Citation Codes

Equivalent Citations

citation codes

Case Number

Civil Misc. Writ No. 20818 of 1988

Advocates

Prakash Krishna
Standing Counsel

Judges

A.N Verma
V.K Khanna
S.K Mookerji, JJ.

Acts

Clause (1) of Article 246 of the Constitution. Likewise, U.P Public Moneys (Recovery of Dues) Act (the State Law)
State Financial Corporation (Amendment) Act, 1985 (No. 43 of 1985) in the State Financial Corporations Act, 1951,
Sections 29 and 31 of the State Financial Corporations Act.
Section 3 of U.P Public Moneys (Recovery of Dues) Act
SECTION 31 STATE FINANCIAL CORPORATIONS ACT
STATE FINANCIAL CORPORATIONS ACT
Dues) Act (hereinafter referred to as the State Act)
S. 3 of U.P Public Moneys (Recovery of Dues) Act
ARTICLE 246 A CONSTITUTION OF INDIA
ARTICLE 254 CONSTITUTION OF INDIA
Section 32-G of the Central Act
Section 32-G, the Central Act
Section 3 of the State Act
provision is Section 46-B
Central Act (Section 32-G).
provision is Article 246
Central law (Section 32-G).
Dues) Act, 1972
Section 46-B
Section 32-G

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Smart Summary

Summary of Opinion — Amarendra Nath Verma, J.

Factual and Procedural Background

This matter was referred to a larger Bench because two Division Benches of the High Court were in conflict about the effect of Section 32-G (inserted by the State Financial Corporation (Amendment) Act, 1985 (No. 43 of 1985)) of the State Financial Corporations Act, 1951, on the continued validity of Section 3 of the U.P. Public Moneys (Recovery of Dues) Act (the “State Act”) insofar as recovery of dues of the U.P. State Financial Corporation (“U.P. Financial Corporation”) is concerned.

One Division Bench (in a bunch of writ petitions including Writ Petn. Nos. 9476 of 1986, 14797 of 1987 and 15437 of 1987) on November 3, 1987 held Section 3 of the State Act repugnant to the Central amendment (Section 32-G) and declared it void insofar as it applied to recovery of dues of the U.P. State Financial Corporation. Another Division Bench in Krishna Utensils v. U.P State Financial Corporation (Writ Petn. No. 20818 of 1988), by judgment dated September 1, 1988, reached the opposite conclusion and treated Section 32-G as complementary. Because of the conflict, the matter was referred to the present Bench.

On the merits in the petition before this Bench, the petitioner had been advanced a loan by the U.P. Financial Corporation, allegedly defaulted; a recovery certificate was issued for Rs. 1,38,700.99. The petitioner challenged the recovery certificate principally on the ground that Section 3 of the State Act had been rendered inoperative by insertion of Section 32-G in the Central Act. The Court also notes factual material in the respondent's counter-affidavit: allegations that the petitioner let out factory premises and received rent, refusal to deposit rent as requested by the Corporation, a civil suit (No. 52 of 1985) filed by the petitioner against the Corporation with an ad interim injunction and related correspondence — facts the petitioner omitted from the petition.

Legal Issues Presented

Whether Section 3 of the U.P. Public Moneys (Recovery of Dues) Act (State Act) is repugnant to Section 32‑G of the State Financial Corporations Act as inserted by the State Financial Corporation (Amendment) Act, 1985 (No. 43 of 1985) and therefore void in its application to recovery of dues of the U.P. State Financial Corporation.
Whether Article 254 of the Constitution (repugnancy between Central and State laws) or Article 246 (distribution of legislative subjects and the doctrine of occupied field) is the appropriate constitutional provision to determine the dispute between the Central amendment and the State Act.
Whether Section 32‑G of the Central Act operates so as to “occupy the field” completely and thereby exclude the operation of the State Act in relation to recovery of dues of State Financial Corporations as arrears of land revenue.
Whether the petitioner’s omission/suppression of certain material factual matters disentitles the petitioner to discretionary relief.

Arguments of the Parties

Petitioner's Arguments

Learned counsel for the petitioner (Sri Prakash Krishna) relied on Article 246 and the doctrine of occupied field: after insertion of Section 32‑G the Central Act occupied the entire field of recovery of dues of State Financial Corporations as arrears of land revenue, leaving no room for State law such as Section 3 of the U.P. Act.
The petitioner sought to read down the phrase “without prejudice to any other mode of recovery” in Section 32‑G to mean only the remedies provided under Sections 29 and 31 of the State Financial Corporations Act and not other modes (such as remedies under other State enactments or civil suits).
As an alternative, counsel attempted to challenge the vires of the U.P. Public Moneys (Recovery of Dues) Act on grounds of supposed lack of legislative competence, relying in part on a Madras High Court decision (AIR 1981 Mad 318).

