Kerala High Court Halts Unlawful Transfer of Funds from Borrower's Account in Revenue Recovery Case
Court Affirms Bank Account Attachment but Blocks Fund Transfer Without Legal Backing
In a significant judgment, the Kerala High Court has intervened in a contentious revenue recovery case, providing relief to the petitioners, Sameer Khan and others, by staying the transfer of funds from their bank accounts to the account of the Special Deputy Tahsildar (Revenue Recovery). The case involved the Kerala State Financial Enterprises Limited (KSFE), which had initiated revenue recovery proceedings against the petitioners for defaulting on a loan.
Presiding over the case, Justice V.G. Arun delivered a nuanced ruling that, while upholding the attachment of bank accounts under the Kerala Revenue Recovery Act, 1968, specifically challenged the legality of transferring funds from the borrowers' accounts to the Tahsildar's account without explicit legal authority. The judgment scrutinized Sections 8 and 19 of the Act, which permit the attachment of movable property, including bank accounts, as a measure to recover public revenue.
The court acknowledged the severe implications of freezing bank accounts, describing it as a "draconian measure." However, it emphasized that such actions must be backed by the authority of law, as mandated by Article 300A of the Constitution of India, which protects individuals from being deprived of their property without legal sanction.
Justice Arun's order noted the absence of statutory provisions empowering the transfer of funds from a borrower’s bank account directly to the authorized officer's account. This, the court held, violated constitutional protections, thereby staying the impugned order's directive for fund transfer.
The KSFE, represented by Standing Counsel Salil Narayanan K.A., argued that the petitioners had defaulted on loan repayments and failed to respond to recovery notices, justifying the extreme measure of account freezing. The petitioners, represented by Advocates S. Nikhil Sankar and D.S. Jayachandran, contended that their loan was secured by immovable property, and thus, recovery should be pursued against that security.
In its decision, the court clarified that while the KSFE could attach bank accounts under Section 19 as "other movable property," the Act did not authorize the transfer of funds to the Tahsildar’s account without explicit legal authority. The court’s reference to previous Supreme Court judgments, such as "State of Maharashtra v. Tapas D Neogy," reinforced the interpretation that bank accounts could be considered as property for attachment purposes but not for direct fund transfer without legal backing.
This ruling underscores the judiciary's role in balancing the enforcement of revenue recovery laws with constitutional safeguards, ensuring that recovery measures do not overstep legal boundaries. The decision serves as a reminder that while the state can employ stringent recovery tactics, they must always align with statutory and constitutional provisions.
Bottom Line:
Kerala Revenue Recovery Act, 1968 - Bank accounts can be attached under Section 19 of the Act as 'other movable property' but transfer of funds from borrower's account to the authorized officer's account is not permissible under the Act.
Statutory provision(s): Kerala Revenue Recovery Act, 1968 Sections 5, 8, 19; Article 300A of the Constitution of India
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