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Allahabad High Court · body

2002 DIGILAW 1211 (ALL)

AJAY MAHAJAN v. STATE OF U. P.

2002-09-09

K.N.SINHA, M.KATJU

body2002
M. KATJU, K. N. SINHA, JJ. ( 1 ) THIS writ petition has been filed against the impugned recovery certificate dated 7. 7. 1998 annexure-1 to the writ petition and citation dated 15. 6. 2002. ( 2 ) HEARD learned counsel for the parties. ( 3 ) M/s. Denim Leather Pvt. Ltd. is a company registered under the Indian Companies Act. It took a loan over Rs. forty lacs from the Pradeshiya Industrial Investment Corporation, U. P. Ltd. (hereinafter referred to as p. I. C. U. P. ). The company mortgaged its units as well as the property belonging to the company. The petitioner is one of the guarantors for the loan taken by the company from the P. I. C. U. P. ( 4 ) THE P. I. C. U. P. issued a recovery certificate dated 7. 7. 1998 in the name of Collector, Agra, for the recovery of the loan from M/s. Denim Leather Private Ltd. True copy of the recovery certificate is Annexure-1 to the writ petition. In paragraph 6 of the writ petition, it is stated that in pursuance of the recovery certificate, the district authorities instead of issuing the citation to recover the dues from the company issued citation directly in the name of the Directors without making any efforts to recover the dues from the assets of the company. True copy of the citation dated 15. 6. 2002 issued in the name of the petitioner to recover the amount of Rs. 1,24,31,287. 81 plus interest is Annexure-2 to the writ petition. A similar citation was issued in the name of the other guarantor Sri Sanjay Mahajan on 4. 4. 1998 under Rule 236 read with Section 280 of the u. P. Z. A. and L. R. Act vide Annexure-3 to the writ petition. A representation was made by Sri sanjay Mahajan to the Collector stating that the company is already possessing the assets of about Rs. 1,89,88,924 and hence the dues are liable to be recovered firstly from the mortgaged property which is the asset of the company. True copy of the representation is Annexure-4 to the writ petition. A representation was made by Sri sanjay Mahajan to the Collector stating that the company is already possessing the assets of about Rs. 1,89,88,924 and hence the dues are liable to be recovered firstly from the mortgaged property which is the asset of the company. True copy of the representation is Annexure-4 to the writ petition. ( 5 ) THE submission of the learned counsel for the petitioner is that the respondents should have first proceeded to recover the amount due from the defaulter company from its mortgaged property and other properties, and in case any amount still remains then alone steps could be taken to recover the balance amount from the guarantors. ( 6 ) IT is stated in paragraph 16 of the writ petition that another guarantor Sri Sanjay Mahajan had filed Writ Petition No. 11903 of 1999 in this Court which was disposed of on 24. 3. 1999 vide annexure-5 to the writ petition. This Court held that first recovery should proceed in accordance with Section 4 (2) (A) of the U. P. Public Moneys (Recovery of Dues) Act, 1972, against the mortgaged property and thereafter, only personally against the petitioner. ( 7 ) A counter-affidavit has been filed and in paragraph 4 of the same, it is stated that the promoters/guarantors of M/s. Denim Leather Private Ltd. are. In the habit of availing loans and defaulting with impunity and thereafter seeking shelter of Courts to evade recovery. They filed a civil Suit No. 498 of 1999 in the Court of Civil Judge, Agra. That civil suit was dismissed for default on 19. 7. 2000 vide Annexure C. A. 1. ( 8 ) IN paragraph 6 of the counter-affidavit, it is stated that recovery from the mortgaged property has become impracticable and hence, P. I. C. U. P. was left with no option except to issue recovery certificate against the guarantors. In paragraph 7 of the counter-affidavit, it is stated that as alleged by the directors/guarantors of the said company the assets which were mortgaged to the p. I. C. U. P. have been destroyed in a fire which broke put in the factory premises on 22. 5. 1999. An F. I. R. has been filed in this connection vide Annexure C. A. 4 and a letter has been sent to the managing Director P. I. C. U. P. vide Annexure-C. A. 5. 5. 1999. An F. I. R. has been filed in this connection vide Annexure C. A. 4 and a letter has been sent to the managing Director P. I. C. U. P. vide Annexure-C. A. 5. ( 9 ) IN paragraph 8 of the counter-affidavit, it is stated that the above story of the said promoters/guarantors was found to be entirely false and baseless since from the evidence which later on emerged, it was proved that no fire broke out and no assets destroyed in the alleged fire. In fact the district authorities attached various Items of plant and machinery from the premises of the factory on 10. 6. 1999 which is a date later than 22. 5. 1999 when the alleged fire is stated to have occurred. From the list of plant and machinery drawn up by the district authorities at the time of attachment of assets on 10. 6. 1999, it was revealed that a large number of plant and machinery was attached on the said date but none of the P. I. C. U. Ps, financed assets were there in the list. Hence, it is alleged in paragraph 8 of the counter-affidavit that fraud has been committed by the petitioner and his associates since it could not be believed that as a result of the alleged fire, only the assets of the P. I. C. U. P. were destroyed and the other assets remained intact to be later on attached by the district authorities on 10. 6. 1999. In this connection, F. I. R. lodged by the petitioner for prosecuting the directors/company is Annexure-C. A. 6. ( 10 ) IN paragraph 9 of the counter-affidavit, it has been stated that a company Petition No. 95 of 1997 was filed against the petitioner which is pending in the High Court, and the Court ordered winding up of the company and liquidation proceeding is still pending in the High Court. In the said petition, the High Court passed an order on 12. 10. 1999 for taking possession of the assets of the company by the official liquidator. A compliance report has been filed by the Official liquidator bearing No. 92 of 2000. In this report, it has been reported that all movable assets, account books and record of the factory premises have been destroyed on 22. 