IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT : THE HONOURABLE MR. JUSTICE P.R.RAMACHANDRA MENON THURSDAY, THE 28TH OCTOBER 2010 / 6TH KARTHIKA 1932 WP(C).No. 17698 of 2010(J) -------------------------- PETITIONER: --------------- SANTHAMMA,W/O.SREEDHARA PANICKER, HINDU,AGED 80 YEARS,RESIDING AT BRINDAVAN, THYCAUD,THIRUVANANTHAPURAM. BY ADV. MR. M.RAMASWAMY PILLAI MR. P.M.JOSEPH RESPONDENTS: --------------- 1. THE AUTHORISED OFFICER,STATE BANK OF INDIA,STRESSED ASSESSED RESOLUTION CENTRE, LHO ANNEXE (WING I),IST FLOOR,CHILD WELFARE COMPLEX,LMS COMPOUND,THIRUVANANTHAPURAM-23. 2. THE STATE BANK OF INDIA, MARAKADE ROAD, TRIVANDRUM,REPRESENTED BY ITS BRANCH MANAGER. R1 AND R2 BY ADV. MR. R.S.KALKURA THIS WRIT PETITION (CIVIL) HAVING BEEN FINALLY HEARD ON 12/10/2010, THE COURT ON 28/10/2010 DELIVERED THE FOLLOWING: P.R. RAMACHANDRA MENON J. ~~~~~~~~~~~~~~~~~~~~~~~~~~~~ W.P. (C) No. 17698 OF 2010 ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~ Dated, this the 28th day of October, 2010 JUDGMENT The issue involved in this case is, whether the petitioner/ guarantor is entitled to have the title deed returned in respect of the particular loan transaction, which has been admittedly closed, but retained at the hands of the respondent Bank referring to the liability of the petitioner as a guarantor to the other transactions as well; thus bringing in the doctrine of banker's lien. 2. The sequence of events as narrated in the Writ Petition shows that, the petitioner is one of the Directors of the Company by name M/s Hotel Amrita (P) Ltd. On the strength of the property offered as security, the Company had availed two different loans of Rs. 20 lakhs and another sum of Rs. 25 lakhs (a total sum of Rs. 45 lakhs) from the respondent Bank, creating security interest over the property. Subsequently, in view of the pressing needs another sum of Rs. 18,70,000/- was provided as loan to the Company, for which yet another property of 54 cents belonging to the petitioner was offered creating security interest over the same on 23.03.2007. The Company turned to be a defaulter, pursuant to which, the accounts were declared as 'NPA' and the Bank proceeded with steps under the SARFAESI Act W.P. (C) No. 17698 of 2010 : 2 : which was sought to be resisted by the Company by filing W.P. (C) 34237 of 2009. The said case was disposed of as per Ext. P3 judgment dated 08.12.2009, enabling the Company to clear the 'overdue' amount of nearly 34 lakhs as specified, subject to which the coercive proceedings were ordered to be kept in abeyance. It was also made clear that, on clearing the overdue amount as above, the Company could seek for renewal of the loan account, which was ordered to be permitted by the respondent Bank. 3. It is the case of the petitioner that, the Company satisfied the 'overdue' amount and that steps are being taken to clear the entire outstanding amount as well. In the meanwhile, taking note of the need of the hour, entire outstanding liability in respect of the 3rd loan of Rs. 18,70,000/- sanctioned on 23.03.2007 was cleared and the title deed belonging to the petitioner herein was sought to be returned by filing a representation in this regard. However, the said title deed was refused to be returned by the Bank, stating that, the request could be entertained only on satisfying the entire outstanding liability under the other two loan accounts as well and that the Bank was very much entitled to have exercised the 'banker's lien' in this regard, which made the petitioner to approach this Court by filing this Writ Petition. W.P. (C) No. 17698 of 2010 : 3 : 4. The respondent Bank has filed a statement dated 17.06.2010, pointing out that, after giving credit to the amount satisfied pursuant to Ext. P3 verdict, the balance sum of Rs.34,43,464.30 is still due from the Company in respect of the two loans. It is also contended that, the petitioner, who had executed a 'guarantee' agreement in favour of the Bank, had agreed that the Bank was entitled to exercise 'lien' on all securities, instruments etc of the guarantors which shall come into control/possession of any of the branches of the Bank, towards discharge and satisfaction to the petitioner's liability towards the bank, as the guarantor. A true copy of the reply dated 01.06.2010 sent by the Bank in response to the request preferred by the petitioner to release the title deed of the property of 54 cents surrendered in connection with granting of the 3rd loan which was already closed, has also been produced and marked as Annexure. R(1). 