CORAMTHE HONOURABLE MR v. T.Sekar Raj

IN THE HIGH COURT OF JUDICATURE AT MADRASDATED : 10-8-2009CORAMTHE HONOURABLE MR.JUSTICE M.CHOCKALINGAMANDTHE HONOURABLE MR.JUSTICE R.SUBBIAHOSA Nos.327, 347 and 411 of 2008 and 48 of 2009andMP Nos.1 and 1 of 2008 in OSA Nos.327 & 347 of 2008andMP No.1 of 2009 in OSA No.48 of 2009The Muthilalpet Benefit Fund Ltd.,Rep. By its AdministratorJustice A.Ramamurthi,No.199, Thambu Chetty StreetChennai 600 001.(cause title accepted vide orders of Court dt.14.8.2008 in MP 1/2008, dt.15.10.2008 in MP 1/2008, and dt.19.1.2009 in MP 1/2009 respectively).. Appellant in OSA 327, 347/2008 and 48/2009T.Sekar Raj.. Appellant in OSA 411/2008 and Respondent in OSA 48/2009vs1.Muthialpet Benefit Fund Ltd., represented by its Administrator Justice A.Ramamurthi, No.199, Thambu Chetty Street Chennai 600 001. (cause title accepted vide order of Court dt.10.8.2009 in MP 1/2009).. 1st Respondent in OSA 411/20082.The Official Liquidator High Court, Madras.. Respondent in OSA 327/2008 and 2nd Respondent in OSA 411/2008O.S.A.No.327/2008 preferred under Order XXXVI Rule (9) of O.S. https://hcservices.ecourts.gov.in/hcservices/ Rules read with Clause 15 of Letters Patent Appeal and Sec.483 ofCompany Act against the order passed by this Court in C.A.No.237 of2008 in C.P.No.156 of 2005 dated 30.4.2008.O.S.A.No.347/2008 preferred under Order XXXVI Rule (9) of O.S.Rules read with Clause 15 of Letters Patent Appeal and Sec.483 ofCompany Act against the order passed by this Court in C.P.No.156 of2005 dated 30.4.2008 and subsequently modified on 14.7.2008.O.S.A.No.411/2008 preferred under Order XXXVI Rule 1 of O.S.Rules read with Clause 15 of Letters Patent Appeal against the orderpassed by this Court in C.P.No.156 of 2005 (on memo of T.Sekar Raj)dated 30.4.2008.O.S.A.No.48/2009 preferred under Order XXXVI Rule (9) of O.S.Rules read with Clause 15 of Letters Patent Appeal and Sec.483 ofCompany Act against the order passed by this Court in C.P.No.156 of2005 dated 30.4.2008.For Appellants: Mr.T.R.Rajagopalan Senior Counsel for Ms.Pushpa Sathyanarayana for appellant in OSA 327 &347/2008 & 48/2009 andfor R1 in OSA 411/2008 Mr.P.Subramani for appellant in OSA 411/2008and for respondent in OSA 48/2009For Respondents: Mr.Balan Haridoss for Mr.A.Jayachandranfor respondent in OSA 327/2008 and forR2 in OSA 411/2008COMMON JUDGMENT(Judgment of the Court was delivered by M.CHOCKALINGAM, J.)This judgment shall govern all these four appeals in OSANos.327, 347 and 411 of 2008 and 48 of 2009.2.OSA 327/2008 challenges an order of the learned Single Judgeof this Court made in C.A.No.237/2008 whereby the Court decided toapply 12% interest uniform in respect of similar cases and aftergiving credit to the amount paid, the interest at 12% per annum needto be calculated.3.In OSA 347/2008 the Benefit Fund has challenged an order inCP no.156/2005 directing the Official Liquidator to issue a freshdraft in the name of the appellant Benefit Fund in respect of themortgage debt due to the company. https://hcservices.ecourts.gov.in/hcservices/

4.Aggrieved over the order in CP 156/2005 applying 12% interestand granting time to the respondent till 9.6.2009 to make the fullsettlement and if not, levying interest at 18%, OSA 411/2008 and48/2009 have been brought forth.5.The Administrator of the Benefit Fund has filed anapplication in C.A.No.237 of 2008 alleging that the two optionsnamely (i) The debtors may be given a waiver of 75% of the defaultinterest mentioned in the computerized statement and the amount sofound due shall be paid by the debtor as a one-time payment in fulland final discharge of the mortgage debts and (ii) Without anyreference to the default to pay interest every month as per the deedof mortgage, the interest due on the principal for a period of fiveyears from the date of mortgage at the agreed simple interest may becapitalized with the principal, and on this capitalized principalthe interest due at the same agreed simple interest for the nextfive years will be capitalized and so on till date, and after addingto the amount so arrived at the miscellaneous charges such aspostage, insurance, interest tax etc., and deducting the paymentmade by the debtor, the balance amount shall be ordered to be paidas one time lump sum payment in full and final discharge of themortgage debt, will be beneficial to the defaulting debtors, and itwill considerably reduce their liability and induce them to pay thescaled down amounts to enable the company to pay the depositors 35%of their matured deposits and try to revive the business of thecompany and bring it to its former position. It is further allegedthat the above two options may be considered and approved. 