2002 (12) TMI 508 - SC - Companies Law

Supreme Court clarifies recovery options for financial institutions under specific statutes

Unique Butyle Tube Industries (P.) Ltd. Versus UP. Financial Corpn.

The Supreme Court held that the recovery proceedings initiated by the U.P. Financial Corporation under the U.P. Public Moneys (Recovery of Dues) Act, 1972 ... Whether the proceedings for recovery initiated by U.P. Financial Corporation under the Uttar Pradesh Public Moneys (Recovery of Dues) Act, 1972 on 6-1-2001 are maintainable in view of section 34(2) of the Recovery of Debts Due to Bank and Financial Institutions Act, 1993 ? Held that:- Appeal allowed. Impugned order is set aside and the proceedings under the U.P. Act are quashed. It shall be, however, open to the Corporation to take such action under the Act or the Financial Act as is legally available to it. Issues Involved:1. Maintainability of recovery proceedings initiated by U.P. Financial Corporation under the U.P. Public Moneys (Recovery of Dues) Act, 1972 in light of section 34(2) of the Recovery of Debts Due to Bank and Financial Institutions Act, 1993.Issue-wise Detailed Analysis:1. Maintainability of Recovery Proceedings under the U.P. Act:The central issue in this case is whether the recovery proceedings initiated by the U.P. Financial Corporation under the U.P. Public Moneys (Recovery of Dues) Act, 1972 (U.P. Act) are maintainable given the provisions of section 34(2) of the Recovery of Debts Due to Bank and Financial Institutions Act, 1993 (the Act).Factual Background:A certificate was issued under the U.P. Act for recovery of certain dues from the appellant due to non-compliance with the loan terms. The Tehsildar, Varanasi, issued a citation for recovery as arrears of land revenue. The appellant challenged this action before the Allahabad High Court, arguing that post-enactment of the Act, such proceedings were not maintainable. The appellant relied on section 32 of the State Financial Corporation Act, 1951 (Financial Act) and sections 17 and 34 of the Act.High Court Decision:The High Court held that the Financial Corporation could choose to proceed under the Act or other permissible modes under the Financial Act, including the U.P. Act. The High Court concluded that the language of section 34(2) of the Act allowed such flexibility.Arguments before the Supreme Court:- Appellant's Argument: The appellant contended that the Act has an overriding effect over other statutes, as per section 34, and the U.P. Act is not saved by the exceptions in section 34(2). They cited Allahabad Bank v. Canara Bank to support their argument that the proceedings under the U.P. Act were not maintainable.- Respondent's Argument: The Corporation argued that the Allahabad Bank case was not applicable and that the U.P. Act allowed for statutory empowerment to issue recovery certificates without adjudication. They referenced Director of Industries v. Deep Chand Agarwal to assert the legality of the procedure under the U.P. Act.Supreme Court's Analysis:The Court examined the relevant statutory provisions:- Section 34 of the Act: It provides the Act with an overriding effect, except for the statutes listed in sub-section (2), which includes the Financial Act but not the U.P. Act.- Section 32G of the Financial Act: It allows recovery of amounts due as arrears of land revenue.- Section 3 of the U.P. Act: It outlines the recovery process as arrears of land revenue and prohibits civil suits for such recovery.The Court noted that the U.P. Act is not mentioned in section 34(2) of the Act, indicating that the mode of recovery under the U.P. Act is not saved by this provision. The Court emphasized that the Financial Corporation has the option to proceed under the Act or the Financial Act, but not under the U.P. Act.Casus Omissus Argument:The Court addressed the plea of casus omissus, stating that courts cannot read into a statute what is not there. The legislative intent must be found in the words used by the Legislature. The Court cannot supply omissions in a statute through judicial interpretation.Conclusion:The Supreme Court concluded that the High Court erred in permitting proceedings under the U.P. Act. The U.P. Act deals with separate modes of recovery that are not related to the Financial Act. Therefore, the proceedings under the U.P. Act were not maintainable.Judgment:The impugned order of the High Court was set aside, and the proceedings under the U.P. Act were quashed. The Corporation was granted the liberty to pursue recovery under the Act or the Financial Act, as legally permissible. The appeal was allowed without any costs.