Andhra HC (Pre-Telangana)
Syndicate Bank, Branch At Hanamkonda vs Excise Superintendent, Excise ... on 28 February, 2002
Equivalent citations: 2003(1)ALT440, II(2003)BC215
JUDGMENT G. Yethirajulu, J.
1. The appellant is the plaintiff in OS No. 374 of 1994 on the file of the Court of the District Munsif at Warangal. The respondent herein is the defendant in the said suit. The plaintiff filed the suit seeking to restrain the defendant and his officers and workmen from attaching and ceasing the properties of the plaintiff-bank under A.P. Revenue Recovery Act, 1864 ('R.R. Act' for brevity).
2. The averments of the plaint are briefly as follows:
3. The plaintiff is a nationalized bank. It furnished bank guarantees to various persons guaranteeing payment towards privilege fee, MGQ, and CST charges payable by them to the Excise Superintendent, Warangal. The above bank guarantees were furnished on 30-9-1988 for a period of 12 months and all the rights of the defendant shall be forfeited unless a demand or claim under the guarantee is made against the plaintiff bank within the said validity period of guarantee i.e., on or before 30-9-1989. The defendant has not invoked the bank guarantee on or before 30-9-1989 and did not demand for payment. He made the demand only on 4-6-1994. Therefore, there is no obligation to the plaintiff to pay the invoked amount after the expiry of the bank guarantee. The bank apprehends that the defendant may invoke the provisions of the Revenue Recovery Act and create trouble to its business. Hence the suit.
4. The defendant filed a written statement. The averments made therein are briefly as follows:
5. The plaintiff issued bank guarantee for some arrack contractors in favour of the defendant. The said guarantee was issued for 12 months for some contractors and 15 months for some other contractors. The conditions of the bank guarantee stipulate that the guarantee will remain in force for a period of 15 months. The bank guarantee will be invoked for the recovery of arrears only after the completion of lease year and the bank guarantees were accordingly invoked on 30-9-1989 and 20-12-1989. The plaintiff bank was postposing the payment on some pretext or the other. The defendant invoked the bank guarantee within the stipulated period i.e., before 31-12-1989. The plaintiff is liable to pay the guarantee amount. The defendant having vexed with the attitude of the plaintiff has finally decided to invoke the provisions of the R.R. Act to safeguard the interests of the Government. The suit is therefore not maintainable under law and is liable to be dismissed with costs.
6. The plaintiff in order to prove its case examined PW1 and marked Exs.AI to A4. The defendant examined DW I and marked Exs.Bl toB21.
7. The trial Court after considering the evidence adduced by both parties dismissed the suit with costs holding that the defendant invoked the bank guarantee within time.
8. The plaintiff being aggrieved by the judgment and decree of the trial Court dated 7-2-1996 preferred AS No. 18 of 1996 on the file of the Court of the District Judge, Warangal.
9. The 1st appellate Court, after considering the provisions of the R.R Act and the material available on record, dismissed the appeal as devoid of merits.
10. The plaintiff being aggrieved by the judgment dated 30-7-1997 of the 1st appellate Court preferred this appeal questioning its validity and legality.
11. The following are the substantial questions of law involved in this appeal:
1. Whether the respondent can invoke the provisions of RR Act against the appellant-Bank exclusively owned by Government of India?
2. Whether the provisions of R.R. Act be invoked superceding the provisions of Indian Limitation Act?
3. Whether the suit is maintainable under law?
Point No. 1:
12. The plaintiff-bank gave guarantee for several arrack contractors guaranteeing the payment of privilege fee, M.G.Q and CST charges to the Excise Department, Warangal. The defendant invoked the bank gurantee on 30-11-1989 and 20-12-1989 requesting the Manager of the plaintiff-bank to send the guarantee amount to him through Demand Drafts, but the bank postponed the payment on the pretext that the period of guarantee was over by 30-9-1989 and also on the ground that since invocation of the guarantee was made subsequent to 30-9-1989 it could not honour the same.
13. The plaintiff contended that the period of guarantee was only 12 months whereas the defendant contends that the guarantee was for a period of 15 months. The trial Court as well as the 1st appellate Court, after taking into consideration a clause of the bank guarantee, which was expressly provided in the last paragraph of the bank guarantee forms that the period of guarantee shall be for a period of 15 months from the date of execution, held that invocation of bank guarantee is within time. There is a concurrent finding of fact by both the Courts below and I do not wish to interfere with the findings of the Courts below on this aspect.
Point No. 1:
14. Under Sub-section (12) of Section 2 of the A.P. Excise Act, 1968 ('Excise Act' for brevity) 'excise revenue' means :
Revenue derived or derivable from any duty, fee, tax, rent, fine, penalty or confiscation levied, imposed or ordered under the provisions of the Act or other law for the time being in force relating to intoxicating drugs.
