IN THE HIGH COURT OF JUDICATURE AT MADRAS
Dated: 07/10/2005
Coram
The Hon'ble Mr.Justice P.K.MISRA
and
The Hon'ble Mr. Justice N.KANNADASAN
O.S.A.No.91 of 2005
and O.S.A. No.92 of 2005
and
C.M.P.No.7524 of 2005
1.Ramapandiyan
2.Vasugi Pandian .. Appellant in both Appeals
-Vs-
1.The Manager,
Indian Bank,
Chinglepet Branch,
Chingleput,Kancheepuram.
2.The Official Liquidator,
High Court,Madras-104.
3.M.Ravindran,
Senior Advocate,
Administrator
Anubhav Group of Companies
Bar Association, High Court Buildings,
Chennai-104. .. Respondents in both Appeals
These Appeals are preferred against the judgment and decree of this
Court dated 31.3.2005 in C.A.Nos.272 and 273 of 2005 in Company Petition
No.130 of 1999.
!For Appellant in
both appeals : Mr.B.Kumar,
Senior Counsel for
Mr.R.Loganathan
^For Respondent-1 in : Mr.V.T.Gopalan,
both appeals Addl. Solicitor General
of India for Mr.Jayesh
Dolia
For Respondent-2 in : Mr.B.Ramesh
both appeals
For Respondent-3: Mr.M.Ravindran
(Administrator)
For Reserve Bank of
India : Mr.C.Mohan for
M/s.King and Patridge
or Highest Bidder : Mr.P.Solomon Francis
:COMMON JUDGMENT
N. KANNADASAN, J.
The above appeals arise as against the order dated 31.3.2005
in C. A.Nos.272 and 273 of 2005 in C.P.No.130 of 1999.
2. The company petition is filed in respect of the Company
called M/s.Anubhav Plantations Ltd., which is a company in liquidation. In
the company petition, the Company Court has appointed Mr.M.Ravindran, Senior
Advocate as an Administrator in respect of the company in liquidation with a
view to take effective steps to recover the amounts due from various persons
who owe money to the company and in order to distribute the same to the
depositors.
3. The Administrator filed a memo dated 24.2.2000 before the
Company Court with regard o the payment of Rs.96 lakhs made by the company to
the appellants towards the advance amount for the purchase of 35.6 0 acres of
land situate at Idayakodumanthangal Village, Chinglepet Taluk, Kancheepuram
District. In the said proceedings, the first appellant appeared before the
Company Court on 29.6.2000 and admitted the receipt of the said sum of Rs.96
lakhs by him and his wife. The first appellant also represented that he has
no objection to bring the properties into sale and the sale proceeds could be
distributed towards the amounts due to the Company as well as the Indian Bank
from whom he borrowed the money for the development of the said lands. The
Company Court, by order dated 29.6.2000, has attached the property in question
and also issued notice to the Indian Bank Chinglepet Branch viz., the second
respondent herein.
4. The Indian Bank viz., the second respondent has filed an
application in C.A.No.150 of 2001 before the Company Court seeking permission
to conduct the auction to sell the property of the appellant after due
publication and permission was granted on 30.4.2001. The Indian Bank has also
obtained a valuation report dated 28.4.2001 which indicates that the value of
the property as Rs.97,84,000/-. In pursuance of the order of the Company
Court, the Indian Bank advertised in the papers on various occasions but no
tender was received. In the meanwhile, the appellant sought permission of the
Company Court to sell the property for a better price by entering into
negotiations with the private parties which was granted. In spite of the said
permission, the appellant was not in a position to bring in any purchaser
immediately. Accordingly, by order dated 10.12.2001, the Company Court has
directed the Official Liquidator to bring the property for sale.
