IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT : THE HONOURABLE MR. JUSTICE C.K.ABDUL REHIM TUESDAY, THE 22ND SEPTEMBER 2009 / 31ST BHADRA 1931 WP(C).No. 16073 of 2005(L) -------------------------- PETITIONER: ------------------ M/S. ARUMUGHAM INDUSTRIES, BASANT NAGAR, MUTHIALPET, PONDICHERY-3, REPRESENTED BY ITS PARTNER V. ARUMUGHAM. BY ADV. SRI.ANIL K.NARENDRAN RESPONDENTS: ---------------------- 1. KERALA FINANCIAL CORPORATION, VELLYAMBALAM, TRIVANDRUM, REPRESENTED BY ITS MANAGING DIRECTOR. 2. THE BRANCH MANAGER, KERALA FINANCIAL CORPORATION, BRANCH OFFICE, THODUPUZHA. 3. M/S. MARAYOOR PAPER BOARDS (P) LTD., MARAYOOR, IDUKKI DISTRICT, REPRESENTED BY ITS MANAGING DIRECTOR. R1 & R2 BY SRI.V.B.UNNIRAJ, SC, KFC SRI.M.M.SAYED MUHAMMED, SC, KFC R3 BY ADV. SRI.R.PADMARAJ SRI.BIJU HARIHARAN THIS WRIT PETITION (CIVIL) HAVING BEEN FINALLY HEARD ON 22/09/2009 , THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING: WP(C).No. 16073 of 2005(L) APPENDIX PETITIONER'S EXHIBITS: P1 : COPY OF CERTIFICATE OF REGISTRATION OF MODIFICATION OF CHARGE, MORTGAGE ETC. DATED 25.5.1989 RELATING TO HYPOTHICATION OF MACHINERY FOR WHICH QUOTATION WAS PLACED. P2 : COPY OF RECORD NOTE OF THE DISCUSSION BETWEEN THE PETITIONER AND 1ST RESPONDENT ON 30.1.1990. P3 : COPY OF JUDGMENT AND DECREE IN O.S. NO.30/93 ON THE FILE OF PRINCIPAL SUB JUDGE, PONDICHERY, DATED 24.7.1995. P4 : COPY OF NOTICE SENT ON BEHALF OF THE PETITIONER TO RESPONDENTS 1 AND 2 DATED 19.1.2005. P5 : COPY OF REPLY NOTICE TO EXT.P4 SENT BY THE 1ST RESPONDENT TO THE PETITIONER DATED 8.2.2005. P6 : COPY OF INVOICE NOS.61,62 AND 63 DATED 15.12.1989 RAISED BY THE PETITIONER ON THE 3RD RESPONDENT. P7 : COPY OF INVOICE NOS.57 AND 58 DATED 13.7.1990 RAISED BY THE PETITIONER ON THE 3RD RESPONDENT. P8 : COPY OF INLAND TRANSIT POLICY DATED 12.7.1990, TAKEN FROM THE NATIONAL INSURANCE COMPANY LIMITED, PONDICHERRY. P9 : COPY OF PETITIONER'S LETTER DATED 14.7.1990 TO THE 3RD RESPONDENT. P10 : COPY OF PETITIONER'S LETTER DATED 14.7.1990, ADDRESSED TO THE 1ST RESPONDENT. P11 : COPY OF LETTER DATED 8.8.1990 OF THE 3RD RESPONDENT ADDRESSED TO THE PETITIONER. P12 : COPY OF PETITIONER'S LETTER DATED 18.10.1990 TO THE 3RD RESPONDENT, WITH COPY TO THE 1ST RESPONDENT. P13 : COPY OF CERTIFICATE OF REGISTRATION OF MODIFICATION OF CHARGE DATED 4.11.1992 ISSUED BY THE REGISTRAR OF COMPANIES. P14 : COPY OF TENDER NOTICE DATED 2.8.1999 PUBLISHED IN NEWS PAPER BY THE KFC. P15 : COPY OF LIST OF ITEMS TAKEN OVER BY THE KFC FROM THE 3RD RESPONDENT, ON 7.10.1997. P16 : COPY OF SCHEDULE DATED NIL OF THE MACHINERIES SOLD BY THE KFC. RESPONDENTS' EXHIBITS: N I L // TRUE COPY // P.A. TO JUDGE. app/- C.K.ABDUL REHIM, J - - - - - - - - - - - - - - - - - - - - - - - W.P(C) No.16073 of 2005 - - - - - - - - - - - - - - - - - - - - - - - Dated this the 22nd day of September, 2009 J U D G M E N T 1. Challenge in this writ petition is against sale conducted by the respondents 1 and 2, under the provisions of the State Financial Corporation Act. The petitioner is a supplier of industrial machineries who had effected supply of various machineries to the third respondent company. The grievance of the petitioner is that while payments with respect to machineries supplied to 3rd respondent was pending, the respondents 1 and 2 had attached the plant and machineries of the third respondent company and sold in public auction on 30.8.1999, pursuant to Ext.P14 notice, in a proceedings initiated against the 3rd respondent, for realisation of amounts due in the loan account availed by the 3rd respondent from respondents 1 and 2. The complaint is that machineries with respect to which payments were pending and with respect to which there was no hypothication in favor of respondents 1 and 2 were W.P(C) No.16073 of 2005 2 also sold by respondents 1 and 2 without any authority. Hence the petitioner is seeking directions for payment of the sale price received by respondents 1 and 2 to the petitioner. 