IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT : THE HONOURABLE MR. JUSTICE ANTONY DOMINIC WEDNESDAY, THE 19TH NOVEMBER 2008 / 28TH KARTHIKA 1930 WP(C).No. 5271 of 2007(C) ------------------------- PETITIONER(S): ------------- ---- USHMATECH TEXTILE ENGINEERS PVT. LTD., P.O. PATTANAKKAD, SHERTALLAI, REPRESENTED BY ITS MANAGING DIRECTOR, T.P.S. MENON. BY ADV. SRI.C.C.THOMAS (SR.) SRI.T.R.HARIKUMAR SRI.V.G.ARUN RESPONDENT(S): ------------------- 1. THE BRANCH MANAGER, KERALA FINANCIAL CORPORATION LTD., KUMARANASAN SMARAKA MANDIRAM, COURT ROAD, ALLEPPEY. 2. THE KERALA FINANCIAL CORPORATION LTD., TRIVANDRUM, REPRESENTED BY ITS MANAGING DIRECTOR. ADV. SRI.S.SREEKUMAR FOR R1 & 2 THIS WRIT PETITION (CIVIL) HAVING BEEN FINALLY HEARD ON 19/11/2008, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING: WPC NO.5271/07 APPENDIX PETITIONER'S EXHIBITS EXT.P1: TRUE COPY OF THE LOAN SANCTION LETTER NO.ALP/2059/2000 2183 DT 29.12.2000. EXT.P2: TRUE COPY OF THE G.O.RT 851/2004/WRD DT 26.7.2004. EXT.P3: TRUE COPY OF THE GO.R5.803/2004 DT 13.7.2004. EXT.P4: TRUE COPY OF THE GO.RT.NO.921/2004/WRD DT 6.8.04. EXT.P5: TRUE COPY OF THE LOAN SANCTION LETTER SLP/1723/01 DT 9.11.2001. EXT.P6: TRUE COPY OF THE POWER OF ATTORNEY DT 30.11.2001. EXT.P7: TRUE COPY OF THE LETTER NO.KFC/ALP/010168110/898/05 DTD. DEC.2005. EXT.P8: TRUE COPY OF THE LETTER NO.USHMA-KFC/1997-2005 DT 3.12.2005. EXT.P9: TRUE COPY OF THE LETTER NO.ALP/KFC/010168110/910/05 DTD.13.12.05. EXT.P10: TRUE COPY OF THE JUDGMENT IN WPC 11393 OF 2005 DT 4.4.2006. EXT.P11: TRUE COPY OF THE LETTER USHMA-KFC-134/06 DT 27.4.2006. EXT.P12: TRUE COPY OF THE LETTER USHMA-KFC-197/06 DT 12.7.2006. EXT.P13: TRUE COPY OF THE LETTER USHMA-KFC-111/06 DT 23.9.2006. EXT.P14: TRUE COPY OF THE LETTER NO.USHMA-KFC-112/06 DT.3.10.2006. EXT.P15: TRUE COPY OF THE LETTER USHMA-KFC-119/2006 DT 27.10.2006. EXT.P16: TRUE COPY OF THE LETTER NO.CZ-3102/06 DT 29.12.2006. EXT.P17: TRUE COPY OF THE STATEMENT FILED IN WPC 30351/06 DT 21.12.06. EXT.P18: TRUE COPY OF the JUDGMENT IN WPC NO.30351/06 DT 24.1.2007. ....2.. WPC NO.5271/07 -2- EXT.P19: TRUE COPY OF THE STATEMENT SHOWING THE FUND REQUIREMENT. EXT.P20: TRUE COPY OF THE CLOSURE NOTICE DT 30.11.2004. EXT.P21: TRUE COPY OF THE NOTICE NO.R.010168110/318/2007 DT 2.7.2007. EXT.P22: TRUE COPY OF THE REPLY DT 12.7.2007. EXT.P23: TRUE COPY OF THE NEWS ITEM PUBLISHED IN THE MALAYALA MANORAMA DAILY DT 1.8.2007. EXT.P24: TRUE COPY OF THENOTICE DT 7.9.2007. EXT.P25: TRUE COPY OF THE MAHAZAR PREPARED BY THE BRANCH MANAGER DT 7.9.2007. EXT.P26: TRUE COPY OF THE LETTER DT 16.9.2007 WITH THE ENCLOSURE. EXT.P27: TRUE COPY OF THE RECEIPT FOR RS.30 LAKHS DATED 28.9.2007. EXT.P28: TRUE COPY OF THE RECEIPT FOR RS.10 LAKHS DT 28.9.2007. EXT.P29: TRUE COPY OF THE REPRESENTATION WITH OTS PROPOSAL DT 18.10.2007. EXT.P30: TRUE COPY OF THE LETTER DT 5.11.2007. EXT.P31: TRUE COPY OF THE OTS PROPOSAL SUBMITTED BY THE PETITIONER DT 12.12.2007. EXT.P32: TRUE COPY OF THE NOTICE NO.ALP/KFC/010168110/1125/07 DT 26.12.2007. EXT.P33: PHOTOCOPY OF THE LETTER DT 24.5.2008 SENT BY THE RESPONDENT/PETITIONER COMPANY TO THE 1ST PETITIONER HEREIN/1ST RESPONDENT. EXT.P34: PHOTOCOPY OF THE LETTER DT 21.6.2008 ISSUED BY THE CORPORATION TO THE RESPONDENT HEREIN/PETITIONER IN THE WPC. EXT.P35: PHOTOCOPY OF THE RELEVANT PAGES OF THE O.T.S.POLICY ISSUED BY THE CORPORATION. EXT.P36: PHOTOCOPY OF THE STATEMENT OF REMITTANCE AS ON 7.8.08 PREPARED BY THE PETIITONER COMPANY. .....3. WPC NO.5271/07 -3- EXT.P37: PHOTOCOPY OF THE LETTER SENT BY THE MANAGING DIRECTOR OF THE PETITIONER COMPANY TO THE CORPORATION. EXT.P38: PHOTOCOPY OF THE STATEMENT ISSUED BY THE K.F.C. EXT.P39: PHOTOCOPY OF THE FULL TEST OF EXT.P35, SCHEME OF O.T.S. BY THE K.F.C. EXT.P40: PHOTOCOPY OF THE CIRCULAR NO.59 DT 1.12.2007 ISSUED BY THE 1ST RESPONDENT. EXT.P41: PHOTOCOPY OF THE LETTER DT 24.10.2007 ISSUED TO THE CHIEF/BRANCH MANAGER OF THE K.F.C. BY THE FINANCIAL CONTROLLER. EXT.P42: PHOTOCOPY