(2012) 270 KLR 011 IN THE HIGH COURT OF KERALA AT ERNAKULAM
PRESENT: THE HONOURABLE MR.JUSTICE P.R.RAMACHANDRA MENON FRIDAY, THE 7TH DAY OF SEPTEMBER 2012/16TH BHADRA 1934 WP(C).No. 16187 of 2007 (B) --------------------------- PETITIONERS: -------------------- 1. SATHEESH CHANDRAN NAIR P.S., 'SRUTHI', KODIMATHA P.O., KOTTAYAM-39. 2. REGHUNATHAN NAIR.D., MUTTATH HOUSE, UZHAVOOR EAST P.O., KOTTAYAM-34. 3. TONY MATHEW, NADAKKUZHAKAL HOUSE, BHAVANA LANE, EDAPPALLY P.O. COCHIN-24. BY ADV. SRI.SIVAN MADATHIL RESPONDENTS: ---------------------- 1. MINI PANICKER, W/O K.C.PANICKER, MADAVANA HOUSE, IDAKKOLI CHAKKANPUZHA P.O., PALA. 2. THE KERALA STATE FINANCIAL ENTERPRISES, REGISTERED OFFICE "BHADRATHA", P.O.BOX 510 CHEMBUKKADU, MUSEUM ROAD, THRISSUR REPRESENTED BY ITS MANAGING DIRECTOR. 3. THE BRANCH MANAGER, KERALA STATE FINANCIAL ENTERPRISES ALAPPUZHA BRANCH, IRON BRIDGE, ALAPPUZHA-II. 4. THE BRANCH MANAGER, KERALA STATE FINANCIAL ENTERPRISES KOTTAYAM MAIN BRANCH, KOTTAYAM. 5. THE SPECIAL DEPUTY THAHSILDAR (RR) KUMARANASAN SMARAKA MANDIRAM, COURT ROAD, ALAPPUZHA - I. 6. THE SPECIAL DEPUTY THAHSILDAR (RR) M.D.COMMERCIAL COMPLEX, KOTTAYAM. 7. MAHATMA GANDHI UNIVERSITY, ATHIRAMPUZHA, KOTTAYAM REPRESENTED BY ITS REGISTRAR. 8. DIRECTOR, SCHOOL OF TECHNOLOGY AND APPLIED SCIENCES, M.G.UNIVERSITY, GOVERNMENT U.P.S., EDAPPALLY P.O. COCHIN - 24. *ADDL. R9 IMPLEADED: R9. RAMACHANDRAN NAIR, NEPHEW OF SIVARAMAN NAIR, MADAVANA HOUSE, EDAKKOLI KARA, VELLILAPPALLI VILLAGE MEENACHIL TALUK, KOTTAYAM DISTRICT ADDL. R9 IS IMPLEADER AS PER ORDER DTD.13/7/2007 IN IA 483/2007. *ADDL. R10 IMPLEADED: R10. JAMES VARGHESE, PADANILATHU HOUSE, THIDANADU P.O., KONDOOR VILLAGE, MEENACHIL TALUK, KOTTAYAM DISTRICT. ADDL. R10 IS IMPLEADER AS PER ORDER DTD.13/8/2007 IN IA 11117/2007. ADDL. R11. IMPLEADED : R11. UZHAVOOR SRVICE CO-OPERATIVE BANK NO.3810 UZHAVOOR P.O. KOTTAYAM DISTRICT REP. BY ITS SECRETARY. ADDL. R11 IMPLEADER AS PRE ORDER DTD.22/2/2008 IN IA 12953/2007. ADDL. R12 IMPLEADED: R2. COMISSIONR OF LAND REVENUE THIRUVANANTHAPURAM ADDL. R12 IMPLEADED AS PRE ORDER DTD.11/2/2009 IN IA 2073/09. R1 BY ADV. SRI.PRAKASH P.GEORGE R2 TO R4 BY ADV. SRI.ASOK M.CHERIYAN, SC, K.S.F.E. LTD. R5, R6 & ADDL.R12 BY ADV. GOVERNMENT PLEADER,SRI.RINNY STEPHEN CHAMAPARAMBIL R7 & R8 BY ADV. SRI. T.A. SHAJI, SC, M.G.UNIVERSITY ADDL.R9 BY ADV. SRI.V.K.PEERMOHAMED KHAN ADDL.R11 BY ADV. SRI.J.JULIAN XAVIER SRI.FIROZ K.ROBIN BY ADV. SRI.B.PREMNATH BY ADV. SRI.PKM.HASSAN BY ADV. SRI.ANTONY M. AMBAT BY ADV. SRI.VARUGHESE M.EASO, SC, M.G. UNIVERSITY BY ADV. SRI.VIVEK VARGHESE P.J., SC, M.G. UNIVERSITY BY SRI.V.A.MUHAMMED, SC, M.G.UNIVERSITY BY SRI.M.L.SAJEEVAN, SC, KSFE LTD. THIS WRIT PETITION (CIVIL) HAVING BEEN FINALLY HEARD ON 08/08/12, ALONG WITH WPC. 21876/2009 AND CONNECTED CASES,THE COURT ON 07-09-2012,DELIVERED THE FOLLOWING: BP WP(C).No. 16187 of 2007 (B) APPENDIX PETITIONER'S EXHIBITS:
RESPONDENT'S EXHIBITS:
//TRUE COPY// P.A. TO JUDGE BP P.R. RAMACHANDRA MENON, J. .............................................................................. W.P. (C) Nos.16187 OF 2007, 16852 OF 2009, 21876 OF 2009, 15549 & 37390 OF 2010 ......................................................................... Dated this the 7th September, 2012 Head Note:- Kerala Revenue Recovery Act, 1968 - Sections 3, 7, 34, 44, 71 - Written Demand - Arrear of public revenue due on land - Before effecting the conveyance - Bonafide Purchaser - Guarantors - Deduction from salary - Sufficient assets are available for the defaulter to be proceeded against at the first instance - Priority Right. J U D G M E N T Does it require a written demand with reference to 'Section 34' of the Revenue Recovery Act (hereinafter referred to as the Act) to intercept the conveyance effected after the 'arrear of public revenue due on land' has fallen due by invoking Section 44 of the Act or is it enough, if demand had already been made under Section 7 before effecting the conveyance? Does the amount payable to the respondent KSFE constitute any 'arrear of public revenue due on land' merely on notifying the institution under Section 71 of the Act, to attract and invoke Section 44, is another question. Is it open for the 'purchaser' of the property to raise such a contention with reference to the written demand under Section 34 of the Act, when there is no such case for the 'vendor'/defaulter, who effected the conveyance and is he a 'bonafide purchaser' as proclaimed? Can the guarantors raise a contention that deduction from their salary, by virtue of prohibitory orders issued at the instance of the KSFE is not correct, when sufficient assets are available for the defaulter to be proceeded against at the first instance?. Whether the KSFE can claim 'priority right' with reference to Section 3 of the Act, for having been notified as an institution under Section 71 of the Act?. These are the main points to be considered in these writ petitions. 2. W.P.(C) Nos. 16187 of 2007, 21876 of 2009, 15549 of 2010 and 37390 of 2010 have been filed by the 'guarantors'; while W.P.(C) No.16852 of 2009 has been filed by the 'purchaser' of the property, which was sought to be intercepted invoking Section 44 (2) of the Act; while the defaulter has not filed any case. 3. One Mini Panicker, who is the first respondent in W.P.(C) 16187 of 2007 was a subscriber to different 'chitts' floated by the KSFE and had availed various amounts from the branches at Kottayam, Ettumannoor and Alappuzha. For procuring disbursement of the amounts as above, different persons including her husband by name Prathap stood as sureties, agreeing to have the due amount recovered from their salary, in case of default. Undoubtedly, Mini Panicker turned to be a defaulter, under which circumstance, coercive proceedings were taken by the KSFE under the Act, both against the defaulter and the guarantors. 4. In the meanwhile, admittedly after service of demand notice under Section 7 of the Act in respect of chitts connected with the 'Kottayam' and 'Ettumannoor' branches and after service of similar demand both under Section 7 and 34 in respect of the branch at 'Alappuzha', Mini Panicker had conveyed some of her properties to one Mr. James Varghese,( the petitioner in W.P.(C) No.16852 of 2009) as per Sale Deed dated 03.01.2007 of SRO, Ramapuram. The defaulter Mini Panicker had created mortgage in respect of some other properties to various Banks including Uzhavoor Service Co-operative Bank (Addl.11th respondent in W.P.(C) No.16187 of 2007) and the State Bank of India, Kaippuzha Branch in connection with the financial assistance availed therefrom. 5. For convenience of reference, the parties are referred to as 'defaulter' (Mini Panicker), 'guarantors'( petitioners in W.P.