IN THE HIGH COURT OF JUDICATURE AT MADRAS DATED :: 10-07-2008 CORAM THE HONOURABLE MR.JUSTICE S.J.MUKHOPADHAYA AND THE HONOURABLE MR.JUSTICE V.DHANAPALAN WRIT PETITION Nos.570 AND 2656 OF 2008 Adhimoolam ... Petitioner in W.P.No.570 of 2008 1.Kannamal 2.Muniammal 3.Padmavathy 4.Iyyakannu 5.Navaneetha Ammal 6.Baby Ammal 7.Subramani 8.Saroja Ammal 9.Ramesh 10.Murugappa Naicker 11.Ganagadurai Naicker 12.Murugesa Naicker 13.Kuppuswamy Naicker 14.Subramaniya Naicker 15.Elumalai Naicker ... Petitioners in W.P.No.2656 of 2008 -vs- 1.Indian Bank, ARMB II, No.55, Ethiraj Salai, Chennai. 2.M/s.Asian Capital Consolidated Fund, rep.by its Proprietor Mr.Manohar Prasad, No.2, Sarangapani Street, T.Nagar, Chennai-600 017. https://hcservices.ecourts.gov.in/hcservices/ 3.M/s.J.D.A.Consultancy Services Private Ltd., 11-A, Silk House, 630, JS Sheth Road, Metro Mumbai, Mumbai-400 002. 4.The DRAT, rep.by its Registrar, No.55, Ethiraj Salai, Chennai-600 008. 5.The Recovery Officer, DRT-1, 6th Floor, Spencer Tower, 770-A, Anna Salai, Chennai-600 002. ... Respondents in both W.Ps. Petitions under Article 226 of The Constitution of India, praying for issuance of a writ of certiorari. For petitioners : Mr.AR.L.Sundaresan, Senior Counsel, for Mr.M.Basker. For respondent 1 : Mr.Jeyesh B.Dolia, for M/s.Aiyar & Dolia. For respondent 2 : Mr.T.V.Ramanujam, Senior Counsel, for M/s.R.Harishankar. For respondent 3 : Mrs.Nalini Chidambaram, for M/s.S.R.Rajagopal. For respondents 4 & 5 : No appearance COMMON ORDER V.DHANAPALAN,J. Petitioners have filed these two Writ Petitions, praying for issuance of a writ of certiorari, to call for the records of the fourth respondent pertaining to the order, dated 31.12.2007, passed in M.A.No.124 of 2007 in D.R.C.No.187 of 2001 in O.A.No.375 of 1997 and quash the same. 2. The facts, which led to the filing of these Writ Petitions, are as follows : https://hcservices.ecourts.gov.in/hcservices/ 2.1. Petitioners are the owners of an extent of 12.03 acres of land in Okkiyam Thoraipakkam Village. On 12.05.1992, the petitioners executed a Power of Attorney in favour of Palaniappa Estates, represented by its Proprietor PL.Sundaram, by which they gave the power to the agent to develop the land to sell the same, to raise finance by deposit of title deeds and other encumbrances and to construct houses, flats, apartments and do all other things, which the Power Agent, in his absolute discretion, may think fit. The Power Agent is doing real estate business and has intended to develop the land by making lay out and undertaking construction on the said property. He has also taken possession of the entire property. 2.2. For the purpose of developing the land, the petitioner approached the second respondent for raising finances and a Memorandum of Understanding was entered into on 17.02.1992 between the Power of Attorney and the second respondent by which the second respondent agreed to provide financial assistance to the maximum limit of Rs.50.00 lakhs on depositing the documents of title with the second respondent. Initially, the second respondent paid a sum of Rs.20.00 lakhs to the Power of Attorney. However, the second respondent failed in keeping its commitments on the balance of Rs.30.00 lakhs, which was agreed to be paid on or before 31.03.1992 and 30.06.1992. In view of the breach committed by the second respondent in making the payment as agreed upon, the petitioner could not successfully complete the business venture as planned by them. The amount of Rs.20.00 lakhs, which was paid, was used for the purpose of construction and sales promotion, but since the second respondent defaulted in payment of the balance amount, the entire project could not be completed. In the meanwhile, the petitioner completed part of the project and effected sale of the land and building to approximately over 60 persons. The petitioner also undertook construction of the residential house on work contract basis. Hence, out of the entire extent of 12.03 acres, during the course of development, about 4 acres has gone for road and other common areas such as parks and the balance extent has been sold to various parties who have also put up the building on the said extent owned by them. The petitioner had entered into an agreement with the land owners only for the purpose of development of the property and even though the second respondent did not fulfil the promise of payment of the balance amount of Rs.30.00 lakhs, they orally gave permission to the petitioner to continue development process and make the sale in spite of the fact that the property had been mortgaged to them by deposit of title deeds as per the Memorandum of Understanding, dated 17.02.1992. Subsequently, the second respondent informed the petitioner that they were taking some facilities from the Indian Bank and, therefore, the petitioner would be required to sign certain documents with the Indian Bank for the deposit of the https://hcservices.ecourts.gov.in/hcservices/ title deeds. Accordingly, the petitioner signed in the deposit register of the Indian Bank as if he has deposited the documents of title with the Indian Bank even though there was absolutely no pecuniary relationship between the petitioner and the Indian Bank. The petitioner signed the deposit register only on an assurance given by the second respondent that he was obtaining a loan from the Indian Bank and that immediately on obtaining the loan on the strength of the title deeds of the petitioner, the balance amount of Rs.30.00 lakhs would be given to the petitioner, but, the petitioner did not get the amount of Rs.30.00 lakhs. 