BY AD v. JACOB P.ALEX

ORDER Review petitioner was a stranger to the writ petition and he has filed this review after obtaining leave. Review petitioner seeks to review the judgment dated 21.03.2022 in W.P.(C) No.9297 of

2. The writ petition was filed by respondents 1 and 2 against respondents 3 and 4 challenging the proceedings initiated under the Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (for short, ‘the SARFAESI Act’) to recover an amount of Rs.23,00,170/- allegedly due to the bank. This Court disposed of the aforesaid writ petition on 21.03.2022 granting the benefit of repayment of outstanding amount of Rs.23,00,170/- in ‘18’ equated monthly instalments, the first of which was directed to commence on 21.04.2022. It was further directed that in the event of a single default, the respondent bank will be entitled to proceed in accordance with law. RP NO. 91 OF 2023 IN W.P.(C) No.9297 of 2022 4

3. Subsequent to the above judgment, the review petitioner sought leave to prefer this review pointing out that he is the decree holder in O.S.No.13 of 2015 on the files of the Sub Court, Pathanamthitta for realising an amount of Rs.34,19,772.73 with 12% interest per annum from the date of suit till realisation. It is averred that the said suit was decreed on 30.01.2016 and thereafter an execution petition was filed as E.P.No.28 of 2016 on

06.04.2016 for recovery of an amount of Rs.42,98,222/- and the property having an extent of 9.31 Ares attached in the suit was brought for sale in the execution proceedings. It is further alleged that after the proclamation for sale was settled in the execution petition, the 4th respondent - State Bank of India filed E.A.No.138 of 2021, produced as Annexure A3, seeking a direction to the decree holder to deposit the amount to discharge the mortgage debts or to apply the amounts due to the banks first, from against the sale proceeds and to enable the bank to receive the same. The review petitioner filed a statement in the Execution Petition on 11.09.2021 stating that he has no objection in utilising the amount realised from the auction of the attached property to first settle the liabilities of the claimant bank. Thereafter, the auction was conducted on

13.09.2021 and the review petitioner as decree holder, participated RP NO. 91 OF 2023 IN W.P.(C) No.9297 of 2022 5 in the auction and bid the property for Rs.90,00,000/-. On the date of sale itself, the review petitioner deposited Rs.22,50,000/- being 1/4th of the sale consideration. A further amount of Rs.31,42,500/- was deposited on 25.09.2021 due to the claim of the bank. Thus, an amount of Rs.53,92,500/- remains deposited by the review petitioner in the execution court towards the sale amount which can be used to clear all liabilities of the bank as on that date. Even an amount of Rs.7,20,000/- towards the value of the stamp paper for executing the sale certificate was also deposited by the petitioner on

25.09.2021.

4. According to the review petitioner, in the meantime, instead of seeking withdrawal of the amount deposited in the execution court, the bank filed an application to set aside the sale as per Annexure A9 on 12.11.2021. A detailed objection was filed by the review petitioner on 08.12.2021 to the said petition. Curiously, on 10.12.2021, the bank initiated proceedings under the SARFAESI Act by issuing a notice under Section 13(2) even despite being aware that the amount lying in deposit with the Court can be utilised for clearing the entire liabilities of the judgment debtor. Subsequently, a possession notice was issued by the bank for recovering an amount of Rs.22,88,150/- since in the meantime the RP NO. 91 OF 2023 IN W.P.(C) No.9297 of 2022 6 borrower had closed a portion of his liabilities. The review petitioner alleged that the circumstances reveal the fact that the 4th respondent had invoked the SARFAESI Act to defeat lawful proceedings pending in execution of the decree.

5. When W.P.(C) No.9297 of 2022 was filed, the petitioner therein and the respondent bank failed to disclose the aforesaid circumstances and behind the back of the review petitioner and without informing the Court about the pending execution proceedings, a judgment was obtained, permitting repayment by instalments. Review petitioner thus alleges that the judgment dated 21.03.2022 is vitiated by fraud and collusion between the respondents and even caused loss to the review petitioner. According to the review petitioner, the property which was auctioned for Rs.90,00,000/- in favour of the review petitioner and who himself had made a deposit of Rs.53,92,500/- to redeem the mortgage, is attempted to be defeated by obtaining a judgment from this Court to repay the amount in instalments and hence the review.

6. A counter affidavit has been filed by respondents 1 and 2 stating that the sale is challenged even by the said respondents and that the value for which the property was sold in auction was far RP NO. 91 OF 2023 IN W.P.(C) No.9297 of 2022 7 less than the actual market value. It was alleged that since the sale has not yet been confirmed, the bank could not avail the amount deposited in court and as the amount due to the bank had risen to Rs.53,62,817/-, proceedings were initiated under the SARFAESI Act. After notice under section 13(2), two loans were settled and closed by respondents 1 and 2 by paying Rs.32,00,000/- and it was thereafter that the bank issued the possession notice for Rs.22,88,150/-, which was the amount due under an educational loan. Since the auction has not yet been confirmed because of the pendency of applications for setting aside the sale, the amount deposited by the review petitioner could not be utilised and it was thus that the writ petition was filed seeking a direction to repay the amount in instalments.

