W. A. No. 1363 of 2021

W. A. No. 1363 of 2021 -1- # **IN THE HIGH COURT OF KERALA AT ERNAKULAM** # **PRESENT** **THE HONOURABLE THE CHIEF JUSTICE MR.S.MANIKUMAR** **&** **THE HONOURABLE MR. JUSTICE SHAJI P.CHALY TUESDAY, THE 8[TH] DAY OF FEBRUARY 2022 / 19TH MAGHA, 1943** **WA NO. 1363 OF 2021** **AGAINST THE JUDGMENT IN WP(C) 6434/2019 OF HIGH COURT OF** **KERALA** ## **APPELLANT/S:** **1 THARA P.S. AGED 55 YEARS W/O.DILEEP KUMAR, CHATHANPARA VEEDU, TC76/2481, VENPALAVATTOM, ANAYARA P.O., THIRUVANANTHAPURAM29. 2 DILEEP KUMAR, AGED 58 YEARS S/O.P.BHASKHARAN, CHATHANPARA VEEDU, TC76/2481, VENPALAVATTOM, ANAYARA P.O., THIRUVANANTHAPURAM29. BY ADVS. THARA P.S.(Party-In-Person) PIRAPPANCODE V.S.SUDHIR** ## **RESPONDENT/S:** **1 THE MANAGER KERALA STATE FINANCIAL ENTERPRISES LIMITED, KOLLAM EVENING BRANCH, KOLLAM. 2 JAYAKRISHNA, W/O.ANANTHAKRISHNAN, ANANDHAPURI, CHEMMAKKAD P.O., KOLLAM. BY ADV MANU RAMACHANDRAN SRI. BINU GEORGE FOR R2** **THIS WRIT APPEAL HAVING COME UP FOR ADMISSION ON** **08.02.2022, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING:** W. A. No. 1363 of 2021 -2- ## **J U D G M E N T** Shaji P. Chaly, J. The appeal is preferred by the petitioners in W. P. (C) No. 6434 of 2019, challenging the judgment of the learned Single Judge dated 20.02.2020, by which the writ court dismissed the relief sought for by the petitioners, to call for the records relating to Ext. P3 award passed by the Lok Adalat dated 10.03.2018 in PLP No. 1418 of 2018. 2. Brief material facts for the disposal of the appeal are as follows:- 3. The 2[nd] respondent had availed Rs. 42,00,000/- by way of chitty transaction from the 1[st] respondent bank for which the appellants stood as guarantors. The 2[nd] respondent, contrary to the said assurance, had defaulted the payments of loan installments and the 1[st] respondent issued notice stating that they are going to initiate revenue recovery proceedings. 4. A pre-litigation petition was filed before the District Legal Services Authority, Kollam by the 1[st] respondent as PLP No. 1418 of 2018 and notice was issued to all the parties in the said petition. The W. A. No. 1363 of 2021 -3- appellants participated in the Adalat on 10.03.2018. The 2[nd] respondent had not participated in the Adalat. Thereafter an award was passed by the by the Adalat dated 10.03.2018, which reads thus:- “Petitioner present. R1 absent. The petitioner relinquished its claim against R1. R2 and R3 present. The case is settled between the petitioner and R2 and R3 for an amount of Rs. 56,00,000/- (Fifty Six Lakhs) and they agreed to pay the said amount on or before 30.06.2018. Failing which the petitioner is at liberty to realize Rs. 60,79,804/- with 6% interest per annum from R2 and R3 and from their assets." 5. The case of the appellants is that the appellants have studied only up to 10[th] standard; they did not know anything regarding the procedures in the Adalat and the members of the Adalat had not informed them anything regarding the proceedings in the Adalath. If they were informed, they could have availed the service of a lawyer. But the 1[st] respondent taking advantage of the ignorance of the appellants obtained an award from the Lok Adalat, which is not signed by the 2[nd] respondent. 6. Appellants have also submitted that the members in the Adalat did not ask anything regarding the issue and discussion was with the 1[st] respondent only. There was unholy alliance between the 1[st] W. A. No. 1363 of 2021 -4- and 2[nd] respondent and that is the reason for absolving the principal borrower from the liability. Appellants are only guarantors and the liability to pay the money is upon the 2[nd] respondent. 7. Appellants have further submitted that the procedure followed in the Adalat was improper and illegal. Appellants are not properly enlightened about the situation and they are forced to sign on the paper shown by the 1[st] respondent. The 2[nd] respondent is the principal borrower and her liability cannot be waived off. The award passed by the Lok Adalat is illegal and is liable to be set aside. 8. The Kerala State Financial Enterprises Ltd., Kollam, the 1[st] respondent, has filed a counter affidavit dated 11.10.2019 in the writ petition, wherein it is submitted that the averment that the KSFE has relinquished the claim over the principal borrower and fixed entire liability on the appellants, the sureties of the principal debtor, is false and made by the appellants with ulterior motive and suppressing real facts. 