Federal Bank Limited v. State of Kerala & Ajitha Joy Homes & Reji Paulose

## `IN THE HIGH COURT OF KERALA AT ERNAKULAM` ## `PRESENT` ``` THE HONOURABLE MR.JUSTICE ZIYAD RAHMAN A.A. WEDNESDAY, THE 10[TH] DAY OF AUGUST 2022 / 19TH SRAVANA, 1944 ``` ## `CRL.MC NO. 515 OF 2022` ``` [ORDER IN CMP NO.1964/2021 IN CRIME NO.686/2021 ON THE FILE OF THE ADDITIONAL CHIEF JUDICIAL MAGISTRATE COURT (EO), ERNAKULAM] ``` ## `PETITIONER/S:` ``` FEDERAL BANK LIMITED,PANAMPILLY NAGAR, OPPOSITE TO HOUSING BOARD BUILDING, PANAMPILLY NAGAR, KOCHI, ERNAKULAM DISTRICT, REPRESENTED BY ITS ASSISTANT VICE PRESIDENT AND BRANCH HEAD, SMT.MAYA.C ``` ``` BY ADV K.P.SUJESH KUMAR ``` ## `RESPONDENT/S:` ``` 1STATE OF KERALA REPRESENTED BY SUB INSPECTOR OF POLICE, ERNAKULAM TOWN SOUTH POLICE STATION, PIN- 682 016 THROUGH BY PUBLIC PROSECUTOR, HIGH COURT OF KERALA, 682031 ERNAKULAM, PIN - 682031 2AJITHA@ AJITHA JOY HOMES W/O.REJI PAULOSE, 10-C, METRO BAY ASSET HOMES, CHATHARI, THRIPPUNITHURA.P.O, ERNAKULAM DISTRICT, PIN: 682301. 3REJI PAULOSE S/O.PAULOSE, 10-C, METRO BAY ASSET HOMES, CHATHARI, THRIPPUNITHURA.P.O, ERNAKULAM DISTRICT, PIN: 682301. [R2 AND R3 ARE IMPLEADED AS PER ORDER DATED 24.6.2022 IN CRL.MA NO.2/2022 IN CRL.MC 515/2022] R1 BY SMT. SEENA C., PP ``` ``` THIS CRIMINAL MISC. CASE HAVING COME UP FOR ADMISSION ON 10.08.2022, THE COURT ON THE SAME DAY PASSED THE FOLLOWING: ``` CRL.MC No.515 of 2022 2 ## `ORDER` ``` The petitioner, a scheduled bank, has approached this Court, being aggrieved by some of the conditions imposed by the Additional Chief ``` ``` Judicial Magistrate Court (Economic Offences), Ernakulam, in C.M.P.No.1964/2021, while releasing ``` ``` a vehicle seized by the Police in Crime No.686/2021 of Ernakulam Town South Police ``` ``` Station, Ernakulam. ``` ``` 2.The facts which led to the filing of this Crl.M.C. are as follows: ``` ``` The 2[nd] respondent availed certain credit facilities from the petitioner Bank for which the 3[rd] respondent stood as guarantor. The credit facilities availed by the said persons included vehicle loans (2 nos.), a housing loan, a mortgage loan and a personal loan for various amounts. Making use of the funds provided by the Bank, the ``` CRL.MC No.515 of 2022 3 ``` accused purchased a Toyota Fortuner Car bearing ``` ``` Reg.No.KL-07-CP 4848 and a Jeep Compass. A hypothecation was created over the said vehicles ``` ``` in favour of the bank and the said fact was also ``` ``` endorsed in the registration certificates of the vehicles. ``` ``` 3.Later, the 2[nd] and 3[rd] respondents failed to remit instalments towards repayment of the said loans, which compelled the petitioner to initiate recovery proceedings against them. As part of the ``` ``` same, a demand notice under Section 13(2) of the Securitization and Reconstruction of Financial ``` ``` Assets and Enforcement of Securities Interest Act, 2002 (SARFAESI Act.) was issued on 1.7.2019, calling upon the 2[nd] and 3[rd] respondents to pay the amount within a period of sixty days from the date of receipt of a copy of the said notice. As the 2[nd] and 3[rd] respondents did not respond to the said notice, proceedings under Section 13(4) of the SARFAESI Act were initiated, and as part of the ``` CRL.MC No.515 of 2022 4 ``` same, M.C.No.36/2020 was submitted by the petitioner before the Chief Judicial Magistrate Court, Ernakulam. On 16.01.2020, the Chief Judicial Magistrate passed an order appointing an Advocate Commissioner to take possession of the ``` ``` vehicles. Even though the Advocate Commissioner made several attempts, the vehicles could not be taken possession of as the said vehicles were clandestinely concealed by the 2[nd]and 3[rd] respondents. As the petitioner got reliable information that the 2[nd] and 3[rd] respondents ``` ``` removed the hypothecated vehicles to an unknown place and attempts were being made to dismantle the vehicles and to sell the same in parts to prevent the bank from exercising its rights, the bank submitted a complaint before the Police on ``` ``` 17.9.2020. Based on the same, Crime No.686/2021 ``` ``` was registered by Ernakulam Town South Police for the offences punishable under Sections 120B, 403, 406, 420, 465, 467, 468, 471 r/w. Section 34 of ``` CRL.MC No.515 of 2022 5 ``` the IPC. During the investigation, the Police ``` ``` could recover the Toyota Fortuner Car and the same was produced before the Additional Chief Judicial ``` ``` MagistrateCourt(EconomicOffences)as T.No.130/2021. To release the said vehicle, an application under Section 451 of Cr.PC was filed by the petitioner. The learned