M/S. A 2 Z BUILDERS (P) LTD. v Housing & Urban Development Corporation Ltd.

## **IN THE HIGH COURT OF KERALA AT ERNAKULAM** ## **PRESENT:** ## **THE HONOURABLE MR.JUSTICE THOTTATHIL B.RADHAKRISHNAN** **WEDNESDAY, THE 4TH DAY OF DECEMBER 2013/13TH AGRAHAYANA, 1935** ## **WP(C).No. 22877 of 2005 (W)** **---------------------------AGAINST THE ORDER DATED 20/05/2005 OF THE DEBT RECOVERY APPELLATE TRIBUNAL, CHENNAI IN R.A. NO.23/2002 AND R.A. NO.27/2003.** **.........** **PETITIONER:** **--------------------** **M/S. A 2 Z BUILDERS (P) LTD., P.T. USHA ROAD, ERNAKULAM, COCHIN, REPRESENTED BY ITS DIRECTOR E.S. JOSE.** **BY SRI.N.N.SUGUNAPALAN, SENIOR ADVOCATE. SRI.BALAKRISHNAN GOPINATH SRI.S.SUJIN** **RESPONDENT(S):** **----------------------------** **1. HOUSING & URBAN DEVELOPMENT CORPORATION LTD., K.S.H.B. SHOPPING COMPLEX, PATTOM JUNCTION, THIRUVANANTHAPURAM.** **2. THE DEBT RECOVERY APPELLATE TRIBUNAL, INDIAN BANK BUILDINGS, OPP. ETHIRAJ COLLEGE, EGMORE, CHENNAI, REPRESENTED BY ITS REGISTRAR.** **3. THE DEBT RECOVERY TRIBUNAL ERNAKULAM BENCH, 5TH FLOOR, KERALA STATE HOUSING BOARD, BUILDING, PANAMPILLY NAGAR, COCHIN- 20, REPRESENTED BY ITS REGISTRAR.** **R1 BY ADVS. SMT.LATHA GIRI, SRI.RAJESH NAMBIAR.** **THIS WRIT PETITION (CIVIL) HAVING BEEN FINALLY HEARD ON 29-11-2013, ALONG WITH WP(C). NO. 23510 OF 2005 AND COC. 915 OF 2011, THE COURT ON 04-12-2013 DELIVERED THE FOLLOWING:** **rs.** ## **WP(C).No. 22877 of 2005 (W)** ## **APPENDIX** ## **PETITIONER'S EXHIBITS:-** **EXT.P1 COPY OF THE ORDER OF THE DEBTS RECOVERY TRIBUNAL, ERNAKULAM DATED 07/08/2002 IN O.A.315/2000. EXT.P2 COPY OF THE MEMORANDUM OF APPEAL NO.R.A. NO.27/2003 ALONG WITH EXHIBITS. EXT.P3 COPY OF THE MEMORANDUM APPEAL FILED IN R.A. NO.23/2003. EXT.P4 COPY OF THE AFFIDAVIT AND PETITION FILED BY THE 1ST RESPONDENT BEFORE THE 2ND RESPONDENT. EXT.P5 COPY OF THE COUNTER AFFIDAVIT FILED BY THE 1ST RESPONDENT BEFORE THE 2ND RESPONDENT. EXT.P6 COPY OF THE ORDER PASSED BY THE 2ND RESPONDENT DATED 20/05/2005. EXT.P7 COPY OF THE ONE TIME SETTLEMENT PROPOSAL SUBMITTED BY THE PETITIONER BEFORE THE ADALAT DATED 23/10/2002. EXT.P8 COPY OF THE LETTER DATED 13/02/1997 SENT BY THE PETITIONER TO THE RESPONDENT CORPORATION. EXT.P8A COPY OF THE LETTER DATED 10/05/1997 SENT BY THE PETITIONER TO THE RESPONDENT CORPORATION. EXT.P8B COPY OF THE LETTER NO.HUDCO/TRO/13145/97/486 DATED 26/05/1997 SENT BY THE RESPONDENT CORPORATION. EXT.P8C COPY OF THE LETTER DATED 28/05/1997 SENT BY THE PETITIONER TO THE RESPONDENT CORPORATION. EXT.P8D COPY OF THE LETTER DATED 17/06/1997 SENT BY THE PETITIONER TO THE RESPONDENT CORPORATION. EXT.P8E COPY OF THE LETTER DATED 07/07/1997 SENT BY THE PETITIONER TO THE RESPONDENT CORPORATION. EXT.P8F COPY OF THE LETTER DATED 14/08/1997 SENT BY THE PETITIONER TO THE RESPONDENT CORPORATION. EXT.P8G COPY OF THE LETTER NO.HUDCO/TRO/A2Z/13145/97/2079 DATED 19/09/1997 SENT BY THE RESPONDENT CORPORATION TO THE PETITIONER. EXT.P8H COPY OF THE LETTER NO.A2Z/5009/3/98 DATED 07/04/1998 SENT BY THE PETITIONER TO THE RESPONDENT CORPORATION.** **2/-..........