Allowed

M/S.Vijaya Hospitality & Resorts Ltd. v. the Chairman and Managing Director, the Federal Bank Ltd.

Kerala HC12 Jan 2017WP(C)/55/2017

Case brief

AI extract

What is this about?

The High Court of Kerala addressed a writ petition regarding possession of resort properties by an Advocate Commissioner under SARFAESI Act. The court found no procedural irregularity in partial possession and directed petitioners to vacate specific portions, settle dues by March 31, 2017, and handed over complete possession if defaults persist.

What did the court decide?

Petitioners directed to vacate specific portions by January 18, 2017, and surrender full possession by February 2 or April 1, 2017, depending on whether dues including a specific sum are paid by March

M/S.Vijaya Hospitality & Resorts Ltd. Vs the Chairman… — 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 K.VINOD CHANDRAN

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THURSDAY, THE 12TH DAY OF JANUARY 2017/22ND POUSHA, 1938

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WP(C).No. 55 of 2017 (F)

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PETITIONERS:

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1. M/S.VIJAYA HOSPITALITY AND RESORTS LTD., 37/991, IST FLOOR, EMMY SQUARE, S.A ROAD, ERNAKULAM, KOCHI-682 020, REPRESENTED BY ITS DIRECTOR MRS.SHALINI VIJAYAN.

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2. C.K VIJAYAN, 37/595, S/O.SRI.KRISHNANKUTTY, AGED 53,

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DEVAKI SADAN, MUTTATHIL LANE, KADAVANTHRA, ERNAKULAM, KOCHI-682 020, REPRESENTED BY HIS POWER OF ATTORNEY MRS.SHALINI VIJAYAN.

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3. MRS.SHALINI VIJAYAN,

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W/O.SRI.VIJAYAN, AGED 43, DEVAKI SADAN, MUTTATHIL LANE, KADAVANTHRA, ERNAKULAM.

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4. MRS. SAIRA THAMPI, W/O.LATE THAMPI KRISHNA, AGED 46, FLAT NO.7A, VIJAYA GLIMPSES, KADAVANTHRA, KOCHI-682 020.

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BY ADVS.SRI.S.EASWARAN

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SRI.P.MURALEEDHARAN (IRIMPANAM) SRI.M.A.AUGUSTINE SRI.P.SREEKUMAR (THOTTAKKATTUKARA) SMT.SOUMYA JAMES

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RESPONDENTS:

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1. THE CHAIRMAN AND MANAGING DIRECTOR, THE FEDERAL BANK LTD., HEAD OFFICE, BANK JUNCTION, ALUVA-683 101

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2. THE FEDERAL BANK LIMITED., VYTTILA BRANCH, ERNAKULAM , KOCHI-682 019, REPRESENTED BY ITS CHIEF MANAGER & AUTHORISED OFFICER MRS .NISHA K. DAS.

2/-

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WP(C).NO.55/2017

3. SRI.PRINCE J. PANANAL, ADVOCATE COMMISSIONER, PULIMOOTTIL CITY SQUARE, IDUKKI ROAD, THODUPUZHA- 685 584.

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R1 & R2 BY ADVS. SRI.MOHAN JACOB GEORGE SMT.P.V.PARVATHI SMT.REENA THOMAS SMT.NIGI GEORGE SRI.T.K.NAVAS R3 BY SRI.M.K.DAMODARAN, SENIOR ADVOCATE ADV. SRI.GILBERT GEORGE CORREYA

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THIS WRIT PETITION (CIVIL) HAVING BEEN FINALLY HEARD ON 12-01-2017, ALONG WITH WPC.NO. 74 OF 2017, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING:

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sts

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WP(C).No. 55 of 2017 (F)

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APPENDIX

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PETITIONER(S)' EXHIBITS

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EXHIBIT P1 COPY OF JUDGMENT DATED 20/12/2016 IN WP(CRL). NO.709 OF 2016

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EXHIBIT P2 RELEVANT EXTRACT OF THE A DIARY PROCEEDINGS IN THE NATURE OF THE ORDER PASSED ON 15/12/2016

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EXHIBIT P2(a) TYPED COPY OF EXT.P2.

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EXHIBIT P3 COPY OF NOTICE DATED 24/12/2016 ISSUED BY THE ADVOCATE COMMISSIONER, RECEIVED BY THE PETITIONERS ON 27/12/2016.

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EXHIBIT P4 RELEVANT EXTRACT OF THE ORDER DATED 28/12/2016 ISSUED BY THE CHIEF JUDICIAL MAGISTRATE COURT, THODUPUZHA.

