Allowed

Federal Bank Limited v. State of Kerala

Kerala HC10 Aug 2022Crl.MC/515/2022

Case brief

AI extract

What is this about?

Allowed relief in CRL.MC. Set aside order conditions restricting bank from selling seized hypothecated vehicle and prohibiting disposal. Directed release of vehicle subject to bond conditions, noting bank's right to sell under SARFAESI Act and CrPC 451.

What did the court decide?

Conditions nos. 4 and 5 of Magistrate's order allowing non-disposal by petitioner were set aside. Vehicle released subject to bond conditions but permitting sale.

Federal Bank Limited Vs State of Kerala — Banking and Recovery | Kerala HC (2022)

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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 ZIYAD RAHMAN A.A.

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WEDNESDAY, THE 10TH DAY OF AUGUST 2022 / 19TH SRAVANA, 1944

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CRL.MC NO. 515 OF 2022

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[ORDER IN CMP NO.1964/2021 IN CRIME NO.686/2021 ON THE FILE OF

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THE ADDITIONAL CHIEF JUDICIAL MAGISTRATE COURT (EO), ERNAKULAM]

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PETITIONER/S:

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FEDERAL BANK LIMITED,PANAMPILLY NAGAR,
OPPOSITE TO HOUSING BOARD BUILDING,
PANAMPILLY NAGAR, KOCHI, ERNAKULAM DISTRICT,
REPRESENTED BY ITS ASSISTANT VICE PRESIDENT AND BRANCH
HEAD, SMT.MAYA.C

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BY ADV K.P.SUJESH KUMAR

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RESPONDENT/S:

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1STATE OF KERALA
REPRESENTED BY SUB INSPECTOR OF POLICE, ERNAKULAM TOWN
SOUTH POLICE STATION, PIN- 682 016 THROUGH BY PUBLIC
PROSECUTOR, HIGH COURT OF KERALA, 682031
ERNAKULAM, PIN - 682031
2AJITHA@ AJITHA JOY HOMES
W/O.REJI PAULOSE, 10-C, METRO BAY ASSET HOMES,
CHATHARI, THRIPPUNITHURA.P.O, ERNAKULAM DISTRICT, PIN:
682301.
3REJI PAULOSE
S/O.PAULOSE, 10-C, METRO BAY ASSET HOMES, CHATHARI,
THRIPPUNITHURA.P.O, ERNAKULAM DISTRICT, PIN: 682301.

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[R2 AND R3 ARE IMPLEADED AS PER ORDER DATED 24.6.2022
IN CRL.MA NO.2/2022 IN CRL.MC 515/2022]

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R1 BY SMT. SEENA C., PP

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THIS CRIMINAL MISC. CASE HAVING COME UP FOR ADMISSION ON
10.08.2022, THE COURT ON THE SAME DAY PASSED THE FOLLOWING:

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CRL.MC No.515 of 2022 2

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ORDER

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The petitioner, a scheduled bank, has
approached this Court, being aggrieved by some of
the conditions imposed by the Additional Chief

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Judicial Magistrate Court (Economic Offences),
Ernakulam, in C.M.P.No.1964/2021, while releasing
a vehicle seized by the Police in Crime
No.686/2021 of Ernakulam Town South Police

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Station, Ernakulam.

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2.The facts which led to the filing of this
Crl.M.C. are as follows:

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The 2nd respondent availed certain credit
facilities from the petitioner Bank for which the
3rd respondent stood as guarantor. The credit
facilities availed by the said persons included
vehicle loans (2 nos.), a housing loan, a mortgage
loan and a personal loan for various amounts.
Making use of the funds provided by the Bank, the

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CRL.MC No.515 of 2022 3

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accused purchased a Toyota Fortuner Car bearing

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Reg.No.KL-07-CP 4848 and a Jeep Compass. A

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hypothecation was created over the said vehicles
in favour of the bank and the said fact was also
endorsed in the registration certificates of the
vehicles.

