ASHOK MAHAJAN versus STATE OF U.P. AND ORS.

Citation: [2006] SUPP. 6 S.C.R. 657 · Decided: 26-09-2006 · Supreme Court of India · Bench: ARIJIT PASAYAT · Disposal: Appeal(s) allowed
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Judgment (excerpt)

. --. 
ASHOK MAHAJAN 
A 
v. 
STATE OF U.P. AND ORS. 
SEPTEMBER 26, 2006 
[ARIJIT PASA Y AT AND LOKESHWAR SINGH PANT A, JJ.] 
B 
Uttar Pradesh Public Moneys (Recovery of Dues) Act, 1972; S.4: 
Recovery of loan-Issuance of recovery certificate against guarantor-
Challenge to-Dismissed by High Court-On appeal, Held: High Court is C 
directed to re-consider the matter in the light of the observations made by 
Supreme Court in the case of Pa wan Kumar Jain v. Pradeshiya Industrial and 
Investment Corporation of U.P. Limited on similar issu.e-Directions issued-
Uttar Pradesh Zamindari Abolition Act, 1950-Section 279(/)(b). 
A Company had taken term loan from the Pradeshiya Industrial and D 
Investment Corporation ofUttar Pradesh by mortg;iging immovable properties. 
Initially, the borrower/company had coinmenced its business as a private 
limited company but subsequently it was converted to a Public Limited 
Company. Appellant was serving as a Director in th.e said company. On 
7. 7.1998 a recovery certificate was issued by the Corporation to one of the E 
guarantors of the company for recovery of the loan. Later, recovery certificates 
were also issued against other guarantors including the appellant. Auction 
proceedings were fixed on 25.5.03 in terms of Seetion 4 of the Uttar Pradesh 
Public Moneys (Recovery of Dues Act) 1972. Appellant filed a writ petition 
on the ground that the recovery could not have been made from him in terms 
of provisions of the Act. The High Court rejected the stand and held that the F 
authority concerned was entitled to recover the amount in question as arrears 
of land revenue in terms of the provisions under Section 279(1)(b) of the Uttar 
Pradesh Zamindari Abolition Act, 1950. Hence the present appeals. 
The appellant, one of the guarantors, contended that even if it is conceded 
that he had any liability, the properties of the principal borrower had to be G 
dealt with first. 
The respondent-State submitted that as borrower has no property, the 
properties of the appellant have rightly been dealt with; and that the appellant 
657 
H 
658 
SUPREME COURT REPORTS [2006] SUPP. 6 S.C.R. 
A has kept on changing his stand. 
Allowing the appeal, the Court 
HELD: Keeping in view the factual scenario of the present case, it would 
be appropriate to direct the High Court to re-consider the matter in the light 
B of the observations made by this Court in the case of Pawan Kumar Jain v. 
Pradeshiya Industrial and Investment Corporation of UP. Limited. 
Pawan Kumar Jain v. Pradeshiya Industrial and Investment 
Corporation of U.P. Limited, (2004( 6 SCC 758, relied on. (662-E-F( 
C 
CIVIL APPELLATE JURISDICTION : Civil Appeal No. 4257 of2006. 
From the Final Judgments and Orders dated 5.12.2002, 19.5.2003 and 
27 .5.2004 of the High Court of Judicature at Allahabad in Civil Misc. Writ 
Petition Nos. 52132 of2002, 21153 of2003 and 25806 of2003 respectively. 
D 
R.K. Jain and P.K. Jain for the Appellant. 
E 
Dinesh Dwivedi, Suvira-Lal, Kamlendra Mishra, Ajay Sharma and Gaurav 
Sarin for the Respondents. 
The Judgment of the Court was delivered by 
ARIJIT PASA Y AT, J. Leave granted. 
Appellant calls in question legality of the judgment rendered by a 
Division Bench of the Allahabad-High Court dismissing the writ petition filed 
by the appellant. The said writ petition was filed under Article 226 of the 
F Constitution of India, 1950 (in short 'the Constitution') for quashing the 
recovery certificate dated 24.4.2002 issued by the respondents I and 2. 
Background facts as projected by appellant in a nutshell are as follows: 
One M/s Denin Leathers Limited (hereinafter referred to as the 'borrower') 
G had taken term loan of Rs.40 lacs from Pradeshiya Industrial and Investment 
Corporation, Uttar Pradesh Limited (in short 'PICUP') and had mortgaged its 
immovable properties to secure the loan. Initially the borrower had commenced 
its business as a private limited company in 1979 but subsequently in the year 
1995 it was converted to a Public Limited Company. While the borrower 
becomes a public limited company, appellant's name was included as a Director. 
H 
ASH OK MAHAJAN v. STATE OF U.P. [PASAYA T, I.] 
659 
On 7. 7 .1998 a recovery certificate was issued in respect of one San jay Mahajan A 
who was one of the guarantors in respect of the loan. According to the 
appellant due to continued losses the financial condition of the company was 
bad and added to the financial problems in the year 1999 because
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