Supreme Court of India (Division Bench (DB)- Two Judge)

Appeal (Civil), 4942 of 2007, Judgment Date: Feb 23, 2015

           law laid down by the Hon'ble 5 Judges of the Apex  Court  of   India
           reported  in  AIR  1969  SC  78  that  in  case  the   Statutory
           Authorities  do  not  act  in  accordance  with  the   procedure
           prescribed in the Statues, then the Civil Court  alone  has  the
           jurisdiction to entertain and try every suit.  The present  suit
           is no exception to the law laid  down  by  the  Hon'ble  Supreme
           Court of India."
                 
                  The short question, which arises for  consideration  in  this  appeal,  is 
                   whether  the  courts  below  were  justified  in dismissing the plaintiff's civil
                   suit as being barred by law.-
      The question as to whether a suit is barred by any law or not would
      always depend upon  the  facts  and  circumstances  of  each  case.
      However, for deciding this question, only the averments made in the
      plaint are relevant.  Since the question  of  jurisdiction  of  the
      Civil Court to entertain and try the civil suit goes  to  the  very
      root of the case and hence it can be raised  at  any  time  by  the
      defendant by taking recourse to the provisions of Order VII Rule 11
      of the Code.  Indeed,  this  principle  of  law  is  well  settled.-
      once  it is held that the Civil Court has no jurisdiction to try the 
      suit on merits, the question as to whether the demand impugned in the 
      suit is legal or not cannot be gone into nor it was gone into.


                                                                  Reportable
                        IN THE SUPREME COURT OF INDIA

                        CIVIL APPELLATE JURISDICTION

                        CIVIL APPEAL No.4942 OF 2007


      Om Aggarwal                                       Appellant(s)

                                    VERSUS


      Haryana Financial Corporation
      and Others                                      Respondent(s)


