A.B.Elezabeth vs Thuravoor Grama Panchayath
2021 Latest Caselaw 15001 Ker

W.P.(C) No. 378/2011                :1:



                                                             CR

                 IN THE HIGH COURT OF KERALA AT ERNAKULAM

                                  PRESENT

                  THE HONOURABLE MR. JUSTICE SHAJI P.CHALY

          FRIDAY, THE 16TH DAY OF JULY 2021 / 25TH ASHADHA, 1943

                            WP(C) NO. 378 OF 2011

PETITIONER:

              A.B.ELEZABETH, W/O. K.T. ANTONY,
              KURISINGAL HOUSE, KOKUNNU, MOOKKANNUR P.O.,, ERNAKULAM.
              BY ADVS.
              SRI.T.K.VENUGOPALAN
              SRI.SHIBU JOSEPH


RESPONDENT:

              THURAVOOR GRAMA PANCHAYATH
               REPRESENTED BY ITS SECRETARY, THURAVOOR P.O., ANGAMALY,,
              ERNAKULAM, PIN-683 586.
              BY ADV SRI.C.A.CHACKO



      THIS WRIT PETITION (CIVIL) HAVING BEEN FINALLY HEARD ON 16.07.2021,

THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING:
 W.P.(C) No. 378/2011              :2:


                Dated this the 16th day of July, 2021.

                              JUDGMENT

This writ petition is filed by the petitioner who was formerly a

Head Clerk of the Thuravoor Grama Panchayat, the respondent herein,

for the period from 01.12.1999 to 07.08.2007, seeking to quash Ext.

P4 demand notice raised by the Secretary of the Thuravoor Grama

Panchayat dated 04.07.2005 directing the petitioner to remit an

amount of Rs. 16,049/- with interest, failing which it was cautioned

that without further notice, recovery action would be initiated. It is

clear from Ext.P4 that the amount demanded was on account of the

excess payment made by the petitioner to Conveners of two

beneficiary committees, found out as per the report of the Local Fund

Audit Authority for the period from 2000-2001 and 2001-2002.

Petitioner also seeks to quash Ext. 11 revenue recovery demand notice

issued by the Secretary of the respondent Grama Panchayat seeking

to recover an amount of Rs. 36,298/- towards the amount specified

above, interest of Rs.20,222/- and other charges.

2. Brief material facts for the disposal of the writ petition are as

follows:

The petitioner retired from the service on 31.07.2002. The

Secretary of the Panchayat issued a communication dated 08.11.2004

to the petitioner that steps should be taken to avoid the local fund

audit objections contained at paragraphs 11 and 13 of the Local Fund

Audit Report for the year 2000-2001 and 2001-2002. Apparently, the

petitioner submitted an objection to the Secretary and requested the

Secretary to adjust any excess amount paid in the final bills submitted

before the Panchayat and the alleged amount can be recovered from

the Conveners accordingly. Other objections were also raised.

3. The case of the petitioner is that the amount paid by the

petitioner was on the basis of certification of the Engineer in the

measurement book, which cannot be found fault with against the

petitioner, since the petitioner being the executive head was liable to

pay the bill prepared by the engineering wing. Other contentions are

also raised.

4. The material contention raised by the petitioner is that the

recovery sought against the petitioner by the Secretary of the Grama

Panchayat is not in accordance with law, since a procedure is

contemplated for the audit of accounts under Section 215 of the Kerala

Panchayat Raj Act, 1994 ('Act, 1994'), the Kerala Local Fund Audit Act,

1994 ('Audit Act, 1994' for short) and the Kerala Local Fund Audit

Rules, 1996 ('Rules, 1996' for short). That apart, it was contended

that the amounts sought to be recovered as per the demand notice

issued by the Secretary is barred by limitation by virtue of the

provisions of Section 215 of the Act, 1994, the Audit Act, 1994 and the

Audit Rules, 1996.

