Raghuvir Singh Verma vs Delhi Financial Corporation and Others

Badar Durrez Ahmed, J.—Rule. With the consent of parties, the matters are taken up for final disposal.

These two petitions are founded on identical facts and raise the same issues and are, Therefore, being disposed of by this common judgment. The grievances of the petitioners are two-fold. In the first instance, they are aggrieved by the notification dated 27.04.1987, whereby the Administrator of the Union Territory of Delhi was pleased to specify the Managing Director, Delhi Financial Corporation as the authority for the purposes of Section 32(G) of the State Financial Corporation Act, 1951 (hereinafter referred to as "the 1951 Act"). This notification empowered the Managing Director of the Delhi Financial Corporation to issue recovery certificates in respect of loans taken from the Delhi Financial Corporation which had not been repaid. The second grievance of the petitioners is with regard to the warrant of arrest. u/s 138 of the Delhi Land Reforms Act, 1954, any person who has defaulted in the payment of arrears of land revenue, may be arrested and detained in custody up to a period not exceeding 15 days unless the arrears with costs, if any, are paid in the meanwhile. Learned counsel for the petitioner submits that the arrest warrants could only be issued in terms of the directions of the Division Bench of this Court in the case of Harmeet Singh Ghai Vs. Anand S. Khullar, Deputy Commissioner (Recovery), Sales Tax and others (and other Cases),

Taking up the first question, it becomes clear that the petitioners are relying upon the Division Bench decision of the Court in the case of Rajeev Anand and Others Vs. Union of India and Others, . In the said judgment of the Division Bench, the question of appointment of a Managing Director of a Financial Corporation as an authority u/s 32-G of the said 1951 Act was under consideration. The Division Bench was of the view that the questions were not whether the Managing Director acting as an authority u/s 32-G of the said Act would be biased or not, but that whether such appointment to determine and issue the recovery certificate would inspire confidence of the entrepreneur or not? The Division Bench held in the negative. It further held that an officer of a Financial Corporation should not be appointed as an authority u/s 32-G of the said Act of 1951. Before the Division Bench, the constitutionality of Section 32-G of the said Act of 1951 was also in question. While upholding the constitutionality, the Division Bench interpreted Section 32-G as implying that the authority to be appointed should be an independent person and, Therefore, they declared that the Managing Director or any other officer of the Financial Corporation cannot be appointed by the State Government as an authority u/s 32-G of the Act. The learned counsel for the petitioner relies heavily on these observations and decision of the Division Bench in the said case. Learned counsel for the respondents, however, has submitted that this judgment of the Division Bench was stayed by the Supreme Court in appeals preferred there from (i.e., Civil Appeal Nos. 4014-4017/198) which are pending before the Supreme Court. The effect of the stay order, according to learned counsel for the petitioners, would be only in respect of the parties thereto and would not govern the petitioners in this case. Learned counsel for the respondents, however, refutes this proposition and states that the stay order would operate in respect of everybody. Without going into this question, I find that the Division Bench decision is not applicable to the petitioners in view of the following observations of the Division Bench itself in paragraph 17 thereof to the following effect:-

"...We are, Therefore, of the view that though Section 32-G is not unconstitutional but it postulates appointment of an independent person and thus it deserves to be declared that the Managing Director or any other officer of the Financial Corporation cannot be appointed by the State Government as an authority u/s 32-G of the Act. We, Therefore, clarify that the concluded matters will not be reopened and certificate u/s 32-G of the Act which were earlier not questioned would not be open to challenge now on the ground of competence and authority of the Managing Director of the Corporation."

From the above, it becomes clear that the judgment of the Division Bench was to have only prospective operation and cases where the appointment had not been questioned would thereafter not be open to challenge. In the present case, the petitioners had been issued the recovery certificates on 28.06.1996. The Division Bench judgment was delivered on 20.02.1998 and these writ petitions have been filed subsequently, i.e., on 23.02.1998. Thus, on the date on which the judgment of the Division Bench was pronounced, the recovery certificates which had earlier been issued on 28.06.1996 had not been questioned and were questioned only subsequently by way of these writ petitions which were filed on 23.02.1998. In this view of the matter, the petitioners would not be in a position to place any reliance on the aforesaid Division Bench judgment in the case of Rajiv Anand (supra). In this view of the matter, I find that as regards the first contention of the petitioners, the same is untenable.

As regards the question of the warrant of arrest, learned counsel for the petitioners has placed before me the decision of another Division Bench of this Court in the case of Harmit Singh Ghai (supra), and in particular, has placed reliance on paragraph 14 thereof which is as under:-

"14. From the scheme of the Land Reforms Act and the Rules made there under and in particular Rule 119 of the Land Reforms Rules, it is amply clear that though arrest and detention of a defaulter is one of the modes of recovery of an arrear of land revenue but a warrant of arrest u/s 138 of the Act cannot be made and issued casually or on a mere receipt of the recovery certificate. As noticed above, Rule 119 (2) of the Land Reforms Rules requires production of the defaulter, who is arrested, before the officer who issued the warrant without delay and mandates that such defaulter shall not be detained in custody unless there is reason to believe that the process of detention will compel the payment of the whole or a substantial portion of the arrear. The said sub-rule thus, necessitates an inquiry into the question or a conscious attempt to ascertain if the detention of the defaulter would be productive of payment of arrears or a substantial portion thereof. The detention order cannot be issued casually or mechanically or arbitrarily at one''s own whim or fancy. The sub-rule obligates upon the officer concerned to decide on the basis of the material before him and though there is nothing in Section 138 of the Act or Rule 119 of the Land Reforms Rules requiring him to give an opportunity to the defaulter of being heard, he has to consider if any evidence is tendered or submissions are made by the defaulter in this behalf and then find out if there is any justification for detaining the defaulter. It is only after he records his satisfaction that the detention of the defaulter will compel him to make the payment of the whole or substantial part of the arrear that he can direct the detention of the defaulter. Before ordering his detention, the officer concerned has to satisfy himself that the defaulter has the means to pay but does not pay and records satisfaction as to it. The detaining Authority has to consider the matter from this angle and satisfy itself if the defaulter has the means but is willfully withholding payment or is fraudulently evading payment. There must be some material on record to enable the authority to entertain the necessary belief for recording satisfaction in this behalf. If he is not so satisfied, the officer is under an obligation to release the defaulter. This, in our view, is the condition precedent for ordering the detention of the defaulter."

In the background of these observations of the Division Bench, the learned counsel for the petitioners submits that the issuance of the warrant of arrest should not be automatic, but must be done only after the guidelines as prescribed above are followed. There can be no dispute with this proposition, particularly in view of the fact that these are the guidelines issued by the Division Bench of this Court which is binding on this court.

In this view of the matter, this contention of the learned counsel for the petitioners can be dealt with by directing that in case the situation arises, arrest warrants be issued against the petitioners only after following the procedure and guidelines as indicated in paragraph 14 of the said Division Bench decision in the case of Harmit Singh Ghai (supra).

With these directions, the writ petitions are disposed of. There shall be no order as to costs.