T.M. Israel vs The State Of Kerala & Ors.

Johnson John, J.

The writ petitioner, who retired from the post of Panchayat Secretary on 30.09.2003, is challenging the revenue recovery proceedings initiated against him after about 16 years from the date of his retirement.

The audit of Meppady Grama Panchayat for the years 2001-2002 and 2002-2003 was conducted by the Audit Department from 13.06.2005 to 23.6.2005 and from 16.03.2006 to 28.03.2006 and thereafter, audit report for the year 2001-2002 was issued on 01.06.2006 and audit report for the year 2002-2003 was issued on 03.11.2006. As per Exhibit P7 demand notice dated 25.07.2019, a sum of Rs.6,61,872/- with interest from 01.04.2000 and as per Exhibit P8 demand notice dated 25.07.2019, a sum of Rs.10,18,025/- with interest from 23.05.2001 is sought to be recovered from the writ petitioner by attachment and sale of his properties.

The specific contention of the writ petitioner is that the revenue recovery proceedings were initiated against him without issuance of any surcharge certificate as contemplated under Section 16 of the Kerala Local Fund Audit Act, 1994 and the respondents resorted to revenue recovery action without proper adjudication of his liability and the same is not legally sustainable.

Heard Smt. Ayswarya Lekshmi, the learned counsel representing the learned counsel for the petitioner on record, Sri. Saneej E.S., the learned Government Pleader appearing for respondents 1 to 6 and 8 and Smt. Shylaja, the learned counsel representing the learned Standing Counsel for the 7^th respondent.

The learned counsel for the writ petitioner argued that admittedly, the petitioner retired from service on 30.09.2003 and Rule 3 of Part III of the Kerala Service Rules (KSR) and Section 215(9) of the Kerala Panchayat Raj Act, 1994 (‘Act, 1994’ for short) prescribe a period of limitation for recovery of dues and the revenue recovery proceedings initiated after 16 years of the retirement without proper adjudication by a competent forum, cannot be sustained under law.

The learned Government Pleader and the learned counsel appearing for the Panchayat argued that the petitioner was the Secretary of the Panchayat from 01.04.2002 to 31.03.2002 and it is revealed in the audit report that Rs.2,41,895/-, the expenditure made by the Secretary for purchasing bitumen from Hindustan Petroleum Corporation, was without proper voucher and other documents and the audit report for the year 2002-2003 would show that the Panchayat sustained a loss of Rs.1,49,940/- towards collection of revenue and the writ petitioner, who was the Secretary during the relevant period, is responsible for the same. It is also argued that before initiating revenue recovery proceedings, the petitioner was given sufficient opportunity to explain his part. It is pointed out that the Grama Panchayat has a duty to recover the loss sustained.

As per Section 180 of the Act, 1994, the officers and employees of the Panchayat, other than contingent employees, shall be Government servants. Rule 3 of Part III of the KSR shows that disciplinary or judicial proceedings, if not instituted while the employee was in service whether before his retirement or during his re-employment, shall be instituted, save with the sanction of the Government, in respect of a cause of action which arose or an event which took place more than four years before such institution, and the Public Service Commission shall be consulted before final orders are passed.

As per Section 215 of the Act, 1994, the Panchayat has to maintain such books of accounts and other books in relation to its account and prepare an annual statement of account in the prescribed form and as per Section 215(4), the auditors shall conduct a continuous audit of the accounts of the Panchayat and shall after completing the audit for a year or for any shorter period or for any transaction or series of transactions, send a report to the Panchayat concerned and duplicate copies thereof to the officer authorised by the Government in that behalf.

The proviso to sub-Section (9) of Section 215 of the Act, 1994 provides that no surcharge under the sub-Section shall be made after a period of four years from the date on which the expenditure in question was incurred. As per Section 215(9), the auditors are required to give a reasonable opportunity to the person concerned to explain his case before certifying the amount due from such person. Section 215(8) shows that the auditors have all the powers of the civil court in the performance of their functions under the Act for the purposes mentioned in the said sub-clause.

