OM AGGARWAL Vs. HARYANA FINANCIAL CORPORATION & ORS.
Supreme Court of India (Division Bench (DB)- Two Judge)
Appeal (Civil), 4942 of 2007, Judgment Date: Feb 23, 2015
law laid down by the Hon'ble 5 Judges of the Apex Court of India reported in AIR 1969 SC 78 that in case the Statutory Authorities do not act in accordance with the procedure prescribed in the Statues, then the Civil Court alone has the jurisdiction to entertain and try every suit. The present suit is no exception to the law laid down by the Hon'ble Supreme Court of India." The short question, which arises for consideration in this appeal, is whether the courts below were justified in dismissing the plaintiff's civil suit as being barred by law.-
The question as to whether a suit is barred by any law or not would
always depend upon the facts and circumstances of each case.
However, for deciding this question, only the averments made in the
plaint are relevant. Since the question of jurisdiction of the
Civil Court to entertain and try the civil suit goes to the very
root of the case and hence it can be raised at any time by the
defendant by taking recourse to the provisions of Order VII Rule 11
of the Code. Indeed, this principle of law is well settled.-
once it is held that the Civil Court has no jurisdiction to try the
suit on merits, the question as to whether the demand impugned in the
suit is legal or not cannot be gone into nor it was gone into.
Reportable
IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION
CIVIL APPEAL No.4942 OF 2007
Om Aggarwal Appellant(s)
VERSUS
Haryana Financial Corporation
and Others Respondent(s)
J U D G M E N T
Abhay Manohar Sapre, J.
1. This civil appeal is filed by the appellant/plaintiff
(hereinafter referred to as "the plaintiff) against the
judgment/order dated 03.03.2005 passed by the High Court of
Punjab & Haryana at Chandigarh in Civil Revision No. 3127 of 2004
which arises out of order dated 26.03.2004 passed by the
Additional District Judge, Hisar in Civil Appeal No. 87/2003/2004.
2. In order to appreciate the issue involved in the
appeal, few relevant facts need to be mentioned in brief.
3. The plaintiff is one of the promoters of a limited
company known as "M/s Indo Britain Agro Farms Limited Hisar" which
is engaged in the manufacture of ordinary white buttons "Mushroom"
at Hisar (Haryana).
4. Respondent No.1/defendant No.1-Haryana Financial
Corporation (hereinafter referred to as "defendant No.1"),
established under the State Financial Corporation Act, 1951 is a
"Corporation" under Section 2 (b) of the Haryana Public Moneys
(Recovery of Dues) Act, 1979 (for short "the Act").
5. The plaintiff had taken various kinds of financial
assistance from defendant No.1 for running his business.
6. In May 1995, defendant No.1 with a view to extend
financial assistance to the plaintiff's Company purchased 3 lacs
equity shares of the said company at the rate of Rs.10/- per share
and, accordingly, invested a sum of Rs.30 Lacs. This investment
led the parties to enter into further business transactions. After
several rounds of negotiations and correspondence between the
parties, the plaintiff entered into an agreement styled as "Buy
Back Agreement" with defendant No.1 on 16.07.1996 (Annexure P-6).
7. In terms of the aforesaid agreement, the plaintiff's
company was to enhance its equity share capital by issuing further
shares to the extent of Rs.485.59 lacs whereas defendant No.1
was to subscribe Rs. 30 lacs towards the share capital of the
plaintiff's Company by way of financial assistance for augmenting
the business. The agreement, inter-alia, provided the terms
specifying therein, the manner in which the plaintiff was to secure
the investment made by defendant No.1, right of the plaintiff to
purchase/buy-back the shares of defendant No.1 Corporation at the
specified rates, right of defendant No.1 to nominate its nominee
directors in the Board of Directors of the plaintiff's Company to
monitor its affairs, right of defendant No.1 to recover their
investment including a right to claim damages sustained in the
transaction as arrears of land revenue from the plaintiff by taking
recourse to the provisions of the Act for making recovery in the
event of any default committed by the plaintiff of any term of the
aforesaid agreement etc.
8. Defendant No.1, however, found that the plaintiff has
failed to ensure compliance of the terms of the aforesaid
agreement. They were, therefore, constrained to invoke the terms of
the agreement and got the notice issued through Tahsildar against
the plaintiff for recovery of Rs.18.03 Lacs under the Act as
arrears of land revenue on 28.02.2002 (Annexure P-14).
9. It is with the aforesaid facts of the case, which were
pleaded in the plaint, the plaintiff filed a suit for declaration
being Civil Case No. 328-C of 2002 in the Court of Civil Judge at
Hisar (Annexure P-15) against the defendants for a declaration that
the Buy-back agreement dated 16.07.1996 be declared null and void
and in alternative the recovery sought to be made by defendant No.1
by issuance of notice of demand for recovery of Rs.18.03 lacs
(Annexure P-14) pursuant to the said agreement is also bad in law
and be set aside.
