State of Kerala and Others v Chamathil Ayurveda Hospitalities Private Limited (Chamathil Ayurveda Hospitalities Private Limited, God's Own Country Resorts, Chowara P.O., Thiruvananthapuram)

IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT: THE HONOURABLE THE CHIEF JUSTICE MR.MOHAN M.SHANTANAGOUDAR & THE HONOURABLE MR. JUSTICE SATHISH NINAN WEDNESDAY, THE 9TH DAY OF NOVEMBER 2016/18TH KARTHIKA, 1938 WA. NO.2115/2016 () IN WP(C).10118/2016 -------------------------------------------FROM THE JUDGMENT DATED 14-07-2016 IN WP(C) 10118/2016 APPELLANT(S)/RESPONDENTS 1 TO 4 IN WPC : ----------------------------------------------------- 1. STATE OF KERALA, REPRESENTED BY ITS SECRETARY, REVENUE DEPARTMENT, THIRUVANANTHAPURAM-695 001. 2. THE TAHSILDAR (REVENUE RECOVERY), NEYYATTINKARA, THIRUVANANTHAPURAM DISTRICT-695 121. 3. THE DEPUTY TAHSILDAR (REVENUE RECOVERY), NEYYATTINKARA, THIRUVANANTHAPURAM DISTRICT-695 121. 4. THE VILLAGE OFFICER, KOTTUKAL VILLAGE, THIRUVANANTHAPURAM-695 121. BY SENIOR GOVERNMENT PLEADER SRI.V.TEKCHAND RESPONDENT(S)/PETITIONER IN WPC : --------------------------------------------- CHAMATHIL AYURVEDA HOSPITALITIES PRIVATE LIMITED, GOD'S OWN COUNTRY RESORTS, CHOWARA P.O., THIRUVANANTHAPURAM, REPRESENTED BY ITS DIRECTOR GEORGE JOSEPH, AGED 65, S/O. LATE C.J.JOSEPH. ## BY ADV.SRI.D.KISHORE THIS WRIT APPEAL HAVING COME UP FOR ADMISSION ON 09-11-2016, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING: WA. NO.2115/2016 () ## APPENDIX ## APPELLANTS' ANNEXURES:- A-I:- COPY OF THE JUDGMENT OF THE DIVISION BENCH OF THIS HONOURABLE COURT IN W.A. NO.421/2010 DATED 21.01.2016. RESPONDENT'S ANNEXURES:-NIL KRJ //true copy// P.A. To Judge ## **MOHAN M. SHANTANAGOUDAR, C.J & SATHISH NINAN, J.** **------------------------------------------------------W.A. No.2115 of 2016 --------------------------------Dated this the 9[th] day of November 2016** ## **J U D G M E N T** ## **Mohan M. Shantanagoudar, C.J** The judgment dated 14.7.2016 passed in W.P.(C) No.10118 of 2016 is called in question in this appeal by the State. 2. The respondent herein availed a loan from the Kerala State Industrial Development Corporation ('the Corporation', for short) for starting a resort. The records reveal that certain portion of the loan remained unpaid. Thus, the Corporation initiated revenue recovery proceedings under the provisions of the Kerala Revenue Recovery Rules, 1968 ('the Rules, 1968', for short) against the respondent for realisation of the outstanding dues. A notice came to be issued by the 2[nd] appellant in initiating revenue recovery proceedings. Immediately, the respondent approached the Corporation and settled the liability by availing the benefit of One Time Settlement Scheme. When the facts stood thus, the Tahsildar demanded a sum of `8,13,642/- as per Ext.P2 towards collection charges as per Rule 5 of the Rules, 1968 in respect of the amounts remitted by the ## W.A. No.2115 of 2016 -: 2 :- respondent directly to the Corporation. The same was questioned by them in W.P.(C) No.29097 of 2013, which came to be disposed of by Ext.P3 judgment dated 27.11.2013, directing the writ petitioner therein/respondent herein to remit the collection charges demanded in Ext.P3 notice therein, subject to the outcome of the cases involving the issue, which were then pending before the Apex Court. However, the Apex Court remitted the matter back to this Court, after setting aside the judgment passed by the learned Single Judge in W.P.(C) No.29097 of 2013 with a direction to rehear the writ petitioner afresh, in accordance with law. In the mean while, the respondent herein had deposited a sum of `8,13,642/-, pursuant to Ext.P3 judgment. The said amount is lying in deposit with the 2[nd] appellant Tahsildar. 3. Subsequently, this Court, as per Ext.P5 judgment in **Deputy Tahsildar (RR)** v. **Vijaya Builders** [2016 (1) KLT 684] held that the collection charges can be recovered only if any amount is recovered by initiating revenue recovery proceedings and not otherwise. Thus, according to the respondent herein, they are not liable to pay any amount as demanded by the 2[nd] appellant Tahsildar, inasmuch as they have voluntarily repaid the entire loan amount immediately after receipt of the notice issued by the W.A. No.2115 of 2016 -: 3 :- Corporation initiating revenue recovery proceedings. In that regard, the respondent filed the above writ petition, which came to be allowed by this Court by the impugned judgment. In our considered opinion, the impugned judgment did not advert to the amended Rule 5 of the Rules, 1968, which reads thus :- “ **5.