- (1.) The appellants are a joint Hindu family firm which has been carrying on business since 1911 in grains, dal, cereals, cotton ginning and pressing, oil manufacture and the like, at a place called Lehragaga in what was once the State of Patiala. The firm had an account called the Cash Credit Account in the Patiala State Bank which had a branch at Lehragaga and used to borrow money in this account on a pledge of its stocks. In 1951-52 there was a heavy slumps in the prices of the commodities with the result that the amounts advanced by the Bank on the security of the goods were very much in excess of the market prices thereof. To cover this shortfall which came to Rs.2,32,000/- the firm catered into an arrangement with the Bank on May 23, 1953, and it is this that forms the source of the present litigation. The Bank sanctioned a loan of Rs.4,50,000/- on what is called "Demand Loan Account." The firm deposited title deeds of the properties belonging to them as security for the amounts that may become payable on that account and the adult members of the family executed a promissory note for that amount and also a memorandum evidencing the deposit office of the title deeds.
(2.) It should be mentioned that in 1951 a firm called Yogiraj Neelkumar was started at Lehragaga of which the partners were Rhagirathlal one of the senior members of the joint Hindu family of the appellant firm and two other strangers Shri Kishore Chand and Shri Banwarilal. That firm did business as Commission Agents and had a Cash Credit Account in the Patiala State Bank at Lehragaga under which it borrowed money for the purpose of its business. That firm also sustained heavy losses during the period of the slump and on May 23, 1953, it owed to the Bank a sum of Rs. 2,17,957-12-6 on account of shortfall. Now what the Bank did under the arrangement dated May 23, 1953, was to adjust the loan of Rs.4,50,000/- towards the shortfalls due to on both from the appellant's firm and the firm of Yogiraj NeelKumar. The complaint of the appellants is that they had nothing to do with the firm of Yogiraj Neelkumar, that Bhagirathlal started it along with strangers as his own separate concern and accordingly the properties of the joint Hindu family of the appellants are not liable for the sum of Rs.2,17,957-12-6 due to the Bank from that firm.
(3.) The amount payable under the demand loan account not having been paid by the appellants, the Bank took steps to realise the same in accordance with the provisions of the Patiala Recovery of State Dues Act, hereinafter referred to as ' the Act' and the rules framed thereunder. It will be convenient at this stage to refer to these provisions and rules in so far as they are material, as it is their vires and constitutionally that form the principal target of attack in these proceedings. Section 3(1) of the Act defines "State Dues" as including debts due to the Patiala State Bank. "Department" is defined in S.3 (2) as including the Patiala State Bank, and "Head of department" in S.3 (6) as meaning the Managing Director in the case of the Patiala State Bank. Section 4(1) authorises the Head of department to determine the exact amount of State dues recoverable from the defaulter in the manner prescribed under the rules. Section 5(1) (a) enacts that State dues may be recovered by the department through the Nazim as if these were arrears of land revenue. Then comes S.6 which is as follows:- "6.(1) The Head of department shall send a certificate as to the amount of State dues recoverable from the defaulter to the Nazim in Form 1 appended to this Act and to the Accountant-General in Form II appended to this Act. Provided that where the head of department is below the rank of a Minister or Secretary, he shall, unless he is the Registrar, Co-operative Societies, send the certificate to the Nazim and the Accountant General through the Minister or Secretary in charge who shall countersign the certificate after satisfying himself that the amount of State dues stated in it is correct. 2. A Certificate transmitted under the preceding sub-section shall be conclusive proof of the matters stated therein and the Nazim or the Accountant-General shall not question validity of the certificate or hear any objections of the defaulter as to the amount of State dues mentioned in the certificate or as to the liability of the defaulter to pay such dues." Section 11 provides that no civil court shall have jurisdiction in respect of any matter which under the Act or the rules is entrusted to the Head of department or any authority or officer authorised by him. Section 12 confers on the State authority to make providing intr alia for the manner in which the amount of State dues shall be determined. Rules framed under S.12 of the Act were published on August 8, 1945. Rule 3 requires that the head of department shall cause a notice to be served on the defaulter to pay such dues on such date before a date specified, or to appear on such date before the head of department and present a written statement of his defence. The date to be fixed should allow at least fifteen days to the defaulter to make payment or to appear and answer the claim. If the defaulter does not appear on the date specified, the head of department may proceed ex parte and determine by order in writing the amount of State dues recoverable from him if he is satisfied that the notice had been duly served, and if not so satisfied, he may direct fresh notice. Rules 6 provides that "where the defaulter appears on the date fixed in the notice and presents his written statement, the head of department or the Inquiry Officer, as the case may be, shall examine the objections of the defaulter stated in the written statement in the light of the relevant records of the department, and shall then by order in writing determine on the same day or on any subsequent day the exact amount of State dues recoverable from him." Rule 7 provides that when the amount determined as payable under rules 5 and 6 remains unpaid, the head of department might issue a notice on the defaulter requiring him to pay the State dues within fifteen days and that in default, the amount could be recovered through the Nazim. Under Rule 8, an appeal against an order determining the amount due under rule 5 or 6 lies to the Board of Directors. Against an Order rejecting an appeal under Rule 8, a revision is provision for service of notice on the defaulter, when proceedings for realising the amount are taken.;