Kerala High Court Quashes Panchayat Prosecution Over Tax Dues, Reiterates Recovery Must Fail First

The Kerala High Court has quashed criminal proceedings initiated by a grama panchayat against the General Manager of GTL Infrastructure Ltd. over alleged non-payment of panchayat tax in respect of mobile towers, holding that prosecution under the Kerala Panchayat Raj Act can be launched only after statutory recovery proceedings are first exhausted.

A Single Bench of Justice C. S. Dias allowed a criminal miscellaneous case filed by the General Manager, who was the first accused in a complaint pending before the Judicial First Class Magistrate-II, Perinthalmanna.

The complaint had been filed by the Mankada Grama Panchayat, alleging non-payment of tax payable to the panchayat in respect of two mobile towers and a battery room for the period from 2018–19 to 2020–21.

The prosecution was initiated under Section 210 of the Kerala Panchayat Raj Act read with the Kerala Panchayat Raj (Taxation, Levy and Appeal) Rules.

Examining Section 210, the Court held that the statutory scheme mandates that recovery of tax arrears must first be attempted through distraint and sale of movable property. Criminal prosecution, the Court said, is permissible only if such recovery becomes impracticable.

“A distraint warrant has to be issued to the defaulter to recover the arrears payable to the Panchayat. It is only when the recovery proceedings become futile that a criminal prosecution can be launched,” the Court observed.

The Court further clarified that “the two cardinal conditions for initiating a prosecution are: (i) the distraint warrant should be issued against the accused, and (ii) the distraint warrant should be unsuccessful.”

Referring to Rules 14 and 15 of the Kerala Panchayat Raj (Taxation, Levy, and Appeal) Rules the Court noted that even after service of a demand notice, if the amount is not paid within fifteen days, the Secretary of the Panchayat “may issue a distraint warrant.”

These provisions, the court said, are incorporated “to prevent unnecessary harassment of the defaulters by initiating criminal prosecution proceedings.”

On facts, the court found that no distraint warrant had been issued and no recovery proceedings had been initiated. “Undisputedly, the first respondent has not issued any distraint warrant or initiated coercive proceedings,” the Court noted, adding that the panchayat had “straight away initiated the criminal prosecution against the petitioner.”

Relying on its earlier decision in Secretary, Pozhuthana Grama Panchayat v. T.K. Unni Peravan, the Court held that the prosecution was premature and unsustainable in law.

Invoking its inherent powers, the High Court quashed the complaint and all further proceedings in the criminal case against the petitioner