Babu Divakaran vs Adoor Municipality
2021 Latest Caselaw 22588 Ker

W.P.(C) No.9597 of 2013              1


          IN THE HIGH COURT OF KERALA AT ERNAKULAM

                                  PRESENT
                THE HONOURABLE MR. JUSTICE SHAJI P.CHALY
   FRIDAY, THE 19TH DAY OF NOVEMBER 2021 / 28TH KARTHIKA, 1943
                          WP(C) NO. 9597 OF 2013
PETITIONER:

      1       BABU DIVAKARAN
              AGED 40 YEARS
              FORMER CHAIRMAN, ADOOR MUNICIPALITY, RESIDING AT
              PUTHENVEETTIL THEKKETHIL, PANNIVIZHA, ADOOR,
              PATHANAMTHITTA DISTRICT.
      2       LILLY JOSEPH
              D/O.MATHEW, ALUMMOOTTIL GARDENS, ADOOR P.O.
      3       REENA SAMUEL
              D/O.RAJAN MATHEW, MATHIRAMPALLIL, PARAKODE P.O.
      4       N.C.KURUPPU
              S/O. NARAYANA KURUPPU, VIJAYALAYAM, ANANDPATHY P.O.
      5       C.T.SOUDAMINI AMMA
              D/O. THANKAMMA, ANITHA BHAVAN, PARAKKODE P.O.
      6       SHAJI JANARDHANAN
              S/O. JANARDHANAN, GEETHABHAVAN, ANADAPPALLY P.O.
      7       CHANDRIKA S.VELAYUDHAN
              CHARUVILAYIL VEEDU, KANNAMKOD, ADOOR P.O.
      8       BINU S.
              S/O. T.D.SAMUEL, THEVALAPURATHIVAD, PARACOD P.O.
      9       A.K.KRISHNAN KUTTY
              ALAVILAYIL, ANANDAPALLY, P.O.ADOOR.
     10       KUNHOONHAMMA JOSEPH
              D/O. DANIEL THONDALI, KUNNAMKODE, ADOOR P.O.
     11       N.D.RADHAKRISHNAN
 W.P.(C) No.9597 of 2013            2


              NEDUNGAPALLY, PANNIVISHA, ADOOR P.O.
     12       ANNAMMA ABRAHAM
              S/O. JOSEPH, KONNAYILLAJOVILLA, ADOOR P.O.


     13       ROSHAN JACOB
              S/O. K.C.JACOB, KILIYILATHU, MANAKALA P.O.
     14       PRASANNA KUMARY
              D/O. BALARAMAN NAIR, BINAVILASAM, ANANDAPALLY P.O.
     15       C.R.RAJAN
              S/O. RAGHAVAN, PUSHPATHADAM, ADOOR P.O.
     16       SAJU MIKHAYEL
              SREEYESUVILASAM, MOONNALAM, ADOOR P.O.
     17       E.K.SURESH
              SUDHEEBHAVAN, NEAR TB, PARACOD P.O.
              BY ADV SRI.SURESH KUMAR KODOTH

RESPONDENTS:
     1     ADOOR MUNICIPALITY
           REPRESENTED BY ITS SECRETARY, ADOOR, PATHANAMTHITTA
           DISTRICT.
      2       THE DIRECTOR
              URBAN AFFAIRS DIRECTORATE, THIRUVANANTHAPURAM.
      3       THE SECRETARY TO THE GOVERNMENT
              DEPARTMENT OF LOCAL ADMINISTRATION,
              THIRUVANANTHAPURAM.
              BY ADVS.
              SRI.JACOB E. SIMON, GOVERNMENT PLEADER
              SRI.V.M.SYAM KUMAR FOR R1


     THIS WRIT PETITION (CIVIL) HAVING                  COME UP    FOR
ADMISSION ON 19.11.2021, THE COURT ON                  THE SAME    DAY
DELIVERED THE FOLLOWING:
 W.P.(C) No.9597 of 2013                 3


                                                                      CR


                                      JUDGMENT

Dated this the 19th day of November, 2021

Petitioners were the Chairperson and members of Adoor Municipality -

the 1st respondent respectively during the period 2000-2005. It is aggrieved

by the action initiated by respondents 1 to 3 i.e., the Adoor Municipality, the

Director, Urban Affairs Directorate, Thiruvananthapuram, the Secretary to the

Government, Department of Local Administration, Thiruvananthapuram, for

realisation of an amount of Rs.2,90,366/-, from the petitioners in equal

proportion towards the loss caused to the Municipality during their tenure, the

writ petition is filed.

