M/S. Heera Life Style (P) LTD. vs. The Chief Manager, Kerala Financial Corporation - Kerala High Court, 23 March 2018

Cause title — parties, addresses and appearances

IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT: THE HONOURABLE MR. JUSTICE SHAJI P.CHALY FRIDAY, THE 23RD DAY OF MARCH 2018 / 2ND CHAITHRA,1940 WP(C).No. 36827 of 2017 PETITIONER: M/S. HEERA LIFE STYLE (P) LTD., HEERA PARK, M.P.APPAN ROAD, VAZHUTHACAUD, THIRUVANANTHAPURAM, REPRESENTED BY ITS MANAGING DIRECTOR A.ABDUL RASHEED @ DR.A.R.BABU. BY ADVS.SRI.K.M.SATHYANATHA MENON SRI.A.SANTHOSHKUMAR SMT.KAVERY S THAMPI RESPONDENTS: 1. THE CHIEF MANAGER, KERALA FINANCIAL CORPORATION, BRANCH OFFICE, VELLAYAMBALAM, THIRUVANANTHAPURAM DISTRICT, PIN:695033. 2. KERALA FINANCIAL CORPORATION, VELLAYAMBALAM, THIRUVANANTHAPURAM DISTRICT, PIN:695033, REPRESENTED BY ITS CHAIRMAN/MANAGING DIRECTOR. BY SRI.BASANT BALAJI, SC, KERALA FINANCIAL CORPORATION THIS WRIT PETITION (CIVIL) HAVING BEEN FINALLY HEARD ON 23-03-2018, ALONG WITH WPC.8784/2018, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING: EL WP(C).No. 36827 of 2017 (C) APPENDIX PETITIONER(S)' EXHIBITS EXHIBIT P1: TRUE COPY OF THE VALUATION REPORT WITH RESPECT TO THE PETITIONER COMPANY DATED 3.1.2014. EXHIBIT P2: TRUE COPY OF THE LOAN SANCTION LETTER NO.4584/1426/2013 DATED 18.3.2013 ISSUED BY THE IST RESPONDENT. EXHIBIT P3: TRUE COPY OF THE LETTER ISSUED BY THE COMMANDANT, STATION COMMANDER, THIRUVANANTHAPURAM TO THE DISTRICT COLLOCATION, THIRUVANANTHAPURAM DATED 19.5.2016. EXHIBIT P4: TRUE COPY OF THE JUDGMENT IN WPC NO.24856 OF 2016 DATED 11.1.2017. EXHIBIT P5: TRUE COPY OF THE JUDGMENT IN WPC NO.5054 OF 2017 DATED 16.2.2017 EXHIBIT P6: TRUE COPY OF THE COMMUNICATION NO.BO/TVM/558/2017 OF THE IST RESPONDENT DATED 19.10.2017. EXHIBIT P7: TRUE COPY OF THE OBJECTION FILED BY THE PETITIONER COMPANY DATED 21.10.2017. EXHIBIT P8: TRUE COPY OF THEOBJECTION FILED BY THE PETITIONER COMPANY DATED 25.5.2017. EXHIBIT P9: TRUE COPY OF THE COMMUNICATION KFC/120394610/576/2017 OF THE IST RESPONDENT DATED 26.10.2017. EXHIBIT P10: TRUE COPY OF THE SALE NOTICE.KFC/BO/TVM/590/2017 OF THE IST RESPONDENT DATED 30.10.2017. EXHIBIT P11: TRUE COPY OF THE DEMAND NOTICE ISSUED BY THE DEPUTY TAHSILDAR (R), KERALA FINANCIAL CORPORATION, ERNAKULAM DATED 31.10.2017. EXHIBIT P12: TRUE COPY OF THE LETTER OF INTENT TO ACQUIRE THE PROPERTY ISSUED BY M/SCARNIVAL REALITY PRIVATE LIMITED EXHIBIT P13: TRUE COPY OF THE LETTER OF INTENT EXECUTED BETWEEN THE PETITIONER AND M/S CARNIVAL REALITY PRIVATE LIMITED DATED 25.1.2018 EXHIBIT P14: TRUE COPY OF THE REQUEST SUBMITTED BY THE PETITIONER BEFROE THE 1ST RESPONDENT DATED 6.2.2018 RESPONDENT(S)' EXHIBITS NIL TRUE COPY P.S. TO JUDGE EL 26.3.2018 SHAJI P. CHALY, J. -------------------------------------------------- W.P.(C) Nos.36827 of 2017 & 8784 of 2018 ----------------------------------------------- Dated this the 23rd day of March, 2018

JUDGMENT The writ petitions are materially connected in respect of the recovery initiated against the petitioner under the provisions of Kerala Revenue Recovery Act, 1968, in order to recover the loan availed by it, consequent to non-payment of the same in accordance with the terms of the agreement. So far as W.P.(C) No.36827 of 2017 is concerned, the reliefs sought for by the petitioner has become practically infructuous, since during the pendency of the writ petition, petitioner sought permission to sell off the property mortgaged to the respondents to third persons, and accordingly, directions were issued by this Court to issue NOC by incorporating sufficient safeguards. To put it short, the property was sold to third persons and the entire amounts due to the respondent Corporation is paid.

