Allowed

R.K.Rajesh Khanna v. State of Kerala

Kerala HC7 Dec 2018WP(C)/14036/2016

Case brief

AI extract

What is this about?

In a writ petition challenging the cancellation of a money lending license, the High Court of Kerala held that the impugned order was passed based on grounds (non-submission of accounts) not stated in the initial show cause notice. The court quashed the cancellation and revision orders, directed the authority to issue a fresh notice within one month, and permitted the petitioner to continue busine

What did the court decide?

Writ petition disposed of by quashing the license cancellation (Ext.P13) and revision (Ext.P17) orders; 4th respondent directed to issue fresh notice and permit petitioner to continue business by inte

R.K.Rajesh Khanna Vs State of Kerala — Cheque Dishonour | Kerala HC (2018)

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IN THE HIGH COURT OF KERALA AT ERNAKULAM

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PRESENT

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THE HONOURABLE MR.JUSTICE V.G.ARUN

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FRIDAY ,THE 07TH DAY OF DECEMBER 2018 / 16TH AGRAHAYANA, 1940

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WP(C).No. 14036 of 2016

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PETITIONER:

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R.K.RAJESH KHANNA AGED 49 YEARS, S/O. RAVEENDRAN, M/S. R.K.FINANCE, BUILDING NO.XXVI/426,CURZON NAGAR,

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OPP.SUMANGALI AUDITORIUM, CUTCHERY WARD, KOLLAM.

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BY ADVS. SRI.S.SREEKUMAR (SENIOR) SRI.LEO GEORGE

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RESPONDENTS:

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1 STATE OF KERALA REPRESENTED BY THE CHIEF SECRETARY TO GOVERNMENT, GOVERNMENT SECRETARIAT, THIRUVANANTHAPURAM-695 001.

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2 THE COMMISSIONER OF COMMERCIAL TAXES KOLLAM-691 001

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3 THE DEPUTY COMMISSIONER COMMERCIAL TAXES, KOLLAM-691 001

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4 THE INSPECTING ASSISTANT COMMISSIONER COMMERCIAL TAXES, KOLLAM-691 001

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SRI.C.K.GOVINDAN, SENIOR GOVERNMENT PLEADER.

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THIS WRIT PETITION (CIVIL) HAVING BEEN FINALLY HEARD ON 07.12.2018, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING:

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WP(C).No. 14036 of 2016 2

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JUDGMENT

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The petitioner has been issued with license

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under the Kerala Money Lenders Act, as evidenced by Ext.P3. The writ petition has been filed, being aggrieved by Ext.P13 order, by which license has

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been cancelled, and also Ext.P17 order in

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revision, confirming the cancellation as per Ext.P13. The main contention urged by the learned Senior Counsel appearing for the petitioner is that the cancellation under Ext.P13 is for reasons which were not stated in Ext.P10 show cause notice. Learned Special Government Pleader contended that, Ext.P12 notice issued subsequently contained the reasons, which were the subject matter of consideration in Ext.P13 order.

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A perusal of Ext.P10 notice reveals that

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the petitioner was required to show cause as to why the license issued to him in the address mentioned in the notice shall not be cancelled, for the reason that the ownership certificate of

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WP(C).No. 14036 of 2016 3

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the building in which the petitioner was

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conducting business, which according to the

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petitioner was owned by him, had been transfered in the name of another person. In Ext.P11 reply to

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the show cause notice, the petitioner has

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elaborately stated the reason as to why the

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license was not liable to be cancelled, based on the reasons mentioned in the show cause notice. Among other contentions, in Ext.P11 the petitioner had inter alia stated that the proposal of the Kollam Corporation for cancellation of the ownership certificate was the subject matter of WP(C) No.13478 of 2015 pending before this Court, wherein an interim order had been granted staying the proposal for cancellation of registration.

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After submission of reply to Ext.P10, the

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petitioner was served with Ext.P12 which contains

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a statement that the petitioner had not produced his books of accounts for the period from 2009-10

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to 2013-14 and had not submitted the audited

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statement of accounts and Balance sheet for the

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WP(C).No. 14036 of 2016 4

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years 2012-13 and 2013-14 and thereby the

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petitioner is violating provisions of the Kerala Money Lenders Act, 1958. Ext.P12 also refers to

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Ext.P10 show cause notice and intimates the petitioner about the date fixed for personal

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hearing.

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After hearing the petitioner's

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representative, Ext.P13 order was passed,

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cancelling the license issued to the petitioner, in exercise of power under Sections 14(1), (b) and (d) of the Kerala Money Lenders Act. The main reason stated in Ext.P13 is that the petitioner had failed to submit his audited statement of

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accounts and to produce the books of accounts, in spite of receipt of Ext.P12 notice. The order also refers to proceedings initiated by the Kollam corporation, as also the writ petition filed by the petitioner challenging the action of the Kollam Corporation. In the order it is further stated that though there was an interim order in the writ petition, no document as to the extension

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WP(C).No. 14036 of 2016 5

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of time limit by the Honourable High Court was filed by the licensee. As would be evident from Exts.P6 and P7, the interim order granted in WP(C)

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No.13478/2015, initially for a period of two months, stands extended until further orders.