2. During the said period, Municipality entered into a contract with a

private firm by name, M/s.Ammini Energy Systems Private Limited, for the

purpose of purchasing certain electric items for installation of street lights.

Pointing out irregularities, the Finance Department of the State Government

caused an inspection and found certain irregularities quantifying the loss so

caused to the Municipality at Rs.2,90,366/-. Consequently, proceedings

purportedly under section 547(1) of the Kerala Municipality Act, 1994, have

been initiated against the 1st petitioner and the Secretary of the Municipality.

3. According to the petitioners, 2 nd respondent Municipality, based on

the resolution adopted by the Council in its meeting held on 15/9/2004,

had invited competitive tenders/quotation from recognised suppliers, for the

supply of electric lamps and other items for installation of street lights in

various wards within the limits of the Municipality, evident from Exhibit P1.

4. It is the case of the petitioners that the Council had taken the aforesaid

decision on the basis of the demands made by all the 22 Councillors, to utilise

the own funds of the Municipality earmarked for the development of each

ward. The tender notice, besides publishing in the notice board, was

published in two vernacular dailies and the details with respect to the lamps

were also specified in the notice, evident from Exhibits P2 to P4. The

quotations were opened on 19.10.2004 and it was placed before the

Municipal Engineer for examination. The Municipal Engineer prepared a note

pointing out that M/s.Ammini Energy Systems Private Limited, alone quoted

the rate for CFL lights, while two others did not quote any rate. It was further

noted that for the supply of sodium vapour lamps, lowest rate was quoted by

M/s.Electro Tech Industries, however, without specifying the ISI mark or

name of the manufacturer. As regards tube lights, it was noted that the

lowest quotation was from M/s.Electro Tech Industries but since it was not

shown that the lights to be supplied by the Electro Tech Industries has ISI

mark, it was suggested to address the suppliers for clarification. Accordingly,

necessary steps were taken in accordance with the note made by the

Municipal Engineer. The response from the respective bidder was placed

before the Municipal Engineer and it was again verified.

5. After verification, the matter was placed before the Council and a

unanimous decision No.7 dated 25.1.2005 of the council preferred the

quotation submitted by M/s.Ammini Energy Systems Private Limited and

authorised the Chairman of the "Standing Committee for Development" to

negotiate further with the supplier. The reasons for preferring M/s.Ammini

Energy Systems Private Limited, has been specifically stated in the said

decision.

6. On a comparative evaluation, the Council noted that M/s.Ammini

Energy Systems Private Limited alone offered automatic CFL and the 550 CFL

already supplied by the company installed in several places were in good

condition and further that, the maintenance of the street lights were being

done promptly. However, as regards the rate quoted by M/s.Ammini Energy

Systems Private Limited in respect of CFL was found to be on the higher side

and it was decided to negotiate with the representative of the company,

evident from Exhibit P5 resolution.

7. Therefore, negotiations were done in respect of the three items quoted

by M/s.Ammini Energy Systems Private Limited, as per which, the supplier

agreed to reduce the price and to enhance the warranty period from 15

months to 20 months. Based on the negotiation, the Council in its meeting

held on 14.2.2015, as per decision No.3(1) and (2) resolved to accept the

quotation, evident from Exhibit P6.

8. Since the amount quoted by M/s.Ammini Energy Systems Private

Limited was on the higher side compared to the rate quoted by M/s.Electro

Tech Industries involving an excess amount of Rs.2,30,296/- although

reasons were stated, the Secretary of the Municipality, sought opinion of the

Government as per Exhibit P7 letter dated 26.2.2005 but there was no

response. Therefore, according to the petitioners, with a view to avoid

unnecessary delay, Exhibit P8 supply order dated 28.2.2005 was issued to

M/s.Ammini Energy Systems Private Limited and Exhibit P9 formal agreement

was executed by and between the Municipality and the Contractor.

