JUDGMENT : Petitioner has filed this writ petition challenging Exhibit P4 demand raised by the Deputy Tahsildar (RR), Office of the Deputy Tahsildar, Kerala Financial Corporation, Kozhikode, respondent No.2, whereby the petitioner was directed to remit collection charges at the rate of 7.5% and 1% towards service charges amounting to Rs.88,565/- as per the provisions of the Kerala Revenue Recovery Act, 1968 (‘Act, 1968’ for short) and the rules thereto. 2. The primary contention advanced by the petitioner is that since the loan transaction was settled after initiating the revenue recovery action as per the provisions of the Act, 1968, he is not liable to pay 7.5% collection charges. 3. Brief material facts for the disposal of the writ petition are as follows: The petitioner, in order to start a small scale industrial unit, availed an amount of Rs.12,00,000/- on 12.07.2013 and Rs.3,50,000/- on 12.12.2014 from the Kerala Financial Corporation. He defaulted payment of installments to the Kerala Financial Corporation, consequent to which revenue recovery action was initiated and the properties belonging to the petitioner were attached. Thereafter, on receiving a notice for settling the transaction in an adalath, the petitioner settled the loan transaction, evident from Exhibit P3 dated 03.04.2019, which is a note issued by the Chief Manager recording that subsequent to the RR conformation, the party has remitted Rs.10,01,000/-. After the approval of the settlement under adalath, the party has remitted Rs.13,49,075/-. Therefore, it was directed to release the documents deposited with the Corporation on receipt of NOC. 4. According to the petitioner, in spite of earnest efforts made by the petitioner, the documents were not released. However, later, after a period of more than three years, he received Exhibit P4 letter dated 04.06.2022 directing him to remit an amount of Rs.88,565/- towards the RR charges and Rs.340/- towards other charges with a further rider that 18% GST also to be remitted on RR charges. The grievance of the petitioner is that even though he submitted Exhibit P5 representation dated 22.06.2022, that was not considered by the District Collector, Wayanad. It was accordingly that the writ petition was filed. 5. I have heard the learned counsel for the petitioner Sri. P.I. Davis and the learned Standing Counsel for the Kerala Financial Corporation Sri. M.R. Venugopal, and the learned Senior Government Pleader Smt. Deepa N. 6. It was accordingly that the writ petition was filed. 5. I have heard the learned counsel for the petitioner Sri. P.I. Davis and the learned Standing Counsel for the Kerala Financial Corporation Sri. M.R. Venugopal, and the learned Senior Government Pleader Smt. Deepa N. 6. The sole question to be considered is whether the Kerala Financial Corporation is entitled to recover the collection charges at the rate of 7.5% from the petitioner, when the amounts were directly paid by the petitioner after the initiating the revenue recovery action and on settlement in the adalath constituted by the Head Office of the Corporation. 7. The issue is guided by Rule 4(viii) of the Kerala Revenue Recovery Rules, 1968 dealing with collection of charges, and it reads as follows : “[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.]” 8. Rule 5 specifies the manner in which collection charges are to be imposed and recovered, and it reads thus : “[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 Section 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.]” 9. Sub-Rule 3 was introduced on and with effect from 06.05.2008, which clearly specifies that institutions, except Government Departments, accepting defaulted payments directly from the defaulter after initiating revenue recovery proceedings under the Act, 1968 and filing the certificate by the District Collector under sub-section (3) of Section 69 of the 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. 10. This is a case where even after the payment made by the petitioner directly and on the basis of settlement in the adalath, the respondents as per Exhibit P4 directed the petitioner to pay 7.5% towards collection charges, apart from 1% service charges, which is an arbitrary and illegal action. 11. The said question was considered by a Division Bench of this Court in Malabar Organics Ltd. v. State of Kerala [ 2009 (4) KLT 328 ], and it is held as follows : 5. The tabled Item (viii) under R.4 and Rr.5(1) have been challenged as ultra vires the Act. What is provided under S.5 is only cost of process. But, as already noted by us, the cost would include other charges also. Such a view is also possible in terms of the wide power given to the Government under S.86 to make rules to carry out all or any of the purposes of the Act. One of the purposes of the Act is to realize the collection charges from the defaulters. If so, the question is only whether the provision is unreasonable and discriminatory. When the defaulters remit the dues directly to the institutions on exhausting all the steps taken by the revenue recovery authorities, all that the institutions have to bear is only 1% of the amount collected from the defaulters. If that be so, the levy of 5% is certainly unreasonable when the amount is collected in the process of recovery by the revenue recovery authorities. After all such proceedings are initiated only in situations of distress. As observed by learned Single Judge of this Court in Bhaskaran v. Sub Registrar ( 2005 (3) KLT 150 ) “Making the poor, poorer is not what is intended by the Revenue Recovery Act and the Rules thereunder”. After all such proceedings are initiated only in situations of distress. As observed by learned Single Judge of this Court in Bhaskaran v. Sub Registrar ( 2005 (3) KLT 150 ) “Making the poor, poorer is not what is intended by the Revenue Recovery Act and the Rules thereunder”. Even otherwise, cost of involvement of