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2016 DIGILAW 82 (KER)

Deputy Tahsildar v. Vijaya Builders

2016-01-21

A.M.SHAFFIQUE, ASHOK BHUSHAN

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JUDGMENT : A.M. Shaffique, J. 1. This appeal has been remitted back to this Court by the Supreme Court for fresh disposal, in accordance with law, with the following observations: "7. In our opinion, in these types of cases, the High Court should have taken up the matters individually and decided whether the State was justified in issuing the demand notices for the purpose of collection charges as well as service charges under Rules 4 and 5 of the Rules. 8. In view of the above, we set aside the judgment and order passed by the High Court and remand the matters to the High Court for a fresh disposal in accordance with law. We also request the High Court to take the cases individually instead of clubbing all the matters and look into the facts of each case and take a positive decision on the pleadings adduced by both the parties." The Writ Petition was filed by respondents 1 to 3 herein seeking for a direction to the respondents namely Kerala Financial Corporation (for short K.F.C.) and its officers to return an amount of Rs. 9,02,670/- collected from the petitioners as per Ext. P15 receipt dated 25.2.2006 and for a declaration that the 3rd respondent Deputy Tahsildar (RR), Kerala Financial Corporation is not entitled to receive collection charges under the Revenue Recovery Act, 1968 (hereinafter referred to as 'the Act'). 2. The, averments in the Writ Petition would disclose that the petitioners being a partnership and its partners availed financial assistance from K.F.C. They had also mortgaged certain item of property. Proceedings were taken by K.F.C. under S. 29 of the State Financial Corporation Act. Petitioners filed W.P. (C) No. 10396/2004, when notice for sale of property was published. The said Writ Petition was disposed of as the sale did not take place on the said date. It is further contended that K.F.C. granted One Time Settlement (OTS) facility to the petitioners and the petitioners remitted Rs. 81 lakhs with interest at 15% from 01.06.2001. By letter dated 05.08.2005, K.F.C. extended time for payment under the OTS scheme till 30.5.2005. Ext. P4 dated 23.07.2001 is the letter issued by K.F.C. granting OTS facilities. As per Ext. P4, there was a direction to remit R.R. charges, if any payable to RR authorities. It seems that the petitioners did not pay the amount in terms of Ext. P4. Ext. P4 dated 23.07.2001 is the letter issued by K.F.C. granting OTS facilities. As per Ext. P4, there was a direction to remit R.R. charges, if any payable to RR authorities. It seems that the petitioners did not pay the amount in terms of Ext. P4. Subsequently they submitted Ext. P5 letter to clear the OTS amount at a reduced rate of interest. By another letter dated 05.08.2005 produced as Ext. P6, petitioners were granted time to pay the entire amount at 15% interest from 01.06.2001 on or before 30.10.2005. It is stated that, in the meantime, another notice of sale of immovable property was issued and a newspaper advertisement was also published on 08.12.2005. Petitioners then filed W.P. (C) No. 657/2006 challenging Exts. P7 and P8 notices. Petitioners submit that, in the meantime, the K.F.C. extended time for settlement under OTS till 28.02.2006, but petitioners did not press the Writ Petition and the same was dismissed as withdrawn. Petitioners thereafter remitted the entire amount as per separate receipts and the entire liability towards K.F.C. was closed within the time fixed. The petitioners thereafter approached the 3rd respondent to release the attachment on the property. The 3rd respondent demanded Rs. 9,02,670/- towards collection charges. Petitioners were forced to pay the collection charges for releasing the attachment and out of compulsion, petitioners paid the said amount. The attachment was released consequently, Petitioners demanded the said amount as per the letter dated 06.07.2006 and since no action was taken by K.F.C. the Writ Petition was filed. 3. Counter affidavit has been filed by the 3rd respondent inter alia stating that the District Collector, Ernakulam had authorized the 3rd respondent as per requisition dated 18.01.2002 to collect Rs. 1,26,59,354/- with interest. Notices under Sections 7, 34 and 36 were issued as per the Act and served to the parties. Notice under S. 49 was published in newspaper, Village Office and Taluk Office as per the Act. Sale was conducted on 25.03.2004. But due to less bid amount, sale was not confirmed. Again the sale of immovable property was posted on 13.01.2006. It was at that stage, they have approached for OTS and the dues were settled with K.F.C. They have also remitted collection charges voluntarily amounting to Rs. 9,02,670/- and thereafter the attachment on the securities were released. 