Kerala High Court
Pius C. Mundadan vs Kerala Financial Corporation on 12 October, 2006
Author: K.Padmanabhan Nair
Bench: K.Padmanabhan Nair
IN THE HIGH COURT OF KERALA AT ERNAKULAM
WP(C) No. 13115 of 2006(J)
1. PIUS C. MUNDADAN, ADVOCATE,
... Petitioner
Vs
1. KERALA FINANCIAL CORPORATION,
... Respondent
2. CHIEF MANAGER,
For Petitioner :SRI.M.M.ABDUL AZIZ (SR.)
For Respondent :SRI.K.K.CHANDRAN PILLAI
The Hon'ble MR. Justice K.PADMANABHAN NAIR
Dated :12/10/2006
O R D E R
K. PADMANABHAN NAIR ,J
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W.P.(C).NOs.13115 & 14504 of 2006
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Dated, this the 12th day of October, 2006
JUDGMENT
W.P.(C)No.14504/2006 is filed by one of the legal representatives of second judgment debtor in O.P. (SFC) No.206/1981 on the file of the District Court, Ernakulam challenging Ext.P5 order passed by the first respondent Corporation taking over possession of 1 acre 72.600 cents of land and buildings situated in Sy.No.163/3A of Kothakulangara South Village, Aluva Taluk on 24.3.2005. in exercise of the powers conferred on it under Section 29 of the State Financial Corporations Act (for short 'the SFC Act'). W.P.(C)No.13115/2006 is also filed by another legal representative of the second judgment debtor in O.P. (SFC) No.206/1981 challenging the very same order.
2. The facts necessary for the disposal of these two Writ Petitions are as follows: M/s.Mundadan Industries, Angamaly was a partnership firm. The firm availed a loan of Rs.5,60,000/- from the Kerala Financial Corporation (for short 'the Corporation') mortgaging four items of properties including property covered by Ext.P5. The Corporation filed O.P.(SFC) No.206/1981 before the District Court, Ernakulam for recovery of the amount advanced. The learned District Judge by order dated 5.10.1983 allowed the Original Petition. The W.P.(C)NOS.13115 & 14504/2006 -:2:- Corporation was allowed to recover an amount of Rs.12,91,505.85 from the firm and its partners. The Corporation filed E.P.No.135/1984 and the mortgaged properties were brought to sale. Properties were sold. Items 1 and 2 were purchased by the decree holder and items 3 and 4 were purchased by strangers. The decree holder took delivery of the property. The petition filed under Order XXI Rule 90 of Civil Procedure Code for setting aside the sale was dismissed. That order has became final and conclusive. Subsequently one of the judgment debtors filed a petition for a declaration that the sale was void. That petition was dismissed. C.R.P.No.2651/1995 was filed before this Court challenging that order. This Court allowed the Civil Revision Petition and set aside the sale of two items of properties including the property covered by Ext.P5. The Corporation was directed to restore the possession of the these two items of properties to the judgment debtors. The properties were redelivered also. The Corporation filed Civil Appeal No.12014/1996 before the Supreme Court challenging the order passed by this Court in the Civil Revision Petition. The Supreme Court allowed the judgment debtors to repay the amount by sale of a portion or whole of the properties after intimating the Corporation. One year time was granted to the judgment debtors for effecting the sale. The judgment debtors had agreed to pay all amounts due to the Corporation as per order dated 5.10.1983 in O.P.(SFC) No.206/1981 and the expenses incurred by the Corporation in maintaining and W.P.(C)NOS.13115 & 14504/2006 -:3:- safeguarding the property after they took delivery of the same. There was dispute regarding the quantum of amount due to the Corporation. A petition was filed before the Supreme Court for quantifying the amount and the Supreme Court disposed of the petition holding that the amount is to be quantified by the executing court. Judgment debtors filed E.A.No.24/2005 before the execution court to quantify the amount due and payable. According to the judgment debtors the actual amount due to the Corporation was only Rs.52,55,445/-. But the Corporation is claiming an amount of Rs.75,72,947/-. The executing court by order dated 19.8.2005 found that the amount due to the Corporation was Rs.79,42,307/-. The petitioner in W.P.(C)No.14504/2006 along with another person filed C.R.P.No.912/2005 before this Court challenging that order. During the pendency of Civil Revision Petition the Corporation issued Ext.P5 order invoking powers conferred on it under Section 29 of the SFC Act and took over possession of 1 acre 72.600 cents of land.
