LexPAWAN KUMAR JAIN versus THE PRADESHIYA INDUSTRIAL AND INVESTMENT CORPORATION OF U.P. LTD. AND ORS.
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PAWAN KUMAR JAIN v. THE PRADESHIY A INDUSTRIAL AND INVESTMENT CORPORATION OF U.P. LTD. AND ORS. I.' AUGUST 11, 2004 [S.N. VARIAVA AND ARJJIT PASAYAT, JJ.] Uttar ,n.-adesh Public Moneys (Recovery of Dues) Act, 1972; Sections 3 and 4/Recovery of Debts Due to Bankers and Financial institutions Act, A B 1993: Sections 2(b) and 3 : C Recovery of loan by State Industrial & Investment Corporation- Issuance of Recovery Notice against guarantor-Challenge to-Writ Petition and Review Petition dismissed by High Court-On appeal, Held: Since Recovery Notice issued by the Corporation under the U.P. Act prior to D issuing of a notification by Central Government enabling State Financial Institutions recovery of debt as per Debts Recovery Act-Action initiated by the Corporation for recovery of debts as per provisions of the U.P. Act would not be barred-Hence, the matter not required to be transferred to Debt Recovery Tribunal -Since property of the principal-debtor not sold off by the Corporation, issuance of recovery notice against guarantor not E justified-Hence, Recovery Notice set aside-State Financial Corporation Act, 1951-Section 29. Respondent No. I-State Financial & Investment Corporation issued a Recovery Notice against appellant-guarantor in terms ofUttar F Pradesh Public Moneys (Recovery of Dues) Act, 1972. Appellant challenged it before the High Court. High Court dismissed the writ petition and Review petition as well. Hence the present appeals. It was contended by the appellant-guarantor that Respondent No. I, State Industrial & Investment Corporation, could make recovery G of debts as per provisions of the Recovery of debts Due to Banks and Financial Institutions Act after the issuance of a Notification by the Central Government to the effect and thus the Recovery Notice issued by the Corporation under the U.P. Act required to be quashed; that the Corporation could not proceed against him until the property of H 447 448 SUPREME COURT REPORTS [2004] SUPP. 3 S.C.R. A the principal-debtor was sold off; and that since a one time settlement had been arrived at between the Corporation and the principal-debtor and possession of the property was taken over by the Corporation, the Corporation could not proceed against him. B Notice under the U.P. Act was much earlier to the Notification, Respondent No. I-Corporation submitted that since Recovery proceedings under the U.P. Act are not barred; that since the principal- debtor had committed defaults and recovery of loan by sale of the property of the principal-debtor was not possible, action has been initiated against the guarantor for recovery of the amount; and that C action under Section 29 of the Financial Corporation Act has already been initiated against the principal-debtor. Disposing of the appeals, the Court D HELD : I.I. Since the action was initiated by the State Industrial E & Investment Corporation prior issuance of Notification by the Central Government for recovery of debts as per provisions of the Debts Recovery Act, proceedings under the U.P. Act would not be barred and would not stand transferred to the Tribunal. (450-A, BJ 1.2. In terms of the provisions of the U.P. Act, action against the guarantor cannot be taken until the property of the principal-debtor is first sold off. Since Corporation has not sold the property of the principal- debtor, action against the Appellant cannot be sustained. Hence, the Recovery Notice is set aside. However, Corporation may proceed against F the Appellant before the Debtor Recovery Tribunal in accordance with principles laid down in Unique Butyle Tube's case. (453-B, C, DJ G Unique Butyle Industries (P) Ltd. v. U.P. Financial Corporation & Ors., [2003) 2 SCC 455, relied on. CIVIL APPELLATE JURISDICTION 3637 of 1998. Civil Appeal Nos. 3636- From the Judgment and Order dated 1.9.97 - 6.11.97 of the Allahabad High Court in C.M.W.P. No. 28391 and C.M. Application No. 69541 of H 1997. .. P.K. JAIN '· PRADESHIYA INDUSTRIAL & INVESTMENT CORPN. OF UP LTD. [VARIAVA, J.] 449 V.A. Mohta, Rakesh K. Khanna, Neeraj Sharma, Shashank Shekkar A and Surya Kant for the Appellant. Aarohi Bhalla and Ms. Sujat~ Kurdukar for the Respondent No. 1. Ms. Shobha Dixit, Rajeev Kumar Dubey and Kamlendra Mishra for B the Respondent Nos. 2 & 3. The Judgment of the Court was delivered by S.N. V ARIA VA, J. : These Appeals are against the Order of the Allahabad High Court dated 01.09.
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