10. The reliefs claimed in the plaint reads as under:
"It is, therefore, prayed that a decree for declaration to the
effect that the Buy-back Agreement dated 16.7.1996 executed by
the plaintiff at Hisar with defendant No. 1 is null and void ab
initio and is liable to be set-aside and in the alternative for
declaration to the effect that the recovery of defendant No. 1
on the basis of this agreement has become time barred and that
the Recovery Certificate issued by the Managing Director of the
defendant No. 1 on the basis of this Agreement is null and void
ab initio and is liable to be set-aside with the consequential
relief of permanent injunction (prohibitory) restraining the
defendants from implementing the Recovery Certificate against
the plaintiff in any manner including his arrest may kindly be
passed in favour of the plaintiff(s) and against the
defendant(s) with costs.
Any other relief to which the plaintiff(s) is/are found
entitled may also be granted."
11. The aforesaid reliefs were founded essentially on the
allegation that the agreement in question was executed by the
plaintiff on account of undue pressure, coercion and duress
exercised by defendant No.1 on him. The plaintiff, in para 21 of
the plaint, also averred that he is aware of the fact that the
civil suit is barred by virtue of the provisions of the Act. Para
21 of the said plaint reads as under:
"That the plaintiff is aware of the fact that the jurisdiction
of the civil court is barred under Haryana Public Moneys
(Recovery of Dues) Act, 1979. But he is also aware of the law
laid down by the Hon'ble 5 Judges of the Apex Court of India
reported in AIR 1969 SC 78 that in case the Statutory
Authorities do not act in accordance with the procedure
prescribed in the Statues, then the Civil Court alone has the
jurisdiction to entertain and try every suit. The present suit
is no exception to the law laid down by the Hon'ble Supreme
Court of India."
12. On receipt of the notice of the suit, the defendants
entered appearance and filed an application under Order VII Rules
10 & 11 read with Section 21 of the Code of Civil Procedure, 1908
(hereinafter referred to as "the Code"). Defendant No.1 contended
that the suit of this nature for claiming the aforementioned
reliefs was not maintainable by virtue of express bar contained in
Section 3(4) of the Act, which in clear terms provided that no
Civil Court shall have jurisdiction to entertain or adjudicate upon
any case relating to the recovery of any sum due from the defaulter
and if any such suit is pending at the commencement of the Act in
any Civil Court then it shall abate. Defendant No.1, therefore,
contended that since the plaintiff has challenged the agreement as
also the recovery notice issued by the Tahsildar under Section 3 of
the Act in the Civil Suit, the same was not maintainable being
barred by Section 3(4) of the Act. It was, therefore, liable to be
dismissed under Order VII Rule 11(d) of the Code read with Section
(3)4 of the Act.
13. The plaintiff opposed the aforesaid application.
According to him, the provisions of the Act were not applicable to
the case in hand notwithstanding the bar contained in Section 3(4)
of the Act for filing a civil suit in the civil court and,
therefore, the civil suit was maintainable.
14. The trial Court, by order dated 16.8.2003, allowed the
application filed by defendant No.1 and, in consequence, dismissed
the suit. It was held that having regard to the averments made in
the plaint and the nature of the reliefs claimed in the suit, the
bar contained in Section 3(4) of the Act was attracted and hence,
the suit was liable to be dismissed as not maintainable.
15. Felt aggrieved, the plaintiff filed an appeal before
the Additional District Judge, Hisar being Civil Appeal No.
87/2003/2004. By order dated 26.03.2004, the Additional District
Judge dismissed the appeal.
16. Against the said order, the plaintiff filed Civil
Revision in the High Court. The High Court, by impugned judgment,
dismissed the revision in limine and upheld the order of the trial
court. It is against this judgment/order the plaintiff has filed
this appeal by way of special leave.
17. The short question, which arises for consideration in
this appeal, is whether the courts below were justified in
dismissing the plaintiff's civil suit as being barred by law.
18. Mr. Suresh Singh, learned counsel appearing for the
appellant/plaintiff, while assailing the legality and correctness
of the impugned order, contended that the courts below committed an
error in dismissing the plaintiff's suit as barred by law. Placing
reliance on the decision of this Court in Unique Butyle Tube
Industries (P) Ltd. vs. U.P. Financial Corporation And Others
(2003) 2 SCC 455, learned counsel contended that the suit should
have been held maintainable for adjudication of reliefs claimed
therein in the light of the law laid down in Unique Butyle case
(supra) wherein this Court has held that a demand for recovery of
the amount cannot be raised by taking recourse to the provisions of
the U.P. Public Moneys (Recovery of Dues) Act, 1972.
19. In contra, learned counsel for the defendants, while
supporting the impugned order, contended that it does not call for
any interference.
