Board of Directors of Irinjalakuda Cooperative Hospital Ltd. v Housing and Urban Development Corporation Ltd. and Debts Recovery Tribunal II

OP(DRT)No.78 of 2023 1 # **IN THE HIGH COURT OF KERALA AT ERNAKULAM** ## **PRESENT** ## **THE HONOURABLE MRS. JUSTICE ANU SIVARAMAN** **THURSDAY, THE 13[TH] DAY OF JULY 2023 / 22ND ASHADHA, 1945 OP (DRT) NO. 78 OF 2023** ## **PETITIONER:** THE BOARD OF DIRECTORS OF THE IRINJALAKUDA COOPERATIVE HOSPITAL LTD. NO.R 954, AGED 65 YEARS KOLATHUMPADY NADAVARAMBA P.O., THRISSUR - 680 661 REPRESENTED BY ITS PRESIDENT, M.P. JACKSON BY ADVS. NISHA GEORGE GEORGE POONTHOTTAM (SR.) N.SASI ## **RESPONDENTS:** 1 THE HOUSING AND URBAN DEVELOPMENT CORPORATION LTD., REGIONAL OFFICE, "SAPHALYAM COMPLEX" 3RD FLOOR, PALAYAM, THIRUVANANTHAPURAM - 695 034 REPRESENTED BY ITS AUTHORISED OFFICER. 2 THE RECOVERY OFFICER, DEBTS RECOVERY TRIBUNAL II, 2ND FLOOR, K.S.H.B BUILDING, PANAMPILLY NAGAR, ERNAKULAM - 682 036 BY ADVS. M.A.ABDUL HAKHIM JOSEPH GEORGE M.A.AZEEZ MUSHTAQUE THIS OP (DEBT RECOVERY TRIBUNAL) HAVING COME UP FOR ADMISSION ON 09.06.2023, THE COURT ON 13.07.2023 DELIVERED THE FOLLOWING:- OP(DRT)No.78 of 2023 2 ## **ANU SIVARAMAN, J.** **= = = = = = = = = = = = = = = O.P.(DRT) No.78 of 2023 = = = = = = = = = = = = = = = = Dated this the 13[th] day of July, 2023** ## **JUDGMENT** 1.This petition is filed challenging Exhibit P8, proclamation for sale of property as also Exhibit P3 order of the recovery officer. The contention raised in the writ petition is that the petitioner, a Cooperative Hospital Society had availed a construction loan of Rs.513.50 lakhs from the 1[st] respondent. When the repayment fell in arrears the 1[st] respondent had filed O.A.No.298/2001 under Section 19(1) of Recovery of Debts due to Banks and Financial Institutions Act, 1993 for recovery of an amount of Rs.8,12,91,302/- with future interest by sale of the secured asset, which formed the property and the building of the petitioner. The O.A was allowed and the 1[st] respondent was permitted to recover an amount of Rs.8,10,27,327/- with interest. Though appeal was attempted, OP(DRT)No.78 of 2023 3 the Appellate Tribunal directed to deposit an amount of Rs.7,26,33,717/- on or before 17.12.2012 towards pre-deposit and since the amount could not be paid, the appeal was not considered. Simultaneous procedure for recovery under the SARFAESI Act were also initiated. It is submitted that an OP(DRT) was filed before this Court and an amount of Rs.1 crore was remitted pursuant to interim orders. Later the OP(DRT) as well as the writ appeal and the Special Leave Petition filed by the petitioner stood dismissed. It is submitted that W.P.(C).No.7976/2015 was also filed, but the judgment therein were reversed in W.A.No.1272/2015. - 2.Thereafter, Exhibit P3 order was passed on 12.9.2017 appointing a qualified Chartered Accountant as Receiver. It is stated that though the petitioner produced the audit reports to substantiate the contention of net loss of the society, Exhibit P4 order was passed ordering attachment of an amount of Rs.10 Lakhs per month from the monthly income of the petitioner and release of the same to the 1[st] respondent till satisfaction of the certificate. It is submitted that the 1[st] OP(DRT)No.78 of 2023 4 respondent filed Appeal No.1 of 2018 against Exhibit P8 order before the Debts Recovery Tribunal II, Ernakulam and Exhibit P5 order of attachment of movable properties was rendered in the appeal on 28.2.2019. Though the said order was challenged before this Court in W.P.(C).No.8542 of 2019, the petitioner was relegated to the appellate remedy and the petitioner filed Appeal 7 of 2017. The appeal was dismissed by Exhibit P7 on the ground that it was not accompanied by 50% predeposit. Thereafter, Exhibit P8 notification for sale was ordered on 2.3.2023, which is under challenge in this original petition. 