Kerala High Court
Kerala State Small Inmdustries Devl vs Gab Industries on 8 October, 2009
Equivalent citations: AIR 2010 (NOC) 289 (KER.), 2010 AIHC (NOC) 549 (KER.)
Author: Thomas P.Joseph
Bench: Thomas P.Joseph
IN THE HIGH COURT OF KERALA AT ERNAKULAM
SA.No. 774 of 1995(A)
1. KERALA STATE SMALL INMDUSTRIES DEVL.
... Petitioner
Vs
1. GAB INDUSTRIES
... Respondent
For Petitioner :SRI.VAKKOM N.VIJAYAN
For Respondent :GOVERNMENT PLEADER
The Hon'ble MR. Justice THOMAS P.JOSEPH
Dated :08/10/2009
O R D E R
C.R.
THOMAS P. JOSEPH, J.
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S.A.No.774 of 1995
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Dated this the 8th day of October, 2009.
JUDGMENT
Could a suit for injunction against recovery of amount under provisions of the Revenue Recovery Act, 1968 (for short, "the Act") be maintained in the civil court notwithstanding the bar under Section 72 of that Act on the ground that recovery of the amount is barred by the law of limitation? That is one of the substantial questions of law framed for a decision in this Second Appeal.
2. Appellant, the Kerala State Small Industries Development and Employment Corporation Ltd. supplied raw materials to respondent Nos.1 and 2 for a sum of Rs.93,259.72 ps. on credit. Respondent Nos.1 and 2 paid Rs.48,887.69 ps. keeping a balance of Rs.44,372.03 ps. with interest as on 04.05.1978. Based on requisition from the appellant, respondent Nos.3 to 5 initiated steps for recovery of the said amount under the Act. On 28.7.1987 a notice under Section 7 of the Act was issued to respondent Nos.1 and 2 demanding payment of Rs.84,867/-. Respondent Nos.1 and 2 approached the court of learned Principal Munsiff, Ernakulam with a suit for prohibitory injunction against recovery of the amount contending that recovery of the amount is barred by the law of limitation and hence appellant cannot resort to the provisions of the Act. Respondent Nos.1 and 2 further contended that to make SA No.774/1995 2 provisions of the Act applicable to the debt in question, no notification under Section 71 of the Act has been issued. Appellant contended that the suit is not maintainable under Section 72 of the Act in so far as the suit is not brought on the ground of fraud. Appellant denied that recovery of amount payable by respondent Nos.1 and 2 is barred by limitation. Further contention is that as per notification dated 13.10.1987 the Act has been made applicable to recovery of amounts due to the appellant. Respondent Nos.3 and 4 also raised similar contentions. Learned Munsiff held that the bar under Section 72 of the Act applied and dismissed the suit as not maintainable. Respondent Nos.1 and 2 took up the matter in appeal. First appellate court held that recovery of the amount payable by respondent Nos.1 and 2 is barred by limitation, there is no legally payable or recoverable deb', provisions of the Act therefore are not applicable, attempt to recover the amount is not legal and hence civil court has jurisdiction to grant injunction. Holding so, judgment and decree of the trial court were reversed and respondent Nos.1 and 2 were granted a decree as prayed for. Appellant has come up in Second Appeal.
3. It is contended by learned counsel for appellant that finding of the first appellate court regarding maintainability of the suit is not correct. According to the learned counsel every question relating to the execution, discharge or satisfaction of a written demand arising between the Collector or the authorized officer and the defaulter, his representative or person claiming right through him SA No.774/1995 3 is to be determined by the authorities mentioned in Section 72 of the Act and not by a suit. Learned counsel argued that the said provision excluded jurisdiction of the civil court in express terms and the proviso to the Section saved only suits brought on the ground of fraud. In this case, there is no allegation of fraud on the part of the appellant or respondent Nos.3 to 5 in initiating proceedings under the Act. Learned counsel has placed reliance on the decision of the Division Bench of this Court in Special Tahsildar v. Vasu [2006 (4) KLT 557]. In response learned counsel for respondent Nos.1 and 2 contend that it is only questions regarding execution, discharge or satisfaction of the written demand which are required to be determined by the Collector or other authority mentioned in the Act that are exempted from the purview of the civil court. Contention of respondent Nos.1 and 2 is that there is no 'debt' legally payable to the appellant in that recovery of the amount has become barred by limitation. An amount the recovery of which is barred by limitation cannot be legally recovered by resort to the provisions of the Act and hence application of the Act did not arise. The question whether recovery of the amount is barred by limitation, according to learned counsel is not a matter required to be decided by the Collector or other authority mentioned in Section
72. Hence it is contended that the suit is maintainable even in the absence of allegation of fraud. Learned counsel has placed reliance on the decisions in SA No.774/1995 4 John v. District Collector [1989 (2) KLT 831], Ayisha Teacher v. District Collector [2009 (4) KLT 53] and Chinnaswamy v. State of Kerala [2009 (2) KLT 525].