5. That apart, at the time of arguments, the learned counsel for

the petitioner also submitted that the demand raised and the

consequential recovery is barred by limitation, in view of Section 243

of the Kerala Panchayat Raj Act 1994, since only a period of three

years is available from the date on which the distraint might first have

been made, a suit might first have been instituted or the prosecution

might first have been commenced, as the case may be, in respect of

such tax or sum.

6. Therefore, according to the petitioner, the action of the

Secretary of the Grama Panchayat is illegal and arbitrary, liable to be

interfered with by this Court exercising the power of discretion

conferred under Article 226 of the Constitution of India.

7. The Secretary of the Panchayat has filed a counter affidavit

basically submitting that as per the audit reports for the years 2000-

2001 and 2001-2002, the petitioner, while she was having additional

charge of Secretary of the Panchayat from 08.03.2001 to 02.06.2001

paid excess amount to the Convener who executed the work of

protection wall of a pond namely Thazhathuveettilkulam and an excess

amount of Rs.11,515/- to the Convener, who executed the work of

Kalluvalam LI Scheme. It was also contended that since no

satisfactory explanation was given by the petitioner to the audit

report, the Panchayat issued a notice dated 04.07.2005 requiring her

to pay Rs.16049/- with interest; however, no amount was paid by the

petitioner. Subsequently, the Deputy Director of Panchayats,

Ernakulam, as per Ext.R(a) communication dated 08.09.2006, required

the Panchayat to recover the amount and inform the same to the said

office, and later as per Ext. R(b) communication dated 06.12.2006, the

Director of Panchayats required the Secretary to show cause as to why

action was not taken against the petitioner. Therefore, according to

the Secretary of the Grama Panchayat, the Secretary was justified in

initiating action against the petitioner and he seeks dismissal of the

writ petition.

8. I have heard, Sri. Shibu Joseph appeared for the petitioner

and Sri. C.A. Chacko appeared for the Thuravoor Grama Panchayat,

and perused the pleadings and the entire materials on record.

9. The discussion of facts made above would make it clear that

the paramount contention advanced by the petitioner against the

recovery is on the basis of the illegalities on the part of the audit

authorities as is contemplated under Section 215 of the Act, 1994

dealing with accounts and audit. According to the petitioner, the

Panchayat Secretary has issued a notice to the petitioner to respond to

the audit report and to pay the amount due from the Secretary on

account of the excess payment made to the Conveners of the

beneficiary committees.

10. Sub-section 5 of Section 215 makes it clear that the

auditors shall specify in the report under sub-section (4), all cases of

irregular, illegal or improper expenditure or of failure to recover

moneys or other property due to the Panchayat, or any loss or waste

of money or other property thereof caused by neglect or misconduct of

the officer and authorities of the Panchayat.

11. The crucial issue revolves around sub-Section (9) of Section

215, which stipulates that the auditors shall, after giving a reasonable

opportunity to the person concerned to explain his case, disallow every

item of expenditure incurred contrary to law and surcharge the same

on the person incurring, or authorising the incurring of, such

expenditure and may charge against any person responsible therefor

the amount of any deficiency, loss or unprofitable outlay occasioned by

the negligence or misconduct of that person or of any such sum which

ought to have been but is not brought into account by that person and

shall, in every such case certify the amount due from such person.

12. Whatever that be, the proviso makes it clear that no

surcharge under the sub-Section shall be made after a period of four

years from the date on which the expenditure in question was

incurred. Explanation thereto prescribes that it shall not be open to

any person whose negligence or misconduct has caused or contributed

to any such deficiency or loss, to contend that notwithstanding his

negligence or misconduct the deficiency or loss would not have

occurred, but for the negligence or misconduct of some other person.

Anyhow, the auditors shall state in writing the reasons for their

decision in respect of every disallowance, surcharge or charge and a

copy of such decision shall be served on the person against whom it is

made in the manner laid down for the service of summons in the Code

of Civil Procedure, 1908.

