IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT : THE HONOURABLE MR. JUSTICE P.R.RAMACHANDRA MENON THURSDAY, THE 2ND SEPTEMBER 2010 / 11TH BHADRA 1932 WP(C).No. 37480 of 2007(J) ---------------------------------- PETITIONER(S): ----------------------- *CENTURION BANK OF PUNJAB LTD., REPRESENTED BY BINOD.P., ASSISTANT GENERAL MANAGER (LAW), CENTURION BANK OF PUNJAB LTD., INDIAN EXPRESS BUILDING, KALOOR, KOCHI-17. * THE NAME AND ADDRESS OF THE PETITIONER IS SUBSTITUTED AS ''M/S HDFE BANK LTD., REPRESENTED BY BINOD P., ASSISTANT VICE PRESIDENT (LEGAL). HDFE BANK LTD., LEGAL DEPARTMENT, INDIAN EXPRESS BUILDING, KALOOR, KOCHI-17. AS PER ORDER DATED 24/3/09 IN IA 3579/09. BY ADV. 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. COMMISSIONER OF LAND REVENUE, GOVERNMENT OF KERALA, THIRUVANANTHAPURAM. 3. THE DISTRICT COLLECTOR, KOTTAYAM. 4. THE TAHSILDAR (REVENUE RECOVERY), KOTTAYAM. 5. M/S.MATHA AGENCIES, A PARTNERSHIP FIRM, REPRESENTED BY ITS PARTNER SRI.MATHUKUTTY CHACKO, KARUVELITHARA BUILDINGS, KODIMATHA, KOTTAYAM- 686 039. 6. M/S.MATHA DISTRIBUTORS, A PARTNERSHIP FIRM, REPRESENTED BY ITS PARTNER SRI.MATHUKUTTY CHACKO, KARUVELITHARA BUILDINGS, KODIMATHA, KOTTAYAM-686 039. (CONTD.........) 7. M/S.MATHA FLAMES (LUBES DIVISION), REPRESENTED BY ITS PROPRIETOR SRI.MATHUKUTTY CHACKO, KARUVELITHARA BUILDINGS, KODIMATHA, KOTTAYAM-686 039. 8. M/S.MATHA FLAMES (L.P.G.DIVISION), REPRESENTED BY ITS PROPRIETOR SRI.MATHUKUTTY CHACKO, KARUVELITHARA BUILDINGS, KODIMATHA, KOTTAYAM-686 039. 9. SMT.MARIAMMA CHACKO, KARUVELITHARA BUILDINGS, KODIMATHA, KOTTAYAM-686 039. 10. SALES TAX OFFICER, KOTTAYAM. R1 TO R4 & R10 BY GOVERNMENT PLEADER ADV.SRI.K.P. PRADEEP THIS WRIT PETITION (CIVIL) HAVING BEEN FINALLY HEARD ON 02/09/2010, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING: WP(C) NO.37480/2007-J APPENDIX PETITIONER'S EXHIBITS: P1 COPY OF THE RELEVANT PAGE OF THE TITLE DEED REGISTER MAINTAINED BY THE BANK IN THE ORDINARY COURSE OF ITS BUSINESS DATD NIL. P2 COPY OF THE LETTER EVIDENCING CREATION OF EQUITABLE MORTGAGE IN RESPECT OF THE PROPERTY EXECUTED BY THE NINTH RESPONDENT IN FAVOUR OF THE BANK DATED 18/10/1995. P3 COPY OF THE COMMUNICATION SENT BY THE THIRD RESPONDENT TO THE DEPUTY GENERAL MANAGER OF THE LORD KRISHNA BANK DATED 27/2/2003. P4 COPY OF THE CLAIM PETITION PREFERRED BY LORD KRISHNA BANK LTD DATED 5/3/2003. P5 COPY OF THE ORDER PASSED BY THE DISTRICT COLLECTOR DATED 10/5/2003. P6 COPY OF THE ORDER PASSED BY THE COMMISSIONER OF LAND REVENUE, THIRUVANANTHAPURAM DATED 23/2/2004. P7 COPY OF THE REPRESENTATION SUBMITTED BEFORE THE DISTRICT COLLECTOR, KOTTAYAM DATED 18/10/2007. P8 COPY OF THE COMMUNICATION ISSUED BY THE SECOND RESPONDENT DATED 16/11/2007. RESPONDENT'S EXHIBITS: NIL /TRUE COPY/ P.S.TO.JUDGE sts P.R. RAMACHANDRA MENON, J. .............................................................................. W.P.(C) No. 37480 OF 2007 ......................................................................... Dated this the 2nd September, 2010 J U D G M E N T The petitioner Bank is before this Court, stated as being aggrieved of the steps taken by the revenue authorities by proceeding against the property belonging to the 9th respondent, who is a partner of the 6th respondent firm, seeking to realise the liability of the respondents 5, 7 and 8 firms, which, according to the petitioner, is not correct or proper as the said property is one over which mortgage rights have been created in favour of the petitioner Bank and further that there is absolutely no connection whatsoever for the 9th respondent with the firms R5, R7 and R8, whose liability is not liable to be enforced against the 9th respondent . 2. The main point of dispute between the petitioner Bank and the first respondent State is with regard to the right of recovery against the properties of the 9th respondent and priority rights, if any, in this regard. The case, as projected in the Writ Petition, is that the respondents 5 to 8 had obtained W.P.(C) No. 37480 OF 2007 2 various loans from the petitioner Bank, for which, the property belonging to the 9th respondent was offered as security, creating mortgage on 18.10.1995. Since the borrower turned to be defaulter, the Bank proceeded with steps originally under the Recovery of Debts Due to Banks and Financial Institutions Act,. 1993 and then followed by SARFAESI Act issuing notices under the relevant provisions of law as early as on 02.12.2002 demanding a sum of Rs. 65 lakhs. So as to facilitate taking over possession of the property, the petitioner filed an application under Section 14 of the SARFAESI Act before the District Magistrate. However, without involvement of the Magistrate, the property could be peacefully taken over by the Bank. 3. When the Bank was about to proceed with further steps, the third respondent informed the petitioner as per Ext.P3 letter that there was an attachment over the property on16.09.2002. Met with the situation, the petitioner preferred Ext. P4 claim petition under Section 46 of the Revenue Recovery Act . However it was rejected as per Ext. P5 issued by the third respondent stating that the mortgage was not proved, which W.P.