S. Sanu v. Kerala Financial Corporation Ltd. and Others

## **IN THE HIGH COURT OF KERALA AT ERNAKULAM** ## **PRESENT:** ## **THE HONOURABLE MR.JUSTICE P.N.RAVINDRAN** **FRIDAY, THE 15TH DAY OF JUNE 2012/25TH JYAISHTA 1934S** **WP(C).No. 19972 of 2011 (V) ---------------------------** **PETITIONER(S):** **-------------** **S.SANU, KALATHIL HOUSE, CMC - 27, CHERTHALA, ALAPPUZHA DISTRICT.** **BY ADVS.SRI.M.R.ANISON** **SMT.K.P.GEETHAMANI SRI.P.N.APPUKUTTAN SMT.P.A.RINUSA SMT.ANNIE JACOB** **RESPONDENT(S):** **--------------** **1. KERALA FINANCIAL CORPORATION LTD. REPRESENTED BY ITS MANAGING DIRECTOR, TRIVANDRUM - 695 001.** **2. THE BRANCH MANAGER, KERALA FINANCIAL CORPORATION LTD, KUMARANASAN SMARAKA MANDIRAM, COURT ROAD, ALAPPUZHA - 688 501.** **3. THE DEPUTY TAHSILDAR(REVENUE RECOVERY), KERALA FINANCIAL CORPORATION LTD, ALAPPUZHA - 688 501.** ## ***ADDL. R4 IMPLEADED:** ***ADDL. R4. STATE OF KERALA,** **REP. BY ITS SECRETARY TO GOVERNMENT, REVENEU DEPARTMENT, SECRETARIAT, TRIVANDRUM.** ***ADDL. R4 IMPLEADED AS PER ORDER IN IA-12700/11 DATED 3.8.2011.** **R1 & R2 BY ADV.SMT.KABANI** **R3 & R4 BY GOVERNMENT PLEADER SRI.EGY N.ALIAS** , **BY ADV. SRI.MOLLY JACOB, SC, KERALA FINANCIAL CORPORATION BY SRI.A.A.ABUL HASSAN, SC, KFC** **THIS WRIT PETITION (CIVIL) HAVING BEEN FINALLY HEARD ON 15-06-2012, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING:** ## **WPC. 19972/2011** ## **APPENDIX** ## **PETITIONER'S EXHIBITS:** |**EXT.P1:**|**COPY OF COMMUNICATION DATED 8.3.2008 SENT BY THE 2ND**| |---|---| ||**RESPONDENT TO THE PETITIONER.**| |**EXT.P2:**|**COPY OF CASH RECEIPT ISSUED BY THE 2ND RESPONDENT TO THE**| ||**PETITIONER DATED 29.03.2008.**| |**EXT.P3:**|**COPY OF CASH RECEIPT ISSUED BY THE 2ND RESPONDENT TO THE**| ||**PETITIONER DATED 29.03.2008.**| |**EXT.P4:**|**COPY OF REQUEST SENT BY THE PETITIONER DATED 25.3.2010 TO**| ||**THE 2ND RESPONDENT.**| |**EXT.P5:**|**COPY OF THE DEMAND NOTICE SENT BY THE 3RD RESPONDENT TO THE**| ||**PETITIONER.**| |**RESPONDENT'S EXHIBITS:**<br>**NIL**|| **/TRUE COPY/** **P.A. TO JUDGE** ## **VPV** ## **P.N.RAVINDRAN,J.** ------------------------------- ## W.P.(C)No.19972 of 2011 -------------------------------------Dated this the 15[th] day of June, 2012 ## **JUDGMENT** The petitioner availed a loan of Rs.10,00,000/- from the Alappuzha branch of the Kerala Financial Corporation Ltd., (hereinafter referred to as 'the Corporation' for short). He committed default in repayment of the loan. The Corporation thereupon took steps to recover the amount due from the petitioner by recourse to the provisions contained in Kerala Revenue Recovery Act, 1968 (hereinafter referred to as 'the Act' for short). The Deputy Tahsildar (Revenue Recovery), Kerala Financial Corporation, Alappuzha thereupon issued demand notices under sections 7 and 34 of the Act to the petitioner on 11.4.2003 and on 14.3.2003 respecitvely. The petitioner did not even thereafter repay the loan and therefore, the Deputy Tahsildar (Revenue Recovery) attached 40.87 Ares of land comprised in Sy.No.181/22-1 of Cherthala Village belonging to the petitioner. The attachment was effected on 10.7.2003. Thereafter steps were taken to bring the attached property to W.P.(C)No.19972 of 2011 2 sale. 2. While matters stood thus, the petitioner submitted a representation dated 6.2.2008 for settling the loan account by remitting the sum of Rs.10.40 lakhs. That request was accepted and thereupon, the Branch Manager of the Corporation at Alappuzha sent Ext.P1 letter dated 8.3.2008 to the petitioner informing him of the decision taken by the Corporation to allow him to settle the loan account under the One Time Settlement Scheme by remitting Rs.10.40 lakhs including the OTS advance Rs.1.25 lakhs, on or before 15.3.2008. The relevant portion of the letter reads as follows:- “Please refer to your request dated 6.2.2008 for settling your loan account by remitting Rs.10.40 lakhs. In this respect you may please note the account details as on 1.3.2008 which are given below: Principal Rs.6.66 lakhs Interest Rs.6.20 lakhs ----------------Rs.12.86 lakhs **==========** The Corporation examined the various difficulties faced by you in running the unit and convinced your inability to run the same successfully for reasons beyond your control. Hence as a measure of help, the Corporation has decided to bear a sacrifice of Rs.2.46 W.P.(C)No.19972 of 2011 3 lakhs as shown below. ## Interest ## Rs.2.46 lakhs The Corporation has also decided to allow you to settle your loan account under One Time Settlement Scheme by remitting Rs.10.40 lakhs subject to the following terms and conditions. 1.You should remit Rs.10.40 lakhs(Rupees Ten Lakhs and forty thousand only) including OTS advance of Rs.1.25 lakhs on or before 15.3.2008. 