Respondent's / Court-noted Factual Contentions

The respondent (U.P. Financial Corporation) in its counter-affidavit stated that the petitioner let out the factory premises to U.P. Agro Development Corporation, realized rent contrary to the mortgage terms, and refused to deposit rent as requested for consideration of rehabilitation.
The respondent noted that the petitioner had instituted Civil Suit No. 52 of 1985 seeking injunction against recovery; an ad interim injunction (dated September 7, 1988) directed the petitioner to deposit rent. These facts and correspondence were material and omitted from the petition, a suppression relied upon by the Court.

Table of Precedents Cited

Precedent	Rule or Principle Cited For	Application by the Court
I.T.C. Ltd. v. State of Karnataka, 1985 (Supp) SCC 476	Clarifies that Article 254 (repugnancy) applies only to matters in the Concurrent List and sets out principles for demarcation under Article 246 including the doctrine of occupied field.	Relied on as the principal authority establishing that repugnancy under Article 254 is irrelevant here and that Article 246 governs whether a Central law occupies the field entirely; the Court applied the five cardinal principles (including that the doctrine of occupied field applies when List I has completely occupied the field).
State of Orissa v. M.A. Tulloch & Co., AIR 1964 SC 1284	Support for the proposition that repugnancy under Article 254 pertains to Concurrent List matters.	Referred to (through I.T.C. reasoning) to bolster the Court's conclusion that Article 254 was inapplicable to entries within Lists I and II and that repugnancy tests had been misapplied by the earlier Bench.
Sudhir Chandra Nawn v. Wealth Tax Officer, AIR 1969 SC 59	Authority supporting limits of repugnancy doctrine to the Concurrent List and interpretations under Article 246.	Quoted with approval in support of the Court's view that Article 254 is inapplicable and that only where Central law completely occupies a field would State law be displaced.
Baij Nath Kedia v. State of Bihar, (1969) 3 SCC 838 : AIR 1970 SC 1436	Authority on the same principles regarding Article 246 / occupied field and repugnancy.	Referred to for the proposition that repugnancy does not arise where laws fall in List I or List II and for principles on occupied field.
Ratan Sons Industries v. U.P. Financial Corporation, 1984 All LJ 44	Held Section 31 of the State Financial Corporations Act was not an exclusive remedy and that Section 46‑B preserved other remedies (making State Act’s recovery machinery available to the Corporation).	The Court expressly endorsed this High Court decision and used it to hold that U.P. Financial Corporation was not confined to Sections 29 & 31 and could avail itself of remedies under the U.P. Public Moneys (Recovery of Dues) Act by virtue of Section 46‑B.
Director of Industries v. Deep Chand, (1980) 2 SCC 332 : AIR 1980 SC 801	Upheld constitutionality of the U.P. Public Moneys (Recovery of Dues) Act and explained the object of providing a speedy recovery mechanism for loans advanced by State/Financial Corporations.	Relied upon to reject a challenge to the State Act's constitutionality and to underscore the remedial purpose and legitimacy of the State recovery machinery.
Ram Chandra Mewalal Varanasi v. State of U.P., 1984 All LJ 235 : 1984 Supp SCC 28 : AIR 1987 SC 1837	Holds that where State law supplements, promotes or is complementary to the Central law it cannot be invalidated for lack of legislative competence.	Applied to show that the State law (U.P. Act) supplements the object of Section 32‑G and is therefore not invalid on grounds of legislative incompetence or procedural differences.
Krishna Utensils v. U.P. State Financial Corporation (Writ Petn. No. 20818 of 1988)	Earlier Division Bench decision holding no repugnancy between Central Act and State Act; treated Section 32‑G as complementary and referred the case to a larger Bench.	Noted as the contrary Division Bench decision that produced the reference to a larger Bench; the present Court records that Krishna Utensils differed from the earlier Nov. 3, 1987 decision and led to the present reference.
Division Bench judgment in Writ Petns. Nos. 9476 of 1986, etc. (dated November 3, 1987)	Struck down the State Act as repugnant to Section 32‑G (Central law) — applied Article 254.	The present Court held that decision to be incorrect in law because it erroneously applied Article 254 where Article 246 was the relevant provision; the present Court declared that decision not good law.
Madras High Court decision, AIR 1981 Mad 318	Relied on by the petitioner in support of a challenge to the vires of the U.P. Public Moneys (Recovery of Dues) Act.	The Court noted the petitioner’s reliance but rejected the attempt to re-open the constitutionality of the U.P. Act in view of the Supreme Court’s prior authoritative decision in Director of Industries v. Deep Chand.

