WA Nos. 26 of 2023 & 128 of 2023 (Annam Steels Pvt. Ltd. & others v. Canara Bank Ltd., Punjab National Bank & Igniva PS Private Limited)

## **IN THE HIGH COURT OF KERALA AT ERNAKULAM** **PRESENT** **THE HONOURABLE MR. JUSTICE A.MUHAMED MUSTAQUE** **&** **THE HONOURABLE MRS. JUSTICE SHOBA ANNAMMA EAPEN** **WEDNESDAY, THE 25[TH] DAY OF JANUARY 2023 / 5TH MAGHA, 1944** **WA NO. 26 OF 2023** **AGAINST THE JUDGMENT IN WP(C)NO.24561/2022 DATED 04.01.2023** **APPELLANTS/PETITIONERS IN THE WRIT PETITION:** - **1 M/S.ANNAM STEELS (P) LTD., AGED 52 YEARS, OFFICE AT 11/40E, FASHION TOWER, CHEROOTY ROAD, KOZHIKODE, REPRESENTED BY ITS MANAGING DIRECTOR E.T.FIROZ, PIN – 673001.** - **2 E.T.FIROZ, AGED 52 YEARS, S/O.E.T.MUHAMMED BASHEER, SOUMYA, 2/1788A, FLORICAN ROAD, KALATHI AVENUE, CIVIL STATION, MALAPPARAMBU, KOZHIKODE, PIN – 673030.** - **3 A.T.MUHAMMED ALI, AGED 65 YEARS, S/O.AHAMMED A.T., NADUVILAKANDI KURACKAL HOUSE, 12/61, KUTTIKKATTOR (P.O.), KOZHIKODE, PIN – 673008.** - **4 MOHAMMED FAVAS, AGED 42 YEARS, S/O. KUNHI MOIDEEN KUTTY, FLAT NO.12 B, SKYLINE OCEANIC, OCEANIC, BEACH ROAD, KOZHIKODE, PIN – 673032.** - **5 ANNEES ADAM K.M., AGED 38 YEARS, S/O.T.MUNEER, KOYAPPATHODI VILLA, KRISHNAN NAIR, ROAD, MALIKADAVU, NEAR GOVT. ITI, KOZHIKODE, PIN – 673010.** - **6 SYED MUHAMMED THAYYIL,S/O AGED 60 YEARS S/O.THAYYIL KHADAR HAJI, THAYYIL HOUSE, KATTACHIRA, B.P.ANGADI (P.O.), VENGALOOR, TIRUR, MALAPPURAM, PIN – 676102.** - **7 V.ABDUL RAZZACK, AGED 65 YEARS, S/O.MUHAMMED, BARIKODAN HOUSE, ERNAD, MALAPPURAM, PIN – 673639.** - **8 ABDUL LATHEEF, AGED 67 YEARS, RAFA PARK HOUSE, THALASSERY, KANNUR, PIN – 670101.** - **9 DR.T.AHAMMED THOTTIYIL, AGED 68 YEARS, THOTTIYIL HOUSE, KOTTAKKAL.P.O, MALAPPURAM, PIN – 676503.** W.A.Nos.26 & 128/2023 2 **10 P.K.SIVADASA MENON, AGED 54 YEARS, LAKSHMI KRIPA, NORTH PARUR, ERNAKULAM, PIN – 673032.** **BY ADVS. S.EASWARAN ABRAHAM JOSEPH MARKOS JOSEPH KODIANTHARA (SR.)(J-381) V.ABRAHAM MARKOS(K/354/1975) ISAAC THOMAS(K/571/2014) ALEXANDER JOSEPH MARKOS(K/001270/2018) SHARAD JOSEPH KODANTHARA(K/001677/2018) JOHN VITHAYATHIL(K/001877/2021) AIBEL MATHEW SIBY(K/1376/2020)** ## **RESPONDENTS/RESPONDENTS IN THE WRIT PETITION:** **1 M/S.CANARA BANK LTD., CHEROOTY ROAD BRANCH, COURT ROAD, KOZHIKODE, REPRESENTED BY ITS CHIEF MANAGER AND AUTHORISED OFFICER, PIN – 673001.** **2 M/S.PUNJAB NATIONAL BANK, EROTH CENTRE, BANK ROAD, KOZHIKODE, REPRESENTED BY ITS CHIEF MANAGER, PIN – 673001.** - **3 IGNIVA PS PRIVATE LIMITED, CALICUT TRADE CENTRE, SAROVARAM BIO PARK, SAROVARAM, ERANHIPALAM, KOZHIKODE-673020, REPRESENTED BY ITS MANAGING DIRECTOR,** **(IMPLEADED AS PER ORDER DATED 24.8.2022 IN I.A.NO.3/2022)** **BY ADVS. C.AJITH KUMAR PRAVEEN.H.** **THIS WRIT APPEAL HAVING COME UP FOR ADMISSION ON 25.01.2023, ALONG WITH W.A.NO.128/2023, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING:** W.A.Nos.26 & 128/2023 3 ## **IN THE HIGH COURT OF KERALA AT ERNAKULAM** ## **PRESENT** **THE HONOURABLE MR. JUSTICE A.MUHAMED MUSTAQUE** **&** **THE HONOURABLE MRS. JUSTICE SHOBA ANNAMMA EAPEN WEDNESDAY, THE 25[TH] DAY OF JANUARY 2023 / 5TH MAGHA, 1944 WA NO. 128 OF 2023** **AGAINST THE JUDGMENT IN WP(C) NO.24561/2022 DATED** **04/01/2023** ## **APPELLANTS/RESPONDENTS 1 & 2 IN WRIT PETITION:** - **1 M/S. CANARA BANK, CHEROOTY ROAD BRANCH, COURT ROAD, KOZHIKODE - 673 001, REPRESENTED BY ITS CHIEF MANAGER AND AUTHORIZED OFFICER, PIN – 673001.