IN THE HIGH COURT OF JUDICATURE AT MADRAS DATED : 10-8-2009 CORAM THE HONOURABLE MR.JUSTICE M.CHOCKALINGAM AND THE HONOURABLE MR.JUSTICE R.SUBBIAH OSA Nos.327, 347 and 411 of 2008 and 48 of 2009 and MP Nos.1 and 1 of 2008 in OSA Nos.327 & 347 of 2008 and MP No.1 of 2009 in OSA No.48 of 2009 The Muthilalpet Benefit Fund Ltd., Rep. By its Administrator Justice A.Ramamurthi, No.199, Thambu Chetty Street Chennai 600 001. (cause title accepted vide orders of Court dt.14.8.2008 in MP 1/2008, dt.15.10.2008 in MP 1/2008, and dt.19.1.2009 in MP 1/2009 respectively) .. Appellant in OSA 327, 347/2008 and 48/2009 T.Sekar Raj .. Appellant in OSA 411/2008 and Respondent in OSA 48/2009 vs 1.Muthialpet Benefit Fund Ltd., represented by its Administrator Justice A.Ramamurthi, No.199, Thambu Chetty Street Chennai 600 001. (cause title accepted vide order of Court dt.10.8.2009 in MP 1/2009) .. 1st Respondent in OSA 411/2008 2.The Official Liquidator High Court, Madras .. Respondent in OSA 327/2008 and 2nd Respondent in OSA 411/2008 O.S.A.No.327/2008 preferred under Order XXXVI Rule (9) of O.S. https://hcservices.ecourts.gov.in/hcservices/ Rules read with Clause 15 of Letters Patent Appeal and Sec.483 of Company Act against the order passed by this Court in C.A.No.237 of 2008 in C.P.No.156 of 2005 dated 30.4.2008. O.S.A.No.347/2008 preferred under Order XXXVI Rule (9) of O.S. Rules read with Clause 15 of Letters Patent Appeal and Sec.483 of Company Act against the order passed by this Court in C.P.No.156 of 2005 dated 30.4.2008 and subsequently modified on 14.7.2008. O.S.A.No.411/2008 preferred under Order XXXVI Rule 1 of O.S. Rules read with Clause 15 of Letters Patent Appeal against the order passed by this Court in C.P.No.156 of 2005 (on memo of T.Sekar Raj) dated 30.4.2008. O.S.A.No.48/2009 preferred under Order XXXVI Rule (9) of O.S. Rules read with Clause 15 of Letters Patent Appeal and Sec.483 of Company Act against the order passed by this Court in C.P.No.156 of 2005 dated 30.4.2008. For Appellants : Mr.T.R.Rajagopalan Senior Counsel for Ms.Pushpa Sathyanarayana for appellant in OSA 327 & 347/2008 & 48/2009 and for R1 in OSA 411/2008 Mr.P.Subramani for appellant in OSA 411/2008 and for respondent in OSA 48/2009 For Respondents: Mr.Balan Haridoss for Mr.A.Jayachandran for respondent in OSA 327/2008 and for R2 in OSA 411/2008 COMMON JUDGMENT (Judgment of the Court was delivered by M.CHOCKALINGAM, J.) This judgment shall govern all these four appeals in OSA Nos.327, 347 and 411 of 2008 and 48 of 2009. 2.OSA 327/2008 challenges an order of the learned Single Judge of this Court made in C.A.No.237/2008 whereby the Court decided to apply 12% interest uniform in respect of similar cases and after giving credit to the amount paid, the interest at 12% per annum need to be calculated. 3.In OSA 347/2008 the Benefit Fund has challenged an order in CP no.156/2005 directing the Official Liquidator to issue a fresh draft in the name of the appellant Benefit Fund in respect of the mortgage debt due to the company. https://hcservices.ecourts.gov.in/hcservices/ 4.Aggrieved over the order in CP 156/2005 applying 12% interest and granting time to the respondent till 9.6.2009 to make the full settlement and if not, levying interest at 18%, OSA 411/2008 and 48/2009 have been brought forth. 5.The Administrator of the Benefit Fund has filed an application in C.A.No.237 of 2008 alleging that the two options namely (i) The debtors may be given a waiver of 75% of the default interest mentioned in the computerized statement and the amount so found due shall be paid by the debtor as a one-time payment in full and final discharge of the mortgage debts and (ii) Without any reference to the default to pay interest every month as per the deed of mortgage, the interest due on the principal for a period of five years from the date of mortgage at the agreed simple interest may be capitalized with the principal, and on this capitalized principal the interest due at the same agreed simple interest for the next five years will be capitalized and so on till date, and after adding to the amount so arrived at the miscellaneous charges such as postage, insurance, interest tax etc., and deducting the payment made by the debtor, the balance amount shall be ordered to be paid as one time lump sum payment in full and final discharge of the mortgage debt, will be beneficial to the defaulting debtors, and it will considerably reduce their liability and induce them to pay the scaled down amounts to enable the company to pay the depositors 35% of their matured deposits and try to revive the business of the company and bring it to its former position. It is further alleged that the above two options may be considered and approved. 