1999 (4) TMI 609 - SC - Indian Laws

Time-barred debts cannot be recovered through revenue recovery proceedings under Section 71 of Kerala Revenue Recovery Act

STATE OF KERALA & ORS. Versus V.R. KALLIYANIKUTTY & ANR.

The SC interpreted Section 71 of the Kerala Revenue Recovery Act, holding that time-barred debts cannot be recovered through revenue recovery proceedings. ... Interpretation of Section 71 of the Kerala Revenue Recovery Act - Debt barred by the law of limitation can be recovered by resorting to recovery proceedings under the Kerala Revenue Recovery Act of 1968 - Meaning of words 'amount due' - HELD THAT:- This Court in the case The Director of Industries, U.P. and Ors. v. Deep Chand Agarwal [1980 (2) TMI 280 - SUPREME COURT], justified the special procedure for recovery of certain debts under the U.P. Public Moneys (Recovery of Dues) Act, 1965 on the ground that the amounts which were advanced by the State. or by the financial institutions were for the economic betterment of the people of that State. Speedy recovery of these amounts was necessary so that these amounts could be re-utilised for the same public purpose. It is doubtful if this public purpose would extend to granting exemption to these claims from the statute of limitation. The law of limitation itself rests on the foundations of public interest. The courts have expressed at least three reasons for supporting the existence of statutes of limitation; (1) that long dormant claims have more of cruelty than justice in them; (2) that a defendant might have lost the evidence to disprove a stale claim; and (3) that persons with good causes of action should pursue them with reasonable diligence. (See Halsbury 4th Edn. Vol. 28 paragraph 605). In Nav Rattanmal and Ors. v. State of Rajasthan [1961 (4) TMI 117 - SUPREME COURT], the Statutes of Limitation have been considered as Statutes of Repose and Statutes of Peace. The generally accepted basis for such statutes is that they are designed to effectuate a beneficent public purpose. Whether public purpose of speedy recovery would outweigh public purpose behind a statute of limitation is a moot point. But we need not examine this aspect any further in view of our interpretation of the words 'amounts due' in Section 71. However, in the present case of any payment voluntarily made by a debtor being adjusted by his creditor against a time-barred debt. The provisions in the present case are statutory provisions for coercive recovery of 'amounts due'. Although the necessity of filing a suit by a creditor is avoided, the extent of the claim which is legally recoverable is not thereby enlarged. Under Section 70(2) of the Kerala Revenue Recovery Act the right of a debtor to file a suit for refund is expressly preserved. Instead of the bank or the financial institution filing a suit which is defended by the debtor, the creditor first recovers and then defends his recovery in a suit filed by the debtor. The rights of the parties are not thereby enlarged. The process of recovery is different. Therefore, all claims which are legally recoverable and are not time-barred on that date can be recovered under the Kerala Revenue Recovery Act. In view of the interpretation which we have put on Section 71 of the Kerala Revenue Recovery Act it is not necessary for us to consider whether by making a requisition under Section 69(2) a creditor sets in motion a process of recovery which is a judicial process which would attract the Law of Limitation. There is a clear provision for adjudication under Section 70(3) of the said Act. This right under Section 70(3) is not affected by Section 72 of the said Act as was contended before us by the respondents. Section 72 does not cover the right of a person making a payment under protest to institute a suit which is expressly provided for under Section 70 Sub-section(3). Looking to the scheme of recovery and refund under Sections 70 and 71, 'amounts due' under Section 71 are those amounts which the creditor could have recovered had he filed a suit. In the premises under Section 71 of the Kerala Revenue Recovery Act claims which are time-barred on the date when a requisition is issued under Section 69(2) of the said Act are not 'amounts due' under Section 71 and cannot be recovered under the said Act. Our conclusion is based on the interpretation of Section 71 in the light of the provisions of the Kerala Revenue Recovery Act. The judgment establishes that the Kerala Revenue Recovery Act cannot be used to recover debts that are time-barred under the statute of limitations. The Act's purpose is limited to providing a mechanism for speedy recovery of legally enforceable debts. 