5. 10. 1999 for taking possession of the assets of the company by the official liquidator. A compliance report has been filed by the Official liquidator bearing No. 92 of 2000. In this report, it has been reported that all movable assets, account books and record of the factory premises have been destroyed on 22. 5. 1999, in the fire regarding which an F. I. R. has been filed by the petitioner, and the said fact was also notified by public notice published in the newspaper Amar Ujala on 23. 5. 1999. Hence it is alleged that on these facts, it seems that assets/ machinery have been destroyed, and hence the stand taken by the petitioner that valuable assets from which recovery can be made is simply to mislead the Court. In paragraph 10 of the counter-affidavit, it is stated that the petitioner and other promoters are in the habit of indulging in fraud and cheating against the financial institutions and investors. There is a news item in the Economic Times newspaper of the Delhi Edition dated 29. 6. 2002, which gives brief particulars of the fraudulent activities on the part of the petitioners and other associates. The substance of the news items is that the promoters of the company including the petitioners have raised funds from the public by way of public issue of equity, and later on disappeared from the public domain without honouring their commitments to the Investors. True copy of the relevant extracts of the newspaper is Annexure-C. A. 7 to the counter-affidavit. ( 11 ) IN paragraph 12 of the counter-affidavit, it is stated that the company has not mortgaged either its land/building or other plant and machinery. The company has only hypothecated those machineries which have been financed by the P. I. C. U. P. As per the version of the company, the said machinery which had, been financed by the P. I. C. U. P. have been completely destroyed. Now the P. I. C. U. P. has nothing left as its first charge or hypothecation from which the recovery could be made. The liability of the guarantor is coextensive with that of the principal debtor, and as such the impugned recovery proceeding is valid. ( 12 ) IN paragraph 14 of the counter-affidavit, it is stated the company has not mortgaged its land, building, etc. The liability of the guarantor is coextensive with that of the principal debtor, and as such the impugned recovery proceeding is valid. ( 12 ) IN paragraph 14 of the counter-affidavit, it is stated the company has not mortgaged its land, building, etc. The loan granted by the P. I. C. U. P. was secured only by the hypothecation of the assets which had been purchased from the said loan. ( 13 ) IN paragraph 21 of the counter-affidavit, it is stated that Section 4 of the U. P. Public Moneys (Recovery of Dues) Act, 1972. Is not applicable in the present case as it refers to the mortgaged property of the person concerned against whom the action is being taken under Section 3. In present case, no immovable property has been mortgaged by the petitioner and as such. Section 4 has no application. In paragraph 23 of the counter-affidavit, it is stated that the above plant/machinery which had been hypothecated to the P. I. C. U. P. for procuring the term loan was no more in the unit. ( 14 ) WE have also perused the supplementary and rejoinder-affidavits. ( 15 ) THERE is no dispute that the petitioner was granted the term loan in question. Under Section 128 of the Indian Contract Act, the liability of the guarantor is co-extensive with that of the principal debtor. Hence, the petitioner is liable to pay the same. ( 16 ) THE petitioner has relied on the U. P. Public Money (Recovery of Dues) Act, 1972. In the case of co-guarantor Sri Sanjay Mahajan in Writ Petition No. 11903 of 1999 vide Annexure-5 to the writ petition, we had observed that the recovery should first proceed according to Section 4 (2) (A) of the U. P. Public Moneys (Recovery of Dues) Act, 1972, against the mortgaged property and thereafter only personally against the guarantor. As observed in the counter-affidavit, no immovable property of the company has been mortgaged and hence, in our opinion. Section 4 of the aforesaid Act has no application. As stated in paragraph 24 of the counter-affidavit, all those plant and machineries which had been hypothecated to P. I. C. U. P. are no more with the company since, it is stated that they have been destroyed in the fire on 22. 5. 1999. Section 4 of the aforesaid Act has no application. As stated in paragraph 24 of the counter-affidavit, all those plant and machineries which had been hypothecated to P. I. C. U. P. are no more with the company since, it is stated that they have been destroyed in the fire on 22. 5. 1999. Hence, in our opinion, the petitioner cannot get any benefit from the order of this court in the case of the co-guarantor Sanjay Mahajan as it appears that the full facts had not been placed before this Court in the writ petition of Sanjay Mahajan. ( 17 ) MOREOVER, this is not a fit case for interference under Article 226 of the Constitution since we are not inclined to exercise our discretion in this case. The Department of Company Affairs has filed a charge-sheet against the petitioner company alleging that it is one of the vanishing companies which had mopped up hundreds of crores of rupees during the boom time in early 90s from the capital market following the opening up of the Indian economy and vanished thereafter. The first charge-sheet was filed in the Court of Special Chief Judicial Magistrate, Agra. Further, intensive investigation into the affairs including M/s. Denim Leather Private Ltd. of which the petitioner and his relatives are the controlling personnel is going on. ( 18 ) THE petitioner is the guarantor of the loan and hence, he has to abide by his guarantee. ( 19 ) IN Writ Petition No. 16830 of 2002, Radhey Shyam Garg v. U. P. Financial Corporation decided on 23. 7. 2002. It was held that Section 4 (2) of the U. P. Public Moneys (Recovery of dues) Act, 1972 has no application to the case wherein personal property of the guarantor has been mortgaged. We agree with this judgment. ( 20 ) FOR the reasons given above this petition lacks merit and is here dismissed. .