3.It is contended by the learned Senior Counsel appearing for the petitioner that Section 29 provides that the provisions of the 2[nd] and 3[rd] schedules of the Income Tax Act, 1961 and the Income Tax (Certificate Proceedings) Rules, 1962 as in force from time to time, shall as far as possible apply with necessary modifications as if the said provisions and the Rules referred the amount of debt due under this Act instead of the Income Tax. It is submitted that Section 29 read with Rules 4, 68 and OP(DRT)No.78 of 2023 5 70 of the 2[nd] schedule to the Income Tax Act provides that no receiver could have been appointed in respect of a debt that fell due more than three years before such measure was taken. It is further submitted that the reasons stated in Exhibit P3 for appointment of a receiver is untenable and that the consideration of the defects pointed out in an audit of a cooperative society cannot be a matter for consideration by a Receiver appointed by a Recovery Officer of the Debt Recovery Tribunal. It is further contended that the Housing and Urban Development Corporation is not a notified financial institution under the RDB Act and that the entire proceedings are illegal. It is stated that the disputes between the parties fall within the purview of Section 69 of the Kerala Cooperative Societies Act and that it has to be adjudicated under the mechanism provided under the said Act and the Rules. It is further contended at ground F as follows:- “It is submitted that Rule 68B of the second schedule to the income Tax Act clearly mandates that no sale of immovable property, shall be made after the expiry of 3 years from the end of the financial year in which the order giving rise to a demand to dues became conclusive. Now the 3 years has been amended on 1.9.2019 and substituted as 7 years. In the OP(DRT)No.78 of 2023 6 context of the Recovery steps initiated under the RDDBFI Act, this would translate as 7 years from the end of the financial year in which the recovery certificate was issued. In this case Recovery Certificate was issued on 15.04.2008 and the entire proceedings initiated beyond the period provided is without the sanction of law and therefore liable to be set aside.” - 4.The judgment of this Court in W.P.(C).No.203651 of 2017 and OP(DRT)No.136 of 2018 are relied on in the writ petition. - 5.A detailed counter affidavit has been filed by the 1[st] respondent contending that the entire original petition is an abuse of process of court and is liable to be dismissed with exemplary costs. It is stated that the OP(DRT) is not maintainable since the petitioner has an effective alternative remedy of appeal under Section 30. It is stated that Exhibits P3 and P8 orders passed by the Recovery Officer are liable to be challenged before the Debt Recovery Tribunal. It is further stated that the petitioner had earlier challenged Exhibit P3 before this Court by filing W.P.(C).No.32461 of 2017 and the writ petition was dismissed on 19.10.2017 by Exhibit R1(a) judgment. It is submitted that the OP(DRT) filed with an 7 OP(DRT)No.78 of 2023 affidavit swearing that the petitioner had not filed any earlier petition seeking the similar relief is liable to be dismissed with costs for misrepresentation and an attempt to mislead this Court. - 6.It is further submitted that the 1[st] respondent had sanctioned a loan of Rs.513.50 lakhs for establishing a Super Specialty Hospital at Irinjalakuda and a loan agreement dated 26.11.11997 was executed by the petitioner by equitable mortgage by deposit of title deeds with respect to 2 Acres 2 cents and 531 square links of property comprised in Survey Nos.253/1 and 254/1 of Velookkara village in Mukundapuram Taluk, Thrissur district. It is submitted that the 1[st] respondent could disburse only a total amount of Rs.4,65,82,000/- in different instalments from 12.1.1998 to 14.8.1998. The further amounts could not be disbursed since there were no satisfactory progress in the implementation of the project and the amount disbursed was not properly