20. Having heard the learned counsel for the parties and on
perusal of the record of the case, we find no merit in this appeal.
21. It is apposite to take note of the provisions of Order
VII Rule 11 of the Code and some of the provisions of the Act,
which have a bearing over the issue involved in the present appeal.
"Order VII, Rule 11(d) CPC
11. Rejection of plaint-The plaint shall be rejected in the
following cases:-
(a).............................
(b).............................
(c).............................
(d) where the suit appears from the statement in the plaint to
be barred by any law;
Section 2(b)(c)(d) and 3 of the Act, 1979:
Section 2(b)
"Corporation" means the Haryana Financial Corporation
established under the State Financial Corporations Act, 1951,
and includes any other Corporation owned or controlled by the
Central Government or the State Government which the State
Government may, by notification, specify;
Section 2(c)
"Defaulter" means a person who, either as principal or as surety
is a party-
(i) to any agreement relating to a loan, advance or grant
given under that agreement or relating to credit in
respect of, or relating to hire purchase of goods sold by
the State Government or the Corporation, by way of
financial assistance, or
(ii) to any agreement relating to a loan, advance or
grant given under that agreement or relating to credit in
respect of, or relating to hire-purchase of goods sold by
a Government company under the State-sponsored scheme; or
(iii) to any agreement relating to a guarantee given by
the State Government or a Corporation in respect of a
loan raised by an industrial concern; or
(iv) to any agreement providing that any money payable
thereunder to the State Government shall be recoverable
as arrears of land revenue, and such person makes any
default in re-payment of the loan or advance or any
instalment thereof 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;
Section 2(d)
"financial assistance" means any financial assistance:-
(i) for establishing, expanding, modernizing, renovating
or running any industrial undertaking; or
(ii) for the purposes of vocational training; or
(iii) for the development of agriculture,
horticulture, animal husbandry or agro-industry; or
(iv) for the purposes of any other kind of planned
development; or
(v) for relief against distress;
Section 3
3. Recovery of certain dues as arrears of land revenue - (1)
Where any sum is recoverable from a defaulter:-
(a) by the State Government, such officer as it may, by
notification appoint in this behalf;
(b) by a Corporation or a Government company, the
Managing Director thereof;
Shall determine the sum due from the defaulter.
(2) The officer or the Managing Director, as the case
may be, referred to in sub-section (1), shall send a
certificate to Collector mentioning the sum due from the
defaulter and requesting that such sum together with the
cost of proceedings be recovered as if it were an arrear of
land revenue.
(3) A certificate sent under sub-section (2) shall be
conclusive proof of the matters stated therein and the
Collector, on receipt of such certificate, shall proceed to
recover the amount stated therein as an arrear of land
revenue.
(4) No Civil Court shall have jurisdiction:-
(a) to entertain or adjudicate upon any case; or
(b) to adjudicate upon or proceed with any pending case,
relating to the recovery of any sum due as aforesaid
from the defaulter. The proceedings relating to the
recovery of the sums due from the defaulters, pending at
the commencement of this Act in any Civil Court, shall
abate."
22. An application for rejection of the plaint can be
filed, if the allegations made in the plaint taken to be correct as
a whole on its face value show the suit to be barred by any law.
The question as to whether a suit is barred by any law or not would
always depend upon the facts and circumstances of each case.
However, for deciding this question, only the averments made in the
plaint are relevant. Since the question of jurisdiction of the
Civil Court to entertain and try the civil suit goes to the very
root of the case and hence it can be raised at any time by the
defendant by taking recourse to the provisions of Order VII Rule 11
of the Code. Indeed, this principle of law is well settled.
23. So far as the provisions of the Act are concerned,
Section 3 of the Act empowers the Corporation to make recovery of
its outstanding dues from the defaulter as arrears of land revenue
by getting the certificate of recovery of the amount issued from
the competent authority whereas sub-section (4) of Section 3 in
clear terms takes away the jurisdiction of the Civil Court to
entertain or/and adjudicate "any case" relating to the recovery of
any sum due from the defaulter. It also takes away the jurisdiction
of Civil Court to proceed with any pending case involving such
issue. If any such case is pending on the date of commencement of
the Act, such case shall stand abate.
24. The provisions of the Act and especially Section 3
thereof came to be interpreted by this Court in S.K. Bhargava vs.
Collector, Chandigarh and others (1998)5SCC 170 and hence its
interpretation is no more res integra. Justice B.N Kirpal,
speaking for the Court, held in para 8 as under:
"8. It is clear from the perusal of the above-quoted section
that before a certificate can be issued by the Managing Director
under sub-section (2) of Section 3, he must determine the "sum
due" from the defaulter as enjoined upon him by Section 3(1)(b).
It is difficult to appreciate the contention of the learned
counsel for the respondent Financial Corporation that any such
determination can take place without notice to the defaulter.