4. The only challenge to the execution of the written demand against respondent Nos.1 and 2 is that recovery of the amount has become barred by the law of limitation and hence, as found by the first appellate court there is no legally payable or recoverable `debt' due to the appellant so that provisions of the Act could be invoked and that steps for recovery of the amount are illegal. To answer the question it is necessary to understand the scope of Section 72 of the Act. Section 72 reads, "General bar to jurisdiction of Civil Courts:- (1) Except as otherwise expressly provided in this Act, every question arising between the Collector or the authorised officer and the defaulter or his representative or any other person claiming any right through the defaulter, relating to the execution, discharge or satisfaction of a written demand issued under this Act or relating to the confirmation or setting aside by an order under this Act of a sale held in execution of such demand, shall be determined not by suit, but by order of-
(i) Commissioner of Land Revenue, where the Collector is a party to the question;
SA No.774/1995 5
(ii) the Collector, in other cases.
(2) No Civil Court shall have jurisdiction to settle, decide or deal with any question or to determine any matter which is by or under this Act required to be settled, decided or dealt with or to be determined by the Government, or the Commissioner of Land Revenue or the Collector or any officer or authority under this Act."
A Division Bench of this Court in Special Tahsildar v. Vasu (referred supra) referring to Section 72 of the Act held, "It is crystal clear that any question relating to execution, discharge or satisfaction of a demand under the Act, arising between the Collector or the Authorised Officer and the defaulter or his representative or any other person claiming any right through the defaulter is outside the purview of adjudication by the civil court. Those are matters to be considered either by the District Collector or by the Board of Revenue."
Now the contention urged by learned counsel for respondent Nos.1 and 2 is that as recovery of the amount is barred by the law of limitation steps for recovery are illegal which is not a matter required to be decided by the authorities mentioned in Section 72 of the Act.
5. The question arises what is `illegality'. `Illegality' signifies that which is contrary to the principles of law as distinguished from mere rules of SA No.774/1995 6 procedure. It denotes a complete defect in jurisdiction or proceedings. `Illegality' arises from infraction, contravention, or breach of an express or implied provision of law or rule, by law, etc.
6. It is apposite to refer to the discussion on Clause 72 of the Bill (which corresponds to Section 72 of the Act) in the Kerala State Legislative Assembly to ascertain whether an illegality in the execution, discharge and satisfaction of a written demand is a matter which cold be agitated in the civil court. It is as under:
[Proceedings of the Kerala Legislative Assembly, First Session (Second Meeting), 1st March, 1968, Vol.XXII-No.14.
"Clause 72 Shri J.A.Chacko: I move:
In clause 72, add the following at the end of the Proviso:"or challenging the legality of the proceedings".
, .
, SA No.774/1995 7 .
.
Shri E.Ahamed: I move also:
In clause 72, in the Proviso, add the following:
"material defect or legality".
.
fraud
-
whims and fancies .
fraud material irregularity-
. 65- SA No.774/1995 8 .
.
. . :.......................
. . :..............................
.. : fraud
.
. . : fraud
.
.
.
.
. . : ?
. . :
.
The amendment moved by Shri E.Ahamed was, by
leave, withdrawn.
The amendment moved by Shri J.A.Chacko was
put and lost.
The question that Clause 72 stands part of the
Bill was put and carried.
SA No.774/1995 9
Clause 72 was added to the Bill". (emphasis
supplied)
English translation of the above proceeding is as under:
Shri J.A.Chacko: I move:
In clause 72, add the following at the end of the Proviso: "or challenging the legality of the proceedings".