** **WP(C).No. 22877 of 2005 (W)** **EXT.P8I COPY OF THE LETTER DATED 11/05/1998 SENT BY THE PETITIONER TO THE RESPONDENT CORPORATION. EXT.P8J COPY OF THE LETTER DATED 10/09/1998 SENT BY THE PETITIONER TO THE RESPONDENT CORPORATION. EXT.P8K COPY OF THE LETTER NO.HUDCO/TRO/13145/98/2013 DATED 07/10/1998 SENT BY THE RESPONDENT CORPORATION TO THE PETITIONER. EXT.P8L COPY OF THE LETTER DATED 28/11/1998 SENT BY THE PETITIONER TO THE RESPONDENT CORPORATION. EXT.P8M COPY OF THE LETTER DATED 02/02/1999 SENT BY THE PETITIONER TO THE RESPONDENT CORPORATION. EXT.P8N COPY OF THE LETTER DATED 13/02/1999 SENT BY THE PETITIONER TO THE RESPONDENT CORPORATION. EXT.P8O COPY OF THE LETTER NO.HUDCO/TRO/A2Z13145/99/3878 DATED 01/03/1999 SENT BY THE RESPONDENT CORPORATION TO THE PETITIONER. EXT.P8P COPY OF THE LETTER DATED 10/03/1999 SENT BY THE PETITIONER TO THE RESPONDENT CORPORATION. EXT.P8Q COPY OF THE LETTER DATED 10/03/1999 SENT BY THE PETITIONER TO THE HONOURABLE MINISTER FOR URBAN DEVELOPMENT, UNION OF INDIA. EXT.P8R COPY OF THE LETTER NO.A2Z/5099/3/99 DATED 24/03/1999 SENT BY THE PETITIONER TO THE RESPONDENT CORPORATION. EXT.P8S COPY OF THE LETTER NO.HUDCO/TRO/A2Z13145/99/2178 DATED 16/09/1999 SENT BY THE RESPONDENT CORPORATION TO THE PETITIONER. EXT.P8T COPY OF THE LETTER NO.HUDCO/TRO/DEFAULT/A2Z13145/99/2562 DATED 05/10/1999 SENT BY THE RESPONDENT CORPORATION TO THE PETITIONER.** ## **RESPONDENT'S EXHIBITS:-** **EXT.R1A COPY OF THE NOTICE DATED 21/06/2011 UNDER SEC.13(2) OF THE SECURITISATION AND RECONSTRUCTION OF THE FINANCIAL ASSETS AND ENFORCEMENT OF SECURITY INTEREST ACT 2002.** **//TRUE COPY//** ## **P.S. TO JUDGE** **rs.** ## THOTTATHIL B. RADHAKRISHNAN, J. = = = = = = = = = = = = = = = = = = = = = = = = **==> picture [188 x 39] intentionally omitted <==** & COC.No.915 of 2011 = = = = = = = = = = = = = = = = = = = = = = = = Dated this the 4[th] day of December, 2013 ## JUDGMENT - 1.The captioned writ petitions are filed under Article 227 of the constitution of India challenging a decision of the Debt Recovery Appellate Tribunal under the Recovery of Debts Due to Banks and Financial Institutions Act, 1993, hereinafter referred to as the “RDB Act”, for short. Petitioner in WP(C).No.22877 of 2005 is the debtor and the petitioner in WP(C).No.23510 of 2005 is the lender HUDCO. - 2.The Debt Recovery Tribunal adjudicated the original application for recovery and allowed it by holding, among other things, that the lender is entitled to WPC.22877/05 & con.cases -: 2 :- recover an amount of Rs.7,07,73,304.95 only plus future interest on that amount at 6% per annum from 19.9.2000 till realisation with costs of proceedings. The original application was filed on 18.9.2000. - 3.The lender and the debtor preferred appeals before the Appellate Tribunal. The lender appealed against the reduction of rate of interest from 19.5% per annum to 12% per annum from the date of loan till 31.3.1999 and thereafter, at 9% per annum till date of suit and confinement of future interest to 6% per annum. - 4.The debtor appealed to the Tribunal contending that the lender HUDCO is estopped from instituting the recovery proceedings on ground of promissory estoppal and also to declare that the debtor is not liable to pay interest as claimed and it is liable to pay only the principal amount. - 5.The Appellate Tribunal held that, applying the law as enunciated in Central Bank of India v. Ravindra and others [(2002) 1 SCC 367 = AIR 2001 SC 3095], the award of interest pendente lite and post-decree alone WPC.22877/05 & con.cases -: 3 :- is discretionary, with the Court, and it is essentially governed by Section 34 CPC dehors the contract between the parties and therefore, the exercise of discretion even for the period up to filing of the original application is not sustainable. Resultantly, the Appellate Tribunal modified the recovery order issued by the DRT and ordered recovery of a sum of Rs.11,60,34,512/- as claimed in the O.A., i.e., the