3. It is averred that the petitioner in W.P.(C) No.14504/2006 requested the Corporation to sell a portion of the property. According to him by selling 92 cents of land the entire debt due to the Corporation can be realised and he is prepared to arrange a buyer. He sent Ext.P7 letter to the Corporation. It is averred that without considering the offer, the Corporation published the notification for sale of the 1.72.600 cents which is illegal. It was contended that before taking possession of W.P.(C)NOS.13115 & 14504/2006 -:4:- property under Section 29 of the SFC Act, no notice as contemplated under the Act was issued. It was also contended that the Corporation filed E.P.No.135/1984 and the same is still pending and as such the Corporation has no jurisdiction to resort to Section 29 of the SFC Act for sale of the properties. Hence the Writ Petition for quashing the communication issued by the Corporation taking over possession of properties and also the notification for sale of the properties.
4. The first respondent Corporation has filed a counter affidavit in both the Writ Petitions. The contentions raised are identical in both the Writ Petitions. It was contended that the Writ Petitions are abuse of process of this Court and filed without any bona fides and suppressing material facts. It was contended that the Writ Petitions are filed without impleading all necessary parties and the same is liable to be dismissed. It was averred that M/s.Mundadan Industries which was a firm to which father of the petitioners was a partner availed a loan of Rs.5,60,000/- from the Corporation. Since the amount was not re-paid, the Corporation filed O.P.(SFC) No.206/1981 before the District Court, Ernakulam and that Original Petition was decreed on 5.10.1983. The District Court ordered sale of the mortgaged properties. That order has become final. The Corporation filed E.P.No.135/1984 on 29.8.1984 for recovery of the decree debt by sale of the mortgaged properties. The properties were sold and item Nos.1 and 2 of the mortgaged properties were purchased by the Corporation. The judgment debtors W.P.(C)NOS.13115 & 14504/2006 -:5:- filed E.A.No.42/1986 for setting aside the sale. That petition was dismissed. The judgment debtors filed C.M.A.No.132/1987 before this Court which was allowed and E.A.No.42/1986 was remanded. The District Court again dismissed E.A.No.42/1986. The judgment debtors filed C.M.A.NO.13/1990 before this Court challenging that order. C.M.A.No.13/1990 was disposed of permitting the judgment debtors to pay off the decree debt within six months. No amount was paid. It was also averred that when the decree holder attempted to take delivery of the properties obstruction petitions were filed and subsequently obstruction petitions were dismissed and the Corporation was allowed to take possession of the properties. It was averred that against the dismissal of obstruction petitions the judgment debtors filed E.F.A.No.30/1993 before this Court. This Court refused to grant stay. Two suits as O.S.No.418/1991 and O.S.No.430/1991 were filed for specific performance of alleged agreements for sale and for injunction. Those suits were dismissed. The sister of the present petitioners filed E.A.No.32/1995 for declaring that the sale was void and that E.A. was dismissed. Subsequently the mother of the present petitioners filed E.A.No.39/1995 under Section 47 and Order XXI Rule 90 of Civil Procedure Code for setting aside the sale and that E.A. was also dismissed. Against the order of dismissal of E.A.No.39/1995 the fourth judgment debtor filed C.R.P.No.2165/1995 before this Court and the Civil Revision Petition was W.P.(C)NOS.13115 & 14504/2006 -:6:- allowed. The revision petitioner was allowed to redeem the property depositing Rs.38 lakhs within one month. But that amount was not deposited by the revision petitioner/judgment debtor No.4. Subsequently C.M.P.Nos.2384/1996 and 2385/1996 were filed by judgment debtor No.2, father of the present petitioners for enlargement of time and for permission to deposit the amount and redeem the property. This Court allowed the petitions and directed the second judgment debtor to deposit Rs.47,32,481/-. That amount was also not deposited. The petitioner in those petitions filed a petition to review the above order. It was averred that the Corporation filed Special Leave Petition, S.L.P. No.17822/1996 before the Supreme Court and leave was granted and the case was numbered as Civil Appeal No.12014/1996. It was contended that the Supreme Court by order dated 11.9.2003 allowed the respondents to pay off all the decree debt either by sale of the entire property or by sale of a portion of the same after due intimation to the appellant Corporation. It was also ordered that if the properties were not sold within a period of one year the appellant Corporation is at liberty to sell the property. That order was not complied with by the judgment debtors. It was contended that one of the legal representatives of the second judgment debtor wrote a letter to the Corporation stating that the amount due to the Corporation was Rs.53,76,077.57. It was averred that some of the legal representatives of second judgment debtor filed I.A.No.7/2005 before the Supreme Court praying W.P.(C)NOS.13115 & 14504/2006 -:7:- that the amount due to the Corporation may be quantified. That prayer was also not allowed. It was held that it is to be done by the executing court or by appropriate forum. It was averred that the legal representatives filed E.A.No.24/2005 in E.P.No.135/1984 for quantifying the amount due and payable. It was argued that the revival of Execution Petition is not possible since the same was closed after recording satisfaction. It was also argued that the Corporation is at liberty to initiate action under Section 29 of the SFC Act and the contention of the petitioners that after initiating proceedings under Sections 31 and 32 of the SFC Act, the Corporation cannot resort to the remedy provided under Section 29 of the SFC Act is unsustainable and the Supreme Court has allowed the Corporation to sell the property.. It was contended that the fact that a decree was passed in the Original Petition was not a bar for taking steps under Section 29 of the SFC Act. It was contended that there is no question of simultaneous proceedings. It was also contended that pendency of Civil Revision Petition and Writ Petitions is not a bar for taking possession of the property under Section 29 of the SFC Act and for proceeding to sell the property. Hence they prayed for dismissal of the Writ Petitions.
