JUDGMENT
G.S. Singhvi, J.
1. In order to provide medium and long term credit to industrial b3 undertakings which could not be financed by the commercial banks, the Central Industrial Financial Corporation was set up under the Industrial Finance Corporation Act, 1948. After some time, the State Governments expressed their desire that the State Financial Corporations should also be set up on the pattern of the Central Industrial Financial Corporation which may function under the ultimate control of the State Governments. In order to meet this demand, and keeping in view the provision of entry 43 of List I of the Seventh Schedule, Parliament enacted the State Financial Corporations Act, 1951 (hereinafter referred to as “the 1951 Act”). The object of providing financial assistance to the existing industrial concerns and new entrepreneurs who wanted to set up industries was satisfactorily achieved. But in the later years, the State Financial Corporations had been dragged into litigation and there is no High Court in the country in which dozens of petitions are filed every year by persons who have availed of the above facilities from such corporations. The primary objective of these petitions is to frustrate the recovery of the dues and as on date recovery of hundreds of crores of rupees given in the form of loans, etc., has been blocked due to the petitions filed in the High Courts and else where. This High Court is no exception to this malady. The present one is also a case in which the petitioners have, in the garb of challenging the constitutional validity of the Haryana Public Money (Recovery of Dues) Act, 1979 (hereinafter referred to as “the 1979 Act”), tried to frustrate the proceedings initiated by the Haryana Financial Corporation (hereinafter referred to as “the Corporation”) to recover the amount due from them.
2. The petitioners, Vipin K. Singal, Vinay K. Singal and Varinder K. Singal, are the directors of the company which was initially incorporated in the name of S. N. S. Medical Leasing Limited. Later on, its name was changed as S. N. S. Laboratories Limited (hereinafter described as “the company”). The company was sanctioned loan of Rs. 60 lakhs by the corporation in the year 1987. After two years, the Haryana State Industrial Development Corporation (hereinafter referred to as “HSIDC”) sanctioned another loan of Rs. 62.60 lakhs to the company. Notices dated February 14, 1992, (annexure P-2) and April 19, 1993, (annexure P-8) were issued by the corporation to remind the company of its obligation to repay the loan in accordance with the agreed schedule. In the second notice, it was clearly indicated that the failure of the company to repay the loan along with interest will lead to initiation of action under section 29 of the 1951 Act. However, the company did not pay any heed to those notices. Consequently, the corporation took possession of the unit. In 1994, the corporation took steps to auction the unit of the company for recover of the dues. However, at the instance of the directors of the company, the corporation agreed to defer the sale of the industry subject to the conditions incorporated in the letter annexure P-16 dated March 25, 1994, sent to the managing director of the company. The representative of the company assured the corporation that all the dues will be cleared as per the terms of settlement package but the said assurance proved to be hollow and despite the fact that extraordinary concession was granted by the corporation by accepting the request of the managing director of the company to sell the machinery, the company and its directors failed to clear the dues. Ultimately, the corporation withdrew the settlement package and communicated its decision to the company vide letter annexure P-26, dated July 5, 1995. Simultaneously, the corporation initiated action for recovery of the dues under the 1979 Act and issued a recovery certificate to the Assistant Collector at Delhi, who, in turn, issued notice annexure P-27, dated October 15, 1996, to the petitioners to deposit Rs. 89,45,083.
3. The petitioners have challenged the impugned notice on the ground that the 1979 Act under which the impugned action has been initiated is beyond the legislative competence of the State of Haryana and also on the ground that the summary provisions contained in the said Act for recovery of the dues are discriminatory and violative of their fundamental right to equality guaranteed under article 14 of the Constitution of India. Still further, they have challenged the impugned notice on the ground of violation of the principles of natural justice.
4. The corporation has defended its decision to recover the amount due by invoking the provisions of the 1979 Act by stating that the company and its directors have failed to pay the amount due (as per the corporation’s version a sum of Rs. 107.80 lakhs was due in 1996). It has relied on the decision of the Supreme Court in Director of Industries, U. P. v. Deep Chand Agarwal, AIR 1980 SC 801, to controvert the plea of the petitioners that the 1979 Act is ultra vires the legislative power of the State. The corporation has also accused the petitioners of adopting dilatory tactics to avoid the payment of dues in spite of the execution of settlement package annexure P-16. The HSIDC has filed an almost similar written statement.
