IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT : THE HONOURABLE MR. JUSTICE PIUS C.KURIAKOSE FRIDAY, THE 23RD OCTOBER 2009 / 1ST KARTHIKA 1931 OP.No. 18343 of 2001(H) ----------------------- PETITIONER(S): --------------- PHILOMINA, CHOKKATTU HOUSE, PAISAKKARI, PAYYAVOOR VILLAGE, KANNUR DISTRICT REPRESENTED BY HER POWER OF ATTORNEY HOLDER S.SUNIL KUMAR. BY ADV. SRI.K.RAMAKUMAR, SENIOR ADVOCATE RESPONDENT(S): --------------- 1. THE KERALA STATE INDUSTRIAL DEVELOPMENT CORPORATION LTD., THIRUVANANTHAPURAM REPRESENTED BY ITS MANAGING DIRECTOR. 2. THE DISTRICT COLLECTOR, KANNUR. 3. THE TAHSILDAR, TALIPARAMBA, KANNUR DISTRICT. ADDL. RESPONDENTS: 4. THE DEVELOPMENT COMMISSIONER, COCHIN SPECIAL ECONOMIC ZONE, KAKKANAD, ERNAKULAM DISTRICT IS IMPLEADED AS ADDL. AS PER ORDER DT. 7-11-07 IN IA.14421/06 5. SEBASTIAN CHEKKATTUR S/O C.V.JOSEPH, CHEKKATTU HOUSE, PAISAKKARY, KANNUR IS IMPLEADED AS ADDL. R5 AS PER ORDER DATED 7-11-06 IN IA. 15067/06. 6. DISTRICT COLLECTOR, ERNAKULAM, KAKKANAD IS IMPLEADED AS ADDL. R6 AS PER ORDER DT. 7-11-06 IN IA.14810/06 ADV. SRI.M.PATHROSE MATTHAI, SENIOR ADVOCATE FOR R1 SRI.SAJI VARGHESE SR. GOVERNMENT PLEADER SRI.D.ANILKUMAR FOR R2, 3 & 6 SRI.A.SAMEER FOR ADDL.R SRI.JOHN VARGHES, A.S.G ASST SOLICITOR GENERAL SRI N N SUGUNAPALAN SRI.JOHN VARGHESE, ASSISTANT SG FOR R4 SRI.P.S.BIJU, ADDL.CGSC FOR ADDL.R4 THIS ORIGINAL PETITION HAVING BEEN FINALLY HEARD ON 9/10/2009, THE COURT ON 23-10-09 DELIVERED THE FOLLOWING: ORDER ON CMP. 29543/01 DISMISSED. 23-10-09 SD/- PIUS C.KURIAKOSE, JUDGE. APPENDIX:- PETITIONER'S EXHIBITS:- EXT.P1 TRUE COPY OF THE POWER OF ATTOREY DATED 3RD DAY OF JULY 1999. EXT.P2 TRUE COPY OF THE NOTICE DATED 22-5-2001 ISSUED TO THE PETITIONER BY THE 3RD RESPONDENT UNDER SECTION 49(2) OF THE RR ACT. EXT.P3 TRUE COPY of the NOTICE DT. 15-5-2001 ISSUED BY THE 3RD RESPONDENT UNDER SECTION 36 OF THE RR ACT. EXT.P4 TRUE COPY OF THE REPRESENTATION DATED 12-6-2001 SUBMITTED BY THE PETITIONER BEFORE THE 2ND RESPONDENT THROUGH HER COUNSEL. EXT.P5 TRUE COPY OF INSPECTION REPORT DT. 6-7-2005 ISSUED BY A QUALIFIED COMPANY SECRETARY IN PRACTICE IN RESPECT OF M/S. TREND SETTERS INSTYLE INDIA LTD. XT.P6 TRUE COPY OF ISPECTION REPORT DT. 6-7-2005 ISSUED BY A QUALIFIED COMPANY SECRETARY IN PRACTICE IN RESPECT OF M/S. TREND TEXTILE LTD. EXT.P7 TRUE COPY OF THE POWER OF ATTORNEY DT. 23-12-1995 REGISTERED WITH THE SUB REGISTRY, ERNAKULAM AS DOCUMENT NO. 890/95. EXT.P8 TRUE COPY of the MINUTES OF THE MEETING HELD ON 21-3-2000 HELD AT COCHIN EXPORT PROCESSING ZONE. EXT.P9 TRUE COPY of the LETTER DT. 10-9-2001 RECEIVED FROM M/S. NATIONAL ISURANCE COMPANY LTD., KOCHI BRANCH. EXT.P10 TRUE COPY OF LETTER DT. 13-3-2000 SENT BY THE 1ST RESPONDENT TO A COMPANY IN TREND SETTERS GROUP. EXT.P11 TRUE COPY OF THE NOTICE DT. 16-4-2002 ISSUED BY THE TAHSILDAR (RR) KANAYANNUR TALUK. RESPONDENTS' EXHIBITS:- EXT.R1(A) TRUE COPY OF THE DEED OF GUARANTEE DT. 23-10-98 EXECUTED BY THE PETITIONER THROUGH HER POWER HOLDER IN RESPECT of the LOAN AVAILED OF BY THE COMPAY TREND TEXTILES LTD. EXT.R1(B) TRUE COPY OF THE DEED OF GUARANTEE DT. 23-10-96 EXECUTED BY THE PETITIONER THROUGH HER POWER HOLDER IN RESPECT OF THE LOAN AVAILED OF BY THE COMPANY TREND SETTERS INSTYLE INDIA LTD. EXT.R1(C) TRUE COPY OF LETTER ISSUED BY THE 1ST RESPONDENT TO THE BORROWER COMPANY SEBASTIAN CHOKKATT AND PETITIONER DT. 20-3-1999 EXT,R1(D) TRUE COPY OF LOAN AGREEMENT EXECUTED ON 23-10-98 BY THE BORROWER COMPANY TREND TEXTILES LTD. AND SEBASTIAN CHOKKATT AND PETITIONER AS CO-OBLIGANT THROUGH HER POWER OF ATTORNEY HOLDER. EXT.R1(E) TRUE COPY OF LOAN AGREEMENT EXECUTED ON 23-10-98 BY THE BORROWER COMPANY TREND SETTERS INSTYLE INDIA LTD. AND SEBASTIAN CHOKKATTU AND PETITIONER AS CO-OBLIGANT THROUGH HER POWER OF ATTORNEY HOLDER. EXT.R1(F) TRUE COPY OF COMMON REQUISITION DATED 17-11-2000 EXT.R1(G) TRUE COPY OF ORIGINAL PETITION NO. 26466 OF 2002 TOGETHER WITH EXT.P2 EXT.R1(H) TRUE COPY OF THE MINUTES OF THE BOARD HELD ON 28-6-1997 WITH COPIES OF THE RESOLUTION. EXT.R1(I) TRUE COPY OF THE MINUTES OF THE BOARD HELD ON 28-6-1997 AND RESOLUTIONS CERTIFIED BY SRI.SEBASTIAN CHOKKATTU. (TRUE COPY) PIUS