Usman, M. vs K.F.C. and Others

S. Siri Jagan, J.—The unsuccessful Petitioner in W.P. (C) No. 10833 of 2004, who failed to get the revenue recovery proceedings initiated by the Kerala Financial Corporation against him personally for recovery of loan amounts due from a Company by name Cedicom (India) Private Ltd., set aside, is the Appellant in this writ appeal.

The Appellant, describing himself as "one among the shareholders of the Company, who acted for some time as a Director/Chairman of the Company", challenged the revenue recovery proceedings initiated personally against him for the dues of the Company inter alia on the ground that "he is neither a surety nor a guarantor for the debts, if any, of Cedicom (India) Private Ltd.". He also challenged the recovery on the ground that the Kerala Financial Corporation had taken over the properties mortgaged by the Company in exercise of their powers u/s 29 of the State Financial Corporations Act (S.F.C. Act) and therefore they could not have simultaneously initiated proceedings under the Revenue Recovery Act, which they actually did by the impugned proceedings. Therefore, it should be taken that once action u/s 29 of the S.F.C. Act has been initiated, the proceedings initiated under the Revenue Recovery Act was abandoned, contends the Petitioner. The Petitioner on these grounds submits that Exts. P-1 and P-2 proceedings under the Revenue Recovery Act is hit by the vice of limitation, the same having been initiated beyond the period of three years prescribed under the Limitation Act for enforcement of personal liability.

In the course of arguments before the learned Single Judge, it appears that the Appellant took Anr. contention also to the effect that once the Recovery of Debts due to Banks and Financial Corporations Act (D.R.T. Act) came into force, revenue recovery proceedings are no longer maintainable for recovery of debts due to Banks and Financial Institutions.

Learned Single Judge found that although the Respondents initiated proceedings both u/s 29 of the S.F.C. Act as also under the Revenue Recovery Act, they did not continue both proceedings simultaneously, but after proceedings u/s 29 of the S.F.C. Act were finalised, the revenue recovery proceedings already initiated were again continued for recovery of the balance amount due from the guarantors for the loan amount given to the Company, one of whom was the Appellant. It was held that since Ext. R-1(a) is the revenue recovery proceedings originally initiated, that was within the limitation period prescribed under the Limitation Act. On that ground, the learned Single Judge found that the proceedings under the Revenue Recovery Act for recovery of the amounts by enforcement of the personal guarantee given by the Appellant for the loan amounts due to the Company does not suffer from the vice of limitation and is therefore perfectly valid. With regard to the contention based on the D.R.T. Act, which was not specifically raised by the Appellant in the memorandum of writ petition, the learned Single Judge, relying his own earlier decision in Amritha Cyber Park (P) Ltd. v. Kerala Financial Corporation & Ors. ILR 2006 Ker. 115, held that the right conferred on the financial institutions by the DRT Act is in addition to and not in derogation of the right vested in such institutions under the six legislations mentioned in Section 34(2) of the Act, which included the State Financial Corporations Act, Section 32G of which authorises the Financial Corporation to realise amounts due to it as an arrear of land revenue and therefore the action taken by the Kerala Financial Corporation impugned in the writ petition cannot be held to be invalid on the ground raised by the Appellant. The said judgment of the learned Single Judge is under challenge in this writ appeal.

We have heard counsel on both sides on all the points mentioned above in detail.