4. Statement is filed by the 3rd respondent further indicating that the payment of Rs. It was at that stage, they have approached for OTS and the dues were settled with K.F.C. They have also remitted collection charges voluntarily amounting to Rs. 9,02,670/- and thereafter the attachment on the securities were released. 4. Statement is filed by the 3rd respondent further indicating that the payment of Rs. 9,02,670/- was made by the petitioners voluntarily. It is also contended that all the steps and procedures to recover the amount from the petitioners have been taken by the revenue authorities. The services of the District Collector to the village office staff were rendered and utilized by K.F.C. Only after the complete proceedings were initiated by the Revenue Department, the amount could be collected from the defaulter. They also placed reliance on Ext. R3(a), a circular by which they were permitted to recover 3% collection charges when there is OTS scheme between the requisitioning authority and the debtor. 5. Learned Single Judge observed that the petitioners had remitted the entire amount as demanded by K.F.C. under OTS. But, as far as collection charges are concerned, the Revenue Recovery authorities are entitled to recover the actual expenses incurred by the State and its machinery for the purpose of issuing notices, newspaper advertisements, infrastructure expenditure etc. Hence the Writ Petition was allowed by issuing the following directions. "For all these reasons, the Writ Petition is allowed. The 3rd respondent shall compute the "actual expenditure" incurred by it in connection with the proceedings taken under the Revenue Recovery Act, pursuant to the requisition made by the 1st respondent for recovery of amounts from the petitioners. The break up of the amounts may also be given and it may be intimated to the petitioners within a period of two months from the date of receipt of a copy of this judgment. Since the petitioners has already paid an amount of Rs. 9,02,670/- by way of collection charges, the said amount less the amount to be determined as the "actual expenditure" shall be refunded to the petitioners, along with the intimation to be so sent by the 3rd respondent in the manner aforementioned." 6. The learned Government Pleader, by impugning the aforesaid judgments, submits that the Government is entitled to recover the entire collection charges. The learned Government Pleader, by impugning the aforesaid judgments, submits that the Government is entitled to recover the entire collection charges. Once the revenue recovery proceedings had been initiated and steps had been taken for sale of property by extending substantial time of various officers involved, it is not possible for computing the actual expenses incurred by the Government. It is, in that circumstances, that a specified percentage is mentioned as collection charges. It is argued that the provision, which existed during the relevant time when revenue recovery proceedings were initiated, permitted 5% of the arrears to be collected when the arrears does not exceed Rs. 5 lakhs and 7.5% of the arrears to be collected when the arrears exceed Rs. 5 lakhs. It is also submitted that when the amendment has come into force with effect from 6.5.2008, the institutions accepting defaulted payments directly from the defaulter after initiating revenue recovery proceedings and filing the certificate by the District Collector under sub-section (3) of S. 69 of the Act, shall be liable to pay 1% of the amount so collected towards service charges for initiating revenue recovery proceedings against the defaulter. It is submitted that the said provision was incorporated only on account of the requisitioning authorities directly collecting amounts from the defaulter after initiating revenue recovery proceedings. However, the said provision has no application at the relevant time when the revenue recovery proceedings were taken against respondents 1 to 3 herein. 7. The learned counsel appearing on behalf of respondents 1 to 3 submitted that though there is a provision enabling recovery of collection charges, when payments are made directly to the requisitioning authority or when payments are effected based on an OTS scheme, there is no procedure for recovering collection charges. That apart, no steps had been taken for recovering any amount. 