13. Sub-Section 11 thereto makes it clear that any person

aggrieved by such disallowance is entitled to make an application to

the District Court, and a further remedy of filing an appeal before the

High Court is also provided therein.

14. Now, I come to the provisions of the Audit Act, 1994, which

defines the term 'auditor' under Section 2(a) to mean the Director of

Local Fund Audit and includes any other Officer of the Local Fund Audit

Department empowered by the Director to perform the functions of an

auditor under the Audit Act, 1994, which inter alia applies to all the

local bodies including the Grama Panchayat by virtue of Section 2(f) of

the Audit Act, 1994, and the term 'local fund audit' is defined under

clause (i) of Section 2(g) to mean a fund administered by a local

authority which, though not part of a Government Department has

been established by or under a law or orders of the Government.

Clause (ii) of Section 2(g) further stipulates that it includes any other

fund which the Government may, by notification in the Gazette,

declare to be a local fund for the purpose of the Audit Act, 1994.

15. Among other provisions, Section 16 of Audit Act, 1994 is

important in the context dealing with 'auditor to surcharge illegal

payments and loss caused by negligence or misconduct' and it reads

thus:

"16. Auditor to surcharge illegal payments and loss caused by negligence or misconduct:- (1) The auditor may disallow any item which appears to him to be contrary to law and surcharge the same against the person making or person or body of persons authorising the making of the illegal payment and may charge against any person responsible therefore, the amount of any deficiency or loss caused by the negligence or misconduct of that person or any sum received which ought to have been, but has not been brought into account by that person and shall, in every such case, certify the amount due from such person.

(2) The auditor shall state, in writing , the reasons for his decision in respect of every disallowance, surcharge or charge and shall communicate the same by registered post to the person against whom it is made together with an extract of the relevant objection in the audit report.

(3) Any person aggrieved by disallowance, surcharge or charge made may, within one month after he has received or been served with the decision of the auditor, apply to the District Court, to set aside such disallowance, surcharge or charge and the court, after taking such evidence as is necessary, may confirm, modify or remit such disallowance, surcharge or charge.

(4) Every sum certified to be due from any person by the auditor under this Act shall be paid by such person to the Executive authority within one month after the intimation to him of the decision of the Director unless, within that time, such person has filed an application before the District Court against the decision under sub-section (3) and such amount ,if not so paid, or such amount as the District Court shall declare to be due, shall be recoverable under the provisions of the Kerala Revenue Recovery Act, 1968 (15 of 1968) for the time being in force , as if it were an arrear of public revenue due on land."

16. Apart from that, Rule 20 of the Rules, 1996 delineates the

procedure for charge/surcharge proceedings and it reads thus:

20. Procedure for charge/surcharge proceedings:- (1) The officer authorised to issue the report on the audit of accounts of a local authorities/local funds shall while issuing the further remarks

under sub-rule (3) of rule 23 of these rules forward to the Director a proposal for charge/surcharge action in respect of the pending cases of losses pointed out in the audit report concerned . The charge/surcharge proposal shall be in From VIII appended to these rules;

(2) On receipt of the proposals for charge/surcharge proceedings from the officer authorised to issue the audit report, the Director shall as early as practicable but before the completion of four months from the date of receipt of such proposals, issue, charge/surcharge notices to the officer(s) held responsible for the losses detected by the auditors.

(3) The charge/surcharge notices shall be in Form IX and IX(A) appended to these rules.

(4) The charge/ surcharge notices (in duplicate) along with extracts of the relevant objections in the audit report shall be communicated to the person against whom it is made by registered post with acknowledgement due.

(5) The duplicate copy of the charge/surcharge notice shall be returned to the Director by the person receiving it, with his dated acknowledgement in proof of having received the notice. (6) Copy of the charge/surcharge notice shall be issued to the Executive authority concerned.