At the outset, we must point out that the Appellant has not approached this Court with clean hands in the writ petition Firstly, in the writ petition, the Appellant described himself as "one among the shareholders who had acted for some time as a Director/Chairman of the Company". He further stated that "he was not at all personally liable for any debts of the Company since the Company is a special legal juristic person in the eye of law". These averments are contained in paragraph 4 of the writ petition. Then, in ground A, he specifically contended that "the Petitioner is neither a surety nor a guarantor for the debts if any of Cedicom (India) Pvt. Ltd." In order to counter this, the Respondents along with a memo dated 11-7-2005 produced before the Court a copy of the deed of guarantee dated 2-6-1989 executed by the Appellant and Ors. in favour of the Kerala Financial Corporation, which categorically proves that the Appellant was a surety/guarantor for the loan granted to the Company in question, which document is not now disputed by the Petitioner and importantly, the Appellant did not care to implead either the Company or the Managing Director of the Company in the writ petition as parties, although in paragraph 4 of the writ petition, he specifically contended that'' Mr. Govindakumar referred to above was the Managing Director of the company and it is he who availed and toll (sic for took) initiative in getting loan from the 1st and 2nd Respondent but the Petitioner was only among the shareholders who had acted for some time as a Director/Chairman of the Company". We are of opinion that in view of these specific averments which are totally against the facts of the case perfectly within the knowledge of the Appellant, the Appellant had approached this Court by suppressing material facts and making false averments and for that reason alone, the writ petition itself ought to have been dismissed and this writ appeal at the instance of such a person should also meet with the same fate.

Still, although the above finding alone is sufficient to dismiss this writ appeal, we are inclined to go into the legal questions raised before us by the learned Counsel for the Appellant.

The main contention raised by the Appellant is that once the Recovery of Debts Due to Banks and Financial Institutions Act, 1993 came into force, the Kerala Financial Corporation could not have taken steps to recover the amounts due from the Company to the K.F.C. except in accordance with the provisions of the said Act and therefore the proceedings initiated under the S.F.C. Act and the Kerala Revenue Recovery Act are without jurisdiction and unsustainable. The second contention raised by the Appellant is that even assuming that such proceedings could have been initiated despite the D.R.T. Act, since the K.F.C. could not have initiated proceedings both u/s 29 of the S.F.C. Act as well as under the Revenue Recovery Act simultaneously, the proceedings stated to have been initiated by Ext. P.-1(a) must be taken to have been abandoned by the K.F.C. by proceeding further in accordance with Section 29 of the S.F.C. Act. Therefore, the proceedings now initiated as per Exts. P-1 and P-2 should be taken as the proceedings initiated under the Revenue Recovery Act, which were issued beyond the period of limitation prescribed under the Limitation Act for enforcement of the personal guarantee of the Appellant. Thirdly, the Appellant contends that Exts. P-1 and P-2 are without jurisdiction in so far as the same have been issued to the District Collector, Palakkad and u/s 69(2) of the Revenue Recovery Act, when any amount other than public revenue due on land which is recoverable under the Act is due, the officer charged with its realisation may send to the Collector of the District in which the demand arose, a written requisition in the prescribed form duly verified and certified by him. In this case, the demand arose within the Trichur District and therefore the requisition issued to the District Collector of Palakkad is unsustainable and hence the proceedings initiated under the Revenue Recovery Act themselves are without jurisdiction and unsustainable, contends the Petitioner.

We shall deal with each of the contentions of the Appellant in seriatim.

In respect of the first contention on the basis of D.R.T. Act, the Appellant heavily relies on the decision of the Supreme Court in AIR 2003 SC 2103 . We are of opinion that this decision actually works against the Appellant''s case. Paragraph 9 of the judgment reads as under:

Section 34 of the Act consists of two parts. Sub-section (1) deals with the overriding effect of the Act notwithstanding anything inconsistent therewith contained in any other law for the time being in force or in any instrument having effect by virtue of any law other than the Act. Sub-section (1) itself makes an exception as regards matters covered by Sub-section (2). The U.P. Act is not mentioned therein. The mode of recovery of debt under the U.P. Act is not saved under the said provision i.e. Sub-section (2) which is of considerable importance so far as the present case is concerned. Even a bare reading therein makes it clear that it is intended to be in addition to and not in derogation of certain statutes; one of which is the Financial Act. In other words, a bank or a financial institution has the option or choice to proceed either under the Act or under the modes of recovery permissible under the Financial Act. To that extent, the High Court''s conclusions quoted above were correct. Where the High Court went wrong is by holding that the proceedings under the U.P. Act were permissible. The U.P. Act deals with separate modes of recovery and such proceedings are not relatable to proceedings under the Financial Act.