The reason for raising this is that, by this Section, the fundamental right of the defaulter or the surety to question the legal defect, if any, that occurs in the revenue recovery proceedings, has been taken away. I have proposed this amendment to safe guard natural justice, to acknowledge the fundamental right of the citizens, and to bring to the notice the denial of the right of a person to approach the Court, if any Revenue Authority conducts revenue recovery proceedings irregularly or in contrary to the provisions. I humbly request that this amendment may be approved.
Shri E.Ahamed: I move also:
In clause 72, in the Proviso, add the following: "material defect or legality". The main reason for this is that it is concerned with the fundamental right of a citizen. If the proceedings are conducted as envisaged in this act, the only option is to approach the Court in the name of 'fraud'. I say that if a decision is made according to the whims and fancies of officials, in the case of a citizen, it is sure that that will greatly affect SA No.774/1995 10 much the fundamental rights available to him. No right has been provided here to approach the Court, if, besides fraud, any material irregularity or legal defects are noticed in the proceedings of the officials. It was in the light of the fact that it was not good to deny the right of a citizen to approach the Court for these reasons, the provision of the Civil Procedure Code was disapproved, when it was proposed in 65. Hence, I request that the amendment I propose may be approved.
Shri K.P.Raghava Poduval:......................... Revenue Minister K.R.Gouri: ....................... Shri E.Ahamed: If that is so, 'fraud' is not needed. Smt.K.R.Gouri: 'Fraud' is mentioned here so that such notices are issued with caution. There is no question of material illegality in the case of service of notice. This is not applicable when the property 10 a.m. of a person not responsible is sold. As such this amendment is not necessary. Besides, there is no bar in filing writ before the Court.
Shri E.Ahamed: Can 'material illegality' be
incorporated?
Smt. K.R.Gouri: That will cause many
difficulties. Hence, I request you not to press this amendment.
The amendment moved by Shri E.Ahamed was, by leave, withdrawn.
The amendment moved by Shri J.A.Chacko was put and lost.
SA No.774/1995 11
The question that Clause 72 stands part of the Bill was put and carried.
Clause 72 was added to the Bill".(emphasis supplied)
7. Whether an amount which on account of the bar of limitation is legally recoverable under the Act is a matter relating to the execution of a written demand. Suits relating to the legality of execution of a written demand issued under the Act as the discussion in the Legislative Assembly on Clause 72 of the Bill reveals, are expressly barred under Section 72 of the Act since such matters are required to be determined by the authorities mentioned in Section 72. Suits brought on the ground of fraud alone are saved by the proviso to Section 72. The legislative intent is very clear that even an illegality relating to the execution of a written demand shall not be the subject matter of a civil suit but, is a matter required to be determined by the Collector or other authority referred to in Section 72 of the Act. The decisions in John v. District Collector and Ayisha Teacher v. District Collector (supra) relied on by learned counsel for respondent Nos.1 and 2 do not relate to recoverability of amount under the Act which is otherwise barred by the law of limitation.
8. I shall refer to the decision in Chinnaswamy v. State of Kerala (supra) relied on by the learned counsel for respondent Nos.1 and 2. In that SA No.774/1995 12 case I had the occasion to consider the scope and application of Section 72 of the Act. It was held that when a declaration regarding non-liability to pay the amount (attempted to be recovered under the Act) which is not required to be determined by the Collector or other authority mentioned under Section 72 of the Act is sought for by the defaulter in a civil court and in consequence to that declaration relief of injunction against recovery of the amount under the Act is also sought for, the suit cannot be said to be barred under Section 72 of the Act. That was a case where alleging that defaulter committed breach of contract he had with the Government and caused loss to the latter, proceeding was initiated against him under the Act for realization of certain amount by way of damages. The defaulter filed suit for a declaration that he is not liable to pay damages to the Government as breach was not on his part. The question whether breach of contract was on the part of defaulter was not a matter which the Government, being one of the parties to the contract could not decide on its own. Adjudication by a court or other forum as is permissible was required whether breach was on the part of defaulter and he was liable to pay damages to the Government and if so, what is the quantum. That was not a matter required to be determined by the Collector or other authority mentioned under Section 72 of the Act. Hence it was held that suit seeking declaration of non-liability and challenging recovery proceedings was maintainable. What is held in Chinnaswamy v. State of Kerala is that if the suit concerned issues which are not required to be determined by SA No.774/1995 13 the Collector or other authority mentioned in Section 72 of the Act and a consequential relief of injunction against recovery of the amount under the Act is prayed for, such suits are not barred under Section 72 of the Act. If the matter in issue is required to be determined by the Collector or other authority under Section 72 of the Act, then the mere fact that a declaration is also prayed for may not take the suit out of the bar under Section 72. The decision in Chinnaswamy v. State of Kerala has to be understood on the facts involved in that case. That decision has no application to the facts of this case.
