Kerala State Co-operative Hospital Complex and Centre for Advanced Medical Services Ltd. v Housing and Urban Development Corporation Ltd, State of Kerala, Debts Recovery Appellate Tribunal

IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT: THE HONOURABLE MR.JUSTICE A.M.SHAFFIQUE WEDNESDAY, THE 5TH DAY OF APRIL 2017/15TH CHAITHRA, 1939 OP (DRT).No. 40 of 2014 (O) ---------------------------- AGAINST THE ORDER IN RA 126/2013 of DEBTS RECOVERY APPELLATE TRIBUNAL, CHENNAI DATED 24/1/2014 AGAINST THE ORDER IN OA 68/2006 of DEBTS RECOVERY TRIBUNAL, ERNAKULAM DATED 5/4/2013 PETITIONER(S): ------------- KERALA STATE CO-OPERATIVE HOSPITAL COMPLEX AND CENTRE FOR ADVANCED MEDICAL SERVICES LTD. PARIYARAM, KANNUR 670502, REPRESENTED BY ITS MANAGING DIRECTOR BY ADVS.SRI.P.V.SURENDRANATH SRI.B.S.SYAMANTHAK SMT.BINDUMOL JOSEPH RESPONDENT(S): -------------- 1. HOUSING AND URBAN DEVELOPMENT CORPORATION LTD, HUDCO, PALAYAM, THIRUVANANTHAPRUAM KERALA STATE 695034 2. STATE OF KERALA, REPRESENTED BY THE SECRETARY TO THE GOVERNMENT, HEALTH AND FAMILY WELFATE DEPARTMENT, SECRETARIAT, GOVERNMENT OF KERALA, THIRUVANANTHAPURAM 695001 3. DEBTS RECOVERY APPELLATE TRIBUNAL, 4TH FLOOR, INDIANBANK CIRCLE OFFICE, 55 ETHIRAJ SALAI, CHENNAI 600008 R1 BY ADV. SRI.S.VINOD BHAT R1 BY ADV. SRI.LEGITH T.KOTTAKKAL BY SR GOVERNMENT PLEADER SRI.C.P.PRADEEP THIS OP (DEBT RECOVERY TRIBUNAL) HAVING BEEN FINALLY HEARD ON 29/11/2016, ALONG WITH OPDRT. 41/2014, OPDRT. 150/2015, THE COURT ON 5/4/2017 DELIVERED THE FOLLOWING: OP (DRT).No. 40 of 2014 (O) ---------------------------- ## APPENDIX PETITIONER(S)' EXHIBITS ----------------------- EXHIBIT P1 A TRUE COPY OF THE O.A NO 68/2006 FILED BY THE RESPONDENT NO 1 EXHIBIT P2 ATRUE COPY OF THE WRITTEN STATEMENT FILED BY THE PETITIONER WITHOUT EXHIBIT EXHIBIT P3 TRUE COPY OF THE ORDER IN OANO 68/2006 DATED 05-04-2013 OF THE DEBT RECOVERY TRIBUNAL ERNAKULAM EXHIBIT P4 TRUE COPY OF THE MEMORANDUM OF APPEALOF THE RA 126/2013 EXHIBIT P5 A TRUE COPY OF THE ORDER IN RA NO 126/2013 DATED 24-012014 RESPONDENT(S)' EXHIBITS NIL ----------------------- Rp //TRUE COPY// PS TO JUDGE ## **A.M. SHAFFIQUE, J.** =============== OP(DRT) Nos.40, 41 of 2014 150 of 2015 ================== Dated this, the 5[th] day of April, 2017 ## **J U D G M E N T** These original petitions are filed by the appellant in RA No.126/2013 and 1[st] respondent in RA No.125/2013 of the Debts Recovery Appellate Tribunal at Chennai. The appeals had arisen from the order passed by the Debts Recovery Tribunal (DRT) Ernakulam in OA No.68/2006. The OA was filed by Housing and Urban Development Corporation Ltd. for recovery of money from the petitioner and State of Kerala. The DRT passed an award for a sum of Rs.146,36,67,491/- with interest at the rate of 19% per annum on Rs.95,10,82,192/- with quarterly rests from 31/12/2005 to 15/2/2006 and thereafter at the rate of 12% per annum from 16/2/2006 to 5/4/2013 and subsequently at the rate of 9% per annum till realisation and costs of the proceedings jointly and severally from the respondents in the Original Application. RA No.125/13 was filed by the Housing and Urban Development OP(DRT) No.40/14 & conn.cases -:2:- Corporation Ltd., who is the applicant in the OA challenging the award of the Tribunal to the extent of awarding interest at a lesser rate than what has been claimed in the OA. The petitioner filed RA No.126/2013 challenging the award itself. The Appellate Tribunal by the order dated 24/1/14 in RA No.126/13 dismissed the appeal. By a separate order dated 24/1/14 in RA No.125/13, the Tribunal allowed the appeal and directed interest to be paid as prayed for in the Original Application. It is impugning the aforesaid orders passed by the Appellate Tribunal that these original petitions are filed. 2. Heard learned counsel appearing for the petitioners and the learned counsel appearing on the part of the respondents. 