As per Section 2(l) of the Kerala Local Fund Audit Act, 1994, surcharge means an amount for which the auditor makes a person liable for loss, waste, misapplication or misappropriation of any money or other property belonging to any local authority. Section 16 of the Kerala Local Fund Audit Act, 1994 reads thus:-

Rule 20(2) of the Kerala Local Fund Audit Rules, 1996 (‘Rules, 1996’ for short) provides that on receipt of the proposals for charge/surcharge proceedings from the officer authorised to issue the audit report, the Director shall as early as practicable but before the completion of four months from the date of receipt of such proposals, issue, charge/surcharge notices to the officer(s) held responsible for the losses detected by the auditors.

Sub-Rule (3) of Rule 20 also provides that charge/surcharge notices shall be in Form IX and IX (A) appended to the Rules. Rule 20(4) provides that charge/surcharge notices (in duplicate) along with extracts of the relevant objections in the audit report shall be communicated to the person against whom it is made by registered post with acknowledgement due. Sub-Rule (9) of Rule 20 provides that charge/surcharge certificate (in duplicate) shall be communicated to the person against whom it is made, by registered post with acknowledgement due.

The learned counsel for the writ petitioner also pointed out that as per Section 243(1) of the Act, 1994, no distraint shall be made, no suit shall be instituted and no prosecution shall be commenced in respect of any tax or other sum due to a Panchayat after the expiration of a period of three years from the date on which the distraint might first have been made, a suit might first have been instituted or the prosecution might first have been commenced, as the case may be, in respect of such tax or sum.

The learned Government Pleader and the learned counsel appearing for the Panchayat cited the decision of a Division Bench of this Court in State of Kerala v. Raveendran [2020 (5) KLT 371] and argued that the Kerala Local Fund Audit Act is a special enactment and therefore, the same will prevail over the Act, 1994 and no period of limitation is provided in the Kerala Local Fund Audit Act, 1994 for issuing a surcharge certificate.

But, the learned counsel for the writ petitioner invited my attention to Rule 20(2) of the Rules, 1996, which contemplates issuance of notice to the officer held responsible for the losses detected by the auditors as early as practicable but before the completion of four months from the date of receipt of such proposals for charge/surcharge proceedings. However, in this case, the respondents have no case that the auditor issued any surcharge certificate or surcharge proceedings as against the writ petitioner and therefore, the question of limitation in connection with issuance of surcharge certificate does not arise in this case.

The learned counsel for the writ petitioner cited the decision of this Court in Babu Divakaran v. Adoor Municipality [2021 (6) KLT OnLine 1201] to point out that the procedure prescribed under the provisions of the Kerala Local Fund Audit Act, 1994 and the Rules, 1996 are peremptory in nature and they have to be followed scrupulously before proceeding to impose the charge/surcharge on the persons responsible. Rule 20(13) of the Rules, 1996 and Section 16(3) of the Kerala Local Fund Audit Act, 1994 shows that a person aggrieved of the surcharge imposed by the auditor is at liberty to approach the District Court to set aside such disallowance/surcharge, and the court is vested with powers to confirm, modify or remit such disallowance, surcharge or charge.

In the additional counter affidavit filed by the 4^th respondent, it is stated that once an audit objection is not settled at the level of the executive authority and the auditor, it does not lapse or become unenforceable and it is carried forward and incorporated into the consolidated audit report, which is placed for examination before the Local Fund Accounts Committee, a Committee constituted under the Rules of Procedure and Conduct of Business of the Kerala Legislative Assembly specifically to scrutinize the audit reports/paragraphs relating to Local Self Government Institutions and other local funds audited under the Kerala Local Fund Audit Act, 1994.

It is further stated in the counter affidavit that the Local Fund Accounts Committee is vested with the authority to examine each pending audit paragraph, call for explanations from the Department and the local body concerned and issue directions for the settlement, clearance or recovery of the amounts involved in such objections and action taken by the Audit Department and by the local body pursuant to such directions of the Local Fund Accounts Committee is, in law, action taken in discharge of a constitutional/legislative oversight mandate, and is entitled to be treated with the same sanctity as action taken suo motu by the auditor under Sections 9, 12 and 16 of the Kerala Local Fund Audit Act, 1994.