** - **2 M/S.PUNJAB NATIONAL BANK, EROTH CENTRE, BANK ROAD,** **KOZHIKODE - 673 001, REPRESENTED BY ITS CHIEF MANAGER, PIN – 673001.** **BY ADV C.AJITH KUMAR** ## **RESPONDENTS/PETITIONERS & 3RD RESPONDENT IN WRIT PETITION:** - **1 M/S.ANNAM STEELS PVT. LTD., OFFICE AT 11/40E, FASHION TOWER, CHEROOTY ROAD, KOZHIKODE, PIN - 673 001, REPRESENTED BY ITS MANAGING DIRECTOR, E.T.FIROZ., PIN – 673001.** - **2 E.T.FIROZ, S/O.E.T.MUHAMMED BASHEER, SOUMYA, 2/1788A, FLORICAN ROAD, KALATHIL AVENUE, CIVIL STATION, MALAPPARAMBU, KOZHIKODE, PIN – 673020.** - **3 A.T.MUHAMMED ALI, S/O.AHAMMED A.T, NADUVILAKANDI KURACKAL HOUSE, 12/61, KUTTIKKATTOOR (P.O), KOZHIKODE, PIN – 673008.** W.A.Nos.26 & 128/2023 4 - **4 MUHAMMED FAVAS, S/O.KUNHI MOIDEEN KUTTY, FLAT NO.12B, SKYLINE OCEANIC, BEACH ROAD, KOZHIKODE, PIN – 673032.** - **5 ANEES ADAM K.M., S/O.T.MUNEER, KOYAPPATHODY VILLA, KRISHNAN NAIR ROAD, MALIKADAVE, NEAR GOVT. ITI, KOZHIKODE-673 010, PIN – 673010.** - **6 SYED MUHAMMED THAYYIL, S/O.THAYYIL KHADAR HAJI, THAYYIL HOUSE, KATTACHIRA, B.P.ANGADI (P.O), VENGALOOR, TIRUR, MALAPPURAM, PIN – 676102.** - **7 V.ABDUL RAZACK, S/O.MUHAMMED, BARIKODAN HOUSE, ERNAD, MALAPPURAM, PIN – 673639.** - **8 ABDUL LATHEEF, RAFA PARK HOUSE, THALASSERY, KANNUR, PIN – 670101.** - **9 DR.T.AHAMMED THOTTAYIL, THOTTIYIL HOUSE, KOTTAKKAL (P.O), MALAPPURAM, PIN – 676503.** - **10 P.K.SIVADASA MENON, S/O.P.K.BALASUNDARA MENON, LAKSHMI KRIPA, NORTH PARUR, ERNAKULAM-673 032, PIN – 673032.** - **11 IGNIVA PS PRIVATE LIMITED, CALICUT TRADE CENTRE, SAROVARAM BIO PARK, SAROVARAM, ERANHIPALAM, KOZHIKODE, REPRESENTED BY ITS MANAGING DIRECTOR, PIN – 673020.** ## **BY ADV S.EASWARAN** **THIS WRIT APPEAL HAVING COME UP FOR ADMISSION ON 25.01.2023, ALONG WITH W.A.NO.26/2023, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING:** W.A.Nos.26 & 128/2023 5 ## **JUDGMENT** ## **[W.A.Nos.26/2023 & 128/2023]** ## **A.Muhamed Mustaque, J.** These appeals arise from the judgment of the learned single Judge in W.P.(C) No.24561/2022 dated 04.01.2022, the reliefs sought in the writ petitions are as follows: “ _a) Issue a writ of certiorari or other appropriate writs, directions or orders calling for the records leading upto Exhibit P11 sale notice and quash the same. aa) Issue a writ of certiorari or other appropriate writs directions or order calling for the records leading to sale of e auction of the property covered by Exhibit P11 and set aside the same. ab) Issue a writ of mandamus or other appropriate writs directions or order declaring that the act of 1st respondent in accepting the bid submitted by 3rd respondent is in violation to the terms of conditions of sale under Exhibit P11 and the provisions of the Security_ W.A.Nos.26 & 128/2023 6 _Interest(Enforcement) Rules 2022._ - _b) Issue a writ of mandamus or other appropriate writs, directions or orders restraining the respondents from proceeding