amount due as on 18.9.2000, the date of the original application. It was also held that the lender was entitled to interest at 9.5% per annum for the pendente lite period and for post-decree period, i.e., from 18.9.2000 on the said amount with quarterly rests till realisation together with costs of the proceedings. Recovery was permitted to be effected against the assets as first charge. - 6.In WP(C).No.22877 of 2005 filed by the debtor, an interlocutory order was issued after hearing learned counsel for parties on 5[th] September, 2005 granting interim stay of further proceedings as on that day on deposit of an amount of Rs.3 crores on or before 30[th] September, 2005 and another sum of Rs.3 crores on or WPC.22877/05 & con.cases -: 4 :- before the last working day of October, 2005. The creditor bank was entitled to withdraw the said amounts, as also the amounts lying in deposit with the Appellate Tribunal. - 7.It was thereafter that WP(C).No.23510 of 2005 was filed by the creditor bank raising the issue of interest and challenging the order of the Appellate Tribunal to that extent. - 8.The aforesaid conditional interim order was from time to time extended and thereafter, it was extended until further orders. The debtor has filed Contempt of Court Case No.915 of 2011 stating that action has been initiated under the provisions of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (SARFAESI Act) and thereby, the person arrayed as respondent in the Contempt of Court Case, who is Senior Manager(Law) of the creditor bank, has acted in contempt of this Court. An affidavit has been filed by the respondent in that case in answer to the allegations as to contempt. WPC.22877/05 & con.cases -: 5 :- 9.Thereafter, though an order was issued in this case on 26.8.2011 in an attempt to prompt a settlement by intervention of the higher authorities of the lender HUDCO, that did not ultimately work out, and it was suggested that the matter could be argued on merits. 10.The learned Senior Counsel on behalf of the debtor placing reliance on Central Bank of India (supra), argued that paragraph 46 of that judgment as reported in (2002) 1 SCC 367 is pointer to the requirement that oppression of debtors ought to be excluded. It was further argued that the concept of penal interest, if applied in the case in hand, would result in unjust enrichment to the creditor bank, though the debtor has shown with materials on record before the DRT and the Appellate Tribunal that it was a case where the debtor was entitled to all ameliorative measures. He further argued that on the basis of the documents, particularly the terms of Exts.B1, B2 and B4 before the DRT, the debtor could not have been directed to pay anything more than the principal amount. It was also argued that the entire property purchased by the debtor was mortgaged with the creditor bank and there is no case of any mis- WPC.22877/05 & con.cases -: 6 :- utilisation or diversion of the loan amount. It was argued that the creditor bank was bound to allow the debtor to sell the property in various plots individually to the prospective purchases and the failure of the second phase of the project was because the creditor bank refused to grant NOC as insisted upon by the Larsen & Toubro Limited, a joint venture partner of the debtor. - 11.Per contra, the learned counsel for the creditor bank argued that in its substance, the debtorcreditor relationship between the parties to this case does not call for any adjudication on equitable