8. The learned counsel also relied upon the following judgments: (i) Kadeeja Beevi vs. Kerala Financial Corporation, 1985 KLT 741 . This is a Division Bench judgment wherein interpreting R. 5(1) of the Kerala Revenue Recovery Rules, 1968, as it then existed, the Division Bench held that since no such collection has been made pursuant to revenue recovery notice, no recovery could be made as collection charges. This is a Division Bench judgment wherein interpreting R. 5(1) of the Kerala Revenue Recovery Rules, 1968, as it then existed, the Division Bench held that since no such collection has been made pursuant to revenue recovery notice, no recovery could be made as collection charges. (ii) In Village Industries Development Centre vs. Kerala Khadhi and Village Industries Board, 1996 (2) KLT SN 44 (C. No. 49) : 1996 (2) KLJ 253, a learned Single Judge decided the case following Kadeeja Beevi (supra). (iii) In Bhaskaran vs. Sub Registrar, 2005 (3) KLT 150 the learned Single Judge had occasion to consider a situation where there was a demand for collection charges. The learned Single Judge held that the amendment to R. 5 of the Rules does not have any impact on the law laid down in Kadeeja Beevi (supra) and Village Industries Development Centre (supra). It was held that the words "to be collected" in R. 5(1) would not make any difference and unless any amount is collected by recourse to revenue recovery proceedings, there is no question of realizing collection charges. It is stated that the expression "collection charges" at Rules 4 and 5 has no separate existence other than by its association with the expression "arrears due". Paragraphs 8 to 11 are relevant which reads as under: "8. As per R. 4 item (viii), collection charges at 5% of the arrears are to be recovered from the defaulter along with the arrears due. As per R. 5(2), the collection charges shall be deducted from the amount recovered and the balance alone shall be payable to the institution referred to under sub-rule (1) of R. 5. I do not think that the expression "to be collected" in R. 5(1) while referring to the institution notified under S. 71 and the expression "collected" while referring to the institution under S. 68 would make any difference in the matter of the application of the dictum laid down in 1985 KLT 741 and 1996 (2) KLT SN 44 (C. No. 49) : 1996 (2) KLJ 253. The proceedings under the Revenue Recovery Act are intended for collecting the amount from the defaulter and making it available to the institution referred to in S. 68 or 71. If the amount is not collected or recovered by the revenue recovery authorities, there is no question of realization of the collection charges. The proceedings under the Revenue Recovery Act are intended for collecting the amount from the defaulter and making it available to the institution referred to in S. 68 or 71. If the amount is not collected or recovered by the revenue recovery authorities, there is no question of realization of the collection charges. The arrears as well as collection charges are to be recovered from the defaulter by a single process. Therefore, it is clear that if the arrears are not collected by recourse to revenue recovery proceedings, there is no question of realizing the collection charges. The expression "Collection charges" in R. 4 and 5 has no separate existence other than by its association with the expression "arrears due". If the amounts payable to the institution are directly paid by the defaulter, there is no question of the collection of the arrears by resorting to revenue recovery proceedings. In such an event, it would be puerile to contend that the defaulter is liable to pay collection charges. Realization of the collection charges in such an event would be not only unjust but also unrealistic. The provision for deduction of "collection charges" from "the amount recovered" in R. 5(2) makes the position clear. The question can be answered in another way; that is, if the defaulter pays the amount due to the creditor directly to the creditor, can the revenue recovery authorities continue the recovery proceedings for realization of collection charges? The answer definitely would be "No". The reason for the answer is also available in R. 5(2). If only "collection charges" are recovered by continuing the revenue recovery proceedings, how could the revenue recovery authorities comply with R. 5(2) after recovery of that amount? To comply with R. 5(2), they have to pay the "balance amount" to the "institution". If collection charges alone are recovered, they cannot pay "the balance amount" to the "institution" since there is no balance. Thus, it can safely be concluded that there could be no realization of collection charges when the arrears are paid by the debtor to the creditor. 