Kerala High Court
Geo Kurian vs The District Collector on 11 November, 2002
IN THE HIGH COURT OF KERALA AT ERNAKULAM
PRESENT:
THE HONOURABLE MR.JUSTICE ANTONY DOMINIC
THURSDAY, THE 15TH DAY OF NOVEMBER 2012/24TH KARTHIKA 1934
WP(C).No. 7013 of 2012 (B)
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PETITIONER(S):
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1. GEO KURIAN, AGED 35 YEARS
S/O.IPE KURIAN, PROPRIETOR, J.K.RUBBERS
PADINJAREYIL HOUSE ,KANNIMANGALAM, AYYAMPUZHA P.O.
ERNAKULAM
2. IPE KURIAN, , AGED 72 YEARS
S/O.IPE, PADINJAREYIL HOUSE ,KANNIMANGALAM
AYYAMPUZHA P.O.,ERNAKULAM
3. CHACKO THOAMS, , AGED 46 YEARS
S/O.THOMAS, VAZHITHALAKATTU HOUSE, MYLAKOMBU P.O.
THODUPUZHA
BY ADV. SRI.P.V.GEORGE(PUTHIYIDAM)
RESPONDENT(S):
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1. THE DISTRICT COLLECTOR
COLLECTORATE, KAKKANADU, ERNAKLUAM-682030
2. DEPUTY TAHSILDAR,
REVENUE RECOVERY ,ALUVA,ERNAKULAM-683101
3. SYNDICATE BANK
REP.BY BRANCH MANAGER, ANGAMALY BRANCH
JANATHA BUILDING, CHURCH JUNCTION, ANGAMALY-683572
R3 BY ADV. SRI.R.S.KALKURA
BY GOVERNMENT PLEADER SRI.RINNY STEPHEN CHAMAPARAMBIL.
THIS WRIT PETITION (CIVIL) HAVING COME UP FOR ADMISSION ON
15-11-2012, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING:
WPC NO.7013/12
APPENDIX
PETITIONERS' EXHIBITS
EXT.P1:- TRUE COPY OF THE NOTICE DTD 16/9/2011 ISSUED U/S.13(2) OF
THE SARFAESI ACT
EXT.P2:- TRUE COPY OF THE OBJECTION DTD 17/10/2011 ISSUED TO EXT P1
EXT.P3:- TRUE COPY OF THE REPLY DTD 24/10/2011 ISSUED BY AUTHORIZED
OFFICER,
EXT.P4:- TRUE COPY OF THE NOTICE DTD 27/10/2011 ISSUED U/S.13(2)OF
THE SARFAESI ACT TO 2ND PETITIONER.
EXT.P5:- TRUE COPY OF THE OBJECTION DTD 29/12/2011 TO EXT P4
EXT.P6:- TRUE COPY OF THE NOTICE DTD 02/3/2012ISSUED TO THE
PETITIONER U/S7 OF THE REVENUE RECOVERY ACT
EXT.P7:- TRUE COPY OF THE NOTICE DTD 02/03/2012 ISSUED U/S.34 OF THE
REVENUE RECOVERY ACT
EXT.P8:- TRUE COPY OF THE OBJECTION DTD 13/3/2012 SUBMITTED TO
RESPONDENTS 1 AND 2.
ADDL.EXT.P9:- TRUE COPY OF THE CERTIFICATE OF REGISTRATION ISSUED BY
COMMERCIAL TAX OFFICER, ANGAMALY DT 1.6.2007.
EXHIBITS OF R3
EXT.R3(a): TRUE COPY OF THE REPLY DT 29.10.11.
EXT.R3(b): TRUE COPY OF THE REPLY DT 1.1.2012.
EXT.R3(c): TRUE COPY OF THE POSTAL RECETIPT INDICATING THE ISSUANCE OF
REPLY TO THE PETITIONERS' COUNSEL ON 4.1.2012.