Consequent to the supply order and the agreement, the items were delivered

to the Municipality.

9. Matters being so, a surprise inspection was carried out by the

Government, which according to the petitioners, without resorting to the

provisions of the Kerala Local Fund Audit Act, 1994, hereinafter called, "Act,

1994" and sections 294 and 295 of the Municipality Act. Inspection of the files

was apparently carried out by the Finance Department of the State

Government on 27th & 28th day of June, 2006 and the Officer concerned has

an opinion that, certain irregularities were committed in the matter of

awarding contract to M/s.Ammini Energy Systems Private Limited, resulting in

a loss of an amount of Rs.2,90,366/-, evident from Exhibit P10 report.

10. In the meanwhile, the Secretary of the Local Self Government

Department - 3rd respondent, caused an enquiry through the Joint

Director of Urban Affairs. Enclosing the said report, the 2 nd respondent

addressed the 3rd respondent as per Exhibit P11 letter dated 3.7.2007, in

which it is stated that, since all the Councillors are party to the decision of the

Council, they are jointly responsible for the loss caused to the Municipality.

11. Based on Exhibit P10 report, Exhibit P12 notice dated 23.3.2007 was

issued by the Municipality informing that recovery action would be taken to

realise an amount of Rs.1,45,183/-being one half of the total loss assessed

from him in terms of section 547(1) of the Municipality Act, 1994. The 1 st

respondent responded to the same by issuing Exhibit P13 reply dated

15.6.2007, explaining the circumstances under which the Municipal Council

has taken the decision to award the contract to M/s.Ammini Energy Systems

Private Limited. On receipt of Exhibit P12, the Municipal Council convened a

meeting on 29.8.2007 and after considering the reply of the petitioners and

also the Secretary, resolved as per Exhibit P14 decision dated 21.8.2007, to

request the Government to drop the proceedings. It seems the Secretary of

the Municipality, against whom proceedings were initiated to recover the

amount, has approached this Court by filing W.P.(C) No.33097/2010, in which

the proceedings against the Secretary were stayed on 17.3.2021. Thereupon,

Exhibit P15 order was passed dated 25.1.2012, by the Secretary to the Local

Self Government Department, whereby it was directed that Chairman,

Councillors and the Secretary should share the loss of Rs.2,90,366/- in equal

proportion as per Exhibit P16 series of notices dated 16.8.2012. It is the case

of the petitioners that they have responded to the notices by issuing Exhibit

P17, and similar replies. It is thus challenging Exhibit P10 report of the

Finance Department and the proceedings pursuant to Exhibit P15 and Exhibit

P16 notices threatening to initiate revenue recovery action against the

petitioners to recover the amount of Rs.13,827/- each, the writ petition is

filed.

12. The paramount contention advanced is that Exhibits P10, P15 and P16

are issued without providing any opportunity of hearing and participation to

the petitioners and therefore, they are violative of the principles of natural

justice. It is also contended that the amount expended for the purchase of

materials in question, is from the local fund administered by the Municipality

within the meaning of section 2(g) of the Act, 1994, and therefore, in the

event of any loss , waste or misappropriation of funds of the Municipality on

account of any negligence or misconduct of any person making such loss, the

course available to remedy such situation is by invoking surcharge

proceedings under section 16 of the Act, 1994.

13. The sum and substance of the contentions advanced by the petitioner

is that before resorting to such procedure, there shall be an audit of the

accounts by the examiner of the local fund as defined under section 2(a) of

the Act, 1994. That apart, section 285 of the Kerala Municipality Act

elaborately provides the procedure and the manner in which the audit of

accounts are to be made. Therefore, according to the petitioners, as provided

under sub-section (9), the local fund examiner, before certifying the amount

due from any person, shall give reasonable opportunity to explain, and sub-

section (10) enables the aggrieved person to prefer an appeal against the

decision made by the local fund examiner before the District Court.