2. You should remit R.R.charges as claimed by the Revenue Authorities, Court expenses and other charges, if any. 3. The OTS facility will be cancelled if the aforesaid amount is not paid on or before 15.3.2008. 4. The Corporation reserves the right to collect the full original amount to us with interest in case of failure to remit the OTS amount with the time allowed”. 3. Along with the representation dated 6.2.2008, the petitioner had remitted the sum of Rs.1.25 lakhs towards the OTS advance. He did not remit the balance amount of Rs.9.15 lakhs on or before 15.3.2008. He remitted it only on 29.3.2008, as can be seen from Exts.P2 and P3 receipts. Long thereafter, he submitted Ext.P4 representation dated 25.3.2010 to the Alappuzha Branch Manager of the Corporation requesting him to return the title deeds deposited by him when he availed the loan. W.P.(C)No.19972 of 2011 4 By Ext.P5 demand notice dated nil, the Deputy Tahsildar (Revenue Recovery), Kerala Financial Corporation, Alappuzha informed the petitioner that he should remit the revenue recovery collection charges failing which revenue recovery proceedings will be initiated to realise the same. Hence this writ petition challenging Ext.P5 and seeking the following reliefs: “(a) To issue a writ of certiorari or other appropriate writ, order or direction to quash Ext.P5 since it is ultra virus the provisions of the R.R.Act and the Rules made thereunder: (b) Issue a writ of mandamus or other appropriate writ order or direction directing the 2[nd] respondent to release the title deed of the petitioner's property at the earliest without levying any amount as collection charges from the petitioner”. 4. The main contention raised by the petitioner is that as he had remitted the entire amount due directly with the Corporation, without the intervention of the revenue authorities, he is not liable to pay collection charges to the third respondent. Relying on the decision of a Division Bench of this Court in **Malabar Organics Ltd. v. State of Kerala [2009 (4) KLT 328]** it is contended that there is no liability to pay collection or W.P.(C)No.19972 of 2011 5 service charges in case the defaulter pays the arrears directly to institution pursuant to the notices issued under section 7 or section 34 of the Act. 5. The learned counsel appearing for respondents 1 and 2 has filed a statement dated 8.6.2012, which is extracted below: “It is submitted that in the above writ petition, the petitioner has challenged Ext.P5 issued by the 3[rd] respondent claiming Revenue Recovery collection charges. The petitioner has fully settled the loan account under the O.T.Scheme during March 2008 by remitting Rs.10.40 lakhs, subject to the following conditions: 1. The petitioner should remit Rs.10.40 lakhs including One Time Settlement OTS advance of Rs.1.25 lakhs on or before 15.3.2008. 2. The petitioner should remit Revenue Recovery charges as claimed by the Revenue authorities, Court expenses and other charges, if any. 3. The OTS facility will be cancelled if the aforesaid amount is not paid on or before 15.3.2008. 4. The Corporation reserves the right to collect the full original amount with interest in case of failure to remit the OTS amount within the time allowed”. W.P.(C)No.19972 of 2011 6 In paragraph 2 of the statement, it is stated that the petitioner has fully settled the loan account under the One Time Settlement Scheme during March 2008. Though one among the conditions in Ext.P1 letter referred to in the statement was that the One Time Settlement facility will be cancelled if the amount of Rs.10.40 lakhs (including the advance of Rs.1.25 lakhs) is not paid on or before 15.3.2008 and it is not in dispute that the petitioner remitted the sum of Rs.9.15 lakhs only on 29.3.2008, there is no explanation in the statement as to whether such payment was accepted or whether the time for payment was extended. However, from the statement, it appears that the remittance made by the petitioner on 29.3.2008 was accepted in full settlement of the loan. Respondents 1 and 2 have stated that under the terms of Ext.P1 letter, the petitioner is bound to pay revenue recovery charges as claimed by the revenue authorities and therefore he is bound to pay the same. 6. The third respondent has filed a counter affidavit dated 9.12.2011. In paragraph 2 thereof, it is stated that as per RRC No.KDis.B1.14798/03 dated 31.3.2003, the District Collector W.P.