EXT.R3(d): TRUE COPY OF THE REQUISITION DT 25.11.11 ISSUED BY THE BANK.
EXT.R3(e): TRUE COPY OF THE RELEVANT PORTIONS OF THE CIRCULAR (PAGES
1,7, AND 8) BEARING NO.RPCD NO.PLAN BC 42A/4.9.2001/2002-2003 DATED
11.11.2002 ISSUED BY THE RESERVE BANK OF INDIA.
EXT.R3(f): TRUE COPY OF RELEVANT PORTIONS OF THE CIRCULAR NAMELY THE
COVERING LETTER ISSUED BY THE RESERVE BANK WITH PAGES 1,2 AND 10.
EXT.R3(g): TRUE COPY OF COVERING LETTER DT 1.7.11 ALONG WITH PAGE NO.21
AND 29.
WP(C) No. 7013/12 -2-
EXT.R3(h): TRUE COPY OF the CIRCULAR DT 28.12.2010 ISSUED by the BANK
REGARDING PRIORITY SECTOR LOANS.
EXT.R3(i): TRUE COPY OF THE LETTER DT 10.10.2003 ISSUED BY THE
PETITIONER.
EXT.PR3(j): TRUE COPY OF NOTIFICATION GO MS NO.306/99/RB SRO 700/1999 TO
INCLUDE ALL PRIORITY SECTOR ADVANCES WITHIN THE PURVIEW OF THE REVENUE
RECOVERY ACT.
EXT.R3(k): TRUE COPY OF THE FULL-TEXT OF CIRCULAR NO.RPCD NO.PLAN BC
42A/4.9.2001/2002-03 DT 11.11.2002, ISSUED BY THE RBI.
EXT.R3(l): TRUE COPY OF THE CIRCULAR BEARING NO.RPCD NO.PLAN BC 84/04
4.9.2001/2006-07, DT 30.4.2007, ISSUED BY THE RBI.
EXT.R3(m): TRUE COPY OF THE CIRCULAR BEARING NO.RPCD SME AND NFS VC
NO.9/060231/2011-12, DT 1.7.11, ISSUED BY THE RBI.
EXT.R3(n): TRUE COPY OF THE FULL-TEXT OF THE CIRCULAR DT 28.12.10
ISSUED BY THE 3RD RESPONDENT BANK.
EXT.R3(o): TRUE COPY OF THE CIRCULAR NO.RPCD PLNFS BC.
NO.63/06.02.31/2006-07, DT 4.4.2007, ISSUED BY THE RBI.
//True Copy//
PA to Judge
Rp
ANTONY DOMINIC, J.
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W.P.(C) NO. 7013 OF 2012
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Dated this the 15th day of November, 2012
J U D G M E N T
Heard the learned counsel for the petitioners and the learned counsel appearing for the Bank.
2. First petitioner is a dealer in rubber. On 13.02.2009, the Bank granted him an overdraft facility of `75 lakhs. As security for the facility, petitioners 2 and 3 along with three others stood as guarantors. Further, three items of immovable properties were also mortgaged by depositing title deeds. The account was irregular and was classified as NPA on 14/05/2011. Notices were issued under Section 13(2) of the SARFAESI Act and replies were also filed. According to the Bank, they decided to simultaneously proceed under the Revenue Recovery Act. Accordingly, Ext.R3(d) requisition under Section 69(2) of the Revenue Recovery Act was issued by the Bank, it being an institution notified under Section 71 of the said Act and as according to the Bank, the overdraft facility enjoyed by the first petitioner came within the purview of priority sector advances. On the basis of the requisition thus issued, Exts.P6 and P7 notices were issued under Sections 7 and WPC.No.7013/12 :2: 34 of the Revenue Recovery Act. It was thereupon, this writ petition was filed challenging the recovery proceedings.
3. Contention raised by the counsel for the petitioners is that the facility extended to the first petitioner was an overdraft facility and that the same did not qualify to be a priority sector advance, which alone could be recovered on the strength of Ext.R3
(j) notification issued under the provisions of the Revenue Recovery Act.
