Recovery Proceeding Inadmissible Under Public Demands Recovery Act for Alleged Defalcation Absent Written Agreement or Adjudication

The petitioner, Rakesh Kumar, challenged the initiation of Certificate Case No. 19 of 2015-16 by the Certificate Officer, Hajipur. The proceeding was initiated for the recovery of Rs. 8,45,256.33/-

A notice under Section 7 of the Bihar & Orissa Public Demands Recovery Act, 1914 was issued on 15.04.2015, followed by a bailable warrant on 13.08.2015

On 12.12.2016, the Certificate Officer rejected the petitioner's objection filed under Section 9 of the Act, citing it as time-barred, despite the petitioner raising issues regarding the maintainability of the demand

The petitioner approached the High Court seeking quashing of the entire proceeding.

1. Whether a certificate proceeding for recovery of money is maintainable in the absence of a written agreement or specific provision of law declaring the amount as a "public demand"

2. Whether mere allegations of defalcation against an individual "ipso facto" constitute a legally payable debt under the Bihar & Orissa Public Demands Recovery Act, 1914

The Court applied Section 9 and Item No. 15 of Schedule I of the Bihar & Orissa Public Demands Recovery Act, 1914

The Court relied heavily on the Division Bench precedent in The Certificate Officer of Siwan Central Co-operative Bank v. The State of Bihar & Ors. (2006) 2 PLJR 176, which established that recovery under the Act is only justified if the amount is due under a contract, agreement, or specific law

It further cited Murlidhar Sohanlal v. State of Bihar (1998) 3 PLJR 526, holding that a "public demand" requires the person liable to have agreed via a written instrument that the sum shall be recoverable as such

The Court noted that the petitioner’s case was "squarely covered" by the Division Bench ruling in the Siwan Central Co-operative Bank case

The court's reasoning in that precedent, adopted here, emphasizes that a certificate proceeding requires a pre-existing legal determination that money is "due and payable"

Allegations of defalcation do not automatically transform a claim into a settled debt or a "public demand" unless there is a written agreement to that effect or a statutory provision

In this instance, there was no such agreement or legal basis shown to categorize the alleged defalcation amount as a recoverable public demand under the Act. Consequently, the Certificate Officer's rejection of the Section 9 objection on the grounds of limitation was improper given the fundamental lack of jurisdiction/maintainability

The holding reaffirms that recovery proceedings under the Bihar & Orissa Public Demands Recovery Act cannot be maintained for alleged defalcations without a written instrument or statutory authority. All pending interlocutory applications were also disposed of