further with Exhibit P11._ - _c) Issue a writ of mandamus or other appropriate writs directions or orders directing the respondents to convene the consortium meeting in order to enable the petitioner to have their request for one time settlement considered by the banks._ - _d)Issue a writ of mandamus or other appropriate writs directions or orders, directing the respondents to keep in abeyance all further proceedings in MC No.453 of 2017 on the files of CJM Court, Kozhikode.”_ 2. Ext.P1 sale notice issued by Consortium of bank. One of the items of properties mortgaged with them. Before the writ court, a contention was raised whether the earnest money deposited by one of the promoters of the company prior to incorporation be treated as an earnest money deposit(EMD) made on behalf of the bidding company ## W.A.Nos.26 & 128/2023 7 at the auction. Admittedly, one Yousuf Pangat took part in the auction and deposited an EMD of Rs.79 lakhs. Thereafter, the promoter submitted the tender and deposited the entire amount. The learned single Judge answered the question, affirming it in favour of the company and held that the sale taken place pursuant to Ext.P11 notice is valid. Accordingly, dismissed the writ petition. However, while dismissing the writ petition, the learned single Judge ordered the return of Rs.790 lakhs deposited by the writ petitioners pursuant to the interim order of the Court. Challenging the dismissal of the writ petition, the writ petitioners have come up with W.A.No.26/2023. The Consortium of bank aggrieved by an order of refund has come up with W.A.No.128/2023. 3. We heard the learned senior counsel appearing for the writ petitioners and the learned senior counsel appearing for the company, the ## W.A.Nos.26 & 128/2023 8 auction purchaser, and also Sri.C.Ajith Kumar, appearing for the Consortium of bank. 4. The learned senior counsel appearing for the writ petitioners would submit that the learned single Judge ought not to have gone into the question on the disputed question of facts and decided the validity of the sale. It is fairly submitted that the writ petitioners will invoke the statutory remedy available under Section 17 of the Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (for short, SARFAESI Act) before the Debts Recovery Tribunal. The learned senior counsel for the company, the auction purchaser, submitted that it is the writ petitioners who invited the decision by the learned single Judge and after obtaining an adverse judgment, the writ petitioners now cannot assail the same in the writ appeal. W.A.Nos.26 & 128/2023 9 5. It is pointed out that in the earlier order of maintainability, the learned single Judge observed that the writ petitioners have an efficacious remedy before the Debts Recovery Tribunal. It is submitted that as against the order of the learned single Judge challenging the interim order, an appeal was filed before this Court and the said appeal was also dismissed. Thereafter, SLP filed before the Apex Court has also been dismissed. Therefore, without resorting to the alternative remedy the writ petitioners invited the judgment on merits. 