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EXHIBIT P5 COPY OF THE ORDER DATED 28/12/2016 ISSUED BY THE DEBTS RECOVERY TRIBUNAL, ERNAKULAM.

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EXHIBIT P6 COPY OF ORDER PETITION DATED 29/12/2016 FILED BY THE PETITIONERS BEFORE THE JUDICIAL MAGISTRATE OF FIRST CLASS, PEERUMEDU AS C.M.P NO.4461/2016.

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EXHIBIT P7 COPY OF THE ORDER DATED 15/12/2016 IN C.M.P.NO.8357 OF 2016 IN CMP.NO.7043 OF 2015 OF THE CHIEF JUDICIAL MAGISTRATE COURT,

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THODUPUZHA.

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RESPONDENT(S)' EXHIBITS

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EXHIBIT R2(a) COPY OF THE RELEVANT PORTION OF S.A.NO.376/2016 FILED BEFORE DRT, ERNAKULAM.

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EXHIBIT R2(b) COPY OF THE INTERIM ORDER DATED 11/08/2015 IN SA.308/15 OF DRT, ERNAKULAM.

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EXHIBIT R2(c) COPY OF THE COMMON JUDGMENT DATED 15/12/2015 IN O.P.(DRT) NO.109/2015 AND O.P.(DRT) NO.151/2015 OF THIS HON'BLE COURT.

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EXHIBIT R2(d) COPY OF THE SECTION 14 APPLICATION. EXHIBIT R2(e) COPY OF THE AFFIDAVIT FILED ALONG WITH EXT.R2(d)

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EXHIBIT R2(f) COPY OF THE ORDER DATED 31/12/2015 APPOINTING AN ADVOCATE COMMISSIONER TO TAKE POSSESSION.

2/-

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WP(C).NO.55/2017

EXHIBIT R2(g) COPY OF THE ORDER DATED 23/02/16 PASSED BY THE DRT IN I.A.NO.216/2016 IN S.A.NO.308/2015.

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EXHIBIT R2(h) COPY OF THE COMMON JUDGMENT DATED 14/06/2016 IN O.P(DRT) NO.49/2016 & O.P.(DRT) NO.50/2016. EXHIBIT R2(i) COPY OF THE LOCATION SKETCH. EXHIBIT R2(j) COPY OF THE OBJECTION TO THE COMMISSION REPORT FILED BY THE BANK BEFORE THE CJM.

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EXHIBIT R2(k) COPY OF THE AFFIDAVIT AND PETITION DATED 15/12/2016 SUBMITTED BY THE BANK BEFORE THE CJM REQUESTING FOR APPOINTMENT OF A SENIOR ADVOCATE AS COMMISSIONER. EXHIBIT R2(l) COPY OF THE ORDER DATED 15/12/2016 PASSED BY THE CJM, THODUPUZHA APPOINTING A SENIOR ADVOCATE AS COMMISSIONER.

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EXHIBIT R2(m) COPY OF THE PETITION FILED BY THE BANK BEFORE THE HON'BLE CJM ON 30/12/2016.

/TRUE COPY/

P.S.TO JUDGE

sts

K. Vinod Chandran, J

W.P.(C).Nos.55 of 2017-F & 74 of 2017-H

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------------------------------------------------------Dated this the 12^th day of January, 2017

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JUDGMENT

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The petitioners in the above writ petitions are a Public Limited Company and a Private Limited Company; represented by the very same individuals, who are Directors. The Public Limited Company in W.P.(C) No.55 of 2017, is running a resort, called “Elephant Court”

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and the Private Limited Company in W.P.(C) No.74 of 2017 is running a resort called “Pepper Vine”; and the parties are hereinafter referred to by those names.

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Substantial amounts are advanced by the respondent-Bank to the petitioners, who are in default. Early in the year 2015, the respondent-Bank had initiated proceedings under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 [for brevity “SARFAESI Act”]. The petitioners were before this Court and the Debts Recovery Tribunal [for brevity “DRT”] several times, seeking for indulgence for time to pay off the debt; the grant of which were not complied with. As of now the

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WP(C) Nos.55/2017 & - 2 - 74/2017

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controversy is of taking over of the property by the Advocate Commissioner, who is the 3^rd respondent in both the writ petitions. The Advocate Commissioner appointed by the Chief Judicial Magistrate [for brevity “CJM”] had taken over the property allegedly in violation of the orders passed by this Court in O.P.(Crl.) No.709 of 2016, as is seen from Exhibit P1 produced in both the writ petitions. The said controversy has to be first laid at rest.

