1962 (4) TMI 134 - SC - Indian Laws

Summary

Issues Involved:
1. Whether the proceedings under the Patiala Recovery of State Dues Act were illegal as the Act had ceased to be in force on the material dates.
2. Whether the Act and the rules made thereunder became void on the coming into force of the Constitution as they are repugnant to Articles 14 and 19(1)(f) and (g).
3. Whether the certificate issued under Section 7 is in accordance with the rules framed under the Act.
4. Whether the Act discriminates against the debtors of the Patiala State Bank compared to other banks, violating Article 14.

Issue-Wise Detailed Analysis:

1. Legality of Proceedings Under the Act:
The appellants argued that the proceedings under the Act were illegal as the Act had ceased to be in force on the material dates. The court examined the Covenant entered into by the Rulers of several States to form the Patiala and East Punjab States Union (Pepsu) and the subsequent Ordinances promulgated by the Raj Pramukh. The court concluded that the Supplementary Covenant, which extended the validity of the Act, was void as the Rulers had surrendered all their sovereign powers to the new State. However, the court held that even if the Ordinances ceased to be in operation, the laws of the erstwhile State of Patiala continued to be in force proprio vigore. Therefore, the appellants' contention was rejected.

2. Constitutionality of the Act and Rules:
The appellants contended that the Act and the rules were void under the Constitution as they were repugnant to Articles 14 and 19(1)(f) and (g). The court examined whether the Act violated Article 14 by discriminating between the Patiala State Bank and other banks. It was held that the Patiala State Bank formed a category in itself, and the special procedure prescribed for it was based on a reasonable classification related to the object of the legislation. The court also found that the Act did not contravene Article 19(1)(f) or (g) as it did not directly or indirectly affect the appellants' right to carry on trade or business. The court concluded that the Act and the rules were reasonable and did not violate any rules of natural justice.

3. Validity of the Certificate Issued Under Section 7:
The appellants argued that the certificates issued by the Managing Director under Section 7 were defective as they were not countersigned by the Minister or Secretary as required by the proviso to Section 6(1). The court found that the Forms prescribed under the Act directed the countersignature provision to be struck out when the certificate was sent by the Managing Director. Therefore, the contention was rejected.

4. Discrimination Against Debtors of the Patiala State Bank:
Justice K. Subba Rao, in his dissenting judgment, held that the Act discriminated against the debtors of the Patiala State Bank compared to other banks, violating Article 14. He argued that the procedure under the Act allowed the creditor to determine its own claim and realize the amounts through a coercive process, which was against the principles of natural justice. He concluded that there were no real differences between the Patiala State Bank and other banks that could reasonably justify the special treatment under the Act.

Conclusion:
The majority judgment upheld the validity of the Patiala Recovery of State Dues Act and the proceedings taken thereunder, rejecting all the contentions raised by the appellants. However, Justice K. Subba Rao dissented, holding that the Act violated Article 14 of the Constitution due to its discriminatory provisions. The appeals and writ petitions were dismissed with costs.