utilised. It is stated that the loan was liable to be repaid in 28 quarterly instalments of Rs.18.34 lakhs from 31.12.1998 to 30.9.2005. OP(DRT)No.78 of 2023 8 But the total repayment was only Rs.24,11,200/- towards interest during the project implementation. No other amounts were paid and the 1[st] respondent had filed O.A before the DRT and the same was allowed by Exhibit P1. Even after the issuance of Exhibit P2 certificate on 15.04.2008, no amounts were paid. Though the petitioner filed Appeal before the DRAT, Chennai, the pre-deposit could not be paid and the appeal was not considered. It is stated that the only payment made by the petitioner subsequent to the issuance of Exhibit P2 Recovery Certificate was Rs.1crore paid in partial compliance of the orders of this Court in OP(DRT) No.11 of 2014, when it challenged the sale proclamation of the year 2014. It is stated that the certificate scheduled property could not be sold in auction for want of bidders since it was a running hospital. The 1[st] respondent had sought appointment of a qualified Chartered Accountant as Receiver and Exhibit P3 order was passed. The Receiver appointed as per Exhibit P3 submitted a report to the Recovery Officer highlighting poor management as well as suspicious excessive payment as salary and other expenses. However, even thereafter, Exhibit OP(DRT)No.78 of 2023 9 P4 only directed the payment of Rs.10 lakhs per month. It is submitted that the entire amount payable by the petitioner is so huge that it would take 746 months, that is 62 years to repay the entire liability at the rate of Rs.10 lakhs per month. It is submitted that even if an amount of Rs.30 lakh is realised from the petitioner by the Receiver, it would take 8 years for the amount to be completed and that 50 lakh per month it would take 55 months for the liability to be wiped off. It is submitted that the petitioner was maintaining an amount of Rs.87 lakhs in the Account No.225 with Irinjalakuda Town Cooperative Bank Ltd. The Recovery Officer by order dated 28.02.2019 directed the Bank not to permit withdrawal/debit from the said account without permission from the Recovery Officer. However, in spite of the restraint order, the Bank permitted withdrawals and the petitioner reduced the credit balance to Rs.32,000/- only because the President of the Bank and the President of the petitioner Society are one and the same person. It is contended that since the monthly attachment of Rs.10 lakhs by Exhibit P4 is meager and impractical compared to the Certificate of Debt which OP(DRT)No.78 of 2023 10 amounts to Rs.23 crores, the respondent again attempted to put the certified scheduled property in auction sale as per Exhibit P8. However, after all attempts had been taken for notifying the same with proper advertisements at an expense of more than Rs.6 lakhs the petitioner had approached this Court and obtained a full stay on the recovery proceedings without remitting any amounts. It is submitted that the legal contentions raised by the petitioner are not liable to be considered in the light of the facts narrated and the conduct of the petitioner. It is contended that even in case the petitioner has any legal contention, it is for the petitioner to raise it appropriately before the DRT and no challenge before this Court is maintainable. - 7.The learned counsel for the respondent contends that the decisions relied on by the learned counsel for the petitioner has been stayed by the Apex Court in SLP No.9931-9932/2019 by its order dated 17.1.2020. The learned counsel also places reliance on decisions of the Apex Court in **Punjab National Bank v.O.C. Krishnan and others** [2001 KHC 1142], OP(DRT)No.78 of 2023 11 **Jayaram K and others v. Bangalore Development Authority and others** [2021 KHC 6802] as also of this Court in **State of Kerala and others v. Dr.K.G.Suresh** [2019 (4) KLT SN 82] to contend that suppression of material facts in a proceeding before a constitutional court would lead to nonsuiting of the concerned person as also the imposition of exemplary costs. It is further contended that the Apex Court in several decisions has clearly held that orders of the Recovery Officer are to be challenged in appeal proceedings under Section 30 and not directly before this Court. 