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CASE NO.: Appeal (civil)  8491 of 2001

PETITIONER: Syndicate Bank

RESPONDENT: New Look Rubbers (P) Ltd & Ors

DATE OF JUDGMENT: 03/04/2008

BENCH: Tarun Chatterjee & Harjit Singh Bedi

JUDGMENT: J U D G M E N T NON-REPORTABLE

CIVIL APPEAL NO.8491 OF 2001

HARJIT SINGH BEDI,J.

1.      This appeal by special leave arises out of the following  facts. 2.      The Syndicate Bank, the appellant herein, sanctioned  various credit limits to the respondent No.1 company  including an overdraft limit of Rs.1,00,000/- and working  capital term loan of Rs.1,00,000/- on certain prescribed  conditions.  These loans were granted after cancellation of the  earlier limits with a view to nurse respondent No.1 which was  a sick unit.  In order to secure the advance, the Managing  Director of respondent No.1, that is respondent No.2 and the  other Directors executed several documents as securities and  respondent No.2 also mortgaged his property to the Bank as a  collateral security.  As the respondent No.1 defaulted in the  repayment of the loan, the Bank filed a suit for recovery  (O.S.No.732/1987) in the Trichur Civil Court seeking a decree  for Rs.1,19,832.63 with interest @ 12.5% per annum in the  Term Loan Account and Rs.2,09,120.75 in the Overdraft  Account with interest @ 16% per annum compounded  quarterly.  The following issues were framed in the suit:   1) What is the correct amount that is due to the  Plaintiff?     2) Whether the defendants are entitled to the benefit of  the direction given by the Reserve Bank of India on  sick units? 3)              What is the correct rate of interest? 4)              Reliefs and costs.

3.      The trial court observed that the Bank had not been  harsh or arbitrary in dealing with the defendants and that it  appeared that the defendants were not prepared to repay the  loan despite the agreements that had been executed.  It was  also observed that the defendants were not entitled to the  benefit of any scheme framed for the rehabilitation of sick  units which had been formulated by the Reserve Bank of  India.  The suit was accordingly decreed on 9th April 1990 and  the defendants were given a year’s time for payment.  No  appeal was filed against this judgment with the result that it  attained finality.  An application for execution of the decree    (EP No. 819/1991) was filed by the Bank on 20th December  1991 and while the matter was still pending, the judgment- debtors (the defendants in the above suit) filed civil suit