2.3. In such circumstances, the petitioner filed C.S.No.376 of 2000 before the High Court for a declaration that the Memorandum of Understanding, dated 17.02.1992, is unenforceable in law and for a consequential relief of permanent injunction, restraining the second respondent from initiating any action on the basis of the Memorandum of Understanding, dated 17.02.1992. During the course of the said proceedings, a compromise was arrived at between the petitioner and the second respondent by which the second respondent agreed to receive a sum of Rs.43.00 lakhs in full and final settlement of his claim against the petitioner and a schedule of payment was also agreed upon. However, Memorandum of Compromise was not filed in the Court, eventhough it was signed by the parties. 2.4. The second respondent and a number of firms/companies and individuals connected with the second respondent had borrowed huge sums of money from the Indian Bank. Therefore, the Indian Bank filed O.A.No.375 of 1997 against the second respondent before the Debts Recovery Tribunal on 14.06.1997. In the application, there were 47 respondents and the petitioners herein were impleaded as respondents 14 to 29 and the second respondent herein was the 42nd respondent. The land of the extent of 12.03 acres in Okkiyam Thurapakkam Village was shown in the schedule to the application as the land which had been mortgaged to the Indian Bank by the second respondent herein. The total claim in respect of the said application was approximately Rs.59.35 crores. 2.5. During the course of hearing of this application, the second respondent indicated to the petitioner that the entire issue was getting settled and, therefore, requested the petitioner to come to the Bank and sign a Memorandum of Compromise to be filed before the DRT. Accordingly, the petitioner signed the memorandum but a copy of the same was given to him only in February 2006, though it was signed on 21.11.2000. The petitioner was not aware of filing of O.A.No.375 of 1997 before the DRT though the petitioners had been impleaded as represented by their Power of Attorney P.L.Sundaram. No notice was served on the petitioner, as he was no longer at the https://hcservices.ecourts.gov.in/hcservices/ address mentioned in the notice. The petitioner was not aware of the fact that an application had been filed for recovery of money and that one of the properties shown in the schedule of application was the property of the petitioner. 2.6. Petitioner signed the Memorandum of Compromise for settlement of the claim between the Indian Bank and the second respondent and their group, but he was not aware of the contents of the memorandum since he was given to understand by the second respondent that they would take care of the entire settlement and return the title deeds to the petitioner. A perusal of the memorandum of compromise would show that the borrowers/guarantors/mortgagors had agreed to pay a sum of Rs.48.47 crores as against the total dues of Rs.124.47 crores as on 30.06.2000. They also paid a sum of Rs.5.00 crores and undertook to pay a sum of Rs.5.00 crores on or the date of filing the compromise memo. The Memorandum of Compromise was filed before DRT on 05.12.2000 and eventually taken up for consideration only on 08.08.2001 and, after hearing the parties, the DRT passed an order recording the compromise on certain terms and conditions. The applicant had no knowledge of the pending proceedings and was set ex parte. On 27.01.2006, a sale notice was issued and only at that stage the petitioner came to know about the pending proceedings and the fact that his property was going to be sold. Immediately, the petitioner filed I.A.Nos.30 and 32 of 2006 for condoning the delay of 2890 days in filing a petition for setting aside the ex parte order, dated 16.03.1998, and for stay of the sale. The said petitions were dismissed by the DRT and aggrieved over the said order, the petitioner filed an appeal before the DRAT. On 28.11.2006, the DRAT passed an order to the effect that the auction would be stayed if the petitioner was prepared to pay Rs.3.25 crores, however, the auction sale was fixed on 29.11.2006 at 02.00 p.m. 2.7. Under the circumstances, the