Disposed

The Federal Bank Limited v. Joshy Varghese

Kerala HC7 Nov 2017Ex.FA/32/2017

Case brief

AI extract

What is this about?

In an execution first appeal, the court acknowledged the bank's first charge on the property due to a DT order. It held that the judgment debtor obtained only the equity of redemption via a valid sale. Consequently, the bank must first recover the debt against other charged properties before proceeding against this property.

What did the court decide?

The court declared the first respondent acquired only the right of redemption and directed the bank to proceed against other charged properties first.

The Federal Bank Limited Vs Joshy Varghese — Banking and Recovery | Kerala HC (2017)

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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 P.N.RAVINDRAN & THE HONOURABLE MR. JUSTICE DEVAN RAMACHANDRAN

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TUESDAY, THE 7TH DAY OF NOVEMBER 2017/16TH KARTHIKA, 1939

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Ex.FA.No. 32 of 2017 ()

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ORDER DATED 15.12.2015 IN E.A.116/2014 IN E.P.60/2012 IN OS 13/2011 OF THE SUB COURT, PERUMBAVOOR.

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APPELLANT(S)/(CLAIM PETITIONER/NON PARTY):

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THE FEDERAL BANK LIMITED,

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BROADWAY BRANCH,

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ERNAKULAM-682031, REPRESENTED BY THE ASST. VICE PRESIDENT, ASSET RECOVERY BRANCH, MR. AMJITH C JOHN.

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BY ADVS.SRI.K.N.SIVASANKARAN SRI.SUNIL SHANKER

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RESPONDENT(S)/(RESPONDENTS/DECREE HOLDER AND JUDGMENT DEBTOR/PLAINTIFF AND DEFENDANT):

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JOSHY VARGHESE, AGED 49 YEARS, S/O. VARGHESE, THELAKKADAN HOUSE, MALAMURY, PULLUVAZHY KARA, RAYMANGALAM VILLAGE.

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JIJI VARGHESE, AGED 51 YEARS, S/O. VARGHESE, THELAKKADAN HOUSE, KALOOR, KOCHI-17.

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R2 BY ADV. SRI.SHAJI CHIRAYATH R2 BY ADV. SMT.JIJI M. VARKEY R2 BY ADV. SMT.SAVITHA GANAPATHIYATAN R1 BY ADV. SRI.V.RAJENDRAN (PERUMBAVOOR) R1 BY ADV. SRI.GEORGE VARGHESE KIZHAKKAMBALAM

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THIS EXECUTION FIRST APPEAL HAVING BEEN FINALLY HEARD ON 07-11-2017, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING:

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P.N. Ravindran & Devan Ramachandran, JJ.

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- - - - - - - - - - - - - - - - - - - - - -- - - Ex.F.A.No.32 of 2017

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- - - - -- - - - - - - - - - - - - - - - - - - - - Dated this the 7^th November, 2017

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JUDGMENT

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Devan Ramachandran, J.

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The appellant herein is the Federal Bank Limited, a scheduled commercial bank under the Reserve Bank of India Act, 1934. It alleges that it has filed O.A.No.193 of 2013 against the second respondent under the provisions of the Recovery of Debts Due to Banks and Financial Institutions Act, 1993 in which a final order has been passed by the Debt Recovery Tribunal. It says it has obtained the said order against the second respondent and his business concern on 22.8.2016. It alleges that the order of the Debt Recovery Tribunal creates a charge over certain extent of property owned by the second respondent through an equitable mortgage executed by him at the time when the loans were availed by him.

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The bank says that while it was prosecuting the original application before the Debt Recovery Tribunal, it came to be aware that one of the secured assets, namely, schedule B in the original application was being proceeded against by the Sub Court, Perumbavoor in execution of a decree passed by it in O.S.No.13 of 2011. The Bank says that on enquiry they found out that O.S.No.13 of

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Ex.F.A.32/2017 2

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2011 was instituted by the first respondent herein against the second respondent herein claiming an amount of Rs.20,40,000/- on the strength of a cheque executed by the latter in favour of the former. The Bank says that they got to know that the suit was decreed by the court below on 30.3.2012 and that an execution petition had been levied by the first respondent against the second respondent to recover the decree debt.

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On thus being aware that the court below had attached the property of the second respondent, described as schedule B to the original application filed by them before the Debt Recovery Tribunal, they filed E.A.No.116 of 2015 staking a claim over the same under Order XXXVIII Rule 8 of the Code of Civil Procedure. The court below, however, dismissed this application, on the ground that the Bank has not been able to establish that it had a first charge over the property, by its order dated 15.12.2015. The Bank says that after the dismissal of the said application, they initially attempted to restore it by filing E.A.Nos.83 and 84 of 2017 which were also dismissed by the court below. They say that they are, therefore, constrained to file this appeal against the initial order of the court below dated 15.12.2015 in E.A.No.116 of 2014 filed by them in E.P.No.60 of 2012 noticed above.

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We have heard Sri Sunil Shankar, learned counsel appearing for the appellant; Sri V.Rajendran, learned counsel appearing for the first respondent and Sri Shaji Chirayath, learned counsel appearing for

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Ex.F.A.32/2017

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the second respondent.