Court's Reasoning and Analysis

The Court set out its reasoning in a sequence of clear legal steps:

Identification of the error of law in earlier Division Bench(s): Both conflicting Division Benches had framed the issue mainly as one of "repugnancy" under Article 254 of the Constitution. The present Court held that this was a legal mistake because the subject-matter of the two statutes falls within the exclusive fields allocated respectively to Parliament and the State Legislature (List I and List II entries) and therefore Article 246 — not Article 254 — is the relevant constitutional provision.
Constitutional allocation and field identification: The State Financial Corporations Act and its 1985 amendment (Section 32‑G) fall within Entry 43 of the Seventh Schedule (incorporation, regulation and winding up of trading corporations, including financial corporations) and thus are within Parliament’s legislative domain under Article 246(1). The U.P. Public Moneys (Recovery of Dues) Act is within a State entry (List II). Because the laws are enacted within their respective allocated domains, the repugnancy framework under Article 254 was inapplicable.
Doctrine of occupied field under Article 246: The Court relied on authoritative precedent (notably I.T.C. Ltd.) that the doctrine of occupied field applies only if the Central law has wholly occupied a field so that no scope remains for State legislation. If the Central law does not manifest a clear and unmistakable intention to occupy the field entirely, minimal encroachments do not necessarily invalidate State legislation.
Textual construction of Section 32‑G: The Court examined the language of Section 32‑G and emphasized the phrase “without prejudice to any other mode of recovery.” That phrase, the Court held, plainly indicates legislative intent that Section 32‑G should coexist with other modes of recovery available to State Financial Corporations and was not intended to occupy the field exhaustively.
Interaction with Section 46‑B of the State Financial Corporations Act: The Court noted Section 46‑B (which states the State Financial Corporations Act is “in addition to, and not in derogation of, any other law for the time being applicable to an industrial concern”) and Ratan Sons (1984 All LJ 44), which had already held that Section 31 is not an exclusive remedy and that the Financial Corporation may avail itself of other recovery modes under state law. This reinforced the reading that Section 32‑G does not oust State remedies.
Legislative purpose and remedial design: The Court considered the object of the State Act and the need for speedy recovery mechanisms (as explained in Director of Industries v. Deep Chand) and concluded the State law supplements and promotes the object of Section 32‑G rather than conflicts with it.
Resolution of competing submissions: The petitioner’s attempt to limit “any other mode of recovery” in Section 32‑G to only Sections 29 and 31 of the State Financial Corporations Act was rejected: those words are broad and the Court found no basis for narrowing them. The petitioner’s further attempt to challenge the State Act’s vires was also rejected in view of the Supreme Court’s prior authoritative ruling upholding the U.P. Act.
Procedural/credibility finding: Separately, the Court found that the petitioner suppressed material facts (letting out premises, receipt of rent, refusal to deposit rent, the civil suit and injunction, correspondence) in the petition, and that omission disentitled the petitioner to discretionary relief.

Holding and Implications

Holding:

S. 3 of the U.P. Public Moneys (Recovery of Dues) Act continues to be valid, notwithstanding the insertion of Section 32‑G in the State Financial Corporations Act.

Direct implications and consequences:

The earlier Division Bench judgment (Writ Petn. Nos. 9476 of 1986 and connected petitions dated November 3, 1987) that struck down the State Act as repugnant to Section 32‑G is declared not good law by this Court because it incorrectly applied Article 254 instead of Article 246.
The remedy under the U.P. Public Moneys (Recovery of Dues) Act remains available to the U.P. Financial Corporation; insertion of Section 32‑G did not oust or occupy the field exclusively.
The petitioner’s writ petition was dismissed on merits and additionally on the ground of suppression of material facts; the petition was dismissed with costs to respondent No. 1.

Broader precedent note:

The Court’s reasoning clarifies the correct constitutional framework (Article 246 and the doctrine of occupied field) to be applied where both Central and State laws fall within their respective exclusive legislative domains, and it reaffirmed existing authorities that a Central statute must clearly occupy a field before State legislation is displaced. The opinion reversed the earlier Division Bench decision to the extent it applied Article 254, but it does not purport to invent new legal doctrines beyond applying and explaining settled principles from cited precedents.

Disposition

The petition failed and was dismissed; costs were awarded to respondent No. 1. The Court recorded the referral outcome and disposed of the main ground of challenge in favour of the respondent as stated above.

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Krishna Utensils, Rampur v. State Financial Corporation And Others

Amarendra Nath Verma, J.:— A difference of opinion between two Division Benches of this Court as to the effect of Sec. 32-G inserted by the State Financial Corporation (Amendment) Act, 1985 (No. 43 of 1985) in the State Financial Corporations Act, 1951, on the continued validity of the U.P Public Moneys (Recovery of Dues) Act (hereinafter referred to as the ‘State Act’) in its application to the dues of the U.P State Financial Corporation, has led to the reference of this case to us.

