@JUDGMENTTAG-ORDER
B. Seshasayana Reddy
1. This writ petition has been taken out by K. Raja Rao seeking a mandamus declaring the action of the respondents in initiating proceedings, dated 06.01.2000, under Revenue Recovery Act without deciding the liability of him as arbitrary, illegal and without jurisdiction. Facts in brief are: M/s. Rama Organics Private Limited availed term loan of Rs.56.80 Lakhs and seed capital of Rs.12.45 lakhs from the Andhra Pradesh Industrial Development Corporation Limited-1st respondent. The assets of the company such as land, buildings, plant and machinery came to be mortgaged in favour of the 1st respondent-Corporation as a security for the loan availed by it. Apart from offering the fixed assets of the company as security, the promoter directors of the company executed personal guarantee bonds. Initially, P. Seshagiri Rao, Mr. Nageswara Rao and Dr. A.K. Chatterjee executed personal guarantee bonds. Subsequently, the petitioner was inducted in the place of Dr. A.K. Chatterjee as Director of the Company and he executed personal guarantee bond on 17.08.1988. The Company committed default in paying the amounts due under term loan as well as the seed capital. The 1st respondent Corporation in exercise of its power u/s 29 of the State Financial Corporations Act, 1951, initiated proceedings against the mortgaged properties of the company and realized Rs.39,00,000/- on 29.12.1993 and adjusted the sale proceeds to the loan account. Balance due as on 31.05.1994 was Rs.131.14 Lakhs. The 1st respondent Corporation issued a notice on 22.03.1996 calling upon the petitioner to pay a sum of Rs.131.14 Lakhs. The petitioner sent a reply on 20.05.1996 denying his liability to pay the amount. The 1st respondent Corporation addressed a letter dated 27.05.1996 to the District Collector to initiate proceedings for recovery of the loan arrears from the petitioner under the provisions of the Revenue Recovery Act. The District Collector, in turn, authorized the Mandal Revenue Officer, Golconda Mandal, Hyderabad District-2nd respondent to attach the movable and immovable properties of the petitioner for recovery of the loan arrears of Rs.131.14 lakhs under letter dated 04.06.1996. The Mandal Revenue Officer-2nd respondent issued distraint order u/s 8 of the Revenue Recovery Act in FORM No. I and called upon the petitioner to pay the arrears. The petitioner issued a reply on 07.01.2000 to the notice dated 06.01.2000. The notice, dated 06.01.2000 issued by the 2nd respondent is under challenge in this Writ Petition.
2. It is the contention of the petitioner that his personal guarantee bond has not been accepted by the 1st respondent Corporation and therefore, no proceedings can be taken out basing on the personal guarantee executed by him and even otherwise, personal guarantee is co-terminus with his directorship and since he resigned as director and his resignation came to be accepted by the Board on 16.10.1989, the personal guarantee, stood terminated with effect from 16.10.1989. It is also the contention of the petitioner that the claim of the 1st respondent as on the date of initiation of proceedings under the provisions of the Revenue Recovery Act for realization of the loan amounts is barred by limitation and therefore, the notice, dated 06.01.2000, calling upon him to pay a sum of Rs.131.14 lakhs is liable to be quashed. For better understanding of the grievance of the petitioner, I deem it appropriate to refer para.3 of the affidavit filed in support of the writ petition, which reads as hereunder:
While the matter stood thus, as the Company affairs have gone beyond rectification by the time, I was joined as a Director and as I came to know that I was not offered the Directorship with fair intention, I submitted my resignation and the same was accepted by the Company in its Resolution dt.16.10.89 and the shares worth of Rs.4,80,000/- standing in my name were transferred in the name of newly C. Opted Director Col. K.S. Rao. I was also relieved of the personal guarantee given to the 1st respondent Corporation and Col. K.S. Rao has furnished his personal guarantee to the 1st respondent Corporation. The Resolution dtd.16.10.89 was communicated to the 1st respondent. The same was also informed to the Registrar of Companies along with Form No.32. Thus, after 16.10.89, I have no connection with the affairs of the Company and Sri Col.K.S. Rao (Retd.) who was inducted as Director and executed personal guarantee is responsible for all his obligations. I submit that during my short period of Directorship, I have not taken any amounts as loans from either the 1st respondent Corporation or any others. I submit that the 1st respondent has recalled the loan on 28.03.88 and issued a notice to that effect to M/s. Rama Organics (P) Ltd., stating that there were outstanding dues of Rs.75,81,000/- as on 28.03.90 and it would be taking steps for the recovery of the said sum by way of sale of the Unit under Sec.29 of the S.F.Cs. Act, 1951. This notice was addressed to M/s. Rama Organics (P) Ltd., with a copy marked to me and other Directors. To this notice, I have sent a reply on 16.04.90 stating that I am no longer the Director of the Company and the personal guarantee given by me was substituted by Col. K.S. Rao and the same was already intimated to the Company. But, the Corporation has not taken any action mentioned in the letter, but once again it gave another notice dtd.28.05.92 stating the same thing. To this notice also, I gave a reply stating once again that I have resigned from the Directorship of the Company and the same was accepted by the Board on 16.10.89 and another person was chosen in my place and that there is no justification for sending a copy of notice to me. I have also addressed another letter dated 17.08.92 repeating my stand. While the matter stood thus, the 1st respondent Corporation by letter dated 25.11.1994 relieved Dr. A.K. Chatterji from guarantee obligations and thereafter issued another notice dtd.22.03.96 to me personally stating that the 1st Respondent has seized the Unit under Sec.29 of the SFCs Act and sold the same and after adjusting Rs.50 lacs towards the share of the 1st respondent, there is a due of Rs.131.14 lacs and demanded payment of the same. It was further stated that failing which, action will be initiated under Sec.58 of the Revenue Recovery Act. On receipt of the said letter, I sent a reply on 20.05.1996 stating that by the date the loan was re-called, I seized to be the Director of the company and further the revocation of personal guarantee by Dr. A.K. Chatterji and execution of personal guarantee by me was not accepted by that date and for all purposes, Dr. A.K. Chatterji continued to be Director of the Company till 25.11.94 when he was relieved of guarantee obligations and from 1990 to 1994 the 1st Respondent has not taken any action against the said persons that I was not even aware of the sale of the Unit etc., and hence there is no obligation on my part to discharge the debt. To this letter, the 1st Respondent has not given any reply. But surprisingly, the Mandal Revenue Officer, Golconda Mandal issued a destraint order dated 15.07.96 to me. To this notice, I gave a reply on 16.07.96 bringing to his notice all the events that occurred and requested him to drop the proceedings. I have marked a copy of this letter to the 1st Respondent. To this letter also no reply was given. Instead of giving reply to my notice, the 1st Respondent addressed a letter dated 28.11.97 to the Collector, Hyderabad to realise the amounts due. Copy of the said letter was marked to me and hence, I addressed a letter to the 1st Respondent on 11.12.97 protesting against the action of the 1st Respondent. To this letter, the 1st Respondent has given a reply by letter dtd.23.06.98, stating that I have executed an agreement of guarantee on 17.08.88 and that I have not been relieved from the guarantee obligation and I am solely responsible for the payment of the amounts due. The 1st Respondent has not at all referred to my earlier letters and the contentions raised by me. To this letter, I have replied on 17.07.98 reiterating my contentions. The 1st Respondent by letter dated 15.08.98 has replied stating that the facts mentioned in its letter dated 11.03.98 stands good."