                               J U D G M E N T


     Abhay Manohar Sapre, J.
      1.          This civil appeal is filed by  the  appellant/plaintiff
     (hereinafter  referred  to   as   "the   plaintiff)   against   the
     judgment/order dated  03.03.2005   passed  by  the  High  Court  of
     Punjab & Haryana at Chandigarh in Civil Revision No. 3127  of  2004
     which  arises  out  of  order  dated  26.03.2004   passed  by   the
     Additional District Judge, Hisar in Civil Appeal No. 87/2003/2004.
      2.          In order  to  appreciate  the  issue  involved  in  the
     appeal, few relevant facts need to be mentioned in brief.
      3.          The plaintiff is one of  the  promoters  of  a  limited
     company known as "M/s Indo Britain Agro Farms Limited Hisar"  which
     is engaged in the manufacture of ordinary white buttons  "Mushroom"
     at Hisar (Haryana).
      4.           Respondent   No.1/defendant   No.1-Haryana   Financial
     Corporation  (hereinafter  referred  to   as   "defendant   No.1"),
     established under the State Financial Corporation Act, 1951  is   a
     "Corporation" under Section 2 (b)  of  the  Haryana  Public  Moneys
     (Recovery of Dues) Act, 1979 (for short "the Act").
      5.          The plaintiff had  taken  various  kinds  of  financial
     assistance from defendant No.1 for running his business.
      6.          In May 1995, defendant  No.1  with  a  view  to  extend
     financial assistance to the plaintiff's Company  purchased  3  lacs
     equity shares of the said company at the rate of Rs.10/- per  share
     and, accordingly, invested a sum of Rs.30  Lacs.   This  investment
     led the parties to enter into further business transactions.  After
     several rounds  of  negotiations  and  correspondence  between  the
     parties, the plaintiff entered into an  agreement  styled  as  "Buy
     Back Agreement" with defendant No.1 on 16.07.1996 (Annexure P-6).
      7.          In terms of the aforesaid  agreement,  the  plaintiff's
     company was to enhance its equity share capital by issuing  further
     shares  to  the  extent  of Rs.485.59 lacs whereas defendant   No.1
     was to subscribe Rs. 30 lacs  towards  the  share  capital  of  the
     plaintiff's Company by way of financial assistance  for  augmenting
     the  business.  The  agreement,  inter-alia,  provided  the   terms
     specifying therein, the manner in which the plaintiff was to secure
     the investment made by defendant No.1, right of  the  plaintiff  to
     purchase/buy-back the shares of defendant No.1 Corporation  at  the
     specified rates, right of defendant No.1 to  nominate  its  nominee
     directors in the Board of Directors of the plaintiff's  Company  to
     monitor its  affairs, right of  defendant  No.1  to  recover  their
     investment including a right to  claim  damages  sustained  in  the
     transaction as arrears of land revenue from the plaintiff by taking
     recourse to the provisions of the Act for making recovery   in  the
     event of any default committed by the plaintiff of any  term of the
     aforesaid agreement etc.
      8.          Defendant No.1, however, found that the  plaintiff  has
     failed  to  ensure  compliance  of  the  terms  of  the   aforesaid
     agreement. They were, therefore, constrained to invoke the terms of
     the agreement and got the notice issued through  Tahsildar  against
     the plaintiff for recovery  of  Rs.18.03  Lacs  under  the  Act  as
     arrears of land revenue on 28.02.2002 (Annexure P-14).
      9.          It is with the aforesaid facts of the case, which  were
     pleaded in the plaint, the plaintiff filed a suit  for  declaration
     being Civil Case No. 328-C of 2002  in the Court of Civil Judge  at
     Hisar (Annexure P-15) against the defendants for a declaration that
     the Buy-back agreement dated 16.07.1996 be declared null  and  void
     and in alternative the recovery sought to be made by defendant No.1
     by issuance of notice of  demand  for  recovery  of  Rs.18.03  lacs
     (Annexure P-14) pursuant to the said agreement is also bad  in  law
     and be set aside.
      10.   The reliefs claimed in the plaint reads as under:
           "It is, therefore, prayed that a decree for declaration  to  the
           effect that the Buy-back Agreement dated 16.7.1996  executed  by
           the plaintiff at Hisar with defendant No. 1 is null and void  ab
           initio and is liable to be set-aside and in the alternative  for
           declaration to the effect that the recovery of defendant  No.  1
           on the basis of this agreement has become time barred  and  that
           the Recovery Certificate issued by the Managing Director of  the
           defendant No. 1 on the basis of this Agreement is null and  void
           ab initio and is liable to be set-aside with  the  consequential
           relief of permanent  injunction  (prohibitory)  restraining  the
           defendants from implementing the  Recovery  Certificate  against
           the plaintiff in any manner including his arrest may  kindly  be
           passed  in  favour  of  the   plaintiff(s)   and   against   the
           defendant(s) with costs.
                 Any other relief to which the  plaintiff(s)  is/are  found
           entitled may also be granted."

      11.         The aforesaid reliefs were founded essentially  on  the
     allegation that the agreement  in  question  was  executed  by  the
     plaintiff  on  account  of  undue  pressure,  coercion  and  duress
     exercised by defendant No.1 on him.  The plaintiff, in para  21  of
     the plaint, also averred that he is aware  of  the  fact  that  the
     civil suit is barred by virtue of the provisions of the Act.   Para
     21 of the said plaint reads as under:
           "That the plaintiff is aware of the fact that  the  jurisdiction
           of the  civil  court  is  barred  under  Haryana  Public  Moneys
           (Recovery of Dues) Act, 1979.  But he is also aware of  the  law
           laid down by the Hon'ble 5 Judges of the Apex  Court  of   India
           reported  in  AIR  1969  SC  78  that  in  case  the   Statutory
           Authorities  do  not  act  in  accordance  with  the   procedure
           prescribed in the Statues, then the Civil Court  alone  has  the
           jurisdiction to entertain and try every suit.  The present  suit
           is no exception to the law laid  down  by  the  Hon'ble  Supreme
           Court of India."