5. Shri Kamal Sehgal, counsel for the corporation pointed out that on February 17, 1998, hearing of this petition was adjourned sine die to await the decision of C.W.P. No. 5201 of 1997, Vivek Sarin v. State of Haryana [1998] 2 RCR 179 in which the constitutional validity of 1979 Act was challenged and submitted that in view of the fact that the constitutional validity of the 1979 Act has been upheld by the Division Bench, this petition should be dismissed. B. R. Gupta, counsel for the HSIDC whole heartedly supported Sehgal’s submission. On the other hand, Arun Nehra, counsel for the petitioners strenuously urged for reconsideration of the decision rendered by a co-ordinate Bench in Vivek Sarin’s case [1998] 2 RCR 179 by arguing that the Bench which decided that case has failed to correctly appreciate the ambit and scope of entry 43 of List I of the Seventh Schedule vis-a-vis entry 43 of List II of the Seventh Schedule. He argued that the expression public debt of the State used in entry 43 of List II cannot be so interpreted as to clothe the State Legislature with the power to legislate on a subject which exclusively falls in the domain of Parliament. In support of this argument, he placed reliance on the judgment of the Madras High Court in G. N. Venkataswamy v. Tamil Nadu Small Industries Development Corporation Ltd., AIR 1981 Mad 318. He further argued that the impugned notice should, in any case, be nullified because no opportunity of hearing was given to the petitioners before determination of the amount due in terms of section 3 of the 1979 Act. To substantiate this submission, Nehra placed reliance on the decision of the Supreme Court in S. K. Bhargava v. Collector [1998] 92 Comp Cas 791; [1998] 2 RCR 526.
6. In order to decide whether the judgment of the Division Bench in Vivek Sarin’s case [1998] 2 RCR 179 requires reconsideration, as urged by Nehra, we may first notice the ratio of that decision. A perusal of the said decision shows that the counsel who appeared on behalf of the petitioner in that case attacked the constitutional validity of the 1979 Act on the ground that the State Legislature had no jurisdiction to enact such law. He urged that Parliament had the exclusive power to enact laws in respect of financial corporations by virtue of entry 43 of List I and, therefore, the 1979 Act be declared as unconstitutional. While repelling the challenge, the Division Bench observed as under :
“Under article 246, Parliament has exclusive power to make laws with regard to matters enumerated in List I. Similarly, the Legislature of a State has exclusive power to make laws in respect of the matters enumerated in List II. When a statute is referable to an entry in List I or II, no question of ultra vires would arise.
In respect of the matters contained in List III, Parliament as well as the State Legislatures have been empowered to make laws. It is only when Parliament as well as the State Legislature enact a law on a matter included in the concurrent List that the test of repugnancy as envisaged under article 254(2) of the Constitution can be applicable. The test of pith and substance is applied to determine as to whether or not the State law has substantially encroached upon the field occupied by the law enacted by Parliament.
An incidental encroachment is normally overlooked. Furthermore, the entries in the legislative lists are merely topics or fields of legislation. These have to be liberally construed.
What is the position in the present case ? The State Financial Corporations Act, 1951, is clearly referable to entry 43 in List I. So far as the State law is concerned, it was enacted ‘to provide for the speedy recovery of certain classes of dues’. In the Statement of Objects and Reasons, it was specifically mentioned that certain industrial concerns had been defaulting in the repayment of loans advanced by the Haryana State Financial Corporation. This has resulted in accumulation of heavy arrears, it was to ensure quick recoveries that the bill was presented.
This Act provides that where a sum is recoverable from a defaulter by the State Government or by a Corporation, the named authority shall send ‘a certificate to the Collector mentioning the sum due from the defaulter and requesting that such sum together with the cost of proceedings be recovered as if it were an arrear of revenue’. The jurisdiction of the civil court to adjudicate upon such a case has been excluded.
