Holding

Section 3 of the Public Moneys (Recovery of Dues) Act, 1965 does not offend Article 14 as the classification is reasonable and serves the Act’s purpose of providing a speedy remedy for recovery of state advances.

Summary

The Director of Industries, U.P. advanced a loan of Rs.15,000 to Deep Chand Aggarwal for setting up a cottage industry, secured by a mortgage on his house. When Aggarwal defaulted, the State used Section 3 of the Public Moneys (Recovery of Dues) Act, 1965, read with the Zamindari Abolition and Land Reforms Act, to treat the outstanding amount as arrears of land revenue and attached his property. Aggarwal challenged this on the ground that the provision was discriminatory and violated Article 14 of the Constitution. The Supreme Court examined whether the classification created by the Act had a reasonable relation to its purpose of providing a speedy remedy for the recovery of state‑advances. It held that the Act’s objective of expediting recovery justified the classification and that the statute gave sufficient guidance to officials, thus not amounting to arbitrary or discriminatory power. Consequently, the Court allowed the appeal, set aside the High Court’s order, and dismissed the writ petition.

Issues considered

Whether Section 3 of the Public Moneys (Recovery of Dues) Act, 1965, which permits recovery of loans as arrears of land revenue, violates Article 14 of the Constitution.
Whether the classification made by the Act between State loans and other debts has a reasonable nexus to the statutory objective.

Legislation cited

Subjects

Article 14constitutional discriminationclassification testpublic money recoveryland revenue arrearsstate loansspeedy remedyadministrative law

Judgment

1015

DIRECTOR OF INDUSTRIES, U.P. AND ORS. A
v.
DEEP CHAND AGGARWAL
February 6, 1980
[D. A. DESAI AND E. S. VENKATARAMIAH, JJ.]
• Public Moneys (Recovery of Dues) Act, 1965 (U.P. Act No. XXV of B
1965) Section 3-Whether offends Article -14 of tl:e Constitution.

A sum of Rs. 15000 /- \Vas advanced to the Re~:pon<lent by the a.ppellant
for the purpose of setting up a panel pins and wire nails industry in Hardoi
.on the former hyPothecating under the mortgage deed his house by ·way of
security for the loan. The respondent committed default in repayment of the
loan. The State Government was compelled to take coercive measures to c
:oecover the ha.lance of the amount due and payable under the <leed as if it
were an arrear of land revenue by resorting to section 3 of the Public Moneys
(Recovery of Dues) Act, 1965 read with sections 279/281 of the U.P.
Zamindari Abolition and Land Reforms Act, 1950. The respondent, there-
fore, filed a petition under Article 226 of the Constitution on the file of the
• High Court of Allahabad (Lucknow Bench) questioning the competence of
the revenue authorities to recover the balance of the amount due under the D
,deed as if it were an arrear of land revenue on the ground of violation of
Article- 14 of the Constitution. Following the decision of this Court in Nor-
thern India Calere.rs P. Ltd. and Anr. v. Stute of Punjab and Anr., [1967]
3 SCR 399 (which held the field at that time and since overruled) the
High Court declared that Section 3 of the Act violated Article 14 of the
Constitution and quashed the recovery proceedings initiated by the revenue
authorities. E
Allowing the appeal by certificate, the Court

HELD : Section 3 of the Public Moneys (Recove1y of Dues) Act 1965
which enables the State Government to recover the sums advanced under the
circumstances mentioned therein, as if these were arrears of land revenue
cannot be held to be discriminatory and viblative of Article 14 of the Consti- F
tution. [10230-El

