THE HON'BLE SRI JUSTICE C.Y.SOMAYAJULU Writ Petition No.12506 of 2003 ORDER: 1 Petitioner filed this petition questioning the distraint order dated 28.05.2003 issued under Section 8 of the Andhra Pradesh Revenue Recovery Act, 1864 (the Act) for recovery of the amount mentioned therein from him. 2 The case, in brief, of the petitioner is that he who was the director of M/s. Victory Straw Boards (P) Limited (the Company) which took a loan of Rs.40.36 lakhs from the Andhra Pradesh Industrial Development Corporation Limited (2nd respondent) also affixed his signature to the guarantee agreement for Rs.40.36 lakhs in favour of the 2nd respondent on 27.09.1984 as a director of the company. Thereafter the company which could not repay the installments due requested the 2nd respondent to refinance the earlier loan along with the interest outstanding thereon and so the 2nd respondent agreed to loan Rs.34 lakhs to the company and wanted all the signatories to the earlier guarantee agreement dated 27.09.1984 sign the fresh agreement of guarantee for Rs.34 lakhs. Petitioner who did not agree therefor did not sign the said agreement of guarantee for Rs.34 lakhs. Even then the 2nd respondent granted a loan of Rs.34 lakhs to the company on the basis of a fresh agreement signed by three of its directors. Subsequently the company, which became sick, closed down its operations, and its assets were seized in November 1992 by Andhra Pradesh State Finance Corporation (SFC) an another lender and sold those assets in 1993, which was also approved by the 2nd respondent by its proceedings dated 26.11.1993, and shared the sale proceeds with the SFC, but did not initiate any legal proceedings against the company and so all the outstanding debts due to the 2nd respondent became time barred. As he entered into a settlement with the SFC for discharge of his personal guarantee given to it on behalf of the company, 2nd respondent, after coming to know about that settlement, started harassing him to pay the amount due to it from the company by threatening to initiate coercive proceedings under the Act. As he refused to do so, 2nd respondent through its letter dated 13.11.2002 claiming that there is an outstanding of Rs.57.42 lakhs from him, issued a telegram dated 17.03.2003 calling upon him to appear before it for negotiations. In reply he issued a legal notice dated 19.04.2003 denying his liability, for which 2nd respondent, after sending a reply with incorrect allegations got issued a distraint order dated 28.05.2003 under Section 8 of the Act through the 1st respondent, granting 15 days time to pay Rs.224.79 lakhs allegedly due from him to the 2nd respondent as the guarantor for the company, though he is not liable to pay any amount to the 2nd respondent. 3 No counter affidavit is filed on behalf of the first respondent. 4 The Assistant General Manager (legal) of the 2nd respondent filed his counter affidavit on behalf of the 2nd respondent inter alia contending that inasmuch as the Government of Andhra Pradesh, in exercise of the powers conferred by the proviso to sub section (1) of Section 52-A of the Act on it, issued a notification No.88, which was published in A.P. Gazette No.28-A dated 11.08.1983 declaring the loans and advances or other sums due to the 2nd respondent corporation can be recovered as arrears of land revenue, it can seek recovery of the amount due to it from the petitioner, as guarantor of the company, by taking recourse to the provisions of the Act. At the request made by the directors of the company, apart from disbursing Rs.40.36 lakhs as loan, 2nd respondent also invested Rs.6 lakhs in the equity capital of the company as the petitioner along with other directors of the company stood surety for the repayment of the said loan and executed an agreement of guarantee on 27.09.1984 in favour of the 2nd respondent. Thereafter the company again approached the 2nd respondent and SFC in 1989 for additional term loan of Rs.34 lakhs and Rs.30 lakhs respectively whereupon the 2nd respondent sanctioned term loan of Rs.34 lakhs on 20.04.1991 to the company, but it availed only Rs.16.64 lakhs. So the averment relating to refinancing of the outstanding loan installments and the interest due under the first loan of Rs.40.36 lakhs is not true. In fact as per the terms of the guarantee, which is binding on the petitioner, 2nd respondent can grant further loan to the principal debtor without the assent or knowledge of the guarantors. As the company defaulted in payment of the amounts due to it, SFC by virtue of the power vested in it by Section 29 of the State Financial Corporation Act, seized the assets of the company on 12.12.1992 and sold the same to M/s. Krishna Agro Board Private Limited for Rs.61 lakhs and paid Rs.20.6 lakhs to the 2nd respondent towards prorata sale consideration. As the petitioner and the company failed to pay the remaining balance due to it, 2nd respondent requested the collector West Godavari and Mandal Revenue Officer Undrajavaram to attach the properties of the petitioner and other guarantors under the provisions of the Act through the letter dated 23.03.1994. In fact the petitioner submitted a false affidavit to the 2nd respondent declaring that he has immovable properties worth Rs.1.24 lakhs at Undrajavaram though he has no immovable properties there in that village. As the company owes a principal amount of Rs.57.44 lakhs to the 2nd respondent, which is enforceable against the petitioner also, and as the petitioner failed to repay the said amount, 1st respondent after issuing a notice dated 08.11.2002 to the petitioner had issued the impugned distraint order on 28.05.2003. The contention that the debt is barred by time is not true because proceedings were initiated immediately after the unit was seized and sold in auction in 1993. 