(C) Nos. 16187 of 2007, 21876 of 2009, 15549 of 2010 and 37390 of 2010, including the husband of Mini Panicker by name Prathap), 'KSFE',( at whose instance the recovery proceedings are being pursued) and the 'purchaser', who purchased the property from the defaulter during the pendency of the recovery proceedings, i..e., the petitioner in W.P.(C) 16852 of 2009. 6. Being aggrieved of the steps taken under the Act, the guarantors have approached this Court by the filing the concerned writ petitions, contending that they are working in the M.G. University, where the husband of the defaulter by name Prathap (the petitioner in W.P.(C) 37390 of 2010) was also working. On the persuasion of said Prathap, all such persons stood as sureties to the defaulter Mini Panicker . After obtaining the amount from the KSFE, the defaulter did not take any earnest effort to discharge the liability and turned to be a defaulter, who even sought to convey a portion of her property to some strangers and had also created rights /interests in favour of various Banks/financial institutions by creating mortgage over the property. Instead of proceeding against the defaulter and her assets, the respondent KSFE, finding it more easy, sought to proceed against the guarantors by causing their salaries to be attached, issuing prohibitory orders under Section 80, r/w 19 (2) of the Act , that too, without any regard to the maximum extent legally attachable. This forms the main subject matter of challenge in the cases filed by the guarantors, who seek for a direction to proceed against the defaulter and her assets before proceeding against the guarantors . 7. When W.P.(C) No.16187 of 2007 came up for consideration before this Court on 29.05.2007, the following interim order was passed: "Urgent notice to R1. GP takes notice for R5 & R6 . Adv. Asok M. Cherian , SC for KSFE takes notice for R2, R3 & R4. Adv. Shri V.A. Muhammed, SC for MG.. University takes notice for R7 & R8. There will be interim direction to KSFE and recovery authority to arrange for attachment and sale of movable and immovable properties of the defaulter for recovery of arrears and file a report in this Court within two months. If defaulter has obtained any stay from Govt. and if condition for stay is violated, then recovery will be continued ignoring the Govt. order. There will be stay against attachment of petitioners' salary for two months." Subsequently, the paternal uncle of the husband of the defaulter got impleaded as Addl.9th respondent therein, who contended that the property which was sought to be proceeded against as belonging to the defaulter, was actually belonging to him and that he was residing in the building situated therein with possession and such other rights. It was also contended that he had executed Sale Deed bearing No.836 /2000 of SRO, Ramapuram and Release deed No.1562/2003 of SRO, Ramapuram, in favour of the defaulter and her husband respectively, only to enable them to obtain loans from the concerned Banks. It is also contended by the said Addl. Respondent that the defaulter and her husband had entered into an agreement with him on 30.05.2005 for sale/re-conveyance of the property to the Addl.9th respondent . On failure to give effect to the said agreement, the Addl.9th respondent filed O.S.No.86 of 2007 (for specific performance) before the Munsiff's Court, Pala and that it has been decreed in favour of the Addl.9th respondent; thus seeking to direct the concerned respondents to proceed against the 'other properties' of the defaulter. 8. After considering the submissions from either side, the following interim order came to be passed by this Court on 19.07.2007, which is extracted below: "Since addl.9th respondent submitted that the defaulter namely, the first respondent has other properties, which can be sold in recovery proceedings, there will be interim direction to the 6th respondent to either notify the property for sale or if it is not within his jurisdiction to transfer the file to the concerned Tahsildar who will attach and sell the said property. Addl.9th respondent will furnish along with copy of this order particulars of other properties of the first respondent with details of location to the 6th respondent for immediate action and for filing report in this Court. If 9th respondent fails to identify the property and furnish particulars of the property, KSFE will proceed with sale of attached property. If prior mortgage is in favour of other Banks, it is upto those Banks to claim preference in payment after sale." Later, on filing I.A.No.12943 of 2007 by the Addl.11th respondent, i.e.. Uzhavoor Service Co-operative Bank Ltd, the above interim order dated 19.07.2007 came to be modified on 22.02.2008, in the following terms: "The interim order dt.19.07.07 will stand modified and it is directed that the property having an extent of 12.14 Ares in R.S.no.133/3/2 of Vellilappally Village, Meenachil Taluk, mortgaged to the Addl.R11, the petitioner herein shall not be proceeded against. " 9. While so, the Addl.10th respondent in W.P.(C) No.16187 of 2007 (petitioner in W.P.(C)No.16852 of 2009) who purchased the property (One acre and 5 cents) as per Sale Deed No.17/2007 dated 03.01.2007 of SRO, Ramapuram put up a claim that his property was not liable to be proceeded against, as he was a 'bonafide purchaser' and that he had no notice whatsoever about the recovery proceedings. After filing a claim petition before the District Collector, the said person approached this Court by filing W.P.(C) No.4711 of 2008, which was disposed of as per judgment dated 13.02.2008 (Ext.P8 in W.P.(C) 16187 of 2007) directing the District Collector, Kottayam, to consider the claim petition and pass final orders in accordance with law. In tune with the said verdict, the District Collector considered the sequence of events and held that the sale effected by the defaulter/vendor was after serving the demand notice under the Act and hence conveyance was hit by Section 44 of the Act; thus, permitting the concerned authorities to proceed against the said property as well (vide Ext.P9 in W.P.(C) 16187 of 2007). Taking note of the pendency of the statutory revision petition filed under Section 83(1) of the Act by the Addl.9th respondent before the Addl.12th respondent Commissioner for Land Revenue, the following interim order was passed in W.P.(C) 16187 of 2007, on 20.03.2009. " It is stated that the revision petition filed by the additional 10th respondent before the additional 12th respondent, in which Ext.P10 interim order was passed, is coming up for hearing on 2.4.2009. In the nature of the case, there will be a direction to the additional 12th respondent to dispose of the revision petition filed by the additional 10th respondent within ten days from 2.4.2009. " Pursuant to the above order, the parties were heard by the Commissioner for Land Revenue, who confirmed Ext.P9 passed by the District Collector, as per order bearing No.LR(B) 7/43773/08 dated 30.04.2009 (Produced as Annexure A1 in W.P.