By virtue of entry 43, the State Legislature is competent to legislate in respect of ‘public debt’ of ‘the State’. The State law is calculated to ensure a quick recovery of the public dues. The impugned legislation squarely falls within entry 43. In fact, a similar legislation, viz., the U.P. Public Moneys (Recovery of Dues) Act has already been upheld by their Lordships of the Supreme Court in Director of Industries, U.P. v. Deep Chand Agarwal, AIR 1980 SC 801. It was emphasised by their Lordships that ‘moneys advanced by the State Government have got to be recovered expeditiously so that fresh advances may be made from the State Government. It is with the object of avoiding the usual delay involved in the disposal of suits in civil courts and providing for an expeditious remedy, the Act has been enacted.’ Section 3 which was almost in similar terms was upheld by their Lordships. Thus, the State legislation was clearly within the competence of the Legislature. Consequently, it is not ultra vires.”
7. We express our unreserved agreement with the opinion expressed by a co-ordinate Bench in Vivek Sarin’s case [1998] 2 RCR 179. Notwithstanding this, we deem it proper to deal with the argument of Nehra that the issue requires reconsideration because in Vivek Sarin’s case [1998] 2 RCR 179, the court did not correctly appreciate the scope of entry 43 of Lists I and II. These entries read as under :
“Entry 43, List I – Union List – Seventh Schedule. – Incorporation, regulation and winding up of trading corporations, including banking, insurance and any financial corporations but not including co-operative societies.
Entry 43, List II – State List – Seventh Schedule. – Public debt of the State.”
8. In order to examine the tenability of the submissions of Nehra, we shall briefly refer to the relevant provisions of the two enactments. As already mentioned above, the 1951 Act was enacted to provide for the establishment of State Financial Corporations 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 latter makes any default in repayment of any loan or advance or any instalment thereof. The financial corporation has a 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 other provisions of the 1951 Act which have a bearing on the argument of learned counsel are sections 32G and 46B. The same read as under :
“32B. Effect of notified order under section 32A. – On the issue of a notified order under section 32A. –
(a) In any case in which the industrial concern is a company as defined in the Companies Act, 1956, all persons holding office as directors of the industrial concern and in any other case, all persons holding any office having the powers of superintendence, direction and control of the industrial concern, immediately before the issue of the notified order, shall be deemed to have vacated their offices as such;
(b) any contract of management between the industrial concern and any managing agent or any director or manager thereof holding office as such immediately before the issue of the notified order shall be deemed to have terminated;
(c) in the case of an industrial concern which is a company as defined in the Companies Act, 1956, the managing agent, if any appointed under section 32A shall be deemed to have been duly appointed in pursuance of the said Act and the memorandum and articles of association of the industrial concern and the provisions of the said Act and the memorandum and articles shall, subject to the other provisions contained in this Act, apply accordingly, but no such managing agent shall be removed from office except with the previous consent of the financial corporation;
(d) the directors or the administrators appointed under section 32A shall take such steps as may be necessary to take into their custody or under their control all the property, effects and actionable claims to which the industrial concern is, or appears to be entitled, and all the property and effects of the industrial concern shall be deemed to be in the custody of the directors or administrators as the case may be, as from the date of the notified order;
(e) the directors appointed under section 32A shall, for all purposes, be the directors of the industrial concern duly constituted under the Companies Act, 1956, and such directors, or as the Case may be, the administrators appointed under section 32A, shall alone be entitled to exercise all the powers of the directors or as the case may be, the persons exercising powers of superintendence, direction and control, of the industrial concern, whether such powers are derived from the said Act or from the memorandum or articles of association of the industrial concern or from any other source whatsoever.
46B. 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.”
9. The 1979 Act was enacted by the State Legislature with a view to ensure speedy recovery of certain classes of dues. The statement of objects and reasons incorporated in the Bill presented before the Assembly which led to the enactment of the 1979 Act read as under :
“Statement of objects and reasons. – Certain industrial concerns have been defaulting in the repayment of loans advanced by the Haryana Financial Corporation resulting in accumulation of heavy arrears which have to be recovered urgently. As the procedure to recover such arrears is lengthy and time consuming. It has been decided to enact ‘the Haryana Public Money (Recovery of Dues) Act, 1979’ to ensure quick recovery.”
10. Section 3 of the 1979 Act which deals with the recovery of dues as arrears of land revenue reads as under :
“3. Recovery of certain dues as arrears of land revenue. – (1) Where any sum is recoverable from a defaulter, –
(a) by the State Government, such officer as it may, by notification, appoint in this behalf;
(b) by a corporation or a Government company, the managing director thereof, shall determine the sum due from the defaulter.