(a) Section 3 ( 1) ( c) of the Act provides that \vhere any person is a party
to a.ny agreement providing that any money payable thereunder to the State
Government shall be recoverable as arrear of land revenue and such person
makes any default in repayn1ent of the Joan. or advance or any instalment
thereof then the arrear due and payable by hin.1 may be recovered as if it G
were an arrear of land revenue by issuing a certificate to the Collector. 1
The remedy of the State Government to recover the amount by instituting a
<Uit also remains unaffected by the Act. [l019G-Hl
(b) There is reasonable basis for the classification made by the statute
and that the classification does haVe a reasonable relation to the object of
the statute. The Act is passed with the object of providing a speedier remedy
to the State Government to realize the loans advanced by it ' or by the ff
~Jttar Pradesh Financial Corporation. The State Government while advancing
loans does not act as an ordinary banker with a view to earning interest.
1016 SUPREME COURT REPORTS (1980] 2 S.C.R

A Ordinarily it advances Joans in order to assist the people financially in esta-
blishing an industry in the State or for the development of agriculture,.
anima1 husbandry and for such oth;:r purposes which would, advance the
economic well-being of the people. The amounts so advanced are repayable
in easy instalments with interest which would ordinarily be lower than the
rate of interest payable on loans .advanced by banking institutions which are
run on commercial lines. The loans are advanced from out of the funds
of the State in \Vhich all the people of the State are vitally interested.
B
Moneys advanced by the Statt: 'Government have got to be recovered expedi-
•
tiously so that' fresh advances may be made to others who ha.ve not~ yet
received finar.cial assistance from the State Government. If the State Govern-
ment should resort to a remedy by way of a suit on the ·mortgage deeds or
~onds executed in its favour, the realization of the amounts due to the
Government is bound to be dela.yed resulting in non~availability of sufficient
c funds in the. hands of the State Government for advancing fresh loans. 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, th€ Act has
been enacted. In the instant case, the mortgage deed provided that the
amount due thereunder could be realised as if it were an arrear of land
revenue; and [1020B-G]

0
(c) The 1nere fact that there is no express provision in the Act containing
guidelines to the authorities concerned regarding the (,,:ircumstances under
..
which the amounts couhl be realized by resorting to the procedure piescribed
for recovering arrears of land revenue, however, in the circumstance of the •
case is not sufficient to hold that section 3 of the impugned Act confers
~rbitrary power on the Sta.te Government and makes a hostile discrimination.
The A.ct which is passed with the object of providing a speedier ren1edy
itself provides sufficient guidance to the officer concerned as to when he
E should resort to the re1nedy provided for. [1021A-C]
Shri Mannalal and Anr. v. Collector of Jhalwar and Ors, [1961] 2 SCR
962; Lachhn1an Das on behalf of Firn1 Tilak Ram Bux v. State of Punjab
& Ors., [1963] 2 SCR 353 and Magan/a/ Chhagganlal (P) Ltd. v. Municipal
Corporation of Greater Bo1nbay and Ors., [1975] 1 SCR 1 followed.

F CIVIL APPELLATE JUR!SDJCTJON; Civil Appeal No. 576 of 1970.
From the Judgment and Order dated 18-8-1969 of the Allahabad
High Court in Writ Petition No. 334 of 1963.
G. N. Dixit and 0. P. Rana for the Appellants.
H. K. Puri for the Respondent.
G The Judgment of the Court was delivered by
VENKATARAMJAH, J.-This appeal by certificate involves the
question whether section 3 of the Public Moneys (Recovery of Dues)
Act, 1965 (U.P. Act No. XXV of 1965) (hereinafter referred to as
'the Act') offends Article 14 of the Constitution and it arises in the
H following circumstances.
The respondent is a resident of Railwayganj, Hardoi in the State
of Ultar Pradesh. He applied to the Government of Uttar Pradesh
DIRECTOR OF INDUSTRIES v. DEEP CHAND (Venkataramiah, !.) IO 17