the Government machinery cannot depend on the amounts collected in the process of coercive steps taken under the Revenue Recovery Act. Whether it is ten thousand rupees or ten crores of rupees, the process is the same. Therefore the levy of collection charges for utilizing the Government machinery, apart from the interest and cost as permitted under R.4, proportionate to the amount collected is nothing but an extortion and thus unreasonable and not permitted or warranted under the Statute or the Constitution. The process of revenue recovery cannot be used as a source of revenue for the State. That is plainly beyond the legislative competence under the Constitution of India. Therefore, we hold that Item (viii) under R.4 and R.5(1) are unreasonable and discriminatory and ultra vires the parent Act and the Constitution of India. The duty of the court normally is to leave the matter at that stage. But, that would certainly be against public interest. The court has also the duty in such circumstances to construct, if situation so warrants. This is a case warranting the exercise of such a duty. Since we have already held that collection of 1% towards collection charges from institutions is permissible, we hold that in the process of recovery under the provisions of the Revenue Recovery Act by taking recourse to coercive steps, only 1% of the amount in addition to the cost of process and other charges as permitted under R.4, is permissible as collection charges. 6. As far as K.F.C and K.S.F.E are concerned, it is brought to our notice that those institutions have their own machinery of recovery, by utilizing the service of officers on deputation from the Government. It is submitted that the entire expenses including salary and maintenance of the establishment are met by the Corporation and the Enterprises. If that be so, there is no justification in realizing the service charges from K.F.C or K.S.F.E in terms of R.5(3). What is permissible is only recovery of the expenses provided under Items (i) to (viii) in the table under R.4.” 12. If that be so, there is no justification in realizing the service charges from K.F.C or K.S.F.E in terms of R.5(3). What is permissible is only recovery of the expenses provided under Items (i) to (viii) in the table under R.4.” 12. The question with respect to the imposition of collection charges was considered by a learned single Judge of this Court in Bhaskaran v. Sub Registrar [ 2005 (3) KLT 150 ] even prior to the introduction of sub-Rule 3 of Rule 5 and it is held thus : 8. … 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 realisation 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 realising 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. Realisation 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 realisation 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”. 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 realisation of collection charges when the arrears are paid by the debtor to the creditor. 9. A defaulter cannot be over burdened by realising 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.” 13. Anyhow, after the introduction of sub-Rule 3 of the Rule 5, a Division Bench of this Court in Deputy Tahsildar (RR) v. Vijaya Builders [ 2016 (1) KLT 684 has considered the said question, and it is held as follows : 17. 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. 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. 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.” 14. After the introduction of sub-Rule 3 of Rule 5, the Division Bench of this Court in Deputy Collector (RR) and others v. Appu Jose [2017 KHC 2715] has considered the said question, and it is held as follows : “6. … R.5(3) had come into force on 6-5-2008 and if the payment of Rs.72 lakhs was after 6-5-2008, definitely the KFC is entitled to collect 1% of the amount as service charges for initiating revenue recovery proceedings. No materials have been produced to arrive at a different finding and the entire factual scenario, especially the details of payment, the date of payment and other particulars are not made available in the case. Hence we do not think that the learned Single Judge was justified in quashing Ext. P-4. Ext. P-4 had been issued based on the fact that Rs.14 lakhs have been collected by revenue recovery proceedings. In such an event, even going by the law laid down by this Court in Bhaskaran v. Sub Registrar, 2005 (3) KLT 150 and Kadeeja Beevi v. Kerala Financial Corporation, 1985 KLT 741 , the petitioners have the obligation to pay collection charges. Similarly, on account of R.5(3) came into force, the petitioners will be liable to pay 1% of the amount as demanded by KFC. In the light of the above factual scenario, we are of the view that the appeal is liable to be allowed. Hence the appeal is allowed. The judgment of the learned Single Judge is set aside and the writ petition is dismissed.” 15. In the light of the above factual scenario, we are of the view that the appeal is liable to be allowed. Hence the appeal is allowed. The judgment of the learned Single Judge is set aside and the writ petition is dismissed.” 15. Taking into consideration the facts, circumstances and the law, I am of the considered opinion that the attempt made by the Deputy Tahsildar (RR), Kerala Financial Corporation, to recover the collection charges at the rate of 7.5% cannot be sustained under law, since it is absolutely against the legal framework. Accordingly, Exhibit P4 is quashed to the said extent. However, I hold that by virtue of sub-Rule (3) of Rule 5, the petitioner is liable to pay 1% towards service charges, since the amounts were paid by the petitioner after the recovery action was initiated by the Kerala Financial Corporation. On payment of the said amount the title deed and other documents if any shall be returned to the petitioner forthwith. Writ Petition is allowed accordingly.