6.The learned Single Judge after observing that the Court hasalready relieved the Administrator of his responsibilities andhanded over the administration to the Official Liquidator, hasdecided to apply 12% interest uniform in respect of similar cases.Aggrieved over the same, the Benefit Fund has brought forth OSANo.327 of 2008. Aggrieved over the other consequential orderspassed by the learned Single Judge, the other three appeals havebeen preferred.7.Advancing arguments on behalf of the appellant MuthiapetBenefit Fund Ltd., the learned Senior Counsel Mr.T.R.Rajagopalanwould submit that the respondent was directed to pay a meagreconsolidated sum; that what has got to be seen is the paramountinterest of the depositors who have invested their savings and otherearnings with a fond hope of getting their periodical and regularreturns; that the prime concern is the recovery of arrears and ifnot in full, at least with a reasonable waiver of interest; that inorder to induce the debtors to return the arrears, the appellantBenefit Fund has been offering waiver on interest payable; that nodoubt, it will be beneficial for both the parties; that it ispertinent to point out that if one of the two options suggested bythe Administrator is sanctioned by this Court, it will considerablyreduce the liability of the debtors and induce them to pay thescaled down payments which would enable the company to repay thematured amount; that apart from that, most of the mortgagors aresuccessfully preventing the company from bringing the secured assets https://hcservices.ecourts.gov.in/hcservices/ to sale under Sec.69 of the Transfer of Property Act by filingfrivolous suits; that the application of 12% interest uniform inrespect of mortgage debts is without jurisdiction and unsustainable,and under the circumstances the suggestions made by theAdministrator have got to be considered in the interest of thewelfare of the company as well as the depositors. 8.The learned Counsel for the appellant in OSA 411 of 2008would contend that the rights of the parties have not beenconsidered by the learned Single Judge; that the learned SingleJudge has misconstrued the case of the appellant and summarilypassed the impugned order directing him to pay a sum ofRs.1,70,452/- which is unsustainable; that it is an admittedposition that he filed a suit in O.S.No.1681/2004 on the file of theCity Civil Court, Chennai, for redemption of the suit property whichcannot be decided in a summary manner; that when the principalamount of Rs.1 lakh has already been paid by him, the interestawarded is not at all maintainable in law, and hence the order hasgot to be set aside.9.The Court heard the Official Liquidator and perused all theorders passed by the learned Single Judge.10.As could be seen above, the order made by the learned SingleJudge in C.A.No.237/2008 whereby a direction was issued to apply 12%interest uniform to the similar cases on hand after giving credit tothe amount paid, and the orders passed in the other applications areonly consequential in nature. The other two appeals are at theinstance of the Benefit Fund and the last one was at the instance ofthe individual. It is not in controversy that the formerAdministrator though he was relieved has given a detailed report andhas suggested two options for the reasons adduced by him in theinterest of the depositors at large to give offer to the debtors ofthe company to exercise any one of the two options in full, finaland one time payment of the mortgage debt due to the company. Thefirst option was the waiver of 75% of the default interest as setout in the computerized statement of account maintained by theBenefit Fund in accordance with the mortgage deed, while the secondoption was without reference to the default to pay the interestevery month as agreed under mortgage deed, the interest due on theprincipal for a period of five years from the date of the mortgageat the