7. In the counter affidavit filed by the 3rd respondent, it is pointed out that the writ petition was disposed of on the date of admission itself and the instructions sought by the Standing Counsel was provided before the writ petition was disposed of. It is further stated that by an inadvertent omission, the details in relation to the pendency of the execution petition before the Sub Court, Pathanamthitta as E.P.No.28 of 2016 was not conveyed to the counsel and the omission was not deliberate or intentional but was RP NO. 91 OF 2023 IN W.P.(C) No.9297 of 2022 8 only because the counsel had sought specific instructions regarding the outstanding amount and the number of instalments that could be given. After narrating the details of the loan availed, the 3rd respondent further stated that Ext.P1 notice under Section 13(2) of the SARFAESI Act was issued on 10.12.2021 and the borrowers had thereafter closed the cash credit facility on 24.02.2022 and what remained was only the educational loan and hence notice under Section 13(4) was issued for Rs.22,88,150/-. It is further stated that pursuant to the judgment, respondents 1 and 2 had made payments and an amount of Rs,7,38,063/- alone is outstanding in the educational loan. It was stated that the claim of the bank on the property of respondents 1 and 2 will stand extinguished on payment of Rs.7,38,063/-.

8. I have heard Sri.Jacob P.Alex, the learned counsel for the review petitioner, Sri.S.Santhosh Kumar, the learned counsel for respondents 1 and 2 as well as Sri.M.Jithesh Menon, the learned Standing Counsel for respondents 3 and 4.

9. The notice under Section 13(2) of the SARFAESI Act was issued on 10.12.2021 while O.S.No.13 of 2015 before the Sub Court, Pathanamthitta was decreed on 30.01.2016 entitling the review petitioner to recover an amount of Rs.34,19,772.73 with RP NO. 91 OF 2023 IN W.P.(C) No.9297 of 2022 9 12% interest. On the date of filing of the execution petition on

06.04.2016, the amount due to the review petitioner from respondents 1 and 2 was Rs.42,98,222.69. The property of 9.31 Ares belonging to the second respondent was brought for sale and after the proclamation of sale was settled, bank filed Annexure A3 application objecting to the sale proclamation. However, the sale was held on 13.09.2021 and the decree holder, who is the review petitioner, purchased the said property for Rs.90,00,000/- with Rs.22.50 lakhs being deposited on the date of sale and a further amount of Rs.31,42,500/- was deposited on the basis of the demand of the bank. Thus by 25.09.2021, the total amount deposited by the review petitioner with the court was Rs.53,92,500/- apart from the cost of stamp duty for executing the certificate of sale.

10. The amount deposited by the review petitioner with the court was more than what was due to the bank and the review petitioner had even submitted before the Sub Court that the amount so deposited can be first appropriated towards the liability due to the bank. However, surprisingly on 12.11.2021, the bank filed E.A.No.232 of 2021 seeking to set aside the sale to which Annexure A10 objection was filed by the review petitioner on 08.12.2021. RP NO. 91 OF 2023 IN W.P.(C) No.9297 of 2022 10 The dates assume significance since on 10.12.2021, the bank proceeded to issue notice under Section 13(2) thereby initiating proceedings under the SARFAESI Act. On 24.02.2022, respondents 1 and 2 closed the cash credit facility by repaying an amount of Rs.32,75,795/- to the bank and what remained was only Rs.22,88,150/- for which a possession notice was issued on

02.03.2022. Thereafter the writ petition was filed on 17.03.2022 seeking instalment payment which came up for admission on

21.03.2022. On the date of admission itself, the Standing Counsel informed that instructions had been obtained and that the bank is willing to settle the account by accepting repayment in limited instalments.

11. Surprisingly, the Standing Counsel for the bank was not informed about the pendency of the execution proceedings or that the property had been subjected to sale or even that the decree holder had agreed in writing before the execution court that the amount deposited therein could be appropriated towards the bank’s liability. It is even more curious to note that the bank had initiated SARFAESI proceedings when the entire amount and more, due to them, had been deposited by the decree holder before the execution court with a written consent that the amount deposited RP NO. 91 OF 2023 IN W.P.(C) No.9297 of 2022 11 could be appropriated towards the bank’s liability. Even though it is stated in the affidavit that it was an inadvertent omission to intimate the Standing Counsel about the existence of the execution petition or the deposit of amount pursuant to a court sale, had those facts been brought to the notice of this Court, such a judgment may not have been rendered, at least without the decree holder on record. The bank had a duty to the Court to come out with the proper factual situations and withholding of such information from the Standing Counsel amounts to withholding of information from the Court itself and therefore, the 4th respondent had enabled the writ petitioner to obtain a judgment in his favour.