3. Rule Nisi came to be issued on 19.10.2001.
4. The 1st respondent filed counter-affidavit. P. Jagan Mohan Reddy, Deputy General Manager (Legal) of the 1st respondent-Corporation has sworn to the counter-affidavit. It is stated in the counter-affidavit that the claim of the 1st respondent as on the date of initiation of proceedings under the provisions of the Revenue Recovery Act is within limitation. The personal guarantee of the petitioner came to be accepted and Dr. A.K. Chatterjee came to be relieved. Since the petitioner stood as guarantor in his personal capacity, his subsequent resignation as director of the Company is immaterial. He continues to be the guarantor despite of his resignation from the Board of Directors of the Company. The 1st respondent Corporation proceeded against the mortgaged properties and adjusted the sale proceeds to the loan account and made a demand for the balance amount. Since the sale has been held on 27.12.93 and sale proceeds have been adjusted to the loan account, proceedings initiated for recovery of the balance amount by taking recourse to the provisions of the Revenue Recovery Act are well within limitation. The claim of the 1st respondent Corporation as on the date of addressing a letter to the District Collector to invoke the provisions of the Revenue Recovery Act for realization of the loan arrears is within limitation. It is also stated in the counter-affidavit that the District Collector authorized the Mandal Revenue Officer-2nd respondent to take up the proceedings under the provisions of the Revenue Recovery Act and therefore, the distraint order issued by the office of the Mandal Revenue Officer-2nd respondent u/s 8 of the Revenue Recovery Act cannot be faulted. It is further stated in the counter-affidavit that sufficient opportunity has been given to the petitioner to verify the records on any working day, but the petitioner failed to avail the said opportunity and therefore, it is impermissible for the petitioner to contend that the liability is disputed.
5. Heard Sri M.P. Chandramouli, learned counsel appearing for the petitioner and Sri S.Sreenivas Reddy, learned counsel appearing for the 1st respondent Corporation.
6. Learned counsel appearing for the petitioner submits that the petitioner executed the personal guarantee bond on 17.08.1988 consequent on his induction as Director of the Company by the Board of Directors and as he resigned as Director on 16.10.1989, personal guarantee bond executed by him shall stand revoked. In a way his contention is that his guarantee bond is co-terminus with his directorship and since he resigned as director on 16.10.1989, the guarantee bond is deemed to have been revoked. It is also submitted by the learned counsel that there is no consistency in the letters issued by the 1st respondent Corporation with regard to the amount due from the Company and therefore, it cannot be said that the amount due from the Company has been specified. He would also submit that the personal guarantee bond executed by Dr. A.K. Chatterjee was not revoked till 15.11.1994 and therefore, question of giving effect to the personal guarantee of the petitioner in place of the said Chatterjee prior to 15.11.1994 does not arise. In elaborating his arguments, the learned counsel submits that the personal guarantee executed by Dr. A.K. Chatterjee remained in force till 15.11.1994 and as the petitioner resigned from the director of the Company even before acceptance of the personal guarantee bond, no proceedings can be initiated basing on the unaccepted personal guarantee bond executed by the petitioner in place of Dr. A.K. Chatterjee. The learned counsel vehemently argued that the claim of the 1st respondent Corporation is barred by limitation and therefore, the 1st respondent Corporation cannot be permitted to recover the time barred debt by taking recourse to the provisions of the Revenue Recovery Act. In support of his submissions, reliance has been placed on the judgment of the Supreme Court in Margaret Lalita v. Indo Commercial Bank Ltd. AIR 1979 SC. 102 and a Division Bench judgment of this Court in B.C. Mulajkar v. state. AIR 1971 A.P. 169
7. In B.C. Mulajkar''s case (2 supra), a Division Bench of this Court held that determination of liability and amount due towards such liability are conditions precedent for initiating proceeding u/s 52 of the Revenue Recovery Act against any person.