2. In a bunch of (Writ Petns. Nos. 9476 of 1986, 14797 of 1987 and 15437 of 1987) disposed of by a Division Bench of this Court by its judgment dated November 3, 1987, it was held that Section 3 of the State Act was repugnant to Act No. 43 of 1985 (hereinafter referred to as the ‘Central Act’) and was, therefore, void and inoperative in its application to the recovery of dues of the U.P State Financial Corporation. In Krishna Utensils v. U.P State Financial Corporation (Writ Petn. No. 20818 of 1988), however, a Division Bench of this Court in its judgment dated September 1, 1988, differed with the earlier Bench decision of this Court and held that there was no repugnancy between the Central Act and the State Act. It ruled that there was really no conflict between the two enactments and that Section 32-G was merely complementary to the various modes of recovery already possessed by the State Financial Corporation Act and was not in derogation of the same. It consequently referred the case to a larger Bench for resolving the conflict of views. That is how the matter is before us. It may be observed at the outset that both the Division Benches proceeded on the premise that the question had to be judged in the light of Article 254 of the Constitution of India. The learned Judges constituting the two Benches, therefore, concentrated mainly on the issue whether the State Law was repugnant to the Central Law and applied the various tests which have been laid down by their Lordships of the Supreme Court as well as the Federal Court for determining the question of repugnancy between the Central Law and the State Law within the meaning of Article 254 of the Constitution of India. Both the Division Benches have, with great respect, gone wrong in applying Art. 254 of the Constitution of India. The appropriate provision to be applied in the present case, in our opinion, is Article 246 of the Constitution of India. There is a long line of decisions of the Supreme Court as well as the Federal Court ruling that the concept of repugnancy is relevant only where the laws enacted by Parliament and the State Legislature supposed to be in conflict with each other deal with the subjects falling in the Concurrent List, viz., List III of the Seventh Schedule of the Constitution. There is a complete unanimity of opinion in the pronouncements of the Supreme Court that there is no question of any repugnancy in respect of State Laws falling in List II and in respect of Central Law covered by List I. In support of this proposition we would content ourselves by referring only to the latest pronouncement on the subject in the case of I.T.C Ltd. v. State of Karnataka, reported in 1985 (Supp) SCC 476. His Lordship Fazal Ali, J., speaking for the majority, referred to the decisions of the Supreme Court with approval in the cases reported in AIR 1964 SC 1284 (State of Orissa v. M.A Tulloch and Co.), AIR 1969 SC 59 (Sudhir Chandra Nawn v. Wealth Tax Officer) and (1969) 3 SCC 838 : (AIR 1970 SC 1436) (Baij Nath Kedia v. State of Bihar) in support of his conclusion that Art. 254(2) applies only to matters contained in the concurrent List and has nothing to do with matters enumerated in List I or List II. The same view was expressed by his Lordship Mukerji, J. in paragraph 230 of the judgment of page 575. His Lordship summed up the law thus:

“The concept of repugnancy arises only with regard to laws dealing with subjects covered by the entries falling in List III, in respect of which both Parliament and State Legislature are competent to legislate. Under Article 254 of the Constitution, a State law passed in respect of a subject-matter comprised in List III would be invalid if its provisions were repugnant to a law passed on the same subject by Parliament. The repugnancy arose only if both the laws could not exist together. Repugnancy does not arise simply because Parliament and the States pass law on the same subject. There cannot be any repugnancy in respect of State laws passed in respect of matters falling in pith and substance in List II or in respect of Central laws passed on subjects falling in List I.”

3. Now it was not disputed before us by the learned counsel for the parties that both the Central laws as well as the State laws are laws which were enacted respectively by Parliament and the State Legislature within their exclusive and respective fields of legislation. The State Financial Corporation Act and its amendment are both indisputably covered by Entry 43 of List of the Seventh Schedule of the Constitution which mentions the topic as ‘Incorporation, regulation and winding up of trading corporations, including banking, insurance and financial corporations but not including co-operative societies. It is equally undeniable that the power to legislate with respect to financial corporations would also embrace within itself the power to enact a law with respect to the mode of recovery of the dues of the financial corporations. Section 32-G of the Central Act is thus clearly a piece of legislation specifically covered by the field of legislation allocated to Parliament under Clause (1) of Article 246 of the Constitution. Likewise, U.P Public Moneys (Recovery of Dues) Act (the State Law) is also covered by Entry 43 of List II of the Seventh Schedule which provides ‘Public debt of the State’.

4. That being so, reference to Article 254 of the Constitution, would, on the strength of the decision of the Supreme Court in the case of I.T.C Ltd., (1985 (Supp) SCC 476) (supra), be out of place. Realizing this obvious constitutional position, Sri Prakash Krishna, learned counsel for the petitioner, who, we must say, argued the case with great ability and fairness, relied mainly on Article 246 of the Constitution of India and the doctrine of occupied field. The contention was that after the enactment of Section 32-G, the Central Act occupied the field of recovery of the dues of the State Financial Corporation as arrears of land revenue wholly and exclusively. With the result, Section 3 of the State Act which provides for recovery of certain dues, inter alia, of the U.P Financial Corporation as arrears of land revenue, was rendered void and inoperative, inasmuch as the State law clearly encroached upon a field wholly occupied by the Central Act (Section 32-G). In support of this contention, learned counsel placed strong reliance on the decision of the Supreme Court in the case of I.T.C Ltd. (supra) as well as (1972) 1 SCC 872 : AIR 1972 SC 1738 (paragraph 37).