      12.         On receipt of the notice of the  suit,  the  defendants
     entered appearance and filed an application under Order  VII  Rules
     10 & 11 read with Section 21 of the Code of Civil  Procedure,  1908
     (hereinafter referred to as "the Code"). Defendant  No.1  contended
     that the suit  of  this  nature  for  claiming  the  aforementioned
     reliefs was not maintainable by virtue of express bar contained  in
     Section 3(4) of the Act, which in  clear  terms  provided  that  no
     Civil Court shall have jurisdiction to entertain or adjudicate upon
     any case relating to the recovery of any sum due from the defaulter
     and if any such suit is pending at the commencement of the  Act  in
     any Civil Court then it shall abate.   Defendant  No.1,  therefore,
     contended that since the plaintiff has challenged the agreement  as
     also the recovery notice issued by the Tahsildar under Section 3 of
     the Act in the Civil Suit, the  same  was  not  maintainable  being
     barred by Section 3(4) of the Act.  It was, therefore, liable to be
     dismissed under Order VII Rule 11(d) of the Code read with  Section
     (3)4 of the Act.
      13.          The  plaintiff  opposed  the  aforesaid   application.
     According to him, the provisions of the Act were not applicable  to
     the case in hand notwithstanding the bar contained in Section  3(4)
     of the Act for  filing  a  civil  suit  in  the  civil  court  and,
     therefore, the civil suit was maintainable.
      14.         The trial Court, by order dated 16.8.2003, allowed  the
     application filed by defendant No.1 and, in consequence,  dismissed
     the suit. It was held that having regard to the averments  made  in
     the plaint and the nature of the reliefs claimed in the  suit,  the
     bar contained in Section 3(4) of the Act was attracted  and  hence,
     the suit was liable to be dismissed as not maintainable.
      15.         Felt aggrieved, the plaintiff filed  an  appeal  before
     the  Additional  District  Judge,  Hisar  being  Civil  Appeal  No.
     87/2003/2004.  By order dated 26.03.2004, the  Additional  District
     Judge dismissed the appeal.
      16.         Against the  said  order,  the  plaintiff  filed  Civil
     Revision in the High Court. The High Court, by  impugned  judgment,
     dismissed the revision in limine and upheld the order of the  trial
     court. It is against this judgment/order the  plaintiff  has  filed
     this appeal by way of special leave.
      17.         The short question, which arises for  consideration  in
     this  appeal,  is  whether  the  courts  below  were  justified  in
     dismissing the plaintiff's civil suit as being barred by law.
      18.         Mr. Suresh Singh, learned  counsel  appearing  for  the
     appellant/plaintiff, while assailing the legality  and  correctness
     of the impugned order, contended that the courts below committed an
     error in dismissing the plaintiff's suit as barred by law.  Placing
     reliance on the decision  of  this  Court  in  Unique  Butyle  Tube
     Industries (P) Ltd.  vs.  U.P.  Financial  Corporation  And  Others
     (2003) 2 SCC 455, learned counsel contended that  the  suit  should
     have been held maintainable for  adjudication  of  reliefs  claimed
     therein in the light of the law laid down  in  Unique  Butyle  case
     (supra) wherein this Court has held that a demand for  recovery  of
     the amount cannot be raised by taking recourse to the provisions of
     the U.P. Public Moneys (Recovery of Dues) Act, 1972.
      19.         In contra, learned counsel for  the  defendants,  while
     supporting the impugned order, contended that it does not call  for
     any interference.
      20.         Having heard the learned counsel for the parties and on
     perusal of the record of the case, we find no merit in this appeal.
      21.         It is apposite to take note of the provisions of  Order
     VII Rule 11 of the Code and some of  the  provisions  of  the  Act,
     which have a bearing over the issue involved in the present appeal.

                         "Order VII, Rule 11(d) CPC

           11. Rejection of  plaint-The plaint shall  be  rejected  in  the
           following cases:-

           (a).............................
           (b).............................
           (c).............................
           (d) where the suit appears from the statement in the  plaint  to
           be barred by any law;

           Section 2(b)(c)(d) and 3 of the Act, 1979:

                                Section 2(b)

             "Corporation"  means   the   Haryana   Financial   Corporation
           established under the State Financial  Corporations  Act,  1951,
           and includes any other Corporation owned or  controlled  by  the
           Central Government or  the  State  Government  which  the  State
           Government may, by notification, specify;

                                Section 2(c)

           "Defaulter" means a person who, either as principal or as surety
           is a party-

                  (i) to any agreement relating to a loan, advance or grant
                  given under that  agreement  or  relating  to  credit  in
                  respect of, or relating to hire purchase of goods sold by
                  the State  Government  or  the  Corporation,  by  way  of
                  financial assistance, or

                  (ii) to any agreement relating  to  a  loan,  advance  or
                  grant given under that agreement or relating to credit in
                  respect of, or relating to hire-purchase of goods sold by
                  a Government company under the State-sponsored scheme; or

