High Court of KeralaSingle Judge2010-08-20Appeal allowed; judgment of the lower appellate...

P.K. Kerala Varma & M/S Narniat Powers & Company v. Kerala State Small Scale Industries Development and Employment Corporation Limited & Administrative Officer

Case / Petition Number:SA 45 of 1998 (E)

Case Details & Bench

Court: High Court of Kerala
Hon'ble Judges: P. Bhavadasan
Judgment Date: 2010-08-20
Court Decision / Holding: Appeal allowed; the judgment and decree of the lower appellate court permitting revenue recovery against the appellants is set aside; the decree and judgment of the trial court restoring the appellants’ relief to the extent of limiting and barring RR is restored; there will be no order as to costs.
Final Disposition: Appeal allowed; judgment of the lower appellate court reversed; trial court decree restored; no costs.

Parties to the Case

Appellants / Petitioners

P.K. Kerala Varma
M/S. NARNIAT POWERS & COMPANY represented by its Managing Partner P.K. Kerala Varma

Respondents

THE KERALA STATE SMALL SCALE INDUSTRIES DEVELOPMENT AND EMPLOYMENT CORPORATION LIMITED, SANTHI NAGAR, TIVANDRUM
THE ADMINISTRATIVE OFFICER, KERALA STATE SMALL SCALE INDUSTRIES DEVELOPMENT AND EMPLOYMENT CORPORATION LIMITED, INDUSTRIAL ESTATE, EDAKKAD, CALICUT - 5.

Legal Representation & Advocates

Counsels for Petitioners

• Sri. P. Radhakrishnan
• Smt. K. Meera

Case Synopsis & Summary

This second appeal (S.A. No. 45 of 1998) arises from O.S. 639 of 1985 before the Munsiff, Kozhikode, involving a small-scale industry leased property dispute. The plaintiffs, a partnership led by P.K. Kerala Varma and a second firm represented by him, had taken two sheds (B-type and C-type) on rent from the Kerala State Small Scale Industries Development and Employment Corporation Limited (KSSIDEL) for operating a business. B-type shed's rent was Rs. 160 per month from 1.8.1964; C-type shed’s rent was Rs. 80 per month from 10.2.1962. The plaintiffs claim vacated the C-type shed on 20.2.1978 and assert no further rent is due for C-type sheds thereafter. They contend liability for B-type sheds ended earlier, and that any demand or liability was disputed; Union Pesticides’ involvement and common but distinct partnership status are highlighted, with Union Pesticides allegedly allotted the sheds. The defendants sought recovery; the trial court held that: (i) liability for C-type sheds existed only up to 10.4.1978; (ii) liability for B-type sheds ended from 1.1.1972; (iii) no penal interest; (iv) the entire claim was time-barred, so no recovery by revenue steps, and granted a decree in plaintiffs’ favor to that extent. The first appellate court reversed, relying on John v. District Collector to allow RR proceedings. The High Court, however, held later decisions require “amount due” to be determined as of date and that time-barred debts cannot be recovered via Revenue Recovery Act. The appeal was allowed; the appellate decision to authorize RR was set aside and the trial court’s decree restored, with no costs.

Provisions of Law Cited

Kerala Revenue Recovery Act, 1968The Limitation Act, 1963

Submissions & Arguments

Contentions of Appellants / Petitioners

The appellants contend that Union Pesticides and the second plaintiff firm are two independent concerns; the liability of Union Pesticides cannot be imposed on the second plaintiff firm, which is at best a guarantor and not a principal debtor. Though there may be common partners, they are separate entities. They challenge the lower appellate court’s reliance on John v. District Collector to permit revenue recovery, arguing that law has evolved: ‘amount due’ means the amount legally due as of the date; if demand is time-barred, RR cannot be used to recover such debts. They emphasize that the alleged arrears arising from time-barred periods cannot be collected by RR, particularly since this would contravene principles of equality and non-arbitrariness. The appellants assert that the trial court correctly found liability only up to specified dates and that after those dates recovery is barred by limitation, so the decree should be restored.

Contentions of Respondents

The respondents argued that rent arrears and related amounts are recoverable; the liability to pay rent and the right to recover arrears remain despite the union arrangement, and that revenue recovery proceedings are a legitimate mode of recovery. They contended that the liability existed and that the rent assessments and arrears could be pursued via Revenue Recovery beyond a mere contractual obligation, citing the need to recover public revenue and to enforce accountability for dues, even if challenged by time limitations in other contexts. They urged that Union Pesticides’ separate status should not absolve the defendants of all liability, and that the RR mechanism is appropriate for arrears owed to the state entity.

Cited Precedents (1)

Case Name	Citation	Treatment	Explanation
John v. District Collector	1989 (2) KLT 831	Distinguished	The High Court distinguishes this decision, noting later authorities limit its scope; it held that ‘amount due’ must be determined as of date and that time-barred debts cannot be recovered through the Revenue Recovery Act; thus John’s reasoning on non-subject-to-limitation recovery was partially overruled/inapplicable here.

