attract clause (c) it is necessary that the person (borrower) himself be party to an agreement relating to a guarantee given by the State Government or Corporation in respect of loan. Secondly, the loan should be such which has been raised by an industrial concern as defined in clause (d) of S. 2 of the Act. There is neither any pleading nor any material on record to show that the petitioner is a party to any such agreement relating to a gurantee. Secondly, the loan should be such which has been raised by an industrial concern as defined in clause (d) of S. 2 of the Act. There is neither any pleading nor any material on record to show that the petitioner is a party to any such agreement relating to a gurantee. The preamble of 1961 Act shows that it has been enacted to provide for the establishment of a Corporation for the purpose of insurance of deposits and guarantee of credit facilities and for other matters connected therewith or incidental thereto. Section 16 of this Act provides that where an order for winding up or liquidation of an insured bank is made, the Deposit Insurance and Credit Guarantee Corporation established under S. 3 shall be liable to pay to every depositor of that bank, in accordance with the provisions of S. 17, certain amount of money. The deposit of certain amount of fee by the bank with the Corporation, in order to insure the deposits made with it, cannot satisfy the requirement of clause (c) of S. 2 of the Act so as to make the Act applicable. It may be mentioned here that this contention based upon Deposit Insurance and Credit Guarantee Corporation Act, 1961 has not been noticed or considered in any other decision of this Court except in Anupam Sari Centre v. Collector (supra), where also it was rejected. ( 28 ) LEARNED counsel also sought the assistance of clause (d) of S. 3 and submitted that the bank can recover the amount as arrears of land revenue by taking recourse to the provisions of the Act. The argument raised has absolutely no substance. In order to make the clause applicable there should be an agreement whereunder the borrower has agreed that the amount may be recovered as arrears of land revenue. Secondly, the words banking company existing in clause (b) are conspicuous by their absence in clause (d ). Therefore, clause (d) can have no application where a bank is seeking to recover its dues. ( 29 ) IN M/s. Lal and Kumar v. State of U. P. AIR 1998 All. 156 , the Court dismissed the writ petition with the observation that overshooting a cash credit limit and running an overdraft offends the contract between the petitioner and the bank and thus equity was against the petitioner. ( 29 ) IN M/s. Lal and Kumar v. State of U. P. AIR 1998 All. 156 , the Court dismissed the writ petition with the observation that overshooting a cash credit limit and running an overdraft offends the contract between the petitioner and the bank and thus equity was against the petitioner. The judgment does not show that any contention was raised that the loan given to the writ petitioner by the bank was not under a State Sponsored Scheme and as such could not be recovered under the provisions of the Act. In fact there is absolutely no reference to the Act in the judgment nor this point was considered. ( 30 ) AN analysis of the relevant provisions of the Act show that if any person who comes within the purview of clause (b) of sub-section (1) makes any default in repayment of loan or advance or any instalments; or having become liable under the conditions of the grant to refund the grant or any portion thereof, makes any default in the refund of such grant or portion or any instalment thereof, or otherwise fails to comply with the terms of the agreement, the local agent of the bank may send a certificate to the Collector mentioning the sum due from such person and the Collector on receiving the certificate shall proceed to recover the amount stated therein as arrears of land revenue. The Collector starts the proceedings for recovery on the basis of a certificate sent to him. The jurisdiction or authority of the local agent of the bank to send a certificate arises only on fulfilment of certain conditions and one of the important condition is that the person from whom the amount is due is of the category enumerated in clause (b) of sub-section (1 ). If the person does not fall within the aforesaid category, the local agent of the bank will have no jurisdiction to send the certificate to the Collector. The requirements of clause (b) of sub-section (1) should be fulfilled and satisfied before a certificate can be sent to the Collector for recovery of the amount as arrears of land revenue. If the person does not fall within the aforesaid category, the local agent of the bank will have no jurisdiction to send the certificate to the Collector. The requirements of clause (b) of sub-section (1) should be fulfilled and satisfied before a certificate can be sent to the Collector for recovery of the amount as arrears of land revenue. It follows as a corollary that if in a given case the requirements of clause (b) of sub -section (1) are not satisfied and a certificate is sent, the same would be without any authority of law and consequently without jurisdiction. The Collector cannot act upon a certificate which suffers from a fundamental error of jurisdiction and, consequently, if any proceeding for recovery of the amount as arrears of land revenue are taken on the basis of such a certificate, the same would be wholly illegal. It is well settled that an error of jurisdiction goes to the very root of the matter and this defect can be raised at any stage. In Kiran Singh v. Chaman Paswan, AIR 1954 SC 340 , it was held as follows :-it is a fundamental principle that a decree passed by a Court without jurisdiction is a nullity, and that its invalidity could be set up whenever and wherever it is sought to be enforced or relied upon, even at the stage of execution and even in collateral proceedings. A defect of jurisdiction, whether it is pecuniary or territorial, or whether it is in respect of the subject-matter of the action, strikes as the very authority of the Court to pass any decree, and such a defect cannot be cured even by consent of parties. ( 31 ) THE correctness of the above quoted principle of law has never been doubted and the principle is of general application. Therefore, if the borrower is not such a person who may satisfy the requirements of various clauses of sub-section (1) of S. 3, no certificate can be sent to the Collector to recover the amount under the provisions of the Act. If the local agent of the bank has erroneously assumed jurisdiction and has sent a certificate even though the case is not covered by clause (b) of sub-section (1) of S. 3, the recovery proceedings initiated by the Collector can be challenged in proceedings under Art. 226 of the Constitution. If the local agent of the bank has erroneously assumed jurisdiction and has sent a certificate even though the case is not covered by clause (b) of sub-section (1) of S. 3, the recovery proceedings initiated by the Collector can be challenged in proceedings under Art. 226 of the Constitution. It is true that exercise of jurisdiction under Art. 226 of the Constitution is discretionary in nature and the Court may refuse to exercise discretion in favour of a person if it finds that equity is against him or it will result in miscarriage of justice. While exercising its powers, the Court must keep in mind the well-settled principles on which such high prerogative writs are issued. At the same time it must be kept in mind that we are governed by rule of law and all actions taken must be supported by law. It cannot, therefore, be laid down as a principle of universal application that even though the proceedings initiated for recovery of the loan as arrears of land revenue are without jurisdiction as the loan does not fall within the purview of the Act yet the Court would shut its eyes and decline to exercise jurisdiction under Art. 226 of the Constitution only on the ground that the borrower owes money to the bank. In a proper case the Court would not hesitate to issue appropriate writ as the facts and circumstances of the case may justify. ( 32 ) IN view of the discussion made above, we are clearly of the opinion that a banking company can recover its dues by taking recourse to S. 3 of the Act only where the loan or advance or grant or credit has been given by it to a borrower under a State Sponsored Scheme and not otherwise. Any money advanced under cash credit limit facility by itself is not determinative of the matter as there is no prohibition under the Act for the State Government to notify such a facility as a State Sponsored Scheme. The real test is whether the banking company has made the advance, etc. under a State Sponsored Scheme. ( 33 ) THE writ petition may now be listed before the appropriate Bench for hearing. Order accordingly.