2. According to the petitioner, they supplied machineries worth Rs.13,00,452/- to the third respondent company by virtue of Exts.P6 and P7 invoices, dated 15.12.1989 and 13.7.1990. With respect to payment of the value, there was tripartite agreement executed between petitioner, third respondent and the second respondent, as evidenced by Ext.P2. It is pointed out that in terms of Ext.P2, the 2nd respondent corporation had agreed to make arrangements to release 90% of the cost of the machineries after conducting due verification and after satisfying about the trial production. It is also contended that at the instance of respondents 1 and 2, the 3rd respondent had submitted “certificate of registration of modification charges” before the Registrar of companies as evidenced by Exts.P1 and P13, including the machinery supplied by the W.P(C) No.16073 of 2005 3 petitioner. Such registration of “modification of charges” will indicate that the machineries in question was actually supplied to the third respondent and the same was available in the plant of third respondent at the time when sale was conducted, is the argument. Further it is pointed out that Exts.P15 and P16, list of items and schedule of machineries, which were put to auction as per Ext.P14 notice, contained those items supplied by the petitioner. It is the contention of the petitioner that when payments were defaulted, lawyer's notice as evidenced by Ext.P12 was caused to the third respondent, with copy endorsed to the 2nd respondent, in which demand was raised for payment of the amounts due with respect to supply of the machineries. Further, the petitioner made direct requests with the respondents 1 and 2 for payment of the value of the machineries. Under the above said facts and circumstances claim of the petitioner is that the sale of the machineries with respect to which payment was pending, conducted by respondents 1 and 2, is without any authority and the value of such machineries W.P(C) No.16073 of 2005 4 cannot be appropriated by respondents 1 and 2 against the loan account of the third respondent company. 3. In the counter affidavit of respondents 1 and 2 dated 28.5.2008, it is contended that respondents 1 and 2 are in no way liable for payment of the amounts due to the petitioner from the third respondent. The supply of machineries as alleged by petitioner is denied by respondents 1 and 2. It is specifically contended that at the time when respondents 1 and 2 had taken over factory of the third respondent, those machineries which were already hypothicated by the third respondent in favour of the corporation alone were available,and the statement of the petitioner that the machineries in question were hypothicated to the corporation is not true and correct. It is also contended that the machineries supplied by the petitioner were found to be second hand and defective machineries while examination conducted by the technical officers of respondents 1 and 2, and those machineries were not hypothicated and nor had taken possession, at the time W.P(C) No.16073 of 2005 5 when the unit was taken over possession. It is also denied that the machineries were laying in the premises of third respondent at the time when the auction was conducted. 4. In this regard, it is noticed that the petitioner had filed a suit against the third respondent before the Principal Sub Court, Pondicherry and obtained Ext.P3 judgment and decree against the third respondent, with respect to amounts due as value of the machineries alleged to have been supplied. The basic facts revealed is that, the order for supply of machineries was placed by the third respondent and supply was effected by the petitioner to the third respondent. Hence inference of a concluded contract for purchase of machineries between the petitioner and the third respondent, alone can be taken. In order to claim liability