- (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 (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 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.";