Magistrate allowed the said application as per Ammexure-A4 order dated 3.12.2021, subject to the conditions, and ``` ``` the conditions relevant for this case are as follows: ``` ``` 1. xxx xxx xxx xxx xxx xxx ``` ``` 2. Toyota Fortuner Car bearing Reg.No.KL-07-CP 4848 shall be released to the petitioner in CMP No.1964/2021 on executing a bond of Rs.35,00,000/- with two solvent sureties each for the like sum OR petitioner shall furnish Bank Guarantee issued by Nationalized/Scheduled Bank for the said amount valid for a period of three years. ``` ``` 3.The petitioner shall produce 4 photographs of both vehicle from its four different dimensions each and produce them along with CD. Photographs shall be attested by petitioner and their counsel. ``` CRL.MC No.515 of 2022 6 ``` 4.Petitioner shall not dispose of the vehicles or make the vehicles anyway unidentifiable pending disposal of the case ``` ``` 5.Petitioner shall produce the vehicle as and when required.” ``` ``` The petitioner challenges the said order to the extent it imposes the condition Nos.2, 4 and 5. ``` ``` 4.Heard Sri.Sujesh Kumar, the learned ``` ``` counsel for the petitioner and Smt.Seena C., the ``` ``` learned Public Prosecutor for the 1[st] respondent. Even though notices were served upon the 2[nd] and ``` ``` 3[rd] respondents, there is no appearance for them. ``` ``` 5.The contention of the learned counsel for the petitioner is that condition Nos.2,4 and 5 are ``` ``` causing serious prejudice to them being the financier of the said vehicle. With regard to condition No.2, it was contended that, since the petitioner itself is a bank, insisting for a bond ``` ``` for Rs.35 lakhs or a bank guarantee is not at all ``` ``` warranted. With regard to conditions Nos.4 and 5, ``` ``` it is contended that, since the petitioner ``` CRL.MC No.515 of 2022 7 ``` requires the vehicle to enforce its security by ``` ``` selling the same, the aforementioned conditions would cause interference in their rights. It is pointed out that, as the vehicle is hypothecated in their favour, the petitioner has every right to proceed against the said vehicle to realize the amounts by selling the said vehicle. No fruitful purpose would be served by keeping the said vehicle in the custody of the petitioner, without selling it. ``` ``` 6.After considering all the relevant aspects and the statutory provisions in this regard, I am of the view that there is some force in the contention put forward by the learned counsel for ``` ``` the petitioner. The application on which Annexure- ``` ``` A4 order passed is submitted under Section 451 of Cr.P.C which comes under Chapter XXXIV of Cr.PC and deals with the disposal of the property. A careful reading of Section 451 Cr.PC would reveal ``` ``` that the said provision is not only intended to ``` CRL.MC No.515 of 2022 8 ``` enable the court concerned to pass orders for ``` ``` interim custody of the articles seized, but also it empowers the court to order the article to be sold or otherwise disposed of, if it is otherwise expedient so to do. Therefore, even though the primary concern of the court while considering an application under Section 451 Cr.PC is the interim custody of the articles concerned, the court can also pass orders for disposal of the property if the situation so warranted. The power of the court in this regard under Section 451 Cr.PC was considered by this Court in Nagarajan v. State of Kerala [2019(4) KLT 641]wherein it was observed as follows: ``` ``` “15. Section 451 of the Code states that, if the property is subject to speedy and natural decay, or if it is otherwise expedient so to do, the Court may, after recording such evidence as it thinks necessary, order it to be sold or otherwise disposed of. The expression “if it is otherwise expedient so to do’’ in S.451 of the Code empowers the Court to dispose of the property during enquiry or trial, if the ``` CRL.MC No.515 of 2022 9 ``` situation so warrants. The provision empowers the Court to sell or dispose of even a property, which is not subject to speedy and natural decay, if the court is satisfied that it is expedient to do so. The expression “if it is otherwise expedient so to do’’ confers a discretion upon the court to order sale of a property other than a property which is subject to speedy and natural decay. But, the discretion has to be exercised judiciously and depending upon the facts and circumstances of each case” ``` ``` 7.The said decision was rendered by this ``` ``` Court after referring to the decision of the Karnataka High Court in K.W. Ganapathy v. State