5. In the meanwhile, the Administrator has filed an
application in C.A.No.1609 of 2001 under Rule 9 and 11 (b) of the Company
Court Rules r/w Section 457 of Companies Act, seeking direction as against the
appellants herein to hand over the possession of the property with a view to
secure better offer for the same. Accordingly, the Company Court, by order
dated 21.11.2003, directed the Official Liquidator to take possession of the
property. In pursuance of the said order to the Official Liquidator initiated
steps to take possession of the said property. But however, the possession
could not be taken, since the first appellant has filed an appeal viz., OSA
No.378 of 2003 and obtained an order of stay. Subsequently, the said appeal
was disposed of by a Division Bench of this Court by order dated 25.11.2003 by
permitting the appellant to sell the property within a period of four weeks
and to discharge the entire amount payable to the Company in liquidation and
on failure to effect the said sale within the stipulated period, the order of
the learned single Judge shall stand confirmed.
6. Since the appellant could not get any purchasers, they
have filed a Review Application No.144 of 2003 in OSA No.378 of 2003. The
Division Bench, by order dated 5.2.2004, has dismissed the same, against which
Special Leave Petition Nos.4195 and 4301 of 2004 were filed before the Hon’ble
Supreme Court. During the pendency of these proceedings, the Official
Liquidator had taken possession of the land which was also brought to the
knowledge of the Hon’ble Supreme Court. On 30.9 .2004, the Supreme Court
dismissed the special leave petitions with a direction that the sale should
take place in pursuance of the order dated 10.12.2001 of the Company Court.
7. In the meanwhile, the Company Court has passed orders
permitting the Official Liquidator to initiate further steps to conduct the
survey of the lands and also for the submission of the valuation report. By
order dated 31.3.2005, the Company Court fixed the value of the land and
building as Rs.86,16,000/- on the basis of the valuation report, surveyor
report as well as the submissions made by all the parties concerned and
directed the appellant to make a substantial payment within a period of two
weeks. Subsequently, the Official Liquidator has caused publication of the
same, inviting tenders and last date of the submission of the tenders was
fixed as 25.4.2005.
8. Subsequently, the appellants filed the Company Application
Nos.2 72 and 273 of 2005 challenging the procedure adopted by the Company
Court in effecting the sale. The said applications were listed on 31.3 .2005,
and the learned single Judge has adjourned the matter to 15.4.2005 by
directing the appellants to make a substantial payment against which order,
the present appeals are filed.
9. The present appeals are filed by raising the main
grievances to the effect that the value as fixed by the Company Court in
respect of the property in question as very low and there are certain
procedural illegality.
10. In the meanwhile, the applications viz., C.A.Nos.272 and
273 of 2005 filed by the Indian Bank were heard by the Company Court on 26
.4.2005, wherein a direction is sought for to hand over the vacant portion of
the property and to bring the property in public auction. Though the said
applications were resisted by the appellants herein by contending that the
appeals filed in OSA Nos.91 and 92 of 2005 on the ground that the procedure
adopted by the Company Court as illegal and the said appeals were pending,
however the Company Court has proceeded with the auction. In the said
auction, one P.S.Muthukumar has offered a sum of Rs.1,32,00,000/- as the
highest bid amount. The Company Court has passed an order of provisional
confirmation of the offer of the abovesaid P.S.Muthukumar subject to final
orders to be passed in the appeals.
11. Subsequently, by order dated 28.4.2005, the Division
Bench has passed an order staying the further proceedings before the Company
Court and the appeals were directed to be listed. Again, when the appeals
were listed on 29.6.2005, this Court permitted all the parties to bring new
bidders who can offer more to the property in question. The Administrator was
directed to inform all the bidders who participated in the earlier auction
including the highest bidder to make any higher offer. The new bidders were
required to make such offer subject to the condition that they pay a sum of
Rs.17,20,000/- towards EMD by way of DD/Pay order.