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The respondent-Bank was before the CJM with an application for appointing a Commissioner for the purpose of taking over the properties. It is submitted by the learned Counsel appearing for the respondent-Bank that an Advocate Commissioner, who was appointed initially, had insisted on an identification of the properties for which the assistance of the Village Officer was also required. It is alleged that the Village Officer, in collusion with the petitioners, refused to assist the Commissioner and the Commissioner too; despite the assurance of the Bank that the property is situated within well demarcated boundaries, was reluctant to take possession. This prompted the Bank to file an affidavit before the CJM and seek for appointment of another Commissioner dispensing the service of the

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WP(C) Nos.55/2017 & - 3 - 74/2017

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Village Officer pointing out the collusion and also the obstruction caused by the petitioners. In such circumstance, the Magistrate had issued orders in the C.M.P. appointing the 3^rd respondent, as is seen from Exhibit P2(a). Elephant Court was before this Court with O.P. (Crl.) No.709 of 2016, which was disposed of on admission, as is seen from Exhibit P1. There is no dispute that the Bank was not present when the matter was disposed of, since they have no Standing Counsel before the High Court and there was no notice served on the respondent. This Court directed the CJM to deliver the copies of the documents applied for by the petitioners and keep in abeyance the order directing take over of the properties till then. The judgment was also handed over to the petitioners on the very next day, i.e., on 21.12.2016. The petitioners' contention is that the same was produced before the Superintendent of the CJM Court on 26.12.2016; upon which it was directed to be filed with a memo. The same reached the CJM only on 28.12.2016, noon. The Commissioner had issued a notice on 27.12.2016, which was received by the petitioners in the evening of that date. Obviously this resulted in the production of the judgment of this Court, before the CJM Court. The Commissioner

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WP(C) Nos.55/2017 & 74/2017

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visited the property along with police assistance on 28.12.2016 in the forenoon and commenced the procedure to take possession of the property.

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It is alleged that the said action was in violation of the judgment passed by this Court, since at that point, the petitioners had not been issued with the copies of the documents, as directed in the O.P.(Crl.), and hence the taking over could not have been proceeded with. It is also alleged that the Counsel for the petitioners had informed the Commissioner about the order; who displayed scant respect to the orders passed by this Court. Admittedly at no point in the intervening period did the petitioners produce the order passed by this Court before the CJM. Nor is there any evidence to show that the order was attempted to be served on the respondent-Bank or the Commissioner, by accepted modes of service; with acknowledgment received. There are contentions raised against the Commissioner in the writ and the same has been refuted by the Commissioner by an affidavit. This Court, at this point, would not go into the allegations raised against the Commissioner. However the judgment having been issued by the Registry of this Court on 21.12.2016, the same ought to have been

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WP(C) Nos.55/2017 & - 5 - 74/2017

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produced immediately before the CJM's Court especially since the prayer before this Court was the non-issuance of copies of documents. The same was produced after 7 days and obviously the attempt was to delay the taking over.

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Suffice it to observe that on the facts and the admission of the petitioners themselves that the order was produced only on 28.12.2016 before the Magistrate, who passed an order keeping in abeyance the proceedings at 1.30 p.m.; this Court does not find any defect in the possession taken partly by the Commissioner prior to the information being received of the orders of the High Court and the order passed by the CJM. In the meanwhile, the petitioners had also approached the DRT, and the delay caused in production of the judgment was to interdict the Commissioner from taking over the property, before the DRT considers the matter. The DRT too passed an order, on 28.12 2016, which is Exhibit P5, keeping the proceedings in abeyance on payment of Rupees Nine Crores within a period of one week. Admittedly no amounts have been paid as directed by the DRT.

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In this context, the earlier proceedings have also to be referred to. Elephant Court, when initially proceedings were initiated by

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WP(C) Nos.55/2017 & - 6 - 74/2017

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the respondent-Bank, was before the DRT in S.A.No.308 of 2015. The DRT, by Exhibit R2(b), directed payment of Rupees Two Crores on or before 30.09.2015. The brother of one of the Directors, who was a former Director, approached this Court with a Original Petition [O.P. (DRT) No.109 of 2015] seeking consideration of three S.As and for keeping in abeyance the recovery proceedings. The said Original Petition was disposed of by Exhibit R2(c). The three S.As filed by the petitioner therein are said to have been rejected by the DRT. This vindicates the stand of the respondent-Bank that the said proceedings were a mere tactic to avoid and delay recovery.