3. First, I shall consider OP(DRT) No. 40/14 arising from RA 126/13. The main contention urged by the petitioner is that the OA itself was not maintainable before the DRT. This contention is taken based on an Apex Court judgment in _**ONGC and another v. Collector of Central Excise**_ (JT 1991 (4) SC 148). The contention is that since the State of Kerala is a party to the proceedings, and being a Central Government undertaking, the applicant ought to have taken up the matter before the High OP(DRT) No.40/14 & conn.cases -:3:- Power Committee rather than approaching the DRT. Secondly, it was contended that there is no basis for the award to be passed especially when substantial contentions had been taken in the matter. It is contended that the application was made by the first defendant/petitioner and the institution was later taken over by the Government under the Kerala Co-operative Hospital Complex and Academy for Medial Sciences (taking over the Management) Act, 1997 which came into force on 17/6/1997. The name of the institute also was changed which was well within the knowledge of the Corporation. A contention was urged that application was barred by limitation and the loan was sanctioned on the guarantee of the Government. The Government having divested control of the petitioner in terms with the statutory provisions, the guarantee had ceased to exist. It is also contended that the OA was filed beyond the period of three years from 24/1/2001. But after hearing the learned counsel on either side and on perusal of the judgment of the Tribunal, it is rather clear that no specific contention had been urged for setting aside the order of the Tribunal and therefore, the Appellate Tribunal was justified in not interfering with the impugned order. 4. Now coming to the next case, i.e. OP(DRT) No.41/2014, OP(DRT) No.40/14 & conn.cases -:4:- which is against the judgment in RA No.125/13, the Appellate Tribunal had interfered with the award of interest. The Tribunal had directed payment of interest at the agreed rate with quarterly rests for the principal amount. But interest pendente lite and future interest had been reduced. The short question is whether the Appellate Tribunal was justified in interfering with the rate of interest awarded by the Tribunal. 5. OP (DRT) No.150/15 was filed by the Housing and Urban Development Corporation Ltd challenging Ext.P6 order passed by the Debts Recovery Appellate Tribunal, Chennai in IA No. 545/2014 in RA No.125/13. The application was filed by the Corporation inter alia contending that though the rate of interest was enhanced, the _pendente lite_ interest ought to have been granted on the entire sum and there was no reason to limit the same. The Tribunal found that the contention of the petitioner to determine the quantum over which interest was calculated cannot be accepted especially when the High Court is already seized of the matter. It is contended by the learned counsel for the petitioner that though specific contention was raised before the Appellate Tribunal regarding the restriction of interest on the principal amount, the appellate authority did not interfere with OP(DRT) No.40/14 & conn.cases **==> picture [21 x 9] intentionally omitted <==** the same. It is contended that future interest ought to have been awarded on the entire amount due which includes principal and interest. 6. Taking into consideration the aforesaid disputed issues, the only matter to be considered is in regard to the rate of interest to be charged on the amount claimed. 7. It is apposite to refer to judgment of the Apex Court in _**Punjab and Sind Bank v. Allied Beverage Company Pvt Ltd.**_ [(2010) 10 SCC 640]. In the above case, the Apex Court was considering a question relating to grant of pendente lite interest and post-decree interest. One question that was considered was whether Section 34 of the Code of Civil Procedure, 1908 can be invoked to change the periodicity of payment of interest. After considering the relevant aspects of the matter and placing reliance upon various other judgments on the point, especially _**Central Bank of India v. Ravindra**_ [(2002) 1 SCC 367] wherein the Constitution Bench held that award of interest pendete lite and post-decree is discretionary with the Court as it is essentially governed by Section 34 of the Code of Civil Procedure dehors the contract between the parties and in a given case, if the Court finds that in the principal sum adjudged on the date of the suit OP(DRT) No.40/14 & conn.cases -:6:- the component of interest is disproportionate with the component of the principal sum 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 only aspect to be looked into is that the discretion shall be exercised fairly, judiciously and for reasons and not in an arbitrary or fanciful manner. Ultimately, the Apex Court held in _**Allied Beverage Company Pvt Ltd**_ (supra) at paras 20 and 21 as under:- _“20. By drawing our attention to the decision of this Court in Syndicate Bank v. Mohan Bros. it is contended that in view of the proviso to Section 34 (1) CPC, if