(C) 16852 of 2009) and dismissed the Revision Petition. W.P.(C)No.16852 of 2009 has been preferred by the 'purchaser' challenging the orders passed by the District Collector and the Commissioner for Land Revenue, raising the contentions as already mentioned hereinbefore. The rights and interests of the KSFE and the Addl. 11th Respondent Uzhavoor Service Co- operative Bank have been sought to be asserted with reference to the pleadings set forth by the concerned parties, by way of counter affidavits/additional counter affidavits etc. The Governmental authorities have also sought to sustain the proceedings, including the orders passed by the District Collector and the Commissioner for Land Revenue. The sum and substance of the contentions of the KSFE and the Government/Department is that the liability of the guarantors and the defaulter /principal debtor are coextensive and as such, it is open to proceed against both, simultaneously. It is also stated that the conveyance effected by the 'defaulter' in favour of the 'purchaser' (the petitioner in W.P.(C) 16852 of 2009) is clearly hit by Section 44, the conveyance having been effected after serving the demand notice to the 'defaulter'. 10. The Uzhavoor Service Co-operative Bank, (Addl.11th respondent in W.P.(C) 16187 of 2007) has pointed out that the mortgage in favour of the Bank was created as early as in the year 2004 and as such, the concerned property is not liable to be proceeded against, for the amounts stated as due to the KSFE, based on the demands raised subsequently in the year 2007. None of the writ petitioners has filed any petition to implead the State Bank of India, Kaippuzha Branch, nor has the State Bank of India come up with any such request. The first respondent in W.P.(C) 16187 of 2007, though has filed I.A.No.9851 of 2007 to implead three parties as additional respondents, (which is inclusive of State Bank of India, Kaippuzha Branch), it is seen that the said I.A. has not been allowed so far and the Bank has not been brought into party array. As such the rights and interests affecting the State Bank of India, Kaippuzha are not proposed to be considered or decided in these matters. 11. With regard to the contention of the 'guarantors' seeking for a direction to proceed against the property of the defaulter, before pursuing any steps against them by attaching their salary, there is no serious dispute with regard to the legal position that their liability is 'coextensive' with that of the principal debtor. By virtue of the mandate under Section 128 of the Contract Act, the liability of a surety/guarantor is coextensive with the liability of the principal debtor. In other words, it is joint and several and it is always open for the creditor to proceed against either of them or simultaneously against them. No plea of discrimination will stand in view of vested right of the creditor to proceed against the principal debtor or the guarantor, as the case may be. Admittedly, it was on the basis of the guarantee given by the concerned writ petitioners, (who are employed in the M.G.University), that disbursement of the due amount was effected by the KSFE in favour of the defaulter . In any view of the matter, having volunteered to stand as sureties and having agreed to have the due amount recovered from the salary, in case of any default by the principal debtor, it is no more open for the guarantors to turn round and contend that the creditor has to proceed first against the principal debtor and his/her assets before proceeding against the guarantors . As such, the said contention is devoid of any merit or bonafides; more so in view of the law declared by the Apex Court in State Bank of India vs. M/s. Indexport Registered and others (1992) 3 SCC 159). But then, the question is whether the concerned respondents could proceed to recover the salary of the guarantors to any extent, as desired. This cannot be answered in the positive, in view of the mandate prescribed under Section 60 of the CPC and hence it is declared that such recovery has to be in conformity with Section 60 of the CPC and never beyond. 12. Though the liability of the guarantors is coextensive with the principal debtor, considering the totality of the circumstances and the facts and circumstances involved, it has to be seen whether any undue advantage is being extended to the defaulter/wrong-doer and the persons claiming under her. It was with this intent, that various interim orders came to be passed by this Court in the course of the above proceedings, directing the concerned respondents to proceed against the properties belonging to the principal debtor/ defaulter . 13. The defaulter/1st respondent in W.P.(C) No.16187 of 2007 has filed a counter affidavit in the said case, conceding that her husband had availed a loan of R. 2 lakhs from the Additional 11th respondent/ Uzhavoor Service Co-operative Bank by mortgaging 12.14 Ares of property in Sy.No.133/03-02 in Block No.24 of Vellilapilly village and that she herself had borrowed a sum of Rs.3.5 lakhs from Kaippuzha Branch of the State Bank of India by mortgaging 20.48 Ares of property in Sy.No.133/03-03 in Block No.24 of the Vellilappilly village. According to her, the total liability to the above Banks would be nearly Rs.5.75 lakhs, while the property is worth more than Rs.20 lakhs. The defaulter/ 1st respondent has stated in the said counter affidavit that she is having no objection in proceeding against the properties pledged with the Bank and if the same is caused to be sold, it will be more than sufficient to wipe off the entire liability to the Banks and also the respondent KSFE and further that she has sent a letter dated 20.06.2007 to the 6th respondent therein in this regard; a copy of which has been produced as Ext.R1(a) (the extent of property has been correctly given as 32.62 Ares in paragraph 4 of the counter affidavit.). It is in the said circumstance, that she has chosen to file I.A.No.9851 of 2007 to implead the Banks also as additional respondents. The first respondent/defaulter has also mentioned that, neither she, nor her husband, is having any objection in selling the property belonging to her and her husband, so as to clear the entire arrears to the Banks as well as the KSFE and that the proceedings against the sureties could be stopped. 14. With regard to the alleged claim put forth by the additional 9th respondent-paternal uncle of the defaulter's husband, it has been admitted by him in paragraphs 3 and 4 of the counter affidavit in W.P.