5. In order to appreciate the argument, we will briefly survey the provisions of the two enactments bearing on the controversy. The State Financial Corporations Act, 1951 was enacted to provide for the establishment of State Financial Corporations Act, with the object of providing immediate and long term credit to industrial concerns. Section 25 of this Act lays down the business which financial corporations may transact. It provides, inter alia, for guaranteeing on such terms and conditions, as may be agreed upon, loans raised by industrial concerns which are repayable within a specified period. Section 29 arms the Financial Corporation with power to take over the management or business or both of an industrial concern in case the letter makes any default in repayment of any loan or advance or any instalment thereof. The Financial Corporation has the further right to transfer by way of lease or sale and realise the property pledged or mortgaged to the Financial Corporation as a security for repayment of the loan or advance. There is then Section 31 of the Act which enacts a special provision for enforcement of claims by Financial Corporation by applying to the District Judge within the limits of whose jurisdiction the industrial concern carries on its business for an order for the sale of property pledged or mortgaged etc. to the Financial Corporation in case the industrial concern commits a breach of any agreement of loan or advance or makes any default of repayment of any loan or advance. The next material provision is Section 46-B which has been the subject of some debate at the Bar. It states:

“46-B. Effect of Act on other laws—

The provisions of this Act and of any rules or orders made thereunder shall have effect notwithstanding anything inconsistent therewith contained in any other law for the time being in force or in the memorandum or articles of association of an industrial concern or in any other instrument having effect by virtue of any law other than this Act, but save as aforesaid, the provisions of this Act shall be in addition to, and not in derogation of, any other law for the time being applicable to an industrial concern.”

6. The effect and scope of this provision came up for consideration before a Division Bench of this Court in the case of Ratan Sons Industries v. U.P Financial Corporation, Kanpur reported in 1984 All LJ 44. The question raised there was whether the remedy conferred upon the State Financial Corporation for recovery of its dues as arrears of land revenue under Section 3 of U.P Public Moneys (Recovery of Dues) Act was available to the corporation or whether the Financial Corporation was confined to the specific remedies provided under Sections 29 and 31 of the State Financial Corporations Act. This Court on an analysis of the relevant provisions held as follows (at Pp. 46-47 of All LJ):

“We are clearly of the opinion that neither of these two provisions lends any support to the petitioners' submission. Section 31 of the State Financial Corporations Act lays down a special provision for enforcement of the claims by Financial Corporations. It enables the Corporation to enforce its claim through a special mode of recovery prescribed thereunder. It, however, does not, directly or by necessary implication, imply that the Financial Corporation is debarred from taking recourse to any other process which may be conferred upon it or be available to it elsewhere by force of other laws of the land. In our considered view the remedy provided under Section 31 is not in derogation of any other mode of recovery which is available to the Financial Corporation under any other law for enforcement of its claims. The remedy under Section 31 is not, in our opinion, the sole or exclusive remedy available to the Financial Corporations. It is only an additional remedy which has been conferred upon the Financial Corporations. This has been made explicit by the latter part of Section 46-B which says that the State Financial Corporations Act shall be in addition to, and not in derogation of any other law for the time being applicable to an industrial concern.

Learned counsel, however, laid particular stress on the first part of Section 46-B which provides that the provisions of the State Financial Corporations Act shall have effect notwithstanding anything inconsistent therewith contained in any other law for the time being in force. Counsel submitted that the process of recovery provided under the U.P Public Moneys (Recovery of Dues) Act, 1972 is much harsher than that provided under Section 31 and, therefore, it must be held that the former is inconsistent with the latter.

We find no merit in the contention. As already observed, the remedy provided under the U.P Act is an additional remedy. As noticed above, from the latter part of Sec. 46B the legislative intent seems obvious, namely, that the Corporation shall not be denied recourse to any other mode of recovery which may be conferred upon it or be available to it under any other enactment. Section 46-B expressly says that the Act is not in derogation of any other law for the time being applicable to an industrial concern. The Corporation was hence fully empowered to enforce its claim through the process enacted in the U.P Public Moneys (Recovery of Dues) Act.”

7. The above decision of this Court also drew support from a decision of the Supreme Court in the case of Director of Industries v. Deep Chand reported in (1980) 2 SCC 332 : AIR 1980 SC 801. We will refer to this decision a little later.