9. It is submitted that the 2[nd] respondent subscribed chitty No.125/2013-17 for a total amount of 60 Lakhs with a period of 40 months. The subscription amount for each month was to the tune of W. A. No. 1363 of 2021 -5- Rs.1,50,000/- and she received 42 Lakhs as prize money on 06.11.2013 by pledging 17.70 Ares of property in resurvey No. 66/341, 66/3 of Palliyoor Village, Chengannoor Taluk belonging to her husband Sri Ananthakrishna Pillai. Subsequently on 27.03.2014, the above security was replaced by another property having an extent of 12 cents comprising re-survey No.1570/1-1, 1569/1-1 of Kadakampally Village, Thiruvananthapuram Taluk belonging to the appellants. The 2[nd] respondent defaulted the installments from 23.06.2014 and the chitty in question was terminated on 22.12.2016. 10. It is further submitted that appellants have appeared on the basis of notice issued from the Adalat conducted by the District Legal Service Authority, Kollam and participated in the Adalat and after a lengthy discussion, assured that they will make payment of the entire loan amount due from 2[nd] respondent, within a time frame, as evident by Ext P3, in order to avoid the legal actions against their property mortgaged with KSFE. Appellants have subscribed their signature fully understanding and accepting the terms on the award which was in fact formulated based on the discussions held with them in the Adalat. The allegation that the appellants were induced to sign the document under misrepresentation that the same is a security till the W. A. No. 1363 of 2021 -6- payment was made by the 2[nd] respondent is false. Appellants have signed the terms which lead to Ext.P3 award, fully understanding the terms and nature of the agreement entered into by them and they cannot turn around from the same. 11. It is also submitted that the Adalat conducted by District Legal Service Authority, Kollam is a solemn proceedings akin to proceedings of a Court of law and Ext. P3 award passed after parties therein have mutually agreed and subscribed signatures are nothing but decree of a Civil Court and if the appellants are allowed to turn around or withdraw from the same, it will occasion miscarriage of justice and mock the legal proceedings. 12. That apart Ext. P3 award was passed as per the assurance in writing given by the appellants, the sureties of 2[nd] respondent, in order to avoid legal action against their property which is mortgaged with the KSFE, the 1[st] respondent. It is not a variance in the terms of the contract between principal debtor and the creditor, but it is an additional agreement entered between surety, in exclusion of principal debtor, when the creditor was in the course of proceedings to realize the arrears/dues of the principal debtor from the mortgaged property W. A. No. 1363 of 2021 -7- of surety. The terms in Ext. P3 to the tune that the KSFE has relinquished its claim against 2[nd] respondent herein is only to mean that the action of recovery proposed on the dues of the 2[nd] respondent was dropped in view of the assurance / agreement entered by the appellants, sureties of the 2[nd] respondent herein. The liability of the 2[nd] respondent and the appellants are co-extensive and the 1[st] respondent is having the right to proceed against any of them according to the convenience. 13. Moreover, appellants, being literate and of sound mind, cannot be heard to say that they subscribed their signature in the documents without fully understanding the nature and consequence of the same. 14. The 2[nd] respondent has also filed a counter affidavit dated 18.11.2019 wherein it is alleged that the entire amount availed from the chitty was taken by the appellants on the agreement that the appellants will repay the chitty installments without making default. As per the agreement, appellants are liable to pay chitty installments to the 1[st] respondent on behalf of the 2[nd] respondent. The 2[nd] respondent has informed the appellants about the notices sent by the W. A. No. 1363 of 2021 -8- 1[st] respondent without any delay and the appellants promised that they will clear the entire arrears towards the chitty with the 1[st] respondent. Appellants also promised that they will appear before the Adalat and make arrangements for settling the issue with the 1[st] respondent and directed the 2[nd] respondent that the 2[nd] respondent need not appear before the Adalat. 