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(No.1340/1993) for injunction seeking an order prohibiting the  execution of the decree rendered in O.S. No.732/1987 alleging  that it was a nullity.  The Bank contested the suit which was  ultimately dismissed by Judgment & Order dated 1st March  1996 and as no appeal was filed thereagainst, this decision too  attained finality.  In April 1993, the judgment-debtors also  filed a Pauper Petition (No. 19/1993) in the Sub-Court,  Trichur claiming damages of about Rs.30/- lacs from the Bank  with 18% and 100% ex-gratia payment on several grounds.   This suit was dismissed for non-prosecution on 15th November  1995 and an application for its restoration was also dismissed  on 6th June 1997.  As no further proceedings were taken by  the judgment-debtors, these orders attained finality as well. It  appears that while this spate of litigation was continuing, the  judgment-debtor filed various objections (during the year  1994-97) in E.P.No.819/1991 alleging that the decree was not  executable, and amongst others, two objection petitions being  E.A.No. 847/1997 and 1197/1997 were filed claming the  protection and benefits available under section 22(1) of the  Sick Industrial Companies (Special Provisions) Act, 1985  (hereinafter called "SICA") and under section 18FH of the  Industries Development and Regulation Act, 1951 (hereinafter  called the "Regulation Act") praying that the execution  proceedings be kept in abeyance till such time the proceedings  initiated by the Government of Kerala for the revival of the unit  were going on.  It appears that while the objections were  pending, the mortgaged property of judgment-debtor No.2 was  sold in auction by the executing court for a sum of Rs.3.50  lacs which was deposited in Court and later released to the  Bank and the sale was also confirmed and possession of the  property handed over to Antony the auction purchaser.  Vide  order dated 21st July 1998 the execution application  Nos.847/1997 and 1197/97 were dismissed.  This order was  challenged by the respondent Nos.1 and 2, the original  defendants, by way of CRP No.2315/1998 alleging that the  execution proceedings ought to have been stayed pending the  decision of the proceedings under section 18 FH of the  Regulation Act and section 22 of SICA.  The respondent No.1  Company also filed a writ petition on 7th April 2000 under  Article 226 of the Constitution of India (No. O.P.11862 of  2000) in the Kerala High Court against the Government of  Kerala, the Kerala Financial Corporation, the Syndicate Bank  and Antony the auction purchaser alleging that the judgment- debtors’ unit had been rendered sick on account of the  arbitrary actions of the Bank and the Kerala Financial  Corporation and that the proceedings in O.S. 732/1987 were  without jurisdiction and, therefore, null and void and  consequently the decree in EP 819/1991 too was not  enforceable.  The Civil Revision and the Civil Writ Petition were  heard together and both were allowed vide order dated 11th  April, 2001 with the High Court observing that though the  benefits of section 18FH of the Regulation Act and section 22  of the SICA were not available to the judgment-debtor but they  were entitled to succeed on other issues and concluded that:                              "The petitioner has filed CRP  2315/98 challenging the common order passed  by the execution court in E.A.847/97 and  E.A.1197/97 in E.P.819/91 in O.S.732/87.   The petitioner was the judgment debtor in  O.S.732/87, a suit instituted by the present 3rd  respondent bank for realization of the entire  arrears due from the petitioner. The decree  holder filed E.P.819/91 and the property and  the residential building belonging to the

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Managing Director of the company placed as  security was sold in auction for an amount of  Rs.3.5 lakhs.  The petition filed by the petitioner  for setting aside the sale was also dismissed.   Later the petitioner filed E.A.847/97 and  E.A.1197/97 u/s 18FH of the IDR Act sec.22 of  the SICA and Sec.151 CPC for annulling the  court sale and also for staying further execution  proceedings.  Both the petitions were dismissed  by the execution court.  I have already found  that sec.22 of SICA or sec.18FH of the IDR Act  have any application in the present case and as  such the above order dismissing E.A.847/97  and E.A.1197/97 has only to be upheld in the  ordinary course.  As the suit was instituted and  proceeded in collusion with the KFC and as  both the above financial institutions have  agreed before the 1st respondent for the revival  of the industry granting concessions and  packages (as evident from ext.P.24), I think it  just and proper to set aside the sale of the  property of the Managing Director of the  company in execution of the decree in  O.S.732/87.  In fact the KFC was strangulating  the industry from one side where as the Bank  was doing the same thing on the Managing  Director of the company from the other side  which was shocking to judicial conscience.  In  the above circumstances for the ends of justice  this court is constrained to interfere and to  undo the injustice caused to the petitioner and  to save both the industry and the Managing  Director of the industry by setting aside the  order of taking over the industry and the court  sale of the property.  The entire amount  deposited by the 4th respondent towards price of  the auctioned property  with 5% of the above  amount and interest at 6% from the date of  deposit till return shall be paid by the 3rd  respondent bank to the 4th respondent.  The  bank also will have to consider the grant of  interest holiday for the period during which the  industry had been under the possession of the  KFC in pursuance to the take over. Hence for  the proper administration of justice, I think it  proper to set aside the court sale and to allow  C.R.P.2315/98."

