State Bank of India, Agricultural Development Branch, Palakkad v. Madhusudhanan K.

Case Details & Bench

Court: High Court of Kerala
Hon'ble Judges: Manjula Chellur
A. M. Shaffique
Judgment Date: 2012-10-30
Court Decision / Holding: Appeals allowed; the learned Single Judge’s order is set aside; borrowers are given an opportunity to repay the entire due amount in three equal monthly installments commencing from 01.12.2012; the Bank may sell the pledged produce if any single default occurs; the Bank is otherwise free to proceed with sale under the conditional relief.
Final Disposition: Appeals allowed; writ petitions disposed; bank may proceed with sale on default; borrowers to pay in installments as ordered.

Parties to the Case

Appellants / Petitioners

State Bank of India, Agricultural Development Branch, Palakkad

Respondents

Madhusudhanan K.

Legal Representation & Advocates

Counsels for Petitioners

• Sri P.V. Surendranath

Counsels for Respondents

• Mr. K. Abdul Jawad

Case Synopsis & Summary

This appeal stems from four writ petitions filed by borrowers who pledged ginger produce to the State Bank of India as security for short-term loans and failed to repay. The Bank sought to auction the pledged produce after issuing a legal notice, contending that the loan agreement authorized sale upon default and that the sale could proceed once notice under Section 176 of the Indian Contract Act had been given. The borrowers challenged the sale, arguing depressed ginger prices and requesting postponement until March 2013 to secure a better realization, or at least time to repay in installments. They also contended that the notice period was insufficient and urged equity as a basis for relief. The High Court analyzed whether the borrowers possessed any statutory right to defer sale and whether equity could justify relief. It acknowledged that there is no statutory right to postpone sale but considered whether equity could permit relief on terms. Relying on Saraswathi Ammal v. Kottayam Bank Ltd. for guidance on what constitutes reasonable notice, the Court held that the notice given (Ext.P1 and subsequent Ext.P2) was adequate, but ultimately concluded that interest of justice favored granting relief on terms. The appeals were allowed, setting aside the Single Judge’s order and directing repayment in three equal monthly installments starting 01.12.2012, with the Bank free to sell on a single default.

Provisions of Law Cited

Section 176 of the Indian Contract Act, 1872

Legal Doctrines & Maxims

Equity as a basis for relief in absence of statutory rights
Reasonable notice/time under Section 176 Indian Contract Act (as explained in Saraswathi Ammal v. Kottayam Bank Ltd.)

Submissions & Arguments

Contentions of Appellants / Petitioners

Bank contended that the loan agreement authorized sale of pledged produce upon default; sale can proceed with notice under Section 176; more than a month’s notice Ext.P2 satisfies reasonable time; emphasized need to protect security and avoid delay in repayment. It relied on Saraswathi Ammal v. Kottayam Bank Ltd. to define reasonable notice and argued there was no statutory right for borrowers to stall sale beyond the agreed terms; sought to set aside the Single Judge’s order and permit sale subject to repayment terms.

Contentions of Respondents

Borrowers argued that ginger prices were depressed and postponing sale would yield better realization in March 2013; claimed lack of market demand and insufficient opportunity; urged equity to grant relief by delaying sale or permitting installment payments; challenged the adequacy of notice and sought relief from immediate sale.

Cited Precedents (1)

Case Name	Citation	Treatment	Explanation
Saraswathi Ammal v. Kottayam Bank Ltd.	1950 KLT 143	Positive	Cited to define 'reasonable time' for notice under Section 176; court held that a notice given more than a month prior to sale satisfies reasonable time as discussed in this precedential decision.

Extracted Judgment Text

Exact text extracted from official judgment records.