12. On 27.7.2005, several persons participated in the bid and
in the course of bid, Indus City Scapes has submitted a highest offer of
Rs.2,70,00,000/- to the property. On 28.7.2005, the highest bidder has
deposited a pay order of Rs.27 lakhs representing 10% of the highest offer
towards EMD. The second highest bidder who has offered a sum of
Rs.2,65,00,000 has not submitted 10% of the amount offered towards EMD. Since
the highest bidder has deposited the EMD and undertook to deposit the balance
amount on or before 31.8.2005, the said offer was accepted subject to further
orders to be passed in the appeals. The Indian Bank was directed to permit
the highest bidder to peruse the documents by making available to them the
Photostat copies. On 31.8.20 05, when the matter was listed again, the
highest bidder deposited the balance amount of Rs.2.43 crores by means of a
pay order. In view of the entire payment made by the highest bidder, the sale
was provisionally confirmed.
13. In the light of the narration of facts as set out above,
it is to be seen that due to the persistent effort made by the appellants
herein the property which was sold in the auction by the Company Court for a
sum of Rs.1.32 crores has fetched a higher amount viz., Rs.2.7 0 crores.
Since the additional amount is realised at the instance of the appellants and
admittedly, the secured creditor viz., the Indian Bank having chosen to remain
content with the amount of Rs.1.32 crores which offer was provisionally
confirmed by the Company Court and which order was not challenged by the
Indian Bank, we have considered the plea of the learned senior counsel for the
appellants as well as the Administrator to apportion the higher amount among
themselves in exclusion of the Indian Bank.
14. Accordingly, the matter was heard on various dates and we
have directed the Indian Bank as to whether the amounts payable by the
appellants could be reduced in terms of the Reserve Bank of India guidelines
under the one time settlement scheme or in terms of the settlement arrived at
by the very same Indian Bank before the Lok Adalat organised by the State
Legal Services Authority. The Indian Bank has expressed its inability to
apply the principles of one time settlement scheme by contending that the bank
has filed an application before the Debt Recovery Tribunal, claiming a
substantial amount by way of principal as well as accrued interest. We have
also directed a responsible Officer of the Reserve Bank of India to apprise
the Court about the manner in which the guidelines envisaged by the Reserve
Bank of India as a one time settlement should be implemented. In pursuance of
the said direction, the counsel representing the Reserve Bank of India
reported that to consider the claim of one time settlement, though the
guidelines are framed, each matter has to be decided by the concerned bank by
considering all the details of the borrowers.
15. In the meanwhile, we have also directed the State Legal
Services Authority to make available all the details pertaining to the cases
which were settled in the recent past, wherein the Indian Bank has agreed for
a settlement for a smaller amount as against the larger claim. Accordingly,
the said particulars were made available by the said authority.
16. Learned counsel for the appellants contended that there
is no impediment on the part of the Indian Bank to treat the loan account of
the appellants on par with other account holders for which the scheme of one
time settlement was made applicable. According to him, inasmuch as the said
scheme was in force till September 2004 and the present proceedings was
initiated and pending from the year 2000 onwards, the benefit of the said
scheme should be made applicable to the appellants also. It is further
contended that the subject matter of the loan account forms part of two loan
viz., 17,50,000/- and Rs.6,76,300/- in all totalling to Rs.23,91,300/- was
disbursed in the year 1987 by obtaining finance from the NABARD, to which the
interest rate was being charged only 6% and the Indian Bank is expected to
charge only 2 % over and above the said 6% as per the terms and conditions of
the sanction of the said amount by NABARD. According to the learned senior
counsel, if the simple rate of interest is calculated at the rate of 9%, the
interest works out to Rs.56,19,555/- and if the same is calculated at the rate
of 12%, it works out to Rs.66,95,640/-. Learned senior counsel further
contended that the Indian Bank has chosen to calculate the interest with
half-yearly rests along with penal rate of interest with the minimum rate of
interest as 12.5% which is not permissible in law as per the decision of the
Apex Court in Corporation Bank vs. D.S.Gowda (1994 (5) SCC 213), the bank is
entitled to charge interest with half-yearly rests since the present loan is
for agricultural purposes. It is further contended that if the rate of
interest is calculated with annual rests from the date of non-performing
account viz., 31.3.1996, the total amount payable by the appellants worksout
to only Rs.81,90,138/-. According to the learned senior counsel, a further
income which was accrued in pursuance of two investments made by the
appellants viz., Rs.8,25,0000/- in ‘Swarna Pushpa’ and Rs.2,10,000/- in ‘Ind
Jyothi’ ought to have been credited to the above said sum. Learned senior
counsel further contended that inasmuch as the Indian Bank has chosen to
remain content with the highest offer of Rs.1.32 crores, which money would
again be distributed by the Company Court to the depositors as well as to the
Indian Bank, there is no justification on the part of the bank to stick to the
claim in entirety as claimed in the application which is pending before the
Debt Recovery Tribunal. The learned senior counsel also contended that the
present loan being sanctioned under the heading agricultural loan has to be
treated on a different pedestal than the others.