(C) 16187 of 2007 that the concerned property, having a total extent of 32.62 Ares in Sy.No.133/3 of Block No.24 of Vellilappally Village, originally belonged to his mother, which came to be vested equally on him and his brother's son by name Prathap (husband of the defaulter and petitioner in W.P.(C) 37390 of 2010), as per settlement deed 495/95 of SRO, Ramapuram [Ext.R9(a)]. It is conceded in paragraph '4' that the said additional respondent and his nephew Prathap executed a Sale Deed No.836/2000 of SRO, Ramapuram covering an extent of 12.14 Ares in favour of the first respondent/ defaulter Mini Panicker and thereafter, he had also executed a Release Deed No.1562/03 of the very same SRO in favour of his nephew Prathap. It is contended that the said documents were executed for facilitating disbursement of the loan amount from the Bank and that the possession still continues with him. Based on Ext. R9(b) agreement for sale dated 30.05.2005, a suit for specific performance was instituted as O.S.No.86/2007 before the Munsiff's Court, Pala and it is contended that the said property is not liable to be proceeded against. 15. On going through the contents of Ext.R9(b) agreement, this Court, prima facie, is of the opinion that it cannot but be a 'self serving document', with some other intent . Even otherwise, while agreeing to effect re-conveyance as alleged by the concerned parties, nothing is mentioned with regard to the sale consideration already paid by the Addl.9th respondent to Mini Panicker, forming the subject matter of Sale Deed 836/2000 or as to the satisfaction of the consideration, referring to the Release Deed No.1562 of 2003 of SRO, Ramapuram. Prima facie, no consideration is discernible from Ext.R9(b) dated 30.05.2005 and if the agreement is not supported by any consideration, how can it constitute a valid agreement giving rise to an enforceable contract, is a matter to be considered at length. There is no case for the additional 9th respondent, but for the suit for specific performance, that any case has been filed by the said respondent to set aside the Sale Deed and Release Deed, if they were not in conformity with the statutory requirements. On the other hand, if the sale/conveyance is complete, whether it can be sought to be re-conveyed merely with reference to the contents of Ext.R9(b), is a further question to be looked into. This being the position, the contention raised by the additional 9th respondent does not gather much momentum. 16. With regard to the rights and interests of the Uzhavoor Service Co-operative Bank (Addl.11th respondent in W.P.(C) No.16187 of 2007), it is discernible from the materials on record that the concerned property was subjected to mortgage (while availing the financial assistance from the Co-operative Bank) as early as in the year 2004. The rights and interests of the Bank and the factual particulars with reference to the creation of mortgage are not disputed from any corner. The respondent KSFE also has not substantiated anything before this Court as to any priority right. True, the KSFE has been notified as an institution under Section 71 of the Act enabling to have recovery facilitated by invoking the remedy under the Act, as if the amount due to the KSFE were arrears of public revenue due on land. Merely for the reason that a procedure for easy recovery under the Act is made available by issuing a notification under Section 71, the dues payable to such institution will not get automatically converted to arrears of public revenue due on land. The 'Act' does not create any new rights, but only provides the procedure for recovery. Though by a deeming fiction, the KSFE has been enabled to recover the amount due to it by resorting to the machinery under the Act, as if such amount were arrears of public revenue due on land, it will not get automatically converted as arrears of public revenue as such. This is the law declared by this Court as early as in 1987 in the decision in A.K. Nanu and others v. State of Kerala and others (1987 (2) KTL 921) and also in Anandan vs. State of Kerala [2009(4) KLT SN 79 (C.No.74)]. As such, no priority right can be claimed by the KSFE with reference to Section 3 of the Act, over the rights and interests of the creditor Bank as per the mortgage created much ago in 2004. 17. The particulars of the various chitts, the amount due to the KSFE, the date of raising demand under Section 7 of the Act , the outstanding amount as on 13.07.2012 etc have been given in paragraph (III) of the additional counter affidavit dated 14.07.2012 filed by the 8th respondent KSFE in W.P.(C)No.16852 of 2009. The said paragraph is extracted below: "III. It is submitted that the 9th Respondent (hereinafter referred to as defaulter ) was initially having five chitty accounts with the KSFE and out of the total five chitty accounts, one account is already closed. At present, there are only four live chitty accounts. It is submitted that out of the existing four chitty accounts, one account each pertains to the Alleppey and Ettumanoor Branches of the KSFE and other two accounts pertain to Kottayam Branch of the KSFE. The details of the existing four chitty accounts are furnished below: File Name of Branch Requi- Sec.7 Amount RRC No. and Amount required to No. defaulter & Ch.No. sition serverd remitted Date close the amount so far by accounts sureties as on 13/07/2012 Mini Ettumanoor B03/22101/05/ Panicker 01/04-2 Dt.15/5/05DC 4481 22447 05/08/05 164397 Ktm 297769 Mini Kottayam B03/54831/05 Panicker 6/04-27 Dt.06/01/06 4887 18940 08/02/06 67512 DC Ktm 300388 Mini Kottayam B03/8776/06 Panicker Evening Dt.24/02/06 05/04-20 5002 185478 03/03/06 215028 DC Ktm 107817 Mini Alappuzha B03/62093/04. Panicker 11/01/-38 25/07/05 Dt.07/02/05 DC Alp 7005 230298 164217 246680 The above position is also discernible from Exts.R8(a) to R8(e) in W.P.(C) 16852 of 2009. 18. In respect of the chitty pertaining to Alappuzha Branch, Section 7 demand notice was issued on 25.07.2005 and notice under Section 34 was served to the petitioner on 09.08.2005 as borne by Ext.R8(a). Section 36 notice was also caused to be served to the defaulter on 17.03.2006 as borne by Ext.R8(b). The factual position in this regard has been virtually conceded by the purchaser/writ petitioner in W.P.