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Ext.P13 also refers to the preventive detention undergone by the petitioner under the provisions of the KAAPA Act, 2007. In this regard, it may be

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pertinent to have a look at Ext.P9 order of revocation dated 17.06.2015 issued by the

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Government of Kerala, directing release of the petitioner forthwith, in exercise of power under section 10 (4) of the KAAPA Act, 2007. Therefore,

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as on the date on which Ext.P13 order was issued, no proceedings under the KAAPA Act was pending against the petitioner.

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Being aggrieved by Ext.P13, the petitioner

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filed a revision petition and as per Ext.P17, the

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revision was rejected for the reason that the petitioner had failed to produce the books of

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accounts and to submit the audited statements.

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WP(C).No. 14036 of 2016 6

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The only question that remains for

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consideration is as to whether the license of the

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petitioner could have been cancelled for nonproduction of books of accounts and non-filing of the audited statements, which was not the charge

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on which the petitioner was directed to show

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cause, as per Ext.P10 notice. It was urged by the

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learned Senior Counsel that, at the time of

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hearing, pursuant to Ext.P12 itself, the

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petitioner's wife had produced the books of accounts and had submitted the audited statement

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of accounts. Ext.P18 is an undertaking which the petitioner has submitted before the 4^th respondent

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expressing willingness to produce the books of accounts for the relevant period.

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In order to resolve the issue it may be

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appropriate to refer Section 14 of the Money

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Lenders Act, which reads as follows:

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1. The licensing authority may, at any time, during the term of any license, cancel it by an order in writing-

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a) if the licensee caries on the business in contravention of any of the provisions of the

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WP(C).No. 14036 of 2016 7

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Act or the rules made thereunder or of the conditions of the license, or

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b) if any reason for which the licensing authority could have refused to grant the license to the money-lender under subsection (3) of Section 4, is brought to the notice of that authority after the grant of the license, or

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c) if the licensee is convicted for an offense under Section 9 or section 11 or Section 13 or [“(CC) if the licensee carries on business without furnishing the security or additional security as provided in this Act: or”]

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d) if the licensee maintains false accounts.

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2) Before cancelling a license under subsection(1), the licensing authority shall give the licensee a notice in writing stating the grounds on which it is proposed to take action and requiring him to show cause against it within such time as may be specified in the notice.

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3) Every order of the licensing authority under this Section shall be communicated to the licensee in such manner as may be prescribed.”] Under section 4 (3) of the Kerala Money Lending Act the licencing authority is satisfied

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a)that the applicant has not complied with the provision of these Act or the Rules made thereunder in respect of an application for the grant of a license or

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b)that the applicant has made willful default in complying with or knowingly acted in contravention of any of the requirement of this Act.

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Sub Section 2 of Section 14 mandate that

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before cancelling the license under sub Section 1,

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WP(C).No. 14036 of 2016 8

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the licensing authority shall give the licensee a notice in writing stating the grounds on which it is proposed to take action and require the licensee to show cause against the proposed cancellation within such time as may be specified in the notice. From a reading of the section it is evident that in the show cause notice issued under Section 14 (2), the ground on which it is proposed to take action against the licensee should be stated specifically. In Ext.P10 show cause notice issued in terms of Section 14 (2), the only ground on which it was proposed to cancel the petitioner's license was the alleged cancellation of the ownership certificate of

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building No.26/426 in Kollam Corporation, in the name of the petitioner. As would be evident from Ext.P11, the petitioner's explanation was confined to the ground contained in Ext.P10. Even though the

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learned Special Government pleader strenuously contended that Ext.P12 was also issued under Section

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14 (2), in which reference is made to nonproduction of books of accounts and non submission

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WP(C).No. 14036 of 2016 9

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of audited statement of accounts, I am unable to

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accept that contention. Reading of Ext.P12 as a whole makes it clear that though there is a mention

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about non-production of books of accounts and non submission of audited statement of accounts and the

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balance sheets, Ext.P12 is essentially a notice of hearing issued pursuant to Ext.P10.

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In that view of the matter, cancellation of

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petitioner's license as per Ext.P13, based on the grounds which were not mentioned in the show cause notice is liable to be set aside. Consequently, the revisional order, Ext.P17 also has to be set aside.

