SCARIA JOSEPH v. THE DISTRICT MANAGER, KERALA FINANCE CORPORATION & Ors.

C.K. ABDUL REHIM, J.-------------------------------------------------W.P.(c) Nos. 19324, 27897 OF 2010------------------------------------------------- DATED THIS THE 20th DAY OF SEPTEMBER, 2012J U D G M E N TThe 1st petitioner in W.P (c) No.27897/2010 had availed3 distinct loans from the respondent Corporation. The 2ndpetitioner in that writ petition is the guarantor to the loantransaction. The loan was availed by mortgaging immovableproperty belonging to the petitioner in W.P (c) No.19324/2010 and also the properties of the 2nd petitioner inW.P (c) No.27897/2010. The petitioner in both these casesare challenging the revenue recovery steps initiated forrealisation of amounts defaulted in the loan accounts.2.The revenue recovery proceedings is impugnedmainly on the ground that it is barred by limitation.Petitioners relied on the decision of the hon'ble SupremeCourt in State of Kerala V. V.R. Kalliyanikutty andanother ((1999) 3 SCC 657). On the facts it is contendedthat the 1st installment with respect to the 3 loans becamedue on 10-10-1992, 01-12-1992 and 10-09-1993,respectively. Therefore the period prescribed under the W.P.(c) Nos.19324, 27897/2010-2-Limitation Act has to be computed from those datesonwards. Hence the debt remains time barred as on thedate of initiation of the revenue recovery, on the date ofrequisition, i.e., on 10-09-2009, is the contention. Thepetitioner in W.P (c) No.19324/2020 had raised a furthercontention that no equitable mortgage has been createdbecause the deposit of title deed was made at Kattapana,which is a place not notified under Section 58 (f) of theTransfer of Property Act. Therefore it is contended that thelimitation period is governed only by Article 19 of theLimitation Act, 1963. Yet another dispute raised isregarding quantification of penal interest. Referring toClause 22 of Ext.P1 list it is contended that penal interestcould not be charged on the amount of interest accrued, butit is leviable only on the defaulted principal amount.3.The contentions were stiffly opposed throughstatement filed on behalf of the respondent Corporation. Itis stated that the period of limitation will start only from thedate on which the loans were recalled. Even as per theschedule of re-payment prescribed under the loan W.P.(c) Nos.19324, 27897/2010-3-agreement, the last installments will fall due only in theyears 1997 and 1998. It is further stated that, on the defaultcommitted by the petitioners the respondent Corporationhad initiated proceedings under Section 29 of the StateFinancial Corporation Act, on 21-05-1999 and 15-02-2000respectively and the properties mortgaged were put to saleunder those proceedings on 19-09-2001 and 10-12-2003.Relying on Section 14 of the Limitation Act it is contendedthat the period during which the proceedings under Section29 was pending need to be excluded while computing theperiod of limitation. The proceedings under the SFC Actcould not be pursued because of a subsequent decision ofthe hon'ble Supreme Court in Karnataka State FinancialCorporation V. N. Narasimhaiah ((2008) 5 SCC176) wherein it was declared that the provisions underSection 29 cannot be applied with respect to a guarantor tothe loan transaction. The respondent Corporation had reliedon Clause 52 of the loan sanctioning letter (Ext.P2) in orderto content that the amount in the loan transaction willbecame due only on recalling of the loans. It is also pointed W.P.(c) Nos.19324, 27897/2010-4-out that the petitioners have instituted a suit as O.S.No.60/1997 before the Sub Court, Kattapana challengingthe recovery proceedings initiated and the said suit wasdismissed only during the year 2003. Hence it is contendedthat the petitioners are not entitled to dispute the liabilityon the basis of the question of limitation.4.While considering the rival contentions, thequestion called upon to be decided is as to whether theimpugned revenue recovery proceedings is unsustainableon the basis that the debt is barred by limitation. First of allit is evident that the debt is created on the basis of anequitable mortgage. Even though the petitioner hadcontended that deposit of title deeds will not constitute anequitable mortgage, counsel for the respondent Corporationhad produced SRO No.1516/1981 dated 29-12-1981, whichis a notification under Section 58 (f) of the Transfer ofProperty Act including the limits of Kattapana GramaPanchayat wherein equitable mortgage can be created bydeposit of the title deeds. Hence it is evident that the periodof limitation applicable with respect to the debt in question W.P.(c) Nos.19324, 27897/2010-5-is the period prescribed under Article 62 of the LimitationAct, which is a period of 12 years.5.The next question is as to from which date thelimitation of 12 years has to be computed. Learned counselfor the petitioners had placed much reliance on Clause 15 ofthe loan agreement which says that, the principal sumremaining un-discharged with the borrower and interestand all other moneys payable to the Corporation shallbecome forthwith due and payable on re-payment of anyinstallment being unpaid on the due dates. The said clausegive right to the Corporation to require the borrower todischarge the liabilities in full, by issuing notice in writing.In the case at hand there is no material to show that theCorporation had exercised such right and recalled the loansand required the borrower or the guarantor to remit theentire amount. Sri. Raju K. Mathews learned counsel for thepetitioner in W.P (c) No.19324/2010 contended that, Ext.P4notice issued by the respondent Corporation on 17-11-1994will amount to recalling the loans and demand for paymentof the entire amounts. On going through contents of Ext.P4, W.P.