(C) 16852 of 2009 in the writ petition itself as discernible from 'Ground A' and 'Prayer No.ii' in the said writ petition. The case of the purchaser in that petition is that, in respect of chitts pertaining to Kottayam and Ettumannoor branches, only Section 7 demand notices were issued to the defaulter, before Ext.P1 sale deed dated 03.01.2007 and no demand notice under Section 34 was ever issued prior to the date of sale and hence it cannot be hit by Section 44 (2) of the Act. Section 44 reads as follows: "44. Effect of engagements and transfers by the defaulter :- (1) Any engagement entered into by the defaulter with anyone in respect of any immovable property after the service of the written demand on him shall not be binding upon the Government. (2) Any transfer of immovable property made by a defaulter after public revenue due on any land from him has fallen in arrear, with intent to defeat or delay the recovery of such arrear, shall not be binding upon the Government. (3) Where a defaulter transfers immovable property to a near relative or for grossly inadequate consideration after public revenue due on any land from him has fallen in arrear, it shall be presumed until the contrary is proved, that such transfer is made with intent to defeat or delay the recovery of such arrear, and the Collector or the authorised officer may subject to the orders of a competent court, proceed to recover such arrear of public revenue by attachment and sale of the property so transferred, as if such transfer had not taken place. Provided that, before proceeding to attach such property, the Collector or the authorised officer shall, (i) give the defaulter an opportunity of being heard; and (ii) record his reasons therefor in writing Explanation: For the purpose of this section, "near relative" includes husband, wife, father, mother, brother, sister, son, daughter, stepson, step-daughter, uncle, aunt, son-in-law, daughter-in-law, brother-in-law, nephew or niece of the transferor Section 44(1), of course, prescribes issuance of a demand in writing. The submission made by the learned counsel for the purchaser/petitioner in W.P.(C) 16852 of 2009 is that the steps against immovable property are separately dealt with under Chapter III of the 'Act'; while the proceedings contemplated under Chapter II, where Section 7 appears, are only in respect of attachment of movable property. Since there is a separate provision in respect of immovable property as given under Section 34, the demand to be served upon the defaulter has necessarily to be with reference to Section 34 and since the respondent KSFE has conceded in the pleadings and proceedings that only demand notice under Section 7 was issued in respect of chitts pertaining to Kottayam and Ettumannoor branches, while Section 34 notice was served only after the date of conveyance i.e. 03.01.2007, the statutory requirement is not complied with and as such, it cannot be hit by Section 44. 19. For convenience of reference, the above provisions, i.e., Sections 7 and 34 are extracted below: "7. Demand notice:- When any movable property is to be attached for arrears of public revenue due on land, the Collector or the authorised officer shall furnish the person employed to make the attachment a demand in writing signed by him. The demand shall contain the name of the defaulter, the amount of the arrear of public revenue due on land for which the attachment is to be made, the date on which such arrear fell due and such other particulars as may be prescribed. The person employed to make the attachment shall serve the demand in writing on the defaulter and if he fails to remit the amount in arrear together with the interest thereon and the cost of process immediately, the demand in writing shall be the authority for making the attachment. " "34. Demand to be served prior to attachment of land:-(1) Before the Collector or the authorised officer proceeds to attach the immovable property of the defaulter, he shall cause a written demand to be served upon the defaulter specifying the name of the defaulter, the amount of the arrear of public revenue due on land for which the attachment is being made, the date on which such arrear fell due, the interest on the arrear and the amount of the batta due to the persons who serve the demand and such other particulars as may be prescribed, and the time allowed for the payment which shall not be less than seven days from the date of service of the demand. (2) If within the time prescribed under sub-section (1), the defaulter objects to the claim of arrears wholly or in part, the Collector or the authorised officer, as the case may be, shall enquire into the objection and record a decision before proceeding to attach the immovable property of the defaulter." Now coming to Section 44(2), the crucial question to be considered is whether the transfer of immovable property by the defaulter was effected after the public revenue due on any land from him had fallen in arrears and whether it was with intent to defeat or delay the recovery of such arrears, to be hit by the provision. 20. With regard to the factual position, the amount had fallen due much earlier and Section 7 demand notice was served upon the defaulter in respect of Kottayam, Ettumannoor and Alappuzha Branhes on 05.08.2005, 08.02.2006, 03.03.2006 and 25.07.2005, i.e. much prior to the date of sale i.e., 03.01.2007. Going by the dictum laid down by the Apex Court, reported in (1996) 6 SCC 287 (State of Kerala and another vs. Radahamany), and Division Bench of this Court in 2006(4) KLT 557 (Spl. Tahsildar v. Vasu), the conveyance effected by the defaulter, being after having the due amount fallen in arrears, by virtue of the deeming fiction, in view of the notification under Section 71 of the Act, it has to be held that conveyance effected by the defaulter in favour of the purchaser on 03.01.2007 is hit by Section 44(2), if it was with intent to defeat or delay the recovery of such arrear. 21. The word 'engagement' appearing in Section 44(1) also occurs while defining the term 'arrear of public revenue due on land' under Section 2(a). This Court has held as per the decision in Agrl. Incometax Officer v. Thankamma Parameswaran (1986 KLT 416) that the term 'engagement' very much takes in the deed of sale as well. What is contemplated under the provision is only of the necessity to serve a written demand . What should be the contents of such demand is discernible from Section 7 and Section 34, which is rather synonymous, ie., showing the particulars of the name of defaulter, amount of arrears of public revenue due on land for which the attachment is being made, the date on which such arrear fell due etc. It is open for the creditor to proceed against either the movables or the immovables or both and the only requirement in either case is that, a demand notice has to be served in writing. The effect of Section 44(1) is only to get over any 'engagement' or such other instances with respect to immovable property (sparing the movables) and virtually no distinction is there with regard to the nature and scope of a demand, whether it be under Section 7 or under Section 34 . As such, once the defaulter is informed/served with a written demand, specifying the particulars as mentioned in the provisions, the defaulter gets an idea as to the scope and extent of the liability and the proceedings being pursued, after which it is not open for the defaulter to convey/transfer any immovable property, which forms the crux of the provision. 