(7) Unless the person served with a charge/surcharge notice remit to the Executive authority concerned the amount involved in the notice and furnish the details thereon to the Director within two months, from the date of receipt of the notice, or furnish

satisfactory explanations, such person shall be served with charge/surcharge certificate in Form X and X(A) appended to the rules, with copy to the Executive authority concerned. (8) The report showing details of remittance of amounts involved in the charge/surcharge notices to be furnished by the person(s) responsible under sub-rule (7) above shall be forwarded to the Director through the Executive authority concerned. The Executive authority shall transmit the same to the Director with a certificate to the effect that the details furnished have been verified by him and found correct .

(9) The charge/surcharge certificate (in duplicate) shall be communicated to the person against whom it is made, by registered post with acknowledgement due.

(10) The duplicate copy of the charge/surcharge certificate shall be returned to the Director by the person receiving it with his/her dated acknowledgement affixed on it.

(11) The charge/surcharge certificate shall be served on the persons responsible within a period of two years from the date of receipt of the charge/surcharge notice by such person.

(12) The Director shall serve on the person responsible for any loss to a local authority/ local fund supplementary charge/ surcharge notice or charge/surcharge certificate relating to the audit report if the circumstances so warrant.

(13) Every sum charge/surcharged by the Director on any person shall be remitted by such person to the Executive Authority within one month from the date of receipt of such charge/surcharge

certificate, unless within that time such person files an application before the District Court against the decision of the auditor. Such amount if not so paid or such amount as the District Court shall declare to be due under sub- section (3) of section 16 of the Act shall be recoverable under the provisions of the Kerala Revenue Recovery Act, 1968 (15 of 1968) for the time being in force, as if it were arrears of public revenue due on land."

17. Therefore, according to the learned counsel for the

petitioner, a clear and structured procedure is prescribed under the

Kerala Panchayat Raj Act, 1994, the Kerala Audit Fund Act, 1994 and

the Kerala Local Fund Audit Rules, 1996 to tackle the situation insofar

as the imposition of surcharge is concerned. However, none of the

mandatory procedures were followed by the Audit Department. It is

true, the petitioner has produced along with the writ petition certain

communications issued by the Grama Panchayat to which the

petitioner has filed an objection. Curiously, the petitioner has not made

the Kerala Local Fund Auditor or the authorities thereunder parties to

this writ petition, which creates a fetter on this Court to identify as to

the truth and veracity of the contentions advanced by the petitioner in

this writ petition. The petitioner has chosen to make only the

Thuravoor Grama Panchayat as a party in the writ petition.

18. It is clear from the provisions discussed above that the

authority under the Audit Act, 1994 and the Rules thereto are

independent from the authorities of the Grama Panchayat in

accordance with the provisions of the Act, 1994. Therefore, the writ

petition is actually bad for non jointer of necessary parties, since in the

absence of the Audit Department in the array of parties, the

contentions raised by the petitioner are not decipherable. Be that as it

may, writ petition is of the year 2011 and the issues are of the year

2001 and 2002 and therefore, much purpose may not be served by

impleading the authorities now. But, at the same time, I find force in

the contention advanced by learned counsel for the petitioner in regard

to the limitation prescribed under the Kerala Panchayat Raj Act, 1994

and consequent illegality in the matter of recovery initiated. Even

though the contention advanced by the petitioner that the procedures

prescribed under the Audit Act, 1994, Rules, 1996 and the Act, 1994

were not able to be established in the matter of audit, it is clear from

the documents produced by the petitioner that on the basis of the

audit reports, the Panchayat has issued Ext. P4 notice dated

04.07.2005, which according to the petitioner, is the notice by which

the petitioner was intimated about her liability on account of the

excess demand made.