petitioner filed a Writ Petition No.46531 of 2006 before this Court and the same was admitted on 29.11.2006 and an interim order passed to the effect that the auction might be held in respect of the property but conformation of the sale should not be done without the prior permission of the Court. Subsequently, on 05.12.2006, the said Writ Petition was disposed of with a direction that the interim order would continue till the final decision is taken by DRAT and DRAT was directed to dispose of M.A.No.204 of 2006 before 31.12.2006. Thereafter, M.A.Nos.204 and 207 of 2006 were dismissed by DRAT on 29.12.2006. Hence, the petitioner filed W.P.No.556 of 2007. In the meantime, the sale certificate was issued. The said Writ Petition was eventually dismissed by the Division Bench on 17.04.2007. However, on 03.01.2007 itself, the third respondent had paid the entire consideration of Rs.23.05 crores. In view of certain negotiations that took place https://hcservices.ecourts.gov.in/hcservices/ between the bank and the borrower, the borrower decided to bring in the entire OTS amount of Rs.157.00 crores, which included the original OTS amount of Rs.123.00 crores as on 31.12.2000. A full satisfaction memo was also filed by the bank and on 09.04.2007, the DRT passed an order recording the full satisfaction memo and dismissing all the original applications, as settled out of court. Therefore, the entire amount has been paid by the borrower and there is no reason to proceed with the sale. The amount of Rs.23.05 crores deposited by the third respondent has been kept in No Lein Account and the Recovery Officer has not allowed the Bank to adjust the same towards the dues. Since a sum of Rs.157.00 crores has been paid towards full and final settlement and to that effect a full satisfaction memo was filed by the bank and the same was recorded by the Tribunal, no amount is due under the Original Applications and the amount of Rs.23.05 crores kept in No Lien Account has to be returned by the Recovery Officer. The entire action of the Recovery Officer in bringing the property of the third party for sale to help the second respondent is totally collusive and arbitrary and the first respondent bank is playing to the tune of the second respondent company and their action is not transparent in law. The Recovery Officer did not wait till the disposal of Writ Petition on merits and proceeded to confirm the sale and return the original sale deeds on the same day when a memo was filed that an appeal was filed as against the orders of the DRAT. The appeal preferred before DRAT in Appeal No.7 of 2007 was dismissed by an order dated 19.07.2007 without considering the above aspects. As against the same, the petitioner preferred an appeal in M.A.No.124 of 2007 before the DRAT and the DRAT, by an order dated 31.12.2007, dismissed the appeal with costs. 2.8. Hence, these Writ Petitions. 3. First respondent has filed a counter affidavit, denying the averments contained in the petition and stating that the Writ Petition is not maintainable in law or in facts. According to them, the bank has no role to play in the agreement. The petitioner, Power Agent of the land owners, created equitable mortgage with the bank by depositing the title deeds in respect of his properties on 02.04.1992 and executed a letter confirming the creation of the mortgage on 03.04.1992. The bank is not concerned with the inter se agreement between the petitioner and the second respondent or any litigation in respect of the same. The petitioner remained ex parte in the original application proceedings in 16.03.1998. Thereafter, he has entered into a memo of compromise on 21.11.2000 as one of the respondents consulted for settlement of the banks due under a compromise entered into between the bank and the second respondent group concerns. The petitioners signed the memo of compromise through their Power of Attorney as original owner of the property. As the https://hcservices.ecourts.gov.in/hcservices/ parties to the compromise memo did not pay the amount in time, by invoking default clause, an interim recovery certificate vide DRC No.187/2001 was issued by the Debts Recovery Tribunal. Further, attachment of all the properties was made by the Recovery Officer of DRT by 02.12.2002. The petitioner has waited till the property is put in public auction and suddenly filed an application to stay the auction proceedings. The averment that the petitioner came to know that the second respondent and the group concerns did not fulfil the terms of compromise and he was not given the memorandum of compromise is only an afterthought. The petitioner watched the proceeding and when the property was put in public auction, the interim recovery certificate was challenged, seeking for setting aside the ex parte order, which cannot, in any event, be challenged by the parties to it. The petitioner is a party to the memo of compromise in