The above paragraph would categorically hold that it was the option or choice of the financial institutions either to choose their remedy under the DRT Act or the SFC Act. In the present case, the KFC decided to opt to proceed under the SFC Act and since Section 32G of the SFC Act permitted the financial corporation to recover amounts due to it as arrear of land revenue and further the Government of Kerala has issued notification u/s 71 of the Revenue Recovery Act making the provisions of the Act applicable to recovery of amounts due to the Kerala Financial Corporation Act, on finding that the amount recovered by proceeding u/s 29 of the SFC Act is not sufficient to satisfy the debt due from the Company, the KFC was perfectly justified in proceeding against the personal guarantors for the loan given to the Company by resorting to proceedings under the Revenue Recovery Act. Further, the first sentence of Unique Butyle Tube''s case shows that the question decided in that case was a different one. The decision starts with the sentence;

The only question that falls for determination in this case is whether the proceedings for recovery initiated by U.P. Financial Corporation (hereinafter referred to as ''the Corporation'') under the Uttar Pradesh Public Money''s (Recovery of Dues) Act, 1972 (in short ''the U.P. Act'') on 6-1-2001 are maintainable in view of Section 34(2) of the Recovery of Debts due to Banks and Financial Institutions Act, 1993 (in short ''the Act'').

Therefore, we do not find any merit whatsoever in the contention of the Appellant In fact, the judgment of the learned Single Judge in Amritha Cyber Park''s case (supra) lays down the correct law on the subject, which is perfectly in accordance with Supreme Court decision in Unique Butyle Tube Industries''s case (supra) and, as such, we affirm the decision of the learned Single Judge in Amritha Cyber Park''s case.

The second contention of the Appellant is that after having initiated proceedings under the SFC Act, the Respondents could not have continued proceedings under the Revenue Recovery Act. This contention has also no legs to stand. As held in Amrita Cyber Park''s case (supra) as also Jayapalan v. K.F.C. 1997 (2) KLT 400, mode of recovery under the SFC Act is in addition to and not in derogation of other modes of recovery and therefore it is perfectly within the powers of the KFC to invoke the Kerala Revenue Recovery Act to realise amounts due to them despite the provisions of the SFC Act. We do not find any reason whatsoever to take a different view and also do not think it necessary to elaborate on it since the issue has been dealt with threadbare in those decisions and as both decisions are reported decisions accessible to everybody, we do not want to risk repetition of the reasonings therein with which we fully agree. Suffice it to state that we confirm those decisions as laying down the correct law on the subject.

The last contention is that in view of Section 69(2) of the Kerala Revenue Recovery Act, proceedings could not have been continued on the basis of the requisition to the Collector, Palakkad, since the demand arose in Thrissur District. This argument is fallacious for two reasons. First is that Ext. R-1(a) requisition is to the District Collector, Thrissur itself, which only has been continued after the proceedings under Sections 29 and 31 of the SFC Act have been finalised. Further, a mere procedural irregularity cannot vitiate the action itself. So also, there is nothing preventing the District Collector, Palakkad to forward the requisition to the Thrissur Collector. In any event, even the Thrissur Collector would have had to forward it to the Palakkad Collector since the Appellant was residing at Palakkad and his properties were also at Palakkad. In fact, in the counter-affidavit of the KFC, it is specifically contended that the District Collector, Thrissur has reported that the defaulters have no properties in Thrissur and therefore the recovery proceedings were continued in Palakkad District for which Exts. P-1 and P-2 notices were issued by the 3rd Respondent.

As held by the learned Single Judge, there is no material on record to show that the proceedings initiated by Ext. R-1(a) was at any time abandoned. It is not disputed that going by Ext.R-1(a), the proceedings for recovery were not barred by limitation. As such, the plea of limitation also does not come to the aid of the Petitioner.

Therefore, both on the ground of suppression of material facts as also on merits, the contentions of the Appellant are liable to be rejected. Accordingly, we dismiss this appeal confirming the judgment of the learned Single Judge in all respects, but without costs, taking a lenient view despite the conduct of the Appellant in approaching this Court with unclean hands.