Kerala High Court
K.P. Ramachandran Nair vs The Tahsildar (Revenue Recovery) on 14 March, 2025
WP(C) NO. 1756 OF 2025
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IN THE HIGH COURT OF KERALA AT ERNAKULAM
PRESENT
THE HONOURABLE MR. JUSTICE GOPINATH P.
FRIDAY, THE 14TH DAY OF MARCH 2025 / 23RD PHALGUNA, 1946
WP(C) NO. 1756 OF 2025
PETITIONER:
K.P. RAMACHANDRAN NAIR,
AGED 68 YEARS
S/O. KUTTAN PILLAI, MANAGING DIRECTOR, M/S. KAYPEE
METALS AND ALLOYS PVT. LTD., HAVING REGISTERED OFFICE
AT PARRY & CO. JUNCTION, MAIN ROAD KOLLAM, RESIDING AT
KURANDIPALLIL HOUSE, OLAYIL, THEVALLY P.O., KOLLAM-
691013, PIN - 691001
BY ADVS.
K.K.SATHISH
THOMSON T.KURICHIYANI
RESPONDENTS:
1 THE TAHSILDAR (REVENUE RECOVERY),
TALUK KACHERI, CHINNAKKADA, KOLLAM DISTRICT, PIN -
691001
2 THE VILLAGE OFFICER,
PERINAD VILLAGE OFFICE, KOLLAM DISTRICT, PIN - 691601
3 THE KERALA FINANCIAL CORPORATION,
REPRESENTED BY ITS BRANCH HEAD, BRANCH OFFICE SARB,
THIRUVANANTHAPURAM, PIN - 695033
4 ADDL. R4. THE SPECIAL OFFICER (REVENUE),
THE KERALA STATE ELECTRICITY BOARD(KSEB),VYDHUTHI
BHAVANAM,PATTOM, THIRUVANANTHAPURAM, PIN 695004
5 ADDL. R5. K. J. THOMAS,
S/O OUSEPH, AGED 64, KARAKKATTU HOUSE, MADAPPALLY P O
CHANGANASSERY 686546 [ADDL. R4 AND R5 ARE IMPLEADED AS
PER ORDER DATED 28.01.2025 IN IA 1/25 & IA 2/25
RESPECTIVELY IN WPC 1756/2025]
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BY ADVS.
SHRI.M.R.VENUGOPAL, SC, KFC
C.S.MANILAL
DHANYA P.ASHOKAN (SR.)
S. MUHAMMAD ALIKHAN
ANJANA S. RAJ
THIS WRIT PETITION (CIVIL) HAVING COME UP FOR ADMISSION ON
14.03.2025, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING:
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JUDGMENT
The petitioner is the Managing Director of a Private Limited
Company namely the K.P.Metals and Alloys Private Ltd. The said
company had availed financial assistance from the Kerala Financial
Corporation (hereinafter referred to as the KFC). On default being
committed, the Kerala Financial Corporation initiated proceedings
under the State Financial Corporations Act, 1951 (hereinafter
referred to as 'the 1951 Act') and took over possession of the
movable and immovable assets of the Company situated in Perinad
Village, Kollam Taluk. Thereafter the KFC permitted the petitioner to
dispose of the plant and machinery for a sum not below Rs.4.25
crores and on condition that the amount received shall be paid to
settle the liabilities to the KFC.
2. The petitioner accordingly entered into an agreement with the
additional 5th respondent and the additional 5th respondent had
purchased the plant and machinery for a sum of Rs.4.65 crores.
When the additional 5th respondent attempted to remove the
articles for which he had entered into an agreement with the
petitioner, the Village Officer, Perinad issued Ext.P5 notice stating
that the additional 5th respondent shall not remove any articles
since Revenue Recovery proceedings were pending to recover
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amounts due from the company to the Kerala State Electricity
Board (KSEB). The petitioner is thus before this Court challenging
Ext.P5 notice.
3. The learned counsel appearing for the petitioner, the learned
counsel appearing for the additional 5th respondent and the
learned senior counsel appearing for the KFC would refer to the
provisions of Section 29 of the 1951 Act as also to the provisions of
Section 46B of the said Act to contend that the Financial
Corporation has the first charge over the properties of the
Company. It is submitted that when action is taken under Section
29 of the 1951 Act, the State Financial Corporation is deemed to be
the owner of the property and therefore, on that ground also, Ext.P5
notice issued by the Village Officer cannot be sustained.
4. The learned counsel appearing for the KSEB submits that more
than Rs.6.98 crores is due to that KSEB and the Revenue Recovery
proceedings have been initiated to recover the said amount. It is
submitted that the KSEB has a right to recover the amounts due to
it also by proceeding against the movables of the company.
5. Heard the learned Government Pleader also.
6. Having heard the learned counsel as above, I am of the view
that Ext.P5 notice issued by the Village Officer cannot be sustained
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in law in the facts and circumstances of this case. Section 29 of the
1951 Act reads thus:
"29. Rights of Financial Corporation in case of
default .-
(1) Where any industrial concern, which is under a liability to the
Financial Corporation under an agreement, makes any default in
repayment of any loan or advance or any instalment thereof or in
meeting its obligations in relation to any guarantee given by the
Corporation or otherwise fails to comply with the terms of its
agreement with the Financial Corporation, the Financial
Corporation shall have the right to take over the management
orpossession or both of the industrial concerns, as well as the
right to transfer by way of lease or sale and realise the property
pledged, mortgaged, hypothecated or assigned to the Financial
Corporation.