for a loan of Rs. 15,000/ for the purpose of setting up a panel pins
and wire nails industry in Hardoi. The State Government which
was interested in the industrial development of the State accordingly
advanced the loan of Rs. 15,000 to t)1e respandent under a mort-
gage deed dated March 10, 1960. The respondent was permitted
to repay the loan in ten half-yearly instalments commencing from
B
• May 1, 1962 together with interest at the rate of 3 per cent per
annum calculated from March 25, 1960. Tc:: mortgage deed
provided that the respondent should spend Rs. 7 ,000 out of the
loan advanced on the purchase of machineries for manufacturing
panel pins and wire nails and the balance of Rs. 8,000 on the
construction of a building for the purpose of the said industry and c
for no other purpose. The respondent also agreed to observe truly
the Uttar Pradesh Rules for the Advance of Loan for Developing
Cottage Industries in the Rural Area promulgated by the State Gov-
e=ent and also to permit the Direc!or of Industries, U.P. or any
official deputed by him to inspect his accounts for the purpose of
verifying whether the amount borrowed had been utilised for the D
specified purpose. The respondent hypothecated under the deed his
house by way of security for the loan. Clause ( 8) of the mortgage
deed, however, inter alia provided that if any of the instalments pay-
able by the respondent as mentioned in the deed was not paid .on the
_, I
stipulated date then the entire amount due llllder the deed could be
recovered by the State Government as arrears of la11d revenue. The E
111ortgage deed was signed by the Director of Industries, U.P. on
!Jehalf of and acting llllder t_he !!Uthority of the Governor of Uttar
Pradesh and the respondent. The respondent committed default in
repayment of the loan. The State Gove=ent was, therefore, com-
pelled to take coercive measures to recover the balance of the amount F
due l!nd payable under the deed as if it were an arr?ar of land
revenue, by resorting to section 3 of the Act read with sections 279 I
281 of the U.P. Zamindari Abolition and Land Reforms Act, 1950.
At the request of the Director of Industries, U.P., the Collector of
Hardoi initiated steps to recover the balance of the amount due under
the deed as an arrear of land revenue. Pursuant to the order of the G
Collector, the Tahsi!dar of Hardoi issued an order of attachment
dated March 12, 1968 of the house of the respondent and also issued
a warrant of arrest of the respondent to recover the amount llllder the
provisions governing the procedure prescribed for realising land
revenue. Immediately thereafter, the respandent filed a petition
under Article 226 of the Constitution on the file of the High Court ff,
of Allahabad (Lucknow Bench) in writ petition No. 334 of 1968
questioning the competence of the revenue authorities to recover the
1018 SUPREME COlrRT iEPORTS [1980] 2 S.C.R.

A the balance of the amount due under the deed as if h were an arrear
of land revenue. Jn that petition, the respondent contended that J
the Act was discriminatory and was, therefore, violative of Article
14 of the Constitution on the ground that the State Government had
two remedies available to it in law·-one by way of a suit for recovery
of the mortgage money and another under the Act which authorised
it to recover the amounts due as if they were arrears of land revenue,
•
that the remedy under the Act was more onerous than a suit so far
as the respondent was concerned and that there were no guidelines
in law as to the circumstances in which the State Government could
resort to the provisions of the Act. The Director of Industries, U.P.
·C ]!nd the revenue authorities who were impleaded as respoadents in
the writ petition contended that the provisions of the Act did not
offend Article 14 of the Constituti.on.

Following the decision of this Court in Northern India Caterers
Private Ltd., & Anr. v. State of Punjab & Anr.(') the High ourt dec-
'f) Jared that section 3 of the Act violated Article 14 of the Constitu-
tion by providing an additional remedy to the State Government over
and above the remedy by way of a suit, leaving it to the unguided •
discretion of the State Government to resort to one or the other and
that the remedy available under the Act was more drastic or prejudi-
cial to the party concerned thrin the suit. Accordingly the High
Court quashed the recovery proceedings initiated by the revenue
authorities. Aggrieved by the decision of the High Court, the Direc-
tor of Industries, U.P. and the revenue authorities have come up in
appeal to this Court.