22. Applying the said legal provision to the case in hand, admittedly, Mini Panicker/ defaulter was served with a demand notice under Section 7, pointing out all the factual particulars in respect of Kottayam, Ettumannoor and Alappuzha branches, also supplemented by a demand notice under Section 34 in respect of Alappuzha branch. It was thereafter, that the property was conveyed to the purchaser/writ petitioner in W.P.(C) 16852 of 2009 ( as per Ext.P1 Sale Deed therein) on 03.01.2007. According to the defaulter/Mini Panicker, she had already conveyed the position as to the subsisting liability, to the purchaser, who had agreed to clear the same and it was he who cleared the liability to all other Banks except for Uzhavoor Service Co-operative Bank, SBI, Kaippuzha Branch and the KSFE. It is in the said circumstance, that the defaulter has put forth a contention that she is having no objection in proceeding against the said property, which is sufficient to clear off the entire liability to the Banks and the KSFE and to save the guarantors. 23. Coming to the scope of demand to be served under Section 7 or 34, such a course is stipulated as mandatory before effecting any attachment of the movables or immovables, as the case may be. Any attachment of the movables without serving a demand notice showing the particulars as specified under Section 7 cannot result in a valid attachment. Same is the position with regard to the immovable property, in view of the clear mandate under Section 34, as to the procedure to be complied with before effecting the attachment. But then, the question is whether any attachment is necessary to invoke the power and procedure under Section 44, which can only be answered in the negative, in view of the law declared by a Division Bench of this Court as per the decision reported in 2006(4) KLT 557 (Spl. Tahsildar v. Vasu). The only requirement is whether the stipulations under Section 44 are satisfied, so as to attract the relevant provision. 24. The necessity to serve a written demand to attract Section 44 of the Revenue Recovery Act is mentioned only in respect of a situation covered by sub-section (1) involving any 'engagement' . Sub-sections (2) and (3) are in respect of the instances of transfer of immovable property effected under the specified circumstances, which do not say anything about the requirement as to service of a written demand. Under sub- section (2) of Section 44, transfer of immovable property made by the defaulter, after the public revenue due on land had fallen in arrear, with intent to defeat or delay the recovery of such arrear, is stipulated as not binding upon the Government. Sub- section (3) deals with such transfer of immovable property to a 'near relative' (as defined in the Explanation therein) or for grossly inadequate consideration, where the intent to defeat or delay the recovery is to be presumed, unless the contrary is proved . In other words, when the burden of proof under sub- Section(2) to show that it was with intent to defeat or delay the recovery of such arrear, is upon the party who alleges the same, in respect of the circumstances under sub-section (3) (involving transfer to a near relative or for grossly inadequate consideration) it is upon the transferor/defaulter ( by virtue of the presumption) to establish that there was no such intent. 25. Sub-section (1) of Section 44, specifying the necessity to have service of written demand stands on a different footing , as it is in respect of any 'engagement' entered into by the defaulter with anybody. True, sale has been held as an instance of 'engagement' as held by a Division Bench of this Court Agrl. Incometax Officer v. Thankamma Parameswaran (1986 KLT 416). But in the case of 'Sale' of immovable property, if it is after the 'public revenue due on land' had fallen in arrears, it is taken care of under sub-sections (2 ) and (3) of Section 44, in the manner specified therein. But coming to the case of 'engagement' as it is normally understood, it pertains to some 'Agreement' which need not necessarily involve any transfer of immovable property. It cannot be a matter of dispute that, merely by executing an agreement for sale, no transfer is effected in respect of immovable property, under the relevant provisions of the Transfer of Property Act . But even under such circumstances, if such agreement/engagement is made by the defaulter in respect of any immovable property after the service of written demand on him , sub-section (1) of Section 44 pops up, to say that it shall not be binding upon the Government. To put it short, the situation sought to be remedied under sub-section (1) of Section 44 , pointing out the necessity to serve a written demand on the defaulter, is conspicuously absent in the case of a conveyance effected under sub-sections (2) or (3) of Section 44. This appears to be the reason, why the law makers have not provided service of 'written demand' on the defaulter, in cases relating to transfer of immovable property coming under sub-sections (2) or (3) of Section 44. 26. As observed by the Apex Court in paragraph '5' of (1996) 6 SCC 287 (State of Kerala and another vs. Radhamany), each sub-section under Section 44 is independent of the transaction dealt with therein. The Apex Court has held that, to attract sub-section(2) of Section 44, the crucial question is, as to the date on which the the 'arrears had fallen due' and when the sale has been effected. Admittedly, in the instant case, though the sale was effected only on 03.01.2007, the arrears had fallen due much earlier, as described in the 'table' given in paragraph III of the additional counter affidavit dated14.07.2012 filed by the KSFE and also as discernible from Exts.R8(a) to R8(e). The distinction between Sub sections (2) and (3) of Section 44 is that, in the case of the latter, if the conveyance is effected to a 'near relative' (as defined in the 'explanation') or for grossly inadequate consideration, there is a presumption, until the contrary is proved, that such transfer is made 'with intent to defeat or delay the recovery of arrears'; thus enabling the concerned authority to proceed against the property as if such transfer had not taken place . 27. Coming to the question whether the sale effected by the defaulter in favour of the purchaser, as per the Sale Deed dated 03.01.2007, was with intent to defeat or delay the recovery of arrears, there is no case for the defaulter that it was never so, or that the defaulter was not aware that any such due had fallen in arrears or that no notice of demand was issued to the defaulter prior to such transaction. On the other hand, it is explicitly conceded in the statement of objections filed by the defaulter in the Revision Petition filed by the purchaser ( petitioner in W.P.