8. Learned counsel appearing for the 1st respondent contends that proceedings for realization of the amount due under both the loans commenced in the year 1990 by taking recourse to Section 29 of the State Financial Corporations Act, 1951 and as the amount realized by sale of the mortgaged properties are found to be insufficient to liquidate the liability of the company, proceedings came to be initiated against the guarantor-petitioner by taking recourse to the provisions of Revenue Recovery Act and as the proceedings for realization of the debts commenced within the limitation period, subsequent proceedings for realization of the dues by taking recourse to the provisions of Revenue Recovery Act are only in continuation and therefore, the contention of the petitioner that the claim against him is barred by limitation, cannot be countenanced. He would also contend that the 1st respondent-Corporation at no point of time relieved the petitioner from the obligations under personal guarantee deed dated 17-8-1988. What all communicated to Dr. A.K. Chatterji under letter dated 25.4.1994 was that in view of the petitioner executing personal guarantee in favour of the Corporation for the loans availed by M/s. Rama Organics Private Limited, he has been relieved from the guarantee obligations. The said letter is in reply to the letter dated 18.11.1994 of Dr. A.K. Chatterjee. It does not mean that the guarantee executed by Dr. A.K. Chatterjee remained in force till 25.11.1994. The moment the petitioner executed guarantee on 17.8.1988, the earlier guarantee executed by Dr. A.K. Chatterjee stood discharged. Learned counsel would further contend that the petitioner executed guarantee bond dated 17.8.1988 and the guarantee bond remains in force till it is revoked or the liability of the company completely discharged and it has nothing to do with the Directorship of the petitioner. In a way, his contention is that the surety-ship is not co terminus with the Directorship of the petitioner. It is also contended by the learned counsel that the petitioner has been allowed to verify the accounts under letter dated 22.3.1996 and despite of allowing such an opportunity, the petitioner failed to avail the same. Learned counsel refers the relevant portion of the letter dated 22.3.1996, which reads as hereunder:-
The Government of A.P., vide notification No.80 published in the A.P. Gazette No.28 A dated 11-8-1988 have declared the loans and advances and other sums due to the APIDC to be recovered as arrears of land Revenue U/s 58A of A.P. Revenue Recovery Act. The Corporation has decided to initiate action under R.R. Act against the guarantors for recovery of above dues. You are therefore hereby called upon to pay the above stated amount at an early date.
You are further informed that if you are disputing the correctness of the amount, you must state the reasons and the basis on which you are disputing the correctness of accounts. Further, if you wish to verify the accounts of the Corporations you may do so within 15 days from the date of receipt of this notice.
You are hereby informed that if no reply is received within the above stipulated period, it will be deemed that you are not disputing the facts stated above and further action as per the rules will be taken for realization of dues.
The learned counsel would contend that the challenge in the writ petition is to the notice dated 06.1.2000 and the said notice came to be issued pursuant to the Distraint Order dated 15.7.1996 and until and unless Distraint Order is quashed, notice dated 06.01.2000 cannot be faulted.
9. In view of the submissions made by the learned counsel appearing for the parties, the issues that arise for consideration are:-
1) Whether the Mandal Revenue Officer is competent to issue Distraint Order dated 15.7.1996? and
2) Whether the claim of the 1st respondent Corporation is barred by limitation?
10. ISSUE NOs.1 and 2: Section 52A of the Revenue Recovery Act, 1864, enables certain banks and other public bodies to recover sums due to them as arrears of land revenue. For better appreciation, I may refer Section 52A of Revenue Recovery Act, which reads as hereunder:-
52-A. Recovery of sums due to certain banks and other public bodies as arrears of land revenue:-
(1) Without prejudice to any other mode of recovery which is being taken or may be taken, all loans granted and all advances made to any person-
(i) by any bank to which the re-payment of the said loans and advances is guaranteed by the State Government or;
(ii) by such Corporation established by or under a Central or Provincial or State Act, or Government Company as defined in Section 617 of the Companies Act, 1956, or such other public body as may be notified in this behalf by the State Government in the Andhra Pradesh Gazette together with interest on such loans;
(iii) by any Bank under any welfare scheme or programme, such as Prime Minister''s Rozgar Yojana and the like, sponsored by the State or Central Government as may be notified therein in this behalf by the State Government in the Andhra Pradesh; together with interest on such loans and advances and all sums, such as rents, margin money and the like, due to the bodies mentioned aforesaid may be recovered in the same manner as arrears of land revenue under the provisions of this Act :
Provided that the State Government may, by notification in Andhra Pradesh Gazette, specify the loans and advances together with interest thereon, and other sum due to the bodies mentioned in it item (ii) and item (iii) above which may be recoverable under the provisions of this section.
