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2023 Supreme(Online)(KER) 22118
HIGH COURT OF KERALA
ANU SIVARAMAN, J
THE BOARD OF DIRECTORS OF THE IRINJALAKUDA CO-OPERATIVE HOSPITAL LTD. NO.R 954, – Appellant
Versus
THE HOUSING AND URBAN DEVELOPMENT CORPORATION LTD., – Respondent
OP (DRT) 78 2023
NISHA GEORGE, GEORGE POONTHOTTAM (SR.), N.SASI, M.A.ABDUL HAKHIM, JOSEPH GEORGE, M.A.AZEEZ, MUSHTAQUE
Parties must avail themselves of the applicable statutory remedies before appealing to higher courts in recovery cases under the RDB Act.
Headnote:
Recovery - Cooperative Society - Recovery of Debts due to Banks and Financial Institutions Act - Sections 19(1), 30; Income Tax Act - Rules 4, 68, 68B - The court analyzed the provisions related to the appointment of a receiver and the timelines for initiating recovery proceedings, ultimately dismissing the petition as it found the appeal process under the DRT more appropriate.
Fact of the Case:
A Cooperative Hospital Society challenged a proclamation for property sale and recovery officer's order due to loan repayment defaults, arguing procedural violations and lack of jurisdiction, including delayed recovery actions under the relevant Act.
Finding of the Court:
The court concluded that the petitioner had evaded repayment and failed to utilize available statutory remedies, making it inappropriate to entertain the challenge against the recovery actions directly. The court upheld the need for appellate procedures under DRT.
Issues: Whether the appointment of a receiver was valid and whether the original petition challenging the recovery actions was maintainable or an abuse of process.
Ratio Decidendi: The court emphasized that the statutory remedies available under Section 30 of the RDB Act should be pursued before challenging recovery proceedings in court, reinforcing the hierarchical structure of legal remedies in debt recovery.
Final Decision: The original petition is dismissed without prejudice to pursue statutory remedies.
JUDGMENT
1.This petition is filed challenging Exhibit P8, proclamation for sale of property as also Exhibit P3 order of the recovery officer. The contention raised in the writ petition is that the petitioner, a Cooperative Hospital Society had availed a construction loan of Rs.513.50 lakhs from the 1st respondent. When the repayment fell in arrears the 1st respondent had filed O.A.No.298/2001 under Section 19(1) of Recovery of Debts due to Banks and Financial Institutions Act, 1993 for recovery of an amount of Rs.8,12,91,302/- with future interest by sale of the secured asset, which formed the property and the building of the petitioner. The O.A was allowed and the 1st respondent was permitted to recover an amount of Rs.8,10,27,327/- with interest. Though appeal was attempted, the Appellate Tribunal directed to deposit an amount of Rs.7,26,33,717/- on or before 17.12.2012 towards pre-deposit and since the amount could not be paid, the appeal was not considered. Simultaneous procedure for recovery under the SARFAESI Act were also initiated. It is submitted that an OP(DRT) was filed before this Court and an amount of Rs.1 crore was remitted pursuant to interim orders. Later the OP(DRT) as well as the writ appeal and the Special Leave Petition filed by the petitioner stood dismissed. It is submitted that W.P.(C).No.7976/2015 was also filed, but the judgment therein were reversed in W.A.No.1272/2015.
2.Thereafter, Exhibit P3 order was passed on 12.9.2017 appointing a qualified Chartered Accountant as Receiver. It is stated that though the petitioner produced the audit reports to substantiate the contention of net loss of the society, Exhibit P4 order was passed ordering attachment of an amount of Rs.10 Lakhs per month from the monthly income of the petitioner and release of the same to the 1st respondent till satisfaction of the certificate. It is submitted that the 1st respondent filed Appeal No.1 of 2018 against Exhibit P8 order before the Debts Recovery Tribunal II, Ernakulam and Exhibit P5 order of attachment of movable properties was rendered in the appeal on 28.2.2019. Though the said order was challenged before this Court in W.P.(C).No.8542 of 2019, the petitioner was relegated to the appellate remedy and the petitioner filed Appeal 7 of 2017. The appeal was dismissed by Exhibit P7 on the ground that it was not accompanied by 50% predeposit. Thereafter, Exhibit P8 notification for sale was ordered on 2.3.2023, which is under challenge in this original petition.
3.It is contended by the learned Senior Counsel appearing for the petitioner that Section 29 provides that the provisions of the 2nd and 3rd schedules of the Income Tax Act, 1961 and the Income Tax (Certificate Proceedings) Rules, 1962 as in force from time to time, shall as far as possible apply with necessary modifications as if the said provisions and the Rules referred the amount of debt due under this Act instead of the Income Tax. It is submitted that Section 29 read with Rules 4, 68 and
70 of the 2nd schedule to the Income Tax Act provides that no receiver could have been appointed in respect of a debt that fell due more than three years before such measure was taken. It is further submitted that the reasons stated in Exhibit P3 for appointment of a receiver is untenable and that the consideration of the defects pointed out in an audit of a cooperative society cannot be a matter for consideration by a Receiver appointed by a Recovery Officer of the Debt Recovery Tribunal. It is further contended that the Housing and Urban Development Corporation is not a notified financial institution under the RDB Act and that the entire proceedings are illegal. It is stated that the disputes between the parties fall within the purview of Section 69 of the Kerala Co- operative Societies Act and that it has to be adjudicated under the mechanism provided under the said Act and the Rules. It is further contended at ground F as follows:-
“It is submitted that Rule 68B of the second