O.A.Nos.375 of 1997 and 385 of 1997 and he cannot say that he is not aware of the original proceedings. The address was given in the original applications as per the documents available with the bank and the address mentioned in O.As. is the last known address available with the bank. The notices sent to the petitioner were retained unserved and publication has been effected on 12.02.1998 in News Today. The bank has taken every care to serve summons on the petitioner. It is an admitted fact that the amount of Rs.23.05 crores deposited by the third party purchaser is kept in Non-interest bearing Sundry Deposit, as directed by the Recovery Officer. It is not true that the present One Time Settlement is the same as the one reached in the year 2000. The petitioner, after signing the memorandum of compromise, is not disputing the same and thus cannot contend differently. The DRT passed an order on 08.08.2001 in terms of the memo of compromise signed by the parties on 21.11.2000. The borrower company namely Gemini group of company/mortgagor/guarantor, who had signed the memo of compromise, defaulted in payment of amount due to the bank. Thus, the bank had to take further steps in bringing the property for sale in terms of the interim recovery certificate of the DRT. It is not true that the bank had filed the recovery certificate and the petitioner was not aware of the same till October, 2006. The petitioner has already agitated the rejection of the certificate for condonation of delay in the earlier round of litigation in W.P.No.567 of 2007 and the said writ petition came to be dismissed on 17.04.2007. As the bank wanted to recover the long pending dues, it initiated action for bringing the mortgaged assets for sale and one of the properties is of the petitioner. The sale of the petitioner's property fetched Rs.23.05 crores in the auction held by the Recovery Officer of DRT. The entire amount of the auction sale proceedings was received by the Recovery Officer on 15.12.2006 and the bank received the amount from the Recovery Officer on 05.01.2007 and the said amount was kept in interest bearing Sundry Deposit account pending the Writ Petition No.567 of 2007. https://hcservices.ecourts.gov.in/hcservices/ 4. It is also stated in the counter that the Gemini group of companies negotiated the One Time Settlement and agreed to pay Rs.157.00 crores inclusive of the sale consideration of few properties and the payment was received on 28.03.2007 and the bank filed full satisfaction memo before DRT on 09.04.2007. M/s.J.D.A.Consultancy Services Pvt.Ltd. brought in additional Rs.23.05 crores so as to enable the bank to file full satisfaction memo as the bank could not utilise the amount deposited by the auction purchaser, namely, J.D.A.Consultancy. The One Time Settlement was not on the basis of the earlier One Time Settlement. The amount of Rs.23.05 crores deposited by the auction purchaser could not be utilised by the bank as the Recovery Officer restrained the bank from doing so and the same was during the pendency of the writ petition. The petitioner ought to have sought for redemption, which he had agreed as per the terms of the compromise signed by him before the sale of the property. There was no silent arrangement for entering into the memo of compromise. The bank has the right to recover its dues in terms of law and as per its policy decisions. The borrower requested the bank for OTS and it was found viable and thus the bank accepted the offer and agreed for accepting Rs.157.00 crores. The right to invoke the interim recovery certificate vests with the respondent bank and the sale of the property of the petitioner has helped the bank to recover substantial amount. The petitioner cannot claim that he is liable to pay only Rs.1.46 crores out of Rs.157.00 crores. Accordingly, he prayed for dismissal of the Writ Petitions. 5. Second respondent has also filed a counter, by putting the petitioner to strict proof of the averments contained in the petition. It is stated in the counter that the second respondent and the petitioner, at the cost of the second respondent, had decided to develop the petition subject property and an initial payment towards the development work was also released to the petitioner by this respondent. The said initial payment was made by mortgaging the petition subject property to the first respondent bank. The initial money was paid with a fond hope that the petitioner will develop the property and the petitioner and this respondent will have a huge income out of the same. But, the petitioner has started swindling the moneys given by this respondent without developing the petition subject property. A criminal complaint was also made against the petitioner by this respondent and the same was investigated. The first respondent initiated recovery proceedings against this respondent as guarantor, wherein the petitioner was also made a