## **IN THE HIGH COURT OF KERALA AT ERNAKULAM** ## **PRESENT:** **THE HON'BLE THE CHIEF JUSTICE MRS. MANJULA CHELLUR & THE HONOURABLE MR.JUSTICE A.M.SHAFFIQUE** **TUESDAY, THE 30TH DAY OF OCTOBER 2012/8TH KARTHIKA 1934** ## **WA.No. 1898 of 2012 ()** **--------------------------------AGAINST THE ORDER/JUDGMENT IN WPC.22512/2012 DATED 01-10-2012. ..............** **APPELLANT/RESPONDENT: -----------------------------------------** **STATE BANK OF INDIA, AGRICULTURAL DEVELOPMENT BRANCH, OPPOSITE TOWN RAILWAY STATION, PALAKKAD, REPRESENTED BY ITS BRANCH MANAGER.** ## **BY ADV. SRI.P.V.SURENDRANATH.** **RESPONDENT/PETITIONER: ------------------------------------------** **MADHUSUDHANAN. K., AGED 29 YEARS, S/O.KRISHNASWAMY, H.NO.12/90, NANDANAM, POOJA NAGAR, PUTHUR POST, PALAKKAD- 678 001.** **BY ADV. MR.K. ABDUL JAWAD.** **THIS WRIT APPEAL HAVING COME UP FOR ADMISSION ON 30-10-2012, ALONG WITH W.A. NO. 1902 OF 2012, W.A. NO. 1905 OF 2012 AND W.A. NO. 1906 OF 2012, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING:** **rs.** ## **WA.No. 1898 of 2012** ## **APPENDIX** ## **PETITIONER'S ANNEXURES:-** **ANNEXURE A1 COPY OF THE NOTICE ISSUED BY THE WAREHOUSING AUTHORITIES TO THE RESPONDENT/PETITIONER-BORROWER WHO HAS STOCKED THE PRODUCE IN THE WAREHOUSE.** ## **RESPONDENT'S ANNEXURES:NIL.** **//TRUE COPY//** **P.S. TO JUDGE** **rs.** ## **MANJULA CHELLUR, C.J & A.M.SHAFFIQUE, J.** **---------------------------------------------------W.A.Nos. 1898, 1902, 1905 & 1906 of 2012** **--------------------------------------------------Dated this the 30[th ] day of October, 2012** **J U D G M E N T** ## **MANJULA CHELLUR, C.J** Heard learned counsel for the appellant-Bank as well as learned counsel representing the respondents in the above four appeals. 2. The respondents herein were the writ petitioners before the learned Single Judge in four different writ petitions. 3. It is not in dispute that all these respondents availed loan from the appellant - Bank by pledging the produce grown by them, that is ginger in the lands cultivated by them. It is also not in dispute that it was a short-term loan and the respondentsborrowers failed to re-pay the loan amounts as agreed between the creditors and the borrowers. In terms of contract between the parties, the appellant-Bank is entitled to sell the produce and realize the loan amount availed by the respondents. **W.A.Nos. 1898, 1902, 1905 & 1906 of 2012** 2 4. In that direction process of auction of the produce of ginger which was stored in the warehouse concerned came to be initiated by the appellant- Bank which was objected to by the respondents-borrowers by approaching the learned Single Judge. Their main grievance was that the price of the dry ginger at present is very low as there is no demand in the market and by March, 2013, the prices are likely to go up and therefore they would be able to realize better price for the produce of ginger. As a matter of fact, the respondents/writ petitioners have not placed any study report pertaining to the market with reference to ginger. Therefore, it is very difficult to accept the contention of the respondents/borrowers that in the month of March, the prices are likely to be increased. It is also difficult to accept that at present, the demand is very less for the ginger. 5. Apparently, there was no agreement between the parties permitting the creditor-Bank to sell produce of ginger belonging to the respondents only if the market is favourable to the growers. In the absence of such an agreement between the parties whether the borrower has a vested right to claim the **W.A.Nos. 1898, 1902, 1905 & 1906 of 2012** 3 relief of this nature has to be seen. Apparently, the terms of agreement, on the other hand, automatically permits sale of the pledged produce by the creditor-Bank, the moment the borrower fails to repay the loan amount. It is not in dispute that after Ext.P1, a legal notice to the borrowers way-back in August, 2012 was sent wherein the intention of the Bank to sell the produce pledged with them by the borrowers was categorically expressed, if the amounts due to the Bank are not paid within the time mentioned in the legal notice. 6. None of the respondents/borrowers honoured the said demand of the bank. Therefore, the property came to be brought for sale in a public auction by notice at Ext.P2. In this background, the other contentions raised by the respondents/borrowers that none of the ingredients of S.176 of the Indian Contract Act are complied with. In other words, according to the respondents/borrowers, no proper notice for sale of the produce came to be given by the creditor -Bank before initiating the sale of the produce in a public auction at Ext.P2. Learned counsel for the appellant - Bank relies upon the decision **W.A.Nos. 1898, 1902, 1905 & 1906 of 2012** 4 reported in **Saraswathi Ammal** v. **Kottayam Bank Ltd.** (1950 KLT 143) wherein their Lordships, at length, had discussed what exactly the reasonable notice means as contemplated under S.176 of the Indian Contract Act. In that context, they said when a legal notice was sent demanding the payment due to the bank within seven days and contemplating sale of the secured property, if the amounts are not paid by the borrower within seven days is a reasonable time given to the party concerned as contemplated under S.176. In the present case more than a month prior to sale notice Ext.P2 legal notice was issued indicating all the necessary steps contemplated by the creditor - Bank in case of failure on the part of the borrowers to repay the amounts due to the bank. In that view of the matter, the defence raised by the respondents-borrowers that no reasonable opportunity to repay the amount was given cannot be accepted by this Court. 7. In the absence of any statutory right vested with the respondents-borrowers, the only ground on which some relief could be granted to the borrowers is ground of equity. **W.A.Nos. 1898, 1902, 1905 & 1906 of 2012** 5 Apparently, except the produce, no other security is offered by the respondents-creditors. The apprehension of the Bank is the delay in the process of sale of the produce may bring down the price much lower and ultimately the Bank may not be in a position to recover the entire loan amount. We cannot totally ignore this apprehension of the Bank as well. In that view of the matter, we are of the opinion, as of right, the respondentsdebtors cannot seek postponement of the sale till March, 2013 unless a consent is given by the creditor - Bank. Then alternatively, learned counsel for the respondents-borrowers seek reasonable time to re-pay the amounts due to the Bank in instalments, at least five in number. 8. Having regard to the entire facts and circumstances, we are of the opinion, except on the ground of equity, no other relief could be granted to the respondents, that too, if there is strict compliance of the directions of the Court which are mentioned below. We are of the opinion, payment of the entire amounts due to the appellant-Bank in three equal monthly instalments 6 ## **W.A.Nos. 1898, 1902, 1905 & 1906 of 2012** would be the best concession that could be shown to the respondents-borrowers with single default clause. Accordingly, the appeals are allowed. The judgment of the learned Single Judge is set aside. The respondents-borrowers are given opportunity to repay the entire amounts due to the appellantBank in three equal monthly instalments with a single default clause commencing from 01.12.2012. The Bank is at liberty to sell the produce, if any single default is committed by the respondents-borrowers. **(MANJULA CHELLUR, CHIEF JUSTICE)** **(A.M.SHAFFIQUE, JUDGE)** rka