6. The learned counsel for the Consortium of bank would submit that they are entitled to retain the amount deposited pursuant to the interim order of the court in the light of the judgment of the Apex Court in **Bank of Baroda v. Karwa Trading Company and Another [(2022) 5 SCC 168** ]. It is submitted that the liability is running to more than Rs.251 crores and only one property has been ## W.A.Nos.26 & 128/2023 10 auctioned and sold. It is also submitted that the proceedings are initiated in respect of the other property to recover the balance amount due. 7. The validity of the sale, cannot be questioned in a writ jurisdiction unless there is a glaring illegality committed in issuing the sale notice. The Apex Court has reminded this Court not to entertain the challenge against the sale as the borrower has an efficacious alternative remedy under the statute before the Debts Recovery Tribunal. It is true that the present dilemma has arisen as the writ petitioners have gone to argue the case on merits. 8. It appears that the writ petitioners, as well as the Consortium of bank, persuaded the learned single Judge to take a decision on merit for the reason that based on the interim order the writ petitioners had deposited Rs.790 lakhs. We are of the view that this Court ought not to have entertained any challenge regarding the sale as ## W.A.Nos.26 & 128/2023 11 the writ petitioners are having an efficacious alternative remedy under the statute invoking Section 17 of the SARFAESI Act. However, the question arises in regard to the payment effected by the writ petitioners pursuant to the interim order. The authority to retain the amount or its appropriation, would depend upon the outcome of the decision in regard to the challenge regarding the sale. Therefore, in what manner, the amount deposited pursuant to the interim order can be appropriated, is left open for the decision by the Debts Recovery Tribunal. We are of the view that the impugned judgment has to be set aside as this Court ought not to have entertained the challenge regarding the sale. The auction was confirmed on 5.9.2022. That will be subject to any challenge before the Debts Recovery Tribunal. In view of the particular circumstances of the case, we grant three weeks' time to the writ petitioners to move to the Debts Recovery Tribunal. The W.A.Nos.26 & 128/2023 12 delivery in respect of the property sold in auction in favour of the third respondent will be deferred for a period of four weeks. We make it clear that we are not interfering with the proceedings initiated in respect of the other properties in Ext.P13 notification. The Debts Recovery Tribunal shall take up the interim application at the earliest considering the outer limit fixed by this Court deferring delivery. The impugned judgment is set aside. The writ appeals are disposed of with the observations and the directions as above. The Debts Recovery Tribunal shall proceed in accordance with law untrammelled by any observations and findings in the impugned judgment. No costs. Sd/- ## **A.MUHAMED MUSTAQUE, JUDGE** ## **Sd/-** ## **SHOBA ANNAMMA EAPEN,** ## **JUDGE** ln