OF THE FIR IN CRIME NO.347/2008 DT 15.10.2008 REGISTERED BY THE S.I.OF POLICE, PATTANAKKAD. EXT.P43: PHOTOCOPY OF THE LETTER DT 21.10.2008 SUBMITTED TO THE PETITIONER TO THE S.I. OF POLICE, PATTANAKKAD. EXT.P44: PHOTOCOPY OF THE LETTER DT. 23.10.2008 WITH POSTAL RECEIPT SENT TO THE BRANCH MANAGER, KFC. EXT.P45: PHOTOCOPY OF THE D.D. DT 23.10.2008 FOR RS.3,40,000/- SENT TO THE K.F.C. EXT.P46: PHOTOCOPY OF THE MINUTES OF THE TASK FORCE COMMITTEE MEETING ON 15.12.2007, DT 17.12.2007. EXTS.OF R1 ANNEXURE R1: TRUE COPY OF THE LETTER DT 14/5/2008 ISSUED BY THE KFC. ANNEXURE R2: TRUE COPY OF THE LETTER DT 14/6/08 ISSUED BY THE USHMA TEXTILE ENGINEERING PVT.LTD. //TRUE COPY// P.A. TO JUDGE ANTONY DOMINIC, J. ============== W.P.(C) NO. 5271 OF 2007 (C) ==================== Dated this the 19th day of November, 2008 J U D G M E N T Petitioner is a company incorporated under the provisions of the Companies Act. It had established a small scale industrial unit and for that purpose had availed of loan from the 2nd respondent, mortgaging the factory building, 1.25 acres of land, machineries and the residential building belonging to the Managing Director. Admittedly, payments were not made as per the terms of the agreement and finally the petitioner made Ext.P8 application dated 3/12/05, for availing of the benefit of one time settlement scheme. It is mentioned in Ext.P8 that as on 13/10/2005, their liability was more than Rs.1.3 crores. Finally the application was rejected by Ext.P16 communication dated 29/12/06 on the basis that the offer made by the petitioner was too low, as compared to the value of the assets mortgaged. It was at that stage, this writ petition was filed seeking to quash Ext.P16 and for other consequential reliefs. 2. In view of certain subsequent developments, the controversies have taken a new turn. In this context, reference to some of the orders that were passed in this writ petition is of relevance. By order dated 28/9/07, it was interalia directed that the petitioner shall remit an amount WPC 5271/07 :2 : of Rs.40 lakhs and the payment made as above will be subject to the decision in the application which they were directed to make for availing of the benefit of OTS Scheme. It is seen that in pursuance to the said order, petitioner made another application evidenced by Ext.P31, which was also rejected by the Corporation by Ext.P32 order dated 26/12/2007. In this order also, it is stated that the offer made was too low as compared to Rs.120.63 lakhs, the value of the assets. 3. Thereafter, when this writ petition came up for orders, this court passed order dated 17/3/2008. In that order, it was interalia directed that Rs.40 lakhs which was already paid in pursuance to the order dated 28/9/07 and Rs.60 lakhs which was offered to be paid shall be given credit towards the amount payable under the OTS. Such an order was passed in view of the fact that the Corporation was also directed to intimate the actual amount that was payable by the petitioner towards their OTS liability. Although subsequently also, order dated 10/4/08 was passed, that is not of much significance now. Finally the Corporation intimated the petitioner by order dated 14/5/2008 that their total liability was Rs.157.58 lakhs as on 1/5/2008 and that they were entitled to a concession of Rs.4.73 lakhs only. It was stated that after giving credit to WPC 5271/07 :3 : Rs.1 crore they had paid, balance due was Rs.52.85 lakhs. 4. On a subsequent occasion, when this writ petition came up for orders, the counsel for the Corporation justified the order dated 14/5/2008 offering concession of Rs.4.73 lakhs on the ground that in terms of the Recovery Policy for the year 2007-08 announced by circular dated 5/9/07, the petitioner fell under Category D 2 and that their eligibility was only for waiver of 50% of the penal interest levied on them. It was also contended that despite this, penal interest in full has been waived. Taking into account the dearth of materials in support of this contention, this Court passed order dated 1/9/08 calling upon the Corporation to explain the basis on which it was asserted that the petitioners case comes only within the D 2 and not D 3 as claimed by the petitioner. 