IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT : THE HONOURABLE MR. JUSTICE S.S.SATHEESACHANDRAN MONDAY, THE 5TH APRIL 2010 / 15TH CHAITHRA 1932 CRP.No. 263 of 1997(G) ---------------------- CMA.62/1978 of ADDL.DISTRICT COURT, THRISSUR .................... REVN. PETITIONER(S)/APPELLANT: --------------------- BANK OF MADURA LIMITED, HAVING ITS REGISTERED OFFICE AT MADURAI AND ADMINISTRATIVE OFFICE AT MOUNT ROAD MADRAS, REP. BY ITS REGIONAL MANAGER, ERNAKULAM SRI.P.VISWANATHAN NAIR. THE REVISION PETITIONER IS SUBSTITUTED AS “M/S ICICI BANK LIMITED, HAVING ITS REGISTERED OFFICE AT LAND MARK, RAISE CROSS CIRCLE, VADODARA 390007, HAVING ONE OF ITS REGIONAL OFFICE AT EMGEE SQUARE, PADMA JUNCTION, M.G.ROAD, KOCHI – 682 035. REP. BY ITS COLLECTION MANAGER AND POWER OF ATTORNEY HOLDER, MR.SIBU GEORGE.” VIDE ORDER DATED 26.3.2010 IN I.A.NO.597/10 IN C.R.P.NO.263/97. BY ADV. SRI.A.M.SHAFFIQUE, SENIOR ADVOCATE SRI.E.K.NANDAKUMAR RESPONDENT(S)/RESPONDENTS: --------------- 1.THE ASSISTANCE COMMISSIONER FOR PAYMENTS FOR SICK TEXTILE MILLS, “SHEESHA TOWER”, 4TH FLOOR, 70/1, MISSION ROAD, BANGALORE – 560 027. 2.KERALA LAKSHMI MILLS LIMITED, PULLAZHI, THRISSUR DISTRICT (ERSTWHILE OWNER) 3.NATIONAL TEXTILE CORPORATION (ANDRAPRADESH), KARNATAKA, KERALA AND MAHI LIMITED, BANGALORE 27 (HAVING TEXTILE UNIT BY NAME KERALA LAKSHMI MILLS, PULLAZHI, THRISSUR, REP. BY ITS COMPANY SECRETARY. BY ADV.SMT.T.D.RAJALAKSHMI THIS CIVIL REVISION PETITION HAVING BEEN FINALLY HEARD ON 05/04/2010 ALONG WITH CRP NO.274 OF 1997, THE COURT ON THE SAME DAY PASSED THE FOLLOWING: S.S.SATHEESACHANDRAN, J. ------------------------------- C.R.P.NOS.263 & 274 OF 1997 () ----------------------------------- Dated this the 5th day of April, 2010 O R D E R The above two revisions are directed against the judgment rendered by the learned District Judge, Thrissur in C.M.A.Nos.61 and 62 of 1978, which were disposed along with a few other appeals under a common judgment dated 24.7.1996. The appeals, all of them, arise from common orders passed by the Commissioner for Payments, the authority constituted under the Sick Textile Undertakings (Nationalisation) Act, 1974 (Act No.57 of 1974), hereinafter referred to as the 'Act', over the claims raised by some banks and concerns in respect of the liability of the owners of two textiles, namely, Alagappa Textile (Kochi) Mills and Kerala Lakshmi Mills. The common revision petitioner in these revisions has filed two claim petitions, one against the Alagappa Textile Mills and the other against Kerala Lakshmi Mills before the Commissioner in respect of the loans extended to such textiles claiming priority in payment of the amount due C.R.P.263 & 274/97 2 from the respective owners of the textiles. Both the claims moved by the revision petitioner bank had been allowed only in part by the Commissioner rejecting their claim arising on post take over liability of the textile and also the interest on the principal amount of the loan advanced during the pre-take over period of management of the textiles. Aggrieved by the order of the Commissioner, to the extent their claims were negatived, the bank has preferred two appeals as C.M.A.No.61 and 62 of 1978 before the District Judge, Thrissur as provided under sub section (7) of Section 23 of the Act. The learned District Judge after hearing the counsel on both sides and re-appreciating the materials tendered, concurred with the conclusions formed by the Commissioner for Payments that the claimant bank cannot claim any priority in respect to the loan advanced to the respective textiles for the sole reason that some of the instalments had been paid after the take over of the management of the textiles. However, the learned District Judge modified the order of the Commissioner for Payments to the extent the interest was declined on the claim raised by the Bank. Both the appeals were partly allowed modifying the order of the C.R.P.263 & 274/97 3 Commissioner for Payments holding that the claimant is entitled to interest also on the claim awarded by the Commissioner which had been upheld under category I of Part A of the Second Schedule of the Act. However, the claim which was canvassed by the claimant bank in respect of the instalments paid after the take over period on the loan provided to the textiles, which had been negatived by the Commissioner for Payments, was upheld by the learned District Judge in both the appeals. Propriety and correctness of the concurrent finding so entered by the Commissioner for Payments and also the learned District Judge that the claimant bank is not entitled to have priority under category 1 of Part A of the Second Schedule the amount of loan to the textiles by way of instalments after the take over of such textiles is impeached in these revisions. 