Page 1

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  

1

Page 2

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").  

2

Page 3

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  

3

Page 4

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,  

4

Page 5

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  

5

Page 6

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  

6

Page 7

(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  

7

Page 8

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  

8

Page 9

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  

9

Page 10

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  

10

Page 11

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-

11

Page 12

(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:-

12

Page 13

(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  

13

Page 14

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  

14

Page 15

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  

15

Page 16

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  

16

Page 17

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  

17

Page 18

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  

18

Page 19

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  

19

Page 20

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  

20

Page 21

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, 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.

34. In view of foregoing discussion, we find no  

merit in the appeal,  which thus fails and is hereby  

dismissed.

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

21

Page 22

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

New Delhi, February 23, 2015.

22