(C)16852 of 2009) before the Commissioner for Land Revenue, that the conveyance was effected to the purchaser intimating existence of such liability, with the firm understanding that it was to be cleared by the purchaser along with all other dues including to the various Banks. It is also stated by the defaulter that, it was the purchaser himself who cleared the liability to all the other Banks except the liability to the Uzhavoor Service Co-operative Bank/Addl.Respondent No.11 in W.P.(C) 16187 of 2007, Kaippuzha Branch of the SBI and also to the KSFE. There is no case for the defaulter as to any lapse on the part of the revenue authorities or as to any loss or prejudice caused to the defaulter in this regard. This being the position, it is not for the purchaser to come up with a contention as to the alleged non-service of written demand with reference to Section 34, at the same time conceding service of demand notice under Section 7. Absolutely no prejudice whatsoever has been resulted either to the defaulter or the purchaser and hence the case moulded by the purchaser/petitioner in W.P.(C) No.16852 of 2009 is not liable to be entertained on this score. 28. There is yet another contention for the purchaser/petitioner in W.P.(C)No.16852 of 2009 that the amount payable by the defaulter to the KSFE does not constitute arrears of public revenue and as such, Section 44 itself cannot have any application to the case in hand. There is a decision rendered by a Division Bench of this Court in A.K. Nanu and others vs. State of Kerala an others (1987 (2) KLT 921) and also by a Single Bench of this Court in Anandan vs. State of Kerala [2009(4) KLT SN 79 (C.No.74)], that merely for the reason that an institution has been notified under Section 71 of the Revenue Recovery Act, enabling the institution to recover the dues invoking the machinery under the Revenue Recovery Act, the nature of the debt will not get automatically converted into 'arrears of public revenue due on land'. The observations made by this Court in the said decisions are in the particular context and not with reference to applicability of Section 44. What Section 71 stipulates is that, once a notification is issued by the Government thereunder, in public interest, all the provisions of the Act shall be applicable to such recovery. In other words, what is provided under the Statute for recovering the arrears of public revenue due on land could be deployed/made use of, for recovering the dues payable to the said institutions notified under Section 71, as if it were arrears of public revenue due on land . Chapter III, where Sections 34 and 44 get enlisted, deals with the procedure for attachment and sale of the immovable property, which necessarily is in the course of the recovery proceedings contemplated under the Act and as such, the scope and application of the Act as to the procedure for recovering the debt invoking the machinery thereunder, as understood by the purchaser/petitioner in W.P. (C)No.16852 of 2009 is quite wrong and misconceived. 29. Incidentally, it is worthwhile to have a reference to some precedents cited by Mr.Lal George, the learned Counsel for the KSFE, to understand the scope of the legal fiction. True, the amount payable to the KSFE by itself does not attract the colour and characteristics, converting it automatically as arrears of public revenue; but by virtue of the legal fiction, it has to be treated, as if it were arrears of public revenue due on land, to the extent of applying the procedure for recovery. The Apex Court held in the decision reported in AIR 1953 SC 244 (State of Bombay v. Pandurang) (paragraph 5) that when a Statute enacts that something shall be deemed to have been done, which in fact and truth was not done, the Court is entitled and bound to ascertain for what purposes and between what persons the statutory fiction is to be resorted to, and full effect must be given to the statutory fiction and it should be carried to its logical conclusion. Later, in AIR 1962 SC 574 (The Dargah Committee, Ajmer v. State of Rajasthan) a Constitution Bench of the Apex Court observed in paragraph 5 in the following terms: "If the amount recoverable by respondent 2 from the appellant is made recoverable as if it were a tax levied by the Committee, then against the levy of such a tax an appeal would be competent under S. 93 (1). Mr. Chatterjee argues that S. 93 (1) provides for an appeal against the levy of a tax, and he draws a distinction between the amount made recoverable as if it were a tax and the amount recoverable as a tax. His contention is that the amount which is recoverable under S. 222 (1) is no doubt by fiction deemed to be a tax but against an amount thus deemed to be a tax an appeal would not be competent under S. 93(1), We are not impressed by this argument. If by the fiction introduced by S. 222(4) the amount in question is to be deemed as if it were a tax it is obvious that full effect must be given to this legal fiction; and in consequence, just as a result of the said section the recovery procedure prescribed by S. 234 becomes available to the committee so would the right of making an appeal prescribed by S. 93 (1) be available to the appellant. The consequence of the fiction inevitably is that the amount in question can be recovered as a tax and the right to challenge the levy of the tax accrues to the appellant." By virtue of the clear mandate under Section 71 of the Revenue Recovery Act, making all the provisions of the Act to be applicable, once a Notification is issued thereunder and in view of the legal fiction, as explained by the Apex Court, the contention of the purchaser/petitioner in W.P.(C)No.16852 of 2009 that Section 44 cannot be applied to the case in hand, is not correct or sustainable and can only be repelled. 30. Now coming to the plea of the petitioner in W.P.(C) No.16852 of 2009 that he was a 'bonafide purchaser', as mentioned herein before, the liability in respect of Alappuzha Branch stands conceded, admitting that written demands under both Sections 7 and 34 were served to the defaulter/Mini Panicker before the transfer was effected on 03.01.2007 and hence it is hit by Section 44. The dispute is confined in respect of the chitty transactions with the Ettumannoor and Kottayam branches; where, only the demand notice under Section 7 was served prior to the date of transfer. The stand of the 14th respondent in W.P.