Therefore, according to the petitioners, the impugned action being contrary

to the statutory provisions, cannot be sustained. It is in the above

background that the coercive action is sought to be quashed. The petitioners

have also taken up a contention that the action initiated against the

petitioners by issuing Exhibit P16 demand notices

dated 16.8.2012 is after a 3 year period of limitation prescribed under section

547 and therefore, they are legally unsustainable.

14. The Municipality has filed a detailed counter affidavit, refuting the

allegations and claims and demands raised by the petitioners and

supporting the action initiated against the petitioners. It is also stated that on

receipt of Exhibit P16 notice, the erstwhile Secretary of the Municipality, has

paid his share of Rs.13,827/- and consequentially, he was absolved from all

liabilities, evident from Exhibit R1(b). The predominant contention advanced

in the counter affidavit is that Exhibit P16 series of notices are issued on the

basis of Exhibit P10 report of the Principal Secretary, Finance Department

dated 7.10.2006 and according to the Municipality, Exhibit P10 is an audit

report made by the Local Fund Audit Department.

15. I have heard, learned counsel appearing for petitioner Sri.Suresh

Kumar Kodoth, Sri.V.M.Shyam Kumar for the Adoor Municipality, learned

Government Pleader Sri.Jacob E. Simon for other respondents and perused

the pleadings and materials on record.

16. Admittedly, proceedings are initiated on the basis of Exhibit P10

report drawn by the Principal Finance Secretary, Government of Kerala. The

funds handled by the Municipality is a subject matter for proceedings under

the Act, 1994, which is an Act provided to regulate the audit of the local

funds under the management or control of certain local authorities in the

State of Kerala. "Auditor" is defined 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 Act, 1994; "local fund" is defined under section 2(g) to

mean, (i) 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 and; (ii) any other fund which the Government may, by

notification in the gazette, declare to be a local fund for the purpose of the

Act, 1994. The manner in which the audit of accounts of the local authorities

to be carried out are specifically recited in the Kerala Local Fund Audit Act,

1994. Section 5 thereto clearly specifies that the Director may, with the

previous sanction of the Government, and without prejudice to the provisions

of sub-section (1) of section 4, audit the accounts of any authority, body,

institution or fund, not included in the Schedule subject to such terms and

conditions, as may be agreed upon between the Director and the person

responsible for the administration of such authority, body, institution or fund.

Section 7 deals with the manner in which the audit is to be conducted and

rule 9 encompasses a liability on the local authorities to prepare and present

an account after audit. The Auditor is vested with ample power to require

production of account and on failure to do so, the Auditor empowered to

initiate penal action. Section 15 deals with procedure to be followed after

getting the report of the Director under section 13, which reads thus:

"15. Procedure to be followed after getting the report of the Director under section 13 - (1) On receipt of a report under section 13, the Executive authority concerned shall either remedy the defects or irregularities which may have been pointed out in the report and send to the Director within two months of the receipt of the report or with in such period as may be specified under the law governing the local authority, intimation of his having done so, or shall within the said period, supply to the Director any further explanations as he may wish to make in regard to the defects or irregularities.

(2) On receipt of such intimation or explanation, the Auditor may, in respect of all or any of the matters discussed in his report- (a) accept the

intimation or explanation and drop the objection; or (b) hold that the defects or irregularities pointed out in the report or any of them have not been removed or remedied.

(3) (a) The auditor shall send a report of his decision to the executive authority concerned within two months from the date of receipt by him of the intimation or explanation referred in subsection (1) or if no such intimation or explanation is received, on the expiry of the period of two months mentioned in that sub-section. (b) If the auditor holds that any defects or irregularities have not been removed or remedied he shall state in the report,- (i) Whether, in his opinion , the defects or irregularities can be regularised and ,if so, by what method; (ii) if they do not admit of being regularised, whether they can be condoned and, if so, by what authority; and (iii) whether the amounts to which the defects or irregularities relate should , in his opinion , be charged and, if so, against whom.

(4) The local authority concerned shall publish in its next administration report such portions of the report under section 13, dealing with defects and irregularities falling under clause (b) of sub-section (2) together with the explanation thereof , if any, given under sub-section (1) and the final report of the auditor thereon under sub-section (3). The report of defects and irregularities, the explanation thereon and the final report shall be open to inspection by the public at the office of the local authority for a period of one month from the date of their receipt.