                  (iii) to any agreement relating to a guarantee  given  by
                  the State Government or a Corporation  in  respect  of  a
                  loan raised by an industrial concern; or

                  (iv) to any agreement providing that  any  money  payable
                  thereunder to the State Government shall  be  recoverable
                  as arrears of land revenue, and  such  person  makes  any
                  default in re-payment of  the  loan  or  advance  or  any
                  instalment thereof or, having  become  liable  under  the
                  conditions of the  grant  to  refund  the  grant  or  any
                  portion thereof, makes any default in the refund of  such
                  grant or portion or any instalment thereof  or  otherwise
                  fails to comply with the terms of the agreement;

                                Section 2(d)

           "financial assistance" means any financial assistance:-

                  (i) for establishing, expanding, modernizing,  renovating
                  or running any industrial undertaking; or
                  (ii)   for the purposes of vocational training; or
                  (iii)         for   the   development   of   agriculture,
                  horticulture, animal husbandry or agro-industry; or
                  (iv)   for the purposes of  any  other  kind  of  planned
                  development; or
                  (v)    for relief against distress;

                                  Section 3
           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 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  an  arrear  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."

      22.         An application for  rejection  of  the  plaint  can  be
      filed, if the allegations made in the plaint taken to be correct as
      a whole on its face value show the suit to be barred  by  any  law.
      The question as to whether a suit is barred by any law or not would
      always depend upon  the  facts  and  circumstances  of  each  case.
      However, for deciding this question, only the averments made in the
      plaint are relevant.  Since the question  of  jurisdiction  of  the
      Civil Court to entertain and try the civil suit goes  to  the  very
      root of the case and hence it can be raised  at  any  time  by  the
      defendant by taking recourse to the provisions of Order VII Rule 11
      of the Code.  Indeed,  this  principle  of  law  is  well  settled.

      23.         So far as the provisions  of  the  Act  are  concerned,
      Section 3 of the Act empowers the Corporation to make  recovery  of
      its outstanding dues from the defaulter as arrears of land  revenue
      by getting the certificate of recovery of the  amount  issued  from
      the competent authority whereas sub-section (4)  of  Section  3  in
      clear terms takes away the  jurisdiction  of  the  Civil  Court  to
      entertain or/and adjudicate "any case" relating to the recovery  of
      any sum due from the defaulter. It also takes away the jurisdiction
      of Civil Court to proceed with  any  pending  case  involving  such
      issue.  If any such case is pending on the date of commencement  of
      the Act, such case shall stand abate.
      24.         The provisions of the  Act  and  especially  Section  3
      thereof came to be interpreted by this Court in S.K.  Bhargava  vs.
      Collector, Chandigarh and  others  (1998)5SCC  170  and  hence  its
      interpretation is  no  more  res  integra.    Justice  B.N  Kirpal,
      speaking for the Court, held in para 8 as under:
           "8. It is clear from the perusal  of  the  above-quoted  section
           that before a certificate can be issued by the Managing Director
           under sub-section (2) of Section 3, he must determine  the  "sum
           due" from the defaulter as enjoined upon him by Section 3(1)(b).
            It is difficult to appreciate the  contention  of  the  learned
           counsel for the respondent Financial Corporation that  any  such
           determination can take place without notice  to  the  defaulter.
           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)
           of Section 3.  In its place, the power has  been  given  to  the
           Managing Director under Section 3(1)(b) to determine as to  what
           is the amount due from the defaulter.  There  can  be  no  doubt
           that 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
           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."             (Emphasis supplied)