The impugned Act was passed in the year 1965 to provide for
speedy recowry of certain classes of dues. payable to the State or to
the Uttar Pradesh Financial Corporation. The Act CQntains three
sections. The first section deals with the title of the Act and extent
of its operation. T11e second section is the definition clause Sec- '
tion 2 (b) of the Act defines the expression 'financial assistance' asi
G any financial assistance (i) for establishing. expanding or running
any industrial undertaking; or (ii) for purposes of vocational train-
ing; or (iii) for the development of animal husbandry; or (iv) for
purposes of any other kind of planned development; or ( v) for relief
against distress. Section 3 of the Act with which we are now con- '
cerned reads as follows : -
"3. Recovery of certain dues as arrears of land revenue-
(I) [1967] 3 S.C.R. 399.
DIRECTOR 'oF INDUSTRIES v. DEEP CHAND (Venkataramia/1, J.) I 0 J9

(1) Where any person is party- A
(a) to any agreement relating to a loan, advance or
grant given to him by the State Government or the
·Corporation by way of financial assistance, or
(b) to any agreement r"lating to a guarantee given by
B:
the State Government or the Corporation in respe.ct
of a loan raised by an industrial concern, or
(c) to any agreement providing that any 111_oney payable
thereunder to the State Government shall be re-
coverable as arrears of land revenue,
and such person- c
(i) makes any default in repayment of the loan or
advance or any instalmen~ thereof, or
(ii) having become liable under the conditions of the
grant to refund the grant or any portion thereof,
J)
makes any default in repayment of such grant or
portion or instalment thereof, or
(iii) otherwise fails to comply with the terms of the
agreement,-
then, in the case of the State Government, such officer as may be
E
authorised in this behalf by the State Government by notification
in the Official Gazette and in the case of the Corporation, the
Managing Director thereof, may, without prejudice 10 any other
mode of recovery under any other law for !he time being in force,
send a certificate to the Collector, mentioning the sum due from such
person and requesting that such sum together with costs of the pro• F
ceedings be recovered as if it were an arrear of land revenue.
(2) The Collector on receiving the certificate shall proceed to
recover the amount stated therein as an arrear of land revenue."

It may be seen that section 3 (1) ( c) of the Act provides
G
that where any person is a party to any agreement providing
that any money payable thereunder to the State Govern-
ment shall be recoverable as arrears of land revenue and such person
lllllkes any default in repayment of the loan or a<lvance or 'any instal-
ment thereof then the arrears due and payable by him may be re-
covered as if it were an arrear of land reve11ue by issuing a certificate R
to the Collector. The remedy of the State Government to recover
the amount by instituting a suit also remains unaffectc{I by the Act.
1020 SUPREME COURT RfPORTS [1980] 2 S.C . R.