4. Counter affidavit has been filed on behalf of the Bank and according to the Bank, in view of the provisions contained in Exts.R3
(k), (l), (m) and (n) circulars issued by the Reserve Bank of India and the Bank itself, the overdraft facility granted to the 1st petitioner was for a "small business" and therefore, is a priority sector advance, recoverable under the Revenue Recovery Act in terms of Ext.R3(j) notification.
5. The only question that is raised for consideration of this Court is whether the overdraft facility in question is a priority sector advance, which is recoverable under the Revenue Recovery Act. While on the one hand, petitioners contended that since the facility in question was granted for trading purposes, it is not recoverable WPC.No.7013/12 :3: under the Revenue Recovery Act, learned counsel for the Bank, contended otherwise. I shall straightaway refer to the circulars relied on by the Bank to justify its action in initiating the Revenue Recovery Act, copies of which are Exts.R3(k), (l), (m,) and (n).
6. Ext.R3(k) is the circular dated 11/11/2002 issued by the Reserve Bank of India dealing with lending to priority sectors. Among the various provisions of this circular, what is important to be noticed is that, as per paragraph 3.3, "small business" also has been included within the scope of this circular and small business has been defined to include individuals and firms managing business enterprises established mainly for the purpose of providing any service other than professional services whose original cost price of the equipment used for the purpose of business does not exceed `20,00,000/-. Subsequently, taking into account the provisions of the Micro, Small and Medium Enterprises Development Act, 2006 which came into force w.e.f. 2/10/06, on 4/4/2007, Ext.R3(o) circular was issued. In that circular, Micro, Small and Medium Enterprises have been defined. In para 3 (b) of the circular, enterprises engaged in providing or rendering services have been included and it is further provided that this category will include among others, "small WPC.No.7013/12 :4: business" also.
7. Later, on 30/4/2007, Reserve Bank of India issued Ext.R3
(l) circular. That circular was issued revising the guidelines for priority sector lending and taking into account the revised definition of small and micro enterprises as per the provisions of Micro, Small and Medium Enterprises Development Act, 2006. Para 1 of the circular contains the categories of priority sector, and small enterprises have been defined in sub clause (ii) thereof. In this paragraph, it is also stated that the micro and small (service) enterprises shall include small road and water transport operators, "small business", professional and self employed persons and all other service enterprises, as per the definition given in Section-1 appended to the notification. In Section 1 appended to the notification, in para 2.1.2 thereof, service enterprises falling within the priority sector have been enumerated. In this category, once again, "small business" is included in sub paragraph (c) thereof.
8. Ext.R3(m) is yet another circular issued by the Reserve Bank of India on 1st of July, 2011. In Section 1 of the said notification, small business and retail trade have been included within the expression of medium enterprises. Ext.R3(n) is the comprehensive WPC.No.7013/12 :5: guidelines of lending to priority sector issued by the respondent Bank on 28/12/10. In the Annexure to the said notification, among the categories of priority sector, "small business" and "retail trade"
have been included within the category of micro, small (service) enterprises. In Section 1 of the Annexure, service enterprises have been included at para 2.1.2. In Clause (c) thereof, "small business and retail trade" are again included.
9. It is relying on the aforesaid provisions of the circulars referred to above that the Bank contends that the loan in question has been granted to the 1st petitioner on the basis that it is a small business. They further argue that small business is included among the priority sector advances and therefore the overdraft facility granted to the 1st petitioner is liable to be recovered under the provisions of the Revenue Recovery Act. However, this contention of the respondent Bank is sought to be contradicted by the learned counsel for the petitioners by contending that since the circulars have been issued taking into account the provisions of Micro, Small and Medium Enterprises Development Act, only if the small business is an "enterprise" within the meaning of the said Act, the advance in question will get coverage of the circulars relied on. It is contended WPC.No.7013/12 :6: that the business to be an enterprise within the meaning of the word "enterprise" as defined in the Act, there should be manufacturing activities and in the absence of which, the petitioners' business venture cannot be said to be an enterprise.