4.      As the order dated 11th April 2001 was a comprehensive  one, taking within its ambit the Civil Revision as well as the  Writ Petition, two LPAs, one by the Bank and the other by the  judgment-debtor, were filed and are pending in the Kerala  High Court against the order in the writ petition whereas the  present appeal has been filed by the Bank against the order in  the Civil Revision. 5.      Mr. A.B.Dial, the learned senior counsel for the appellant  has pointed out that the High Court had overstepped its  jurisdiction as after giving a positive finding that the  respondent was not entitled to any relief under section 22 of  the SICA or under section 18 FH of the Regulation Act, it had  virtually set aside all the effective orders of the Civil Courts  which had been made in favour of the appellant Bank and had  attained finality.  It has further been pleaded that the further  direction of the High Court as to the entitlement of the  respondent to the benefit of the re-settlement schemes for

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revival was not the issue before it as the executing court or the  High Court could not go beyond the decree itself and hold that  the suit which had led the decree was bad having been filed in  collusion with one or the other party.  Respondent No.2  appearing in person has, however, argued that the High Court  had proceeded on the basis that the respondent had been  gravely wronged by the Bank and the Kerala Financial  Corporation and has also submitted a large number of  documents in support of this submission.  He has also pointed  out that the State Government had taken steps towards the  revival of his unit and as such, there was no justification in  interfering with the order of the High Court. 6.      Before we go to the issues raised, we reproduce here the  final directions of the High Court: "1.     The order of the 2nd respondent KFC  taking possession of the industrial unit  New Look Rubbers (P) Ltd. (petitioner  company) is set aside and the KFC is  directed to surrender possession of the  industrial unit to the petitioner forthwith.

2.      The 2nd respondent (KFC) shall  grant interest holiday for the period from  the date of taking possession of the  industry till it is handed over to the  petitioner.

3.      The court sale of the property of the  Managing Director of the petitioner  company in pursuance to the decree in  OS 732/87 of Sub-Court, Trichur, shall  stand set aside and the3rd respondent  shall return the entire sale amount with a  sum equal to 5% of the above amount  and with 6% interest on the sale amount  from the date of deposit till the date of  return to the 4th respondent."

7.      We are of the opinion that the High Court has clearly  overstepped its jurisdiction.  The facts of the case show that  the appellant had filed civil suit O.S.No.732/1987 against the  respondent for recovery of the sums advanced as loan plus  interest.  This suit was decreed on 9th April 1990 with the  positive finding that there was no harsh or arbitrary behaviour  in the proceedings against the respondent.  Admittedly, no  appeal was filed against the judgment dated 9th April 1990 and  it attained finality.  The appellant Bank thereafter filed  E.P.No.819/1991 for the realization of the decretal amount on  which the respondent filed O.S. No.1430/93 praying that the  appellant Bank be injuncted from executing the decree in  O.S.No.732/1997.  This suit too was dismissed on 1st April  1996.  Another Pauper Petition No. 19/1997 was filed by the  respondent claiming damages from the Bank and this too was  dismissed.  Admittedly all these matters have attained finality.   Two sets of objections in execution petition, E.A. No.847/97  and E.A.No.1197/97 had been filed with regard to the  applicability of section 22(1) of SICA and section 18 FH of the  Regulation Act and in the meanwhile, the property mortgaged  was sold in execution of the decree.  The aforesaid objection  petitions were dismissed on 21st July 1998.  It is against the  order in E.A. No.1197/1997 that the present revision was  filed.   We are therefore of the opinion that in the light of the  issues decided by the Civil Court in the various litigations  which were allowed to become final and as the decree had  already been executed in as much that the mortgaged property

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has been sold, the directions issued by the High Court are  clearly not warranted.   We are also of the opinion that there  can be no objection to the revival of the respondent’s unit but  that is a matter between the respondent and the Kerala  Financial Corporation or other Governmental Agencies and  cannot in any manner affect the legal rights that have accrued  to the appellant as a consequence of a series of orders/  judgments.  We accordingly allow this appeal, set aside the  order of the High Court in so far as the decision in the Civil  Revision is concerned, but with the rider that should the  Government or its agencies choose to provide any succour to  the respondent they would be at liberty to do so, but without  in any manner affecting the rights or interest of the appellant  Bank.  There will be no order as to costs.