C. KURIAKOSE,J. --------------------------------- OP.No.18343of 2001 -------------------------------------- Dated this the 23rd day of October, 2009 J U D G M E N T The petitioner in this original petition is the second petitioner in WP(C) No. 6144 of 2007 which is already disposed of by this Court 19-9-2008 by common judgment in writ petition Nos. 6144 of2007 and 5128 of 2008. The case of the petitioner is that she is a non-resident Indian owning landed property in Ernakulam and Cannanore Districts. Her husband Sri.Sebastian Chokkattu (first petitioner in WP(C) No. 6144 of 2007) was the Director of Trend Setters Group of Companies in the Special Economic Zone, Kakkanad, Kochi. It is stated that some of the companies in the group are facing winding up proceedings before this Court. Due to labour unrest all the companies in the group are now under lock out. Before the winding up proceedings started the companies in the Trend Setters OP. 18343/01 - 2 - Group had availed term loan from the first respondent KSIDC. Besides the assets of the companies certain properties belonging to the petitioner and her husband were offered as collateral security for the loan taken by the companies. The details of those properties seven items in number extending to a total of 4 acres 4 cents and 7 sq. links are mentioned in paragraph (2) of the writ petition. According to the petitioner, besides the properties mentioned in the writ petition no other properties belonging to the petitioner was offered as collateral security for the term loan taken by the Trend Setters Group of Companies from the first respondent. But now the third respondent Thaliparamba Tahsildar has issued Ext.P2 notice under section 49(2) of the Revenue Recovery Act to the petitioner informing that 3.63 acres of landed properties belonging to her as co-owner with her husband will be put to auction for realisation of the loan amount advanced by the first respondent to the Trend Setters Group of Companies. OP. 18343/01 - 3 - Ext.P2 was followed by Ext.P3 notice under section 36 of the Revenue Recovery Act. 2. The petitioner submits that the property mentioned in Exts.P2 and P3 notices belong jointly to the petitioner and her husband and that the said property was never offered as collateral security to the first respondent. Hence the proposed auction of that property for realisation of the loan taken from the first respondent is illegal. It is submitted that on receiving Exts.P2 and P3 the petitioner submitted Ext.P4 representation before the second respondent District Collector, Kannur requesting him to cancel the proposed auction. An identical representation was submitted by the petitioner before the third respondent Tahsildar also. In fact the second and third respondents were approached by the petitioner after submitting Ext.P4 through their authorised representatives. But it is known, that ignoring Ext.P4 the auction sale is going to be conducted pursuant to P2 and P3. It is in the above circumstance that the original petition OP. 18343/01 - 4 - was instituted with the following original prayers: i. To issue a writ of certiorari or other appropriate writ quashing Exts.P2 and P3 notices issued to the petitioner by the third respondent. ii.To declare that no property belonging to the petitioner other than that is specifically offered as collateral security is liable to be proceeded against for realising the loan taken by Trend Setters Group of Companies. 3. The first respondent KSIDC filed a detailed counter affidavit. It is contended therein that Sri.Sebastian Chokkattu and his wife the petitioner are Directors of different companies promoted by them. The Companies were closed down and wound up due to mismanagement and diversion of funds by the Managing Director and the other Directors including petitioner. The companies availed loans from the first respondent. One such company is Trend Textiles Ltd. which was formerly known as Poly Fibre Products Ltd. The said company availed a short term loan of Rs.100 lakhs which was converted into a direct term loan on the terms and conditions stipulated in the loan OP. 18343/01 - 5 - agreement. Sri.Sebastian