(C)16852 of 2009 (the Commissioner for Land Revenue), as reflected from paragraph '3' of the counter affidavit filed in the said case is as follows: "3. Meanwhile, the property comprised in Re.Sy.142/3A(20..23 ares) and 142/17A (22.65 ares) was handed over by Smt. Mini Panicker to one Sri.James Varghese on 3.1.2007 as per sale deed No.17/07 of Sub Registrar Office, Ramapuram. The property was alienated after it has been attached by the revenue authorities. The attachment of the properties was clearly noted in the Village records. Hence, the trasferee was well aware of the liability of the property while purchasing it. The said transfer of property is not legally sustainable" 31. That apart, the learned Counsel for the petitioner in W.P.(C)No. 16187 of 2007, submits with reference to Ext.R10(b) dated 24.09.2007 ,produced along with the counter affidavit of the respondents 10 to 12 ( in W.P.(C)16852 of 2009) and Ext.P14 dated 07.08.2007 communication issued by the Village Officer, Vellilappilly to the purchaser/petitioner in W.P.(C) 16852 of 2009 under the Right to Information Act, 1985 ( produced along with the reply affidavit dated 07.08.2012 of the purchaser/petitioner in W.P.(C)16852 of 2009) that the factum of attachment in respect of the dues payable to Alappuzha Branch of the KSFE was endorsed in the Vellilappilly Village records as well . If the purchaser had taken any earnest effort to ascertain the actual facts and figures, the adverse circumstances would have been brought to light then and there. There is no case for the purchaser that he had verified the relevant records in this regard (despite getting information vide Ext.P14 under the RTI Act), which by itself suggests that he was aware of the correct factual position or else was interested even otherwise in purchasing the property, which does not give him the status of a 'bonafide purchaser'. This Court finds considerable force in the said proposition mooted from the part of the Revenue, the petitioner in W.P.(C) 16187 of 2007 and also from the part of the KSFE. This is more so in view of the positive assertion made by the defaulter before the Commissioner for Land Revenue that existence of liability to KSFE and other financial institutions/Banks was conveyed to the purchaser, who had agreed to have them cleared, thus leading to the conveyance. It is also asserted by the defaulter that it was the purchaser himself who had cleared the liability to the other Banks/Financial Institutions (except Uzhavoor Service Co-operative Bank, Kaippuzha Branch of the SBI and KSFE) which is a pointer as to the correct factual position and the understanding in between. The detailed objections filed by the defaulter/Mini Panicker before the Commissioner for Land Revenue in the Revision Petition filed by the purchaser (petitioner in W.P.(C)16852 o 2009) have been extracted in the order dated 30.04.2009 passed by the Commissioner for Land Revenue, which is reproduced below: "Smt. Mini Panicker, the 4th respondent has filed detailed objection note as follows: 1. The above Revision Petition is not at all maintainable either before law or on facts . All averments in the said petition except the following are false and hence denied. 2. The 4th respondent sold her property to the petitioner herein and executed sale deeds in favour of him. At the time of execution of the sale deeds, RR proceedings were initiated against the said properties. The petitioner purchased the said properties fully knowing the liabilities fasted on it. The 4th respondent informed the petitioner well in advance of her various liabilities including the liability owing to KSFE. Thereafter, the petitioner along with the 4th respondent and her husband went to the Village Office and enquired the outstanding balance as per the RR proceedings. The petitioner himself had cleared all the arrears in the bank except the loan in SBT, Uzhavoor branch and KSFE (RR) Wing. At the time of the execution of the said sale deed the petitioner represented to the 4th respondent that the entire arrears to KSFE and the SBT will be cleared within a month. 3. The 4th respondent had sold the property because the revenue attachment on the salary of her husband and his colleagues shall come to an end. So the entire debts of the 4th respondent may be realised by proceeding against the said properties." The assertions made by the defaulter as above have not been successfully rebutted by the purchaser. In the said circumstance, this Court finds that the claim of the purchaser /petitioner in W.P.(C) 16852 of 2009 that he was a 'bonafide purchaser' is not liable to be swallowed without a pinch of salt. 32. In the result, it is declared and ordered as follows: (1) The challenge raised by the petitioner in W.P.(C) 16852 of 2009 against the proceedings of the revenue authorities including the orders passed by the District Collector and the Commissioner for Land Revenue, (produced therein as Ext.P8 and Annexure A respectively) holding that Ext.P1 Sale Deed dated 03.01.2007 is hit by Section 44 of the Revenue Recovery Act, fails. The orders passed by the concerned authorities are upheld. (2) It is declared that the liability of the guarantors, who are the petitioners in the other four writ petitions, is 'coextensive' with that of the defaulter and it is open for the concerned respondents to proceed against them and their properties as well. However, the recovery of salary sought to be made from such petitioners shall only be to the extent as permissible under Section 60 of the CPC. (3) The claim put forth by the Addl.9th respondent in W.P. (C) 16187 of 2007 in respect of the properties conveyed by him to the defaulter as per Sale Deed No.86/2000 of SRO, Ramapuram and also in respect of the Release Deed No.1562/03 of SRO, Ramapuram, executed in favour of the husband of the defaulter (petitioner in W.P.(C) 37390 of 2010) is held as without any basis, in so far as the rights and interests of Addl.11h respondent Bank /Uzhavoor Service Co-operative Bank and also the State Bank of India, Kaippuzha Branch are concerned, from whom the concerned parties had availed financial assistance creating mortgage over the properties in question. (4) W.P.(C) 16852 of 2009 stands dismissed as devoid of any merit and all other petitions are allowed in part, in so far as the extent of recovery from salary is involved. (5) If the petitioner in W.P.(C)16852 of 2009 has sustained any loss or damage in respect of the sale effected by the defaulter/Mini Panicker, it is open for the said person to work out the remedy against the defaulter, by filing appropriate proceedings before the appropriate Court. P.R. RAMACHANDRA MENON, JUDGE. lk |
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W.P. (C) No. 16187 of 2007 - Satheesh Chandran Nair P.S. Vs. Mini Panicker, (2012) 270 KLR 011posted Sep 20, 2012, 10:28 AM by Law Kerala [ updated Sep 20, 2012, 10:28 AM ] |
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