Allahabad High Court - Lucknow Bench Judgement

Allahabad High Court - Lucknow Bench Judgement

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JUDGEMENT HEADLINE : It Is Well Settled That A Corporation, Albeit One Which Is Owned And Controlled By The State Government, Is Not The State Government, Since A.......
JUDGEMENT TITLE : Pramod Kumar Pandey Vs. U.P. State Food & Essential Commodities Corp. & 2 Ors. On 23/07/2014 By Allahabad High Court - Lucknow Bench
CASE NO : MISC. BENCH NO. 6462 OF 2014
CORAM : Hon'ble Dhananjaya Yeshwant Chandrachud,Chief Justice And Hon'ble Devendra Kumar Upadhyaya,J.

HIGH COURT OF JUDICATURE AT ALLAHABAD, LUCKNOW BENCH

Chief Justice's Court A.F.R.

Case :- MISC. BENCH No. - 6462 Of 2014

Petitioner :- Pramod Kumar Pandey
Respondent :- U.P. State Food & Essential Commodities Corp. & 2 Ors.
Counsel For Petitioner :- Y.S. Lohit
Counsel For Respondent :- C.S.C.,Anil Saran

Hon'ble Dr. Dhananjaya Yeshwant Chandrachud,Chief Justice
Hon'ble Devendra Kumar Upadhyaya,J.

The Petitioner Was A Salesman, Employed With The U.P. State Food And Essential Commodities Corporation Ltd., The First Respondent And At The Material Time, He Was Assigned Duties As A Godown Incharge. On 7 April 2006, An Order Of Suspension Was Passed On The Ground Of Alleged Misconduct. A Disciplinary Proceeding Was Convened. The Petitioner Was Held Guilty Of Having Committed An Act Of Misconduct.
It Is Common Ground That The Allegation Against The Petitioner Was That On An Inspection Of The Godown, A Shortage Was Detected In The Stock Of Food Grains. Upon The Finding Of Misconduct In The Disciplinary Inquiry, The Petitioner Was Dismissed From Service On 30 July 2007.
In Writ Proceedings (Writ Petition No. 489 (S/S) Of 2007) Before This Court, The Order Of Dismissal Was Set Aside On 9 May 2008 Leaving It Open To The Disciplinary Authority To Take A Decision Afresh In Accordance With Law. Thereafter, By An Order Dated 2 July 2009, An Order Of Dismissal Was Again Passed. The Petitioner Was Found Guilty Of Having Caused A Loss To The Extent Of Rs.43,77,078/- And Hence Was Dismissed From Service. The Petitioner Has Challenged The Order Of Dismissal In A Writ Petition Which Is Pending Before This Court (Writ Petition No.4566 (S/S) Of 2009).
On 6 April 2010, An Order Of Recovery Was Issued Against The Petitioner By The General Manager Of The First Respondent By Which, It Was Directed That In Accordance With The Provisions Of Section 3 Of The U.P. Public Moneys (Recovery Of Dues) Act, 19721, An Amount Of Rs.43,54,557/- Be Recovered As Arrears Of Land Revenue. The Petitioner Challenged The Order In A Writ Petition Before This Court.
On 16 January 2014, The Respondents Agreed To Withdraw The Impugned Recovery Certificate With Liberty To Issue A Fresh Recovery Certificate. Consequently, The Writ Petition Was Dismissed Reserving The Right To The First Respondent To Pass A Fresh Order. Thereupon, A Fresh Order Has Been Passed On 21 June 2014 By The Managing Director Of The First Respondent For The Recovery Of An Amount Of Rs.43,54,557/- Under The Provisions Of Section 3 (1) Of The Act.
The Basis Of Challenge In The Petition Is That The First Respondent Had No Jurisdiction To Invoke The Provisions Of The Act Since, Ex Facie, Section 3 Has No Application. It Is Urged That Since The Legislation Itself Does Not Empower The First Respondent To Recover The Amount Of The Alleged Loss As Arrears Of Land Revenue, It Is Not Open To The Employer To Do So In The Guise Of Formulating Model Conduct, Discipline And Appeal Rules.
The Learned Counsel Appearing On Behalf Of The Respondents, On The Other Hand, Submits That The First Respondent Was Acting Within Its Powers In Invoking The Provisions Of The Act. He Has Placed On Record, A Copy Of The Resolution Passed By The Board Of The First Respondent On 29 September 2004 By Which An Approval Was Granted To The Amended Conduct, Discipline And Appeal Rules. It Is Urged That The Conduct, Discipline And Appeal Rules, As Amended, Specifically Empower The First Respondent To Recover The Amount Of Any Loss Caused, As Arrears Of Land Revenue Under The Act.
Before We Consider The Nature Of The Challenge, It Would Be Necessary To Have Due Regard To The Relevant Provisions Contained In The Act. Section 2 (a) Defines The Expression "Corporation" As Follows:
"Corporation" Means The Uttar Pradesh Financial Corporation Established Under The State Financial Corporation Act, 1951, And Includes Any Other Corporation Owned Or Controlled By The Central Government Or The State Government And Specified In A Notification Issued In That Behalf By The State Government In The Official Gazette."
Under A Notification Dated 30 July 1975 Issued By The State Government Under Section 2 (a), The First Respondent Has Been Notified To Be A Corporation (vide Entry 22 Of The Notification). Section 3 (a) Provides As Follows:
"3. Recovery Of Certain Dues As Arrears Of Land Revenue.--(1) Where Any Person Is Party--