Chokkattu, petitioner's husband and the petitioner represented by her power of attorney holder Sri.Sebastian Chokkattu executed Ext.R1(a) deed of guarantee. Having executed Ext.R1(a) the petitioner is not entitled to deny its execution on her behalf by her power of attorney holder who is none other than her husband. It is further contended in the counter affidavit that the petitioner and her husband had promoted another company called Trend Setters Instyle India Ltd. They had also availed a short term loan which was at their request converted as a direct loan. The loan agreement in connection with that loan was executed on 23-10-1998 by the company. The petitioner and Sebastian Chokkattu have furnished personal guarantee and executed deed of guarantee on 23-10-1998. Ext.R1(b) is the copy of the deed of guarantee. It is then contended that as sureties the petitioner and her husband are liable for repayment of the loan given to Trend Textiles Ltd. and Trend Setters Instyle India Ltd. Both these OP. 18343/01 - 6 - companies committed default in repayment of the term loans. By Ext. R1(c) notices were issued to the Companies and the Directors calling upon them to pay the arrears lest R.R. proceedings would be taken. The letters sent to the petitioner and her husband Sebastian Chokkattu were returned unclaimed. Since there was default on the part of the borrower companies and the guarantors Sri. Sebastian Chokkattu and the petitioner, revenue recovery proceedings had to be initiated. R.R. proceedings have been taken against the immovable properties belonging to the petitioner and Sri. Sebastian Chokkattu since they were liable as sureties of the borrower companies. The properties in Payyavoor Village (subject matter of the writ petition) were attached by the third respondent. Notice of attachment was issued to the petitioner and to Sri.Sebastian Chokkattu and it is on their failure to pay the amount that the properties are brought for sale. P2 and P3 notices are therefore proper and valid. It is contended that the KSIDC is entitled to OP. 18343/01 - 7 - proceed against all the properties of the petitioner and her husband even if the properties are not mortgaged or charged as collateral security. Petitioner and her husband are guarantors and hence their properties can be attached and sold under the Revenue Recovery Act. The proposed sale is pursuant to an attachment order validly issued. The counter affidavit emphatically denies the averments of the petitioner that he has not furnished any personal guarantee for any loan taken from the first respondent. It is pointed out that admittedly she and her husband mortgaged the property in Thengode Village as security for loan to their companies they having executed R1(a) and (b) deeds of guarantee after executing loan documents. Right to take usufructs from the properties were sold long before the orders of this court. Loans given to Trend Textiles Limited and Trend Textiles India Limited as short term loans were converted into direct term loans on the request of the said companies subject to specific terms and conditions in OP. 18343/01 - 8 - sanction letters No. 3566 and 3563 dated 4-10-1997 of the first respondent and the terms and conditions of the loan agreements executed on 23-10-1998 by the borrower companies and Sri.Sebastian Chokkattu and the petitioner as co-obligant. Exts. R1(d) and (e) copies of the loan agreements are relied on in this context. Notices sent to the borrower companies and to the guarantors the petitioner and Sebastian Chokkattu in the address given by them in the loan documents were returned unclaimed. R.R. proceedings in respect of direct term loans under agreements executed on 23-10-1990 are not barred by limitation. R.R. Proceedings were initiated against the borrower companies and the sureties within the period of limitation from the date of execution of the loan agreements and date of default and payments. R.R. proceedings were initiated only when loans were defaulted. Ext.R1 (f) copy of the requisition for initiation of R.R. proceedings is also produced. Reiterating that the R.R. proceedings are