Explanation:- In this sub-section, "bank", means any banking company as defined in clause (c) of Section 5 of the Banking Regulation Act, 1949, and includes-
(a) the Reserve Bank of India constituted under the Reserve Bank of India Act, 1934.
(b) the State Bank of India constituted under the State Bank of India Act, 1955.
(c) any subsidiary bank as defined in the State Bank of India (Subsidiary Bank) Act, 1959;
(d) any corresponding new bank constituted u/s 3 of the Banking Companies (Acquisition and Transfer of Undertaking) Act, 1970.
(e) any corresponding new Bank constituted under the Banking Companies (Acquisition and Transfer of Undertakings) Act, 1980" (Central Act 40 of 1980).]
(2) Out of the proceeds of the dues pertaining to the bodies mentioned in item (ii) and item (iii) of sub-section (1) so recovered ten per centum thereof shall be deducted towards the collection charges and the balances shall be paid by the Collector or other officer empowered by the Collector in that behalf, to the respective bodies.
11. Indisputably, the 1st respondent Corporation is wholly owned by the State Government. It comes under sub-section (1)(ii) of Section 52A. Therefore, I find that the 1st respondent Corporation can recover the amount due from the petitioner basing on the personal guarantee dated 17.8.1988 by taking recourse to the provisions of Revenue Recovery Act, 1864. Section 5 of the Act empowers the Collectors to authorize any officer to proceed to recover the arrears, together with interest and costs of the process by sale of the defaulter''s movable and immovable properties. The District Collector under letter dated 04.6.1996 authorized the Mandal Revenue Officer to attach the movable and immovable properties and recover the loan arrears of Rs.131.14 lakhs from the guarantors. Therefore, the contention of the petitioner that the Mandal Revenue Officer is not competent to issue Distraint Order dated 15.6.1996 has no substance.
12. The principal contention of the petitioner is that the claim of the 1st respondent is time barred and that there is no consistency as to the amount due from the company. Learned counsel appearing for the petitioner refers to the letters emanating from the 1st respondent corporation.
13. I have gone through various letters emanating from the 1st respondent Corporation. In the letter dated 22.5.1996 the amount due after adjusting the amount realized by sale of the assets of the company has been indicated. Therefore, I am of the view that there is no discrepancy with regard to the amounts due from the company after adjusting the amount realized by way of sale of assets of the company to the loan account. Even otherwise, the 1st respondent Corporation has given an opportunity to the petitioner under letter dated 22.3.1996 to verify the accounts. The petitioner did not choose to avail the same. The petitioner having failed to avail the said opportunity cannot be permitted to contend that there is no consistency with regard to the amount due from the company. The proceedings for realization of the amount due from the company commenced in the year 1990. The mortgaged properties have been sold by taking recourse to Section 29 of the State Financial Corporations Act and after adjusting the sale proceedings to the loan account, proceedings have been initiated for recovering the balance amount by taking recourse to the provisions of the Revenue Recovery Act. It can be said without any controversy that the proceedings have been commenced for realization of the dues by sale of mortgaged properties within limitation. The further proceedings for realization of the balance amount by taking recourse to the Revenue Recovery Act is only continuation of the process of recovery proceedings initiated earlier. Therefore, the contention of the petitioner that the claim of the 1st respondent Corporation against the company is barred by limitation has no substance. In view of the above discussion, the writ petition is devoid of merits and the same is accordingly dismissed. No costs.
12 BSSR, J W.P.No.6842 of 2000