(c) Nos.19324, 27897/2010-6-this court do not finds any statement to the effect that theCorporation had recalled the loan accounts and requiredthe defaulters to make payment of the entire amounts.Since the petitioners had failed in proving through anyacceptable materials that the facility under the loanaccounts were recalled in exercise of Clause 15 and thepetitioners were required to make payment of the entireprincipal amount and interest due, on any date prior to thedue date of payment of last installments, I am notpersuaded to accept the contentions raised in this regard.Therefore it is evident that the limitation period prescribedunder Article 62 of the Limitation Act will run in the normalcourse only from the date stipulated for payment of the lastinstallment, which evidently fall in the year 1998.6.Further question is with respect to theapplicability of exclusion provided under Section 14 of theLimitation Act, 1963. It provides that, in computation of theperiod of limitation, time spend during which the plaintiffhas been persecuting another civil proceedings before anycourt of law with due diligence and good faith shall be W.P.(c) Nos.19324, 27897/2010-7-excluded. Factual matrix reveals that proceedings underSection 29 was initiated in the year 1999 & 2000 and theproperties were put to auction during the year 2001 &2003.Subsequently the said proceedings were not pursued on thebasis of law declared by the hon'ble Supreme Court in theyear 2008. Further, it is evident that the petitioners haveinstituted a civil suit in the year 1997, which continued tillthe year 2003. Hence, question arises as to whether thoseproceedings will fall within the purview of Section 14 and asto whether the period spend to prosecute those proceedingscan be excluded. Sri. Raju K. Mathews had relied on adecision of the hon'ble Supreme Court in ConsolidatedEngineering Enterprises V. Principal Secretary,Irrigation Department and others ((2008) 7 SCC 169).It is held therein that Section 14 of the Limitation Act willapply only on satisfaction of certain conditions enumeratedthereunder. The hon'ble Supreme Court observed thatSection 14 will apply only if both the proceedings are in acourt of law. Contention of the petitioners is that Section 29proceedings was not initiated and prescribed not with due W.P.(c) Nos.19324, 27897/2010-8-diligence and not in good faith. Per contra, learned counselfor the respondent Corporation contended thatunsustainability of the proceedings against guarantors inthe loan transaction was declared only through a decisionrendered in the year 2008, whereas the proceedings wasinitiated in the year 1999 itself and it was diligentlyprosecuted proclaiming sale of the mortgage property, evenin the year 2003. Another contention is that, since theimpugned revenue recovery proceedings is not aproceedings initiated before a court of law, the provisions ofSection 14 cannot apply. But it is evident that the KeralaRevenue Recovery Act under which the recoveryproceedings is initiated, does not prescribe any time limit.There is no limitation with respect to the method ofrecovery. The legal dictum laid in Kalliyanikutty's case(cited supra) is only to the effect that a time barred debtcannot be recovered by resorting to procedure prescribedunder the Revenue Recovery Act. Therefore thefundamental question which is to be decided is as towhether the debt remained time barred as on the date of W.P.(c) Nos.19324, 27897/2010-9-initiation of the revenue recovery steps. It is settled law thatthe date of initiation of the revenue recovery proceedings isthe date of requisition, which in this case is on 20-09-2009.Therefore the crucial question as to whether the debtremained time barred as on 20-09-2009, is to be answeredon the negative based on the findings rendered as above.Therefore I am not inclined to accept the contentions raisedin challenge of the impugned recovery steps on the basis ofthe question of limitation.7.Challenge against the quantum of amount soughtto be recovered based on the dispute with respect tocomputation of interest, is not a matter which can beadjudicated in a writ petition instituted under Article 226 ofthe Constitution of India. Correctness of such computationis left open for challenge by the petitioners in appropriateproceedings. I am also inclined to observe that thepetitioners will be at liberty to invoke benefit of 'One TimeSettlement' scheme if any prevailing, formulated by therespondent Corporation with respect to settlement ofdefaulted loan accounts.Considering the fact that the loan W.P.(c) Nos.19324, 27897/2010-10-accounts pertains to the year 1992 and the account isremaining defaulted for a considerable period, it may be acase where the liability for payment of the interest will runmany folded than the principal amount availed. Therefore Iam of the opinion this is a fit case where waiver of interestto the possible extent can be considered by the respondentCorporation, in order to facilitate the petitioners to wipe offtheir liabilities. Therefore if any approach in view of thesettlement of the loan account is made by the petitioners,the competent authority under the respondent Corporationshall consider the same and shall take appropriate decisionat the earliest possible.8.In the result the writ petitions are dismissedreserving liberty to the petitioners with respect to mattersas observed above.Sd/-C.K. ABDUL REHIM, JUDGE.AMGTrue copy P.A to Judge