5. Though no further affidavit has been filed by the Corporation, Corporation has now made available a full text of its Recovery Policy 2007- 08. True, going by Clause 6 of the Recovery Policy referred to above, if a unit is classified under D1 or D2 category, their entitlement is restricted to waiver of 50% penal interest. In the Recovery Policy, the OTS adopted by the Corporation is incorporated in para 7. However, the counsel for the WPC 5271/07 :4 : petitioner has, along with his counter affidavit in IA 9490/08, produced Circular No.59 dated 1/12/07 issued by the Corporation. In this circular, it is stated that the Board of the KFC in their meeting held on 24/11/07, amended the Recovery Policy 2007-08, and that it has been decided to extend the OTS benefits of D1 and D2 cases also in the best interest of the Corporation on satisfying the conditions enumerated in para 1 thereof. Counsel for the petitioner also makes reference to para 6 of Circular No.59, where it is stated that OTS has been made available to working capital loans and short term loans as well. The said Circular also provides that the applications for OTS should be received before 31/12/2007. 6. Obviously though the main prayer in the writ petition is against Ext.P16, now the controversy boils down the decision of the Corporation evidenced by order dated 14/5/2008. In the 14/5/2008 communication, petitioner has been given only waiver of penal interest, as per para 6 of the Recovery Policy. Obviously, by the time this communication was issued, the Recovery Policy of the Corporation announced by circular dated 5/9/07 stood amended by Circular No.59 dated 1/12/2007. If that be so, as against their original eligibility for waiver of penal interest, subject to satisfying the conditions specified in WPC 5271/07 :5 : the circular No.59, petitioner is also eligible to have their case considered for the benefit of OTS, as per para 7 of the Recovery Policy itself. Though the counsel for the Corporation has a case that this circular has since been clarified, I do not think that this Court should labour much on that issue at this stage. It is obvious that while considering Ext.P31 application made by the petitioner on 12/12/2007 resulting in the order dated 14/5/2008, the petitioner's case for OTS under the Recovery Policy 2007-08 has not been considered. If that be so, for that reason itself, the case of the petitioner deserves reconsideration. 7. Therefore, the writ petition is disposed of with the following directions. 8. The request of the petitioner for OTS made by Ext.P31 application dated 12/12/2007, shall be reconsidered by the Corporation in the light of Recovery Policy dated 5/9/07 as amended by Circular No.59 dated 1/12/2007 and in the light of the rules untramelled by Ext.P16 and order dated 14/5/2008. On such reconsideration, if the petitioner is found to be eligible for the benefit, the liability shall be quantified and from the amount that is quantified to be payable, Rs.1 crore paid by the petitioner pursuant to orders dated 28/9/07 and 17/3/2008 and Rs.3.4 lakhs paid on WPC 5271/07 :6 : 23/10/2008 towards the value of the machinery sold shall be given credit. Thereafter, the balance as found due will be demanded from the petitioner, which shall be paid also. 9. It is directed that both parties shall maintain status quo in regard to the assets, until a decision is taken, as ordered above. It is also directed that the Corporation shall decide the matter in the manner as directed, as expeditiously as possible, at any rate within 6 weeks of receipt of a copy of this judgment. Writ petition is disposed of as above. ANTONY DOMINIC, JUDGE Rp