10. This contention of the petitioners should be tested with reference to the provisions of Section (2)(e) of the Micro, Small and Medium Enterprises Development Act referred to above. Section 2
(e) of the Act reads thus;
"2(e) "enterprise" means an industrial undertaking or a business concern or any other establishment, by whatever name called, engaged in the manufacture or production of goods, in any manner, pertaining to any industry specified in the First Schedule to the Industries (Development and Regulation) Act, 1951 (65 of 1951) or engaged in providing or rendering of any service or services;"
11. A reading of the above provision of the Act shows that "enterprise" includes industrial undertaking engaged in the manufacture or production of goods pertaining to any industry specified in the First Schedule to the Industries (Development and Regulation) Act. In addition, it also includes business concerns engaged in providing or rendering of any service or services. Admittedly, petitioners' establishment is a business concern engaged in buying of natural rubber from the growers and selling it WPC.No.7013/12 :7: to wholesalers or manufactures of rubber products. Such a business concern is an enterprise as defined in Section 2(e) of the Act and therefore, this contention of the petitioner does not hold good.
12. Yet another contention raised by the counsel for the petitioners was that for an establishment to qualify as a small business, the cost of the equipment used for the purpose of business should not exceed `20,00,000/-. This contention was raised relying on Clause 3(b) of Ext.R3(o) circular referred to above. According to the petitioners, business of the 1st petitioner does not require any equipment and unless the business in question requires and possesses equipments, the cost of which does not exceed `20,00,000/-, the business cannot qualify to be a small business as defined in the circular. Having considered this submission, I am of the view that the cost of equipment specified in the notification is only an upper limit and any business concern, which has equipments, the cost of which is within that limit, will be a small business as defined in the circular. Further, the business of the 1st petitioner will require atleast weighing equipments, the type of which will depend upon the volume of business transacted by him and its investment is liable to be reckoned for this purpose. For WPC.No.7013/12 :8: these reasons, I do not find any substance in the contention that in the absence of equipments, the cost of which does not exceed `20,00,000/-, the establishment of the 1st petitioner cannot qualify to be a small business.
13. In the result, I must accept the case of the Bank that advance availed of by the 1st petitioner was for a small business, which is covered by the provisions of the circulars issued by the Reserve Bank of India and the Bank and therefore, such advances qualify to be priority sector advances and are recoverable under the Revenue Recovery Act in view of the provisions contained in Ext.R3
(j) notification issued under Section 71 of the Revenue Recovery Act.
14. At this stage, relying on the Apex Court judgment in Ram Kishun and Ors. v. State of U.P. And others (AIR 2012 SC 2288), counsel for the petitioners contended that the liability being co- extensive, they have to share the liability equally. Therefore, according to the learned counsel, it is for the Bank to initiate proceedings against each of them for their respective share of the liability in question. In my view, the said contention has been raised only on account of a misreading of the judgment of the Apex Court. All that the Apex Court has held in the judgment is that in view of WPC.No.7013/12 :9: Section 146 of the Contract Act, in a case where there are more than one surety/guarantor, they have to share the liability equally unless there is an agreement to the contrary. This judgment only recognises the fact that the liability of each of the guarantor is limited to his proportionate share of the liability and this judgment does not lay down any principle that the creditor should proceed against each of those sureties and should recover his respective share. On the other hand, so long as the liability is co-extensive, it is open to the creditor to recover his dues from all or any one of the sureties and in that process, if any one of them was made to pay anything more than his proportionate share, it is for that person concerned to recover the excess amount paid from the other defaulters, be it the borrower or the guarantor. Therefore, this judgment will not be of any assistance to the petitioners to raise the aforesaid plea. Therefore this contention also fails.
Writ petition is dismissed.
ANTONY DOMINIC, JUDGE Rp