5. The petitioner produced Ext. P8 receipts (showing satisfaction of the various amounts) along with affidavit dated 01.07.2010. It is contended that, the original liability under the two original loans (20 + 25) coming to nearly 65 lakhs as on the date of issuance of notice under Section 13 (2) of the Act had been brought down to nearly 50 %, as admitted by the Bank, in view of the W.P. (C) No. 17698 of 2010 : 4 : remittances made pursuant to Ext. P3 judgment passed by this Court and as such, the documents originally surrendered, having an alleged value of nearly 3 crores, are enough and more to safe guard the interests of the Bank. This being the position, retention of the document surrendered in connection with the 3rd loan of Rs. 18,70,000/- sanctioned on 23.03.2007 is stated as absolutely without any rhyme or reason but an arbitrary exercise of power and pressure tactics, when liability under the said loan is fully satisfied. The case of the petitioner is that, the petitioner is entitled to get back all the documents in respect of the 3rd loan for generating funds to run the existing business and to discharge the liabilities, including that to the Bank, in a more effective and efficient manner. 6. The respondent Bank filed I.A. 9860 of 2010, producing two documents as Exts. R1 (a) and R1(b), which are two 'guarantee agreements' dated 24.08.2005 and 23.03.2007, executed by the petitioner in favour of the second respondent. Thereafter, the Bank filed I.A. 10561 of 2010 producing two more documents as Annexures R1 (c) and R1 (d) dated 23.03.2007, which are the concerned 'memoranda' for recording extension of the mortgage by deposit of title deed and the letter of confirmation for extension of mortgage in respect of the 3rd loan. Referring to 'Clause 8' of W.P. (C) No. 17698 of 2010 : 5 : Exts.R1 (a) and R1 (b) guarantee agreements and 'Clause 4' of Annexure R1 (c) and paragraph 2 of Annexure R1 (d), the bank contends that the petitioner had volunteered to extend the guarantee offered at the time of availing the 3rd loan of Rs. 18.70 lakhs, in respect of the other existing liabilities as well and this being the position, the request for returning the title deed in respect of 3rd loan is not liable to be acceded to, unless and until, the existing liabilities under the other loans are also cleared in toto. 7. The learned counsel for the petitioner submits that, it is very much open to the mortgagor to redeem the mortgage in the manner as he finds fit; either separately or otherwise, by virtue of the mandate under Sections 60 and 61 of the Transfer of Properties Act. The said contention is sought to be rebutted by the learned counsel for the respondent Bank stating that, prescription under Section 61 enabling the petitioner to redeem the mortgage separately or simultaneously is “in the absence of any contract to the contrary” and since the relevant clauses (as mentioned hereinbefore) of Exts. R1 (a) and (b) and Annexures R1 (c) and (d) stipulate it otherwise, such clauses are 'contracts to the contrary'. As such, the stand of the Bank is stated as correct and proper and not assailable under any circumstances. W.P. (C) No. 17698 of 2010 : 6 : 8. The rights of the mortgagor to redeem the property mortgaged are provided under Section 60 of the Transfer of Properties Act. Section 61 dealing with the right to redeem the property separately or simultaneously which reads as follows:-. 61. Right to redeem separately or simultaneously -- A mortgagor who has executed two or more mortgages in favour of the same mortgagee shall, in the absence of a contract to the contrary, when the principal money of any two or more of the mortgages has become due, be entitled to redeem any one such mortgage separately, or any two or more of such mortgages together. Obviously, Section 61, stipulates in unequivocal terms that the right contained thereunder “is in the absence of contract to the contrary”. This being the position, the question to be considered is, whether there is any 'contract to the contrary'. 9. 'Clause 8' of Exts.R1 (a) and R1(b) guarantee agreements executed by the petitioner reads as follows: 8. That the Bank shall be entitled to adjust, appropriate or set-off or exercise lien of or on all monies, securities, goods, instruments held to the credit or for the benefit of the Guarantors or any account or coming into the control or possession of the Bank in any of its branches whether for any W.P. (C) No. 17698 of 2010 : 7 : specified purpose or otherwise with or without any particular mandate and whether singly or jointly, towards the discharge and satisfaction of the liability of the Guarantors hereunder. 'Clause 4' of Annexure R1 (c) produced by the Bank along with I.A. 10561 of 2010 reads as follows: 4. Consequent to the grant of above enhanced mortgage debt, the Mortgagor/s have further confirmed that the benefit of the mortgage/s on the Schedule A and B properties shall also apply for, stand extended to and cover the enhanced mortgage debt and also for discharge of all other liabilities and indebtedness together with all interest, discount, commission, costs, charges by the Borrowers to the Bank. 