of Karnataka [2002(2)KLT OnLine 1011(Karnt.) = [2002 Crl.L.J.3867]. The relevant observations made by the Karnataka High Court are as follows: ``` ``` “6. Irrespective of the fact whether the properties have evidentiary value or not it is not necessary that the original of the property has to be kept intact without alienation. As suggested above, the photography or photostat copy of the property can be taken and made a part of the record duly certified by the Magistrate at the time when the interim custody of the property is handed over to the claimant. In the event of the original of the property ``` CRL.MC No.515 of 2022 10 ``` not produced in the evidence, photograph could be used as secondary evidence during the course of evidence. Ultimately, while passing final orders, it is only the value of the property that becomes a prime concern for the Court. If a person to whom the interim custody is granted, is not entitled to the property or its value and if some other person is held to be entitled to have the property or its value by taking necessary bonds and security from the person to whom interim custody is granted, the value could be recovered and made payable to the person entitled to. The rightful owners, who have lost the property by an act of crime even after detection and recovery are continued to be prevented from beneficial possession and enjoyment of the same by the archaic conditions imposed as a regular routine despite the changed context of scientific developments. ``` ``` 7. To illustrate, a situation one X loses gold jewellery by theft. The police successfully detect and discover the gold jewellery the same is produced before the Court. Production of gold jewellery and marking of the same in evidence to prove the same as corpus delecti is one of the insistence of law as a part of fair trial. Even after the gold jewellery is given to the custody of X to deprive him by imposing the condition of non-alienation from exercise of right of ownership for unreasonable length of time would be too harsh and one sided, and a nonchalant approach towards the victims of ``` CRL.MC No.515 of 2022 11 ``` crime. It may be that X requires the gold jewellery for the purpose of the marriage of his daughter or may be that he may requires funds for medical treatment or other genuine needs, when he has no alternative source except by sale of the gold jewellery, the condition of non-alienation in such situation would be onerous and unreasonable. The production of property during the trial having incriminating value is a insistence to secure the rights of accused as a part of fair trial. At the same time, when there is a possibility of having a secondary evidence of the said property, it is no longer necessary in law to insist that the property to be kept intact without alteration and non-alienation”. ``` ``` The view taken by this Court in Naragarajan’s case (supra) was upheld by a Division Bench of this Court in Suresh Serve v. State of Kerala [2020(3) KLT 395]. In the said judgment, it was observed as follows: ``` ``` “(b) In a case involving theft of huge quantity of gold ornaments from a jewellery store or from a jewellery manufacturing unit, the court should take extra precautions to see whether the claimant has established, by cogent evidence, a strong prima facie case to show his entitlement for staking the claim. In such cases, there ought to be records ``` ## CRL.MC No.515 of 2022 12 ``` to support his claim. If there are sufficient documentaryevidenceshowinghis unquestionable entitlement to the articles, especially in a case where there is no rival claimant for the jewellery, we find no reason for imposing a condition that the entire jewellery shall be produced in the same condition, as and when directed. If it is established by evidence that the ornaments claimed by him are stock in trade in the jewellery store, no earthly purpose will be served by returning them to the claimant by imposing such restrictions. Hence, such a condition need not be imposed in all cases, disregarding the factual situation in each case.” ``` ``` Even though the observations made by the Division ``` ``` Bench of this Court were in respect of the release of jewellery, which was part of the stock in trade of a jewellery store, I am of the view that the principles laid down in the said decision can be made applicable to this case as well. ``` ``` 8.The documents show that the vehicle was ``` ``` purchased by the accused persons with the funds provided by the petitioner bank. Hypothecation is also seen entered in the R.C.book in