12. The significance of the said judgment is evident from the proceedings before the execution court on 22.10.2022 wherein the Standing Counsel for the bank submitted to the court that the cash credit account due to the bank is closed, while the writ petitioner had produced a copy of the judgment dated 21.03.2022 in W.P.(C) No.9297 of 2022 stating that all coercive proceedings have been stayed by the judgment. The execution proceedings were pointed out as stayed under the cover of the judgment.

13. On an appreciation of the entire circumstances that have arisen in the case, it is evident that the judgment under review was RP NO. 91 OF 2023 IN W.P.(C) No.9297 of 2022 12 obtained by withholding information that was material. If the 4th respondent had informed the Court that an execution proceeding was pending and that the review petitioner had obtained a decree, certainly this Court would have directed to implead the decree holder as a party to the writ petition and may have even directed the bank to proceed to recover its dues from the amount deposited by the review petitioner before the execution court. Since the aforesaid information was withheld from this Court, I am of the view that the judgment was obtained after suppressing material facts.

14. In the above circumstances, I deem it appropriate to review the judgment. In the result, the judgment dated 21.03.2022 in W.P.(C) No.9297 of 2022 is reviewed and recalled. This review petition is allowed as above. Sd/- BECHU KURIAN THOMAS, JUDGE RKM RP NO. 91 OF 2023 IN W.P.(C) No.9297 of 2022 13 APPENDIX OF RP 91/2023 REVIEW PETITIONER'S ANNEXURES : ANNEXURE A1 ANNEXURE A2 ANNEXURE A3 ANNEXURE A4 TRUE COPY OF THE DECREE DATED 30.01.2016 IN OS NO. 13/2015 BEFORE THE SUB COURT, PATHANAMTHITTA TRUE COPY OF THE EXECUTION PETITION FILED BY THE REVIEW PETITIONER AS E.P. NO. 28 OF 2016 IN OS NO.13/2015 BEFORE THE SUB COURT, PATHANAMTHITTA TRUE COPY OF THE APPLICATION DATED 07.09.2021 FILED ON BEHALF OF THE BANK AS EA NO. 138 OF 2021 IN E.P. NO. 28 OF 2016 IN OS NO.13/2015 BEFORE THE SUB COURT, PATHANAMTHITTA TRUE COPY OF THE OBJECTION DATED 11.09.2021 FILED BY THE DECREE HOLDER (REVIEW PETITIONER) IN EA NO. 138 OF 2021 IN E.P. NO. 28 OF 2016 IN OS NO.13/2015 BEFORE THE SUB COURT, PATHANAMTHITTA ANNEXURE A5 TRUE COPY OF THE ORDER DATED 13.09.2021 IN E.P. NO. 28 OF 2016 IN OS NO.13/2015 BEFORE THE SUB COURT, PATHANAMTHITTA ANNEXURE A6 TRUE COPY OF THE RECEIPT NO. 15/21-22 DATED 13.09.2021 IN EP NO. 28 OF 2016 ANNEXURE A6(A) TRUE COPY OF THE MEMO DATED 13.09.2021 SUBMITTED BY THE DECREE HOLDER (REVIEW PETITIONER HEREIN) IN EP NO. 28 OF 2016 ANNEXURE A7 TRUE COPY OF THE RECEIPT NO. 17/21-22 DATED 25.09.2021 IN EP NO. 28 OF 2016 ANNEXURE A7(A) TRUE COPY OF THE MEMO DATED 25.09.2021 SUBMITTED BY THE DECREE HOLDER (REVIEW PETITIONER HEREIN) IN EP NO. 28 OF 2016 ANNEXURE A8 TRUE COPY OF THE RECEIPT NO. 18/21-22 RP NO. 91 OF 2023 IN W.P.(C) No.9297 of 2022 14 ANNEXURE A9 ANNEXURE A10 DATED 25.09.2021 IN EP NO. 28 OF 2016 TRUE COPY OF THE APPLICATION DATED 12.11.2021 FILED ON BEHALF OF THE BANK AS EA NO. 232 OF 2021 IN E.P. NO. 28 OF 2016 IN OS NO.13/2015 BEFORE THE SUB COURT, PATHANAMTHITTA TRUE COPY OF THE OBJECTION DATED 08.12.2021 SUBMITTED BY THE DECREE HOLDER (REVIEW PETITIONER) IN EA NO. 232 OF 2021 IN E.P. NO. 28 OF 2016 IN OS NO.13/2015 BEFORE THE SUB COURT, PATHANAMTHITTA ANNEXURE A11 TRUE COPY OF THE ORDER DATED 22.10.2022 IN EP NO. 28 OF 2016 IN OS NO.13/2015 BEFORE THE SUB COURT, PATHANAMTHITTA RESPONDENTS' ANNEXURES : ANNEXURE R1(A) TRUE COPY OF EA NO: 166/2021 IN EP NO: 28/2016 IN OS NO: 13/2015 OF SUB COURT, PATHANAMTHITTA FILED ON 30/09/2021. ANNEXURE R1(B) TRUE COPY OF EA NO: 319/2022 IN EP NO: 28/2016 IN OS NO: 13/2015 OF SUB COURT, PATHANAMTHITTA FILED ON 22/10/2022.