8. We fully endorse the opinion expressed by this Court in Ratan Sons case, (1984 All LJ 44) and hold that for the recovery of its dues U.P Financial Corporation was not confined to the remedies provided under Sections 29 and 31 of the State Financial Corporations Act. As observed in Ratan Sons case, there is nothing in the language or scheme of the State Financial Corporations Act to justify the contrary conclusion. In our opinion, if there was any doubt about it the same stands completely dispelled by the latter part of Section 46-B which expressly states that the provisions of that Act shall be in addition to and not in derogation of any other law for the time being applicable to an industrial concern. Indeed if the view that the State Financial Corporations were confined in the matter of recovery of their dues only to Sections 29 and 31 of the Act is accepted it would mean that a State Financial Corporation would not even have the remedy of a suit for the recovery of its dues. Such a result could obviously not have been intended by the Legislature.

9. The position that, therefore, emerges from the foregoing discussion and as indeed fairly conceded by the petitioner is that prior to the introduction of Section 32-G the U.P Financial Corporation could lawfully take recourse to the machinery provided under the State law for recovery of its dues as arrears of land revenue.

10. The question is: Has the position altered after the insertion of Section 32G?. The question must, in our considered view, the answered in the negative. As observed above, the governing constitutional provision is Article 246 which states:

“246. Subject matter of laws made by Parliament and by the Legislatures of States—

(1) Notwithstanding anything in clauses (2) and (3), Parliament has exclusive power to make laws with respect to any of the matters enumerated in List I in the Seventh Schedule (in this Constitution referred to as the ‘Union List’)

(2) Notwithstanding anything in clause (3), Parliament, and, subject to clause (1), the Legislature of any State also, have power to make laws with respect to any of the matters enumerated in List III in the Seventh Schedule (in this Constitution referred to as the Concurrent List)

(3) Subject to clauses (1) and (2) the Legislature of any State has exclusive power to make laws for such State or any part thereof with respect to any of the matters enumerated in List III in the Seventh Schedule (in this Constitution referred to as the ‘State List’)

(4) Parliament has power to make laws with respect to any matter for any part of the territory of India not included in a State notwithstanding that such matter is a matter enumerated in the State List.”

11. This provision has been the subject of consideration in a large number of decisions rendered both by the Supreme Court as well as the Federal Court. It is, however, unnecessary to burden our decision with all the various pronouncements of the Supreme Court as we find that there is a complete unanimity among the learned Judges on the subject. We will, therefore, content ourselves by referring to the decision of the Supreme Court in the case of I.T.C Ltd., (1985 (Supp) SCC 476) (supra). His Lordship Fazal Ali, J., speaking for the majority, spelled out five cardinal principles emerging from anj interpretation of Article 246 of the Constitution with regard to demarcation andi delimitation of fields of legislation between Parliament and State Legislatures. The fifth principle spelled out in paragraph 17 of the judgment is relevant for our purposes and it reads thus:

“The doctrine of occupied field has a great lace in the interpretation as to whether or not a particular Legislature is competent to legislate on a particular entry. This means that when the field is completely occupied by List I, as in this case, then the State Legislature is wholly incompetent to legislate, and no entrenchment or encroachment, minimal or otherwise, by a State Legislature is permitted. In other words, where the field is not wholly occupied, then a mere minimal encroachment or entrenchment would not affect the validity of the State Legislation.”

12. His Lordship also referred with approval to the decision in Sudhir Chandra Nawn (AIR 1969 SC 59) (supra) and Baij Nath Kedia ((1969) 3 SCC 838 : AIR 1970 SC 1436) (supra) both of which emphasized the same aspect. His Lordship Mukharji, J. also in the same case (I.T.C Ltd.) (1985 (Supp) SCC 476) observed that it is only if the Central Law completely occupies the field that the State law even if enacted with respect to the matter falling in List II shall have to give way to the Central law. The view expressed by their Lordships was founded on the scheme of the distribution of Legislative functions between the Central and State Legislatures under our Constitution. They placed particular reliance on clause (3) of Article 246 which expressly states that the power of the legislature of any State to make laws shall be subject to clauses (1) and (2) of Article 246 of the Constitution. The view was also in recognition of the dominant position of Parliament in the matter of distribution and delimination of legislative functions as recognized in our Constitution.

13. The question then is whether Section 32-G has the effect of occupying the entire field with respect to recovery of the dues of Financial Corporations as arrears of land revenue. The language of Section 32-G is explicit and unambiguous. It provides that the remedy being conferred under Section 32-G is “without prejudice to any other mode of recovery”, such a language is wholly inconsistent with the legislative intent to occupy the entire field. The words ‘without prejudice to any other mode of recovery’ indicate in the clearest terms the intention of the Legislature which was to preserve all other remedies which the Financial Corporations already possessed for recovery of its dues, Prior to the insertion of Section 32-G there was no specific provision in the Central Act arming the Financial Corporations with the power to recover its dues as arrears of land revenue. The State Corporations, however, acquired that power under State laws, such as, the U.P Public Moneys (Recovery of Dues) Act as a result of the saving clause enacted in the latter part of Section 46-B. It is possible that in home States there was no law corresponding to the U.P Public Moneys (Recovery of Dues) Act. It appears, therefore, that in order to fill this gap arising from a possible absence of a provision in any State law for recovery of the dues the Central Legislature thought it necessary to insert Section 32-G. But while doing so, the Central Legislature expressly declared that the remedy provided under Section 32-G was without prejudice to any other mode of recovery already possessed by the Financial Corporation. This was made explicit by the use of the words ‘without prejudice to any other mode of recovery’.