(a) To Any Agreement Relating To A Loan, Advance Or Grant Given To Him Or Relating To Credit In Respect Of, Or Relating To Hire- Purchase Of Goods Sold To Him By The State Government Or The Corporation, By Way Of Financial Assistance; Or
(b) To Any Agreement Relating To A Loan, Advance Or Grant Given To Him Or Relating To Credit In Respect Of, Or Relating To Hire- Purchase Of Goods Sold To Him, By A Banking Company Or A Government Company, As The Case May Be, Under A State-Sponsored Scheme; Or
(c) To Any Agreement Relating To A Guarantee Given By The State Government Or The Corporation In Respect Of A Loan Raised By An Industrial Concern; Or
(d) To Any Agreement Providing That Any Money Payable Thereunder To The State Government [or The Corporation]2 Shall Be Recoverable As Arrears Of Land Revenue; And Such Person--
(i) Makes Any Default In Repayment Of The Loan Or Advance Or Any Instalment Thereof; Or
(ii) 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
(iii) Otherwise Fails To Comply With The Terms Of The Agreement, Then, In The Case Of State Government, Such Officer As May Be Authorized In That Behalf By The State Government By Notification In The Official Gazette, And In The Case Of The Corporation Or A Government Company The Managing Director [or Where There Is No Managing Director, Then The Chairman Of The Corporation, By Whatever Name Called]3 [or Such Officer Of The Corporation Or Government Company As May Be Authorized In That Behalf By The Managing Director Or The Chairman]4 Thereof, And In The Case Of A Banking Company, The Local Agent Thereof, By Whatever Name Called, May Send A Certificate To The Collector, Mentioning The Sum Due From Such Person And Requesting That Such Sum Together With Costs Of The Proceedings Be Recovered As If It Were An Arrear Of Land Revenue."
Clause (a) Of Sub-section (1) Of Section 3 Governs A Situation Where There Is An Agreement Relating To A Loan, Advance Or Grant Given To A Person Or Relating To Credit In Respect Of, Or Relating To Hire-purchase Of Goods Sold By The State Government Or A Corporation By Way Of Financial Assistance. Clause (b) Governs A Situation Where There Is An Agreement Relating To A Loan, Advance Or Grant Given To A Person Or Relating To Credit In Respect Of, Or Relating To Hire-purchase Of Goods Sold By A Banking Company Or A Government Company, As The Case May Be, Under A State-Sponsored Scheme.
The Expression "State-sponsored Scheme" Is Defined In Section 2 (g) As Follows:
"(g) "State-sponsored Scheme" Means A Scheme Sponsored By Way Of Financial Assistance By The State Government Under Which The State Government Either Advances Money To A Banking Company Or A Government Company For The Purpose Of Disbursing Loans, Advances Or Grants Or For Purpose Of Sale Of Goods On Credit Or Hire-purchase Or Guarantees Or Agrees To Guarantee The Repayment Of A Loan, Advance Or Grant Or The Payment Of The Price Of Goods Sold On Credit Or Hire-purchase [and Includes Any Other Scheme Of Financial Assistance, By A Banking Company Or A Government Company, Which Is Declared To Be A State Sponsored Scheme By The State Government By Notification In The Gazette]5"

