Lekshmi Enterprises and ors. Vs. State of Kerala and ors. - Court Judgment

Excerpt:
- state financial corporation act, 1951[c.a. no. 63/1951. sections 29 & 31: [k.s. radhakrishnan, thottathil b. radhakrishnan & m.n. krishnan, jj] recovery of loan amount held, once industrial concern commits default in repayment of the loan or advance made by the financial corporation and under a liability, the right of the corporation to invoke section 29 of the act accrues and it is open to the corporation to realise the entire loan advanced to the industrial concern not only from the properties of the industrial concern but also from the properties pledged or mortgaged b y the sureties for the loan advanced by the corporation. section 29 is a complete code by itself. liability of principal-debtor and surety is always joint and co-extensive. [n. narasimhaiah v karnataka state.....orderv. giri, j.1. the petitioners challenge exts. p6 and p7 notices issued under the revenue recovery act (for short ('the rr act') demanding an amount of rs. 20,13,87,103/-with interest at 19.75% per annum with effect from 1-8-2006 as also collection charges at 5.5%. the notices under the rr act are under challenge in this writ petition inter alia on the ground that the provisions of the rr act cannot be invoked for recovery of amounts due from the petitioners at the instance of the 3rd respondent. the 3rd respondent is a new generation bank, and it is not in the public sector. the petitioners challenge the notices under the rr act on more than one ground.2. it is firstly contended that the 3rd respondent, has already approached the debt recovery tribunal, ernakulam in o.a. no. 227/06......

Judgment:
ORDER

V. Giri, J.

1. The petitioners challenge Exts. P6 and P7 notices issued under the Revenue Recovery Act (for short ('the RR Act') demanding an amount of Rs. 20,13,87,103/-with interest at 19.75% per annum with effect from 1-8-2006 as also collection charges at 5.5%. The notices under the RR Act are under challenge in this writ petition inter alia on the ground that the provisions of the RR Act cannot be invoked for recovery of amounts due from the petitioners at the instance of the 3rd respondent. The 3rd respondent is a new Generation Bank, and it is not in the public sector. The petitioners challenge the notices under the RR Act on more than one ground.

2. It is firstly contended that the 3rd respondent, has already approached the Debt Recovery Tribunal, Ernakulam in O.A. No. 227/06. It is then contended that the 3rd respondent has also invoked the provisions of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act [Act 54/02] {for short 'Securitisation Act'} and in exercise of the powers under Section 13(4) of the Securitisation Act, some of the mortgaged properties have been taken possession of by the 3rd respondent. At the same time, the impugned notices under the RR Act have been issued for recovery of amounts due to the Bank. The petitioners contend that it is not open to the 3rd respondent to prosecute 3 parallel remedies at the same time under the Recovery of Debts (Due to Banks and Financial Institutions) Act, the Securitisation Act and under the RR Act.

3. It is then contended by the petitioners that the amounts due to the 3rd respondent cannot be recovered by recourse to the provisions of the RR Act, as the provisions of the RR Act can be invoked only for amounts comprehended by the notification issued under the RR Act declaring recovery of certain categories of amounts due to banks and financial institutions as recoverable under the provisions of the said Act. Reference in this regard is made to the decision of the Supreme Court in Califfs India Chambers v. Syndicate Bank : AIR1999SC2637 .

4. I heard learned Counsel for the petitioners Sri. Sreelal Warrier, learned Counsel for the 3rd respondent Sri. K.K. John and Mr. Mathew George Vadakkel, Senior Government Pleader.

5. Learned Counsel for the petitioners submits that it is not open to the 3rd respondent to prosecute the three remedies under the three Acts for recovery of the same amount simultaneously. Reference in this regard is made to the judgment of a learned single Judge of this Court reported in Sheriff v. State of Kerala : 2005(1)KLT873 .

6. Mr. John, on the other hand, submits that the right available to a bank or financial institution to prosecute the remedies under the Securitisation Act on the one hand, and the Recovery of Debts Due to Banks and Financial institutions Act [Act 51/93 {for short 'DRT Act')] is recognised by the Supreme Court in the decision reported in Transcore v. Union of India : AIR2007SC712 .