(2) The officer or the managing director, as the case may be, referred to in sub-section (1), shall send a certificate to the Collector mentioning the sum due from the defaulter and requesting that such sum together with the cost of proceedings be recovered as if it were an arrear of land revenue.
(3) A certificate sent under sub-section (2) shall be conclusive proof of the matters stated therein and the Collector, on receipt of such certificate, shall proceed to recover the amount stated therein as arrears of land revenue.
(4) No civil court shall have jurisdiction, –
(a) to entertain or adjudicate upon any case; or
(b) to adjudicate upon or proceed with any pending case, relating to the recovery of any sum due as aforesaid from the defaulter. The proceedings relating to the recovery of the sums due from the defaulters, pending at the commencement of this Act in any civil court, shall abate.”
13. Nehra’s argument that the trinity of sections 31, 32G and 46B of the 1951 Act should be treated as a complete code unto itself and, therefore, the domain of the State Legislature to enact law for recovery of the dues of the financial corporation should be treated as excluded appears to be based on the following assumptions :
(i) The provisions contained in the 1979 Act for recovery of dues of the State Financial Corporation are inconsistent with those contained in the 1951 Act;
(ii) Entry 43 of List II empowers the State Legislature to enact law for recovery of public debt of the State Government and not of the agencies and instrumentalities of the State.”
14. However, as we shall see hereinafter these assumptions are clearly unfounded and misconceived. Section 31 of the 1951 Act contains a provision for enforcement of 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 which may 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 later part of section 46B which says that the 1951 Act shall be in addition to, and not in derogation of any other law for the time being applicable to an industrial concern. The language of section 32G is also explicit and unambiguous. It lays down that the remedy being conferred under section 32G is “without prejudice to any other mode of recovery”. 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 can avail of for recovery of its dues.
15. In other words, the plain language of sections 31, 32G and 46B of the 1951 Act clearly negates the theory of occupied field sought to be propounded by Nehra by arguing that in view of the provisions contained in the 1951 Act for recovery of the dues of State financial corporations, the jurisdiction of the State Legislature to enact law on this subject should be treated as exclusive and we have not the slightest hesitation in holding that far from attempting to occupy the entire field, the Central legislation expressly manifested an intention to leave the other modes of recovery available to the financial corporations under other enactments untouched. As a logical corollary, it must be held that the provisions contained in the 1979 Act for recovery of the dues of the corporation are not ultra vires the 1951 Act. This view of ours finds full support from the observations made by the Supreme Court in Director of Industries, U.P. v. Deep Chand Agarwal, AIR 1980 SC 801. In paragraph 6 of that judgment, the apex court observed that “the U.P. Act was designed to provide a speedier remedy to the State Government to realise 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 loans, advances 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 realisation of the loan as arrears of land revenue”.
16. In Ram Chandra Mawa Lal v. State of Uttar Pradesh, AIR 1987 SC 1837, the apex court 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.
17. We are further of the view that there is no reason to construe entry 43 of List II in a manner which may denude the State Legislature of its power to enact law for recovery of public debts due to the instrumentalities and agencies of the State. It cannot be denied that the corporation is a creature of statute and it carries on an important Governmental function by giving assistance in the rapid industrialisation of the State. Therefore, it has to be treated as an agency of the State for the purpose of article 12 of the Constitution. Under entry 43 of List II, the State Legislature is empowered to enact law for speedy recovery of the dues of the State. Therefore, its power to enact law for recovery of the dues of the agencies and instrumentalities of the State cannot be questioned.
18. On the basis of the above discussion, we reaffirm the view taken by the co-ordinate Bench in Vivek Sarin’s case [1998] 2 RCR 179 and hold that the 1979 Act is not ultra vires the legislative competence of the State.
