Collection charges under the Revenue Recovery Act are not applicable unless amounts are recovered through the Act's provisions.

1The question involved in this case is as to whether respondents 2 to 4 are legally entitled to recover commission or collection charges on initiation of revenue recovery proceedings, eventhough no amount was recovered through the proceedings initiated under S.71 of the Revenue Recovery Act, 1968.

2 Petitioner is a registered society, set up and developed at the instance of the Kerala Khadi and Village Industries Board for the purpose of manufacturing and supplying 7-Spindle Muslin Charkhas. Petitioner had availed of a loan from the respondent Board. Total amount advanced by the Board was Rs. 17,85,871. Petitioner could not repay the amount due to various financial difficulties. Board then initiated action for recovery of the amount. Total amount due to the Board as on 31.3.1985 was Rs. 23,50,303.67. There was some litigation between the petitioner and the respondent Board. However, no amount was recovered from the petitioner through revenue recovery proceedings.

3 In order to amicably settle the matter, petitioner sent a latter dated 17.11.1994 putting forward certain suggestions/proposals to the Board. Respondent Board vide their letter dated 21.1.1995 informed the petitioner that it was prepared to settle the accounts as suggested by petitioner, provided petitioner was prepared to accept the conditions mentioned in that letter. However, with regard to condition No.3, petitioner informed the Board that petitioner would remit collection charges at the rate of 5% if demanded by the revenue department. Petitioner subsequently by letter dated 2.3.1995 informed the Board that claim for collection charges was illegal and requested the Board not to include the amount towards collection charges in the final payment to the Board. Board by letter dated 21.3.1995 requested the petitioner to remit the outstanding amount of Rs. 23,50,303.67 and Rs. 35,255/- towards contingency charges. Board also requested the petitioner to remit an amount of Rs. 1,17,515/- towards collection charges stating that it would be refunded if the revenue department did not make any claim for it.

4 Petitioner complied with all the conditions mentioned in Ext. P2 letter and remitted the entire amount of Rs.25,03,073.67 on 24.3.1995. Pursuant to this, Board vide letter dated 7.4.1995 informed the District Collector the factum of remittance of the entire amount by the petitioner and requested him to return the RRC. It is evident from the said communication, Ext. P5, that respondent Board had stated that no amount was realised through revenue recovery proceeding. Petitioner later made repeated representations for refund of the amount of Rs. 1,17,515/- paid towards collection charges. However, no action has been taken by the Board. Petitioner then issued a lawyer notice to the respondent dated 7.6.1995 directing the Board to pay the amount with 18% interest. Since no action has been taken, petitioner has approached this Court for a declaration that petitioner is not liable to pay any amount as collection charges as arrears were not collected/realised under the provisions of the Revenue Recovery Act. Petitioner also is seeking a direction to the Board to refund the amount of Rs. 1,17,515/- with interest at 18% from 24.3.1995 till date of actual payment/ realisation.

5Counsel for the respondent Board submitted that revenue recovery charges has to be remitted in the office of the District Collector, since they have initiated proceedings. It was pointed out by counsel for the Board that eventhough the amount was not realised through revenue recovery proceedings, as per S.7 of the R.R. Act and other Governments orders, a demand notice was served on the petitioner on 4.8.1987. As per the Act 5% of total dues should be paid to revenue authorities as collection charges, which according to Board, is a mandatory provision. They relied on Circular dated 13.10.1992 which says that collection charges shall be deducted from the amount recovered and the balance alone shall be payabl