considerations in defeasance of the terms of the contract. He further argued that the materials on record would show that the DRT and the Appellate Tribunal were justified in conclusions that they had arrived, though the Appellate Tribunal should have granted the entire claim for interest as made by the bank. - 12.The findings of the DRT as affirmed by the Appellate Tribunal clearly exclude the acceptability of the contentions of the debtor that the creditor bank was WPC.22877/05 & con.cases -: 7 :- bound under principles of promissory estoppel and that in terms of the contents of Exts.B1, B2 and B4 in the original proceedings, the debtor is eligible to succeed to the extent of its plea. This Court would loath interfere in visitation under Article 227 of the Constitution of India unless the appreciation of materials by the Tribunals is palpably faulty, grossly erroneous on facts and results in miscarriage of justice. Looking at the quality of the findings made by the DRT as modified by the Appellate Tribunal, it can be seen that the terms of the contract and the nature of contentions between the parties have been well considered by the Appellate Tribunal and there is no ground to interfere on any such reasoning. - 13.As far as the question of interest is concerned, while applying the ratio of Central Bank of India (supra), the Appellate Tribunal failed to appreciate that while the rate of interest granted by the DRT was modified by it, the award of pendente lite and future interests as quarterly rests is onerous and needed to be excluded. The component of penal interest added after commencement of the lis ought to WPC.22877/05 & con.cases -: 8 :- have also been excluded. Under such circumstances, this Court takes on record a statement filed by the creditor HUDCO along with the memo dated 12.1.2012 filed by its counsel in WP(C).No.23510 of 2005 which shows the total amount payable as on 19.12.2011 as Rs.174885651/excluding legal charges of Rs.568500/-. This amount is arrived by applying the terms of the Appellate Tribunal's order and pegging the decree amount at Rs.116034512/- as on 18.9.2000 and then, arriving at an amount of Rs.115447423/- as the decree amount after removing compounding on penal interest. 14.This leads to Contempt of Court Case which is filed on the allegation that there is violation of the interlocutory orders. The inhibition as per the interlocutory orders during the pendency of WP(C). No.22877 of 2005 was only against the further enforcement of recovery proceedings under the RDB Act. That had nothing to do with the initiation of proceedings under the SARFAESI Act in terms of jurisdiction and the laws. Under such circumstances, no contempt is made out. WPC.22877/05 & con.cases -: 9 :- In the result, i.WP(C).No.22877 of 2005 is allowed modifying the appellate order granted by the Appellate Tribunal to be one for recovery of Rs.115447423/- as on 18.9.2000 with future interest at 9.5% per annum for the pendente lite period and for post-decree period from 18.9.2000 on the said sum of Rs.115447423/-. The provisions for capitalising the interest on quarterly basis as granted by the Appellate Tribunal will also stand vacated. The other conditions in terms of the appellate order will stand and the order for costs before the DRT and the Appellate Tribunal will be proportionate to the amounts affirmed hereby. ii.WP(C).No.23510 of 2005 is dismissed. iii.COC.No.915 of 2011 is dismissed. iv.No costs. THOTTATHIL B. RADHAKRISHNAN, JUDGE Sha/-