19. The argument of Nehra that the summary procedure prescribed by section 3 of the 1979 Act for recovery of the dues of the corporation is arbitrary, discriminatory and violative of article 14 of the Constitution of India appears to be based on the decision of the Supreme Court in Northern India Caterers (Private) Ltd. v. State of Punjab, AIR 1967 SC 1581. In that case, the question which arose for consideration by the apex court was whether the procedure for eviction contained in the Punjab Public Premises and Land (Eviction and Rent Recovery) Act, 1959, is discriminatory and violative of article 14 of the Constitution of India. By a majority judgment, the Constitution Bench of the Supreme court accepted the argument that discrimination would result if there are two available procedures for eviction, one more drastic or prejudicial to the party concerned than the other which can be applied at the arbitrary will of the authority. However, in view of the decision of a larger Bench of seven judges in Maganlal Chhagganlal (P.) Ltd. v. Municipal Corporation of Greater Bombay, AIR 1974 SC 2009, overruling the judgment relied upon by Nehra, it cannot be held that the summary procedure prescribed under the 1979 Act is discriminatory or violative of article 14 of the Constitution of India. A careful study of the preambles to the two enactments and the object sought to be achieved by the enactment of the 1979 Act shows that the procedure laid down in the 1979 Act is neither arbitrary nor discriminatory. The very fact that the competent authority is required to hear the party before determining the dues provides ample safeguard against the possibility of arbitrary exercise of power. However, simply because in a given case the action of the competent authority may be found to be arbitrary cannot, in our opinion, be made a ground for striking down the statute. In Maganlal Chhagganlal’s case, AIR 1974 SC 2009, their Lordships considered the provisions of the Bombay Municipal Corporation Act, 1888, and the Bombay Government Premises (Eviction) Act, 1955, and held as under (headnote) :
“Where a statute providing for a more drastic procedure different from the ordinary procedure covers the whole field covered by the ordinary procedure without any guidelines as to the class of cases in which either procedure is to be resorted to, the statute will be hit by article 14. Even there a provision for appeal may cure the defect. If from the preamble and surrounding circumstances, as well as the provisions of the statute explained and amplified by affidavits, necessary guidelines could be inferred the statute will not be hit by article 14. Then again where the statute itself covers only a class of cases the statute will not be bad. The fact that in such cases the executive will choose which cases are to be tried under the special procedure will not affect the validity of the statute. Therefore, the mere availability of two procedures will not vitiate one of them, that is the special procedure.
Merely because one procedure provides the forum of a civil court while the other provides the forum of an administrative tribunal, it cannot be said that the latter is necessarily more drastic and onerous. To attract the inhibition of article 14 there must be substantial and qualitative differences between the two procedures so that one is really and substantially more drastic and prejudicial. Superfine differences are bound to exist when two procedures are prescribed …
The fact that the Legislature considered that the ordinary procedure is insufficient or ineffective in evicting unauthorised occupants of Government and corporation property and provided a special speedy procedure therefor is a, clear guidance for the authorities charged with the duty of evicting unauthorised occupants.
The provisions of these two Acts cannot be struck down on the fanciful theory that power would be exercised in an unrealistic fashion. In considering whether the officers would be discriminating between one set of persons and another, one has got to take into account normal human behaviour and not behaviour which is abnormal. It is not fancied possibility but the real risk of discrimination that the court must take into account.
Considering the object with which these special procedures were enacted by the Legislature it cannot be said that the difference between the two procedures is so unconscionable as to attract the vice of discrimination. After all, article 14 does not demand a fanatical approach. Therefore, neither the provisions of Chapter V-A of the Bombay Municipal Corporation Act nor the provisions of the Bombay Government Premises (Eviction) Act, 1955, are hit by article 14 of the Constitution. (Case law discussed), Northern India Caterers (Private) Ltd. v. State of Punjab, AIR 1967 SC 1581.”
20. In view of the authoritative pronouncement of the seven-judge Bench of the Supreme Court, we hold that the procedure prescribed under the 1979 Act for recovery of the dues does, not offend article 14 of the Constitution.
21. The question whether the impugned notice should be quashed on the ground of violation of the principles of natural justice deserves to be answered in favour of the petitioners in view of the decision of the Supreme Court in S. K. Bhargava’s case [1998] 92 Comp Cas 791. Learned counsel for the corporation also fairly conceded that in view of that decision, he cannot support the impugned action because no notice was given to the petitioners by the managing director of the corporation before making determination of the dues.
22. No other point has been argued.
23. In the result, the writ petition is disposed of in the following manner :
(i) It is held that the Haryana Public Moneys (Recovery of Dues) Act, 1979, is intra vires the provisions of the Constitution;
(ii) Notice annexure P-27 is declared a nullity and quashed with liberty to the corporation to take fresh action against the petitioners for recovery of the dues.