It is not in dispute that no notice was served on the writ petitioner before the initiation of the revenue recovery proceedings and there was no proper adjudication regarding the exact amount due by a process known to law. In Babu Varghese v. Bar Council of Kerala [1999 (1) KLT 836 (SC)], the Honourable Supreme Court held thus in paragraph 25:

The specific contention of the writ petitioner is that without proper adjudication by a proper forum, the demand raised against him by resorting to revenue recovery action is not legally sustainable. In Corporation of Kozhikode and another v. K.N. Radha and others [2022 (4) KHC 557], a Division Bench of this Court held that in order to proceed with the revenue recovery as per the revenue recovery Act, there should be an adjudicated sum due as per a process known to law and that without proper adjudication by a competent forum, it is not possible to resort to revenue recovery proceedings.

In Lt. Col. E.V Krishnan v. State of Kerala (2022 (6) KLT OnLine 1275] , this Court held that when amounts have not been legally quantified, or when there is no corresponding adjudication, a remedy of recourse to the Revenue Recovery Act is not permissible. In State of Kerala v. V.R. Kalliyanikutty [(1999) 3 SCC 657 = 1999 (2) KLT 146 (SC)], the Hon’ble Supreme Court held thus:

It is well settled that if a statute has conferred a power to do an act and has laid down the method in which the power has to be exercised, it necessarily prohibits the doing of the act in any other manner than that which has been prescribed and therefore, the argument of the learned Government Pleader that the action taken by the Audit Department and the local body in accordance with the directions of the Local Fund Accounts Committee is to be treated with the same sanctity as action taken by the auditor as per the statutory provisions cannot be accepted.

In Govindankutty C. B. v. State of Kerala and Others [2016 (4) KHC 555], this Court held that the Revenue Recovery Act is only an instrument in the hands of the Government or Local Authority for realisation of the amount due to them, if the amount sought to be recovered is liquidated or quantified amount. It cannot be disputed that revenue recovery is a summary mechanism for recovery of an amount adjudicated as due by a competent forum and the revenue authority is not a competent forum to adjudicate or to decide the dispute and therefore, the proceedings in revenue recovery action is in the nature of execution.

Admittedly, in this case, there was no adjudication by a competent forum with proper notice to the writ petitioner before the initiation of the revenue recovery proceedings. Therefore, the revenue recovery proceedings initiated against the writ petitioner who retired on 30.09.2003 as per Exhibits P5, P6, P7, P8, P9 and P10 in the year 2019 in connection with the audit reports for the years 2001-2002 and 2002-2003 are liable to be quashed.

In the attending facts and circumstances taken cumulatively, this Court cannot conclude the matter without observing that the State holds a fundamental responsibilty to maintain public trust by ensuring high standards of integrity from the side of the officials handling public money. The officials and the public servants are accountable not only to the State, but also to the public at large, in as much as the funds of the tax payers are utilised for public purposes. Since the matter involves public money and public authorities are accountable for lapses or failure to discharge its duties and there is every reason to suspect deliberate and intentional delay from the side of superior officials to protect individuals who swindled public money, it is necessary to conduct an independent and impartial inquiry to ascertain the possible legal action against officials who failed to discharge their duties in time and deliberately delayed the action to help those who swindled public money. It cannot be disputed that deliberate delay from the side of a public official to protect individuals who have swindled public money is a criminal offence under the Prevention of Corruption Act, 1988 and the Bharatiya Nyaya Sanhita, 2023.

In the result, the writ petition is allowed and the revenue recovery proceedings initiated against the writ petitioner as per Exhibits P5, P6, P7, P8, P9 and P10 are quashed. The first respondent is directed to take steps to conduct an independent and impartial inquiry to ascertain the possible legal action against officials who failed to discharge their duties in time and deliberately delayed the action to help those who swindled public money and also to initiate criminal prosecution, if there is prima facie materials to show intentional abuse of position or criminal misconduct from the side of any official to obtain a pecuniary advantage for any other person.

Writ petition stands disposed of in the aforesaid terms.