'Para 2' of Annexure R1 (d) executed by the petitioner on 23.03.2007 while availing of the 3rd loan, depositing the title deed in respect of 54 cents of land, reads as follows : 2. This is to confirm that consequent upon the enhancement of the limits and/or grant of additional facilities as mentioned above we had admitted and confirmed on 23.03.2007 (Date of extension of mortgage) that the benefit of the aforesaid mortgage shall also apply for, stand extended to and cover the enhanced portion of the limits and/or the additional W.P. (C) No. 17698 of 2010 : 8 : facilities and also for all other liabilities and indebtedness of the Borrowers to the Bank. From the above, it is very much clear that the petitioner had executed Annexures R1 (c) and R1(d) in particular; in connection with the 3rd loan of Rs. 18.70 lakhs extended by the Bank on 23.03.2007; that the property of 54 cents was being offered as security creating mortgage and that the benefit of the aforesaid mortgage shall also apply for existing/enhanced portion of limits/additional facility and also for “ all other liabilities and indebtedness of the borrowers to the Bank”. 10. Name of the 'borrower' has been clearly given in Annexures R1 (c) and R1 (d) at column Nos. 1 and 2 respectively, as 'M/s Hotel Amrita Private Limited, Thycaud, Trivandrum' and there is no dispute that the said borrower is still to clear the balance liability under the two loans sanctioned earlier on 22.08.2005, though nearly 50 % has already been cleared pursuant to Ext. P3 judgment. This being the position, the petitioner has volunteered and agreed to have the mortgage created over the 54 cents of land while availing the 3rd loan of Rs. 18. 70 lakhs, to be extended in respect of the existing liability/indebtedness as well. As it stands so, the petitioner cannot claim it as matter of right, to have the said title deed returned; unless and until the entire liability is discharged in respect of all the loan W.P. (C) No. 17698 of 2010 : 9 : transactions. In short, the stand taken by the Bank does not reveal any irregularity, illegality or impropriety in any manner and no interference is warranted in the Writ Petition. 11. However, it has to be borne in mind that the original liability was substantially brought down (nearly to 50 %) and that the Bank was very much satisfied with the worth of the property originally offered as security while extending the loan of Rs. 45 lakhs on 22.08.2005. There is no specific case or legally acceptable material with the Bank that the value of the property has gone down. As such, it is for the Bank to consider, whether the rights and interests of the Bank with respect to the remaining liability would stand protected by the security tendered originally at the time of extending the first two loans and whether the title deed of the property in respect of the 3rd loan also is to be retained. The title deeds of the property in respect of the 3rd loan are seen retained; placing reliance on the relevant clauses in Ext. R1 (a) and R1 (b) and Annexures R1 (c) and (d), in a quite mechanical manner. The respondent Bank, being a nationalized Bank presumably with maximum number of branches in the world and foremost in the banking sector in India, may not be justified in viewing things in a mechanical manner as may be done by a 'private financier' and has necessarily to adopt a W.P. (C) No. 17698 of 2010 : 10 : pragmatic approach than a pedantic attitude. This Court finds considerable support in this regard from the judgments rendered by a Division Bench of this Court in W.P.(C) 18954 of 2006 and by a Single Bench in W.P.(C) 4215 of 2008, as to the adequacy/extent of security to be retained. 12. In the said circumstances, the respondents are directed to consider the adequacy/inadequacy of the extent of property retained at the hands of Bank by way of security and if it is found that the property offered as security at the time of availing the first two loans in the year, 2005 is sufficient to safe guard the interests of the Bank in respect of the remaining liability, the title deeds surrendered in respect of the 3rd loan of Rs. 18.70 lakhs extended on 23.03.07, (which stands already closed), shall be returned to the petitioner, so as to enable the petitioner to find out the ways and means to pursue the business and to generate funds to meet the obligations. The proceedings in this regard shall be considered and finalized by the respondents as expeditiously as possible, at any rate, within 'one month' from the date of receipt of a copy of this judgment. The Writ Petition is disposed of as above. P. R. RAMACHANDRA MENON, JUDGE kmd