the liability in relation to the sum adjudged had arisen out of commercial transaction, the rate of such further interest may exceed 6% p.a. but shall not exceed the contractual rate of interest and the Bank is entitled to claim interest as per the contract. It is true that in this decision, a three-Judge Bench, after finding that the decision in Central Bank of India case shows that no reference has been made to the proviso which specifically deals with the awarding of interest arising out of commercial transaction, referred the issue to a larger Bench. We were not informed about any decision by a larger Bench contrary to the decision in Central Bank of India. Even otherwise, considering factual aspects, even the Company_ OP(DRT) No.40/14 & conn.cases ## -:7:- _agreed for settlement but it was not successful due to financial difficulties and all other circumstances, we feel that the High Court has fairly neutralised the claim of the Bank as well as the sufferings of the Company and passed a workable order by reducing the rate of interest to 14% p.a., which would be simple interest, in respect of period pendente lite and future interest with effect from 4- 7-2003, the day on which the Bank filed an application before DRT. Though request was made by the Company for further reduction up to 12% p.a., since it was a commercial transaction and the Bank being a nationalised bank, we are not inclined to accede to their request._ _21. The approach and the course adopted by the High Court is acceptable and we are not inclined to either enhance the rate of interest as claimed by the Bank or order further reduction as requested by the Company. Consequently, both the appeals are dismissed with no order as to costs.”_ 8. Viewed in the light of the principle laid down by the Apex Court, it is rather clear that the Debts Recovery Tribunal has exercised the discretion in accordance with law. There is no material to indicate that such a discretion has been exercised in an arbitrary or fanciful manner. When such a discretion has been exercised well within the principles laid down by the Apex Court, there was no reason for the appellate authority to have interfered with the award of interest pendente lite and post decree. The OP(DRT) No.40/14 & conn.cases -:8:- interest awarded was at the rate of 19% per annum on the principal amount from 31/12/2005 to 15/2/2006 and thereafter at the rate of 12% per annum from 16/2/2006 to 5/4/2013 which is during the pendency of the application and subsequently at the rate of 9% per annum till realisation. 9. The DRT had considered the award of pendente lite interest and post-decree in para 13.1, 13.2 and 13.3. Reference is also made to the judgment of the Apex Court in _**Ravindra**_ (supra) and it is held that this is a fit case to invoke the discretionary power of the Tribunal with regard to the grant of interest pendente lite and post decree. 10. Under such circumstances, the appellate authority was not justified in interfering with the rate of interest. The Appellate Tribunal observed that the DRT having found that the application of interest was proper and correct and the petition had been filed within limitation, the defendants are bound to pay the contractual rate of interest and direction had been issued to award interest at the rate as specified by the applicant in OA 68/2006 before the Tribunal. When a discretion has been exercised by the DRT as far as the pendente lite interest and future interest is concerned, it was not proper for the appellate authority to interfere with the OP(DRT) No.40/14 & conn.cases -:9:- same unless there are specific reasons stated in the order. The only reason stated is that there is a finding by the Tribunal that the interest charged was not exorbitant. But it is relevant to note that the reference in para 7.3 of the Tribunal's order is with reference to the interest charged prior to the filing of the OA and not pendente lite interest or post decree interest. In the result, I am of the view that the appellate authority committed serious error of law in interfering with the rate of interest. In the result, the original petitions are disposed of as under: (i) OP(DRT) No.40/2014 is dismissed. (ii) OP(DRT) No.41/2014 is allowed setting aside the order passed by the appellate authority and confirming the order passed by the Debts Recovery Tribunal in OA No. 68/2006. (iii) OP(DRT) No. 150/15 is dismissed. Sd/- ## **A.M. SHAFFIQUE, JUDGE** Rp //True Copy// P.S to Judge