not OP. 18343/01 - 9 - barred by limitation it is stated that the loans in question were subject to terms and conditions of the loan agreements executed on 23-10-1998 and on the basis of deeds of guarantee executed by petitioner and her husband on 23-10-1998. The R.R. proceedings for sale of immovable property are dated 22-5-2001 pursuant to requisition by first respondent on 17-11-2000. The proceedings are therefore not barred by limitation at all. Along with the counter affidavit filed to IA. No. 2681/08, the first respondent has produced R1(g) which is copy of O.P. No. 26466 of 2002 filed before this Court by the petitioner. This is produced to show that the petitioner's contention that she was not aware of the attachment of her properties in Thengode Village in Ernakulam District is false. It is pointed out that in Ext.R1(g) O.P. it is clearly averred that except the properties specified in paragraph (2) mortgaged to KSIDC no other properties of the petitioner was offered as security and that the third respondent Tahsildar (RR), has OP. 18343/01 - 10 - attached 3.7595 hectares of property including properties belonging to the petitioner and her three minor daughters. The petitioner had produced as Ext.P2 in that O.P. the notice of attachment dated 16-4-2002. Along with the counter affidavit to IA. 2682/08 the first respondent has produced Ext. R1(h) copy of the minutes of the Director Board of Trend Textiles Limited declaring that the Managing Director Sri.Sebastian Chokkattu and Smt.Philomina Chokkattu, the Director are authorised duly and severally to deliver and deposit the title deeds with the KSIDC in respect of the immovable properties in order to create the equitable mortgage. It is further declared that Smt.Philomina Chokkattu, the petitioner had executed a power of attorney in favour of Sebastian Chokkattu empowering her to put signatures in all the documents to be executed in favour of KSIDC. It is also declared and resolved that Mr.Sebastian Chokkattu and Smt.Philomina Chokkattu are severally authorised to approve and finalise such other deeds and OP. 18343/01 - 11 - documents as may be required by KSIDC and the common seal of the company be affixed in the presence of the above two. Ext.R1(i) is copy of similar resolution adopted by Trend Setters Instyle India Limited. 4. The petitioner filed a reply affidavit on 9-7-2005 for answering the contentions raised by the first respondent. Ext.P5 and P6 copy of inspection reports issued by a qualified Company Secretary in practice in respect of Trend Setters Instyle India Limited is relied on to contend that Smt. Philomina Chokkattu was not a Director of these companies at any point of time. Ext.P7 is copy of the power of attorney executed by Philomina Chokkattu in favour of her husband Sebastian Chokkattu. It is contended on the basis of Ext.P7 that the petitioner appointed her husband as her attorney only in respect of her properties including the properties specifically mentioned therein. It is contended that on the strength of Ext.P7 Sri.Sebastian Chokkattu has no authority to execute a deed of guarantee or to make her OP. 18343/01 - 12 - a co-obligant in a loan agreement. Therefore, Ext.R1(a), R1(b), R1(d) and R1(c) documents produced by the KSIDC are void ab initio. It is then contended that all along the petitioner Smt.Philomina Chokkattu had been disputing her liability to discharge the loan liability of the defaulted companies. Even in the original petition she had stated that what is offered as surety for the loan by her power holder were properties at Thengode and no other properties belonging to her. Not even the Thengode properties cannot be proceeded against on the basis of R1(a), R1(b), R1(d) and R1(e) as they are void documents. When there is such a genuine dispute regarding the R.R. proceedings the first respondent ought not have proceeded with the recovery proceedings and the dispute ought to have been got adjudicated by a competent civil court of appropriate jurisdiction. 