Dismissed

M/s.Udhayan Enterprises Ltd., v. The Federal Bank Limited

Madras HC25 Jan 2017WP/23867/2016

Case brief

AI extract

What is this about?

The High Court dismissed a writ petition filed by a borrower seeking direction to return title deeds offered as security. The Court held that since the borrower had not paid the full debt and availed of a security adjustment made by a related legal heir in a pending appeal, the bank could not be compelled to return the documents without a mutual compromise.

What did the court decide?

Writ petition dismissed; no costs.

M/s.Udhayan Enterprises Ltd., Vs The Federal… — Contract and Commercial Disputes | Madras HC (2017)

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IN THE HIGH COURT OF JUDICATURE AT MADRAS

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DATED: 25.01.2017

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CORAM:

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THE HONOURABLE MR.JUSTICE S.MANIKUMAR

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and

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THE HONOURABLE MR.JUSTICE M.GOVINDARAJ

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W.P.No.23867 of 2016

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M/s. Udhayam Enterprises Ltd., Rep. by its Director, K.K.V.Sethuraman, Srinagar, Thodukadu Post, Sriperumputhur - 602 105. .. Petitioner versus 1. The Federal Bank Limited, Rep. by its Managing Director, Aluva, Kerala State. 2. Deputy General Manager, Chennai Zone, The Federal Bank Limited, Petucula Tower, Royapettah, Chennai - 600 014. 3. The Chief Manager, Asset Recovery Branch, Fedral Bank Limited, 1st Floor, No.57, Royapettah High Road, Royapettah, Chennai - 600 014 .. Respondents

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Writ Petition filed under Article 226 of the Constitution of India, to issue a Writ of mandamus, directing the respondent to return the document of the petitioner which was given as security and sub matter of O.A.No.1305 of 2000 on the file of DRT-I, Chennai as per the letter issued by the 3rd respondent dated 28.02.2012.

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For Petitioner : Mr.Adi Narayana Rao. For Respondents : Mr.AV.Radhakrishnan

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ORDER

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(Order of the Court was made by S.MANIKUMAR, J.)

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Though, considerable time was spent, at the end of the arguments, Mr.Adi Narayana Rao, learned counsel for the petitioner prayed for withdrawal of the writ petition and going through the materials on record, we are not inclined to permit withdrawal, and proceed to pass the following order.

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M/s.Udhayam Enterprises Limited, Sriperumputhur, has availed loan from Fedral Bank Limited, State of Kerala, the 1st respondent by executing promissory notes, and deposit of title deeds of immovable property. There was a default in payment. Therefore, Fedral Bank Limited, has filed O.A.No.1305 of 2000, for the following prayers;

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a) Directing the Defendants 01 to 04 jointly and severally to pay the Applicant Rs.1,17,77,691.00 (Rupees One Crore Seventeen lakhs seventy seven thousand six hundred ninety one) together with interest @ 19.5% per annum with quarterly rests form the date of this Application till realisation and cost of this Application.

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b) Directing the sale of immovable mortgaged properties described in Schedule 'C' to 'G' hereunder for the recovery of the entire amount claimed under Relief (a) herein above, together with interest thereon and Applicant's cost and to apply the sale proceeds in discharge of the above dues.

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c) Directing with out prejudice to the Applicants' right of seizure and sale without the intervention of the Tribunal, the sale of hypothecated movable assets described in Schedule 'A' and 'B' hereunder for the recovery of the entire amount claimed under Relief (a) above together with interest thereon and Applicants costs and to apply the sale proceeds thereof in discharge of the above dues.

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d) Directing the Defendants to pay the contingent expenses incurred / to be incurred by the Applicant during the pendency of this Application till realisation of the entire amount due from the Defendants.

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e) Directing the Defendants to pay the entire cost and expenses incurred or to be incurred by the Applicant for the recovery of the entire amount due to it.

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f) It is also prayed that while issuing the Recovery

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Certificate, the Recovery Officer may be directed to exempt the Applicant from payment of Earnest Money Deposit, sale consideration etc to the extend of the amount due to the Applicant, in case the Applicant participate in the auction proceedings of the mortgaged property/properties, permitting the Applicant to set-off the amounts towards the liability due from the Defendants.

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Upon adjudication, DRT-I, Chennai, has passed orders in O.A.No.1305 of 2000 dated 20.07.2006, holding that the bank is entitled to recover a sum of Rs.1,17,77,691/- with future interest, at the rate of 19.5% per annum, with quarterly rests from the date of application (21.12.2000) till the date of realization of the entire dues. Relevant portion of the order is extracted hereunder.

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"6. In the result, it is declared that

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a) The applicant bank is entitled for a Recovery Certificate against the defendants 1 to 4, jointly and severally for a total sum of Rs.Rs.1,17,77,691/- [Rupees One Crore seventeen lakhs seventy seven thousand six hundred and ninety one only] with future interest at the rate of @19.5% per annum with quarterly rests from the date of application (21.12.2000) till the date of realization alongwith costs, which includes the advocate fees as per rules and also D5 and D6 are liable to pay to the extent of the assets/property inherited from the deceased Mr.Subbarao.

