KERALA BANK (KERALA STATE CO.OP.BANK LTD) v. MANARKATTU THEATRES (P) LTD

THE HONOURABLE MR. JUSTICE AMIT RAWAL & THE HONOURABLE MRS. JUSTICE C.S. SUDHA MONDAY, THE 8TH DAY OF JANUARY 2024 / 18TH POUSHA, 1945 WA NO. 1003 OF 2023 AGAINST THE JUDGMENT IN WP(C) 7022/2023 OF HIGH COURT OF APPELLANTS/RESPONDENTS NOS.2 AND 3: KERALA 1 2 THE KERALA STATE COOPERATIVE BANK LTD CO-BANK TOWERS, PALAYAM, THIRUVANANTHAPURAM REPRESENTED BY ITS CHIEF EXECUTIVE OFFICER, PIN - 695033 REGIONAL MANAGER KERALA STATE CO-OPERATIVE BANK LTD, REGIONAL OFFICE, KOVILAKATHUMPADAM, THIRUVAMBADY P.O. THRISSUR, PIN - 680022 BY ADV P.C.SASIDHARAN RESPONDENTS/PETITIOENRS & RESPONDENT NO.1: 1 2 3 PNB VESPER LIFE SCIENCE PVT LTD DOOR NO.40 1045G, 5TH FLOOR, AMRITHA TOWERS, MG ROAD, COCHIN 682011, REPRESENTED BY ITS DIRECTOR SRI.P.N.BALARAM, PIN - 682011 MINI C B, AGED 52 YEARS W/O BALARAMAN, PADINJARETHALACKAL HOUSE, PERINGAVU P.O, THRISSUR, PIN - 680018 THE REGISTRAR OF CO-OPERATIVE SOCIETIES OFFICE OF THE REGISTRAR OF CO-OPERATIVE SOCIETIES, THIRUVANANTHAPURAM, PIN - 695014 THIS WRIT APPEAL HAVING COME UP FOR HEARING ON

08.01.2024, ALONG WITH WA.1394/2023, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING: WA NO. 1394 OF 2023 and conctd. case 3 JUDGMENT Amit Rawal, J.

1. This judgment shall dispose of two intra court appeals bearing No.1394 of 2023 and 1003 of 2023 preferred against the separate judgments of the Single Bench dated

20.6.2023 and 10.4.2023 rendered in W.P.(C) No.10371 of 2023 and 7022 of 2023 respectively.

2. The reliefs sought in both the aforementioned writ petitions were in the following manner. WP(C)No.1394 of 2023 i. Issue a writ of Mandamus or such other appropriate writ or order commanding the respondents to release the Original Title Deeds (Title Deed Nos.212/1997 and 3112/2001 of Meenachal SRO) to the petitioner which were deposited by the petitioner towards security for the financial facilities availed by "J.J. Holiday Resort (P) Limited as the loan availed by the principal borrower stands closed; ii. Direct the respondents to release the above original title deeds forthwith within a short time limit prescribed by this Hon'ble Court; iii. Dispense with the English translation of Malayalam documents produced in this writ petition. WP(C) No.1003 of 2023 i. issue a writ in the nature of mandamus, or any other appropriate writ, order or direction, directing the WA NO. 1394 OF 2023 and conctd. case 4 respondents 2 to 3 to reschedule the loan of PNB Vesper Life Sciences Pvt. Ltd, for a period of two years from the date of reschedulement, payments, conversion of interest accrued or to be accrued into another credit facility, grant the benefit of interest waiver (including interest on interest)as per Ext:P5 Judgment of Supreme Court dated 27.11.2020 and Ext: P 4, P6 RBI circulars dated 06.08.2020 & 05.05.2021 and grant a moratorium of six months for the payments. (ii) declare that petitioners are entitled for the benefit interest waiver (including interest on interest) as per Ext: P5 Judgment of Supreme Court and Ext:P4, P6 RBI circulars dated 06.08 2020 & 05.05.2021 and for the benefit of moratorium. (iii) issue a writ in the nature of mandamus, or any other appropriate writ, order or direction, directing the respondents 2 to 3 to allow the petitioners to settle the loan account as a onetime settlement after giving the benefits of interest waiver as referred in Ext: P5 order of the Judgment of Hon'ble Supreme Court, P4 & P6 RBI circulars, onetime settlement scheme implemented by the co-operative Department of Kerala and on the final settlement of the loan of PNB Vesper Life Sciences Pvt. Ltd return the documents, title deeds, release the properties which were mortgaged to the Bank in respect of the above loan. (iv). issue a writ of mandamus, or any other appropriate writ, order or direction, directing the respondents 2 to 3 not to evict, vacate the petitioners from the House and properties comprising in the title deed No: 2262/1996 of Sub Registrar office Ayyanthole, Thrissur and permitting them to reside there peacefully. (v) issue a writ of mandamus, or any other appropriate writ, order or direction, directing the 1st respondent to issue direction to the 2nd respondent bank to allow one time settlement scheme for the petitioners and to consider Exhibit P10 application and take a decision within a time limit as prescribed this Hon'ble court. (vi) Declare that when the loan, in respect of PNB Vesper Life Sciences Pvt. Ltd which the mortgage was created, is repaid in full, the bank has no right to retain the documents in respect of the petitioner's property. WA NO. 1394 OF 2023 and conctd. case 5 (vii) dispense with the production of English translation of vernacular exhibits produced in this writ petition

3. The pith and substance of the prayer extracted above reveals that the writ petitioners/respondents had taken the facility of loan from the Appellant Co-operative Society against the mortgage of the tile deeds. Society had sanctioned the loan of Rs.2 (two) Crores in one matter and Rs.7 (seven) crores in other on 28.3.2016 and 25.3.2014 respectively.

