LPA/17820/2007 1/8 JUDGMENT IN THE HIGH COURT OF GUJARAT AT AHMEDABAD LETTERS PATENT APPEAL No. 178 of 2007 In SPECIAL CIVIL APPLICATION No. 20640 of 2006 With LETTERS PATENT APPEAL No. 1908 of 2007 In SPECIAL CIVIL APPLICATION No. 20640 of 2006 With LETTERS PATENT APPEAL No. 1923 of 2007 In SPECIAL CIVIL APPLICATION No. 20640 of 2006 And CIVIL APPLICATION No. 2572 of 2007 In LETTERS PATENT APPEAL No. 178 of 2007 For Approval and Signature: HONOURABLE MS. JUSTICE R.M.DOSHIT HONOURABLE MR.JUSTICE SHARAD D.DAVE ========================================================= 1 Whether Reporters of Local Papers may be allowed to see the judgment ? 2 To be referred to the Reporter or not ? 3 Whether their Lordships wish to see the fair copy of the judgment ? 4 Whether this case involves a substantial question of law as to the interpretation of the constitution of India, 1950 or any order made thereunder ? 5 Whether it is to be circulated to the civil judge ? ========================================================= STATE BANK OF SAURASHTRA & 3 - Appellant(s) Versus RAHIL (MINOR THROUGH HIS GUARDIAN PETITIONER NO.3) & 5 - Respondent(s) ========================================================= Appearance : MR PRANAV G DESAI for Appellant(s) : 1, 3, MS NALINI S LODHA for Respondent(s) : 1, MR RR MARSHAL, SR.ADVOCATE with MR ADIL R MIRZA for Respondent : 2-3. MRS KETTY A MEHTA for Respondent(s) : 4, MR RS SANJANWALA with MR AMIT V THAKKAR for Respondent(s) : 5, MR SN THAKKAR for Respondent(s) : 6, ========================================================= LPA/17820/2007 2/8 JUDGMENT CORAM : HONOURABLE MS. JUSTICE R.M.DOSHIT and HONOURABLE MR.JUSTICE SHARAD D.DAVE Date : 12/09/2008 ORAL JUDGMENT (Per : HONOURABLE MS. JUSTICE R.M.DOSHIT) These three Appeals preferred under clause 15 of the Letters Patent arise from the order dated 18th January, 2007 made by the learned Single Judge in above Special Civil Application No.20640/2007. The matter at dispute is the compromise entered into by the appellant - State Bank of Saurashtra (now acquired by the State Bank of India) (hereinafter referred to as, “the Bank”) with the respondent – Rajan Jawahar Vakharia in respect of the dues of the firm K.J.Vakharia and Company in which one Jawahar Vakharia, the father of Rajan Vakharia is a partner. The petitioners are one Harish Vakharia, LPA/17820/2007 3/8 JUDGMENT brother of the said Jawahar Vakharia and the sons and the grandson of Harish Vakharia. According to the writ petitioners – Rahil Vakharia and others, the family business of K.J.Vakharia and Company and K.J.Tex Private Limited was partitioned in the year 1994. In the said family partition part of the land and the business of K.J.Tex Private Limited had come to their share. The business of the firm K.J.Vakharia and Co. had gone to the share of the aforesaid Jawahar Vakharia and his family. The petitioners had settled the dues of the K.J.Tex Private Limited with the Bank and the Bank had accepted the said settlement. The Bank has now entered into a settlement with the respondent Rajan Vakharia in respect of the dues of the firm K.J.Vakharia and Company. Under the said settlement on payment of agreed amount, the Bank has agreed to release the land which has gone to the share of the said Rajan Vakharia. Consequently, the Bank will recover its outstanding dues from the properties which have come to the share of the petitioners. The LPA/17820/2007 4/8 JUDGMENT petitioners' interest would be gravely prejudiced if that settlement is acted upon. It may be noted that several legal proceedings in respect of outstanding dues of the Bank and the properties in question are pending before the Debt Recovery Tribunal and the Civil Court. In the circumstances, the learned Single Judge has, by impugned order, directed the Bank to give post-decisional hearing to the writ petitioners and to continue to maintain status quo earlier directed to be maintained by order dated 29th August, 2006 made by this Court (Coram: Akil Kureshi, J.) in Special Civil Applications Nos.2422/2006 and 546/2005. The learned Single Judge has directed that “the parties shall maintain status quo till (1) the Bank grants the post-decisional hearing and modifies its decision, if found necessary; and (2) the Debt Recovery Tribunal decides an application for interim injunction which if not made by the petitioner till this point of time, shall be made LPA/17820/2007 5/8 JUDGMENT within a period of a fortnight from today before the Tribunal.” Feeling aggrieved by these directions, the Bank has preferred the present Letters Patent Appeal No.178/2007, the writ petitioners have preferred Letters Patent Appeal No.1908/2007 and the respondent no.5 has preferred Letters Patent Appeal No.1923/2007. The Appeals are hotly argued. According to the writ petitioners, the impugned compromise has been entered into by the Bank with the respondent no.4 fraudulently to deprive the petitioners of their rightful ownership of the properties which have come to their share in family partition. According to the Bank, the Bank has right to enter into settlement with its clients. It is the prerogative of the Bank and the Court of law should not interfere with such settlement. In support of the argument, Mr.Desai has relied upon the judgment of the Hon'ble Supreme Court in the matter of Karnataka State Industrial Investment LPA/17820/2007 6/8 JUDGMENT and Development Corporation Limited v/s. Cavalet India Limited and others [(2005)4 SCC 456]. Mr.Sanjanwala appearing for the respondent no.5 – appellant in Letters Patent Appeal No.1923/2007 has submitted that the respondent no.5 has, in compliance with the compromise, parted with more than Rs.2 crores. If now the compromise is not allowed to go through, the respondent no.5 cannot raise further money. He has also submitted that status quo was ordered to be maintained qua the properties which have gone to the share of the writ petitioners. He seeks clarification that the said status quo does not affect the properties which have come to the share of the respondent no.5. We do agree that the Bank has a right to enter into a settlement with its client. A court of law would not interfere with such settlement. However, in the peculiar facts of the case and the pending litigations before various fora, we are of the opinion that the learned Single Judge LPA/17820/2007 7/8 JUDGMENT has rightly directed the Bank to give post- decisional hearing to the writ petitioners. We do not propose to interfere with the order of the learned Single Judge. In view of the acquisition of the State Bank of Saurashtra by the State Bank of India, we direct that the post-decisional hearing referred to by the learned Single Judge will be given by the State Bank of Saurashtra Unit Credit Committee of the appellant State Bank of India. The status quo ordered to be maintained by the learned Single Judge also does not warrant interference. If any of the parties has any confusion regarding the extent of its applicability, such party may approach the learned Single Judge for clarification. Subject to the above directions, the Appeals and the Civil Application are disposed of. LPA/17820/2007 8/8 JUDGMENT (Sharad D.Dave, J.) (Ms.R.M.Doshit, J.) /moin