7. Normally, the validity of the proceedings under the RR Act will have to be judged with reference to the provisions of the enactment. Is there anything in the enactment which stands in the way of the creditor seeking recovery of amounts due from a defaulter, which is otherwise recoverable by recourse to the provisions of the RR Act, merely because the creditor has already taken steps either under the DRT Act or under the Securitisation Act for recovery of the same amount? A perusal of the provisions of the RR Act will show that there is no statutory bar in proceeding under the RR Act for recovery of amounts, which are otherwise due, in terms of the provisions of the RR Act. If the amount, which is sought to be recovered, comes under the category of public revenue due under the RR Act within the meaning of Section 2(j) of the Act and if the person is a defaulter within the meaning of Section 2(e) of the Act, then the provisions of the RR Act could be invoked for recovery of such amounts. I may hasten to add, at this stage, that this opinion is being expressed in the context of considering the jurisdiction of officials under the RR Act to proceed under the provisions of the said enactment. If there are objections against the attachment of any particular property for variety of reasons; either that there is Imperfect title to the property; or that the property is not otherwise available for attachment; or that an attachment of the property and a process against the same is not warranted for any reason, then such objections by the defaulter could be gone into by the officials under the RR Act in the first instance. Such objections could be raised under Section 34(2) of the RR Act, where there is an objection on the part of the defaulter that the claim of arrears wholly or in part thereof is not due. In such a case, the authority concerned can lift the attachment of the properties. The second stage at which such objections could be raised by the defaulter is at the stage under Sections 46 and 47 of the Act. Section 47 deals with release of attachment at the instance of parties, who may legitimately pursue an objection to the property under attachment, which is not liable for such attachment for recovery of amounts from the defaulter, for the reason that the property does not belong to the defaulter. Under Section 47, persons interested in the land are entitled to obtain release from the attachment by discharging the claim of arrears for recovery of which, the provisions of the RR Act was initiated in the first instance. The right to object under Section 34(2) of the Act and the right available under Sections 46 and 47 of the Act is meant to be exercised not in derogation of the jurisdiction of the officials who enforce the provisions of the RR Act, but in acceptance of the same. Essentially, under Section 34(2) of the Act if objections are received, the Collector or the authorised officer, shall enquire into the objection and record a decision. In other words, in a case where there is an objection on the premise that there is no amount as such due from the defaulter to the Government or the requisitioning authority, as the case may be, it must be enquired into by the Collector or the authorised officer.

8. On a conspectus of the provisions of the RR Act, one will, therefore, have to come to the conclusion that there is no express provision in the Act standing in the way of proceedings under the said Act being enforced, for recovery of amounts due to a bank like the 3rd respondent for the reason that the said bank has already invoked the provisions of the DRT Act or the Securitisation Act, as the case may be.

9. Then the question is whether the power of initiation and continuance of the proceedings under the RR Act are impliedly barred by the totality of the scheme under the RR Act.

10. As stated above, learned Counsel for the petitioners relied on the decision in Sheriff v. State of Kerala : 2005(1)KLT873 to contend for the position that recourse to the provisions of the RR Act and recourse before a Civil Court which are parallel remedies, are mutually exclusive and therefore, recourse to one remedy would impliedly bar recourse to the other. This Court considered the applicability of the doctrine of election in the context of execution levied by a creditor, on a decree passed by a civil Court and prosecution of the execution proceedings on one hand and simultaneous proceedings under the RR Act. This Court found that the proceedings before the civil Court and proceedings under the RR Act are not mutually exclusive and therefore recourse to one does not impliedly bar the recourse to the other. After observing so, this Court observed so in paragraphs 4 and 5 of the said judgment.

Though this decision was referred to in State Bank of India's case 1998 (2) KLT 138, the principle laid down in the Supreme Court decision was not specifically adverted to. While accepting the fact that it is open to the bank to proceed under the Revenue Recovery Act and it will not prevent the Bank from proceeding to take recourse to such ready merely because they filed an execution petition, at the same time they cannot simultaneously proceed with two parallel proceedings. It is open to the Bank to abandon or give up either of the two courses open to them and to confine to the one unless either of the two proceedings have come to a finality.

In the present case admittedly the execution petition is still pending. Therefore, it is open to the Bank either to withdraw the execution petition and to recover the amount under the Revenue Recovery Act or to give Up the revenue recovery proceedings until the execution proceeding is culminated.

11. What was interdicted, therefore, was a prosecution of the execution petition and simultaneous prosecution of the proceedings under the RR Act. In my view, the stage, which was considered by this Court in the case of Sheriff has obviously not reached in the present case and the proceedings be fore the Debl Recovery Tribunal are at the stage of pre-trial. There is no decree or a certificate which could lend itself to a process of execution. The fact that the bank has invoked its power as a mortgagee and a financial institution by instituting an application before the Debt Recovery Tribunal by itself cannot result in the bank being estopped or otherwise disabled in law from seeking to recover the amounts due to the bank from the same person by resort to the provisions of the RR Act. (This is, of course, subject to the finding that the RR Act is otherwise available to the bank for recovery of the amounts in question. The said aspect will be dealt with later). In my view, the principle laid down by this Court in the case of Sheriff does not have any application, and cannot be applied to the facts of this case.