A At the outset, it has to be stated that the decision of this 'Court I
in Northern India Caterers Private Ltd., & Anr. (supra) is over-
ruled by this Court in Magan/al Chhaggan/al (P) Ltd. v. Municipal
Corporation of Greater Bombay & Ors.(') The question for deter-
minatiO!ll in this case is whether section 3 of the impugned Act
violates Article 14 of the Constitution. In order to decide this
B
question, it is necessary to determine the object of the Act and whe-
ther the classification made between the State on the one hand and •
others who have also advanced moneys under mortgage deeds bears
any reasonable relation to the object of the statute. T11e Act is
passed with the object of providing a speedier remedy to che State
c Government to realize the loans advanced by it or by the Uttar Pra-
desh Financial Corporation. The State Government while advancing
loans does not act as an ordinary banker with a view to earning in-
terest. Ordinarily it advances l.oans in order to assist the people
financially in establishing an industry in the State or for the develop-
ment of agriculture, animal husbandry and for such other purposes
•
D which would advance the economic well-being of the people. The
amounts so advanced are repayable in easy instalments with interest
which would ordinarily be lower than the rate of interest payable on
loans advanced by banking institutions which are run on commercial
lines. The loans are adYanced from out of the funds of the State
in which :ill the people of the State are vitally interested. Moneys
E advanced by the State Government have got to be recovered expedi-
tiously so that fresh advanc.es may be made. to others who have not
yet received financial assistance from the State Government. If the
State Government should resort to a remedy by way of a suit on the
mortgage deeds or bonds executed in its favour, the realization of the
F amounts due to the Government is bound to be delayed resulting in
non-availability of sufficient funds in the hands of the State Govern-
ment for advancing fresh loans. It is with the object of avoiding the
usual delay involved in the disposal of suits in civil courts and pro-
viding for an expeditious remedy, the Act has been enacted. In the
instant case, the mortgage deed provided that the amount due there.-
G under could be realised as if it were an arrear of la,1d revenue. It cannot,
therefore, be said that there is no reasonable basis for the classi-
fication made by the statute and that the classification does not have
a reasonable relation to the object of the statute.
It is also argued that the impugned Act does not provide any
H guidelines to the authorities concerned regarding the circumstances
under which the amouJJ1'1. could be realized by resorting to the pro-
(l) [ 1975] 1 S.C.R.
DIRECTOR OF INDUSTRIES v. DEEP CHAND (Venkataramiah, l.) 1021

cedure prescribed for recovering arrears of land revenue. It is no A
doubt true that there is no express provision in the Act containing
such guidelines. That, however, in the circumstances of the case is
not sufflcient to hold that section 3 of the impugned Act confers
arbitrary power on the State Government and makes a hostile dis-
crimination. Under section 3 of the Act, the Collector can proceed
to realize the amount due as arrears of land revenue only on the basis B
of a certificate issued by an officer as may be authorised in that behalf
by the State Gove=ent mentioning the sum due from any person
referred to therein. Such officer is expected ordinarily to avail
himself of the speedier remedy provided under the statute. We are of
the view that the Act which is passed with the object of providiug a
c
speedier remedy itself provides sufficient guidance to the officer con-
cerned as to when he should resort to the remedy provided by it. As
observed by this Court in Magan/al Chhgganlal (P) Ltd.'s case
(supra), one expects the officer concerned to avail himself of the pro-
cedure prescribed by the Act and not to resort to the dilatory proce-
dure of the ordinary civil court. In that case, the legality of the pro- D
visions of the Bombay Government Premises (Eviction) Act, 1955 and
the provisions contained in Chapter VA of the Bombay Municipal
Corporation Act, 1888 which provided a speedier remedy to recover
possession of premises belonging to the State Government and the
' i
Bombay Municipal Corporation which were in unauthorised occupa-
tion of any person was questioned on the ground that the remedies E
under the said provisions were more onerous than the remedy by way
of a suit which was also available to the State Government and the
Corporation. While upholding the above provisions, Alagiriswami, J.
who spoke for the majority observed thus :

"The statute itself in the two classes of cases before us F
clearly lays down the purpose behind them, that is premises
belonging to the Corporation and the Government should be
i
subject to speedy procedure in the matter of eviicting un'
authorized persons occupying them. This is a sufficient
guidance for the authorities on whom the power has been
conferred. With such an indication clearly given in the
G
statutes one expects the officers concerned to avail themselves
of the procedures prescribed by the Acts and not resort to
the dilatory procedure of the ordinary Civil Court. Even
normally one cannot imagine an officer having the choice of
two procedures, one which enables him to gtet possession of H
the property quickly and the other which would be a prolong-
ed one, to resort to the latter. Administrative officers, no
1022 SUPREME CCuRl' REJ>OR15 [1980] 2 s.c.R.