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b) It is further declared that in case of default of payment by the defendants 2 to 4, the applicant bank is at liberty to sell the applicant schedule properties and to adjust the sale proceeds thereof towards the amount due.

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c) If the sale proceeds of the schedule mentioned properties are not sufficient to satisfy the debt after defraying the expenses of such sale, the defendants 2 to 4 only are personally liable to pay the amount of such deficiency of amount with interest as mentioned above until realization.

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Recovery certificate be prepared and issued accordingly. A copy of the order be communicated to the parties concerned."

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According to the petitioner/borrower, when the subject properties were brought for sale, the borrower approached the bank for OTS. Bank agreed to receive Rs.102 Lakhs together with interest, at the rate of 16.75%, by way of letter dated

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20.06.2011, as OTS. The petitioner remitted all the dues and that the same was acknowledged by the bank on 21.02.2012.

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The petitioner has contended that when the entire amount under OTS has been settled, bank has to return the documents pertaining to the immovable properties, offered as secured asset. Instead, the bank has issued a letter dated 28.02.2012 instructing the petitioner, to record settlement in O.A.No.1305 of 2000 and A.P.No.12 of 2009, before DRT-I, Chennai, so as to enable the petitioner to get the documents, at the earliest.

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It is the case of the petitioner that when the amount due and payable under OTS has been paid and recorded, bank ought to have returned the documents, which they failed and hence, left with no other alternative, instant writ petition has been filed for a mandamus, directing the bank to return the document given as security.

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Upon notice, Fedral Bank Limited, Kerala, 1st respondent in its counter affidavit, has contended that the bank initiated proceedings under Recovery of Debts Due to Banks and Financial Institutions Act, 1993 vide O.A.No.1305 of 2000, in which, the petitioner, Mr.K.K.V.Seetharaman, his brother Mr.K.V.K.Haranath, petitioner's mother Mrs.K.Jhansi and the petitioner's sister Mrs.J.S.Jayasree were added as defendants.

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DRT-I, Chennai has passed an exparte order on 20.07.2006 directing the petitioner company and other defendants to pay a sum of Rs.1,17,77,691/- along with future interest at 19.5% per annum from the date of application (21.12.2000) till the date of realisation along with costs.

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Subsequently, one of the legal heirs Mrs.J.S.Jayasree, filed an interim application to set aside the exparte order, claiming right over the mortgaged properties. Based on the application, DRT-I reopened the order made against Mrs.J.S.Jayasree, sister of Mr.K.K.V.Seetharaman. In the said proceedings, a conditional order was passed by the tribunal directing Mrs.J.S.Jayasree to deposit Rs.10 Lakhs.

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The Bank in the counter affidavit filed before us has contended that Mrs.J.S.Jayasree filed petitions before the Recovery Officer and that same were dismissed. Being aggrieved by the decision of the tribunal, Mrs.Jayasree has filed Appeal No.12 of 2009.

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Inviting the attention of this Court to the proceedings dated 17.09.2009 in Appeal No.12 of 2009 between Mrs.J.S.Jayashree and Fedral Bank Limited, Royapettah, Chennai-

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14 and the averments made in the counter affidavit filed herein, Mr.A.V.Radhakrishnan, learned counsel for the bank submitted that when appeal No.12 of 2009 came up for hearing, learned counsel appearing for Mrs.J.S.Jayasree, appellant therein reported that sum of Rs.10 lakhs already deposited along with accrued interest, may be adjusted towards the loan account of the company and accordingly, the same has been done.

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Drawing the attention of this Court to the OTS amount of Rs.102 Lakhs, communicated to the Director, M/s.Udhayam Enterprises Limited, vide letter dated 13.08.2010, learned counsel for the bank further submitted that the above said sum was arrived at, after adjusting Rs.10 Lakhs deposited by Mrs.J.S.Jayasree, sister of the Director of the Company. However, claim of Mrs.J.S.Jayasree, regarding 1/5th share of the property, is still pending.

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Material on record that when the petitioner, sought for return of the title deeds, bank has requested the writ petitioner to record compromise in A.P.No.12 of 2009 filed by Mrs.J.S.Jayasree against O.A.No.1305 of 2000, for settlement of the disputes raised by her, and for return of documents. But, the petitioner is not a party in Appeal No.12 of 2009. The Bank wanted the following memorandum to be signed by all parties.

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"The above OA was decreed on 20.07.2006 and DRC No.220/2006 was issued in favour of the Applicant bank for recovery of Rs.3,42,25,700.90/- (Rupees Three Crores Forty Two Lakhs Twenty Five Thousand Seven Hundred and Paise Ninety Only) from the Defendants 1 to 4 jointly and severally and from Defendants 5 and 6 to the extent of the properties inherited from the deceased Sri.Subba Roa and also by sale of scheduled properties. Subsequently the Applicant Bank sanctioned a settlement and the account was settled by the defendants by remitting a total amount of Rs.1,61,43,935/- (Rupees One Crore Sixty One Lakhs Forty Three Thousand Nine Hundred and Thirty Five Only) since the date of decree till 21.02.2012.