8.I have considered the contentions advanced on either side at considerable length. The petitioner raises a technical contention with regard to the delay in initiating of proceedings as per Exhibit P3. I notice from the original petition and the IAs filed that the challenge raised is specifically against the appointment of the Receiver as per Exhibit P3 order. The petitioner has not disclosed the filing of the earlier writ petition in the OP(DRT) or in the affidavit filed in support thereof. Further, no reason has been stated as to why this OP(DRT)No.78 of 2023 12 OP(DRT) has been filed without any attempt to avail of the statutory remedy available under Section 30. It appears that the petitioner has succeeded in evading payment of the amounts due under a loan for the past more than a decade without making any substantial payments. In the facts and circumstances of the instant case, I am of the opinion that this Court would not be justified in entertaining a challenge against Exhibits P3 and P8 in exercise of its discretionary jurisdiction. In case the petitioner has any contentions to raise, it is for the petitioner to prefer an appeal and to raise the same appropriately before the appellate authority, that is, the DRT. - 9.In the facts and circumstances of the case and from the conduct of the petitioner, I am convinced that this is not a fit case for this Court to exercise its supervisory jurisdiction without the petitioner availing the statutory remedy available to it. In the above view of the matter, this original petition is dismissed, without prejudice to the right of the petitioner to avail the statutory remedy. Further coercive steps shall be OP(DRT)No.78 of 2023 13 deferred for one month from today to enable the petitioner to approach the DRT for relief, if so advised. Sd/- **Anu Sivaraman, Judge** sj OP(DRT)No.78 of 2023 14 ## **APPENDIX OF OP (DRT) 78/2023** PETITIONER EXHIBITS |Exhibit-P1|TRUE COPY OF THE FINAL ORDER DATED| |---|---| ||15.04.2008 IN O.A.NO. 298/2001 ISSUED BY| ||THE DEBTS RECOVERY TRIBUNAL, ERNAKULAM| |Exhibit-P2|TRUE COPY OF THE RECOVERY CERTIFICATE| ||ISSUED BY THE DEBTS RECOVERY TRIBUNAL,| ||ERNAKULAM DATED 15.4.2008 IN DRC NO.2963| ||IN O.A.NO. 298/2001| |Exhibit-P3|TRUE COPY OF THE ORDER IN I.A. NO.| ||81/2017 IN TDRC NO. 492/2016 (DRC NO.| ||2963) IN O.A.NO. 298/2001 DATED| ||12.09.2017 ISSUED FROM THE OFFICE OF THE| ||RECOVERY OFFICER, DEBTS RECOVERY| ||TRIBUNAL-2, ERNAKULAM| |Exhibit-P4|TRUE COPY OF THE ORDER DATED 14.08.2018| ||IN I.A.NO.941/2018 IN TRDC NO. 492/2016| ||(DRC NO. 2963) IN O.A.NO.298 OF 2001| ||ISSUED FROM THE OFFICE OF THE RECOVERY| ||OFFICER, DEBTS RECOVERY TRIBUNAL-2,| ||ERNAKULAM| |Exhibit-P5|TRUE COPY OF THE ORDER OF ATTACHMENT OF| ||MOVABLE PROPERTIES DATED 28.02.2019 IN| ||DRC NO.2963 [TDRC NO. 492/2016] ISSUED| ||BY THE DEBTS RECOVERY TRIBUNAL-II,| ||ERNAKULAM| |Exhibit-P6|TRUE COPY OF THE JUDGMENT DATED| ||02.04.2019 IN W.P.(C) NO. 8542/2019| ||PASSED BY THIS HON'BLE COURT| |Exhibit-P7|TRUE COPY OF THE ORDER IN APPEAL NO.| ||7/2019 DATED 11.05.2020| OP(DRT)No.78 of 2023 15 Exhibit-P8 TRUE COPY OF THE PROCLAMATION OF SALE BY THE 2ND RESPONDENT DATED 10.1.2023 Exhibit-P9 - True copy of the audit certificates of the Co-operative Department for the years 2017-18. - Exhibit-P10 True copy of the audit certificates of the Co-operative Department for the years 2018-19 Exhibit-P11 True copy of the audit certificates of the Co-operative Department for the years 2020-21. RESPONDENT EXTS. Exhibit R1 (a) Photostat Copy of the judgment dated 19/10/2017 of this Honble Court in W.P. (C).No 32461/2017 True copy PS to Judge