A less than the courts, do not function in a vacuum. It would
be extremely unreal to hold that an administrative officer
would in laking proceedings for eviction of unauthorised
occupants of Government proporty or Municipal property
resort to the procedure prescribed by the two Acts in one
case and to tbc ordinary Civil Courts in the other. The pro-
B visions of these two Acts cannot be struck down on the fanci-
ful theory that power would be exercised in such an un-
realistic fashion. In considering whether the officers would '
be discriminating between one set of persons and another, one '•-.:'

c
has got to take into account normal human behaviour and
not behaviour which is abnormal. It is not every fancied
possibility of discrimination but the real risk of discrimina-
tion that we must take into account. This is not one orf those
·-
cases where discrimination i~ writ large on the face of the
statute. Discrimination may be possible but is very impro-
bable. And if there is discrimination in actual practice this
D Court is not powerless. Furthermore, the fact that the
Legislature considered that the ordinary procedure is insuffi-
•
cient or ineffective in evicting unauthorised occupants of
Government and Corporation property and provided a special
speedy procedure therefor is a clear guidance for the autho-
rities charged with the duty of evicting unauthorised occu-
E pants. We therefore, find ourselves unable to agree with the
majority in the Northern India Caterers' case.

Certain provisions similar to the Act impugned in this case enabling
a State Government to recover the amounts due to it by resorting to
a speedier remedy have been upheld by this Court in two cases--Shri
F Manna Lal & Anr. v. Collector of Jhalawar & Ors.(') aT'd Lachhman
Das 011 behalf of firm Tilak Ram Ram Bux v. State of Punjab &
Ors.(2). Jn the case of Shri Ma11na Lal & Anr. (supra) the facts, were
these : The Jhalawar State Bank was originally a Bauk belonging to
the princely State o[ Jhalawar. Its assets, including moneys due to it,
became vested in the United State of Rajasthan under the convenant
G
executed by the Ruler -Of Jhalawar along wi~h other Rulers by which
the United State of Rajasthan was formed. On the promulgation of
the Constitution of India, the United State of Rajasthan became the
State of Rajasthan in the Indian Union and all its assets including
the Jhalawar State Bank and its dues vested in the State of Rajas'.han.
H In that case the question which arose for consideration was whether
(I) [1961] 2S.C.R.962.
(2) [1963] 2 S.C.R. 353.
·~
DIRECTOR OF INDUSTRIES v. DEEP CHAND (Venkataramiah, J.) l 023

moneys which had been advanced by the Jhalawar State Bank could A I
be recovered by taking pr9ceedings under the Rajasthan Public
Demands Recovery Act. This Court held that the amounts could be
recovered by the State of Rajasthan after the Bank had become vest-
ed in it as a public demand under the Rajasthan Public Demands
Recovery Act and that the said Act did not offend Article 14 of the
Constitution even though it provided a special facility to the Govern- B
ment as a banker for the recovery of the bank's dues for the Govern-
ment could legitimately be put in a separate class for this purpose.
In the latter case i.e. the case of Lachhman Das on behalf of Firm
Tilnk Ram Ram Bux (supra), the right of Patiala State Bank to
recover the amounts due to it under the provisions of the Patiala c·
Recovery of State Dues Act was questioned. This Court hdd that
the Bank established by a State had distinctive features which differ·
entiated it from other Banks and formed a category in itself and the
Act in setting up separate authorities for determination of disputes
and in prescribing a special procedure to be followed by them for
the recovery of the dues by summary process could not be consi-
dered to be discriminatory.
• We are, therefore, of the \'tiew that section 3 of the Act which
enables the State Government to recover the sums advanced under
the circumstances mentioned therein as if they were arrears of land
revenue cannot be held to be discriminatory and violative of Article
14 of the Constitution. E

For the foregoing reasons, we allow the appeal, set aside the
order passed by the High Court and dismiss the writ petition. Since
the High Court disposed of the case on the basis of the decision of
this Court in Northern India Caterers Private Ltd. & Anr. (supra)
~.· which has since been overruled, We make no order as to co,.sts. F I

V.D.K. Appeal allowed.

r

11-138 SCI/80