15. The learned writ court, after considering the rival submissions and taking into account the pleadings contained in the writ petition, the counter affidavits filed by the respondents and the documents on record, has dismissed the writ petition holding as follows:- “5. Having heard the learned counsel appearing on both sides and having considered the contentions advanced, I am of the opinion that the petitioners, being sureties to transactions between the 1[st] and 2[nd] respondents, cannot contend that they are not liable to pay any amounts. Even de hors Ext.P3, the respondents can proceed against the properties of the petitioners, in view of the fact that they stood as sureties to transactions of the 2[nd] respondent and repayment was admittedly defaulted. I find no sustainable grounds raised as against Ext.P3 in the writ petition. Petitioners, who had admittedly affixed their signature to the agreement cannot be heard to contend that they W. A. No. 1363 of 2021 -9- are not bound by the Award. I am of the opinion that the prayer in this writ petition cannot be granted. In case the petitioners have any contention with regard to the liabilities of the 2[nd] respondent, it is for the petitioners to raise the same in appropriate proceedings against the 2[nd] respondent. Reserving the said liberty, the writ petition is closed. ” 16. It is thus challenging the legality and correctness of the judgment, the appeal is preferred. 17. The paramount contentions advanced by the appellants are that the procedure laid down in the Legal Services Authorities Act, 1987, has not been complied by the District Legal Services Authority, Kollam; the appellants have studied only up to 10[th] standard and they did not know anything regarding the procedures in the Adalat; the members in the District Legal Services Authority, Kollam, had not informed the appellants regarding the procedures to be followed in the Lok Adalat; members in the Adalat did not ask anything regarding the issue and discussions was with 1[st] respondent only and the strange decision of the 1[st] respondent relinquishing their claim over the principal debtor itself is sufficient to hold that a fraudulent act was committed by the 1[st] respondent. W. A. No. 1363 of 2021 -10- 18. It is further submitted that the contention of the 1[st] respondent that the matter has been settled between appellants and the 1[st] respondent, and the appellants agreed to pay the liability due to the 1[st] respondent is wrong as the appellants never accepted any such proposal made by the 1[st] respondent. Writ court ought to have looked into the fact that the appellants stood as guarantors on the belief that the 2[nd] respondent will clear the loan liability by regularly paying the EMI. 19. It is also contended that the writ court had not considered the issue raised under Section 139 of the Indian Contract Act, 1872 which states that if the creditor does any act, which is inconsistent with the rights of the surety, or omits to do any act which his duty to the surety requires him to do and the eventual remedy of the surety himself against the principal debtor is thereby impaired, the surety is discharged. The award does not mention regarding the right of the surety to realize the amount from the 2[nd] respondent and that itself impair the right of the surety. 20. Appellants have submitted that as per section 20(2) of the Legal Service Authorities Act, 1987, when one of the parties file an W. A. No. 1363 of 2021 -11- application before the Legal Service Authority for referring a matter to the Lok Adalat, the authority shall refer the said matter to the Lok Adalat, only after hearing the other party. In the instant case, the appellant was not heard by the Legal Service Authority before referring the matter to the Lok Adalat. Unless conditions laid down under section 20(2) are satisfied, which are sine qua non for valid reference before the Lok Adalat, Lok Adalat can have no jurisdiction to settle the dispute referred to it. 21. Appellants have further submitted that in the instant case, the award passed by the Lok Adalat does not contain the signature of the 2[nd] respondent, who was a party to the proceedings. As per the dictum laid down by a Hon'ble Division Bench of this Court in **Leela v. Manager, M/s. National Insurance Co. Ltd. [2008 (1) KHC 564]** ; in view of Regulation 33 of the Kerala State Legal Services Regulation, 1998, an award passed by the Lok Adalat without the signatures of all the parties to the proceedings is liable to be set aside. The procedure laid down in Regulation 17 was also not complied by the District Legal Services Authority. 