17. As far as the Administrator is concerned, he contended
that he has also initiated several steps by pursuing litigation upto the level
of the Apex Court and thereby incurred expenses of about Rs.5,40,00 0/-
(travelling expenses, salary to the security guards to protect the property in
question, publication expenses towards survey and other miscellaneous
expenses), and as such the necessary safeguard should be made to protect the
interest of the depositors since the Company in liquidation has paid a sum of
Rs.96 lakhs to the appellants for the purchase of the property in question by
way of an advance and the said amount should be disbursed to the depositors
concerned.
18. The learned Additional Solicitor General appearing for
the Indian Bank contended that the Indian Bank being a secured creditor, its
interest should be protected since the bank deals with the public funds and
the action of the bank in charging the interest cannot be challenged inasmuch
as the said interest is being charged in terms of the agreement entered into
with the borrower. The learned Additional Solicitor General further contended
that even though initially a sum of Rs.23,91,300/- alone was disbursed by way
of loan in the year 1987, in the year 1999, the bank has chosen to file a suit
to recover an amount of Rs.87 lakhs and the present dues as on today comes
about to Rs.2 crores and odd and as such, he has pleaded that the interest of
the bank should be safeguarded adequately, since the appellants do not have
any other property. As regards the claim made in respect of charging of the
interest is concerned, the Supreme Court in its decision in Central Bank of
India vs. Ravindra and Others (2002 (1) SCC 367) has observed that it can be
charged either on annual or six monthly rests and as such, the bank cannot be
found fault in charging the interest at half-yearly rests.
19. For the purpose of deciding the above issues, we have
perused the details furnished by the State Legal Services Authority in respect
of the matters wherein the Indian Bank has agreed for the settlement through
Lok Adalat. We are extracting the details of few cases wherein the bank has
settled for a lesser amount and the details are as set out hereunder:-
Date of Case Number Total amount Amount Settled
Adalat claimed (Rs.) and Awarded (Rs.)
——- ———– ————- —————–
29.4.05 OA 827/98 3,26,94,359.00 45,00,000.00
22.1.05 OA 2233/01 17,96,462.00 7,05,000.00
07.2.04 OA 745/01 84,82,962.36 28,00,000.00
07.2.04 OA 474/01 3,59,86,583.00 1,50,00,000.00
07.2.04 OA 513/01}
OA 989/01}
OA 199/01} 7,41,96,579.00 2,92,00,000.00
28.8.04 TA 28/01 1,99,30,840.00 1,00,00,000.00
28.8.04 OA1881/01 1,13,89,271.00 35,00,000.00
A perusal of the above details disclose that the Indian Bank has settled the
matter in respect of several loan accounts for a lesser amount though the
claim made therein was on the higher side. In the instant case, though the
present claim of the Indian Bank worksout to Rs.2 crores and odd, the said
amount is arrived at by calculating the interest at the compound rate with
quarterly rests inclusive of penal interest. It is not in dispute that if the
interest is calculated at the rate of 12% simple interest, the same works out
to Rs.66,95,640/- as against the principal amount of Rs.23,91,300/-.