So far as W.P.(C) No.8784 of 2018 is concerned, the following are the reliefs sought for by the petitioner:

i) Issue a writ of mandamus or any other appropriate writ order or direction, directing respondents 1 to 3 to refund the amounts collected as revenue recovery commission @ 7.5%, 18% GST and DNF from the petitioner as evident from Ext.P8, Ext.P9 and Ext.P10; ii) Issue a writ of mandamus or any other appropriate writ order or direction, directing the 1st respondent to consider Ext.P3 request of the petitioner to provide compromise settlement facility/one time settlement of loan account No.120394610 and to refund the excess amount collected towards interest, penal interest and other hidden charges to the petitioner; iii) Issue a writ of mandamus or any other appropriate writ order or direction, directing the 1st and 2nd respondents to adjust the excess amount collected from the petitioner to the loan account No.120394610 as interest, penal interest and other hidden charges and further towards Revenue Recovery commission @ 7.5%, 18% GST and DNF towards the loan account No.120390910 of M/s. Heera Construction Company Limited after excluding the excess interest, penal interest and other hidden charges and also after deducting RR charges at the rate of 7.5% and 18% GST and DNF to the said account by treating it as one time settlement of loan account No.120390910 and to provide the benefits under the one time settlement and refund the balance amount to the petitioner at the earliest; iv) Issue such other reliefs which may deem fit and proper on the facts and circumstances of the case; and v) Allow this Writ Petition (Civil) with costs.”

In my considered opinion, revenue recovery action is initiated by the respondents under the provisions of the Kerala Revenue Recovery Act and notices under Sections 7 and 34 are issued, which are also under challenge in the connected writ petition. Consequent to recovery action, collection charges at the rate of 7.5% is charged by the respondents. It is the contention of the learned counsel for the petitioner that, petitioner is not liable to pay any amount towards collection charges. However, in my considered opinion, the issue with respect to the collection charges are guided by Rule 5 of the Kerala Revenue Recovery Rules, 1968, which read thus:

“5. (1) Collection charges at the rate of 5 per cent of the arrears to be collected under the provisions of the Act on behalf of any institution notified under Sec.71 or collected on behalf of any institution under Section 68 when the arrears does not exceed Rupees Five Lakhs and at the rate of 7.5% when the arrears exceed Rupees Five Lakhs, shall be realised from the defaulters and accounted as arrears to such institutions. (2) The collection charges shall be deducted from the amount recovered and the balance alone shall be payable to the institution. (3) Institutions

except

Government Departments accepting defaulted payments directly from the defaulter after initiating Revenue Recovery Proceedings under the Kerala Revenue Recovery Act, 1968 (15 of 1968) and filing the certificate by the District Collector under sub-section (3) of Section 69 of the said Act shall be liable to pay 1% of the amount so collected towards service charge for the initiation of Revenue Recovery Proceedings against the defaulter, and to intimate the fact of such acceptance to the District Collector concerned at once.”

Sub-rule (1) makes it clear that, the respondents are entitled to charge 7.5% only if the amounts, recovered fully through the process of revenue recovery. It is an admitted fact that, petitioner has paid the amounts due to the respondent Corporation directly, and therefore, in my considered opinion, the imposition of collection charges at the rate of 7.5% is illegal. Learned counsel for the petitioner has also a case that petitioner is not liable to pay any amount towards collection charges. In my considered opinion, the said contention cannot be sustained, since sub-rule (3) takes care of the said situation, and the petitioner is liable to pay 1% of the amount so collected, since the respondent Corporation has already made requisition to the District Collector, certificate was issued for the debt due, and thereafter only, Sections 7 and 34 of the Kerala Revenue Recovery Act is initiated.

So far as the GST imposed is concerned, it is a statutory due from the petitioner in the transaction. Therefore, it cannot be said that the collection of 18% GST by the respondents in order to pay the same to the statutory authority can be said to be illegal.

Having regard to the facts and circumstances of the writ petitions, W.P.(C) No.36827 of 2017 is disposed of, recording that the entire amount is paid by the petitioner and therefore, the reliefs sought for by the petitioner against the coercive action has become inconsequential and redundant. However, learned counsel for the petitioner has a case that yet another transaction is pending by and between the parties and the respondents may be directed to consider the settlement of the said matter by resorting to One Time Settlement available for settlement of the loan transactions. Therefore, there will be a direction to the respondent Corporation to consider any representation received from the petitioner for settlement of pending transactions under One Time Settlement, after providing an opportunity of participation to the petitioner, at the earliest possible time, from the date of receipt of such an application.

So far as W.P.(C) No.8784 of 2018 is concerned, as is pointed out above, the imposition of collection charges at the rate of 7.5% is illegal and bad. Therefore, the respondent Corporation is directed to calculate the collection charges at the rate of 1% in accordance with Rule 5(3) of the Kerala Revenue Recovery Rules, 1968, and return the balance against the collection charges to the petitioner, or, the respondent will be at liberty to adjust the same against the pending transaction by and between the petitioner and the respondent Corporation. The writ petitions are disposed of accordingly. SHAJI P. CHALY JUDGE St/- 24.03.2018 The words “respondent Corporation” appearing in the second sentence of last paragraph of the common judgment dated 23/03/2018 in W.P.(C) Nos.36827/2017 & 8784/2018 are corrected and substituted as “3rd respondent” and the word “respondent” appearing in the last sentence of last paragraph is corrected as “1st respondent” as per order dated 12.04.2018 in I.A.No.7071/2018 in W.P.(C) No.8784/2018. Registrar (Judicial)