Allahabad HC Stays Revenue Recovery Against NBFC And Its Director For Liability Of Their Borrower [Read Order]

The bench of Justice Pankaj Mithal and Justice Vivek Agarwal said,

"…the petitioners are separate legal entities other than respondent No.15 and prima facie the dues of the respondent No.15 cannot be recovered from the personal properties of the petitioners.

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Until further orders of this court, no coercive steps shall be taken against the petitioner for recovering any amount pursuant to the impugned recovery dated 30.11.2017 which is in the name of the respondent No.15 provided the petitioner No.1 surrenders his passport if any within a week with the District Magistrate, Ghaziabad and furnishes security other than cash and bank guarantee of the disputed amount…"

The Petitioner had approached the high court seeking ad-interim mandamus commanding the Respondents not to take any coercive measure against him in pursuance of the recovery certificate worth Rs. 150 crores.

Jain alleged that the order of recovery did not name him and yet, the respondents, with the help of UP police officials, detained him without any warrant of arrest or institution of any criminal proceedings or lodging of any First Information Report whatsoever.

He alleged that he was illegally arrested and forcibly kept in District Jail, Ghaziabad. During this time of his detention, he was mentally tortured and humiliated and threatened for life without even him being apprised of the alleged offence for which such a coercive action was being taken against him by the District Administration, Ghaziabad. Moreover, he was forcibly made to sign handover cheques in the favour of respondents by way of post-dated cheques.

Considerably, the recovery order was passed in view of the failure of Celebration City Projects Pvt Ltd (CCPL) to make payments in accordance with schedule of premium towards a land allotted to it by the Respondent authorities.

Counsel for the Petitioner Senior Advocate Anoop Trivedi assisted by Advocate Abhinav Gaur argued that the authorities had wrongly attributed Jain to be a major share holder of CCPL and acting under colourable exercise of power, arrested him without even serving him with any recovery certificate/demand notice.

It was submitted that he was not at all the defaulter from whom recovery could have been effectuated for arrears of land revenue and that even the recovery certificate which was issued by the Respondent Development Authority had not mentioned him to be the defaulter.

They added that he was merely one of the directors of a Non-Banking Financial Company namely M/s. Sakshi Fincap Pvt. Ltd., which had granted inter-corporate loan to CCPL and that he was not in control of the business of CCPPL but only shared a relation of a lender and a borrower.

It was thus alleged that the Respondents' acts were in gross derogation of his fundamental right of personal liberty under Article 21 of the Constitution, freedom to do business under Article 19(1)(g) of the Constitution, the right of property under Article 300A of the Constitution, and also the provisions of U. P. Revenue Code, 2006 and the Rules framed thereunder and U.P. Public Moneys Recovery of Dues Act, 1972.

While the position of the Petitioner as a shareholder of CCPL remains a disputed fact between the parties, the present direction in essence echoed that even if the Petitioner were a share holder, he had a separate legal identity from its Company.

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