      25.         Applying the aforesaid principle of law to the facts of
      the case in hand,  it is clear by mere reading of the  plaint  that
      firstly, the plaintiff was a  "defaulter" as defined under  Section
      2(c) of the Act; secondly, the investment made by  defendant  No.1-
      Corporation pursuant to an agreement dated 16.07.1996  was  in  the
      nature of the "financial assistance" as defined under Section 2 (d)
      of the Act; thirdly, the demand raised by  the  respondent  was  in
      relation to the amount given by way of financial  assistance  under
      Section 3 of the Act and lastly, the subject  matter  of  the  suit
      viz., challenge to the legality of the  agreement  and  the  demand
      fell under Section 3(4)(a) and (b) of the Act.
      26.          In the light of the four aforementioned  facts,  which
      are clearly discernable from the averments made in the  plaint,  we
      are of the considered opinion that the provisions of  the  Act  get
      attracted to the case in hand  which,  in  turn,  attract  the  bar
      contained in sub-section (4) of Section 3 in filing the civil  suit
      by the defaulter. The suit  is,  therefore,  apparently  barred  by
      virtue of bar contained in Section 3(4) of the Act.   It  was  thus
      rightly dismissed by the courts below by taking recourse  to  Order
      VII Rule 11 (d) of the Code.
      27.         We do not find any force in the submission urged by the
      learned counsel for the plaintiff that on the  basis  of  law  laid
      down in Unique Butyle case (supra), the  suit  should  be  held  as
      maintainable for adjudication of the  reliefs  claimed  therein  on
      merits.
      28.         On perusal of the decision rendered  in  Unique  Butyle
      case (supra), it is clear that the said decision was rendered in  a
      writ petition  filed  by  the  defaulter  against  the  Corporation
      wherein the question  involved  was  whether  the  proceedings  for
      recovery initiated by the U.P. Financial Corporation under  the  U.
      P. Public Moneys (Recovery of Dues) Act, 1972 are  maintainable  in
      view of Section 34(2) of the Recovery of Debts  Due  to  Banks  and
      Financial Institutions Act 1993.
      29.         This Court examined the aforesaid question in the light
      of the provisions of the aforementioned two Acts and held that  the
      proceedings initiated under the U. P. Public  Moneys  (Recovery  of
      Dues) Act, 1972, are not maintainable in view of overriding  effect
      given to the Central Act by virtue of Section 34(2) of the  Central
      Act over the State Act.
      30.         It is pertinent to  mention  that  while  deciding  the
      question, their Lordships took note of the law laid  down  in  S.K.
      Bhargava case (supra) and held that the provisions of U.P. Act  and
      that of the Haryana Act are not similar.  This is what was held  in
      para 15:
           "We may notice here that to strengthen  his  arguments,  learned
           counsel for the appellant referred to the decision of this Court
           in S.K. Bhargava  vs.  Collector,  Chandigarh.   The  said  case
           related to the Haryana Public Moneys  (Recovery  of  Dues)  Act,
           1979 (in short "the Haryana Act").  With  reference  to  certain
           observations in para 8 of the said judgment,  it  was  submitted
           that a  process  of  adjudication  is  inbuilt,  even  when  the
           Managing Director of the Corporation takes  action.   We  notice
           that Section 3 of the Haryana Act is  couched  differently  from
           Section 3 of the U.P. Act. Reference was made in the  said  case
           to Director of Industries Case, (1980) 2 SCC 332 and  held  that
           while upholding  the validity of Section 3 of the U.P. Act,  the
           Court was not called upon  to  deal  with  the  question  as  to
           whether the principles of natural justice were implicit  in  the
           said Section. We also do not think it necessary to go into  that
           question."

      31.         In the light of several distinguishing features noticed
      in the case in hand and the facts of  Unique  Butyle  case  (supra)
      such as the question as to whether the  suit  filed  in  the  Civil
      Court was barred or not, which is the subject matter of this  case,
      was not decided in Unique Butyle case.  Secondly, the case in  hand
      arose out of Haryana Act whereas the  Unique  Butyle  case  (supra)
      arose out of U.P Act and thirdly, both Haryana  Act  and  U.P.  Act
      were held not identical in their wordings.
      32.          In the  light  of  these  distinguished  features,  no
      reliance can be placed on the law laid down in Unique  Butyle  case
      (supra) for deciding the issue involved in the  present  case.   It
      has, in our considered opinion, no application to the case in hand.
      33.         Before parting with the case, we consider  it  apposite
      to clarify that we have not examined the legality  and  correctness
      of the demand on its merits once it is held that Civil Court has no
      jurisdiction to entertain the civil suit. In other words,           
      34.         In view of foregoing discussion, we find  no  merit  in
      the appeal, which thus fails and is hereby dismissed.


                         ..........................................J.
                                          [RANJAN GOGOI]


                        ...........................................J.
                                      [ABHAY MANOHAR SAPRE]

      New Delhi,
      February 23, 2015.