9. A defaulter cannot be over burdened by realizing the collection charges when he pays the arrears to the creditor. Thus, it can safely be concluded that there could be no realization of collection charges when the arrears are paid by the debtor to the creditor. 9. A defaulter cannot be over burdened by realizing the collection charges when he pays the arrears to the creditor. Suppose a debtor pays to the creditor the arrears immediately on receipt of notice from the revenue recovery authorities; it is not at all just to say that he must be mulcted with the liability to pay collection charges as provided in R. 4. If such an interpretation is placed, we would be putting the debtor who could not pay the amount within the time stipulated by the creditor in a most disadvantageous position. 10. Therefore, I hold that Ext. P8 is not legal in so far as it relates to the demand for payment of revenue recovery charges of Rs. 1,90,500/- If the petitioner pays a sum of Rs. 1.02 lakhs within one month from today, it shall be treated that all the arrears due from the petitioner to the Kerala Financial Corporation stand discharged. It is made clear that in the facts and circumstances of the case, the Kerala Financial Corporation would not be justified in claiming further interest on the interest of Rs. 1.02 lakhs. If the sum of Rs. 1.02 lakhs is not paid by the petitioner within one month from today, the Kerala Financial Corporation would be entitled to claim interest on that amount. 11. Before parting with the case, I would like to express concern over the realization of huge collection charges from the defaulters. As per R. 4, 5% of the arrears shall be the collection charges. No scale is provided taking into account the quantum of the amount due. Under the Kerala Court Fees and Suits Valuation Act, advalorem fee is provided under Art. 1 of Schedule 1. Before the commencement of the Kerala Court Fees and Suits Valuation Amendment Act 2 of 2003, 2% was provided as court fee up to Rs. 15,000/-, 5% up to Rs. 50,000/-, 7.5% up to Rs. 10 lakhs, 5% up to Rs. 10 million and 0.05% if it exceeded Rs. 10 million. By the Kerala Court Fees and Suits Valuation Amendment Act 2 of 2003, the rate of Court fee was enhanced. The rate has an ascending and descending trend depending the amount involved. 15,000/-, 5% up to Rs. 50,000/-, 7.5% up to Rs. 10 lakhs, 5% up to Rs. 10 million and 0.05% if it exceeded Rs. 10 million. By the Kerala Court Fees and Suits Valuation Amendment Act 2 of 2003, the rate of Court fee was enhanced. The rate has an ascending and descending trend depending the amount involved. In the Kerala Revenue Recovery Rules, 1968, there is no such difference in the rate of collection charges with reference to the quantum of arrears. This may some times cause great hardship to the defaulters. The process of collection of arrears by recourse to revenue recovery proceedings certainly does not involve that much time and expenditure of money when compared with the disposal of a suit and the disposal of the execution proceedings before the Civil Court. Costs payable by the defendant in a money suit depends on the court fee paid by the plaintiff. But a defaulter from whom arrears are collected under the Revenue Recovery Act is liable to pay 5% of the arrears to be collected irrespective of the quantum of the arrears due. It is common knowledge that a considerable percentage of revenue recovery proceedings are being taken against agriculturists in respect of agricultural loans. We cannot shut our eyes to the reality of hundreds of agriculturists having committed suicide in recent years on the threat of revenue recovery action being taken against them. The data in this regard have been reportedly collected on all India basis. If huge sums are to be collected by way of revenue recovery charges, it would result in making a debtor of two debts; one the original debt and the other the debt of collection charges." In fact, that was a case where the petitioner had paid the amount under OTS scheme, while revenue recovery proceedings were pending. To release the title documents, the Corporation demanded a further payment of Rs. 3 lakhs. Petitioner acceded to the said request and paid the amount. But the entire title documents were not released. K.F.C. made a further demand for collection charges which came to be challenged. The learned Single Judge allowed the Writ Petition holding that the demand for payment of revenue recovery charges was illegal. 12. 