5. The learned counsel appearing for the petitioners in both the Writ Petitions argued that the Corporation cannot resort to the remedies available under Sections 31 and 32 and also under Section 29 of the SFC Act simultaneously. W.P.(C)NOS.13115 & 14504/2006 -:8:- They relied on the decisions reported in A.P.State Financial Corporation v. M/s.GAR Re-Rolling Mills (AIR 1994 SC 2151) and State Bank of India v. Kuttappan (1998 (2) KLT 130). The learned counsel appearing for the first respondent Corporation relied on a decision reported in Usman v. Kerala Financial Corporation (2006(2) KLT 449) to argue that there is no bar for initiating proceedings under Sections 31 and 29 of the SFC Act simultaneously.
6. In this case it is admitted that the first respondent Corporation filed O.P. (SFC) No.206/1981 for realisation of the amount due the Corporation. The Original Petition was decreed, properties were brought to sale and sold in E.P.No.135/1984. After sale of properties satisfaction was recorded and E.P.No.135/1984 was dismissed. Long after the sale of the properties one of the judgment debtors filed E.A.No.39/1995 under Section 47 of the Civil Procedure Code for a declaration that the sale was void. The executing court dismissed the same. Challenging that order C.R.P.No.2651/1995 was filed. That was allowed by this Court. Decision is reported in Achamma Cyriac v. Kerala Financial Corporation (AIR 1997 Ker.75). The first respondent Corporation filed Special Leave Petition before the Supreme Court. That was allowed and the case was numbered as Civil Appeal No.12014/1996 which was disposed of on 11.9.2003. The operative portion of the order reads as follows:
W.P.(C)NOS.13115 & 14504/2006 -:9:-
"On behalf of the respondents it is stated that they are willing to have a portion of the property mentioned in Schedule 1 and 2 (of the petition filed by the appellant - Corporation) sold for the purpose of payment of all amounts due to the appellant- Corporation, as per the order dated 5th October, 1983 in O.P.(SFC) No.206/1981. The respondents are also agreed that the expenditure which may be incurred by the appellant-Corporation in safeguarding and maintaining the property after they took delivery may also be paid to the appellant.
We accordingly direct that the respondents are at liberty to sell the property or any portion thereof after intimation to the appellant-Corporation. The respondents to fix the date of advertisement and to get the form of the advertisement approved from the appellant-Corporation. The advertisement should state that the agreement of sale will be entered into jointly with the appellant-Corporation and that the sale proceeds are to be paid directly to the appellant- Corporation by the purchaser. On receipt of sale consideration appellant-Corporation shall be entitled to adjust the same against the amounts due under the decree, the cost and expenditure incurred by them.
Sale to be effected within a period of one year from today. In the event of such sale not taking place within one year from today, the appellant-Corporation will be at liberty to proceed to sell the property."
It is admitted by both sides that no amount was re-paid by the debtors. The petitioners filed I.A.No.7/2005 in Civil Appeal No.12014/1996 before the Supreme Court for extension of time and for quantification of the amount. The above I.A. was disposed of by the Supreme Court holding that it is not for the W.P.(C)NOS.13115 & 14504/2006 -:10:- Supreme Court to decide what is the amount due and that those are questions to be adjudicated by the executing court or in an appropriate forum. Six months time was granted to the debtors to sell the property. Thereafter the petitioners filed E.A.No.24/2005 for revival of E.P.No.135/1984 and to fix the amount due under the decree in the light of the directions of the Supreme Court in Civil Appeal No.12014/1996 and I.A.No.7/2005. The executing court quantified the amount as per order dated 9.8.2005. But the prayer for revival of the Execution Petition was not allowed. Since the Execution Petition was already closed no Execution Petition is pending before the District Court.