(2) Any transfer of property made by the Financial Corporation, in
exercise of its powers under sub-section (1), shall vest in the
transferee all rights in or to the property transferred as if the
transfer had been made by the owner of the property.
(3) The Financial Corporation shall have the same rights and
powers with respect to goods manufactured or produced wholly
or partly from goods forming part of the security held by it as it
had with respect to the original goods.
(4) Where any action has been taken against an industrial
concern under the provisions of sub-section (1), all costs,
charges and expenses which in the opinion of the Financial
Corporation have been properly incurred by it as incidental
thereto shall be recoverable from the industrial concern and the
money which is received by it shall, in the absence of any
contract to the contrary, be held by it in trust to be applied firstly,
in payment of such costs, charges and expenses and, secondly,
in discharge of the debt due to the Financial Corporation, and the
residue of the money so received shall be paid to the person
entitled thereto.
(5) Where the Financial Corporation has taken any action against
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an industrial concern under the provisions of sub-section (1), the
Financial Corporation shall be deemed to be the owner of such
concern, for the purposes of suits by or against the concern, and
shall sue and be sued in the name of the concern.
It is clear from a reading of Section 29 of the 1951 Act that any
transfer by the State Financial Corporation of the property taken
over under Section 29 will vest in the transferee all rights in the
property as if the property had been transferred by the owner. That
apart, Sub-Section (1) of Section 29 makes it clear that the State
Financial Corporation has the right to sell any property taken over
under Section 29. Though, in the facts of this case, the property was
actually sold by the petitioner, in the light of the fact that the
movables in question were part of the property taken over by the
State Financial Corporation, it can only be held that the petitioner
was acting for and on behalf of the State Financial Corporation and
for all intends and purposes as its agent. Therefore, the Revenue
Recovery proceedings will be subject to the aforesaid right of the
State Financial Corporation. In the facts of the present case, the
State Financial Corporation permitted the petitioner to enter into an
agreement with the additional 5th respondent for sale of the plant
and machinery which had been taken over under Section 29 (on
26.02.2021) for a sum not less than 4.25 crores. The additional 5 th
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respondent has purchased the plant and machinery for a sum of
Rs.4.65 crores and the amount has been remitted to the KFC. In
such a situation, the Village Officer could not have issued Ext.P5,
preventing the additional 5th respondent from removing the articles
which he had purchased, on the ground that Revenue Recovery
proceedings were pending against the Company at the instance of
the KSEB.
7. There is yet another aspect to the matter. Section 46B of the
1951 Act reads thus:
"46B. Effect of Act on other laws.-
The provision of this Act and of any rules or orders made
thereunder shall have effect notwithstanding anything
inconsistent therewith contained in any other law for the
time being in force or in the memorandum or articles of
association of an industrial concern or in any other
instrument having effect by virtue of any law other than
this Act, but save as aforesaid, the provisions of this Act
shall be in addition to, and not in derogation of, any
other law for the time being applicable to an industrial
concern."
The provisions of Section 46B of the 1951 Act was subject matter of
the decision of the Supreme Court in Union of India & Others v.
SICOM Ltd and Another; 2009 KHC 4022, where after
considering the provisions of Section 46B, the Supreme Court held
as follows:
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"23. Furthermore, the right of a State Financial Corporation is a
statutory one. The Act contains a non obstante clause in S.46B of
the Act which reads as under.
"S.46B. Effect of Act on other laws.-- The provision of this Act and
of any rule or orders made thereunder shall have effect
notwithstanding anything inconsistent therewith contained in any
other law for the time being in force or in the memorandum or
articles of association of an industrial concern or in any other
instrument having effect by virtue of any law other than this Act,
but save as aforesaid, the provisions of this Act shall be in
addition to, and not in derogation of, any other law for the time
being applicable to an industrial concern.
The non obstante clause shall not only prevail over the contract
but also other laws. (See Periyar & Pareekanni Rubber Ltd. v.
State of Kerala, 2008 (4) SCALE 125)."
8. Thus it is clear that no claim of KSEB can override the right of
the KFC, in the facts and circumstances of this case. In the light of
the above, this Writ Petition is allowed and Ext.P5 will stand
quashed.
This Writ Petition is ordered accordingly.
sd/-
GOPINATH P.
JUDGE
Nsd
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APPENDIX OF WP(C) 1756/2025
PETITIONER EXHIBITS
Exhibit P1 TRUE COPY OF THE INDEX OF CHARGES ISSUED BY
THE MINISTRY OF CORPORATE AFFAIRS DATED
13.01.2025
ExhibitP2 TRUE COPY OF THAT CERTIFICATE OF
REGISTRATION FOR MODIFICATION OF CHARGE
DATED 27/3/2018
Exhibit P3 TRUE COPY THAT LETTER DATED 16/10/2023
ISSUED 3RD RESPONDENT
Exhibit P4 TRUE COPY OF THAT COMPROMISE SETTLEMENT
DATED 16/10/2024 ISSUED BY THE 3RD
RESPONDENT TO THE PETITIONER
Exhibit P5 TRUE COPY OF THAT NOTICE ISSUED BY THE 2ND
RESPONDENT DATED 04/01/2025
Exhibit P6 TRUE COPY OF THAT DEMAND NOTICE DATED
7/11/2019 ISSUED BY THE DEPUTY THASILDAR,
KOLLAM
