Kerala High Court
Radhamani *(Deceased) P.K.Vijaya ... vs Kerala Financial Corporation on 8 August, 2025
2025:KER:59657
I.A.No.9 of 2025 & W.P.(C)No.24448 of 2014
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IN THE HIGH COURT OF KERALA AT ERNAKULAM
PRESENT
THE HONOURABLE MR. JUSTICE S.MANU
FRIDAY, THE 8TH DAY OF AUGUST 2025 / 17TH SRAVANA, 1947
WP(C) NO. 24448 OF 2014
PETITIONER:
RADHAMANI *(DECEASED)
PARUTHIPALLIL HOUSE,
CHAMBAKKARA P.O.,
POONITHURA VILLAGE,
ERNAKULAM DISTRICT, PIN - 682 038.
**P.K.VIJAYA LAKSHMI,
W/O MURALEEDHARAN,
A7, MAHALAKSHMI APARTMENTS, THEVERAKARA ROAD,
THRIPUNITHURA, PIN - 683301 -
** IS IMPLEADED AS PER ORDER DATED 16.09.2015 IN
I.A.13301/2015.
BY ADVS.
SRI.C.K.KARUNAKARAN
SMT.T.P.LAKSHMI VARMA
RESPONDENTS:
1 KERALA FINANCIAL CORPORATION
REPRESENTED BY BRANCH MANAGER,
KUMARANASAN SMARAKA BUILDING,
COURT ROAD, ALAPUZHA - 688 001.
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I.A.No.9 of 2025 & W.P.(C)No.24448 of 2014
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2 DEPUTY TAHSILDAR (RR)
KERALA FINANCIAL CORPORATION, ERNAKULAM, PIN -
682 017.
3 M/S.FATHIMA FOODS & PROTEINS (P) LTD.
VALAMANGALAM NORTH, THURAVOOR P.O.,
ALAPUZHA, PIN - 688 532,
REPRESENTED BY ITS MANAGING DIRECTOR,
V.P.FAKRUDEEN, FATHIMA MANZIL, CHANDIROOR P.O.,
ALLEPPY DISTRICT - 688 537.
4 STATE OF KERALA
REPRESENTED BY THE SECRETARY,
FINANCE DEPARTMENT, GOVERNMENT SECRETARIAT,
THIRUVANANTHAPURAM - 695 001.
* V.P.FAKRUDEEN,
ADDL.R5: FATHIMA MANZIL,
CHANDIROOR P.O.,
ALLEPPY DISTRICT, PIN - 688537.
ADDL.R6: V.P.NAZAR,
VALIYATHARAYIL,
CHANDIROOR P.O.,
ALLEPPY DISTRICT, PIN - 688537.
ADDL.R7: AJAYAKUMAR P.K.,
PARUTHIPALLIL, CHAMBAKKARA,
POONITHURA P.O., ERNAKULAM DISTRICT, PIN -
682038.
*(ADDL.R5 TO R7 ARE IMPLEADED AS PER
ORDER DATED 23.10.2014 IN I.A.14243/2014.)
BY ADVS.
SRI.MILLU DANDAPANI,SC,K.F.C.
SHRI.VARGHESE C.KURIAKOSE
2025:KER:59657
I.A.No.9 of 2025 & W.P.(C)No.24448 of 2014
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SHRI.SINU.G.NATH
SHRI.M.R.VENUGOPAL, SC, KFC
SMT.DHANYA P.ASHOKAN (SR.)
SRI.S.M.RAJEEVAN
THIS WRIT PETITION (CIVIL) HAVING BEEN FINALLY
HEARD ON 08.08.2025, THE COURT ON THE SAME DAY
DELIVERED THE FOLLOWING:
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I.A.No.9 of 2025 & W.P.(C)No.24448 of 2014
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S.MANU, J.
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I.A.No.9 of 2025 & W.P.(C).No.24448 of 2014
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Dated this the 08th day of August, 2025
JUDGMENT
Petitioner was a guarantor to a loan obtained by the 3 rd respondent from the 1 st respondent Kerala Financial Corporation (KFC). The 3rd respondent defaulted repayment. The 1st respondent proceeded against the petitioner and notified sale of residential property of the petitioner. The petitioner approached this Court stating that the 3 rd respondent company had sufficient properties to meet the entire liability and hence it is unjust to proceed against the residential property of the petitioner.
2. On 24.09.2014, this Court passed an interim order in favour of the petitioner on condition that she should deposit a sum of ₹20,00,000/- (Rupees Twenty lakhs only) with the KFC in a no-lien account. The petitioner complied with the order and deposited ₹20,00,000/- in a no-lien account.