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3.Later, the 2nd and 3rd respondents failed to

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remit instalments towards repayment of the said

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loans, which compelled the petitioner to initiate
recovery proceedings against them. As part of the
same, a demand notice under Section 13(2) of the
Securitization and Reconstruction of Financial

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Assets and Enforcement of Securities Interest Act,

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2002 (SARFAESI Act.) was issued on 1.7.2019,
calling upon the 2nd and 3rd respondents to pay the

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amount within a period of sixty days from the date
of receipt of a copy of the said notice. As the 2nd
and 3rd respondents did not respond to the said

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notice, proceedings under Section 13(4) of the
SARFAESI Act were initiated, and as part of the

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CRL.MC No.515 of 2022 4

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same, M.C.No.36/2020 was submitted by the

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petitioner before the Chief Judicial Magistrate

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Court, Ernakulam. On 16.01.2020, the Chief

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Judicial Magistrate passed an order appointing an
Advocate Commissioner to take possession of the
vehicles. Even though the Advocate Commissioner
made several attempts, the vehicles could not be
taken possession of as the said vehicles were
clandestinely concealed by the 2ndand 3rd
respondents. As the petitioner got reliable
information that the 2nd and 3rd respondents
removed the hypothecated vehicles to an unknown
place and attempts were being made to dismantle
the vehicles and to sell the same in parts to
prevent the bank from exercising its rights, the
bank submitted a complaint before the Police on
17.9.2020. Based on the same, Crime No.686/2021
was registered by Ernakulam Town South Police for
the offences punishable under Sections 120B, 403,
406, 420, 465, 467, 468, 471 r/w. Section 34 of

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CRL.MC No.515 of 2022 5

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the IPC. During the investigation, the Police
could recover the Toyota Fortuner Car and the same
was produced before the Additional Chief Judicial
MagistrateCourt(EconomicOffences)as

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T.No.130/2021. To release the said vehicle, an
application under Section 451 of Cr.PC was filed
by the petitioner. The learned Magistrate allowed
the said application as per Ammexure-A4 order
dated 3.12.2021, subject to the conditions, and
the conditions relevant for this case are as

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follows:

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1. xxx xxx xxx xxx xxx xxx

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2. Toyota Fortuner Car bearing Reg.No.KL-07-CP
4848 shall be released to the petitioner in CMP
No.1964/2021 on executing a bond of
Rs.35,00,000/- with two solvent sureties each
for the like sum OR petitioner shall furnish
Bank Guarantee issued by Nationalized/Scheduled
Bank for the said amount valid for a period of
three years.

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3.The petitioner shall produce 4 photographs
of both vehicle from its four different
dimensions each and produce them along with CD.
Photographs shall be attested by petitioner and
their counsel.

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CRL.MC No.515 of 2022 6

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4.Petitioner shall not dispose of the
vehicles or make the vehicles anyway
unidentifiable pending disposal of the case

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5.Petitioner shall produce the vehicle as
and when required.”

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The petitioner challenges the said order to the

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extent it imposes the condition Nos.2, 4 and 5.

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4.Heard Sri.Sujesh Kumar, the learned

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counsel for the petitioner and Smt.Seena C., the
learned Public Prosecutor for the 1st respondent.
Even though notices were served upon the 2nd and
3rd respondents, there is no appearance for them.

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5.The contention of the learned counsel for

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the petitioner is that condition Nos.2,4 and 5 are
causing serious prejudice to them being the

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financier of the said vehicle. With regard to

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condition No.2, it was contended that, since the
petitioner itself is a bank, insisting for a bond
for Rs.35 lakhs or a bank guarantee is not at all
warranted. With regard to conditions Nos.4 and 5,

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it is contended that, since the petitioner

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CRL.MC No.515 of 2022 7

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requires the vehicle to enforce its security by
selling the same, the aforementioned conditions
would cause interference in their rights. It is
pointed out that, as the vehicle is hypothecated
in their favour, the petitioner has every right to
proceed against the said vehicle to realize the
amounts by selling the said vehicle. No fruitful
purpose would be served by keeping the said
vehicle in the custody of the petitioner, without
selling it.

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6.After considering all the relevant aspects
and the statutory provisions in this regard, I am

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of the view that there is some force in the
contention put forward by the learned counsel for
the petitioner. The application on which Annexure-
A4 order passed is submitted under Section 451 of
Cr.P.C which comes under Chapter XXXIV of Cr.PC
and deals with the disposal of the property. A
careful reading of Section 451 Cr.PC would reveal
that the said provision is not only intended to

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CRL.MC No.515 of 2022 8

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enable the court concerned to pass orders for
interim custody of the articles seized, but also
it empowers the court to order the article to be
sold or otherwise disposed of, if it is otherwise
expedient so to do. Therefore, even though the
primary concern of the court while considering an
application under Section 451 Cr.PC is the interim
custody of the articles concerned, the court can
also pass orders for disposal of the property if
the situation so warranted. The power of the court
in this regard under Section 451 Cr.PC was
considered by this Court in Nagarajan v. State of
Kerala [2019(4) KLT 641] wherein it was observed
as follows:

