P. Jayapalan vs Kerala Financial Corporation and Others

K.S. Radhakrishnan, J.—The question involved in this case is as to whether the respondent-Corporation is justified in invoking the provisions of the Kerala Revenue Recovery Act for realisation of the amount due from the petitioner, without complying with the provisions of Section 32G of the State Financial Corporations Act, 1951.

The Government of Kerala, in exercise of the powers conferred by Section 71 of the Kerala Revenue Recovery Act, 1968, declared that the provisions of the Act would be applicable to the recovery of amounts due from any person or, class of persons to the Kerala Financial Corporation. By virtue of the said notification, proceedings were initiated to attach the property of the petitioner and the Corporation took steps to recover the amount due to it.

The Corporation had sanctioned a loan of Rs. 86,000 to the petitioner for establishment of an industrial unit. In order to secure repayment, the petitioner executed a loan agreement on July 21, 1989, followed by creation of an equitable mortgage over 5 cents of land in Survey No. 2371/13-1 of Pallipuram village, belonging to him. He also executed a hypothecation deed on July 25, 1989, hypothecating the plant and machinery of the unit in favour of the Corporation. As per the terms of the loan agreement, the petitioner agreed to repay the loan amount in 72 monthly instalments. Out of the loan amount of Rs. 86,000, the petitioner availed of only an amount of Rs. 71,300.

The petitioner defaulted in payment of instalments and the Corporation issued a notice recalling the loan amount. Since the amount was not repaid, the Corporation issued a requisition to the District Collector for realisation of an amount of Rs. 1,15,453 as on December 31, 1993, with future interest.

A notice of demand was served on the petitioner, and sufficient time was given as per Section 34 of the Revenue Recovery Act. The petitioner did not file any objection to the said notice, nor did he pay the arrears. The second respondent, therefore, issued a notice of attachment as contemplated u/s 36 of the Revenue Recovery Act. The petitioner then approached this court and filed O. P. No. 2006 of 1995 and the said original petition was dismissed. The petitioner has now approached this court for identical relief, but with a contention that the respondents have no legal right to proceed under the Revenue Recovery Act without complying with Section 32G of the State Financial Corporations Act, 1951. It is, therefore, necessary to examine the provisions of the State Financial Corporations Act.

Section 32G of the Act is extracted below :

"32G. Recovery of amounts due to the financial corporation as an arrear of land revenue.--Where any amount is due to the financial corporation in respect of any accommodation granted by it to any industrial concern, the financial corporation or any person authorised by it in writing in this behalf, may, without prejudice to any other mode of recovery, make an application to the State Government for the recovery of the amount due to it, and if the State Government or such authority, as that Government may specify in this behalf, is satisfied, after following such procedure as may be prescribed, that any amount is so due, it may issue a certificate for that amount to the collector, and the collector shall proceed to recover that amount in the same manner as an arrear of land revenue."

On the basis of the above mentioned provision, counsel for the petitioner submitted that where any amount is due to the Corporation in respect of any accommodation granted by it to any industrial concern, the Corporation or any person authorised by it in writing in that behalf, has to make an application to the State Government for recovery of the amount due and only if the State Government or such authority is satisfied, it may issue a certificate for that amount to the collector, and the collector shall proceed to recover that amount in the same manner as an arrear of land revenue.

I am afraid, the petitioner has not properly understood the scope of Section 32G. This section has been specifically engrafted in the Act, in order to enable the financial corporations to recover amounts due to them in respect of any accommodation granted by them to industrial concerns, and not other amounts as arrears of land revenue. This mode of recovery is in addition to and not in derogation of other mode or modes of recovery available to them such as u/s 31 of the State Financial Corporations Act, 1951.

The scope of Section 32G has to be understood in the light of Section 46B of the Act. Section 46B is extracted below :

"46B. Effect of Act on other laws.--The provisions of this Act and of any rules or orders made thereunder shall have effect notwithstanding anything inconsistent therewith contained in any other law for the time being in force or in the memorandum or articles of association of an industrial concern or in any other instrument having effect by virtue of any law other than this Act, but save as aforesaid, the provisions of this Act shall be in addition to, and not in derogation of, any other law for the time being applicable to an industrial concern."

Section 32G of the Act lays down a special provision for enforcement of claims by financial corporations. It enables the corporation to enforce its claim through a special mode of recovery prescribed thereunder. It, however, does not directly or by necessary implication imply that the financial corporation is debarred from having recourse to any other process which may be conferred upon it or be available to it elsewhere by force of other laws of the land. The procedure prescribed in Section 32G for recovery of the amount is not in derogation of any other mode of recovery which is available to the financial corporation under any other law for enforcement of claims. The remedy u/s 32G is not the sole or exclusive remedy available to financial corporations. It is only an additional remedy which has been conferred upon financial corporations. This has been made explicit by the latter part of Section 46B of the Act which says that the State Financial Corporations Act shall be in addition to, and not in derogation of, any other-law for the time being applicable to an industrial concern.

In view of the above mentioned legal provisions the contention of counsel for the petitioner that only on the basis of an authorisation given by the Corporation in writing to the Government, if the State Government directs the concerned district collector, the amount can be recovered as arrears of land revenue, cannot be sustained. As I have already mentioned, Section 46B clearly states that the Act shall be in addition to, and not in derogatioh of, any other law for the time being applicable to an industrial concern. Therefore, Sections 32G and 29 are all in addition to the mode of recovery applicable to industrial concerns under the Revenue Recovery Act. In view of the said legal position, the respondents are justified in invoking the provisions of the Revenue Recovery Act.

It is pertinent to note that an identical question came up for consideration before a Division Bench of the Allahabad High Court in Ratan Sons Industries v. V. P. Financial Corporation [1984] AllLJ 44 wherein the Division Bench of the Allahabad High Court considered the question of applicability of Section 31 of the Act vis-a-vis Section 46B. Section 31 is another mode of recovery just like Section 32G. In the said decision the Division Bench held that Section 31 shall be in addition to and not in derogation of any other law for the time being applicable to an industrial concern." I respectfully follow the said decision.

Even otherwise, I am of the view that the petitioner is not entitled to get any relief from this court. The petitioner had earlier approached this court challenging the validity of the action taken under the Revenue Recovery Act. That writ petition was dismissed. In the present writ petition also he is challenging the same action taken under the Revenue Recovery Act but stating that the notice is illegal and violative of Section 32G of the Act. Since I have found the proceedings initiated by the Corporation are valid and legal, I need not go into the question as to whether the present writ petition is hit by the principles of res judicata. In the circumstances, I do not find any reason to interfere with the steps taken by the corporation for recovery of the amount due from the petitioner. Accordingly, this O. P. is dismissed.