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3. During the pendency of this writ petition, the original writ petitioner passed away and her daughter got impleaded as additional petitioner vide order dated 16.9.2015 in I.A.No.13301/2015 to prosecute the writ petition further. Later, the additional petitioner made efforts to settle the matter with KFC. Finally, it was agreed that the loan transaction can be settled under a compromise settlement scheme. The communication issued by the KFC in this regard was produced as Ext.P8 along with I.A.No.4/2025. The petitioner filed I.A.No.2/2025 for permitting the 1 st respondent to appropriate the amount of ₹20,00,000/- lying in the no-lien account towards the amount agreed to be paid under the compromise settlement scheme.
4. On 25.03.2025, I.A.No.4 of 2025 was considered by this Court. This Court directed the 1 st respondent to appropriate the amount of ₹20,00,000/- deposited in no-lien account, as directed on 24.09.2014, towards the amount agreed for settlement. Thereafter, I.A.No.5/2025 was filed by the KFC 2025:KER:59657 I.A.No.9 of 2025 & W.P.(C)No.24448 of 2014 6 seeking to modify the interim order dated 25.3.2025. In the affidavit filed in support of the petition, KFC contended that it approved the settlement of the loan taking into account the amount of ₹20,00,000/- deposited in the no-lien account with the Corporation also as remitted by the borrower towards discharge of the liability. The KFC further stated that while passing the order dated 25.3.2025 a mistake crept in the order as the amount of ₹20,00,000/- remaining in the no-lien account was considered as the compromise settlement advance. Further it was stated while determining the final settlement amount of ₹76.50 lakhs Corporation had considered all previous remittances. Petitioner filed counter affidavit in I.A.No.5/2025. Petitioner stated in the counter affidavit that the KFC authorities demanded that the full OTS amount of ₹76.50 lakhs be paid by the petitioner as the amount of ₹20,00,000/- was remaining in the no-lien account. Accordingly, the petitioner remitted entire ₹76.50 lakhs and requested the KFC to refund the amount remaining in the no-lien account. Petitioner produced copy of a 2025:KER:59657 I.A.No.9 of 2025 & W.P.(C)No.24448 of 2014 7 letter dated 29.3.2025 submitted to the KFC seeking to return the amount retained in the no-lien account. On 10.4.2025, considering the prayer in I.A.No.6/2025, the interim order dated 25.3.2025 was recalled.
5. Thus, though the transaction was settled by the petitioner by remitting an amount of ₹76.50 lakhs as per the OTS offer, a further dispute arose regarding appropriating the amount of ₹20,00,000/- lying in the no-lien account. I.A.No.9/2025 was filed by the petitioner for a direction to the KFC to refund the amount of ₹20,00,000/- remaining in the no- lien account.
6. Learned counsel for the petitioner Sri.C.K.Karunakaran argued that the KFC is now making an attempt to appropriate the amount remaining in the no-lien account also. He pointed out that there is no mention about inclusion of the said amount in considering the remittances made by the petitioner in Ext.P8 compromise settlement sanction communication. He pointed out that while mentioning 2025:KER:59657 I.A.No.9 of 2025 & W.P.(C)No.24448 of 2014 8 the settlement amount, the KFC specifically included advance amount of ₹20,00,000/- which is a separate remittance demanded for arriving at the settlement. If the KFC had genuinely taken into account the amount remaining in the no- lien account also while arriving at the settlement amount, nothing prevented the KFC from stating the same in Ext.P8 communication. He submitted that the KFC raised such a claim, only after the petitioner approached this Court, in I.A.No.5/2025. He therefore submitted that the claim raised by the KFC is clearly an afterthought and the same is liable to be rejected by this Court. The learned counsel relied on the judgment of the Hon'ble Supreme Court in Nava Bharat Ferro Alloys Ltd. v. Transmission Corporation of A.P. Ltd. and others [(2011) 1 SCC 216] to contend that, when writ proceedings come to an end, it is the duty of the Court, if interim orders were granted earlier, to restore the parties to the position they would have been in but for the interim orders. He therefore urged that I.A.No.9/2025 may be allowed and the KFC 2025:KER:59657 I.A.No.9 of 2025 & W.P.(C)No.24448 of 2014 9 may be directed to return the amount of ₹20,00,000/- remaining in the no-lien account to the petitioner.