The jurisdiction of the civil courts to go into the question as
to what is the amount due is expressly ousted by sub-section (4)
of Section 3. In its place, the power has been given to the
Managing Director under Section 3(1)(b) to determine as to what
is the amount due from the defaulter. There can be no doubt
that any such determination by the Managing Director will result
in civil consequences ensuing. The determination being final
and conclusive, would have the result of the passing of a final
decree, inasmuch as the defaulters from whom any amount is found
to be due, would become liable to pay the amount so determined
and the Collector will have the right to recover the same as
arrears of land revenue." (Emphasis supplied)
25. Applying the aforesaid principle of law to the facts of
the case in hand, it is clear by mere reading of the plaint that
firstly, the plaintiff was a "defaulter" as defined under Section
2(c) of the Act; secondly, the investment made by defendant No.1-
Corporation pursuant to an agreement dated 16.07.1996 was in the
nature of the "financial assistance" as defined under Section 2 (d)
of the Act; thirdly, the demand raised by the respondent was in
relation to the amount given by way of financial assistance under
Section 3 of the Act and lastly, the subject matter of the suit
viz., challenge to the legality of the agreement and the demand
fell under Section 3(4)(a) and (b) of the Act.
26. In the light of the four aforementioned facts, which
are clearly discernable from the averments made in the plaint, we
are of the considered opinion that the provisions of the Act get
attracted to the case in hand which, in turn, attract the bar
contained in sub-section (4) of Section 3 in filing the civil suit
by the defaulter. The suit is, therefore, apparently barred by
virtue of bar contained in Section 3(4) of the Act. It was thus
rightly dismissed by the courts below by taking recourse to Order
VII Rule 11 (d) of the Code.
27. We do not find any force in the submission urged by the
learned counsel for the plaintiff that on the basis of law laid
down in Unique Butyle case (supra), the suit should be held as
maintainable for adjudication of the reliefs claimed therein on
merits.
28. On perusal of the decision rendered in Unique Butyle
case (supra), it is clear that the said decision was rendered in a
writ petition filed by the defaulter against the Corporation
wherein the question involved was whether the proceedings for
recovery initiated by the U.P. Financial Corporation under the U.
P. Public Moneys (Recovery of Dues) Act, 1972 are maintainable in
view of Section 34(2) of the Recovery of Debts Due to Banks and
Financial Institutions Act 1993.
29. This Court examined the aforesaid question in the light
of the provisions of the aforementioned two Acts and held that the
proceedings initiated under the U. P. Public Moneys (Recovery of
Dues) Act, 1972, are not maintainable in view of overriding effect
given to the Central Act by virtue of Section 34(2) of the Central
Act over the State Act.
30. It is pertinent to mention that while deciding the
question, their Lordships took note of the law laid down in S.K.
Bhargava case (supra) and held that the provisions of U.P. Act and
that of the Haryana Act are not similar. This is what was held in
para 15:
"We may notice here that to strengthen his arguments, learned
counsel for the appellant referred to the decision of this Court
in S.K. Bhargava vs. Collector, Chandigarh. The said case
related to the Haryana Public Moneys (Recovery of Dues) Act,
1979 (in short "the Haryana Act"). With reference to certain
observations in para 8 of the said judgment, it was submitted
that a process of adjudication is inbuilt, even when the
Managing Director of the Corporation takes action. We notice
that Section 3 of the Haryana Act is couched differently from
Section 3 of the U.P. Act. Reference was made in the said case
to Director of Industries Case, (1980) 2 SCC 332 and held that
while upholding the validity of Section 3 of the U.P. Act, the
Court was not called upon to deal with the question as to
whether the principles of natural justice were implicit in the
said Section. We also do not think it necessary to go into that
question."
31. In the light of several distinguishing features noticed
in the case in hand and the facts of Unique Butyle case (supra)
such as the question as to whether the suit filed in the Civil
Court was barred or not, which is the subject matter of this case,
was not decided in Unique Butyle case. Secondly, the case in hand
arose out of Haryana Act whereas the Unique Butyle case (supra)
arose out of U.P Act and thirdly, both Haryana Act and U.P. Act
were held not identical in their wordings.
32. In the light of these distinguished features, no
reliance can be placed on the law laid down in Unique Butyle case
(supra) for deciding the issue involved in the present case. It
has, in our considered opinion, no application to the case in hand.
33. Before parting with the case, we consider it apposite
to clarify that we have not examined the legality and correctness
of the demand on its merits once it is held that Civil Court has no
jurisdiction to entertain the civil suit. In other words,
34. In view of foregoing discussion, we find no merit in
the appeal, which thus fails and is hereby dismissed.
..........................................J.
[RANJAN GOGOI]
...........................................J.
[ABHAY MANOHAR SAPRE]
New Delhi,
February 23, 2015.