Kerala High Court
George vs Thodupuzha Municipality on 22 June, 2006
Equivalent citations: 2006(3)KLT609
Author: Thottathil B. Radhakrishnan
Bench: Thottathil B. Radhakrishnan
JUDGMENT Thottathil B. Radhakrishnan, J.
1. The Petitioner in WPG No. 32831/04 and his wife are the owners of certain buildings within the limits of Thodupuzha Municipality. Sometime in 1997, they objected to the revision of property tax of one of their buildings, a commercial one, that is, a lodge, hereinafter, the "assessed building," for short and stated in opposition to the demand that the rate at which revision has been made, is unreasonable and exorbitant. They also contended that some of the rooms in that building were left unoccupied. As of now, all those issues are concluded by Ext.Rl (a) in W.P.C No. 32831 of 2004, the judgment dated 17/9/2004 in O.P.No. 32528 of 1999, by which this Court dismissed that Writ Petition after noticing, inter alia, that, following the quinquennial revision in 1997, the petitioner made a representation and on 12/11/1997, the revenue inspector of the Municipality visited the building and placed a report; that thereafter, the petitioner was heard through the counsel and orders were passed on the basis of the said report and that certain relaxation from the original assessment was extended to the petitioner. Such issues are no more available to be opened at the instance of the petitioner, in spite of the allegation that Ext.Pl in W.P.C.No. 32831/04, a representation placed on 06/10/1997 is still pending to be disposed of.
2. On account of the failure of the petitioner in W.P.C.No. 32831/04 and his wife to pay off the outstanding property tax, the Municipality initiated action for recovery, by attachment of movable properties of the defaulters and, accordingly, seized a motor car from the residential premises of the petitioner in W.P.C.No. 32831/04. It is also the allegation of the writ petitioner that certain other movables which were in that car were also seized, though I do not find any record to hold so.
3. W.P.C.No. 32332/04 is filed by a financier, holding out an endorsement in the Registration Certificate book of the vehicle in question, to the effect that the vehicle is hypothecated to the said financier.
4. It was, thereafter, that the defaulter filed WPC No. 32831/04.
5. During the course of proceedings in these Writ Petitions, this Court had issued an interlocutory order, directing release of the vehicle, on the defaulter furnishing a bank guarantee for Rs. 1.5 lakhs. The Municipality took the stand that the bank guarantee furnished was not in the form, that is normally adopted in relation to such matters and they even placed a draft of the proper form along with the counter affidavit. However, the fact remains that there was no proper bank guarantee obtained and placed thereafter, before the Municipality, by the defaulter, and the vehicle in question is still lying in a police station. It is submitted that the Contempt of Court Case filed by the defaulter, alleging that the Municipality-failed to act on the bank guarantee, was also not entertained by this Court.
6. On the aforesaid facts, the learned Counsel for the defaulter, the petitioner in WPC.No. 32831/04, addressed arguments contending that, by virtue of provisions contained in Section 237 of the Kerala Municipality Act 1994, hereinafter referred to as the "1994 Act", arrears of property tax and such dues are the first charge on the immovable property, in relation to which demanded arrear is outstanding and the movables of the defaulter, if any, found therein, and that recovery could be only by distress action against such property. It is urged that there is, therefore, an implied exclusion of all other procedures for, recovery of the property tax arrears. It is further urged that there is no lawful authority referable to the 1994 Act for initiation of proceedings, by way of distress action against movables lying in any building of the defaulter, other than the annexed building, in relation to which the arrear of property tax is sought to be recovered. Accordingly, it is contended that the seizure of the motor vehicle from the residential building of the defaulter is an unauthorised act, when no property tax is outstanding on account of that residential building. So much so, it is urged that the proceedings taken, have to fail. Incidentally, it is also urged that the action taken by the Municipality is a mala fide exercise of power, particularly, if the case of the petitioner as to total absence of power is upheld.
7. On behalf of the financier, it is urged that the car in question belongs to the financier and the defaulter is only to be treated as a hirer in the realm of laws relating to hire purchase,
8. Per contra, the learned Counsel for the Municipality urges that since relevant rules have not been framed under the 1994 Act and in view of the provisions of the said Act providing for repeal and saving of provisions made under the predecessor statute, namely, the Kerala Municipalities Act, 1960, hereinafter, the "1960 Act", for short, the provisions of the Second Schedule to the 1960 Act namely the "Taxation and Finance Rules" would apply and that therefore, the action taken by the Municipality is well in conformity with Rule 32 thereof, falling under the caption 'Collection of Tax'. It is also urged that in the absence of a case for the defaulter that the seized car does not belong to him, it is not open to the defaulter to urge that the seizure of the said movable from the residential building of the defaulter does not stand.
9. Section 237 of the 1994 Act provides for property tax to be a first charge on the property. It reads as follows:
The property tax on buildings and lands shall, subject to the prior payment of land revenue, if any, due to the Government thereon, be a first charge upon the said buildings or lands and upon the movable property, if any, found within or upon the same and belonging to the person liable to such tax.