7. Learned Senior Counsel appearing for the KFC, Smt.Dhanya Asokan submitted that the petitioner is attempting to get the amount deposited at the inception of the proceedings released knowing very well that the KFC had taken into account the said remittance also while computing the settlement amount of ₹76.50 lakhs. The Corporation adopted a lenient approach in the case of the petitioner and agreed to settle the matter by waiving a huge amount. Therefore, if the Corporation is directed to release the amount in the no-lien account to the petitioner, it would result in a huge loss. The learned counsel contended that the writ petition has become infructuous since the transaction which led to recovery proceedings has been settled and the petitioner paid the amount as fixed by the Corporation. She submitted that I.A.No.9/2025 filed by the petitioner is beyond the ambit of the writ petition. She hence submitted that passing orders in favour of the petitioner in 2025:KER:59657 I.A.No.9 of 2025 & W.P.(C)No.24448 of 2014 10 I.A.No.9/2025 will be inappropriate. She hence prayed that the I.A. may be dismissed and it may be clarified that the amount can be appropriated by the KFC.
8. I.A.No.7/2025 was filed by the petitioner for a direction to the KFC to produce duly certified account statement of the loan account relating to the 3 rd respondent for the period from 1.4.2014 to 29.3.2025. The said I.A. was allowed by this Court on 22.5.2025. It was directed that the account statement shall be produced along with a memo within a period of two weeks. Nonetheless the 1st respondent Corporation did not produce copy of the account statement.
9. Terms and conditions stated in the compromise settlement sanction communication are extracted hereunder:-
1. The balance outstanding in your loan account as on 01.03.2025 is Rs.7,54,74,155/-. The Corporation is ready to settle the account for Rs.76,50,000/- as offered by you by sacrificing an amount of Rs.6,78,24,155/-.
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2. Settlement amount of Rs.76,50,000/- (including advance amount of Rs.20,00,000/-) is to be remitted on or before 31.03.2025. The validity of this offer is only up to 31.03.2025.
3. RR charges, GST, Court expenses, other expenses if any to be remitted in addition to compromise settlement amount.
4. All Legal Suits/Petitions pending against the Corporation has to be withdrawn by the party and furnish proof before releasing the original title deeds deposited with the Corporation.
5. If you fail to settle the account on or before 31.03.2025, this facility will be cancelled and the Corporation reserves the right to demand the full original amount due, along with applicable interest, and initiate necessary legal and coercive actions to recover the outstanding dues, without any further notice."
10. The 1st respondent had stated in Ext.P8 that the total outstanding in the loan account as on 1.3.2025 was 2025:KER:59657 I.A.No.9 of 2025 & W.P.(C)No.24448 of 2014 12 ₹7,54,74,155/-. Further it was stated that the Corporation was ready to settle the account for ₹76,50,000/- by sacrificing an amount of ₹6,78,24,155/-. Therefore, it is clear that the Corporation expressed its willingness to waive an amount of ₹6,78,24,155/- clearly in Ext.P8. Then the remaining amount was only ₹76,50,000/- as the total outstanding as on 1.3.2025 was ₹7,54,74,155/-. The question is as to whether the said total balance outstanding was stated after appropriating or taking into account the amount remaining in the no-lien account also. The amount was deposited in the no-lien account as directed by this Court. The very purpose of directing to keep the amount in a no-lien account was to ensure that the amount cannot be appropriated by the 1st respondent without orders from this Court. The 1 st respondent did not seek permission of this Court to adjust the amount or to appropriate the amount before issuing Ext.P8. Therefore, lawfully the 1 st respondent could not have appropriated or adjusted the amount remaining in the no-lien account. It is pertinent to note that despite an 2025:KER:59657 I.A.No.9 of 2025 & W.P.(C)No.24448 of 2014 13 interim order passed by this Court on 22.5.2025 in I.A.No.7/2025, the 1st respondent did not produce copy of the account statement. Adverse inference is liable to be drawn against the 1st respondent Corporation in this regard.
11. The learned Senior Counsel for KFC submitted that the amount in the no lien account has not been appropriated by it. The Corporation cannot be heard to contend that while computing the total balance outstanding as on 1.3.2025, it had taken into account ₹20,00,000/- remaining in the no-lien account as no permission was obtained from this Court for appropriating the said amount. Since the Corporation computed the balance outstanding as ₹7,54,74,155/- without appropriating the said amount and conveyed it to the petitioner by Ext.P8 and also stated clearly that it was sacrificing an amount of ₹6,78,24,155/-, it cannot be permitted to raise a claim for the amount remaining in the no lien account especially after the petitioner remitted the entire settlement amount of ₹76,50,000/-. If the KFC had taken into account the amount in 2025:KER:59657 I.A.No.9 of 2025 & W.P.(C)No.24448 of 2014 14 the no-lien account or it proposed to appropriate the amount nothing prevented it from stating so in the settlement sanction communication.
