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2012 DIGILAW 886 (KER)

P. K. Thampi Raj v. State Bank of Travancore

2012-09-25

C.N.RAMACHANDRAN NAIR, P.S.GOPINATHAN

body2012
JUDGMENT :- Ramachandran Nair, J. The first appellant died during pendency of this Writ Appeal, and the 2nd appellant being his wife, we permitted impleadment of the three children of the appellants' as additional appellants 3 to 5 by allowing impleading application i.e. I.A.No.711/2012. The original appellants, who are husband and wife, availed a loan of Rs.15,000/- from State Bank of Travancore 30 years back and committed default. The Bank filed suit which was decreed in 1984 for an amount of Rs 19,500/-. The mortgaged property which was a commercial building in the town with appurtenant land was let out on rent and even by attachment and recovery of rent for a little over one year would have been sufficient to recover the decree- debt of less than Rs 20,000/-. The 2nd appellant, who is the co-borrower with her late husband, who is no more, is in a parallelized condition on account of Meningitis. Among their three children, one daughter is mentally retarded and one child is a psychiatric patient. The family in these conditions could not prevent sale of the mortgaged property in execution proceedings. In the sale conducted by the Bank in execution proceedings, the Bank purchased the property for the decree amount. Instead of selling the property the Bank retained it and continued to collect rent of Rs. 1,41,600/- in the course of a few years. Even though rent collection itself was sufficient to absolve the decree amount of Rs 19,500/-with future interest, and in fairness, the Bank could have returned the property to the borrowers who were in miserable plight and unable to look after their interest in the way clever people do, they sold the property on 10/07/2007 for Rs. 10,10,001/-. On coming to know about the huge profit made by the Bank in sale of the appellants' property, the deceased borrower along with his co- borrower, who is the sick wife, approached the Bank for refund of sale proceeds after setting off the loan amount and interest and other cost incurred. When the Bank declined, the appellants approached this Court with Writ Petition which was dismissed by the learned Single Judge stating the legal position that decree holder can purchase the property in execution proceedings with the permission of Court, and since the Bank has become absolute owner it can sell the property as it's own and make profit. When the Bank declined, the appellants approached this Court with Writ Petition which was dismissed by the learned Single Judge stating the legal position that decree holder can purchase the property in execution proceedings with the permission of Court, and since the Bank has become absolute owner it can sell the property as it's own and make profit. It is against this judgment, this Writ Appeal is filed by the appellants, and the first appellant once personally appeared before us and explained his plight and that of his family members and he died shortly thereafter. 2. Taking note of the miserable conditions of family and the huge profit made by the Bank totaling Rs. 1,51,601/- by way of sale consideration and rent collection from appellants' building, which is far in excess of the decree amount of Rs. 19,500/-in 1984 and future interest thereof until recovery, and having regard to the technical finality of the legal proceedings which is in favour of the Bank, we issued an interim order on 15/06/2012 holding that what will be considered by this Court in writ proceedings is whether injustice is done, no matter the same is perpetuated in accordance with procedure prescribed by law, and if satisfied, this Court will deem it our obligation to grant relief in exercise of the extra ordinary jurisdiction conferred on us under Article 226 of the Constitution of India. The respondents being a Public Sector Bank with Head Office and operations mostly in this State, we directed the Managing Director and if he does not want to decide by himself, the Board of Directors to take a decision in fairness and on compassionate ground to refund at least a portion of the profit obtained on sale of appellants' property to them which we felt they could do at least as part of their corporate social responsibility which is being statutorily reconsidered in this country. Learned Standing Counsel today produced copy of the minutes of the Director Board meeting of the Bank held on 10/09/2012 refusing to refund any amount to the appellants by stating that they are otherwise discharging their corporate social responsibility in their own way and they have paid income tax on capital gains on sale of the appellants' property purchased by them in execution proceedings. 3. 3. We have heard learned counsel for the appellants and learned Standing Counsel for the respondent Bank and have also gone through the minutes of the Board Meeting produced in the Court. 