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Extracted Judgment Text

Exact text extracted from official judgment records.

## **IN THE HIGH COURT OF KERALA AT ERNAKULAM** ## **PRESENT :** **THE HONOURABLE MR. JUSTICE P.BHAVADASAN FRIDAY, THE 20TH AUGUST 2010 / 29TH SRAVANA 1932** ## **SA.No. 45 of 1998(E)** ## **--------------------** **OS.639/1985 of PRL.MUNSIFF COURT, KOZHIKODE-I AS.2/1991 of III ADDL.SUB COURT, KOZHIKODE** **....................** ## **APPELLANTS** / **RESPONDENTS/PLAINTIFFS** ## **--------------** **1. P.K. KERALA VARMA, S/O. BALA RAMA VARMA, AGED 58 YEARS, RESIDING IN PANNIYANKARA AMSOM AND DESOM, KOZHIKODE TALUK.** **2. M/S. NARNIAT POWERS & COMPANY REPRESENTED BY ITS MANAGING PARTNER P.K. KERALA VARMA, BUSINESS PREMISES AT NORTH BEYPORE, KOZHIKODE TALUK.** - **BY ADV. SRI.P.RADHAKRISHNAN SMT.K.MEERA** ## **RESPONDENTS/APPELLANTS/DEFENDANTS** - **---------------** **1. THE KERALA STATE SMALL SCALE INDUSTRIES DEVELOPMENT AND EMPLOYMENT CORPORATION LIMITED, SANTHI NAGAR, TIVANDRUM.** **2. THE ADMINISTRATIVE OFFICER, KERALA STATE SMALL SCALE INDUSTRIES DEVELOPMENT AND EMPLOYMENT CORPORATION LIMITED, INDUSTRIAL ESTATE, EDAKKAD, CALICUT - 5.** **BY** **THIS SECOND APPEAL HAVING BEEN FINALLY HEARD ON 12/08/2010, THE COURT ON 20/08/2010 DELIVERED THEFOLLOWING:** ## **(M.N)** ## **P. BHAVADASAN, J.** - - - - - - - - - - - - - - - - - - - - - - - - - - - S.A. No. 45 of 1998 - - - - - - - - - - - - - - - - - - - - - - - - - - - - - Dated this the 20th day of August, 2010. ## **JUDGMENT** The plaintiffs in O.S. 639 of 1985 before the Munsiff's Court, Kozhikode are the appellants. First plaintiff is the Managing Partner of the second plaintiff firm. The firm had taken two sheds of B and C types from the defendants for running a small scale industry. The rent of B type sheds was Rs.160/- per month. B type sheds were taken on rent on 1.8.1964. C type sheds were taken on rent 10.2.1962 at the monthly rent of Rs.80/-. It is claimed that on 20.2.1978 the plaintiffs had vacated C type sheds. From that day onwards, according to the plaintiffs, they are not liable to pay any rent for C type sheds. The firm is liable to pay rent from 10.2.1962 to 28.2.1978. The liability to pay rent for B type sheds is from 1.8.1964 to 31.10.1971. The plaintiffs would point out that another concern by name Union Pesticides sought allotment of those sheds and S.A.45/1998. 2 they were allotted with the said sheds. Though there are common partners in the second plaintiff firm and Union Pesticides, they are two distinct concerns. It seems that the plaintiffs were served with a notice on 14.5.1985 issued by the defendants calling upon the first plaintiff to pay the arrears of rent. Since the amount was not quantified and there was a threat of resorting to revenue recovery proceedings, the plaintiff approached this court. In the meanwhile, the defendants took possession of the machineries kept in the premises. The stand taken by the plaintiffs is that after surrendering B and C type sheds they are not liable to pay further rent especially during the period occupied by Union Pesticides. It is also contended that at any rate the claim is barred by limitation and therefore the amounts could not be recovered. On the basis of these allegations they prayed for reliefs made mention of in the plaint. 2. The first defendant resisted the suit by pointing out that the allegations in the plaint are without basis. They S.A.45/1998. 3 point out that when the rent was sought to be enhanced in respect of C type sheds, the plaintiffs had approached the court. The arrear now claimed is only on the basis of the direction in the said case. They disputed that B type sheds were surrendered on 31.12.1971. According to them the plaintiffs requested them to transfer allotment of B type sheds to Union Pesticides by communication dated 21.3.1973 and they had taken the responsibility of seeing that the rent is duly paid. Neither the plaintiffs nor Union Pesticides paid the rent and that fell in arrears. Therefore the plaintiffs are liable to pay rent. They contended that they are entitled to initiate revenue recovery proceedings for recovery of the rent due from the plaintiffs. They therefore contended that the plaintiffs are not entitled to any relief. 3. Second defendant adopted the contentions of the first defendant. The trial court raised necessary issues for consideration. The evidence consists of the testimony of P.W.1 and the documents marked as Exts. A1 to A80 from S.A.45/1998. 4 the side of the plaintiffs. The defendants examined D.W.1 and had Exts. B1 to B11 marked. On a consideration of the materials before it, the court below passed a decree, which reads as follows: _“1. The plaintiffs' liability to pay rent for C type sheds is only for a period upto 10.4.1978._ _2. After 1.1.1972 the plaintiffs have no liability to pay rent for B type sheds._ _3. The plaintiffs are not liable for penal interest._ _4. The entire claim made against the plaintiffs was barred by limitation on the date of suit and therefore the defendants cannot collect these amounts by resorting to revenue recovery steps. In view of the above findings the plaintiffs are entitled to get a decree to the following extent:-_ _1. It is declared that the defendants are not entitled to resort to revenue recovery proceedings for realisation of any amount by way of rent, arrears of rent, interest or penal interest in respect of C type sheds for the period after 10.4.1978 and in respect of B type sheds after 1.1.1972 against the 2[nd] plaintiff and against the 1[st] plaintiff as the partner of the 2[nd] plaintiff firm._ S.A.45/1998. 