3 lakhs. Petitioner acceded to the said request and paid the amount. But the entire title documents were not released. K.F.C. made a further demand for collection charges which came to be challenged. The learned Single Judge allowed the Writ Petition holding that the demand for payment of revenue recovery charges was illegal. 12. On the other hand, learned Government Pleader placed reliance on the judgment in David vs. Kerala State Financial Corporation, 1988 (1) KLT 585 wherein the Division Bench observed that the jural relationship between the petitioners and K.F.C. was purely contractual and if there is a breach of conditions in the said contract or for enforcement of rights thereunder, the remedy of the petitioners will be to file a suit in the ordinary Civil Court and extra ordinary jurisdiction under Article 226 of the Constitution of India cannot be invoked. 13. Another judgment relied upon is Mohan Roy vs. State Bank of Travancore, 1990 (2) KLT 120 wherein a learned Single Judge held that charges payable under R. 5 constitute part of the amount due to the creditor as cost of recovery and hence recoverable from the defaulter. Paragraph 5 of the judgment is relevant which reads as under: "5. Even otherwise, I am inclined to hold that the amount of 5% is also liable to be recovered under the Revenue Recovery Act, This amount of 5% is payable by the first respondent to the State under R. 5(1) of the Kerala Revenue Recovery Rules. The said rule provides that collection charges at the rate of 5% of the arrears collected under the provisions of the Act, on behalf of any institution notified under S. 71, shall be realized from such institutions. That part of the rule is clear that Government gets 5% of the arrears collected on behalf of any institution notified under S. 71 as collection charges. This amount constitutes part of the cost of recovery and is ordinarily payable by the debtor whose recalcitrance and default has led to the recovery proceedings and expending of money by the creditor for realization of the dues. Such cost of recovery forms part of the amount due to the creditor namely the institution notified under S. 71 and is therefore, liable to be recovered from the defaulter under the provisions of the Revenue Recovery Act. Such cost of recovery forms part of the amount due to the creditor namely the institution notified under S. 71 and is therefore, liable to be recovered from the defaulter under the provisions of the Revenue Recovery Act. It will not be proper to read R. 4 and 5 separately and limit the recovery under the Act only to the actual arrears due and the charges specified in R. 4. The charges payable under R. 5 equally constitute part of the amount due to the creditor as cost of recovery and hence recoverable by it from the defaulter. It must be noted here that if the creditor had resorted to the remedy of suit, with payment of court fee and expenditure of other amounts, the said amounts will be recoverable from the defaulter as part of the costs in the suit. It will be obnoxious to hold that the cost of recovery, which are otherwise payable by the defaulter should alone be liable to be recovered by an ordinary civil suit and not under the Revenue Recovery Act when the entire arrears could be recovered under the said Act. The very scheme of the Act and the purpose of making the Act applicable to such institutions as the first respondent is to ensure speedy and cheaper recovery of the amount due. Such recovery should comprehend within it all the amounts which are due under the contract in question including those which are incurred as costs of recovery. I have no hesitation to overrule the contention of the petitioner that the charges payable under R. 5 are not recoverable under the Act." 14. Having regard to the aforesaid factual situation, the short question to be considered is whether the learned Single Judge was justified in directing the revenue authorities to collect only the actual expenditure and not the entire collection charges. 15. It is apparent from the facts of the case, as rightly observed by the learned Single Judge, that the amounts paid by the petitioners were on the basis of OTS between the K.F.C. and the debtor. Of course, steps were taken for revenue recovery by the revenue authorities. R. 4 of the Rules specifies the items and the expenditure or rate for which charges can be levied. 16. Rule 4 of the Rules and the Table reads as under: "4. Of course, steps were taken for revenue recovery by the revenue authorities. R. 4 of the Rules specifies the items and the expenditure or rate for which charges can be levied. 