favour of the ``` CRL.MC No.515 of 2022 13 ``` petitioner and the statutory stipulations ``` ``` contained in the SARFAESI Act enable the petitioner, being a secured creditor, to take possession of the vehicle and conduct the sale of the same by following the procedure contemplated ``` ``` under the said Act. It is also clear that, ``` ``` exercising such power, the petitioner had already approached the Chief Judicial Magistrate Court, ``` ``` Ernakulam and an order was passed providing ``` ``` assistance to the petitioner to take possession of ``` ``` the car. Such an order indicates the legal entitlement of the petitioner to have the vehicle in his possession and to sell it or otherwise ``` ``` dispose of it for converting the same into amounts ``` ``` to be set off towards liability of the 2[nd] and 3[rd] ``` ``` respondents. Therefore, I do not find any reason ``` ``` to decline the prayer sought by the petitioner. ``` ``` 9.This is all the more necessary because keeping the said vehicle in the custody of the petitioner would not serve any fruitful purpose to ``` CRL.MC No.515 of 2022 14 ``` the petitioner or the 2[nd] and 3[rd] respondents. ``` ``` Since the petitioner is entitled to realize the amount towards the credit facility granted to the respondents 2 and 3, any delay in recovery would increase the amount day by day on account of accruing of interest thereon, which would result ``` ``` in the increase in the burden of the respondents 2 ``` ``` and 3 as the time passes. Therefore, the disposal of the secured asset, namely the vehicle, at the ``` ``` earliest opportunity is in the best interest of the petitioner as well as respondents 2 and 3. ``` ``` 10.It is true that, in some cases, it may ``` ``` become necessary to produce the property before ``` ``` the court for the purpose of the trial. However, ``` ``` as observed by this Court in Naragarajan’s case ``` ``` (supra), it is not necessary that the original ``` ``` property inevitably has to be preserved and ``` ``` produced. Instead of producing the original property, production of the photographs of the property, depicting all features of the same, ``` CRL.MC No.515 of 2022 15 ``` would be sufficient. What is required for the ``` ``` purpose of the trial is the proper identification of the property, which is the subject matter of the dispute. Taking photographs of the said vehicle from all angles and preparing a mahazar giving a clear description of the vehicle's nature, dimensions and features would serve the said purpose, as the same can be used as a substitute for the production of the original ``` ``` property. ``` ``` 11.Another contention put forward by the learned counsel for the petitioner is with regard to the 2[nd] condition in the order impugned. The said condition is about furnishing a bond for Rs. ``` ``` 35,00,000/- or bank guarantee with two solvent ``` ``` sureties. However, I am of the view that, since the petitioner is a bank, the said condition would not cause any difficulty. Moreover, as I have already decided that permission can be granted to the petitioner to dispose of the property, it is ``` CRL.MC No.515 of 2022 16 ``` only proper that the 2[nd] condition in the order ``` ``` impugned be retained. ``` ``` In such circumstances, Crl.M.C. is allowed, ``` ``` condition Nos.4 and 5 imposed by the Additional Chief Judicial Magistrate (EO), Ernakulam in ``` ``` Annexure-A4 order are hereby set aside. The ``` ``` vehicle shall be released to the petitioner upon complying with condition Nos.2 and 3 in the order impugned, and in addition to that, the learned Magistrate shall ensure that a proper mahazar is prepared by the Investigating Officer showing a clear description of the nature, dimensions and features of the vehicle in the present condition. ``` ``` Sd/- ZIYAD RAHMAN A.A. JUDGE ``` ``` pkk ``` CRL.MC No.515 of 2022 17 ## `APPENDIX OF CRL.MC 515/2022` ``` PETITIONER’S ANNEXURES: ``` |`ANNEXURE`|`1`|`TRUE COPY OF THE DEMAND NOTICE ISSUED UNDER`| |---|---|---| |||`SECTION 13(2) OF THE SARFAESI ACT, DATED`| |||`1/07/2019`| |`ANNEXURE`|`2`|`TRUE COPY OF ONLINE STATUS REPORT IN MC`| |||`NO.36/2020 ON THE FILE OF THE CJM COURT,`| |||`ERNAKULAM, DATED 16/01/2020`| |`ANNEXURE`|`3`|`TRUE COPY OF MEMORANDUM OF CMP NO.1964/2021`| |||`ON THE FILE OF THE ADDITIONAL CHIEF JUDICIAL`| |||`MAGISTRATE COURT (EO), ERNAKULAM, DATED`| |||`8/11/2021`| |`ANNEXURE`|`4`|`CERTIFIED COPY OF THE ORDER IN CMP`| |||`NO.1964/2021 IN CRIME NO.686/2021 ON THE FILE`| |||`OF THE ADDITIONAL CHIEF JUDICIAL MAGISTRATE`| |||`COURT (EO), ERNAKULAM, DATED 3/12/2021`|