IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT : THE HONOURABLE MR. JUSTICE C.N.RAMACHANDRAN NAIR FRIDAY, THE 21ST NOVEMBER 2008 / 30TH KARTHIKA 1930 WP(C).No. 10217 of 2006(N) -------------------------- PETITIONER(S): --------------- THE KERALA FINANCIAL CORPORATION, REPRESENTED BY THE CHIEF MANAGER, M SQUARE BUILDINGS, PAVAMANI ROAD, KOZHIKODE. BY ADV. SRI.B.G.BHASKAR SRI.JACOB ABRAHAM RESPONDENT(S): --------------- 1. STATE OF KERALA, REPRESENTED BY THE CHIEF SECRETARY, GOVERNMENT OF KERALA, TRIVANDRUM. 2. THE ASST. EXCISE COMMISSIONER, KOTTAYAM. 3. THE DISTRICT COLLECTOR, KOZHIKODE. 4. THE TAHSILDAR, VATAKARA. 5. E.M.KARUNAN, ANANTHAPURI, KOLLAM, KOYILANDY. 6. AMMUKKUTTY, W/O.DINESAN, KANNAMMALIL HOUSE, VAZHAPPALLY KIZHAKKU VILLAGE, KOTTAYAM. 7. THE LAND REVENUE COMMISSIONER, THIRUVANANTHAPURAM. ADV. SRI.GEORGE POONTHOTTAM FOR R6 SRI.S.ANANTHAKRISHNAN FOR R5 SRI.N.K.SUBRAMANIAN FOR R5 SRI.SHYAM PADMAN FOR R5 R1 TO R4 & R7 BY GOVERNMENT PLEADER SRI. TEKCHAND THIS WRIT PETITION (CIVIL) HAVING BEEN FINALLY HEARD ON 21/11/2008, ALONG WITH WPC NO. 32004 OF 2003 THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING: 2 APPENDIX (WPC 10217/06) PETITIONER'S EXHIBITS: EXT.P1 T;RUE PHOTOSTAT COPY OF THE AGREEMENT DATED 4.2.1997 EXECUTED BETWEEN THE PETITIONER AND THE FIFTH RESPONDENT. EXT.P2 TRUE PHOTOSTAT COPY OF THE LETTER OF CONFIRMATION DATED 6.2.1997 ISSUED BY THE 5TH RESPONDENT TO THE PETITIONER. EXT.P3 TRUE PHOTOSTAT COPY OF THE LETTER DATED 6.2.1997 ISSUED BY THE PETITIONER TO THE FOURTH RESPONDENT. EXT.P4 TRUE PHOTOSTAT COPY OF THE STATEMENT OF ACCOUNTS FOR THE PERIOD 1.2.97 TO 31.3.05 MAINTAINED BY THE PETITIONER IN RESPECT OF KARUNA WOOD INDUSTRIES DATED 21.5.2005 EXT.P5 TRUE PHOTOSTAT COPY OF THE NOTICE DATED 24.5.2000 ISSUED BY THE FOURTH RESPONDENT TO THE 5TH RESPSONDENT. EXT.P6 TRUE PHOTOSTAT COPY OF THE CLAIM PETITION DATED 28.7.2000 SUBMITTED BY THE PETITIONER TO THE FOURTH RESPONDENT. EXT.P7 TRUE PHOTOSTAT COPY OF THE JUDGMENT DATED 9.12.2004 OF THIS HON'BLE COURT MADE IN WPC 23946 OF 2000. EXT.P8 TRUE PHOTOSTAT COPY OF THE PROCEEDINGS DATED 14.3.2005 OF THE FOURTH RESPONDENT. EXT.P9 TRUE PHOTOSTAT COPY OF THE JUDGMENT DATED 19.5.2005 OF THIS HON'BLE COURT MADE IN WPC 21419 OF 2005 EXT.P10 TRUE PHOTOSTAT COPY OF THE REVISION PETITION FILED BY THE PETITIONER BEFORE THE 7TH RESPONDENT. EXT.P11 TRUE PHOTOSTAT COPY OF THE PROCEEDINGS OF THE 6TH ;RESPONDENT DATED 21.2.2006 RESPONDENTS' EXHIBITS: NIL. TRUE COPY P.S. TO JUDGE. C.N. RAMACHANDRAN NAIR, J. -------------------------------------------- W.P.C. NO. 10217/2006 & 32004/2003 -------------------------------------------- Dated this the 21st day of November, 2008 JUDGMENT Connected cases are filed by creditor institutions challenging recovery proceedings for recovery of arrears of abkari dues on the ground that by virtue of mortgage executed in their favour, they have got prior charge. However, this issue is settled in favour of the State by this Court holding that State has priority even over the mortgage debt. However, it is conceded that abkari arrears due from the borrowers have been cleared under Amnesty Scheme. Government Pleader submitted that arrears of sales tax are due from the borrowers which should also be paid from out of the sale proceeds before clearing the mortgage debt of KFC. I do not think sale should be withheld any more because KFC being a Government of Kerala undertaking can be ordered to pay arrears of sales tax due from the borrowers from out of the sale proceeds. Accordingly WPC 10217 of 2006 is disposed of giving freedom to KFC to notify the property for sale after issuing notice to the fourth respondent in that WP and to the petitioner Bank in 2 WPC 32004 of 2003. There will be direction to KFC to make payment of arrears of sales tax due from the defaulters from out of sale proceeds to the fourth respondent and appropriate the balance sale consideration. 2. It is not known whether the claim of petitioner in WPC 32004 of 2003 is in respect of very same property mortgaged by borrowers to KFC. In any case since State has priority over the mortgage debt over petitioner in WPC 32004 of 2003, Bank is free to proceed for recovery by attachment and sale of borrowers' property on condition that from out of sale proceeds arrears of sales tax due to the State will be paid in terms of demand to respondents 1 and 2 in that WPC and balance will only be appropriated towards debt due to the Bank. The sale officer of the Bank will make payment in terms of the above direction. If there is any inter se claim of parties to be settled, the same will be referred to District Collector, Kozhikode who will consider relative claims of parties and pass appropriate orders in the matter. WPC 32004 of 2003 is disposed of as above. (C.N. RAMACHANDRAN NAIR) Judge kk 3