12. The learned Senior Counsel for the respondent had raised a contention that the prayer in I.A.No.9/2025 is beyond the scope of the writ petition and hence it is only to be rejected. However, the subject matter of the I.A. is the amount deposited in a no-lien account in compliance with the interim order passed by this Court in the above writ petition. It is true that the reliefs sought in the writ petition have become infructuous because of the settlement. However, as the amount was deposited pursuant to the interim order, the Court has a duty to decide as to how the said amount shall be dealt with. Otherwise, injustice will be resulted. In Nava Bharat Ferro Alloys Ltd. v. Transmission Corporation of A.P. Ltd. and others [(2011) 1 SCC 216], the Hon'ble Supreme Court, referring to the judgment in Adoni Ginning Factory v. Secy. A.P. Electricity Board [(1979) 4 SCC 560] held thus:-
2025:KER:59657 I.A.No.9 of 2025 & W.P.(C)No.24448 of 2014 15 "23. This Court further clarified that the terms in which the prayer in the stay application was made by the consumers did not determine the effect of the order issued by the Court in the writ petitions raising similar questions of law. The phraseology used in the prayer for interim orders could be materially different though in essence the relief may be similar. On a question of principle this Court held that the impugned order coming to an end upon dismissal of the substantive proceedings, it is the duty of the Court to put the parties in the same position as they would have occupied but for the interim orders of the Court for otherwise it would give rise to unjust results. This Court said:
.........It is equally well settled that an order of stay granted pending disposal of a writ petition/suit or other proceeding, comes to an end with the dismissal of the substantive proceeding and that it is the duty of the court in such a case to put the parties in the same position they would have been but for the interim orders of the court. Any other view would result in the act or order of the court prejudicing a party (Board in this case) for no fault of its and would also mean rewarding a 2025:KER:59657 I.A.No.9 of 2025 & W.P.(C)No.24448 of 2014 16 writ petitioner in spite of his failure. We do not think that any such unjust consequence can be countenanced by the courts. As a matter of fact, the contention of the consumers herein, extended logically should mean that even the enhanced rates are also not payable for the period covered by the order of stay because the operation of the very notification revising/enhancing the tariff rates was stayed. Mercifully, no such argument was urged by the appellants. It is un-understandable how the enhanced rates can be said to be payable but not the late payment surcharge thereon, when both the enhancement and the late payment surcharge are provided by the same notification the operation of which was stayed...."
13. Therefore, I.A.No.9/2025 is allowed. The 1 st respondent shall refund the amount of ₹20,00,000/- remaining in the no-lien account either by Demand Draft or Bank transfer to the Account No.12190100195895 (Federal Bank, IFSC Code- FDRL0001219) and to return the title deeds.
2025:KER:59657 I.A.No.9 of 2025 & W.P.(C)No.24448 of 2014 17 W.P.(C)No.24448 of 2014 No orders are required in the writ petition in view of the facts and circumstances narrated above, other than the order in I.A.No.9/2025. It is accordingly disposed of.
Sd/-
S.MANU JUDGE skj 2025:KER:59657 I.A.No.9 of 2025 & W.P.(C)No.24448 of 2014 18 APPENDIX OF WP(C) 24448/2014 PETITIONER'S EXHIBITS EXHIBIT P1 . TRUE COPY OF 1ST RESPONDENT'S LETTER DATED 27.11.2008.
EXHIBIT P2. TRUE COPY OF THE SALE NOTICE DATED 17.01.2013.
EXHIBIT P3. TRUE COPY OF REPRESENTATION TOGETHER WITH THE MINISTER'S ENDORSEMENT DATED 09.03.2014.
EXHIBIT P4. TRUE COPY OF ENCUMBRANCE CERTIFICATE DATED 27.01.2014 ISSUED BY THE SRO, PATTANAKKAD.
EXHIBIT P5. TRUE COPY OF 1ST RESPONDENT'S NOTICE DATED 30.08.2014 ISSUED UNDER SECTION 29 OF THE SFC ACT.
EXHIBIT P6. TRUE COPY OF SALE NOTICE DATED 02.08.2014 ISSUED BY 2ND RESPONDENT.
Exhibit P7 A TRUE COPY OF THE LETTER DATED
21.01.2025 GIVEN TO THE 1ST RESPONDENT
Exhibit P8 TRUE COPY OF THE LETTER DATED
24.03.2025 ISSUED BY THE KFC
Exhibit P9 A TRUE COPY OF LETTER DATED 29.03.2025
TO KFC