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“15. Section 451 of the Code states that, if
the property is subject to speedy and natural
decay, or if it is otherwise expedient so to
do, the Court may, after recording such
evidence as it thinks necessary, order it to be
sold or otherwise disposed of. The expression
“if it is otherwise expedient so to do’’ in
S.451 of the Code empowers the Court to dispose
of the property during enquiry or trial, if the

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CRL.MC No.515 of 2022 9

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situation so warrants. The provision empowers
the Court to sell or dispose of even a
property, which is not subject to speedy and
natural decay, if the court is satisfied that
it is expedient to do so. The expression “if it
is otherwise expedient so to do’’ confers a
discretion upon the court to order sale of a
property other than a property which is subject
to speedy and natural decay. But, the
discretion has to be exercised judiciously and
depending upon the facts and circumstances of
each case”

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7.The said decision was rendered by this

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Court after referring to the decision of the

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Karnataka High Court in K.W. Ganapathy v. State of

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Karnataka [2002(2)KLT OnLine 1011(Karnt.) = [2002
Crl.L.J.3867]. The relevant observations made by

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the Karnataka High Court are as follows:

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“6. Irrespective of the fact whether the
properties have evidentiary value or not it is
not necessary that the original of the property
has to be kept intact without alienation. As
suggested above, the photography or photostat
copy of the property can be taken and made a
part of the record duly certified by the
Magistrate at the time when the interim custody
of the property is handed over to the claimant.
In the event of the original of the property

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CRL.MC No.515 of 2022 10

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not produced in the evidence, photograph could
be used as secondary evidence during the course
of evidence. Ultimately, while passing final
orders, it is only the value of the property
that becomes a prime concern for the Court. If
a person to whom the interim custody is
granted, is not entitled to the property or its
value and if some other person is held to be
entitled to have the property or its value by
taking necessary bonds and security from the
person to whom interim custody is granted, the
value could be recovered and made payable to
the person entitled to. The rightful owners,
who have lost the property by an act of crime
even after detection and recovery are continued
to be prevented from beneficial possession and
enjoyment of the same by the archaic conditions
imposed as a regular routine despite the
changed context of scientific developments.

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7. To illustrate, a situation one X loses gold
jewellery by theft. The police successfully
detect and discover the gold jewellery the same
is produced before the Court. Production of
gold jewellery and marking of the same in
evidence to prove the same as corpus delecti is
one of the insistence of law as a part of fair
trial. Even after the gold jewellery is given
to the custody of X to deprive him by imposing
the condition of non-alienation from exercise
of right of ownership for unreasonable length
of time would be too harsh and one sided, and a
nonchalant approach towards the victims of

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CRL.MC No.515 of 2022 11

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crime. It may be that X requires the gold
jewellery for the purpose of the marriage of
his daughter or may be that he may requires
funds for medical treatment or other genuine
needs, when he has no alternative source except
by sale of the gold jewellery, the condition of
non-alienation in such situation would be
onerous and unreasonable. The production of
property during the trial having incriminating
value is a insistence to secure the rights of
accused as a part of fair trial. At the same
time, when there is a possibility of having a
secondary evidence of the said property, it is
no longer necessary in law to insist that the
property to be kept intact without alteration
and non-alienation”.

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The view taken by this Court in Naragarajan’s case
(supra) was upheld by a Division Bench of this
Court in Suresh Serve v. State of Kerala [2020(3)
KLT 395]. In the said judgment, it was observed as
follows:

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“(b) In a case involving theft of huge
quantity of gold ornaments from a jewellery
store or from a jewellery manufacturing unit,
the court should take extra precautions to see
whether the claimant has established, by
cogent evidence, a strong prima facie case to
show his entitlement for staking the claim.
In such cases, there ought to be records

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CRL.MC No.515 of 2022 12

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to support his claim. If there are sufficient
documentaryevidenceshowinghis
unquestionable entitlement to the articles,
especially in a case where there is no rival
claimant for the jewellery, we find no reason
for imposing a condition that the entire
jewellery shall be produced in the same
condition, as and when directed. If it is
established by evidence that the ornaments
claimed by him are stock in trade in the
jewellery store, no earthly purpose will be
served by returning them to the claimant by
imposing such restrictions. Hence, such a
condition need not be imposed in all cases,
disregarding the factual situation in each
case.”

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Even though the observations made by the Division
Bench of this Court were in respect of the release
of jewellery, which was part of the stock in trade
of a jewellery store, I am of the view that the
principles laid down in the said decision can be
made applicable to this case as well.