12. The applicability of the doctrine of election to a simultaneous prosecution of remedies available to the creditor under more than none enactment has been considered by the Supreme Court in Transcore v. Union of India : AIR2007SC712 . The argument on the question of doctrine of election was rejected by the Supreme Court in the following terms:

In any event, there is no repugnancy nor inconsistency between the two remedies, therefore, the doctrine of election has no application.

13. The question is whether the principle is different in a case where the provisions of the RR Act are also invoked, at a point of time when a creditor has already invoked the provisions of the two enactments mentioned therein.

14. As noted above, there is no express, bar in the provisions of the RR Act referable to the prosecution of any proceedings under the DRT Act or the Securitisation Act. Does, any provision under the RR Act spell out a case of mutual exclusion of the remedy under the RR Act and the remedy available to the bank under the DRT Act and Securitisation Act? Are there any provisions in the three enactments which contemplate a collision between any one or more of the provisions at the stage of invocation of the same or at the stage of enforcement of the same? Whether any right available to a defaulter, vis-a-vis his personal assets or the mortgaged properties get detrimentally affected. If a creditor fakes recourse to the provisions of the RR Act, notwithstanding the invocation of the provisions of the DRT Act or the Securitisation Act? Is a creditor obliged to abandon his remedy under the above mentioned enactments seeking recourse to the provisions of the RR Act? In my view, if the answer to the above questions are in the affirmative, then, the contention of the petitioners requires to be accepted. But, in my view, there is nothing in the three enactments aforementioned, which could spell out the case of mutual exclusion in the operation of the three enactments thereby necessitating the creditor to express his intention to abandon the remedy under any one of the enactments before proceeding under the other two enactments.

15. In the circumstances, the doctrine of election is not available to the petitioners with a view to deter the 3rd respondent from invoking the provisions of the RR Act, merely for the reason that the 3rd respondent has exercised his right as a mortgagee under the Securitisation Act and as a bank under the provisions of the DRT Act. I am unable to accept the contentions of the petitioners in this regard.

16. Learned Counsel for the petitioners then contends that going by notification SRO 1465/87 issued under Section 71 of the RR Act, the provisions of the Act are available to recover only such amounts which are due from a person on account of any loan advanced by that bank under various development schemes. Reference in this regard is made to the decision of the Supreme Court in Califfs India Chambers v. Syndicate Bank : AIR1999SC2637 . The argument would have merited acceptance but for the fact that the notification itself stood amended in 1999. The phrase 'development scheme' as defined therein, has been amended to include all priority sector advances with effect from 30-7-1999.

17. Mr. John, learned Counsel for the 3rd respondent submits that advances availed of by the petitioners are: The advances made to a small scale industry and such advances are classified as priority sector advances. There is no contra assertion by the petitioners to the aforementioned factual assertion by the 3rd respondent.

18. The advances availed by the 1st petitioner would consequently be covered by the 'priority advances' as occurring in SRO 1465/99. In that view of the matter, it cannot be said that the initiation of the proceedings under the RR Act, is without jurisdiction.

19. In the ultimate analysis, though no doubt, the question of jurisdiction may have to be decided with reference to the express provisions contained in the enactment, it would not be justified to lose sight of the fact that what is sought to be done by the creditor, who might get desperate, in circumstances where the total outstanding is above Rs. 20 crores, is to take steps, as are available under law, for effecting such recovery as far as possible, the DRT Act, Securitisation Act and the RR Act are essentially intended to enable recovery of amounts by the creditor as against the recalcitrant defaulter. Unless one is in a position to come to conclusion on a conspectus of the provisions of the enactments that a real prejudice would be caused to the debtor by subjecting himself to the process under one enactment while simultaneous proceedings are there under another enactment, it would not be possible to seriously consider the case of any prejudice to the extent of justifying restraint of a creditor from prosecuting a remedy, which is otherwise available to him legitimately under the provisions of an enactment. What could be the prejudice that the petitioners may have, if they are subjected to the provisions of the RR Act merely by reason of the pendency of the proceedings under the Securitisation Act or the DRT Act. After all, if on culmination of the proceedings under any one enactment, the debt stands discharged, it is open to the creditor not to continue the proceedings prosecuting his remedies under the other enactment. Since the mortgaged properties are accessible under all the three enactments, if proceedings are taken against the mortgaged property under one enactment, the possibility of any prejudice being caused to the debtor merely by reason thereof may not really arise for consideration. At the same time, if any one of the properties, not liable for attachment, are attached under the provisions of the RR Act, then it is always open to the defaulter, to assert his right under the provisions of the RR Act, and seek an exemption from such attachment. In other words, the rights which are available to the defaulter under the RR Act qua any properties belonging to him or qua any properties in which he has any Interest are neither diluted nor forfeited, merely because the creditor has, taken recourse to the DRT Act or the Securitisation Act, as the case may be.

20. For all these reasons, I do not find any merit in the writ petition and the same is, therefore, dismissed.