5. The petitioner has filed a further reply on 27-1- 2008. Along with the same the petitioner has produced OP. 18343/01 - 13 - Ext.P11 copy of the order of attachment made in respect of the properties situated at Thengode in Ernakulam District by the revenue recovery authorities. It is stated that Ext.P11 was not within the knowledge of the petitioner nor was the attachment made with notice to her. She came to know about it only on reading the counter affidavit filed by the first respondent. It is contended that Ext.P11 is absolutely without jurisdiction in violation of principles of natural justice, unauthorised and is liable to be declared void. On producing Ext.P11 the petitioner sought incorporation of additional ground (f) in the writ petition and additional prayer that all the records leading to Ext.P11 be called for and Ext.P11 be quashed by issuance of a writ of certiorari or other appropriate writ. 6. To the reply affidavit the first respondent KSIDC has filed an additional counter affidavit on 6th August 2005. It is reiterated therein that the petitioner's husband Mr. Sebastian Chokkattu and the petitioner had promoted the OP. 18343/01 - 14 - companies and loan agreements and deeds of guarantees were executed by them as co-obligants. It is submitted that by Exts. R1(d) and R1(e) the petitioner and her husband Mr.Sebastian Chokkattu had agreed as co-obligants to mortgage their properties described in paragraph 2 of the O.P. as collateral security for the loans. It is also submitted that the borrower companies are the petitioner's family concerns with the petitioner and her husband and her close relatives as share holders. They have borrowed crores of rupees from financial institutions and banks and diverted the amounts and invested huge amounts in immovable properties and shares in companies. The properties purchased by the petitioner and her husband are not out of profit earned by the companies but by diversion of the loan amounts received by them. No amount was repaid against the loans due to the first respondent by borrower companies. The companies were closed down under the pretext of labour trouble after diverting the funds availed of OP. 18343/01 - 15 - from first respondent. Large amounts due to suppliers of raw materials and to others were not paid and defaulted and both the companies were ordered to be wound up by this Court. The petitioner was acting in concert with her husband in promoting the companies in availing the loans and in diverting the loan amounts to purchase properties in her name and in her husband's name. She authorised her husband to act on her behalf as power of attorney holder. Sri. Sebastian Chokkattu declared to the first respondent that he was duly authorised to execute the loan agreement and the guarantee agreements on petitioner's behalf as her power of attorney holder and had assured to produce the power of attorney to the respondent soon after. The petitioner is fully aware of the fact that her husband executed loan agreements on her behalf as co-obligant and agreed to mortgage and mortgaged her immovable properties also as her agent and attorney. The contention presently raised that the power of attorney given to her OP. 18343/01 - 16 - husband does not authorise him to execute guarantee agreement on her behalf is without bonafides. At any rate, Ext.P7 power of attorney is executed by the petitioner and the terms of that power of attorney are wide enough to enable Sri.Sebastian Chokkattu to act before all authorities and persons for matters relating to her and her properties. Clause 11 of Ext.P7 generally authorises Sri.Sebastian Chokkattu to act as attorney or agent and to execute and do all acts, deeds and things as fully and effectively as the petitioner herself would do personally. Petitioner's husband had declared that the petitioner had authorised him to execute the loan documents and guarantee agreement for availing the loan and had assured the first respondent that the power of attorney will be produced shortly. But after signing the loan agreement and deeds of guarantee and after mortgaging the petitioner's immovable properties Sri.Sebastian Chokkattu did not produce the power of attorney. The petitioner and her husband had resorted to OP. 18343/01 - 17 - defraud the first respondent after availing the loan. The petitioner has affirmed and admitted the mortgage of her immovable properties as collateral security by her husband in accordance with the loan agreements executed by him as power of attorney holder of the petitioner who has also a co- obligant. The additional counter affidavit goes on to reiterate the contentions already raised by the first respondent and deny the averments raised by the petitioner in the original petition as well as through the reply affidavit. 