Clause (c) Of Sub-section (1) Of Section 3 Refers To An Agreement Relating To A Guarantee Which Is Furnished By The State Government Or By A Corporation In Respect Of A Loan Raised By An Industrial Concern.
Neither Clauses (a), (b), (c) Or (d) Of Section 3 (1) Would Apply To A Situation, As In The Present Case, Where A Recovery Is Contemplated Against An Employee Of The Corporation For An Amount Of Loss Found To Have Been Sustained In Pursuance Of An Order Passed In Disciplinary Proceedings.
Clause (d) Refers To A Situation Where There Is An Agreement Between A Person And The State Government Or A Corporation Providing That Any Money Payable Thereunder Shall Be Recoverable As Arrears Of Land Revenue. For Clause (d) To Apply, There Has To Be An Agreement And That Agreement Must Provide That Any Money Which Is Payable Would Be Recoverable As Arrears Of Land Revenue. In Other Words, The Money Which Is Payable Under That Agreement Must Be Stipulated By The Agreement As Being Recoverable As Arrears Of Land Revenue. Where This Is So, And There Is A Default In Repayment Of A Loan Or Advance Or In Making A Refund Or A Grant Or Any Portion Thereof Or A Person Fails To Comply With The Terms Of The Agreement, The Authorized Officer Of The State Government Or, In The Case Of A Corporation, A Duly Authorized Officer Is Empowered To Proceed To Recover The Amount As Arrears Of Land Revenue.
The Issue Before The Court, In The Present Case, Is Whether A Loss Which Is Quantified In The Course Of Disciplinary Proceedings As Having Been Caused By The Misconduct Of An Employee Of A Corporation Within The Meaning Of Section 2 (a) Can Be Recovered As Arrears Of Land Revenue Under Section 3 Of The Act. Plainly, None Of The Clauses Of Sub-section (1) Of Section 3 Is Attracted.
Undoubtedly, The First Respondent Having Been Notified As A Corporation For The Purposes Of Section 2 (a), It Is Entitled To Proceed Under Section 3 But, In Order To Do So, The Dues Must Meet The Description Of Either One Of The Four Sub-clauses Of Sub-section (1) Of Section 3. Neither Sub-clause (a) Nor For That Matter Sub-clauses (b), (c) Or (d) Empowers The Corporation To Recover The Amount Of A Loss Found To Have Been Caused By The Misconduct Of An Employee In Disciplinary Proceedings As Arrears Of Land Revenue Under Section 3 Of The Act.
What The First Respondent Purported To Do Is To Adopt Model Conduct, Discipline And Appeal Rules Under Which It Is Sought To Be Stipulated That Where An Employee Is Found To Have Committed An Act Of Misconduct Under Rule 5 (24), The Amount Of Loss Can Be Recovered In A Manner Of Arrears Of Land Revenue For Which A Recovery Certificate Can Be Issued.
This, In Our View, Would Not Empower The Corporation To Recover As Arrears Of Land Revenue, Dues Quantified As A Loss Sustained From A Misconduct Of An Employee Under The Provisions Of Section 3 Of The Act, Where There Is No Enabling Provision In The Act Empowering The First Respondent To Do So. The Model Conduct, Discipline And Appeal Rules Cannot Enlarge Upon Or Amend The Statutory Provisions Which Are Embodied In Legislation. Where The Legislation Has Provided For The Contingencies In Which A Corporation May Proceed To Recover Outstanding Dues As Arrears Of Land Revenue, Any Action For Recovery In That Behalf Has To Fall Within The Parameters Of The Governing Statutory Provision, Namely Section 3. Where The Dues Which Are Sought To Be Recovered Do Not Meet The Description Of The Exigencies Which Have Been Specified In Section 3 (1), As In The Present Case, It Would Be Unlawful For The Corporation To Assume The Power To Recover Dues As Arrears Of Land Revenue. The Model Conduct, Discipline And Appeal Rules Cannot Amend Or Alter A Statutory Provision.
In Fact, In A Judgement Of The Supreme Court In Iqbal Naseer Usmani Vs. Central Bank Of India And Others6, The Supreme Court While Construing The Provisions Of The U.P. Public Moneys (Recovery Of Dues) Act, 1972 Specifically Held That The Provisions Of The Act "can Only Be Utilized For Recovery Of Sums Due In Special Circumstances As Enumerated In Section 3 (1) Of The Act."7.
At This Stage, We May Also Note That The Resolution Which Has Been Passed By The First Respondent On 29 September 2004, Also Makes A Reference To The Provisions Of The Public Accountants Default Act, 1850. We Have, Therefore, Scrutinized The Facts Of The Present Case With Reference To The Provisions Of The Aforesaid Act. Though The Impugned Order Invokes The Provisions Of The Act Of 1972, We Have Considered This Aspect Since It Is Well Settled That The Mere Reference To A Wrong Statutory Provision Will Not Abrogate An Administrative Order Where A Statutory Power, Nonetheless, Exists.
Section 3 Of The Public Accountants Default Act, 1850 Is An Act For Avoiding Loss By The Default Of Public Accountants. The Expression "public Accountant" Is Defined In Section 3 As Follows:
"3. Public Accountant Defined.-For The Purpose Of Sections 1 And 2 Of This Act, The Expression "public Accountant" Means Any Person Who As Official Assignee Or Trustee Or As Sarbarakar, Is Entrusted With The Receipt, Custody Or Control Of Any Moneys Or Securities For Money, Or The Management Of Any Land Belonging To Any Other Person Or Persons, And For The Purpose Of Sections 4 And 5 Of This Act, The Expression Shall Also Include Any Person Who, By Reason Of Any Office Held By Him In The Service Of The Central Government Or The Government Of A State, Is Entrusted With The Receipt, Custody Or Control Of Any Moneys Or Securities For Money, Or The Management Of Any Lands Belonging To Such Government."