7. In M/s. GAR Re-Rolling Mills case (supra) the Supreme Court held that even after the Corporation obtained a decree under Section 31 of the Act it can proceed under Section 29 of the Act without executing the decree. It was held as follows:
"The Financial Corporation set up under S.3 of Act is entitled to take recourse to the remedy available to it under S.29 of the Act even after having obtained an order or a decree after invoking the provisions of S.31 of the Act but without executing that decree/order. The expression "without prejudice to the provisions of S.29 of this Act" as appearing in S.31 of the Act clearly demonstrates that the Legislature did not intend to confine the Corporation to take recourse to only a particular remedy against the defaulting industrial concern for recovery of the amount due to it. It left the choice to the Corporation to act in the first instance under S.31 of the Act and W.P.(C)NOS.13115 & 14504/2006 -:11:- save its rights and remedies under S.29 of the Act to be availed at a later stage, with the sole object of enabling the Corporation to recover its dues. However, the Corporation cannot simultaneously pursue two remedies at the same time.
The principle laid down in M/s.GAR Re-Rolling Mills case (supra) was followed by a learned Single Judge of this Court in Usman's case (supra). In Usman's case it was held as follows:
"What is prohibited is against continuation of two alternate proceedings for recovery against debtor and there is no bar against initiating both remedies in time and pursuing one after another. Therefore KFC was perfectly within their right to initiate revenue recovery proceedings vide Ext.R1(a) to get over limitation and to keep it pending until proceedings initiated under S.29 of the SFC Act was over."
In Kuttappan's case (supra) it was held as follows:
"The doctrine of election is applicable to such a situation that principle would apply only in cases where the two courses of action available are mutually exclusive, and the opposite party on the faith of the representation by conduct or otherwise, had acted to his detriment or has adopted a course of action which otherwise he would not have resorted to. It is not possible to hold that the two remedies open to the decree holder are mutually exclusive."
So the mere fact that the Corporation filed O.P.(SFC) No.206/1981 before the District Court, Ernakulam and obtained a decree is not a ground to hold that the Corporation has no jurisdiction to initiate action under Section 29 of the SFC Act. W.P.(C)NOS.13115 & 14504/2006 -:12:- E.P.No.135/1984 is not pending. That E.P. was closed long back recording satisfaction. It is true that in C.R.P. No.2651/1995 this Court held that sale was void. But the order passed in C.R.P.No.2651/1995 merged with the order passed by the Supreme Court in Civil Appeal No.12014/1996. The petitioner had agreed to pay the entire amount due under the order passed in O.P.(SFC) No.206/1981 by selling a portion of the property within one year. They did not pay any amount. The petitioner can not compel the Corporation that they shall sell the property only through the Court. No E.P. is pending as on this date. The Supreme Court gave permission to the Corporation to sell the property. The action initiated is perfectly correct and does not call for interference. It is argued that no notice was issued before taking possession of the assets. Ext.P2 produced by the petitioners shows that the Corporation had issued the notice on 21.2.2006 and took over possession of the property. So the Writ Petitions are only to be dismissed.
8. The counsel appearing for the petitioners in the Writ Petitions submitted that the petitioners are prepared to find out a buyer. It is argued that the petitioner in W.P.(C) No.14504/2006 had written a letter to the first respondent stating that a buyer is readily available but without giving any reply the property was notified for sale. Shri K.Chandran Pillai, the counsel for the first respondent submitted that that offer is only a pretext to delay the realisation of the amount and the petitioners have no intention to pay any amount. It is argued that amount was W.P.(C)NOS.13115 & 14504/2006 -:13:- advanced in the year 1972 and except a meager amount realised by the sale of item Nos. 3 and 4 no amount was repaid so far.
9. The conduct of the petitioners narrated in the counter affidavit filed by the first respondent shows that the chance of the petitioners paying the amount due to the Corporation is very slim. But as a final chance I am inclined to grant one more opportunity to the debtors to pay of the debt due to the Corporation. If the petitioners or any one of the debtors pay or deposit Rs.25 lakhs in the District Court, Ernakulam within two months from today, they will be given four more months time from the expiry of the initial two months period fixed to pay off the balance amount due to the Corporation. It is open to the petitioners to find out a purchaser and inform the Corporation. If the prospective purchaser is prepared to pay the entire amount due to the Corporation, Corporation shall give permission to the debtors to sell a portion or the entire property. The purchaser shall pay the sale consideration direct to the Corporation. No further time will be granted to the petitioners on any count. If the petitioners fail to deposit Rs.25 lakhs within two months the Corporation can sell the property.
The Writ Petitions are disposed of in the above terms.
K. PADMANABHAN NAIR JUDGE cks W.P.(C)NOS.13115 & 14504/2006 -:14:-