22. We have heard, learned counsel for the appellant Mr. W. A. No. 1363 of 2021 -12- Pirappancode V. S. Sudhir assisted by Sri. Akash S., Sri. Manu Ramachandran for the Kerala State Financial Enterprises Ltd. and Sri. Binu George for the 2[nd] respondent and perused the pleadings and material on record. 23. The question emerging for consideration is whether any interference is required to the judgment of the learned Single Judge. 24. As discussed above, the appellants herein on receipt of notice appeared before the Lok Adalat, participated in the proceedings and settled the matter even in the absence of the principal debtor / the 2[nd] respondent in the appeal, namely one Jayakrishna, w/o Ananthakrishnan, Anandhapuri, Chemmakkad P. O., Kollam. Therefore the appellants are not at liberty to turn around and rely upon Section 139 of the Contract Act, 1872 dealing with discharge of surety by creditor's act or omission impairing sureties eventual remedy, which specifies that if the creditor does any act which is inconsistent with the rights of the surety, or omits to do any act which his duty to the surety requires him to do, and the eventual remedy of the surety himself against the principal debtor is thereby impaired, then the surety is discharged. W. A. No. 1363 of 2021 -13- 25. Therefore Section 139 cannot be applied automatically in all and every circumstances. The phraseologies employed thereunder makes it clear that the liability of the surety would stand discharged under the circumstances specified thereunder including the impairment of the remedy of the surety himself against the principal debtor. 26. Merely because the appellants have agreed to pay the amount in lieu of the sale of the property provided by them towards security for the chitty / loan transaction that will not take away the right of the appellants to seek indemnification under Section 145 of the Indian Contract Act, 1872. 27. Section 145 dealing with implied promise to indemnify surety makes it clear that, in every contract of guarantee there is an implied promise by the principal debtor to indemnify the surety; and the surety is entitled to recover from the principal debtor whatever sum he has rightfully paid under the guarantee but no sums which he has paid wrongfully. 28. On a close analysis of the said provision, it is quite clear and evident that nothing stands in the way of the appellants from seeking W. A. No. 1363 of 2021 -14- indemnification of the amount if any paid by the appellants against the guarantee offered by them in the alleged transaction availed by the 2[nd] respondent. 29. Even though the appellants have a contention that they did not actually understood the proceedings before the Lok Adalat, they have not raised any contention that they were not aware of the consequences of the guarantee offered by them against the transaction in question. 30. So also a writ court is not expected to act on a mere statement in a writ petition, that the appellants did not properly conceive before the Lok Adalat, the proceedings and grant relief without any supporting materials to establish the same. 31. Moreover it is well settled in law that a settlement entered in a Lok Adalat cannot be normally interfered with unless fraud, misrepresentation or act of such degree is alleged by the aggrieved person and established before the Court. Taking into account all the factual and legal circumstances, we have no hesitation to hold that the appellants have not made out any W. A. No. 1363 of 2021 -15- case for interference with the judgment of the learned Single Judge there being no jurisdictional error or other legal infirmities justifying us to do so in an intra court appeal filed under Section 5 of the Kerala High Court Act, 1958. Upshot of the above discussion is, the writ appeal fails, accordingly it is dismissed. **Sd/-** **S. MANIKUMAR CHIEF JUSTICE** **Sd/SHAJI P. CHALY JUDGE** Eb ///TRUE COPY/// P. A. TO JUDGE