party and as mortgagor/guarantor. After due service to the petitioner, the petitioner, in those proceedings, did not appear and therefore was set ex parte before the Tribunal. Since the recovery proceedings were pending, as per the legal advice, this respondent was directed to https://hcservices.ecourts.gov.in/hcservices/ file a memorandum of compromise with all the parties, including the petitioner. On explaining all these things, the petitioner readily joined in the compromise and a memorandum of compromise was also filed before the DRT. Due to various calamities and unforeseen circumstances, the said compromise was not able to be fulfilled. Subsequently, since that failure has happened at borrowers end, as per the terms of compromise, an interim recovery certificate was issued by the Tribunal and the properties were brought into auction. All the properties mortgaged were brought into auction by the Recovery Officer of the Tribunal. Several publications were given and some of the properties were sold and some were not sold. Under the circumstances, after deducting the money which was realized by the bank from auctions, the bank has given opportunity to the borrowers and the balance was paid by the borrower in full quit and the bank has filed a full satisfaction memo before the Tribunal. As a matter of fact, when the petitioner has misappropriated funds by utilizing the same for his own use, that was questioned by this respondent by filing a criminal complaint with the police department. The petitioner has come in person and executed the documents relating to the mortgage and now claims as if he has blindly believed this respondent and signed those documents, which is concocted for the purpose of this Writ Petition. It is also not correct to state that the petitioner was not aware of the pending O.A.in Debt Recovery Tribunal against this respondent and the petitioner, as the petitioner had discussed about the pending O.A.on several occasions. 6. The counter further goes to the effect that the compromise was worked out by the borrowers with the respondent bank and at that time it was finalised that the properties which were sold cannot be redeemed and hence the borrowers were forced to accept the compromise and agree to pay the balance amount. Even for that payment, they obtained financial assistance from some other financial company by mortgaging the properties which were available with them. The present petition is nothing but a sheer abuse of process of law. The person, who mortgaged the property, illegally alienated the same to various third parties and now claims protection under law in the guise of filing this writ petition, which is against the settled principles of law. 7. It is also stated in the counter that this respondent has no connection whatsoever with the auction purchaser and all the allegations made in the petition are created for the purpose of the case and the transaction between the auction purchaser and the bank are not with this respondent's knowledge. The borrowers have made One Time Settlement with the bank with regard to the balance claimed by the bank after due appropriation of the amounts realized from the auction of several properties. The petitioner has unnecessarily https://hcservices.ecourts.gov.in/hcservices/ made this respondent as a party to this Writ Petition and deliberately pleaded the distorted statements before this Court. Accordingly, he prayed for dismissal of the Writ Petition with exemplary costs to this respondent. 8. Third respondent has also filed a counter, stating that most of the allegations in the writ petition are not within the knowledge of this respondent, as this respondent is an auction purchaser in an auction conducted by the Debts Recovery Tribunal on 29.11.2006 except those facts which have come to the knowledge of this respondent after 29.11.2006. The present Writ Petition is not maintainable on the principles of res judicata. The writ petitioner had instituted a writ petition in W.P.No.556 of 2007 before this Court for a writ of certiorarified mandamus to quash the order dated 29.12.2006 in M.A.Nos.204 and 207 of 2006 and for a consequential relief forbearing the Debts Recovery Tribunal from proceeding with confirmation of sale in respect of the properties sold in public auction by the Recovery Officer on 29.11.2006. The said writ petition having been dismissed on 17.04.2007, the present writ petition is hit by the principles of res judicata and is not maintainable before this Court. Most of the averments and allegations contained in the affidavit filed in support of this writ petition have been raised before this Court in W.P.No.556 of 2007 and as such the petitioner is in law not entitled to raise the very same issue before this Court by way of this writ. The order passed in W.P.No.556 of 2007 having attained finality, the instant Writ Petition is not maintainable in law. The sale