Mobile View
Main Search Forums Advanced Search Disclaimer
Cites 4 docs
The State Financial Corporations Act, 1951
Section 29 in The State Financial Corporations Act, 1951
M/S. Unique Butyle Tube ... vs U.P. Financial Corporation & Ors on 20 December, 2002
Shantamma Kesavan vs The District Collector,Kottayam on 5 July, 2010
Citedby 5 docs
Salini Ravindran, W/O. ... vs The Deputy Tahsildar (R.R.) on 25 February, 2010
P.V.Chandran, ... vs The Kerala Financial Corporation on 29 August, 2008
Pius C. Mundadan, Advocate vs Kerala Financial Corporation on 12 October, 2006
Nabeesath Missiriya.T.B vs State Of Kerala, Rep. By Secretary on 19 January, 2010
P.M.Aboobacker, S/O. ... vs Kerala Financial Corporation on 2 September, 2010

User Queries
Kerala High Court
Usman vs Kerala Financial Corporation on 2 January, 2006
Equivalent citations: 2006 (2) KLT 449
Author: C R Nair
Bench: C R Nair

JUDGMENT

C.N. Ramachandran Nair, J.

1. Petitioner, a personal guarantor for the loan availed by Cedicom (India) Private Ltd., hereinafter called the "company" which is not made party in this Writ Petition, from the first respondent is challenging Exts. P1 and P2 recovery proceedings issued against him under the RR Act for recovery of arrears to the tune of Rs. 60 lakhs and odd. Petitioner is not denying the liability of the company and the petitioner's liability as personal guarantor. However, recover, proceedings initiated under the RR Act are seriously contested on the ground of limitation and on the ground that after the commencement of Recovery of Debts (due to Banks and Financial Institutions) Act hereinafter called the "DRT Act", no recovery proceedings for recovery of debt due to a financial institution can be initiated except by resorting to the provisions of the DRT Act. Another objection raised is that recovery proceedings initiated are not in accordance with mandatory provisions of the RR Act particularly Section 69 of the RR Act.

2. I have heard senior counsel Sri. P.G. Parameswara Panicker, appearing for the petitioner, and standing counsel for the KFC.

3. The admitted facts are as follows. Then company availed two loans, one for Rs. 21.3 lakhs and the other for Rs. 2 lakhs, in May, 1989, and both the loans were repayable in instalments and the last instalment of both loans was repayable by 10.10.1999. When the company committed default, the first respondent initiated revenue recovery proceedings as well as proceedings under Section 29 of the State Financial Corporations Act hereinafter called the "SFC Act". After initiation of proceedings both under the RR Act and under the SFC Act, KFC took over the industrial unit and sold it on 8.8.1996. As the sale proceeds obtained was thoroughly inadequate to take care of the balance liability remaining which was above Rs. 60 lakhs, the respondents continued revenue recovery proceedings against the petitioner, who is admittedly a personal guarantor for the loans. The revenue recovery notices produced as Exts. P1 and P2 under challenge are dated 5.3.2004. According to petitioner, these proceedings are the first revenue recovery proceedings initiated against the petitioner, and since proceedings are initiated several years after default the same are barred by limitation. Petitioner has relied on the decision of the Supreme Court in V.R. Kallyanikutty's case. 1999 (2) KLT 146 (SC) and contended that revenue recovery proceedings are liable to be vacated on account of limitation alone. The first respondent filed a counter affidavit and along with it produced Ext. R1(a), copy of Form No. 24 issued under Section 69(2) of the RR Act on 28.1.1998 through the District Collector, Trichur, and contended that there is proper initiation of revenue recovery proceedings vide Ext. R1(a) and Exts. P1 and P2 are continuation of the very same recovery proceedings at Palakkad where petitioner is residing and has properties. Therefore according to respondents 1 and 2 Exts. P1 and P2 being continuation of revenue recovery proceedings earlier initiated vide Ext.R1 (a) which was within time are not barred by limitation.

4. Petitioner does not deny Ext. R1(a) proceedings for recovery initiated by respondents 1 and 2 for recovery on 28.1.1998, but does not accept Exts. P1 and P2 as continuation of it. Moreover, relying on the decision of the Supreme Court in A. P. State Financial Corporation's case, , petitioner contended that