(C) No. 37480 OF 2007 3 made the petitioner to file a Revision before the Commissioner for Land Revenue, as provided under Section 83(1) of the Kerala Revenue Recovery Act . After considering the case, the Commissioner for Land Revenue passed Ext. P6 order upholding the priority rights of the Government to realise sales tax arrears in preference to the rights and claims of the Bank, giving necessary instructions to the third respondent /District Collector. 4. The learned Counsel for the petitioner/Bank fairly concedes that the rights and liberties of the State to recover sales tax arrears due to the State is on a 'priority basis' and this being the position, the petitioner does not intend to challenge Ext. P6 order any further, in this regard. However, the learned Counsel further submits that the property exclusively belongs to 9th respondent, who was the partner of M/s Matha Distributors alone , i.e. the 6th respondent herein and was never a partner in the other institutions who are shown as respondent Nos. 5, 7 and 8 respectively. This being the position, the revenue authorities are not justified in proceeding against the property of the 9th respondent in respect of the liability, if any, W.P.(C) No. 37480 OF 2007 4 of the respondents 5, 7 and 8, towards the alleged sales tax arrears, plainly for the reason that she did not have any connection whatsoever with such establishments and hence that the petitioner is entitled to get back the excess amounts pursuant to the revenue sale, after setting off the liability of the 9th respondent in respect of the 6th respondent firm and that alone. It is with this intent, that the petitioner has preferred Ext. P7 petition before the third respondent. However, without properly analysing the reliefs sought for therein, Ext. P8 reply has been issued by the second respondent stating that the Department/Revenue is having 'priority rights', which made the petitioner to approach this Court by filing this Writ Petition. 5. The respondents have filed a statement and counter affidavit producing copies of some documents referred to as Annexures- 1 to 3 along with the statement ( which are same as Exts. R3(a) to R3(c) produced along with the counter affidavit.). The learned Government Pleader, with reference to Ext.R3(a) Mahazar and the subsequent sale notice produced and marked as Ext.R3(b), submits that the total liability has gone up to Rs. W.P.(C) No. 37480 OF 2007 5 1,36,77,376/-. However, the observations in Ext.R3(a) mahazar show that the amount was mainly due from M/s Matha Flames (7th and 8th respondents), with which the 9th respondent ( whose property is being proceeded against) prima facie does not have any connection whatsoever, as contended by the petitioner. This vital aspect, particularly with regard to the link of the 9 th respondent with the respondents 5, 7 and 8 has not been considered or dealt with by the third respondent in any of the proceedings produced before this Court. It is also brought to the notice of this Court that, during the pendency of the above proceedings, the sale of the concerned property was held and the amount procured therefrom is stated as retained in the District Treasury and the prayer made by the petitioner in Ext.P7 is to release the balance amount, after realising the actual amount by virtue of 'priority rights' of the Department, by virtue of mortgage rights created over the property in connection with the loan transaction. 6. The learned Counsel submits that the statement and the counter affidavit filed from the part of the concerned W.P.(C) No. 37480 OF 2007 6 respondents do not reveal the above factual particulars, especially with regard to the extent of liability of the 6th respondent, so as to confine the relief or apportion the liability and the involvement of the 9th respondent and her connection with the other firms. It is also found that eventhough the concerned Sales Tax Officer was impleaded as the 10th respondent, no counter affidavit has been filed from the part of the said respondent with regard to the specific plea/claim raised by the petitioner, to limit the liability based on the priority rights. 7. In the above circumstance, this Court finds that the matter requires to be considered by the third respondent, to fix the actual extent of liability of the 6th respondent firm and to what extent, the property of the 9th respondent could be proceeded against, if she is not having any connection with the respondents 5, 7 and 8. Accordingly, the third respondent is directed to re-consider Ext. P7 application preferred by the petitioner Bank in accordance with law and pass appropriate orders therein, with reference to the specific points raised W.P.(C) No. 37480 OF 2007 7 therein, after giving an opportunity of hearing to the petitioner as well as to the requisitioning authority/10th respondent as the case may be. The proceedings shall be finalised as above, as expeditiously as possible, at any rate within 'six weeks' from the date of receipt of a copy of the judgment. If it is found that the 9th respondent is not a partner of the respondents 5, 7 and 8 firms, the priority rights in respect of the arrears of sales tax to be satisfied by the said respondents shall not be sought to be enforced against the property of the 9th respondent, on which event, the balance amount procured in the sale, after appropriating the liability in respect of the 6th respondent firm, shall be caused to be released to the petitioner within two months thereafter. The Writ Petition is disposed of as above. P.R. RAMACHANDRA MENON, JUDGE. lk