7. The additional 4th respondent Development Commissioner at Cochin Special Economic Zone, Kakkanad has also filed a counter affidavit. It is contended therein that Cochin Special Economic Zone has been set up by the Department of Commerce, Government of India to attract foreign investment in export oriented ventures. More than Rs.98 crores had been invested by the Government of India for developing the infrastructure in this 103 acre Zone to provide a world class setting for attracting investors OP. 18343/01 - 18 - globally. Special fast clearance mechanisms have also been instituted to ensure free working environments for the units in the zone. It is submitted that there were 54 functioning units in the Cochin Special Economic Zone in the year 2001 apart from another 12 units which were under implementation. For solving the water scarcity which was experienced by all the units it was decided to set up separate water supply system for 15 lakhs litres per day for the CSEZ with the funds available from Critical Infrastructure Balancing Scheme. CSEZ constructed a water intake well in Kadamprayar river close to its bank. The pumping installations are on the building constructed above the well. Since the intake well and pumping installations are on the bank of Kadamprayar river, there is no encroachment of land belonging to the petitioner. Pipelines have been laid through the pathway leading up to the river bank paying restoration charges to the local Panchayat. Referring to the prayers in the writ petition it is pointed out OP. 18343/01 - 19 - that the petitioner has not contended anything about the attachment of properties at Thengodu Village in Ernakulam District. As per records available in Kakkanad Village Office the Kerala State Industrial Development Corporation has attached the entire land area of the petitioner towards recovery of dues to them. Therefore the petitioner has no ownership over the property. If there is any encroachment as alleged by the petitioner, the objection should come from the KSIDC, who are the owners of the property. The petitioner has accepted the attachment of property in Ernakulam District which was mortgaged to KSIDC as collateral security. Therefore the allegation that the encroachment will interfere with the pending OP is baseless and the petitioner is not entitled for the relief as sought for in IA. No. 14420/06. Any restriction on the operation of this installation will affect the functioning of 90 industrial units and around 7250 employees who are solely dependent on this supply system. The second respondent District OP. 18343/01 - 20 - Collector, Kannur has filed a counter affidavit. It is contended therein that in the light of the proposal made by the Secretary, KSIDC the District Collector, Kannur authorised the Tahsildar, Taliparamba to collect an amount of Rs.9,98,44,000/- towards KSIDCs due from Sri.Sebastian Chokkattu. Accordingly, demand notice under Sections 7 and 34 were issued and got served to the defaulters by affixture on their building bearing door No.PP-V-112. But the defaulters were not ready to credit the same. Therefore an extent of 3.63 acres of land in R.S. No.6/1 of Payyavoor Desom of Payyavoor Village owned and possessed by Mr.Sebastian Chokkattu and Philomina Chokkattu was attached on 21-5-2001 and the same was put for sale. The sale was scheduled to be conducted on 23- 6-2001. Subsequently adjourned to 4-7-2001, 19-7-2001, 6-8-2001, 20-8-2001 and 24-9-2001 for want of bidders. On 24-9-2001 the auction sale could be conducted and one Jaseentha Joseph, D/o T.J.Joseph, Theeyattuparambil, OP.