(5) Nothing in this section or in section 13 shall preclude the auditor, at any time , from bringing to the notice of the Government or of any officer of Government for such action as may be necessary, any information which appears to the auditor to support a presumption of criminal misappropriation or fraud or which, in his opinion, deserves special

attention or immediate investigation."

17. Section 16 deals with Auditor to surcharge illegal payments and loss

caused by negligence or misconduct, which 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."

18. Rule 20 of the Kerala Audit Fund Rules 1996 (Rules, 1996) deals with

procedure for charge/surcharge proceedings and in fact rule 19 deals with

form and contents of the audit report. For the sake of brevity and

convenience, rule 20 of the Rules, 1996 is extracted hereunder:

"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) or 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 Form VIII appended to these rules.

2. On receipt of the proposals for charge/surcharge proceedings from the officer authorised to issue the auditor report, the Director shall as early as practicable but before the completion of four month 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 these 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 retransmit 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 four months 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 same 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."

19. Rule 21 of the Rules, 1996 clearly stipulates that Auditor to name the

persons responsible for the loss detected and the extent of responsibility of

such person and it is specified that the loss detected by the Auditor during

the course of audit of accounts of a local authority/local fund shall be fixed

correctly by the Auditor at the time of audit by verifying the records

concerned. The name(s) of the person(s) held responsible shall be

incorporated in the audit report as well as in the proposal for

charge/surcharge action to be forwarded to the Director.

20. On an analysis of the provisions of the Kerala Audit Fund Act, 1994

and the Rules, 1996 thereto, it is clear that the procedure prescribed

thereunder are peremptory in nature and they have to be followed

scrupulously before proceeding to impose the charge/surcharge on the

persons responsible. It is clear from section 16 of the Act, 1994 that a person

aggrieved on the basis of surcharge imposed by the Auditor, is at liberty to

apply to the District Court, to set aside such disallowance/surcharge and the

court, after taking such evidence, is vested with power to

confirm/modify/remit such disallowance, surcharge or charge. It also makes it

clear that every sum certified to be due from any person by the Auditor under

the Act shall be paid by such persons to the executive authority within one

month after 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) of section 16 and such amount if

not paid, or such amount District Court shall declare to be due, shall be

recoverable under the provisions of the Kerala Revenue Recovery Act, 1968

21. Therefore, assuming that Exhibit P10 is an audit report in terms of the

reference made by the Director as per the Act, 1994, the imperative aspect

contained under the Act, 1994, is to specify the person responsible, and the

amount due from each person to be made part of the report.

22. On a perusal of Exhibit P10, it is clear that the report has not spelt out

the names of persons, who are responsible for the alleged loss caused to the

Municipality nor any proceedings were issued to them enabling them to take

recourse to the legal remedies as provided under section 16 of the Act, 1994.

That apart, if the report is served on the persons responsible and the

amounts were not paid within one month as provided under section 16(4) of

the Act, 1994, then a remedy is open to the executive authority of the local

body to proceed against the responsible persons under the provisions of the

Kerala Revenue Recovery Act. Therefore, it can be seen that, if at all Exhibit

P10 dated 7.10.2006 was served on the petitioners within a reasonable time

therefrom and if the amounts were not paid by the petitioners within two

months, proceedings under the Kerala Revenue Recovery Act ought to have

been initiated as if it were an arrear of public revenue due on land.

23. Therefore, it is clear from the audit report, if the audit report was

served on the petitioners after scrupulously following the imperatives

contained under the Act, 1994 and the Rules thereto, there is no bar for

recovery of the amount in view of the statutory empowerment to recover the

amounts. But here is a case where there is no mention of the names of the

persons responsible for the loss caused to the Municipality and there is no

case for the respondent that Exhibit P10 report was served on each of the

petitioners enabling them to challenge the same before the District Court in

contemplation of section 16(3) of Act, 1994.

