S.K. BHARGAVA versus THE COLLECTOR, CHANDIGARH AND ORS.

Citation: [1998] 2 S.C.R. 1158 · Decided: 23-04-1998 · Supreme Court of India · Bench: B.N. KIRPAL · Disposal: Appeal(s) allowed

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Judgment (excerpt)

A 
B 
S.K. BHARGA VA 
11. 
THE COLLECTOR, CHANDIGARH AND ORS. 
APRIL 23, 1998 
[B.N. KIRPAL AND S.S. MOHAMMED QUADRI, JJ.] 
Haryana Public Moneys (Recovery of Dues) Act, 19791 State Finacial 
Corporation Act, 1951 : 
C 
S.3(I)(b)/ S.31-lssuance of recovery certificate-Opportunity of 
hearing to defaulter-Held, it is not a mere claim which is forwarded to 
Collector for realisation-It is 'sum due' as determined by Managing Director 
of Haryana Financial Corporation which alone is recoverable-The 
determination cannot be done without notice to alleged defau!ter--As no 
D opportunity of hearing was given to alleged defaulter while determining the 
sum due and before issuance of recovery certificate u!s 3(2) of 1979 Act, both 
determination of sum due and recovery certificate are vitiated and are set 
aside Administrative law-Principles of natural justice. 
The Appellant was the Director of company which committed default in 
E repayment of loan obtained by it from Haryana Finacial Corporation. A 
winding up petition against the company was filed before the High Court. The 
company was ordered to be wound up. Haryana Finacial Corporation filed an 
application under s. 31 of the State Financial Corporation Act, 1951. The 
Cumpany Judge held the Corporation to be a preferential creditor. The 
assets of the company were sold and from the sale proceeds some amount was 
F 
paid to the Corporation and in order to recover the balance, the Corporation 
took recourse to proceedings under s. 3(3) of Haryana Public Moneys 
(Recovery of Dues) Act, 1979. A recovery certificate was issued to the 
Collector for realisation of the said amount from various persons including 
the appellant. 
G 
The appellant filed a writ petition before the High Court contending 
that no liability under the recovery notice could be fixed on him as he was 
not afforded an opportunity of being heard before issuance of the recovery 
certificate. He also pleaded that he had resigned as a Director of the Company. 
The High Court held that the guarantor was not entitled to any other notice 
H before the amount sought to be realised could be recovered a~ the amount 
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S.K. BHARGAVA v. COLLECTOR, CHANDIGARH 
1159 
due had been found to be recoverable in judicial proceedings. Aggrieved, the A 
appellant filed the present appeal. 
Allowing the appeal, this Court. 
HELD: l.l. Before a certificate under sub-section (2) of Section 3 of 
Haryana Public Moneys (Recovery of Dues) Act, 1979 can be issued by the B 
Managing Director of a Corporation or a Government Company to which the 
amount is due, he must determine the 'sum due' from the defaulter as 
., 
enjoined upon him by Section 3(1 )(b). It cannot be said that any such 
determination can take place without notice to the deafulter. 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) <1f Section 3. In its place, the power has C 
been given to the Managing Director under Section 3(1 )(b) to determine as 
to what is the amount due from the defaulter. 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 D 
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. 
11163-B-DI 
1.2. Even though Section 3 ofJ 979 Act does not expressly provide for 
an opportunity being given to the alleged defaulter to explain as to whether 
any amount is due or not but in view of the nature of the said provision, the E 
principles of natural justice must be read into it. The requirement of 
determination of the sum due, by the Managing Director must be regarded 
as providing for the Managing Director hearing the alleged defaulter before 
coming to the conclusion as to what is the sum due. The very use of the words 
'determine' and 'sum due' implies that there may be a tis between the parties F 
and they have to be heard before a final conclusion is arrived at by the 
Managing Director. It is not a mere claim of the Corporation which is 
forwarded to the Collector for realisation, but it is the 'sum due' as determined 
by the Managing Director which alone is recoverable. This determination 
cannot be done without notice to the alleged defaulter. [1163-E-FI 
Directo

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