5 _2. The defendants are hereby restrained by a decree of perpetual injunction from resorting to revenue recovery proceedings for the recovery of any rent, arrears of rent, interest and penal interest in respect of B type as well as C type sheds against the 2[nd] plaintiff and against the 1[st] plaintiff as the partner of the 2[nd] plaintiff.”_ 4. Aggrieved by the judgments and decrees of the trial court, the defendants carried the matter in appeal as A.S. 2 of 1991. The lower appellate court reversed the finding of the trial court and held that revenue recovery proceedings are not barred by limitation in view of the decision reported in **John v. District Collector** (1989 (2) K.L.T. 831) It is the said judgment and decree that are assailed in this appeal. 5. The following substantial questions of law are seen raised in the memorandum of Second Appeal: _“(i) Can it be said that the respondents had begun revenue recovery proceedings against the appellants without issuance of notice as_ S.A.45/1998. 6 _contemplated in the Kerala Revenue Recovery Act?_ _(ii) When the arrears of rent alleged to be due to the respondents are disputed by the appellants right from the beginning, are not the appellants entitled to be given an opportunity to substantiate their contentions and prove the same before recovery steps are initiated?_ _(iii) Whether debts barred by limitation can be recovered by recourse to Revenue Recovery Act? (iv) Are not the proceedings initiated under the Revenue Recovery Act in the matter of a time barred debt, highly discriminatory in as much as it confers special privilege to certain class of people to recover time-barred debts while others are not conferred the benefit of such recovery, particularly when there is no reasonable classification in the matter of conferring such a privilege and no guidelines prescribed?_ _(v) Was not The Kerala Revenue Recovery Act 1968 brought into force to consolidate and amend the laws relating to the recovery of arrears of public revenue in the state. Since the alleged arrears of rent due to the respondents from the appellants will not constitute public revenue, is it_ S.A.45/1998. 7 _not arbitrary to invoke provisions of Revenue Recovery Act to recover ordinary debts and it is not the notification conferring such an arbitrary benefit to the respondents violative of Article 14 of the Constitution of India?_ _vi) Is not the authority constituted under the Kerala Revenue Recovery Act exercising adjudicatory powers while considering the objections of the defaulter. If so, should he not be treated as a court and the Limitation Act be made applicable to him._ _vii) Should the privilege that there is no extinguishment of the right and remedy in respect of recovery of public money be given to bodies and individuals who are only by notification deemed to have the power to recover debts under the provisions of Revenue Recovery Act?”_ 6. Learned counsel appearing for the appellants pointed out that Union Pesticides and the second plaintiff firm are two independent concerns and the liability of Union Pesticides cannot be fastened on the second plaintiff firm. Even assuming that the second plaintiff had undertaken to see that Union Pesticides pays the rent promptly, the status S.A.45/1998. 8 of the second plaintiff is only that of a guarantor and cannot be treated as a principal debtor at all. Learned counsel contended that though there may be common partners in two firms, it cannot be said that they are one and the same. It is also contended that the decision relied on by the lower appellate court to hold that the defendants can resort to revenue recovery proceedings is no longer good law in view of the subsequent decisions. It was therefore contended that revenue recovery proceedings cannot be allowed. 7. The only contention taken before this court is that the lower appellate court was not justified in holding that in view of the decision in **John's case** , the defendants are entitled to proceed under the Revenue Recovery Act. It is true that in the said decision it was held that revenue recovery proceedings is only a mode of recovery and is not subject to limitation. But as rightly pointed out by learned counsel for the appellants, later decisions have held that amount due means amount due as on date and if demand is barred by limitation, revenue recovery proceedings cannot S.A.45/1998. 9 be resorted to. The amount due has been construed as legally due and if that be so, the amount claimed by the defendants is barred by limitation. 8. In the light of the above fact, this appeal is only to be allowed. The judgment and decree of the lower appellate court so far as it permits the defendants to resort to revenue recovery proceedings is set aside and the decree and judgment of the trial court to that extent is restored. The appeal is allowed as above. There will be no order as to costs. **P. BHAVADASAN, JUDGE** sb.