Dismissed

M/S. Confederation for Ayurvedic Renaissance-Keralam Limited v. State Bank of India, Palarivattom

Kerala HC10 Oct 2018WP(C)/25987/2018

Case brief

AI extract

What is this about?

The High Court of Kerala dismissed a writ petition filed by an Ayurvedic company challenging a bank's proposed sale of the petitioner's leasehold right as a secured asset. The Court held that recovery proceedings are pending before the competent Debt Recovery Tribunal and the bank has the right to enforce its security.

What did the court decide?

The Writ Petition was dismissed in its entirety. The court declined to issue writs of certiorari or mandamus challenging the bank's sale or recovery proceedings.

M/S. Confederation for Ayurvedic Renaissance-Keralam… — Company and Corporate | 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 DAMA SESHADRI NAIDU

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WEDNESDAY,THE 10TH DAY OF OCTOBER 2018 / 18TH ASWINA, 1940

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WP(C).No. 25987 of 2018

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PETITIONER:

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M/S. CONFEDERATION FOR AYURVEDIC RENAISSANCEKERALAM LIMITED, (CARE-KERALAM LTD), KINFRA SMALL INDUSTRIES PARK,NALUKETTU ROAD, KINFRA PARK, P.O.KORATTY,THRISSUR - 680 309 REPRESENTED BY ITS VICE CHAIRMAN.

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BY ADVS. SRI.R.SANJITH SMT.C.S.SINDHU KRISHNAH

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RESPONDENTS:

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1 STATE Bank OF INDIA, PALARIVATTOM STRESSED ASSETS MANAGEMENT, BRANCH,7TH FLOOR, VANKARATH TOWERS, BYE PASS JUNCTION, PALARIVATTOM,KOCHI - 682 024, REPRESENTED BY ITS CHIEF MANAGER.

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2 KINFRA SMALL INDUSTRIES PARK NALUKETTU ROAD, KINFRA PARK (POST),KORATTY 680 309, THRISSUR REPRESENTED BY ITS MANAGING DIRECTOR.

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3 DEPARTMENT OF MINISTRY OF AYURVEDA YOGA AND NATUROPATHY, UNANI,SIDDHA AND HOMOEOPATHY (AYUSH),AYUSH BHAWAN, B BLOCK, GPO COMPLEX,INA, NEW DELHI - 110 023,REPRESENTED BY ITS SECRETARY.

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4 DEPARTMENT OF INDUSTRIES GOVERNMENT OF KERALA, SECRETARIAT,STATUE JUNCTION, THIRUVANANTHAPURAM,KERALA - 695 001, REPRESENTED BY ITS SECRETARY.

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5 DEPARTMENT OF HEALTH AND SOCIAL JUSTICE GOVERNMENT OF KERALA, SECRETARIAT,STATUE JUNCTION, THIRUVANANTHAPURAM, KERALA - 695 001, REPRESENTED BY ITS SECRETARY.

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WP(C).No. 25987 of 2018

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BY ADVS. SRI.TOM K.THOMAS M.GOPIKRISHNAN NAMBIAR SRI.N.NAGARESH, ASSISTANT SOLICITOR GENERAL SRI.JOSON MANAVALAN SRI.K.JOHN MATHAI SRI.KURYAN THOMAS SRI.PAULOSE C. ABRAHAM SRI.P.GOPINATH SRI.N.NAGARESH ASSISTANT SOLICITOR GENERAL

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OTHER PRESENT:

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GP. SMT RASHMI.K.M

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THIS WRIT PETITION (CIVIL) HAVING COME UP FOR ADMISSION ON 10.10.2018, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING:

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WP(C).No. 25987 of 2018

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JUDGMENT

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The petitioner, a public limited company, established what it calls a cluster of Ayurvedic industries, supported by the 3^rd respondent AYUSH Department, a Government of India Enterprise. It has “equity partnership” with Kerala State Industrial Infrastructure Development Corporation (KINFRA), a Government of Kerala enterprise.

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First, the petitioner company took land on lease from the 2^nd respondent, KINFRA, on the condition it should pay the lease charges. Besides that, through KINFRA’s express consent, it borrowed about Rs.10 Crore from the 1^st respondent Bank. It defaulted on repayment. So the 1^st respondent initiated recovery proceedings and filed Original Application No.10 of 2018 before the Debt Recovery Tribunal, Ernakulam. It seems the petitioner has been contesting that OA.

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When the Bank decided to sell the secured asset—that is, the leasehold right over the land the 2^nd respondent leased to the petitioner—the petitioner has filed this Writ Petition.

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In fact, the petitioner has sought these reliefs:

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“i) To call for the records leading to the issuance of Exhbit P2 examine its legality, propriety and quash the same and its allied proceedings by issuing a Writ of Certiorari.

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ii) To issue a writ of mandamus and direct the 2^nd respondent to comply with the decisions taken in Exhibit P4, expedite the settlement talks with the 1^st respondent and also formulate the revival scheme for the petitioner company

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WP(C).No. 25987 of 2018

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within a time frame to be fixed by this Honourable Court.

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iii) To issue a Writ of mandamus and direct the 1^st respondent to cooperate with the petitioner and 2^nd respondent in arriving at a one time settlement of the liabilities of the petitioner with the 1^st respondent.

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iv) To issue a Writ of Mandamus and direct the 1^st respondent to acquire proper valuation report for the secured assets before further proceeding with the sale.”

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The petitioner's counsel has first contended that the property belongs to

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KINFRA and the Bank cannot bring it for sale. Later, he diluted his stand. But he maintains that the petitioner, a public limited company, runs an industry having an element of public interest. According to the learned counsel, the company has been trying to negotiate with the Bank for a one-time settlement and have the issue settled.