24. It is true, section 547 of the Kerala Municipality Act, 1994 deals with

liability of Chairperson, Secretary and Councillors for the loss, waste or

misapplication of money and sub-section (1) thereto stipulates that

notwithstanding anything contained under section 67, the Chairperson, every

Councillors and the Secretary shall be liable for the loss, waste or

misapplication of money or other property owned by or vested in a

Municipality, if such loss, waste or misapplication is a direct consequence of

their neglect or misconduct and a suit for compensation may be instituted

against them by the Municipality or by any tax payer of the Municipal area,

however, every such suit shall be instituted within 3 years after the date on

which the cause of action arose.

25. Therefore, going by the said provision, it is clear that the cause of

action arose when Exhibit P16 report dated 7.10.2006 was drawn by the

Principal Secretary to Finance Department of the State of Kerala and the suit

prescribed under section 547(2) is barred even at the time of issuance of

Exhibit P16 series of notice dated 16.8.2012. However, as I have pointed out

above, the recovery action on the basis of Exhibit P10 report was not barred,

if any action under the Kerala Revenue Recovery Act was initiated within

three years from the date of cause of action as provided under Section 539 of

the Kerala Municipality Act 1994, but no action under the said act was also

not initiated. That apart the recovery cannot be proceeded with since the

mandatory requirements contained under the provisions of the Act, 1994 and

the Rules, 1996 thereto, were not followed by the respondents which is quite

clear and evident from Exhibit P10 report specifically discussed above.

26. That apart section 295 of the Kerala Municipality Act, 1994 deals with

the manner in which the accounts and audit of the Municipality are to be

dealt with and sub-section (3) thereto clearly specifies that the Examiner of

local fund accounts and his nominees shall be the Auditors of the

Municipality. Various other imperative conditions are prescribed thereunder

and one important aspect of the said provision is that subsection (11) enables

any person aggrieved by any disallowance, surcharge or charge ,may within

14 days after the date of service on him of the decision of the Auditor, make

application 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 with such

orders as to costs as it may think proper in the circumstances. A further

appeal is provided under sub-section (13) of section 295 from the order of

the District Court to the High Court. Sub-section (14) also makes it clear if the

amount is not paid within 30 days after the date of service on him of the

decision of the Auditors etc., the amount shall be recoverable as if it were an

arrear on land revenue.

27. Taking into account all the legal and factual circumstances, I am of

the considered opinion that in the absence of the imperative requirements in

Exhibit P10, the audit report has seriously prejudiced the petitioners from

taking recourse to law. That apart Exhibit P10 report only shows that the

Secretary was alone found fault with the matter of loss suffered by the

Municipality. Above all since no opportunity of hearing and participation was

provided to the petitioners before imposing liability and initiation of recovery

proceedings the entire action is violative of the principles of natural justice,

and therefore arbitrary and illegal .

28. Therefore, the rule position is clear from the provisions of the

enactments discussed above, however no action was also initiated to recover

the amounts from the petitioners either by filing a civil suit or for recovery

under the Kerala Revenue Recovery Act, within the limitation period

prescribed under law. True, in the writ petition filed by the petitioners, a

stay was granted by this Court on 5.4.2013, which is still in force, but at the

time of filing of the writ petition itself the recovery was barred under law

calculating the cause of action from the date of Exhibit P10 .

29. Therefore, the petitioners are entitled to succeed in the writ petition

and accordingly I hold that the Municipality is not entitled to proceed against

the petitioners on the basis of Exhibit P10 report submitted by the Principal

Secretary to Finance Department and the consequential notice viz., Exhibit

P15 dated 25.1.2012 and Exhibit P16 series of notice dated 16.8.2012 issued

to the petitioners, as they are barred under law .