14. Upon the plain terms of the Statute (Section 32-G) therefore, we have not the slightest hesitation in holding that far from attempting to occupy the entire field, the Central Legislature expressly manifested an intention to leave the other modes already possessed by the Financial Corporations under other enactments untouched. In short, the Central Legislature did not purport to occupy the entire field. We have already found above that prior to the insertion of Section 32-G, the U.P Financial Corporation did have available to it the mode of recovery enacted under Section 3 of U.P Public Moneys (Recovery of Dues) Act. That remedy is not lost to the Financial Corporations by the insertion of Sec. 32-G.

15. Learned counsel for the petitioners, however, urged that the words occurring in Sec. 32-G ‘without prejudice to any other mode of recovery’ must be read down so as to be restricted only to the remedies specifically provided under Sections 29 and 31 of the State Financial Corporations Act and not to any other mode of recovery possessed by the Financial Corporations under any other law. We regret we cannot agree. The argument ignores Section 46-B which is an integral part of the statute. The reasoning which led this Court to hold in Ratan Sons case, (1984 All LJ 44) that the remedy provided under U.P Public Money's (Recovery of Dues) Act was available to the U.P Financial Corporation and that the corporation was not confined to the remedies under Sections 29 and 31 is applicable with equal validity to the import of the words ‘without prejudice to any other mode of recovery’. Further the words any other mode of recovery are words of the widest possible amplitude and we find no valid ground for whittling them down to mean only the modes of recovery provided under Sections 29 and 31 of the Act. As already observed acceptance of the learned counsel's submission would mean that the Financial Corporation would stand deprived even of the remedy of a civil suit. Such a result could not have been in the contemplation of the Legislature.

16. Further, in construing Section 32-G, the object and purpose of the State Financial Corporations Act as well as the need for providing a speedy remedy to the Corporation for recovery of its dues should not be forgotten. While considering a challenge to the constitutionality of the U.P Public Moneys (Recovery of Dues) Act., 1965, their Lordships of the Supreme Court in the case of Director of Industries, U.P v. Deep Chand Agarwal, ((1980) 2 SCC 332 : AIR 1980 SC 801) (supra) observed in paragraph 6 of the judgment that the U.P Act was designed to provide a speedier remedy to the State Government to realize the loans advanced by it or by the Uttar Pradesh Financial Corporation. Loans were advanced to assist the people financially in establishing an industry in the State or for the development of agriculture, etc. The loans are advanced from out of the funds of the State in which all people of the State are vitally interested. Consequently moneys advanced by the State Government or Financial Corporation have got to be recovered expeditiously so that fresh advance may be made to others who have not yet received financial assistance from the State Government. It is for this purpose that the State Government and the Financial Corporations were armed with a machinery for speedy recovery of their loans as arrears of land revenue through the modality of issue of a certificate to the Collector for realization of the loan as arrears of land revenue.

17. It will thus be seen that the State law merely advances, promotes and supplements the remedy conferred on the State Financial Corporation under Section 32-G. There is no conflict or collision between the two except that the remedy provided under S. 32-G is slightly more circuitous and perhaps time consuming. In the case of Ram Chandra Mewalal Varanasi v. State of U.P, reported in 1984 All LJ 235 (paragraph 51) : 1984 Supp SCC 28 : (AIR 1987 SC 1837), the Supreme Court considering a somewhat identical problem, held that where the State Law merely promotes the real object of the Central law and is supplementary or complementary to the Central law, it cannot be invalidated on the ground of lack of legislative competence. In any case, the legislative intent behind S. 32-G being explicit and unambiguous, we cannot accept the contention that the State law has been rendered void and inoperative qua the dues of the Financial Corporation after the insertion of Section 32-G.

18. Learned Counsel next submitted that insofar as the recovery of the dues of the Financial Corporations as arrears of land revenue is concerned, the field must be deemed to have been wholly occupied by Section 32-G and consequently where the Financial Corporation seeks to recover its dues as arrears of land revenue, it must be held to be confined to the mode prescribed under S. 32-G. This argument is more or less a repetition of the submission already dealt with elaborately hereinabove. The argument proceeds on the erroneous assumption that S. 32-G is exhaustive in its operation. Section 32-G, in our opinion, merely prescribes ore of the several modes in which dues can be recovered as arrears of land revenue. There is nothing in the provision to suggest that all other modes of recovery of dues as arrears of land revenue stand excluded. The fact that under S. 32-G it is the State Government which upon being satisfied, issues the certificate of recovery to the Collector, unlike the mode prescribed under S. 3 of the State law under which the certificate is issued by a designated officer of the Financial Corporation would also make no difference to the result. As observed above, a mere difference in procedure prescribed under the two enactments would not by itself have the effect of invalidating the State law. So long as the Central law does not manifest a clear and unmistakable intention to occupy the field in its entirety, the State law enacted within the exclusive field of legislation allocated to it cannot be struck down merely on the ground that the procedure prescribed by the State law differs in some respects from that prescribed by the Central law.

