Kerala High Court
Radhamani *(Deceased) P.K.Vijaya ... vs Kerala Financial Corporation on 8 August, 2025
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I.A.No.9 of 2025 & W.P.(C)No.24448 of 2014
1
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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2
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
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I.A.No.9 of 2025 & W.P.(C)No.24448 of 2014
3
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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4
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
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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
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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
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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
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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
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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
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₹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
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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
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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:-
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"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
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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.
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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
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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