revenue recovery proceedings if any initiated vide Ext. Rule 1(a) should be deemed to have been abandoned because the first respondent pursued only proceedings under Section 29 of the SFC Act against the defaulter-company, attached it's properties and sold the same. Therefore, according to the petitioner, Exts. P1 and P2 notices issued on 5.3.2004 should be taken as fresh initiation of revenue recovery proceedings which are obviously time-barred and not issued in continuation of the recovery proceedings earlier issued as Ext. R1(a) in Form No. 24 under Section 69(2) of the RR Act on 28.1.1998 through the District Collector, Trichur. Even though petitioner has raised technical objection that the covering letter enclosing Ext.R1(a) in Form No. 24 is not produced in Court, and Ext. R1(a) itself does not disclose that it is issued through District Collector, Trichur, standing counsel for respondents 1 and 2 contended that debt arose in Trichur and therefore the District Collector, Trichur, only is the revenue recovery authority through whom recovery can be initiated under Section 69(2) of the RR Act. If required, counsel stated that the Corporation will produce the covering letter also before Court. I do not think non-production of covering letter entitles this Court to disbelieve Ext. 1(a) which is a statutory notice issued in the prescribed Form with all the particulars. Moreover, it is to be seen from the communication issued by the second respondent dated 31.7.2003 at page 34 of the W.P. that copies of subsequent revenue recovery's notices issued by the KFC to the District Collector, Palakkad are marked to the Deputy Tahsildar (RR), KFC, Trichur. Therefore obviously prior to Exts. P1 and P2, revenue recovery proceedings were initiated and Ext. R1(a) is the first initiation of revenue recovery proceedings. Even though the contention raised by the petitioner relying on the above decision of the Supreme Court that simultaneous proceedings under the RR Act and SFC Act cannot be pursued and creditor-organisation has to elect one of the same. I do not find any violation of the principle laid down by the Supreme Court because after initiation of proceedings under both the statutes, that is under the RR Act and SFC Act. Respondents 1 and 2 pursued the proceedings under Section 29 of the SFC Act and completed the same by sale of industrial unit taken over from the company. It is thereafter that they continued the recovery proceedings against the petitioner, who is admittedly a surety for the loans granted to the defaulter-company. It is explained by the first respondent in the counter affidavit that only after initiation of revenue recovery proceedings vide Ext. R1(a) and after getting report that petitioner is residing in Palakkad and petitioner has no property in Trichur District, revenue recovery proceedings are initiated before the District Collector at Palakkad vide Exts. P1 and P2. Of course, Section 69(4) of the RR Act provides that where the Collector finds that the defaulter has property in another District, he will forward the certificate for recovery to the Collector of that District. This does not mean that the creditor-organisation itself is barred from requiring the Collector of the District in which the defaulter has property to continue recovery proceedings there. What is to be considered is whether there is proper initiation of revenue recovery proceedings in terms of Section 69(2) of the RR Act, and whether recovery proceedings are initiated within the period of limitation. The Hon'ble Supreme Court has held in the case above referred that what is required to save limitation is to initiate recovery proceedings under the RR Act by issuing notice under Section 69(2) of the RR Act. In fact, in this particular case, a valid notice in Form No. 24 was issued under Section 69(2) vide Ext.R1(a) within the time stated above. A subsequent notice issued on 31.7.2003 by the second respondent, which is produced by the petitioner himself at page 34 of the WP, shows that Exts. P1 and P2 are not the first revenue recovery notices issued, but there was prior revenue recovery proceeding, copies of which were forwarded to the recovery authorities at Trichur. This obviously means that revenue recovery proceeding was first initiated in Trichur and the same was pending. Therefore I find Ext. R1(a) is the first notice issued by the respondents under Section 69(2) of the RR Act and was issued to the District Collector of the District in which the debt arose. There is only a procedural impropriety in KFC directly requesting the District Collector, Palakkad, to initiate recovery proceedings against the petitioner in the Palakkad District as against the District Collector, Trichur, forwarding revenue recovery certificate to the District Collector, Palakkad for recovery under Section 69(4) of the RR Act. I do not think the procedural omission by Collector, Trichur will invalidate revenue recovery proceedings once validly initiated. In any case, even assuming that Exts. P1 and P2 are not in accordance with Section 69(4) of the Act, recovery proceedings can be continued even now by the District Collector, Trichur by forwarding the revenue recovery certificate to the District Collector, Palakkad as there is valid initiation of recovery proceedings within time vide Ext. R1(a). Therefore the two contentions raised by the petitioner, first on limitation and the other on procedural omission, are not sustainable and hence recovery proceedings initiated against the petitioner cannot be interfered with.

5. So far as the petitioner's argument that recovery proceedings initiated vide Ext. R.1(a) was abandoned or should be deemed to have been abandoned, I do not think any such presusmption can be drawn by this Court without any material, to show that revenue recovery proceedings originally initiated are withdrawn by the second respondent. Even though the Supreme Court has stated in the decision above referred that the creditor should elect anyone of the courses of action, the Supreme Court has not barred a creditor from initiating recovery proceedings in time to get over limitation, and thereafter to pursue it after the alternate proceedings initiated under the another Act is completed. In other words, I am of the view that KFC rightly initiated proceedings under the RR Act kept it pending until proceedings initiated under Section 29 of the SFC Act are over and then continued revenue recovery or otherwise revenue recovery proceedings would have been barred by limitation. What is prohibited by the decision of Supreme Court is against continuation of two alternate proceedings for recovery against debtor and there is no bar against initiating both remedies in time and pursuing one after another. Therefore KFC was perfectly within their right to initiate revenue recovery proceedings vide Ext.R1(a) to get over limitation and to keep it pending until proceedings initiated under Section 29 of the SFC Act was over. Even though petitioner has relied on a decision of this Court in Kesavan v. District Collector I.L.R. (1976) 1 Ker. 575 and contended that revenue recovery proceeding will be valid, only if procedure prescribed under the Act are strictly followed. I do not think the request made by the KFC directly to the District Collector, Palakkad for proceeding for recovery against the petitioner's property in that District will invalidate recovery proceedings for the reason that request for recovery originally initiated in Trichur should have been forwarded by the District Collector, Trichur, to the District Collector, Palakkad, under Section 69(4) of the RR Act, because the same has not caused any prejudice to the petitioner. In any case for the sake of procedural compliance, the Collector, Trichur is directed to issue certificate under Section 69(4) of the RR Act to the Collector, Palakkad immediately for continuing recovery.

6. So far as the last contention raised based on the decision of the Supreme Court in Unique Butyle Tube Industries P. Ltd. v. U.P. Financial Corporation , that after commencement of the DRT Act, revenue recovery proceedings are not maintainable, is concerned, I have today disposed of another Writ Petition, W.P.C. No. 3149 of 2005, wherein the same issue raised is decided against the petitioner. I follow the said judgment and reject petitioner's contention. The revenue recovery proceedings initiated and continued against the petitioner are upheld but with direction to Collector, Palakkad to continue recovery on Collector, Trichur making up the procedural omission by forwarding the certificate under Section 69(4) of the RR Act which should be done immediately.

W.P. is devoid of any merit and is dismissed.