** (1) Collection charges at the rate of 5 percent of the arrears to be collected under the provisions of the Act on behalf of any institution notified under Section 71 or collected on behalf of any institution under Section 68 when the arrears does not exceed Rupees Five Lakhs and at the rate of 7.5% when the arrears exceed Rupees Five Lakhs shall be realised from the defaulters and accounted as arrears to such institutions. (2) The collection charges shall be deducted from the amount recovered and the balance alone shall be payable to the institution. (3) Institutions except Government Departments accepting defaulted payments directly from the defaulter after initiating Revenue Recovery Proceedings under the Kerala Revenue Recovery Act, 1968 (15 of 1968) and filing the certificate by the District Collector under subsection (3) of Section 69 of the said Act shall be liable to pay 1% of the amount so collected towards service charge for the initiation of Revenue Recovery Proceedings against the defaulter and to initiate the fact of such acceptance to the District Collector concerned at once.” ## W.A. No.2115 of 2016 -: 4 :- It is to be noticed that sub-rule (1) of Rule 5 deals with instances where recovery has been effected pursuant to the proceedings under the Revenue Recovery Act, whereas sub-rule (3) of Rule 5 applies to cases where after initiation of revenue recovery proceedings, the defaulter directly and voluntarily makes payment to the concerned institution which is the creditor. In the earlier case where recovery through revenue recovery proceedings are effected, the collection charges payable are 5%, if the arrears does not exceed `5 lakhs and 7.5% when the arrears exceed `5 lakhs. Sub-rule (3) of Rule 5 makes it clear that the Institutions except Government Departments accepting defaulted payments directly from the defaulter after initiating Revenue Recovery Proceedings under the Kerala Revenue Recovery Act, 1968 shall be liable to pay 1% of the amount so collected towards service charge for the initiation of Revenue Recovery Proceedings against the defaulter. Undisputedly, the respondent has repaid the entire outstanding dues to the financier directly, immediately after receipt of the notice issued by the 2[nd] appellant Tahsildar relating to revenue recovery proceedings. Hence, the provisions of sub rule (3) of Rule 5 is applicable to the facts of this case. Consequently, the State Government is entitled to recover 1% of the amount collected W.A. No.2115 of 2016 -: 5 :- by the financier under the head of 'service charges for initiation of revenue recovery proceedings'. 4. But the question still to be decided is as to whether it is the respondent, being the defaulter, or the financial institution, who is liable to pay the 1% amount to the Government. The said question needs to be decided by the learned Single Judge, after hearing the financial institution. Since the financial institution is not made a party in the writ petition as well as before this Court, we do not propose to observe anything on merits as to who is liable to pay the amount to the Government. That question is left open. However, we reiterate that the State Government is entitled to collect 1% of the amount collected by the financier as 'service charges'. Accordingly, this writ appeal is disposed of with the following directions :- - (i) The judgment of the learned Single Judge is modified to the effect that the State Government is entitled to collect 1% of the amount deposited by the defaulter directly to the financial institution. - (ii) Since the defaulter has already deposited 7.5% of the amount, the State Government is directed to repay 6.5% of the amount so deposited to the ## W.A. No.2115 of 2016 ## -: 6 :- defaulter/respondent herein, by retaining 1% of the amount. - (iii) The respondent herein/writ petitioner shall implead the financial institution also as a party respondent in the writ petition. It is also open for the writ petitioner to amend the writ petition, if he so chooses. - (iv) The learned Single Judge shall dispose of the writ petition after hearing the parties only to the extent of determining as to whether it is the defaulter or the financial institution, who is liable to pay 1% of the amount, without being influenced by the observations made in Annexure-1 judgment (W.A. No.421 of 2010) produced in this appeal. ## **Sd/MOHAN M. SHANTANAGOUDAR CHIEF JUSTICE** **Sd/SATHISH NINAN JUDGE** Jvt/10.11.2016