(C)No.19972 of 2011 7 authorized the Deputy Tahsildar (Revenue Recovery), to collect an amount of Rs.8,16,780/- with interest at the rate of 17% compounded quarterly from 1.4.2003, plus collection charges at the rate of 5% and other dues to be collected from the petitioner. In paragraph 3 it is stated that pursuant thereto, notices under sections 7 and 34 of the Act were served on the petitioner through the Village Officer, Cherthala North, that as the petitioner did not respond to the notices, the immovable properties owned by him were attached on 10.7.2003 under section 36 of the Act and after attachment, steps were taken to sell the property. In paragraph 3, it is also stated that though thereafter the petitioner closed the loan account under the One Time Settlement Scheme voluntarily, he remitted the dues only after revenue recovery proceedings were initiated against him and that the petitioner was prompted to settle the dues by availing One Time Settlement benefits because of the coercive steps initiated by the third respondent under the Act on being convinced that he cannot escape from the proceedings initiated under the Act and therefore, he is liable to pay the collection W.P.(C)No.19972 of 2011 8 charges. In paragraph 6 of the counter affidavit, the third respondent has stated that the judgment in **Malabar Organics Ltd. v. State of Kerala (supra)** has been challenged by the State before the Apex Court by filing SLP No.7242 of 2010 and connected cases and that the Apex Court has stayed the operation of the judgment in Malabar Organics' case. 7. I heard Smt.K.P.Geethamani, learned counsel appearing for the petitioner, Smt.Kabani, learned counsel appearing for respondents 1 and 2 and Sri.Egy N.Alias, learned Government Pleader appearing for respondents 3 and 4. The case of the petitioner is that as he had settled the loan account directly under the One Time Settlement Scheme, he is not liable to pay collection charges as demanded by the third respondent. Relying on the decision of this Court in **Malabar Organics Ltd. v. State of Kerala (supra)** it is contended that item (viii) under Rule 4 and Rule 5 of the Kerala Revenue Recovery Rules were held to be unreasonable and discriminatory and ultra vires the Parent Act and the Constitution of India and therefore, the petitioner is not bound to pay collection charges as stipulated therein. It is also W.P.(C)No.19972 of 2011 9 contended that since the Kerala Financial Corporation has its own machinery of recovery utilizing the services of officers on deputation from the Government, there is no justification in realizing service charges in terms of rule 5(3), that the levy under rule 5(3) of Kerala Revenue Recovery Rules namely levy of 1% of the amount collected towards service charges has no application to the Kerala Financial Corporation and the Kerala State Financial Enterprises and that the Kerala Financial Corporation and the Kerala State Financial Enterprises can only recover the expenses provided under items (i) to (vii) of the Table below rule 4 of the rules. 8. In the instant case, the third respondent has not in Ext.P5 letter informed the petitioner of the amounts payable by him under items (i) to (vii) of the Table below rule 4 of Kerala Revenue Recovery Rules. All that he has stated is the petitioner should remit the revenue recovery collection charges. The third respondent has not, even in the counter affidavit dated 9.12.2011 set out the amount payable by the petitioner under items (i) to (vii) of the Table below rule 4 of Kerala Revenue W.P.(C)No.19972 of 2011 10 Recovery Rules. It is not in dispute that the entire amount due to the Kerala Financial Corporation was paid on 29.3.2008 and the loan account was closed. As held by this Court in **Malabar Organics Ltd. v. State of Kerala (supra)** in the case of recoveries made by the Kerala Financial Corporation under the Act, the defaulter is liable to pay only the expenses covered by items (i) to (vii) of the Table below rule 4. As stated earlier, even though more than 4 years have passed after the petitioner closed the loan account, even today the third respondent has not disclosed the amount payable by the petitioner under rule 4. In such circumstances, I am of the opinion that the Kerala Financial Corporation should return to the petitioner the original of the document/documents deposited by him with intention to create a mortgage as security for the loan availed by him. Needful in the matter shall be done and the documents/documents of title returned within one week from the date on which the petitioner produces a certified copy of this judgment before the second respondent. It is however clarified that this will not stand in the way of the third respondent from realising from the petitioner the W.P.(C)No.19972 of 2011 11 expenses provided under items (i) to (vii) of the Table below rule 4 of Kerala Revenue Recovery Rules and upon the third respondent raising a demand in that regard by issuing an appropriate notice, the petitioner shall pay the said amount without protest within two weeks from the date on which a demand in that regard is received by him. Sd/- **P.N.RAVINDRAN JUDGE** /TRUE COPY/ P.A. To JUDGE vpv