15. Since the amounts due from the contractors is the rentals of the arrack shops, the amount covered by the bank guarantee therefore comes within the purview of this section.
Section 65(1) of the Excise Act reads as follows:
65. Recovery of Government dues :--(1) The following moneys, namely:--
(a) all excise revenue;
(b) any loss that may accrue when, in consequence of default, a lease under Section 17 has been taken under management by the Collector, or has been resold by him;
(c) amounts due to the Government by any person on account of any contract relating to the excise revenue; and
(d) the costs, charges and expenses (including the salaries and allowances of the Prohibition and Excise Officers) specified in Sub-section (2) of Section 28, may be recovered from the person primarily liable to pay the same or from his surety, as if they were arrears of land revenue.
16. When once the amount due to the Government under the Excise Act is treated as arrears of land revenue, the provisions of the RR Act can be invoked and the procedure prescribed therein can be followed for recovery of the said amount.
17. The A.P. Excise Act has not prescribed any period of limitation for recovery of the amounts due to the Government whereas limitations is prescribed for filing of suits against the Government. Section 70 of the Excise Act, which speaks about limitation for filing the suits, reads:
70. Limitation of suits :--No suit shall lie against the Government, or against a Prohibition and Excise Officer, other than a suit by Government, in respect of anything done or alleged to have done in pursuance of this Act unless the suit is instituted within six months from the date of the Act complained of.
18. In the present case the defendant invoked the bank guarantee within time. When once there was invocation of bank guarantee, the amount covered by the guarantee became due and the plaintiff-bank is bound to pay the amount covered by the guarantee. Had the plaintiff aggrieved by the notices of invocation of bank guarantee, it should have approached the civil Court within six months from the date of such notices, but it slept over the matter for a period beyond six months leading to bar of civil suit.
19. The learned Counsel for the appellant-plaintiff laid stress on the provisions of Section 52-A of the Revenue Recovery Act, which reads;
52-A. Recovery of sums due to certain banks and other public bodies as arrears of land revenue :--(1) Without prejudice to any other mode of recovery which is being taken or may be taken, all loans granted and all advances made to any person --
(i) by any bank to which the re-payment of the said loans and advances is guaranteed by the State Government; or
(ii) by such Corporation established by or under a Central or Provincial or State Act, or Government Company as defined in Section 617 of the Companies Act 1956, or such other public body as may be notified in this behalf by the State Government in the Andhra Pradesh Gazette together with interest on such loans;
(iii) by any bank under any welfare scheme or programme, such as Prime Minister's Rozgar Yogana and the like, sponsored by the State or Central Government as may be notified therein in this behalf by the State Government in the Andhra Pradesh Gazette;
together with interest on such loans and advances and all sums, such as rents, margin money and the like, due to the bodies mentioned aforesaid may be recovered in the same manner as arrears of land revenue under the provisions of this Act:
Provided that the State Government may, by notification in Andhra Pradesh Gazette, specify the loans and advances together with interest thereon, and other sum due to the bodies mentioned in item (ii) and item (iii) above which may be recoverable under the provisions of this section.
Explanation :--.....
(2) xxx He contends that since Section 52-A of the Revenue Recovery Act was introduced for the benefit of the banks, the provisions incorporated therein cannot be used against it.
20. The RR Act is originally meant to assist the Government officials for the recovery of the amounts due to the Government. Subsequently, certain amendments were brought to the said Act extending the benefit to the Nationalised Banks and Government Corporations etc. There is no force is the contention of the learned Counsel for the bank that the defendant is taking the help of the provisions of Section 52-A. When once the Government is vested with the power, conferred on the Government under the Excise Act, to recover the amount due, it has every right against anybody, including a bank exclusively owned by the Government of India, for recovery of the amount due to it.
21. The learned Counsel for the appellant - bank also contended that the defendant cannot take the help of the provisions of the Revenue Recovery Act for realization of the amount due, after the period of three years. The said contention has no force. No injunction can be granted by a civil Court restraining the Excise Department from exercising a statutory right conferred on it under Section 65 of the Excise Act. The defendant invoked the bank guarantee within time. Therefore, the amount became due to the Government. Though it is stated in Ex.A4- demand notice dated 20-6-1995 that the defendant would be constrained to take the aid of the provisions of the Revenue Recovery Act, he did not initiate any action under the said Act. In the event of the concerned authorities taking action under the Revenue Recovery Act, they may apply to the Civil Court, under Section 59 of the Revenue Recovery Act, for redress within six months from the date of cause of action. But, when no action was initiated by the Excise Department resorting to the provisions of the Revenue Recovery Act, there is no cause of action for the plaintiff to go to a civil Court to seek the relief of injunction. The plaintiff instead of making the payment due under the bank guarantee approached the civil Court without any cause of action by twisting the facts for the reasons best known to it. I therefore hold that the defendant has every right to take the aid of the provisions of the Revenue Recovery Act for realization of the amounts due to the Government against the plaintiff, which is a nationalized bank. This point is accordingly answered in favour of the defendant and against the plaintiff-bank.