agreed simple interest could be capitalized with theprincipal and after adding to the amount so arrived at themiscellaneous charges such as postage, insurance, interest tax etc.,and deducting the payments by the debtors, the debtors should paythe debt in full, final and one time payment in discharge of themortgage debt. After the former Administrator was relieved of hisresponsibilities and the administration was handed over to theOfficial Liquidator, the present Administrator was appointed, and hehas also filed a report. In the course of the report, theAdministrator has pointed out the said two options open to thedebtors. The learned Single Judge should have considered thesuggestions made by the former Administrator in the interest of thelarge body of depositors apart from the welfare of the company. But, https://hcservices.ecourts.gov.in/hcservices/ nothing is available in the order to indicate that the suggestionsmade in respect of the options by the former Administrator wereconsidered by the learned Single Judge. Needless to say in a givencase like this, the interest of the depositors is paramount. TheAdministrator is normally appointed in a given situation where thefinancial institution is facing a financial crisis and unable to payits depositors. As could be seen, it is clear from the report ofthe former Administrator that it was to encourage the debtors to payoff their dues. 11.It is also brought to the notice of the Court that a waiverof 50% of the interest was granted by this Court by order inC.A.No.1203 of 2005 dated 13.9.2005. When such a beneficial orderwas made, the debtors have failed to pay their dues which would beindicative of the indifferent attitude of the borrowers. Even theinitial payment namely 35%, as per the compromise sanctioned by theCourt could not be paid. When these two options were made open,naturally it would reduce the liability of the borrowers. They mayeven be allowed to make payment of the debts scaled down. If doneso, it would enable the company to repay the depositors the maturedamounts as found in the compromise. Neither the debtors have madethe payments proper, nor they have been allowed to take stepsagainst the assets. Under such circumstances, the said applicationwas filed seeking permission of the Court to keep open either of theoptions to the debtors. Once it is found as a mode of earlyrecovery of the debts from the borrowers, the learned Single Judgeshould have considered the suggestions before making the impugnedorder. On the contrary, the learned Single Judge withoutconsidering any aspect of the matter, has ordered the application of12% interest uniform stating that difficulties were found inrealization of the debts which, in the considered opinion of thisCourt, is not a sound reason. It is also quite evident that thepresent application has been filed by the Benefit Fund only on thestrength of the suggestions made by the former Administrator which,in the opinion of the Administrator, could be followed. Under thecircumstances, that order made in C.A.No.237/2008 has got to be setaside. Accordingly, the order of the learned Single Judge inC.A.No.237 of 2008 is set aside, and the matter is remitted back tothe learned Single Judge for considering the suggestions made by theformer Administrator, as per the observations made above. 12.All other three appeals namely OSA Nos.347 and 411/2008 and48/2009 have arisen only in respect of the payment of interest to becalculated at 12% as per the order. In view of the order madeabove, the orders passed thereon by the learned Single Judge havegot to be set aside. Accordingly, they are set aside and remittedback to the learned Single Judge for consideration along with themain matter. https://hcservices.ecourts.gov.in/hcservices/

13.Accordingly, all these original side appeals are allowed.Consequently, connected MPs are closed.Sd/Asst.Registrar/true copy/Sub Asst.Registrarnsv/To:1. The Administrator,The Muthilalpet Benefit Fund Ltd.,No.199, Thambu Chetty StreetChennai 600 001.2.The Official LiquidatorHigh Court, Madras3.The Sub-Assistant Registrar,Original Side, High Court,Madras.+4ccs to Mr.P.Subramani, Advocate Sr 37393 & 37536+2ccs to Mr.K.Simeon, Advocate Sr 37392+1cc to Mr.T.R.Rajaraman, Advocate Sr 37417NG(CO)km/17.11.OSA Nos.327, 347 and 411of 2008 & 48 of 2009