Sd/-

                                                  SHAJI P.CHALY
smv                                                    JUDGE




                          APPENDIX OF WP(C) 9597/2013

PETITIONER EXHIBITS
                            P1 : COPY OF THE QUOTATION NOTICE NO.E1-
                            6268/04.
                            P2 : COPY OF THE QUOTATION RECEIVED FROM
                            M/S. AMMINI ENERGY SYSTEMS PVT.LTD.
                            P3 : COPY OF THE QUOTATION RECEIVED FROM
                            M/S.ELECTRO TECH INDUSTRIES, KALAMASSERY.
                            P4 : COPY OF THE QUOTATION RECEIVED FROM
                            M/S.SEEMA SHOPPY, ERNAKULAM.
                            P5 : COPY OF THE RESOLUTION NO.7 ADOPTED BY
                            THE COUNCIL.
                            P6 : COPY OF THE DECISION OF THE COUNCIL
                            DTD.14.2.2005.
                            P7 : COPY OF THE LETTER DTD.26.2.2005
                            ADDRESSED TO THE 3RD RESPONDENT.
                            P8 : COPY OF THE SUPPLY ORDER
                            DTD.28.2.2005.
                            P9 : COPY OF THE AGREEMENT DTD.15.3.2005.
                            P10: COPY OF THE REPORT DTD.7.11.2006.
                            P11: COPY OF THE LETTER DTD.3.7.2007.
                            P12: COPY OF THE NOTICE DTD.23.3.2007.
                            P13: COPY OF THE REPLY DTD.15.6.2007.
                            P14: COPY OF THE DECISION OF THE COUNCIL
                            DTD.21.8.07.
                            P15: COPY OF ORDER DTD.25.1.2012 ISSUED BY
                            3RD RESPONDENT.
                            P16: COPY OF DEMAND NOTICE ISSUED BY 1ST
                            RESPONDENT TO 1ST PETITIONER.



                          P16(A): COPY OF DEMAND NOTICE ISSUED BY 1ST
                          RESPONDENT TO 2ND PETITIONER.
                          P16(B): COPY OF DEMAND NOTICE ISSUED BY 1ST
                          RESPONDENT TO 3RD PETITIONER.
                          P16(C): COPY OF DEMAND NOTICE ISSUED BY 1ST
                          RESPONDENT TO 4TH PETITIONER.
                          P16(D): COPY OF DEMAND NOTICE ISSUED BY 1ST
                          RESPONDENT TO 5TH PETITIONER.
                          P16(E): COPY OF DEMAND NOTICE ISSUED BY 1ST
                          RESPONDENT TO 6TH PETITIONER.
                          P16(F): COPY OF DEMAND NOTICE ISSUED BY 1ST
                          RESPONDENT TO 7TH PETITIONER.
                          P16(G): COPY OF DEMAND NOTICE ISSUED BY 1ST
                          RESPONDENT TO 8TH PETITIONER.
                          P16(H): COPY OF DEMAND NOTICE ISSUED BY 1ST
                          RESPONDENT TO 9TH PETITIONER.
                          P16(I): COPY OF DEMAND NOTICE ISSUED BY 1ST
                          RESPONDENT TO 10TH PETITIONER.
                          P16(J): COPY OF DEMAND NOTICE ISSUED BY 1ST
                          RESPONDENT TO 11TH PETITIONER.
                          P16(K): COPY OF DEMAND NOTICE ISSUED BY 1ST
                          RESPONDENT TO 12TH PETITIONER.
                          P16(L): COPY OF DEMAND NOTICE ISSUED BY 1ST
                          RESPONDENT TO 13TH PETITIONER.
                          P16(M): COPY OF DEMAND NOTICE ISSUED BY 1ST
                          RESPONDENT TO 14TH PETITIONER.
                          P16(N): COPY OF DEMAND NOTICE ISSUED BY 1ST
                          RESPONDENT TO 15TH PETITIONER.
                          P16(O): COPY OF DEMAND NOTICE ISSUED BY 1ST
                          RESPONDENT TO 16TH PETITIONER.
                          P16(P): COPY OF DEMAND NOTICE ISSUED BY 1ST



                          RESPONDENT TO 17TH PETITIONER.
                          P17 : COPY OF REPLY SUBMITTED BY 17TH
                          PETITIONER.
                          P18 : COPY OF JUDGMENT DTD.4.2.2013 IN WPC
                          NO.8212/2011.

Respondents' Exhibits
EXT.R1(a)                 TRUE COPY OF THE SUPPLY ORDER DTD.28.2.2005
                          BEARING NO.E1-6268/04 ISSUED TO M/S.ELECTRO
                          TECH INDUSTRIES

EXT.R1(b)                  TRUE COPY OF THE ORDER DTD.22.8.2012
                          BEARING NO.E1-6268/04 ISSUED BY THE
                          SECRETARY OF THE MUNICIPALITY.