Point Nos. 2 and 3:
22. On invocation of the bank guarantee by the defendant, the amount covered by the bank guarantee became due to the Government. Therefore, the Excise Department has every right to take steps under the Revenue Recovery Act for realization of the said amount.
23. The learned Counsel for the appellant-bank submitted that since the defendant did not proceed under the Revenue Recovery Act within three years, he is not entitled to take steps for recovery of the amount under the said Act. In support of his contention, the learned Counsel relied on a judgment of the Supreme Court in State of Kerala v. V.R. Kalliyani Kutty, .
24. The dispute among the parties in the above case is recovery of loan due to the State Finance Corporation under Section 71 of the Kerala Revenue Recovery Act, 1968. In exercise of the powers conferred under Section 71, the Kerala State Government issued a notification bearing SRO No. 797 of 1979 by which the provisions of the said Act have been made applicable to the recovery of the amounts due from any person to any bank on account of any loan advanced to such person by that bank for agriculture or non-agricultural purposes. The Supreme Court in the said case, observed as follows:
The overall scheme of the Act, therefore, is to provide for speedy recovery, not merely of public revenue but also of certain other kinds of loan which are required to be recovered speedily in public interest.
The Supreme Court further observed as follows:
A debt, which is barred by the law of limitation, cannot be recovered by resorting to recovery proceedings under the Kerala Revenue Recovery Act of 1968, the object is only speed up recovery and not enlargement of the right to recover. Words "amounts due" in Section 71 and notifications issued thereunder do not refer to the amounts repayable under the terms of the loan agreements executed between the debtor and the creditor irrespective of whether the claims of the creditor has become time-barred, these words refer only to those claims of the creditor which are legally recoverable. ......Therefore, all claims which are legally recoverable and are not time-barred on that date can be recovered under the Kerala Revenue Recovery Act. Therefore, under Section 71 of the Kerala Revenue Recovery Act claims which are time-barred on the date when a requisition is issued under Section 69 (2) of the said Act are not "amounts due" Section 71 and cannot be recovered under the said Act.
25. The State Finance Corporation, in the above judgment, instead of filing a suit for recovery of the debt, decided to invoke Section 71 of the Kerala Revenue Recovery Act, 1968. Since the action under the Kerala Recovery Act was much later to the period of limitation for the recovery of the debt due to the State Finance Corporation, the Supreme Court held that Section 71 only covers arrears not otherwise time-barred.
26. In N.A. Radha v. State of Andhra Pradesh, , this Court held that the amounts barred by limitation cannot be recovered under the A.P. Revenue Recovery Act, 1864.
27. The principle laid down in the above judgments is applicable only in respect of time-barred debts. The apex Court gave the judgment in Kalliyanikutti (supra) with reference to Section 71 of the Kerala Revenue Recovery Act, which was incorporated in the Act, enabling realization of debts due to the banks and financial corporations. In the case on hand, the amount became due to the Government under the Excise Act. Under the A.P. Excise Act, no limitation is provided for realization of the amount due to the Government. When once the limitation is not applicable under a particular special Act, the question of limitation for initiating action under the Revenue Recovery Act will not arise.
28. The learned Counsel for the appellant-bank cited another judgment of the Allahabad High Court in Dhummun Ram v. State of U.P., 1979 Tax L.R 2451, wherein the Allahabad High Court observed that the loss suffered by the excise authorities due to withdrawal of a highest bidder and refusal to pay instalments of licence fee payable as contracted represented the damage claimable from the excise authorities from the defaulter. The Court further observed that since Section 39 of the U.P. Excise Act does not anywhere provide mat in such circumstances damages can be recovered as arrears of land revenue, the difference will be recover from the defaulter through a civil Court and it is not excise revenue recoverable as arrears of land revenue.
29. The judgment of the Allahabad High Court clearly indicates that since there is no provision under U.P Excise Act to treat the loss as excise revenue recoverable under the Revenue Recovery Act, the excise revenue not accrued to the Excise Department due to withdrawal by the highest bidder can be recovered as arrears of land revenue. The observation of the Allahabad High Court in this regard is as follows;
Where the highest bid offered by retail vendors of foreign liquor at the auction is the licence fee payable by the bidders for obtaining the exclusive privilege of selling by retail foreign liquor in a particular locality, such fee is excise revenue. Such fee is payable by the highest bidder to the Government on account of contract based on his bid. The fee payable for the licence is hence recoverable as an arrear of land revenue.