6.The learned Single Judge after observing that the Court has already relieved the Administrator of his responsibilities and handed over the administration to the Official Liquidator, has decided to apply 12% interest uniform in respect of similar cases. Aggrieved over the same, the Benefit Fund has brought forth OSA No.327 of 2008. Aggrieved over the other consequential orders passed by the learned Single Judge, the other three appeals have been preferred. 7.Advancing arguments on behalf of the appellant Muthiapet Benefit Fund Ltd., the learned Senior Counsel Mr.T.R.Rajagopalan would submit that the respondent was directed to pay a meagre consolidated sum; that what has got to be seen is the paramount interest of the depositors who have invested their savings and other earnings with a fond hope of getting their periodical and regular returns; that the prime concern is the recovery of arrears and if not in full, at least with a reasonable waiver of interest; that in order to induce the debtors to return the arrears, the appellant Benefit Fund has been offering waiver on interest payable; that no doubt, it will be beneficial for both the parties; that it is pertinent to point out that if one of the two options suggested by the Administrator is sanctioned by this Court, it will considerably reduce the liability of the debtors and induce them to pay the scaled down payments which would enable the company to repay the matured amount; that apart from that, most of the mortgagors are successfully preventing the company from bringing the secured assets https://hcservices.ecourts.gov.in/hcservices/ to sale under Sec.69 of the Transfer of Property Act by filing frivolous suits; that the application of 12% interest uniform in respect of mortgage debts is without jurisdiction and unsustainable, and under the circumstances the suggestions made by the Administrator have got to be considered in the interest of the welfare of the company as well as the depositors. 8.The learned Counsel for the appellant in OSA 411 of 2008 would contend that the rights of the parties have not been considered by the learned Single Judge; that the learned Single Judge has misconstrued the case of the appellant and summarily passed the impugned order directing him to pay a sum of Rs.1,70,452/- which is unsustainable; that it is an admitted position that he filed a suit in O.S.No.1681/2004 on the file of the City Civil Court, Chennai, for redemption of the suit property which cannot be decided in a summary manner; that when the principal amount of Rs.1 lakh has already been paid by him, the interest awarded is not at all maintainable in law, and hence the order has got to be set aside. 9.The Court heard the Official Liquidator and perused all the orders passed by the learned Single Judge. 10.As could be seen above, the order made by the learned Single Judge in C.A.No.237/2008 whereby a direction was issued to apply 12% interest uniform to the similar cases on hand after giving credit to the amount paid, and the orders passed in the other applications are only consequential in nature. The other two appeals are at the instance of the Benefit Fund and the last one was at the instance of the individual. It is not in controversy that the former Administrator though he was relieved has given a detailed report and has suggested two options for the reasons adduced by him in the interest of the depositors at large to give offer to the debtors of the company to exercise any one of the two options in full, final and one time payment of the mortgage debt due to the company. The first option was the waiver of 75% of the default interest as set out in the computerized statement of account maintained by the Benefit Fund in accordance with the mortgage deed, while the second option was without reference to the default to pay the interest every month as agreed under mortgage deed, the interest due on the principal for a period of five years from the date of the mortgage at the agreed simple interest could be capitalized