IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT : THE HONOURABLE MR. JUSTICE C.K.ABDUL REHIM FRIDAY, THE 9TH OCTOBER 2009 / 17TH ASWINA 1931 WP(C).No. 21187 of 2008(V) -------------------------- PETITIONER(S): --------------- THE KARNATAKA BANK LTD., REPRESENTED BY T.B.MOHAN RAO, BRANCH MANAGER, ERNAKULAM BRANCH, CHELOOR BUILDINGS, M.G.ROAD, ERNAKULAM - 682 016. BY ADVS. SRI.P.B.SURESH KUMAR SRI.LEO GEORGE RESPONDENT(S): --------------- 1. STATE OF KERALA, REPRESENTED BY THE CHIEF SECRETARY TO GOVERNMENT, GOVERNMENT SECRETARIAT, THIRUVANANTHAPURAM. 2. KERALA STATE ELECTRICITY BOARD, REPRESENTED BY ITS SECRETARY, KERALA STATE ELECTRICITY BOARD, VAIDHUTHI BHAVAN, THIRUVANANTHAPURAM. 3. THE DISTRICT COLLECTOR, ERNAKULAM. 4. THE SPECIAL TAHSILDAR (REVENUE RECOVERY) -I, FORT KOCHI, ERNAKULAM. 5. M/S.SUI PAK, REPRESENTED BY ITS PARTNER ABBAS ABDULLA, M/S.SUI PAK, SUI CENTRE, XIII/2, MOULANA AZAD ROAD, KOCHI-2. R1 & R3 TO R4 BY GOVT. PLEADER SRI. C.K. GOVINDAN R2 BY ADV. SRI.P.P.THAJUDEEN, SC, K.S.E.B THIS WRIT PETITION (CIVIL) HAVING COME UP FOR ADMISSION ON 09/10/2009, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING: shg/ C.K. ABDUL REHIM, J. - - - - - - - - - - - - - - - - - - - - - - - W.P.(C)No. 21187 of 2008 - - - - - - - - - - - - - - - - - - - - - - - Dated this the 9th day of October, 2009 J U D G M E N T 1. The petitioner Bank has approached this court seeking direction to respondents 1 to 3 to disburse sale proceeds received pursuant to sale of property belonging to the 5th respondent, which was sold on 18.04.2008. The petitioner had sanctioned a loan to the 5th respondent for which a mortgage of the property in question was created. The revenue recovery proceedings pursuant to which the sale was conducted, was initiated against the 5th respondent for realisation of sales tax arrears as well as amounts due to the 2nd respondent, the Kerala State Electricity Board. Simultaneously the petitioner Bank had also approached the Debt Recovery Tribunal and obtained a Recovery Certificate for realisation of the loan amount defaulted along with interest. According to the petitioner much before the sale conducted by the RR authorities, the charge was created in favour of the Bank. W.P.(C)No. 21187 of 2008 -2- 2. It is noticed that when steps for execution was initiated by the Recovery Officer attached the Debt Recovery Tribunal, it was realised that revenue recovery proceedings are pending against the property and the Revenue Officials declined to issue a location sketch. At that time the Bank had approached this court on an earlier occasion and in Ext.P3 judgment this court directed to conduct sale of the property in question and to recover the arrears due to the State. Further this court directed that, with respect to to the properties on which the Government have no prior charge, location sketch shall be issued to the petitioner Bank. It is pursuant to the direction contained in Ext.P3 that the sale of the property in question was conducted on 18.04.2008. It is submitted that the sale was conducted for an amount of Rs.42,20,747/-. 3. Contention of the petitioner Bank is that they were having prior charge on the property, since the mortgage involves transfer of interest in the property and W.P.(C)No. 21187 of 2008 -3- on such creation of mortgage in favour of the Bank, any other charge in respect of such property cannot be enforced against the transferee who had parted with consideration for creating such interest, without notice. Therefore even the provisions contained in Section 26 B of the Kerala General Sales Tax Act cannot be invoked against the interest of the Bank, without notice to them, is the contention. 4. It is pointed out that the legal question in this regard stands already settled, by virtue of decision of Hon'ble apex court reported in 2009 (4) SCC 94 and various other decisions of this court. Therefore the claim of the petitioner Bank that they are entitled to realise the sale proceeds without appropriating dues of sales tax arrears and the amount due to 2nd respondent, is not at all sustainable. 5. However, learned counsel for the petitioner Bank pointed out that out of the sale proceeds received, the W.P.(C)No. 21187 of 2008 -4- arrears of sale tax dues is only to the extent of about Rs.29,00,000/-. Further it is pointed out that the principal amount due to the 2nd respondent will be around Rs.3,62,000/- only, and the huge amount of penal interest (surcharge) which the 2nd respondent is now claiming is unconscionable and unreasonable. The learned counsel for the petitioner pointed out a decision of this court reported in 2006 (1) KLT 811 wherein it is held that the high rate of penal interest (surcharge) provided under the Electricity Act is not reasonable or proper. The petitioner makes a further contention that the dues with respect to the 2nd respondent stands already realised by sale of immovable property and the remaining claims is only with respect to penal interest. 6. Having considered facts and circumstances of the case, I am of the view that the appropriation of the sale proceeds received by virtue of the revenue recovery proceedings is a matter which is to be adjudicated by the W.P.(C)No. 21187 of 2008 -5- competent authority under the provisions of the Kerala Revenue Recovery Act. According to the Government Pleader appearing for the respondent Nos. 1, 3 & 4, the amounts due to the Government as well as the 2nd respondent will be more than that of the sale proceeds realised. However, it is not proper for this court to adjudicate upon the question regarding appropriation of the sale proceeds. It is for the petitioner Bank to persue their remedies before the appropriate authorities. If the petitioner Bank makes any such request it is for the authority under the Kerala Revenue Recovery Act to make an adjudication with respect to such claim. 7. Under the above said circumstances the Writ Petition is disposed of directing the petitioner Bank to approach the 3rd respondent District Collector with a claim regarding appropriation of the sale proceeds received and if any such claim is received the 3rd respondent shall adjudicate upon the same after issuing notice to all parties W.P.(C)No. 21187 of 2008 -6- cornered, and shall take final decision at the earliest possible. The writ petition is disposed of with the above observations. C.K. ABDUL REHIM JUDGE shg/