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Hence, Exts.P13 and P17 orders are quashed. As rightly pointed out by the learned Government Pleader non production of books of accounts and non submission of audited statements of accounts and

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balance sheet is a very serious lapse as far as

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licensees under the Money Lenders Act are concerned. Therefore, while quashing Exts.P13 and P17, I make

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it clear that the 4^th respondent would be at liberty

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to issue fresh show cause notice and initiate

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WP(C).No. 14036 of 2016 10

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appropriate action in the manner provided under Section 14 of the Money Lenders Act, if the petitioner has failed to submit the books of

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accounts and audited statements and balance sheet,

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in spite of the undertaking in Ext.P18. The fresh proceedings, if any shall be initiated within a period of one month from the date of receipt of a

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copy of this judgment. The petitioner would be at

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liberty to appear and submit necessary documents at the time of hearing. Until a final decision is

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rendered pursuant to the fresh show cause notice, the petitioner would be permitted to continue the business, in the manner he had been continuing on the strength of the interim order in this case.

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With the above observations, the writ petition is disposed of.

Sd/-

V.G.ARUN JUDGE

JS/07.12

WP(C).No. 14036 of 2016 11

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APPENDIX

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PETITIONER'S EXHIBITS:

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EXHIBIT-P1	COPY OF THE SALE DEED NO.1615/2008 OF ERAVIPURAM SRO EXECUTED BY SMT.LALITHAMBIKA AND HER SON IN FAVOUR OF THE PETITIONER AND HIS WIFE DTD.11.4.2008.
EXHIBIT-P2	COPY OF THE UPTO DATE BASIC TAX RECEIPT DTD.6.4.2015 ISSUED BY THE VILLAGE OFFICER, KOLLAM WEST VILLAGE EVIDENCING PAYMENT OF BASIC TAX IN RESPECT OF PROPERTY COVERED BY EXT.P1 SALE DEED.
EXHIBIT-P3	COPY OF THE CERTIFICATE OF REGISTRATION ISSUED BY THE 4TH RESPONDENT PERMITTING THE PETITIONER TO CONDUCT BUSINESS OF MONEY LENDING IN BUILDING NO.MC XXVI/426.
EXHIBIT-P4	COPY OF THE PRINT OUT OF THE RECEIPT EVIDENCING PAYMENT OF RENEWAL FEES BY THE PETITIONER WITH RESPECT TO THE LICENCE UNDER THE KERALA MONEY LENDERS ACT FOR THE YEAR 2015-16.
EXHIBIT-P5	COPY OF THE PLAINT IN OS NO.115/2010 BEFORE THE SUB COURT, KOLLAM, DTD.9.2.2010.
EXHIBIT-P6	COPY OF THE INTERIM ORDER PASSED BY THIS HON'BLE COURT IN WPC NO.13478/2015 DTD.12.5.2015.
EXHIBIT-P7	COPY OF THE INTERIM ORDER PASSED BY THIS HON'BLE COURT EXTENDING THE OPERATION OF EXT.P6 ORDER UNTIL FURTHER ORDERS DTD.13.8.2015.
EXHIBIT-P8	COPY OF THE OPINION OF THE ADVISORY BOARD CONSTITUTED UNDER SECTION 8(1)OF THE KERALA ANTI SOCIAL ACTIVITIES (PREVENTION) ACT 2007 DTD.12.6.2015.
EXHIBIT-P9	COPY OF THE ORDER OF REVOCATION OF DETENTION ISSUED BY THE GOVERNMENT DTD.17.6.2015.

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WP(C).No. 14036 of 2016 12

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EXHIBIT-P10	COPY OF THE NOTICE ISSUED BY THE 4TH RESPONDENT AT THE OFFICE OF THE PETITIONER DTD.9.6.2015.
EXHIBIT-P11	COPY OF THE REPLY SUBMITTED BY THE PETITIONER TO EXT.P10 NOTICE ISSUED BY THE 4TH RESPONDENT DATED NIL WITHOUT ENCLOSURES.
EXHIBIT-P12	COPY OF THE NOTICE ISSUED TO THE PETITIONER BY THE 4TH RESPONDENT DTD.13.7.2015.
EXHIBIT-P13	COPY OF THE ORDER BEARING NO.320204 28813/2015-16 DTD.31.7.2015 ISSUED BY THE 4TH RESPONDENT.
EXHIBIT-P14	COPY OF THE MEMORANDUM OF APPEAL WITHOUT ANNEXURES FILED BEFORE THE 3RD RESPONDENT DTD.3.8.2015.
EXHIBIT-P15	COPY OF THE INTERLOCUTORY APPLICATION FILED BY THE PETITIONER IN EXT.P14 APPEAL.
EXHIBIT-P16	COPY OF THE JUDGMENT PASSED BY THIS HON'BLE COURT IN WPC NO.23748/2015 DTD.7.8.2015.
EXHIBIT-P17	COPY OF THE ORDER PASSED BY THE 3RD RESPONDENT IN RP NO.190/2015 DTD.8.3.2016.
EXHIBIT-P18	COPY OF THE LETTER ISSUED BY THE 4TH RESPONDENT DTD.18.8.2015 CONTAINING THE ENDORSEMENT DTD.19.8.2015.

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RESPONDENT'S EXHIBITS: NIL

R.K.Rajesh Khanna v. State of Kerala

Case brief

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R.K.Rajesh Khanna v. State of Kerala

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