The Expression Includes Besides An Official Assignee Or Trustee Any Person Who Is Entrusted With The Receipt, Custody Or Control Of Moneys Or Securities For Money, Or The Management Of Any Land Belonging To The Central Government Or The State Government By Virtue Of His Service In Such Government.
The First Respondent Is A Corporation With A Distinctive Personality Of Its Own. It Is Well Settled That A Corporation, Albeit One Which Is Owned And Controlled By The State Government, Is Not The State Government, Since A Corporation Has Its Own Legal Personality.
Consequently, The Petitioner Who Is An Employee Of The First Respondent Cannot Be Regarded Within The Meaning Of Section 3 Of The Act, As Being In The Service Of The Government Of A State.
For These Reasons, We Are Of The View That The Petition Would Have To Be Allowed, Inter Alia On The Ground That The First Respondent Was Not Entitled To Invoke The Provisions Of The Act And The Recovery Action Was Ultra Vires Only On That Ground. However, We Leave It Open To The First Respondent To Take Or Adopt Such Remedies As May Be Available In Law For The Recovery Of Its Alleged Claim.
Accordingly, Leaving It Open To The First Respondent To Do So, We Quash And Set Aside The Impugned Order 21 June 2014. The Petition Is, Accordingly, Allowed.
There Shall Be No Order As To Costs.

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