1. ISSUES PRESENTED and CONSIDEREDThe core legal question considered in this judgment is whether a debt that is barred by the statute of limitations can be recovered through recovery proceedings under the Kerala Revenue Recovery Act, 1968.2. ISSUE-WISE DETAILED ANALYSISRelevant Legal Framework and PrecedentsThe Kerala Revenue Recovery Act, 1968, is designed to consolidate and amend laws related to the recovery of arrears of public revenue in Kerala. The Act provides a mechanism for the speedy recovery of public revenue and certain other dues deemed necessary in the public interest. Section 71 of the Act allows the government to extend its provisions to recover amounts due from individuals to specified institutions, such as banks and the Kerala Financial Corporation, particularly for loans given for agricultural purposes or economic development.The court referenced analogous provisions in the U.P. Public Moneys (Recovery of Dues) Act, 1965, and the interpretation by the Supreme Court in The Director of Industries, U.P. and Ors. v. Deep Chand Agarwal, which upheld the classification of loans for speedy recovery as a valid classification under Article 14 of the Constitution. The court also considered the Privy Council's interpretation of 'money due' in Hansraj Gupta & Ors. v. Dehra Dun-Mussoorie Electric Tramway Co. Ltd. and the Supreme Court's interpretation of similar terms in New Delhi Municipal Committee v. Kalu Ram and Anr.Court's Interpretation and ReasoningThe court examined whether the term 'amounts due' in Section 71 of the Kerala Revenue Recovery Act includes time-barred claims. The court interpreted 'amounts due' as referring to amounts that are legally recoverable, meaning they must not be time-barred. The court reasoned that the Act does not create new rights but merely provides a process for speedy recovery. Therefore, it cannot be used to recover debts that are not legally enforceable due to being time-barred.Key Evidence and FindingsThe court found that the Kerala Revenue Recovery Act does not expressly provide for the recovery of time-barred debts. The Act's purpose is to facilitate speedy recovery, not to enlarge the rights of creditors to recover debts that are otherwise unenforceable by law. The court also noted that the right to file a suit for refund under Section 70(3) implies that defenses available in a suit, such as the statute of limitations, are preserved.Application of Law to FactsThe court applied its interpretation of 'amounts due' to the facts of the case, concluding that claims which are time-barred cannot be recovered under the Kerala Revenue Recovery Act. The Act's provisions do not override the statute of limitations, and creditors cannot use the Act to bypass the legal defenses available to debtors.Treatment of Competing ArgumentsThe respondent institutions argued that the term 'amounts due' should include time-barred debts, relying on the notion that the statute of limitations bars the remedy but not the right. The court rejected this argument, emphasizing that the Act does not explicitly allow for the recovery of time-barred debts and that such an interpretation could potentially violate Article 14 by creating an unjust classification.ConclusionsThe court concluded that the Kerala Revenue Recovery Act does not permit the recovery of time-barred debts. Claims that are time-barred on the date a requisition is issued under Section 69(2) are not 'amounts due' under Section 71 and cannot be recovered under the Act.3. SIGNIFICANT HOLDINGSPreserve Verbatim Quotes of Crucial Legal Reasoning'The Kerala Revenue Recovery Act does not create any new right. It merely provides a process for speedy recovery of moneys due. Therefore, instead of filing a suit, (or an application or petition under any special Act), obtaining a decree and executing it, the bank or the financial institution can now recover the claim under the Kerala Revenue Recovery Act.'Core Principles EstablishedThe judgment establishes that the Kerala Revenue Recovery Act cannot be used to recover debts that are time-barred under the statute of limitations. The Act's purpose is limited to providing a mechanism for speedy recovery of legally enforceable debts.Final Determinations on Each IssueThe court allowed Civil Appeal Nos. 12393 and 12394 of 1996, dismissing Civil Appeal Nos. 4211 of 1988, 4393 of 1988, 4175 of 1988, and the appeal arising from S.L.P.(C) No.12051 of 1988, holding that the Kerala Revenue Recovery Act cannot be used to recover time-barred debts.