2. As the claimant bank has been amalgamated with another bank, a petition was filed seeking substitution of that amalgamated bank as an additional party in these revisions. That application has been allowed and the bank in which claimant bank had been amalgamated has been brought as the C.R.P.263 & 274/97 4 additional revision petitioner in these revisions. 3. I heard the respective counsel for the claimant bank/revision petitioner and also the 3rd respondent. The short question posed for consideration in these revisions is confined to the right claimed by the claimant bank to have priority of the loan advanced by way of instalments to the respective textiles after take over of the management of such textiles in continuation of the loan agreement entered into prior to the taking over of the management. Admittedly, the management of these textiles had been taken over under the provisions of the Act by the National Textile Corporation, the 3rd respondent on 19.5.1972. The claims canvassed by the claimant bank for the period from the taking over of the management of the textiles, from 19.5.1972, till the appointed date specified under the Act, that is, 31.3.1974, admittedly, stand allowed by the orders passed by the Commissioner for Payments. Interest claim made by the claimant bank in respect of the loan extended during the above period, which was declined by the Commissioner for Payments, had been reversed in appeals by the learned District C.R.P.263 & 274/97 5 Judge allowing such claims also in favour of the bank. The instalment loan amount paid after 1.4.1974 on the loan amount sanctioned earlier should also be treated as coming under the priority clause covered by Category 1 of Part A of the Second Schedule of the Act is the case of the claimant bank. In the given facts of the case, particulars of the claim and the quantification made appear to be not relevant as the issue canvassed had been settled by a judicial pronouncement rendered by the apex court in National Textile Corporation (Gujarat) Ltd. v. State Bank of India & others (AIR 2006 SC 2927). On the above issue, as to whether a claimant could canvass for priority of the amount advanced on a pre-existing loan after taking over management of the textiles under the Act, the apex court has held thus: “Continuing the credit facilities given by the Banks to the owner after the appointed date under the Act, would not bring in the liability of the owner towards the creditor as falling under category 1 of Part A.” C.R.P.263 & 274/97 6 In the above decision, it is also seen that the priority covered under category 1 of Part A of the Second Schedule is confined only to the principal amount covered by the loan that was provided after the taking over of the management. Interest on the loan amount even in respect of the post take over period could not be claimed as under Category I of Part A of the Second Schedule of the Act as a priority debt from the owner is the view expressed by the apex court holding that though the term 'liability' takes in interest the priority is only for payment of the amount of loan, that is, the principal amount and not the interest amount due therein. Since no challenge is canvassed by any of the respondents on the grant of interest by the learned District Judge in respect of the claim covered by the post take over period from 19.5.1972 to 31.3.1974, in reversal of the order of the Commissioner for Payments, no further dilation on that question is called for in these revisions. Having regard to the priority provided under the Second Schedule in respect of the liability cast upon the owner of the textiles from the amount provided by the Central Government under Section 8 of the Act to the owner of the textiles, to the creditors of such owner, as C.R.P.263 & 274/97 7 per the provisions of that Act, and in the light of the judicial pronouncement rendered by the apex court, as referred to above, it has to be concluded that the claims canvassed by the claimant bank in respect of the amount paid on the pre-existing loan by way of instalments after the appointed date under the Act canvassing priority for such amount as also under the First Schedule, was rightly and correctly negatived by the Commissioner for Payments and also by the learned District Judge. There is no merit in these revisions and they are dismissed. S.S.SATHEESACHANDRAN JUDGE prp S.S.SATHEESACHANDRAN, J. ------------------------------- C.R.P.NOS.263 & 274 OF 1997 () ----------------------------------- O R D E R 5th day of April, 2010 C.R.P.263 & 274/97 9