9. I stated that illegality in the attempt to recover the amount as per written demand issued under the Act is a matter required by Section 72 of the Act to be determined by the Collector or other authority mentioned in the Act. I also stated that the present suit does not fall within the mischief of the proviso to Section 72 of the Act. Hence the first appellate court was not correct in holding that as recovery of the amount has become time barred, "there is no debt as such", the provisions of the Act do not apply and hence the civil court has jurisdiction. I hold that the suit is not maintainable.
10. The next substantial question of law raised is whether recovery of the amount payable to the appellant is barred by limitation. According to the learned counsel for appellant, amount due to the appellant is recoverable under the Act as if it is public revenue due on land, amount due to the appellant which is an instrumentality of the State has to be viewed on a par with debt due SA No.774/1995 14 to the State and hence Article 112 of the Limitation Act would apply. Learned counsel for appellant placed reliance on the decision in Godan Namboothiripad v. Kerala Financial Corporation[AIR 1988 Kerala 31]. There, in paragraph No.4 it is stated with reference to the liability of the Kerala Financial Corporation that "even if it is assumed that the Limitation Act is applicable, the amount due to the institution notified under Section 71 of the K.R.R. Act is treated on a par with the amounts due to the Government in terms of Section 68 and as such Article 112 of the Limitation Act shall govern the case".
Per contra, it is argued by learned counsel for respondent Nos.1 and 2 that appellant, Corporation is not a 'State' as understood in Article 112 of the Limitation Act and hence appellant is not entitled to the protection of that provision. Learned counsel has placed reliance on the decisions in Nanu v. State of Kerala [1987 (2) KLT 921], John v. District Collector [1989 (2) KLT 831], Kerala Fianancial Corporation v. P.S.John [1996(1) KLT 814] and State of Kerala v. V.R.Kalliyanikutty [1999 (2) KLT 146(SC)]. Learned counsel argued that though this Court had taken the view in Nanu's case and John's case (supra) that amounts the recovery of SA No.774/1995 15 which are already time barred cannot be recovered under the provisions of the Act, those decisions were overruled by the Full Bench in Kerala Financial Corporation v. P.S.John (supra). But decision of the Full Bench has been overruled by the Apex Court in State of Kerala v. V.R.Kalliyanikutty (supra). Learned counsel pointed out from paragraph No.2 of the decision of the Supreme Court that what was under challenge before the Supreme Court was decision of the Full Bench in Kerala Financial Corporation v. P.S.John and the Supreme Court held that the Act does not confer any fresh right for recovery of the amount nor does it extent period of limitation but only provided a special mode for recovery subject to the law of limitation. Learned counsel argued that in the light of decision of the Apex Court, it is idle for appellant to contend that for recovery of amount under the Act provisions of the Limitation Act are either not applicable or, that Article 112 of the said Act applied.
11. I am not required to go into the correctness or otherwise of the above arguments since while deciding the question first above stated I found that civil court has no jurisdiction to entertain the suit. I make it clear that it is open to respondent Nos.1 and 2 to raise appropriate contention regarding recoverability of the amount under the Act on account of the bar of limitation as pleaded by them when the written demand under the Act is sought to be enforced against them. Question regarding limitation is therefore left open to be agitated by respondent Nos.1 and 2 before appropriate authorities under the SA No.774/1995 16 Act.
12. In the light of my finding on question first above stated as to the jurisdiction of civil court, judgment and decree of the first appellate court cannot be sustained.
Resultantly, the Second Appeal succeeds. Judgment and decree of the first appellate court are set aside and that of the trial court are restored. Parties shall suffer their cost through out.
THOMAS P.JOSEPH, Judge.
cks SA No.774/1995 17 THOMAS P.JOSEPH, J.
S.A.No.774 of 1995 JUDGMENT 9th October, 2009.