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Subsequently, Pepper Vine approached the DRT by filing S.A.No.457 of 2015. There was an order passed at Exhibit R2(g), which directed payment of Rupees Four Crores on or before 04.03.2016; which was not complied with. Exhibit R2(h) is a judgment passed in the Original Petition filed by Pepper Vine, again seeking indulgence for settlement of the dues. The indulgence extended to the petitioner insofar as the time granted by this Court in Exhibit R2(h) was also not complied with. Noticing the earlier proceedings and also the recalcitrant attitude of the petitioner in not complying with the earlier

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WP(C) Nos.55/2017 & - 7 - 74/2017

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orders, it cannot but be observed that despite several opportunities granted to the petitioners to pay off the dues, the petitioners had made no attempts to prove their bona fides in the matter. The petitioners had successfully warded off the recovery steps without paying any amounts to the Bank. There are said to be existing internal squabbles within the management and the family; which is the root cause of the present state of affairs. But the creditor cannot be asked to wait till the internal disputes are resolved especially since, with time, the debts escalate; especially when the dues are so enormous as in the present case and eventually the sale of the properties would be unable to satisfy the debt.

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The writ petitions are filed seeking a challenge to Exhibit P2 order of the CJM and Exhibit P5 order of the DRT. This Court having found that there is no procedural irregularity in the part possession taken of the property, there is no reason why the petitioner should be relegated to the DRT as of now. The learned Counsel for the petitioners had pleaded for continuing the guests who were in occupation and also inducting fresh guests who had booked in advance on an undertaking that the entire amounts due in both the

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WP(C) Nos.55/2017 & 74/2017

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accounts would be cleared on or before 31.03.2017. Only considering the hardship which would visit the guests who are occupying Pepper Vine, this Court would pass the following orders.

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Elephant Court admittedly has been taken possession of by the Commissioner. However, there is some portion of Elephant Court which has not been taken over as of now, in which, admittedly, no guests are put up. The petitioners are in possession of the balance portion wherein the respondent-Bank allege that the workmen of the petitioners are staying. The petitioners shall vacate the premises and give vacant possession by surrender to the Commissioner, who shall visit the property on 18.01.2017, on which date an inventory shall be taken and possession handed over to the Bank in the presence of the authorised officer of the Public Limited Company, who shall be present there.

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With respect to Pepper Vine, the petitioners are in possession of the same and it is submitted that there are guests occupying the rooms. The order of the DRT at Exhibit P5 itself permitted the petitioner to continue the existing booking and not to have any further booking. There is a controversy as to how the same

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WP(C) Nos.55/2017 & - 9 - 74/2017

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has to be interpreted. The learned Counsel for the respondent-Bank submits that fresh guests are inducted each day; to which the petitioners submit that such induction were made of only customers who had prior booking and no bookings have been taken after the order of the DRT . In any event, the petitioners could allow even new guests to be inducted and occupy, but on condition of the petitioners paying an amount of Rupees Two Crores and Fifty Lakhs as undertaken by the petitioners to the account of Pepper Vine on or before 31.01.2017. If the same is not paid, the petitioners would take the risk of removing any guest, whatever be the date of his/her booking or the date of induction, from the premises and vacant possession handed over to the Commissioner on 02.02.2017 in the presence of the officials of the Bank. The Commissioner shall also take an inventory before such possession is taken over.

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The Bank shall continue the possession of Elephant Court and the petitioners of Pepper Vine, provided the above directions are complied with till 31.03.2017, before which date the petitioners undertake to settle the entire dues in both the accounts. On such settlement, Elephant Court would have to be handed over back

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WP(C) Nos.55/2017 &

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10 -

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74/2017

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to the petitioners, at any date on which full satisfaction is made. If not, the petitioners would undertake to surrender Pepper Vine also to the respondent-Bank on 01.04.2017 and further proceedings will be taken therefrom. If Rupees Two Crores and Fifty Lakhs is not paid as undertaken, necessarily the Bank obtaining vacant possession of Pepper Vine would be entitled to proceed as provided under law for satisfaction of the debts due to the Bank.

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The writ petitions would stand dismissed with the above

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directions. No Costs.

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Sd/- K.Vinod Chandran Judge.

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vku/-

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[ true copy ]

M/S.Vijaya Hospitality & Resorts Ltd. v. the Chairman and Managing Director, the Federal Bank Ltd.

Case brief

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M/S.Vijaya Hospitality & Resorts Ltd. v. the Chairman and Managing Director, the Federal Bank Ltd.

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