The court ruled that security deposits can be adjusted against arrears, rejecting automatic forfeiture upon license cancellation, emphasizing fairness in state actions under Article 14.

JUDGMENT :

The petitioner and respondent Nos. 8 & 9 submitted bids for toddy shop Nos. 38 to 55/2000-01 of Kazhakuttom Range for an annual rent of Rs.3,55,05,010/- following a government notification. A permanent agreement was executed on 1.4.2000, with the petitioner as the principal debtor and respondent Nos. 8 & 9 as sureties, along with a security deposit of Rs.1,14,73,181/-. Due to default in payment of “kist” from July 2000 and failure to replenish the security deposit, the petitioner's licenses were cancelled, and the security deposit was forfeited on 6.10.2000. On 29.5.2001, the Assistant Excise Commissioner forwarded a requisition to recover the kist due for 2000-2001 with interest up to 31.1.2001 (Ext.P9). The Amnesty Scheme was introduced on 26.5.2008. The Supreme Court, in its judgment dated 5.3.2009 (Ext.P2) in V.K. Ashokan v. Asstt. Excise Commnr. & Ors. held that forfeiture of the security deposit should not automatically follow license cancellation.

2. The petitioner filed WP(C) No. 3198/2010 challenging Ext.P9, which was dismissed as withdrawn on 5.8.2010 (Ext.P1), allowing the petitioner to pursue other remedies. The Amnesty Scheme was reintroduced on 25.10.2013 (Ext.P3), and multiple notices were issued to the petitioner between 5.3.2009 and 11.3.2017 (Exts.R2(b) to R2(g)). Respondent Nos. 8 & 9 applied for the Amnesty Scheme on 30.3.2017 (Ext.P5), and the petitioner submitted a representation on 31.7.2017 (Ext.P6) to halt revenue recovery proceedings.

3. The petitioner filed the present Writ Petition in August 2017, seeking a declaration that the petitioner and respondent Nos. 8 & 9 are entitled to credit of the security amount of Rs. 1,06,51,503/- towards arrears for toddy shop Nos. 38 to 55 of Kazhakoottam Excise Range for 2000-2001, in light of Ext.P2 Supreme Court judgment. The petitioner also sought credit for the value of the property in respondent No. 8’s solvency certificate (Rs. 65 Lakhs), a declaration that Section 50(2) of the Kerala Revenue Recovery Act , 1968, is illegal, and benefits under the Amnesty Scheme (Ext.P3). On 16.8.2017, the court granted an interim order staying the petitioner’s arrest. On 20.12.2017, respondent No. 8 was deleted from the party array. The petitioner’s counsel limited the prayers to availing the Amnesty Scheme reintroduced on 15.7.2024, and also for giving credit for the security deposit of Rs. 1,06,51,503/-.

4. Learned Senior Counsel Sri.C.C.Thomas, instructed by Sri.M.G.Karthikeyan, learned counsel appearing for the petitioner, argued that the security amount should be adjusted towards arrears as per Ext.P2 Supreme Court judgment, which was followed in Exts.P10 to P12 judgments of this Court. He contended that the government can only collect the original kist/rental with interest for delayed payments, and any additional amount is unenforceable under Section 74 of the Indian Contract Act , 1872. The counsel also argued that the purchase of respondent No. 8’s property for Rs. 1/- under Section 50(2) of the Kerala Revenue Recovery Act , 1968, was illegal, as the property’s value was not credited towards arrears.

5. Opposing the prayers in the writ petition, Smt.Surya Binoy, learned Senior Government Pleader contends that the petitioner's claim, that the petitioner and respondent Nos. 8 & 9 are entitled to get credit of the security amount towards the arrears sought to be recovered in Ext.P9, is barred by the principles of res judicata as Ext.P1 judgment dismissing WP(C). No.3198/2010 also had challenged Ext.P9 revenue recovery proceedings and since no liberty was reserved by the petitioner to file a fresh writ petition, the petitioner is barred from raising any challenge agai