4. We had through the interim order cautioned the Bank that we are not considering just legality of the transactions but we will in exercise of extraordinary jurisdiction of this Court under Article 226 of the Constitution of India consider whether the transactions led to injustice to the appellants and if so will consider the appropriate relief to be granted to them. In fact, we expected if not the Managing Director personally but at least the Board of Directors to show some humanity and compassion to the plight of this family, which is completely ruined in debt and on account of death of the head of the family and the remaining in disease and chronic disabilities. However, we are amazed to notice the attitude of the Board of Directors of the Bank which behaved worse than cut-throat money lenders notoriously known in Kerala as "blade companies" by lecturing to this Court about their compliance in regard to payment of income tax and the corporate social responsibility being undertaken by them. What we notice is that the decree amount in 1984 was Rs. 19,500/-and the future interest payable was @ 13.5% per annum. The appellants have filed a statement of liability and adjustments from rent which shows that as on September, 2000 the entire liability, i.e. the decree amount with interest, would have been fully absolved through rent collection alone up to that time. Therefore, according to the appellants, the subsequent rent collection and sale consideration retained by the Bank and interest earned up to July, 2012, will account for an accumulated amount of more than Rs. 18.7 lakhs. However, learned Standing counsel for the Bank submitted that the appellants cannot claim any set off of rent against the decree amount because the Bank collected the rent treating the building as their own after purchase in execution proceedings with permission of the Court. According to him, everything is done strictly in accordance with law and the Bank is entitled to be the beneficiary of the entire profit including the rent collection and the sale proceeds received because purchase was for the decree amount and notionally the purchase price was adjusted against the decree amount. According to him, everything is done strictly in accordance with law and the Bank is entitled to be the beneficiary of the entire profit including the rent collection and the sale proceeds received because purchase was for the decree amount and notionally the purchase price was adjusted against the decree amount. Legality is on the one side which certainly is in favour of the Bank. However, what we feel is that a public sector institution at least should be fair in their dealings and should not exploit the weak and the vulnerable. Everyone in this country knows how obliging these Banks are to the powerful and the influential and how easily their debts in crores are written off allowing them to go Scot free. We do not think the transaction is a fair deal expected from a public sector Bank because when the decree amount was only Rs. 19,500/-and the building was fetching annual rent of Rs. 14,400/-, the Bank should have in the course of less than two years collected the rent and set off the debt amount with future interest and returned the property to the appellants, which may not be good business but magnanimity which if shown would have raised the prestige of the Bank above that of an ordinary money lender. No man in his right sense or ability will suffer this exploitation by the Bank, and in our view, the consequence silently suffered by the appellants itself intrinsically prove that they are unable to manage their affairs in a sensible or reasonable manner. We, therefore, hold that the whole transaction is an unfair deal at the hands of the Bank, which made a huge profit at the expense of thoroughly unfortunate people unable to handle their affairs. However, we accept the contention of the Bank that they would have paid tax on capital gains, but strangely, the Bank has not said what is the amount of tax paid and what is the net gain they made in the deal. We wish to remind the Bank that it is engaged only in money lending and should not take up real estate business with borrowers property. Excess over decree amount and interest if obtained on sale of defaulters' property should in fairness go to them and to them only. We wish to remind the Bank that it is engaged only in money lending and should not take up real estate business with borrowers property. Excess over decree amount and interest if obtained on sale of defaulters' property should in fairness go to them and to them only. While the clever borrowers get all incentives at the hands of the Bank and invariably the Bank writes off huge debts, the sick and the weak are exploited by the Bank, which is not befitting for a public sector institution. We, therefore, feel in exercise of our extraordinary jurisdiction under Article 226 of the Constitution, we should order refund of at least part of the profit made by the respondent Bank on sale of appellants' property. 5. Learned counsel for the appellants has relied on the statement furnished by him showing the net gain for the Bank at Rs. 18.7 lakhs and odd from which according to him only tax payment should be reduced. We are unable to accept this contention because the legal position remains that after the Bank purchased the property, rent and sale proceeds go to their own account. Considering huge profit made by the Bank in the whole deal, we direct refund of Rs.6.50 lakhs to the appellants i.e. at the rate of Rs. 2 lakhs to the 2nd appellant and Rs. 1.50 lakhs each to additional appellants 3, 4 & 5, within a period of two weeks from date of production of a copy of this judgment. This Writ Appeal is allowed by vacating the judgment of the learned Single Judge and by allowing the Writ Petition to the extent indicated above.