30. In view of the specific finding of the Allahabad High Court regarding the recovery of excise revenue under the Revenue Recovery Act, I am of the view that there is no force in the contention of the learned Counsel for the appellant that the defendant cannot take the aid of the Revenue Recovery Act for realisation of the amount due from the bank.
31. The learned Counsel for the appellant-bank also relied on a judgment of the Supreme Court in State of Maharashtra v. Dr. M.N. Kaul, , wherein the Supreme Court held that the guarantor cannot be made liable beyond the terms of his engagement and the enforceability of the guarantee also depends upon its terms.
32. There is no ambiguity in the facts of the case on hand. The plaintiff stepped into the shoes of the contractor by offering bank guarantee and, when it was invoked within the period of contract, it cannot say that the invocation of the bank guarantee is beyond the terms of the guarantee form. Therefore, the above judgment is not helpful to the appellant.
33. The learned Counsel for the appellant-bank cited another judgment of the Kerala High Court in Canara Bank v. Gokul Das Shenoy, 1 (1999) BC 228. A Division Bench of the Kerala High Court while considering the provisions of the Indian Contract Act and the Limitation Act held that the cause of action against the guarantor arises only when the principal debtor fails to perform the contract and the demand4s made to the guarantor.
34. The above judgment is more helpful to the respondent than the appellant-bank. In the case on hand, the excise contractor is supposed to pay all the amounts due to the Government before 30-9-1989 and obtain a clearance certificate to that effect. Since the contractor failed to obtain the clearance certificate, the defendant invoked the bank guarantee against the plaintiff-bank while it was in force. Since there is no limitation provided under the Excise Act for realization of the amount due to the Government, the plaintiff-bank cannot take the plea of limitation and it will not come in the way of the defendant to take steps for realization of the amount due to the Government under the bank guarantee by invoking the provisions of the Revenue Recovery Act.
35. The learned Counsel for the appellant-bank has drawn the attention of this Court to the provisions of Subsections (1) and (2) of Section 29 of the Indian Limitation Act, 1963, which reads as follows:
29. Savings :--(1) Nothing in this Act shall affect Section 25 of the Indian Contract Act, 1872.
(2) Where any special or local law prescribes for any suit, appeal or application a period of limitation different from the period prescribed by the Schedule, the provisions of Section 3 shall apply as if such period were the period prescribed by the Schedule and for the purpose of determining any period of limitation prescribed for any suit, appeal or application by any special or local law, the provisions contained in Sections 4 to 24 (inclusive) shall apply only in so far as, and to the extent to which, they are not expressly excluded by such special or local law.
(3).....
36. The provisions under this section are applicable only in respect of the suits, appeals or applications filed before a Court of Law. There is no provision under A.P. Excise Act that the amount due under the Act shall be recovered through Court, Since the defendant expressed its intention to proceed under the Revenue Recovery Act, the provisions of Section 29 of the Limitation Act are not applicable.
37. The bank guarantee constitutes an agreement between the bank and the contractor under which there is an absolute obligation of the bank to make the payment to the Excise Department merely on demand. The bank is prohibited under the guarantee from raising any objection. Demand made on the bank in accordance with eventualities mentioned in the Deed of Guarantee is conclusive as regards the amount due and payable by the bank. The bank guarantee is a definite undertaking on the part of the bank and constitute an engagement of the bank to pay the amount covered under the guarantee to the Excise Department merely on demand. The Hon'ble Supreme Court in General Electric Service v. Pung Sons, , after taking into consideration a catena of earlier decisions of the Supreme Court held that in order to restrain operation of either irrevocable Letter of Credit or bank guarantees, there should be serious dispute and there should be substantial equities in the form of preventing irretrievable injustice between the parties, otherwise the very purpose of bank guarantee would be negatived and the fabric of treating the operation will be jeopardized.
38. In view of the above position of law, the suit filed by the bank questioning the invocation of the bank guarantee and the mode of recovery by the Excise Department is not maintainable.
39. In the light of the above discussion, I am further of the view that the defendant is entitled to invoke the provisions of the Revenue Recovery Act for realization of the amount and that the provisions of Section 29 of the Indian Limitation Act, 1963 are not applicable in respect of the excise revenue due to the Government under the provisions of the Excise Act. This point is accordingly answered.
40. In the result, the appeal is dismissed confirming the judgments and decrees of the Courts below, but under the circumstances without costs.