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The facts of this case are rather peculiar. It is virtually admitted by the parties that the appellant Federal Bank had filed O.A.No.193 of 2013 and had obtained a final order against the second respondent herein from the Debt Recovery Tribunal. It is also virtually conceded that in the said final order the property involved in this appeal is also found to be charged in favour of the Federal Bank. The court below however, while dismissing E.A.No.116 of 2014 filed by the Bank, which has led to the impugned order, found that the Bank had not been able to produce any document in support of their assertion that they have first charge over the property. This is presumably because at the time when the Bank was prosecuting the execution application, the original application filed by the Bank before the DRT had not been orderded. This is evident because the original application was disposed of by the Debt Recovery Tribunal only on 22.8.2016. The court below, therefore, did not have any material before it and the Bank also did not take care to produce sufficient materials in establishment of their claim that they have first charge over the property. This is singularly why the court below went on to dismiss the claim petition.

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We do not think, going by the circumstances detailed above, that the court below has erred in any manner. However, it is also expressly admitted by the learned counsel appearing for the second

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Ex.F.A.32/2017

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respondent that the original application filed against him has been finally decree dordered. He also concedes that the property in question is charged to the Federal Bank. Learned counsel for the first respondent though initially tried to assert that the certified copy of the order of the Debt Recovery Tribunal in the original application filed by the appellant has not been placed on record, eventually conceded that the Debt Recovery Tribunal had indeed decreed the application declaring that the Bank has charge a over the property in question, which had been created as early as in the year 2002.

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When the factum of the mortgage and the fact that the original application has been decreed, granting such charge in favour of the Bank, is admitted it is only ineluctable that the Bank would have the first charge over the property, at least, with respect to the amounts to be recovered under the final order in the original application.

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Faced with the above, Sri.V.Rajendran, the learned counsel appearing for the first respondent admits that his client is aware that since first charge has been found in favour of the Bank, he would only obtain the equity redemption of the mortgage and not complete proprietary rights over the property through the court conducted sale. He says that the sale conducted by the court below was in execution of the decree that he has obtained and prays that the sale may not be set aside because he is ready to concede that what has been obtained by

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Ex.F.A.32/2017

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his client through such sale is only the right of redemption of mortgage and nothing more.

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When it is so accepted by the first respondent and when it is admitted by the second respondent that the original application against him has been decreed, we are drawn to consider what would be the relief that can be granted in this appeal.

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Since the Federal Bank is holding first charge over the property and since the first respondent has obtained the property in a properly and validly held court auction, it will only lead to an inference that the first respondent has obtained only the equity of redemption over the property and it will be open to him to redeem the mortgage and acquire full rights over the same. The learned counsel for the first respondent at this point says that the Bank has got other properties charged under the final order in O.A.No.193 of 2013. He prays that the Bank may be directed, in consideration of equity and fair play, to proceed against the other properties first and only thereafter proceed against the property in question, so that his client would be in a position to pay off the balance amount, if any, recoverable by the Bank through the execution proceedings and by sale of other properties.

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We find considerable force in the said submission. We are certain that the first respondent has bid for the property in a validly conducted court auction. We are, however, also certain that the Bank has a first charge over the property. The question before us is to

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Ex.F.A.32/2017 6

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reconcile these two apparently conflicting interests. However, on a closer view it becomes apparent that there is no conflict at all because what has been obtained by the first respondent in the court auction is only the equity of redemption and it is always available to him to pay off the amounts to the bank so as to get the charge over the property released.

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Sri Sunil Shankar, learned counsel appearing for the appellant also admits that the Bank has other properties which are charged with them under the final order of the Debt Recovery Tribunal. Taking into all these circumstances, we are certain that we will be justified in issuing the following declarations and directions while disposing of this appeal:

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(a) The rights obtained by the first respondent through the sale conducted by the execution court in E.P.No.60 of 2012 in O.S.No.13 of 2011 is only the right of redemption of mortgage available to the judgment debtor against the Federal Bank Limited.

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(b) The Federal Bank Limited is concededly holding first charge over the property and it will certainly be available to them to proceed against the sale in execution of the final decree obtained by them in O.A.No.193 of 2013;

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(c) The Federal Bank, though is declared to hold first charge over the property under the final order in O.A.No.193 of 2013, they will be obligated to first proceed against the other properties shown in the

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Ex.F.A.32/2017

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said final order and to bring the property purchased by the first respondent in O.S.No.13 of 2011 on the file of the Sub Court, Perumbavoor only if they are not able to obtain the entire amounts covered by the final order or if there is any amount in excess after the sale of the other properties are completed.

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In other words, we order that the Bank shall proceed against the property in question only after exhausting the remedies as against the other properties charged with them in the final order of the Debt Recovery Tribunal in O.A.No.193 of 2013.

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We are issuing the orders as above since we see that the second respondent has not challenged the final order of the Debt Recovery Tribunal and has accepted the same thereby conceding that the first charge over the property remains with the appellant Federal Bank.

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This appeal is disposed of as above but without any order as to

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costs.

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(P.N. Ravindran, Judge)

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(Devan Ramachandran, Judge)

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kav/

The Federal Bank Limited v. Joshy Varghese

Case brief

What is this about?

What did the court decide?

The Federal Bank Limited v. Joshy Varghese

Case brief

What is this about?

What did the court decide?

What the court decided

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