20. In this connection, it is useful to refer to the decision
of the Apex Court in Central Bank of India vs. Ravindra and Others (2002 (1)
SCC 367) wherein in paragraph-55 in sub clause-6 which reads as follows:-
“55. .. .. .. ..
(6) Agricultural borrowings are to be treated on a pedestal different
from others. Charging and capitalisation of interest on agricultural loans
cannot be permitted in India except on annual or sixmonthly rests depending on
the rotation of crops in the area to which the agriculturist borrowers
belong.”
.. ... .. ..
.. ... .. ..
58. Subject to the above we answer the reference in the following
terms:
(1) Subject to a binding stipulation contained in a voluntary contract
between the parties and/or an established practice or usage interest on loans
and advances may be charged on periodical rests and also capitalised on
remaining unpaid. The principal sum actually advanced coupled with the
interest on periodical rests so capitalised is capable of being adjudged as
principal sum on the date of the suit.
(2) The principal sum so adjudged is “such principal sum” within the
meaning of Section 34 of the Code of Civil Procedure, 1908 on which interest
pendente lite and future interest i.e., post-decree interest, at such rate and
for such period which the court may deem fit, may be awarded by the court.”
21. The apex Court in its decision rendered in Central Bank
of India vs. Ravindra (AIR 2001 SC 3095) while formulating the principles in
paragraph-55 in clause (8), the following observation is made:-
“55. .. .. ..
(8) Award of interest pendente lite and post-decree is discretionary
with the Court as it is essentially governed by Section 34 of the CPC dehors
the contract between the parties. In a given case if the Court finds that in
the principal sum adjudged on the date of the suit the component of interest
is disproportionate with the component of the principal sum actually advanced
the Court may exercise its discretion in awarding interest pendente lite and
post-decree interest at a lower rate or may even decline awarding such
interest. The discretion shall be exercised fairly, judiciously and for
reasons and not in an arbitrary or fanciful manner.” (Emphasis supplied by us)
22. In the light of the principles as set out above and in
order to pass an equitable order, we have taken note of the following
aspects:-
a) The suit was filed in the year 1999 to recover a sum of
Rs.87,07,258/- with future interest. Till the date of filing the suit, the
rate of interest charged by the bank varied from 12.5% onwards upto 19.8 5% at
half-yearly rests including penal interest.
b) As per the pleadings as set out in the plaint, a sum of
Rs.32,74,611/- is indicated as outstanding towards the principal and a sum of
Rs.54,32,647/- is indicated as memorandum of interest.
c) It is not in dispute that the appellants have borrowed the loan
only for agricultural purposes. If that is so, the said loan should be
treated on a different pedestal as per the decision of the Apex Court rendered
in Central Bank of India’s case referred to supra.
d) Since the suit is filed in the year 1999, claiming a sum of Rs.87
,07,258/- an award of interest pendente lite and post-decree is discretionary
with the Court as per the decision of Central Bank of India’s case, wherein
discretion is conferred upon the Court either to award a lower interest or
even declined to award any interest. If such principle is adopted, in our
opinion, the bank’s interest can be protected by awarding an interest of 10%
approximately on the suit claim viz., Rs.87,07,258/- for a period of six years
by taking note of the fact that the suit was filed in the year 1999. e)
Even though Indian bank has chosen to issue advertisements to sell the
property on various occasions, there was no bid from the general public.
f) The Indian Bank has not chosen to file any further appeal aggrieved
against the highest bid of Rs.1.32 crores which was offered by the bidder
before the Company Court and it is only at the instance of the appellants, the
higher amount of Rs.2.70 crores is realised. If the matter would have rested
at that stage, the Bank and Respondent No.2 and 3 would have shared Rs.1.32
crores and may be the Bank would have got a personal decree in the suit filed
before the Debt Recovery Tribunal, which would have been of no practical use.