16. Rule 4 of the Rules and the Table reads as under: "4. Batta and other charges at the rates specified in Column (2) of the Table below; shall be levied in respect of the item specified against them in column (1) of the said Table. These charges shall be recovered from the defaulters along with the arrears due. S. No. Item Rate (i) Demand notice fee (either under Section 7 or under Section 34). 50.00 per demand notice (ii) Fee for the distraint and sale of movables 50.00 per case (iii) Fee for the attachment and sale of immovable to meet the cost of labour 50.00 per case (iv) Tom torn charges 1.00 do. (v) Publication charges Actual expenses incurred (vi) Transport charges or other charges Financial Code (vii) For arrest and detention in civil jail Subsistence allowance at such Rates as may be specified by the State Govt. for judgment debtors under S. 57 of the Code of Civil Procedure, 1908. (viii) Collection charges 5% of the arrears to be collected, when the arrears does not exceed Rupees Five lakhs and 7.5% of the arrears to be collected, when the arrears exceed Rupees Five Lakhs. In fact, prior to 06/03/2012, the rates shown in Item Nos. (i), (ii) and (iii) respectively were Rs. 2.00, 1.00 and 1.00. 14. Rules 5(1), (2) and (3) now indicates as under: "5(1) Collection charges at the rate of 5 percent of the arrears to be collected under the provisions of the Act on behalf of any institution notified under S. 71 or collected on behalf of any institution under S. 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 realized 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. (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 S.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." 17. There is no dispute about the fact that when recovery is being effected by revenue recovery authorities, they are entitled to collect all the amounts as specified in items (i) to (viii) which are applicable. R. 5(1) permits collection charges to be levied when recovery proceedings have been taken at the instance of any institution notified under S. 71 or collected on behalf of any institution under S. 68. 18. The facts of this case disclose that the petitioners had paid the amount under an OTS though the petitioner could not pay the amount within the specified time. By Ext. P16 dated 02.03.2006, the revenue recovery authorities had released the attachment stating that the defaulters had closed the loan account under OTS and they had also remitted the collection charges. The contention urged on behalf of the writ petitioners is that the recovery of collection charges was totally, illegal as no recovery was made based on revenue recovery proceedings. Ext. P6 is the letter dated 05.08.2005 issued by K.F.C. termed as OTS extension letter, where they have called upon the petitioners to remit the revenue recovery charges and court expenses, if any. But, it is relevant to note that, going by the scheme of revenue recovery, collection charges can be recovered only if any amount is recovered through revenue recovery proceedings. R. 4 itself takes care of various stages where demand notice had been issued, when there is attachment and sale of immovable property, publication charges, transport charges and other charges. But, apparently, it may not be possible for the Government to quantify the actual infrastructural expenses involved in the matter. R. 4 itself takes care of various stages where demand notice had been issued, when there is attachment and sale of immovable property, publication charges, transport charges and other charges. But, apparently, it may not be possible for the Government to quantify the actual infrastructural expenses involved in the matter. When revenue recovery proceedings are initiated, there is every possibility of the officers spending their time for taking various steps under the Revenue Recovery Act and the Rules framed thereunder. Such expenditure cannot be quantified. Only such expenses relating to publication in newspaper and other items mentioned in Table to R. 4 are capable of quantification. But, it is not possible for this Court to suggest any method to arrive at the actual cost. Since Rules have already been framed, it is possible for the Government to compute the actual expenditure, if no recovery is effected by way of revenue recovery proceedings. Under such circumstances, we are of the view that the learned Single Judge was justified in directing recovery of the actual expenditure involved in the matter and to refund the balance amount. Accordingly, we do not find any ground to interfere with the judgment of the learned Single Judge and the Writ Appeal is dismissed.