4. The liability aforementioned had already been discharged by the loanee. The title deeds laying with the Bank was sought to be returned by a request which was denied, resulted to filing of the writ petitions as noticed above.

5. Learned counsel appearing on behalf of the appellants submitted that the writ petitions at the instance of the loanee was not maintainable on account of the following points. a) Writ petitions owing to non availment of alternative and efficacious remedy under the provisions of Section 69(f) of WA NO. 1394 OF 2023 and conctd. case 6 the Co-operative Societies Act were not maintainable. b) Respondents loanee had formed new companies and taken loan by mortgaging some other properties, the value of which is much less than the loan facility and for that, Arbitration Cases Nos. 351, 352 and 353 of 2020 are pending for recovery of total amount of Rs.10.12 crores. c) Bank can always retain a lien in view of the provisions of Section 171 of the Indian Contract Act. In support of the contention relied upon the judgment of the Supreme Court in Syndicate Bank v. Vijay Kumar and Others (1992 KHC 821). d) Learned Single Judge erroneously decided the maintainability of the writ petition against appellants by relying upon the judgment of the Division Bench of this Court in Managing Director, Kerala State Co-operative Housing Federation v. Leela Issac and Others (2017 (2) KHC 535).

6. On the other hand, counsel representing the loanee supported the judgment of the Single Bench and submitted that the ratio of decidendi culled out in the judgment in Syndicate Bank (supra) would not be applicable as the judgment is in 'Personam' and not in 'Rem' as the loanee had WA NO. 1394 OF 2023 and conctd. case 7 consciously agreed by permitting the Bank to retain the FDs despite discharge of the liability in respect of some other transactions. Section 171 of the Indian Contract Act would not be applicable as it opens with a 'Non Obstante Clause', in the absence of the contract whereas there was a specific and separate contract in respect of all the two loan transactions. As far as far as the other loan transactions are concerned for which ARCs are stated to be pending, separate mortgage deeds were executed by submitting the different title deeds. The valuation of the property was sufficient for extending the loan facility. Financial institutions do not extend the facility of loan without obtaining the valuation and particularly having a less value vis-a-vis the loan amount. The action of the bank was without jurisdiction and therefore writ jurisdiction had rightly been invoked in view of the ratio decidendi culled out in the judgment Managing Director, Kerala State Co-operative Housing Federation (supra) and urged us for dismissal of the writ appeals.

7. We have heard the learned respective counsels and appraised the paper book and judgment of the Supreme Court. WA NO. 1394 OF 2023 and conctd. case 8

8. Section 69(f) of the the Co-operative Societies Act deals with resolution of the disputes in respect of the facts as submitted before us. Concededly, the loan transactions sanctioned by the appellant in favour of the respondents were on 25.3.2014 of 7 crores and 28.3.2016 of 2 crores respectively. The liability including the interest has already been discharged way back but a request for release of the title deeds was declined. It is in that aspect jurisdiction of the writ court was invoked. It is settled law law that if the action of the respondent withholding the document is irrational, without jurisdiction and impermissible in law, the writ jurisdiction can always be invoked even if there is an alternative and efficacious remedy. As per the facts noticed above, for three pending matters loanee and the bank had executed different loan transactions by creating an equitable mortgage of the properties, which are not subject matter of the present case. In other words, the properties in question involved in these present cases are independent of the loan transactions. Section 171 of the Contract Act reads thus: 171 General lien of bankers, factors, wharfingers, attorneys and policy brokers- Bankers, factors, wharfringers, attorney of a High Court and policy brokers may, in the absence of a WA NO. 1394 OF 2023 and conctd. case 9 contract to the contrary, retain as a security for a general balance of account, any goods bailed to them, but no other persons have a right to retain, as a security for such balance, goods bailed to them, unless there is an express contract to that effect.

9. On perusal of the aforementioned provisions, it is evident that the said provisions can always be invoked by a Bank in the absence of any contract. The contents of the mortgaged deed have not been placed on record but it was not denied that the party had agreed to create a separate mortgage of the properties in respect of the loan transactions, as noticed above. The judgment rendered in Syndicate Bank (supra), as per the findings recorded in paragraph 5 would not be applicable to the facts of the case as the loanee had consciously with wide eyes open permitted the Bank to retain the FDs despite discharge in respect of some other amount due from him. Therefore, the argument does not merit acceptance. We have also not been apprised the dates and events of the other three loan transactions which are stated to be pending before the Arbitration Court to reflect as to whether the Companies involved therein had been defaulter of the transactions referred to above or not. WA NO. 1394 OF 2023 and conctd. case 10 As an upshot of our findings, we do not find any illegality and perversity in the judgment of the learned Single Bench allowing the writ petitions. Writ appeals sans merit. Accordingly, dismissed. Sd/- AMIT RAWAL JUDGE Sd/- C.S. SUDHA JUDGE WA NO. 1394 OF 2023 and conctd. case 11 APPENDIX OF WA 1003/2023 RESPONDENT ANNEXURES Annexure R1(a) TRUE COPY OF THE LIST OF RELEVANT PAGES OF SCHEDULE BANKS AS PER THE RESERVE BANK OF INDIA ACT Annexure R1(b) TRUE COPY OF THE ORDER OF THE HON'BLE HIGH COURT IN WP(C) NO. 7022 OF 2023 DATED 20.03.2023 Annexure R1(c) TRUE COPY OF THE RELEVANT PAGES OF THE ATTACHMENT ORDER OF THE JOINT REGISTRAR OF CO-OPERATIVE SOCIETIES DATED 12.04.2023