19. Finally, learned Counsel for the petitioner made a feeble attempt to challenge the vires of U.P Public Moneys (Recovery of Dues) Act on the ground of supposed lack of legislative competence. In support learned Counsel also placed reliance on the decision of the Madras High Court reported in AIR 1981 Mad 318. The argument cannot be accepted in view of the pronouncement of the Supreme Court in the case of The State of U.P v. Deep Chand Agarwal ((1980) 2 SCC 332 : AIR 1980 SC 801) (supra), which expressly upheld the constitutionality of the enactment. Learned Counsel tried to distinguish that decision on the ground that in that case there was no challenge to the legislative competence of the State Legislature to enact U.P Public Moneys (Recovery of Dues) Act. We think that the constitutionality of the enactment having been upheld by the Supreme Court, it is not open to this Court to reexamine the vires of the enactment on the ground suggested by the learned Counsel. The Division Bench in the case reported in 1984 All LJ 768 rightly held that after the decision of the Supreme Court it is not open to this Court to reexamine the validity of the Act.

20. In Writ Petition No. 9476 of 1986 and connected petitions (supra) the Bench, while striking down the State law, held that the State law was repugnant to the Central law (Section 32-G). Points of difference were indicated by the Bench. With profound respect to the learned Judges, they ignored the indisputable position that the Central law as well as the State law were not dealing with the topics falling in the Concurrent List. Each law was a piece of legislation enacted within the sphere of legislation allocated respectively to Parliament and the State Legislature. Article 254 which was made the basis of the decision by the learned Judges was hence wholly inapplicable to the controversy. The real issue was whether the Central law occupied the field wholly not leaving any scope for the operation of the State law. We have already answered this question in the negative. We, therefore, hold that the decision in Writ No. 9476 of 1986 and connected writ petitions dated November 3, 1987 is not good law. We, however, approve the ultimate conclusion as to the validity of U.P Public Moneys (Recovery of Dues) Act reached by the Division Bench referring this case to us, though, for the reasons given by us.

21. This Court, therefore, holds that S. 3 of U.P Public Moneys (Recovery of Dues) Act continues to be valid, notwithstanding the insertion of S. 32-G in the State Financial Corporations Act.

22. That disposes of the main ground of challenge to the impugned recovery proceedings. Since the entire case has been referred to us, we may briefly refer to the relevant facts of the case. The petitioner was advanced a loan of Rs. 1,12,660/- (out of the total sanctioned loan of Rs. 2,17,000/-) by the U.P Financial Corporation. The allegation is that the petitioner committed serious defaults in the repayment of the loan as a consequence of which after all efforts made by the Financial Corporation to extend maximum facility to the petitioner for the repayment of the loan having failed, a recovery certificate was issued to the Collector for recovery of Rs. 1,38,700.99 which has been challenged by the petitioner on the ground mentioned above. The allegation further is that contrary to the term in the mortgage deed the petitioner let out the factory premises to Messrs. U.P Agro Development Corporation and started realizing rent from it. Thereupon the Financial Corporation asked the petitioner to deposit the rent being realized from the U.P Agro Development Corporation so that the question of rehabilitation of the petitioner's unit be considered by the Corporation, the petitioner declined to do so. It is also pointed out in the counter-affidavit that the petitioner also filed a civil suit No. 52 of 1985 for permanent injunction restraining the Financial Corporation from realising its dues from him. An ad interim injunction was also issued on September 7, 1988 under which the petitioner was directed to deposit rent. The institution of the suit and the correspondence exchanged between the petitioner and the Financial Corporation on the subject had a material hearing. The petitioner, however, did not consider it necessary to mention these material facts. In our opinion, the omission to mention these facts in the petition amounts to suppression of material facts which disentitles the petitioner to the grant of any discretionary relief by this Court.

23. The petition is hence liable to be dismissed on this ground also quite apart from the fact that the main challenge to the validity of the impugned recovery proceedings has failed on merits.

24. In the premise, the petition fails and is dismissed, with costs to the respondent No. 1.

25. Petition dismissed.

Krishna Utensils, Rampur v. State Financial Corporation And Others

Summary of Opinion — Amarendra Nath Verma, J.

Factual and Procedural Background

Legal Issues Presented

Arguments of the Parties

Petitioner's Arguments

Respondent's / Court-noted Factual Contentions

Table of Precedents Cited

Court's Reasoning and Analysis

Holding and Implications

Disposition

Krishna Utensils, Rampur v. State Financial Corporation And Others

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