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2009 DIGILAW 970 (KER)

Haleema Ibrahim v. Kerala Financial Corporation

2009-10-14

C.N.RAMACHANDRAN NAIR, V.K.MOHANAN

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Judgment :- Ramachandran Nair, J. In these connected writ petitions, three are filed by the defaulter and two are filed by the purchaser of the defaulter's property in the auction conducted by the Kerala Financial Corporation in recovery proceedings. 2. We have heard counsel appearing for both sides and the Standing Counsel appearing for the Kerala Financial Corporation. 3. The loan availed of for business purpose was around Rs.18 lakhs in the year 1992. However, shortly thereafter, the borrower committed default which led to initiation of recovery proceedings. At first, the K.F.C. exercised their authority under Section 29 of the State Financial Corporations Act, 1951 (for short 'S.F.C. Act') and took over possession of the industrial unit. Even though the borrower was granted the O.T.S. benefit, she could not make the payment under the O.T.S.Scheme. However, when the property was notified for sale, the borrower filed writ petition before this Court in which this Court granted stay against confirmation of sale for a short period. The said stay expired on 21.3.2005. The purchaser of property had deposited only Rs.50,000/-. Even though the stay expired on 21.3.2005, the K.F.C. issued a conditional order of confirmation of sale to the purchaser on 20.3.2006 which is produced as Ext.P2 in W.P.(C) No.2526 of 2009. One of the conditions for confirmation of sale was payment of balance sales price of Rs.38.50 lakhs within 15 days from the date of receipt of the said letter issued by the K.F.C. Admittedly, the purchaser did not make the payment, but challenged the conditions imposed in the letter issued by the K.F.C. Since the auction purchaser did not comply with the terms imposed by the K.F.C. including payment of balance consideration, the K.F.C. again offered O.T.S. benefit to the defaulter. The defaulter accordingly remitted Rs.26 lakhs in instalments. Even though the defaulter accepted the O.T.S.Scheme and made substantial payments, there was still delay in payment of interest portion for the payment of which she again applied for time. It is seen from Ext.P12 produced in W.P.(C) No.29472 of 2008 that the K.F.C. allowed the defaulter to finally settle the liability on payment of a further amount of Rs.6 lakhs towards the interest by 30.8.2008. In fact, when the defaulter filed the said writ petition, this Court granted interim order granting time to pay Rs.6 lakhs in terms of the demand made by the K.F.C. by 31.10.2008. In fact, when the defaulter filed the said writ petition, this Court granted interim order granting time to pay Rs.6 lakhs in terms of the demand made by the K.F.C. by 31.10.2008. According to the defaulter/petitioner, the entire liability is settled under the O.T.S.Scheme by 31.10.2008 and the only violation of the condition imposed by the K.F.C. is two months delay in payment of Rs.6 lakhs. 4. The position as of now is that the defaulter has settled the full liability under the O.T.S.Scheme during the pendency of confirmation of sale of the property by the K.F.C. to the purchaser. According to the counsel appearing for the defaulter, the sale was never confirmed and Ext.P2 produced in W.P.(C) No.2526 of 2009 is only an offer to confirm the sale provided auction purchaser agrees with the terms offered by the K.F.C. On the other hand, counsel appearing for the auction purchaser contended that sale is confirmed by Ext.P2 and all what the auction purchaser contested before this Court was the unreasonable conditions imposed by the K.F.C. We are of the view that even if Ext.P2 is taken as a confirmation letter, the auction purchaser cannot claim the benefit because admittedly he was not satisfied with the conditions. In fact, the fundamental condition imposed under Ext.P2 is payment of balance sale consideration of Rs.38.5 lakhs within two weeks from the date of issue of Ext.P2. Going by Ext.P2, the auction purchaser should have deposited Rs.38.5 lakhs by 5.4.2006. On the other hand, instead of making payment, the auction purchaser has chosen to contest the conditions imposed in the confirmation letter issued by the K.F.C. before this Court. We do not find anything unreasonable in the conditions imposed by the K.F.C. because all what is stated is that sale deed could be executed only after pending cases are over and sale confirmation will be subject to the result of the cases pending in the court. There is nothing wrong in the financial institution making sale subject to the result of the litigation pending among parties in civil court and in the High Court. It was absolutely open to the auction purchaser either to accept the terms or to claim refund of the advance made by him. There is nothing wrong in the financial institution making sale subject to the result of the litigation pending among parties in civil court and in the High Court. It was absolutely open to the auction purchaser either to accept the terms or to claim refund of the advance made by him. Even though the sale was contracted way back in March 2005, after four years, the total payment made by the auction purchaser is only Rs.2.6 lakhs whereas the defaulter has settled the full liability by making the full payment in terms of the O.T.S.Scheme granted by the K.F.C. Even though auction purchaser contested the grant of O.T.S. benefit to the defaulter, we do not think, there is anything wrong or illegal about grant of OTS benefit by the financial institution to the borrower. In fact the benefit granted is not unique in the case of one borrower, but on the other hand the O.T.S. is a general scheme usually granted to borrowers basically to revive the industry for their business or at least, to ensure the retention of mortgaged properties. It is to be noted that financial institution is under the control of the Government and therefore, always Government policies are to encourage financial institution and even commercial banks to make sacrifices in favour of borrowers to help them to tide over their financial crisis. We do not find anything unusual in the O.T.S. benefit granted to the defaulter, because even when physical possession of the unit was taken over by the K.F.C. under Section 29 of the S.F.C. Act, she could not make payment to retrieve possession. Further, in respect of a loan of Rs.18 lakhs advanced in 1992, the K.F.C. has already received Rs.32 lakhs in instalments. We are therefore of the view that the O.T.S. benefit granted is also quite equitable and without making major sacrifices by the financial institution. However, we feel, the purchaser is entitled to be compensated with interest. It is stated that Rs.50,000/- was paid in January 2005 and balance of Rs.2,10,000/- on 24.8.2006. The sale happened only on account of chronic default by the defaulter and therefore, interest is payable by the defaulter viz., Mrs. Haleema Ibrahim. The writ petitions are accordingly disposed of directing the defaulter viz., Mrs. It is stated that Rs.50,000/- was paid in January 2005 and balance of Rs.2,10,000/- on 24.8.2006. The sale happened only on account of chronic default by the defaulter and therefore, interest is payable by the defaulter viz., Mrs. Haleema Ibrahim. The writ petitions are accordingly disposed of directing the defaulter viz., Mrs. Haleema Ibrahim to give a demand draft for simple interest at the rate of 15% per annum up to 15th October, 2009 on the amounts deposited by the auction purchaser. The interest payable will be worked out and informed by the K.F.C. The borrower will make payment of interest within three weeks from the date of receipt of this judgment and the K.F.C. shall refund the amount deposited by the auction purchaser within two weeks from the date of production of a copy of this judgment. The Interlocutory Applications in W.P.(C) No.2526 of 2009 (i.e., I.A.Nos.12497 & 12496 of 2009) seeking for a direction to take appropriate action to be initiated against Officers of first respondent and third respondent do not survive and the above petitions are closed. I.A.No.11254 of 2006 in W.P.(C) No.4711 of 2005 is closed.