5 The contention of Sri M.S.Ramachandra Rao, learned counsel for the petitioner is that since the petitioner stood surety for the loan taken by the company in 1984 and did not stand surety for the loan taken by the company for the 2nd time and since the petitioner did not acknowledge the debt at any time subsequently or make any part payments, the remedy of the 2nd respondent to recover the amount from the petitioner stood barred by time by the date of issuance of distraint order dated 28.05.2003 and so in view of the ratio in State of Kerala Vs. Kalliyani Kutty[1] which is followed in N.A.Radha and others Vs. State of Andhra Pradesh, Revenue Department and others[2] and V.K. Roy and others Vs. Commissioner, Municipal Corporation of Hyderabad, and another[3], respondents have no right to recover any amount from the petitioner. There is no representation on behalf of the respondents. 6 For deciding this Writ Petition it is not necessary to go into the question whether the second loan of Rs.34 lakhs granted by the 2nd respondent to the company was a refinance as contended by the petitioner or was a fresh loan granted as per the liberty given to it under the agreement of guarantee executed by the petitioner, as the point for consideration in this Writ Petition is whether the claim against the petitioner was barred by time by the date of issuance of the notice impugned. 7 Now the question is whether the provisions of the Limitation Act, 1963 apply to the 2nd respondent or not. In Kalliyani Kutty case (1 supra) strongly relied on by the learned counsel for the petitioner a Three Judge Bench of the apex Court while considering the provisions of Kerala Revenue Recovery Act, 1968 (Kerala Act) which are almost similar to the relevant provisions of the Act, held that a debt barred by limitation on the date of issuing a request under section 69(2) of the Kerala Act, cannot be recovered under the said Act. A learned single Judge of this court in N.A. Radha case (2 supra) by relying on the said decision also held that debt barred by time, cannot be recovered under the Act by the SFC. In V.K.Roy case (3 supra) a division bench of this Court while considering the validity of a distraint order made under the Hyderabad Municipal Corporations Act, 1963 (Hyderabad Act) for recovery of the house tax had, by following the ratio in Kalliyani Kutti case (1 supra), held that taxes due for over a period of three years cannot be recovered by taking recourse to distraint proceedings under the provisions of the Hyderabad Act. 8 The averment in the counter affidavit filed on behalf of the 2nd respondent is that as per the terms of the guarantee agreement dated 27.09.1984 the principal borrower i.e. the company has to pay the amounts on the dates mentioned and if it commits default, the 2nd respondent is entitled to recover the same from the guarantors from their movable and immovable properties. Immovable properties belonging to the company, admittedly, were seized and sold by the SFC even in 1993 i.e. on 26.11.1993. It is not the case of the 2nd respondent that the petitioner hypothecated or mortgaged any of his immovable properties. He gave only a personal guarantee. The period of limitation for enforcing personal guarantee is three years from the date of default. Even assuming that the period of limitation against the petitioner begins from the date after the creditor failed in its attempt to recover from the principal borrower, as all the assets of the company were sold away on 26.11.1993, the period of limitation for enforcing the guarantee given by the petitioner commences from 26.11.1993. 9 There is nothing on record to show that petitioner either acknowledged his liability or made any part payment in or after 1993 to keep the bond of guarantee entered into by him with the 2nd respondent alive, within three years from 26.11.1993. The distraint notice impugned in this petitioner is dated 28.05.2003 nearly 10 years after 1993. So it is clear that the claim of the 2nd respondent against the petitioner stood barred by time by the date of issuance of the warrant impugned in this petition and so in view of the ratio in Kalliyani Kutti case (1 supra), N.A.Radha case (2 supra) and V.K. Rao case (3 supra) respondents cannot recover the amount allegedly due from the petitioner by taking recourse to the provisions of the Act and so the distraint proceedings issued by the 1st respondent are liable to be and hence are quashed. 10 Accordingly the writ petition is allowed with costs and rule nisi is made absolute. -------------------------- C.Y.Somayajulu, J. 04.02.2008 kvsn [1] 1999 (3) SCC 657 [2] 2000 (2) ALT 484 [3] 2003 (1) ALT 236 (D.B)