with the principal and after adding to the amount so arrived at the miscellaneous charges such as postage, insurance, interest tax etc., and deducting the payments by the debtors, the debtors should pay the debt in full, final and one time payment in discharge of the mortgage debt. After the former Administrator was relieved of his responsibilities and the administration was handed over to the Official Liquidator, the present Administrator was appointed, and he has also filed a report. In the course of the report, the Administrator has pointed out the said two options open to the debtors. The learned Single Judge should have considered the suggestions made by the former Administrator in the interest of the large body of depositors apart from the welfare of the company. But, https://hcservices.ecourts.gov.in/hcservices/ nothing is available in the order to indicate that the suggestions made in respect of the options by the former Administrator were considered by the learned Single Judge. Needless to say in a given case like this, the interest of the depositors is paramount. The Administrator is normally appointed in a given situation where the financial institution is facing a financial crisis and unable to pay its depositors. As could be seen, it is clear from the report of the former Administrator that it was to encourage the debtors to pay off their dues. 11.It is also brought to the notice of the Court that a waiver of 50% of the interest was granted by this Court by order in C.A.No.1203 of 2005 dated 13.9.2005. When such a beneficial order was made, the debtors have failed to pay their dues which would be indicative of the indifferent attitude of the borrowers. Even the initial payment namely 35%, as per the compromise sanctioned by the Court could not be paid. When these two options were made open, naturally it would reduce the liability of the borrowers. They may even be allowed to make payment of the debts scaled down. If done so, it would enable the company to repay the depositors the matured amounts as found in the compromise. Neither the debtors have made the payments proper, nor they have been allowed to take steps against the assets. Under such circumstances, the said application was filed seeking permission of the Court to keep open either of the options to the debtors. Once it is found as a mode of early recovery of the debts from the borrowers, the learned Single Judge should have considered the suggestions before making the impugned order. On the contrary, the learned Single Judge without considering any aspect of the matter, has ordered the application of 12% interest uniform stating that difficulties were found in realization of the debts which, in the considered opinion of this Court, is not a sound reason. It is also quite evident that the present application has been filed by the Benefit Fund only on the strength of the suggestions made by the former Administrator which, in the opinion of the Administrator, could be followed. Under the circumstances, that order made in C.A.No.237/2008 has got to be set aside. Accordingly, the order of the learned Single Judge in C.A.No.237 of 2008 is set aside, and the matter is remitted back to the learned Single Judge for considering the suggestions made by the former Administrator, as per the observations made above. 12.All other three appeals namely OSA Nos.347 and 411/2008 and 48/2009 have arisen only in respect of the payment of interest to be calculated at 12% as per the order. In view of the order made above, the orders passed thereon by the learned Single Judge have got to be set aside. Accordingly, they are set aside and remitted back to the learned Single Judge for consideration along with the main matter. https://hcservices.ecourts.gov.in/hcservices/ 13.Accordingly, all these original side appeals are allowed. Consequently, connected MPs are closed. Sd/ Asst.Registrar /true copy/ Sub Asst.Registrar nsv/ To: 1. The Administrator, The Muthilalpet Benefit Fund Ltd., No.199, Thambu Chetty Street Chennai 600 001. 2.The Official Liquidator High Court, Madras 3.The Sub-Assistant Registrar, Original Side, High Court,Madras. +4ccs to Mr.P.Subramani, Advocate Sr 37393 & 37536 +2ccs to Mr.K.Simeon, Advocate Sr 37392 +1cc to Mr.T.R.Rajaraman, Advocate Sr 37417 NG(CO) km/17.11. OSA Nos.327, 347 and 411 of 2008 & 48 of 2009 https://hcservices.ecourts.gov.in/hcservices/