against respondents 1 and 2, the petitioner is mainly banking upon Ext.P2 which is the minutes of a tripartite meeting. On a perusal of Ext.P2 it is revealed that the modalities with respect to supply and erection of machineries and with respect to effecting payment out of W.P(C) No.16073 of 2005 6 the loan amount sanctioned by the respondents 1 and 2, are the matters dealt with in Ext.2. Respondents 1 and 2 had agreed for effecting payment directly to the suppliers out of the loan amount, if it is satisfied that the supply of machineries is as per the specification and its trial run is effected in a proper manner. But I do not think that by virtue of the tripartite decision any liability can be fetched on respondents 1 and 2, to bind them for payment of value of the machineries. Therefore the petitioner cannot successfully attribute any failure on the part of respondents 1 and 2 in not effecting payment of the amount due under supply of machineries. 5. The next question to be considered is whether there was unauthorised sale conducted by the respondents 1 and 2 with respect to machineries belonging to the petitioner (kept in the premises of 3rd respondent) which were not hypothicated. Or in other words whether the respondents 1 and 2 had effected sale of machineries, which actually does not belong to the third respondent company. W.P(C) No.16073 of 2005 7 With respect to the above aspects the petitioner's pleadings are based on various documents like “certificate of registration of modification of charges”, schedule attached along with the sale notice etc: On the other hand learned standing counsel appearing for the respondents 1 and 2 stoutly refuted such allegations on the basis of dates with respect to supply of machineries and the dates of creation of such charges, which do not tally each other. Further such allegations are refuted on the contention that even if any such machineries were supplied to the third respondent, those machineries were not taken over possession or sold in the auction conducted. 6. From the rival contentions it is revealed that there exist dispute with respect to the above said factual aspects as to whether the sale included those machineries supplied by the petitioner with respect to which payments were pending and if any such machineries where included whether they were actually hypothicated or not. I am of the opinion that all these questions cannot be resolved in a W.P(C) No.16073 of 2005 8 proceedings under Article 226. At the most the claim of the petitioner seems to be one in the nature of damages against respondents 1 and 2, based on an allegation that KFC had conducted unauthorised sale of machineries, which belonged to the petitioner or machineries upon which the petitioner has got a lien. Such a claim if to resolved, need adjudication on the basis of facts and figures, which I am afraid, this court can venture in the jurisdiction under Article 226. 7. Further, I also notice that it is not clear as to whether the machineries were sold separately or in a single lot as plant and machineries. In such case it is also difficult to segregate the receipts with respect to the machinery alone. All these aspects cannot be looked into and adjudicated upon in this writ petition. The entitlement of the petitioner or the liability of the respondents 1 and 2 in this regard cannot be decided without taking full fledged evidence. Therefore the petitioner cannot be permitted to seek direction against respondents 1 and 2 for payment of W.P(C) No.16073 of 2005 9 above amount out of the sale consideration received. Accordingly the writ petition fails and the same is liable to be dismissed. However, it is made clear that dismissal of this writ petition will not in any way prejudice rights if any, available to the petitioner for seeking damages against respondents 1 and 2 on the basis of the alleged cause of action. C.K.ABDUL REHIM, JUDGE. app/-