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In this context, the petitioner's counsel submits that because of the one-time settlement the Bank offered, earlier the petitioner negotiated with KINFRA. In fact, the company's Board of Directors authorised KINFRA to negotiate with the Bank, submits the counsel. The petitioner's counsel contends that if the Bank provides breathing time to the petitioner, it will clear the outstanding arrears and will also regularise the loan account.

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The Standing Counsel for the respondent Bank has submitted that, after taking loan, the petitioner company has paid only meagre amounts. And now the outstanding amount is huge; it stands at Rs.11 Crore. According to him, though the Bank has extended one-time settlement facility ending on 30.09.2018, the petitioner never came

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WP(C).No. 25987 of 2018

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forward for a settlement. About the petitioner's first contention that the Bank cannot sell KINFRA's property, the Bank’s counsel draws my attention to the Ext.R1(b) communication, dated 14.01.2010, KINFRA addressed to the erstwhile entity of the present creditor Bank. In the end, he has submitted that KINFRA has no standing to object to the Bank’s recovery proceedings, especially the sale it has proposed. Though the sale may have been deferred for want of prospective bidders, no legal impediment, according to the Standing Counsel, could come in the Bank’s way to enforce its rights.

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The learned Standing Counsel for the 2^nd respondent KINFRA, on the other hand, has submitted that KINFRA has the primary charge. According to him, besides the initial lumpsum amount the petitioner paid, it has not paid the balance lease amount; it ought to have paid the balance amount in ten instalments. It has committed default. He further submits that since the KINFRA has primary charge, the Bank's recovery steps cannot affect its rights. But he submits that so far KINFRA has started no steps of recovery.

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Heard the learned counsel for the petitioner, the learned Standing Counsel for KINFRA, and the learned Standing Counsel for the respondent Bank.

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To begin with, this Court does not desire to draw itself into the controversy, if any, between the petitioner and KINFRA about the arrears of lease amount. It is open for KINFRA to take suitable steps of recovery if the petitioner owes any money to it.

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Here, the petitioner, first, has taken a plea about the invalidity of recovery

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WP(C).No. 25987 of 2018

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proceedings the Bank has initiated, that is selling the secured asset: the mere lease hold right. Ext.R1(b) dispels that contention. And it reads in part:

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“[K]erala Industrial Infrastructure Development Corporation (KINFRA) have no objection in M/s Care Keralam Ltd. mortgaging the lease hold right on the 4.1955 acres of land in favour of State Bank of Travancore Regional Office, Thrissur for the purpose of availing finance for settling up and running the above industrial unit in KINFRA Small Industries Park, Koratty, Thrissur subject to Clause 17 of the KINFRA Land Disposal Regulations and subject to the payment of the annual lease premium due after the moratorium period. In case the annual lease premium is not paid on the respective due dates, KINFRA will have first charge over the lease hold property. In case the Bank transfers the lease hold interest to another person on enforcement of the security, in the event of mortgagor commits default in repayment of the loan availed by the lessee, the transferee/sublessee is bound by the provisions of the lease deed and they are only entitled to the lease hold interest on the land for the balance period of the lease. . .”

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(italics supplied)

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About the breathing time the petitioner persists with, I reckon the Bank has

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already offered one-time settlement, but the petitioner has not taken it. Nor has it even communicated to the Bank about its intention and the practical difficulty, if any, it has been facing, as now the petitioner's counsel articulated. True, it may have negotiated with KINFRA and it may have further authorised it to pursue the matter with the Bank. But that internal arrangement will not affect the Bank's rights. Had the petitioner displayed any bona fides , it would have pleaded with the Bank to have the OTS time extended. It did not.

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Further, indisputably, the Bank's recovery proceedings are pending before the Debt Recovery Tribunal, a competent forum. And before that forum, the petitioner has

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WP(C).No. 25987 of 2018

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entered appearance and pleaded its defence, too.

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Under these circumstances, I find no merit in this Writ Petition and, accordingly,

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dismiss it.

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Sd/-

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DAMA SESHADRI NAIDU

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JUDGE

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WP(C).No. 25987 of 2018

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APPENDIX

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PETITIONER'S EXHIBITS:

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EXHIBIT	P1	TRUE COPY OF THE MINUTES OF THE BOARD OF DIRECOR DATED 09.4.2016.
EXHIBIT	P2	TRUE COPY OF THE SALE NOTICE PUBLISHED IN NEW INDIAN EXPRESS DAILY DATED 18.07.2018.
EXHIBIT	P3	TRUE COPY OF THE COMMUNICATION ISSUED BY THE PETITIONER TO THE 2ND RESPODNENT DATED 23.1.2018.
EXHIBIT	P4	TRUE COPY OF THE MINUTES OF THE MEETING HELD ON 19.6.2018 ALONG WITH THE COVERING LETTER AND THEIR ENGLISH TRANSLATION.
EXHIBIT	P5	TRUE COPY OF THE LEASE DEED DATED 23.12.2009.
EXHIBIT	P6	TRUE COPY OF THE BOND EXECUTED BY THE PETITIONER IN FAOVUR OF THE 3RD RESPONDENT.
EXHIBIT	P7	TRUE COPY OF THE DETAILS OF THE GRANT OF FUND FROM THE 3RD RESPONDENT.
RESPOND	ENTS' EXHIBITS	- NIL
// TRUE	COPY //	P.A. TO JUDGE

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M/S. Confederation for Ayurvedic Renaissance-Keralam Limited v. State Bank of India, Palarivattom

Case brief

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M/S. Confederation for Ayurvedic Renaissance-Keralam Limited v. State Bank of India, Palarivattom

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