g) The Indian Bank has chosen to settle for a meagre amount as against
the amount claimed as one time settlement before the Lok Adalat in number of
cases.
h) It is not in dispute that the appellants do not have any other
property and as such, the suit is filed by the Indian Bank before the Debt
Recovery Tribunal is allowed to be proceeded with, necessarily all the
questions raised by the appellants such as the payments made on various
occasions and investment made by the Indian Bank in mutual funds etc., will
have to be gone into and the bank has to establish its claim to get a decree
as claimed therein, which would be time consuming.
i) Having regard to the fact that the loan which was sanctioned
originally works out to only Rs.21,06,264/- (Rupees Twentyone Lakhs Six
Thousand Two Hundred and Sixtyfour only) and the Indian Bank has disbursed the
said sum from and out of the finance obtained by NABARD at the rate of 6%
interest and considering the fact that huge payments were made on several
occasions by the appellants which was adjusted towards interest, the amount
which is presently quantified and payable to the Indian Bank would be seven or
eight times over and above the principal sum.
j) The amount of Rs.96 lakhs was paid by the Anubhav Plantations Ltd.,
long back, out of total sale consideration of about Rs.1.80 crores and we
intend to protect the Indian Bank rather than Anubhav Plantations Ltd., with
regard to the claim of interest is concerned, since the Indian Bank is dealing
with the public money.
k) Since the present litigation has commenced as early as in the year
2000, and some of the proceedings were pursued upto the level of Apex Court,
in order to give a quietus to the entire matter, it would be just and
necessary to pass an order so as it should bring the entire litigation to a
logical end.
23. For the aforesaid reasons and in the interest of justice,
the sum of Rs.2.70 crores should be apportioned in the following manner:-
a) Indian Bank/Respondent-1 – a sum of Rs.1.40 crores (Rupees One
Crore and Forty Lakhs only).
b) The Administrator representing the Anubhav Plantations Limited is
entitled to receive a sum of Rs.1 crore (Rupees One Crore Only), out of which
amount, he shall draw the expenses incurred by him as per the memo filed
before the Court.
c) The Official Liquidator is entitled to withdraw the incidental
expenses such as the payment of Rs.20,000/- from the Punjab National Bank,
which was paid to the previous bidder as per our order dated 3.10 .2005 and
other expenses.
d) After adjusting the payments under the heading a,b and c, the
appellants are entitled for the remaining amount.
e) The EMD which was ordered to be deposited in the Indian Bank shall
be adjusted towards the amount payable to the Indian Bank.
f) The concerned bank viz., Punjab National Bank, wherein the amount
is lying in deposit pursuant to the earlier order of this Court, shall
disburse the amount, as indicated above, to the appellants as well as the
Anubhav Plantations Ltd represented by Administrator, the Official Liquidator
and Indian Bank within a period of ten days from today. The Official
Liquidator shall send necessary communication by calculating the amount
payable to all the parties concerned on or before 13.10.2005.
24. In view of the order passed as above, it is made clear
that the bank shall not pursue its claim as against the appellants in the
proceedings initiated against them before the Debt Recovery Tribunal and the
above payments should be treated as a full and final settlement towards the
entire amount payable to the Indian Bank.
25. In the light of the above, the highest bid offered by
Indus City Scapes is confirmed and the Official Liquidator is directed to
initiate further action including execution of the sale deed in favour of the
highest bidder. The Indian Bank is also directed to hand over all the
original title deeds to the highest bidder within a period of seven days from
today. The appeals are disposed of in the above terms. No costs.
Consequently, connected CMP is closed.
26. In the course of hearing, we had requested the Reserve
Bank of India Officer to remain present and assist in the hearing of the
matter. We place on record our appreciation for the invaluable services
rendered by such Officer as well as the counsel appearing for the Reserve Bank
of India. Reserve Bank of India Officer’s presence is discharged.
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