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Hence it is humbly submitted the Hon'ble Tribunal may be pleased to record the said compromise and struck off the above OA from the file as settled out of Court and pass such other proper and necessary orders to render justice.

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Dated at Chennai, on this the 24th day of February, 2014. (1) M/s. Udayam Enterprises Ltd (2) Sri. Shankar (3) Sri.K.K.V.Seetharaman For Applicant Bank (4) Sri.K.V.K.Haranath (5) Smt.K.Jhansi

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(6) Smt.J.S.Jayasree"

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The petitioner as well as Mrs.J.S.Jayasree, are not willing to file any memorandum, as suggested. But, the writ petitioner, is harping on the ground that when the entire OTS amount has been paid, documents have to be returned. During the course of hearing, when we posed a question to Mr.Adi Narayana Rao, learned counsel for the petitioner as to whether his client had paid Rs.10 Lakhs to the bank, on his own, or the said amount has been adjusted, the answer was in the negative, that he did not pay the said sum.

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On 17.09.2009, in Appeal No.12 of 2009, learned counsel for Mrs.J.S.Jayasree has reported that Rs.10 Lakhs already deposited along with accrued interest, shall be adjusted towards the loan account. However, it is the contention of the learned counsel for the petitioner in the instant writ petition, that the said adjustment was without prejudice to the rights of Mrs.J.S.Jayasree in Appeal No.12 of 2009. Though, Mrs.J.S.Jayasree and the Fedral Bank Limited, Assets Recovery Branch, Chennai - 14, alone are the parties in A.P.No.12 of 2009, it cannot be disputed that bank had been permitted by the tribunal to appropriate Rs.10 Lakhs with accrued interest towards the loan account. For brevity proceedings dated 17.09.2009, in Appeal No.12 of 2009, is extracted. Appeal 12/2009 17.9.2009

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Today counsel for appellant present and reported that the amount of Rs.10 Lakhs already deposited, along with accrued interest may be adjusted towards the loan account without prejudice to the rights of the parties in the appeal and also the said amount has to be taken into consideration, in case there is settlement between the parties. Accordingly, Fedral Bank is permitted to appropriate the amount Rs.10 Lakhs with accrued interest towards the loan account. Arguments on main appeal on 12.10.2009."

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Contention of the bank that a sum of Rs.10 Lakhs has been appropriated towards the loan account, is fortified by the counter affidavit dated 31.07.2012 filed in A.P.No.12 of 2009. Bank has contended that appropriation of Rs.10 Lakhs deposited in No Lien Account was done as per the order of the tribunal dated 17.09.2009 in Appeal No.12 of 2009 and that the petitioner therein (Mrs.J.S.Jayashree), was well aware of the same. Bank has further contended that before the tribunal, she has made a claim for return of the said amount.

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Inasmuch as Appeal No.12 of 2009 is still pending before the DRT-I, Chennai, we are not traversing into the merits of the

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claim made by Mrs.J.S.Jayasree. From the perusal of the letter dated 13.08.2010 issued by Fedral Bank Limited, Asset Recovery Branch, Royapettah, Chennai - 14 to Mr.K.K.V.Sethuraman, Director of M/s.Udhayam Enterprises Limited, it could be deduced that after the order of the tribunal dated 17.09.2009 permitting Fedral Bank to adjust a sum of Rs.10 Lakhs deposited, a sum of Rs.102 Lakhs (including delayed period interest) has been arrived at, and that the bank has directed the petitioner, to make payments, as per the following schedule

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Rs.96.00 L is to be paid on or before 27.8.2010

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Rs.6.00 L is to be paid on or before 18.9.2010

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Reading of the letter dated 13.08.2010 also shows that request for further time, has been considered. Thus, admittedly the petitioner has not paid Rs.10 Lakhs to the bank and taking advantage of the adjustment of Rs.10 Lakhs deposited by his sister, he has sought for return of documents. Whereas, bank has contended that, when sum of Rs.10 Lakhs deposited has been permitted to be adjusted and accordingly done, on the consent given by Mrs.J.S.Jayasree, sister of one of the Directors, bank cannot return the documents and expected to lose Rs.10 Lakhs. Therefore, bank has contended that, if all the parties, consent to file a compromise memo as stated supra, the dispute could be settled. On the facts and circumstances, when a candid admission has been made before this Court that Rs.10 Lakhs was not paid by the writ petitioner, but only adjusted towards the loan account, bank cannot be compelled to return the documents.

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Further, when the dispute in Appeal No.12 of 2009 is pending, bank cannot be found fault with, for requesting the petitioner to file a joint memo by all the parties, interested in the property.

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On the facts and circumstances of the case, we are of the view that the petitioner has not made out a case for issuance of a Writ of Mandamus. For the reasons stated supra, writ petition is dismissed. No costs.

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Sd/-

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+1cc to Mr.Adinarayana Rao, Advocate, S.R.No.4714

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pk(CO) md(10/02/2017)

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M/s.Udhayan Enterprises Ltd., v. The Federal Bank Limited

Case brief

What is this about?

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M/s.Udhayan Enterprises Ltd., v. The Federal Bank Limited

Case brief

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