IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT : THE HONOURABLE MR. JUSTICE C.N.RAMACHANDRAN NAIR THURSDAY, THE 3RD APRIL 2008 / 14TH CHAITHRA 1930 WP(C).No. 37113 of 2007(R) -------------------------- PETITIONER: ------------ 1. M/S.K.M.J.RICE MILLS (P) LTD., KADAVOOR P.O., POTHANIKKAD, MUVATTUPUZHA - 686 671 REPRESENTED BY ITS MANAGING DIRECTOR, SRI.JOSHY MATHEW. 2. JOSHY MATHEW, KIZHAKKEBHAGATH HOUSE, KADAVOOR P.O., POTHANIKKAD, MUVATTUPUZHA - 686 671. 3. SHIJU K.MATHEW, KIZHAKKEBHAGATH HOUSE, KADAVOOR P.O., POTHANIKKAD, MUVATTUPUZHA-686 671. 4. K.C.MATHEW, KIZHAKKEBHAGATH HOUSE, KADAVOOR P.O., POTHANIKKAD, MUVATTUPUZHA - 686 671. 5. CHINNAMMA MATHEW, KIZHAKKEBHAGATH HOUSE, KADAVOOR P.O., POTHANIKKAD, MUVATTUPUZHA - 686 671. 6. MARY GEORGE, KIZHAKKE KURUVITHADAM, KADAVOOR P.O., POTHANIKKAD, MUVATTUPUZHA - 686 671. 7. DENNY JOHN, KALAMBATTU PARAMBIL HOUSE, KADAVOOR P.O., POTHANIKKAD, MUVATTUPUZHA. BY ADV. SRI.RAJU JOSEPH RESPONDENTS: ------------- 1. THE KERALA FINANCIAL CORPORATION, VELLAYAMBALAM, THIRUVANANTHAPURAM REPRESENTED BY ITS MANAGING DIRECTOR. 2. THE DISTRICT MANAGER, KERALA FINANCIAL CORPORATION DISTRICT OFFICE, KALOOR, KOCHI-682 017. 3. THE DISTRICT COLLECTOR, ERNAKULAM. 2 4. THE DEPUTY TAHSILDAR (RR), FOR KERALA FINANCIAL CORPORATION OFFICE OF THE KERALA FINANCIAL CORPORATION, ERNAKULAM. R1, R2 & R4 BY ADV. SRI.M.M.SAYED MUHAMMED, SC, KFC R3 BY G.P. SRI. E.P. GOVINDAN THIS WRIT PETITION (CIVIL) HAVING BEEN FINALLY HEARD ON 03/04/2008, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING: 3 APPENDIX PETITIONERS' EXHIBITS: P1: TRUE COPY OF NOTICE DT.6.2.2007. P2: TRUE COPY OF APPLICATION DT.14.9.2004. P3: TRUE COPY OF SALE NOTICE DT.NIL. P4: TRUE COPY OF SALE NOTICE DT.NIL. P5: .DO. DT.17.5.2005. RESPONDENT'S EXHIBITS: R1(a): TRUE PHOTOCOPY OF AUCTION NOTICE DT.25.10.2007 PUBLISHED IN MATHRUBHUMI AND DESABHIMANI DAILY DT.27.10.2007. R1(b): TRUE PHOTOCOPY OF NOTICE OF SALE IN RESPECT OF 1.05 ACRES OF LAND OF VANNAPPURAM VILLAGE ISSUED BY DEPUTY TAHSILDAR, KFC, KOTTAYAM. R1(c): TRUE PHOTOCOPY OF LETTER DT.17.12.2007 ISSUED BY TAHSILDAR, KOTHAMANGALAM. TRUE COPY PS TO JUDGE C.N. RAMACHANDRAN NAIR, J. -------------------------------------------- W.P.C. NO. 37113 OF 2007 -------------------------------------------- Dated this the 3rd day of April, 2008 JUDGMENT Heard counsel for the petitioners and standing counsel appearing for KFC. Loan was availed from KFC by the first petitioner-company and a Firm by name M/s. K.M.J. Rice Mills. Petitioners 2 to 7 are either Directors of the defaulter-company or partners of the firm or guarantors. Recovery proceedings were initiated by KFC by way of attachment and sale of properties of the defaulter-company and Firm and also against Directors, partners and guarantors personally. Standing counsel for KFC submitted that as of now the total liability due from the company and Firm is above Rs. 2.75 crores. However, it is conceded that business is closed and sale proceeds of one property which is around Rs. 33 lakhs is credited to the loan account. This Writ Petition was filed when another item of property was attempted to be sold by the KFC. This Court has granted stay against confirmation of sale and sale is stated to be to a relative of defaulters. I do not think there is any need for this Court to consider the challenge raised against recovery proceedings because counsel for the petitioners submitted 2 that petitioners are willing to settle liability under OTS scheme. Having regard to the amount involved and the fact that business is closed, I feel this is a fit case for KFC to grant OTS benefit. Since more than ten per cent of the liability is recovered and since petitioner has a case that without liquidating assets, namely, immovable properties, petitioners will not be able to pay further amount, I direct the KFC to consider and grant OTS benefits and grant reasonable time to make payment without demanding deposit of 10% of the outstanding liability as a condition for considering the OTS benefit. The Branch Manager or District Manager of the KFC will permit the petitioners or their representative to verify the correctness of the statement of accounts already furnished to the petitioners with reference to loan acounts, and if any mistake is pointed out by the petitioner, the same should be corrected by the KFC. The Board of KFC is directed to take a decision on OTS and grant three months time to the petitioners to settle the liability. As and when OTS benefit is granted, petitioners are free to negotiate for sale of any item or items of mortgaged property and even enter into agreement for sale after disclosing to the purchaser that the property is subject to mortgage. However, sale deed will be executed only on clearing the entire arrears under the OTS scheme 3 either by petitioners or purchasers under agreement. W.P. is disposed of granting stay for three months against all further proceedings with further direction to the petitioners not to transfer or part with or encumber the property or do anything to reduce it's value until arrears are cleared. Petitioners or their authorised representative will approach the Branch Manager or District Manager of the KFC for verification of accounts along with a copy of this judgment, and the Branch Manager/District Manager will forward his remarks for the Board to consider and grant OTS benefit without any delay. However, if liability is not settled under OTS scheme granted by KFC, then there will be direction to the petitioners to hand over possession of the mortgaged properties to KFC and KFC will be free to sell such properties and if sale proceeds of such properties are not sufficient to wipe off the debt, to proceed against the personal properties of directors, partners and guarantors to the extent permissible. Issue photocopy tomorrow itself. (C.N. RAMACHANDRAN NAIR) Judge kk 4