The statutory charge created thereby is a first charge for the property tax upon the said buildings and lands and upon the movable property, if any, found within and upon the same and belonging to the person liable to such tax, subject of course, to the prior payment of land revenue. This means that, in so far as tax due by way of property tax on buildings and lands is concerned, after satisfying the outstanding dues as land revenue, a first charge is provided on the buildings and lands, in relation to which there is arrear of tax and such charge extends to such movable properties, which are found within the said buildings and lands, if such movables belong to the person liable to such tax.
10. The creation of a statutory charge is not, by itself, a procedure for recovery. The statutory charge created by Section 237 of the 1994 Act is the statutory guard provided by the Legislature for the Municipality to ensure that its priority in so far as recovery of property tax is concerned, does not get entangled by any subsidiary rights created by act of parties or other situations. The creation of such a first charge by a statutory provision does not, by itself, exclude any other mode of recovery from the defaulter. The plea of the defaulter in this regard deserves only to be repelled. I do so.
11. Section 237 of the 1994 Act is not a guiding factor to decide as to what shall be the modes of recovery that a Municipality can take recourse to, for the purpose of reaching at ways and means of ensuring that the monies due to it by way of property tax, come to it. All that has to be ensured is that this is done as sanctioned by law. The mandate of Section 538 of the 1994 Act is that all amounts due, including those sums due under the said Act or any other law or rules or bye-laws made thereunder, can be demanded and recovered in the manner provided in the Rules, unless provisions are made in the Act. No Rules have been framed under the 1994 Act regarding the procedure for recovery. However, Section 575 of the 1994 Act, the clause relating to repeals and savings, provides among other things, in Sub-section 2(ii) thereof, that, notwithstanding the repeal of the 1960 Act, any Rule in the Schedules to the said repealed Act, which are in force, at the commencement of the 1994 Act shall continue to be in force unless they are inconsistent with the provisions of the 1994 Act. There is nothing in the 1994 Act contrary to or inconsistent with the provisions in the Second Schedule to the 1960 Act and therefore, the Second Schedule to the 1960 Act continues to be in force, in so far as modes of recovery of taxes are concerned, notwithstanding the repeal of the said enactment.
12. Now, coming to the provisions of the Second Schedule to the 1960 Act, which are the "Taxation and Finance Rules", Rule 32(1) provides for recovery by distraint under warrant, as has been done in the instant case, followed by sale. It reads as follows:
Rule 32(1):If the amount due on account of any tax together with the demand notice fee and the cost of service of the notice is not paid within fifteen days from the service of the notice and if the person from whom the tax is due has not shown cause to the satisfaction of the Commissioner why it should not be paid, the Commissioner may recover by distraint under his warrant and sale of the movable property of the defaulter the amount due on account of the tax together with the demand notice fee and cost of service, warrant fee and the distraint fee and with such further sum as will satisfy the probable charges that will be incurred in connection with the detention and sale of the property so distrained;
Provided always that movable property described in the proviso to Section 60 of the Code of Civil Procedure, 1908 shall not be liable to distraint.
A reading of Rule 36 of the Taxation and Finance Rules, makes it abundantly clear that any movable property of a person in default may, subject to the proviso to the said Rule, be subjected to distraint and sale, wherever it is found within the Municipality. There is no legislative interdiction that only such movables as can be found in the building to which the default relates, could be proceeded against by distraint action. Hence, the argument advanced on behalf of the defaulter on this count fails.
13. It is in this context, it becomes relevant that the defaulter does not dispute the fact that the seized vehicle belongs to him. So much so, 1 do not find any illegality in the action taken by the Municipality, as against the movable in question. The Municipality was well within the authority to have taken recourse to the restraint action, in relation to the, movable of the defaulter, since the action taken was within the limits of the Municipality.
14. Coming to W.P.C.No. 32332 of 2004, filed by the financier, as already noticed, the vehicle, of which, the defaulter is the registered owner, was hypothecated to the financier. Being only a transaction of hypothecation, the registered owner is also the full owner. The fact that, the financier has only a hypothecation, is explicit from the endorsement of the registering authority on the copy of the registration certificate book, produced in the said case. The quality of rights of a financier, to whom a movable is hypothecated, is in no way better than the right of the Municipality, to proceed against the said movable for recovery of outstanding dues. Profitable reference is rightly made by the learned Counsel for the respondent in this regard, to the decision of the Madras High Court in Nedungadi Bank Ltd. v. Pondy Metal Rolling Mills and Ors. Co. Cases 2005 Vol. J24 wherein it was held that if the property is attached and brought to sale by another creditor, the financier with a hypothecation in his favour will not have a better right over the hypothecation. 1 am in complete agreement with the ratio of the said decision. In the aforesaid circumstances, the contentions on behalf of the financier are only to be overruled. I do so.
Having regard to the aforesaid, these Writ Petitions fail and are accordingly dismissed with costs.