19. Therefore, even assuming that the said notice is a valid

notice on the basis of the report of the auditor, recovery should have

been initiated within a period of three years as is contemplated under

Section 243 of the Act, 1994 dealing with limitation. Even though this

Court is unable to identify the issues raised by the petitioner on

account of the audit for want of necessary parties in the writ petition,

the recovery should have been made by the Panchayat in accordance

with the provisions of Section 243 of the Act, 1994, since the amount

due was on account of the audit for the period 2000-2001 and 2001-

2002. Which thus means, the Panchayat had at the most a period of 3

years from Ext P4 notice dated 04.07.2005 for initiating the recovery

through a process known to law, which was not undertaken by the

Panchayat.

20. Section 243 of Act, 1994 clearly stipulates that no recovery

can be made after expiration of a period of three years from the date

on which destraint might first have been commenced or as the case

may be, in respect of the amount alleged to be due from the

petitioner. In the instant case, even the demand notice is issued by

the Panchayat as per Ext. P11 only on 25.11.2010, which also would

not save the period of limitation, because at the most, it could be

treated as a claim made. In order to start the proceedings under the

Kerala Revenue Recovery Act, 1968 ('Act, 1968' for short), there

should be a requisition made under section 69(2) of the Act, 1968.

Which thus means, the demand raised itself is barred by limitation as

prescribed under Section 243 of the Act, 1994, and there is no case for

the Panchayat that any steps were taken under the Act, 1968 for

recovery of the amount.

21. Viewed in that perspective, I am of the considered opinion

that even though the petitioner is not entitled to succeed on account of

not following the proper procedure to be followed by the statutory

audit authority as deliberated above, the petitioner is entitled to

succeed on the ground of limitation prescribed under Section 243 of

the Act, 1994, and therefore no recovery could be initiated after the

expiry of a period of 3 years from the effective date discussed above.

Accordingly, the writ petition is allowed and the demand raised

against the petitioner evident from Ext. P11 dated 25.11.2010 is

quashed.

sd/-

SHAJI P. CHALY, JUDGE.

Rv

APPENDIX OF WP(C) 378/2011

PETITIONER'S EXHIBITS:

EXHIBIT P1 TRUE COPY OF COMMUNICATION ISSUED BY THE RESPONDENT DATED 08.11.2004.

Exhibit P2 TRUE COPY RELEVANT PAGES OF THE LOCAL FUND AUDIT REPORT.

Exhibit P3 TRUE COPY OBJECTIONS SUBMITTED BY THE PETITIONER.

Exhibit P4 TRUE COPY OF LETTER DATED 4/7/05 ISSUED BY THE RESPONDENT.

Exhibit P5 TRUE COPY OF LETTER DATED 21/07/05 ISSUED BY THE RESPONDENT Exhibit P5(A) TTRUE COPY OF LETTER DATED 25/6/05 ISSUED BY THE DEPUTY DIRECTOR OF PANCHAYATH Exhibit P6 TRUE COPY OF OBJECTIONS DATED 7/8/05 SUBMITTED BY THE PETITIONER Exhibit P7 TRUE COPY OF LETTER DATED 16/5/07 ISSUED BY THE RESPONDENT.

Exhibit P8 TRUE COPY OF REPLY SUBMITTED BY THE PETITIONER DATED 15/6/07 Exhibit P9 TRUE COPY OF LETTER DATED 28/11/07 ISSUED BY THE RESPONDENT Exhibit P9(A) TRUE COPY OF RESOLUTION OF THE MEETING OF THE RESPONDENT.

Exhibit P10 TRUE COPY OF REPRESENTATION DATED 7/3/08 SUBMITTED BY THE PETITIONER.

Exhibit P11 TRUE COPY OF R.R DEMAND NOTICE DATED 25/11/2010 ISSUED BY THE RESPONDENT.

RESPONDENT EXHIBITS:

Exhibit R(a) TRUE COPY OF LETTER 8/9/06 OF DEPUTY DIRECTOR OF PANCHAYATS,ERNAKULAM Exhibit R(b) TRUE COPY OF LETTER DATED 6/12/06 OF DIRECTOR OF PANCHAYATS.

/True Copy/

PS To Judge.

rv