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8.The documents show that the vehicle was

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purchased by the accused persons with the funds
provided by the petitioner bank. Hypothecation is
also seen entered in the R.C.book in favour of the

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CRL.MC No.515 of 2022 13

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petitioner and the statutory stipulations

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contained in the SARFAESI Act enable the
petitioner, being a secured creditor, to take
possession of the vehicle and conduct the sale of
the same by following the procedure contemplated
under the said Act. It is also clear that,
exercising such power, the petitioner had already
approached the Chief Judicial Magistrate Court,
Ernakulam and an order was passed providing
assistance to the petitioner to take possession of
the car. Such an order indicates the legal
entitlement of the petitioner to have the vehicle
in his possession and to sell it or otherwise
dispose of it for converting the same into amounts
to be set off towards liability of the 2nd and 3rd
respondents. Therefore, I do not find any reason
to decline the prayer sought by the petitioner.

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9.This is all the more necessary because
keeping the said vehicle in the custody of the

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petitioner would not serve any fruitful purpose to

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CRL.MC No.515 of 2022 14

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the petitioner or the 2nd and 3rd respondents.

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Since the petitioner is entitled to realize the
amount towards the credit facility granted to the
respondents 2 and 3, any delay in recovery would
increase the amount day by day on account of
accruing of interest thereon, which would result
in the increase in the burden of the respondents 2
and 3 as the time passes. Therefore, the disposal
of the secured asset, namely the vehicle, at the
earliest opportunity is in the best interest of
the petitioner as well as respondents 2 and 3.

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10.It is true that, in some cases, it may

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become necessary to produce the property before
the court for the purpose of the trial. However,
as observed by this Court in Naragarajan’s case
(supra), it is not necessary that the original
property inevitably has to be preserved and
produced. Instead of producing the original

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property, production of the photographs of the
property, depicting all features of the same,

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CRL.MC No.515 of 2022 15

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would be sufficient. What is required for the

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purpose of the trial is the proper identification
of the property, which is the subject matter of
the dispute. Taking photographs of the said
vehicle from all angles and preparing a mahazar
giving a clear description of the vehicle's

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nature, dimensions and features would serve the

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said purpose, as the same can be used as a
substitute for the production of the original
property.

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11.Another contention put forward by the
learned counsel for the petitioner is with regard
to the 2nd condition in the order impugned. The
said condition is about furnishing a bond for Rs.
35,00,000/- or bank guarantee with two solvent
sureties. However, I am of the view that, since
the petitioner is a bank, the said condition would
not cause any difficulty. Moreover, as I have
already decided that permission can be granted to
the petitioner to dispose of the property, it is

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CRL.MC No.515 of 2022 16 only proper that the 2^nd condition in the order impugned be retained.

¶103

In such circumstances, Crl.M.C. is allowed,
condition Nos.4 and 5 imposed by the Additional
Chief Judicial Magistrate (EO), Ernakulam in
Annexure-A4 order are hereby set aside. The
vehicle shall be released to the petitioner upon
complying with condition Nos.2 and 3 in the order
impugned, and in addition to that, the learned
Magistrate shall ensure that a proper mahazar is
prepared by the Investigating Officer showing a
clear description of the nature, dimensions and
features of the vehicle in the present condition.

¶104

 Sd/-
 ZIYAD RAHMAN A.A.
JUDGE

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pkk

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CRL.MC No.515 of 2022 17

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APPENDIX OF CRL.MC 515/2022

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PETITIONER’S ANNEXURES:
ANNEXURE 1TRUE COPY OF THE DEMAND NOTICE ISSUED UNDER
SECTION 13(2) OF THE SARFAESI ACT, DATED
1/07/2019
ANNEXURE 2TRUE COPY OF ONLINE STATUS REPORT IN MC
NO.36/2020 ON THE FILE OF THE CJM COURT,
ERNAKULAM, DATED 16/01/2020
ANNEXURE 3TRUE COPY OF MEMORANDUM OF CMP NO.1964/2021
ON THE FILE OF THE ADDITIONAL CHIEF JUDICIAL
MAGISTRATE COURT (EO), ERNAKULAM, DATED
8/11/2021
ANNEXURE 4CERTIFIED COPY OF THE ORDER IN CMP
NO.1964/2021 IN CRIME NO.686/2021 ON THE FILE
OF THE ADDITIONAL CHIEF JUDICIAL MAGISTRATE
COURT (EO), ERNAKULAM, DATED 3/12/2021

Federal Bank Limited v. State of Kerala

Case brief

What is this about?

What did the court decide?

Federal Bank Limited v. State of Kerala

Case brief

What is this about?

What did the court decide?

What the court decided

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