Madras High Court
L.Jayakumar vs Central Bank Of India on 21 June, 2022
W.A.No.536 of 2015
IN THE HIGH COURT OF JUDICATURE AT MADRAS
RESERVED ON : 29.10.2021
DATE OF DECISION : 21.06.2022
CORAM:
THE HON'BLE MR. JUSTICE T.RAJA
AND
THE HONOURABLE MR.JUSTICE D.BHARATHA CHAKRAVARTHY
W.A.No.536 of 2015
L.Jayakumar .. Appellant
Vs
1.Central Bank of India,
Rep. By its General Manager,
48/49, Montieth Road,
Egmore, Chennai – 8.
2.Central Bank of India,
Asset Recovery Cell,
Rep. By its Assistant General Manager,
Regional Office,
48/49, Montieth Road,
Egmore, Chennai – 8. .. Respondents
Prayer : Writ Appeal has been filed under Section 15 of Letter of Patent against
the order dated 20.10.2014 passed in W.P.No.17177 of 2011 by the learned Single
Judge of this Court.
For Appellant : Mr.T.R.Rajaraman, SC
for Mr.V.Karthikeyan
1/13
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W.A.No.536 of 2015
For Respondents : Mr.T.M.Hariharan
JUDGMENT
T. RAJA, J.
Unsuccessful appellant has brought this appeal challenging the correctness
of the impugned order passed by the learned Single Judge in W.P.No.17177 of
2011, dated 20.10.2014.
2. It is the claim of the appellant before the learned Single Judge that the
respondent bank refused to pay the arrears of legal fees and remuneration to a
sum of Rs.26,42,615/- along with interest. Therefore, he filed W.P.No.17177 of
2011 seeking for issuance of a writ of mandamus to direct the respondent bank to
pay the above said payment. Learned Single Judge refused to accept the said
prayer of the writ petitioner/appellant. Aggrieved by the same, the
appellant/writ petitioner has filed the present writ appeal.
3. Learned Senior counsel for the appellant submitted that the appellant is
an Advocate and Senior Member in the Bar having practice in the Madras High
Court for over 36 years. He was in the panel of Advocates nearly 36 years in
most of the nationalized banks and corporate including Central Government
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W.A.No.536 of 2015
undertaking Companies. The appellant and his brother were partners in a
registered legal firm M/s.L.Jayakumar & Associates, in which, the appellant was
having 80% share till 2008. The said firm is one among the panel of Advocates
for various nationalized Banks, Central Government and State Government
Undertaking and the appellant was to appear at Delhi, Mumbai, Bangalore,
Hyderabad and Kerala.
4. Whileso, in the year 2001, the appellant was requested to assist a
Nationalized Bank (Canara Bank) to collect confidential particulars of a chronic
defaulter in London while he was in London. In the middle of 2003, the
respondent bank approached the appellant and informed that M/s.S&S Power
Switch Gear Limited was their customer, however, since the said Concern became
a Sick Unit, the respondent bank was to find a way to recover a sum of Rs.472.24
lakhs in the recovery proceeding pending on the file of DRT, Madras, in
O.A.No.223/03 (New No.526/07). The appellant, after studying various factors,
opined that the said Company might have created an artificial loss with an
intention to prevent the creditors from realising their investments and loan,
therefore, unless all the consortium of all the banks, who have advanced loan,
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W.A.No.536 of 2015
make a joint effort expeditiously before the alleged winding up proceeding, it
would be difficult to recover the said loan. Thereafter, based on the advise of the
appellant, the respondent bank decided to initiate necessary legal action, for
which, the respondent bank offered payment of 5% as fees to the appellant in the
event of succeeding in his efforts to recover atleast 25% of the book debt.
Thereafter, the appellant had explored all the possibilities to recover the loan
from the said Company with a condition that the respondent bank should
cooperate with his efforts to proceed against all the Directors of the said Company
both in the Insolvency Court and Criminal Court under Sections 405, 415, 418,
463, 468 read with 34 IPC. Agreeing with the said suggestions made by the
appellant, the respondent bank by their letter dated 30.07.2004 offered Rs.60,000/-
as fees plus 5% from and out of the recovery made either through the Court or
through compromise, provided the recovery exceeds 25% of the amount due in
the account as per prescribed norms of the Bank. Although the appellant initially
demanded higher payment of fees and incentive, after holding discussion with
the officials of the Bank, he had agreed to take efforts to recover the loan amount
by initiating insolvency proceedings and criminal proceedings against the
Directors of the Company. The Respondent bank had also agreed to pay separate
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W.A.No.536 of 2015
fees for insolvency proceeding and other proceedings filed against the said
Company both in the High Court and DRT.
5. In the meantime, the said M/s.S.S.Power Switch Gear Limited filed an
application under Section 5 of the SICK Industrial Companies (Special Provision)
Act, 1985, seeking to stay all the proceedings pending in the DRT. Subsequently,
the Board for Industrial and Financial Reconstruction (BIFR) issued a notice dated
08.11.2005 for winding up of the said Company and the said notice was
forwarded to the High Court under Section 20(1) of the Sick Industrial
Companies (Special Provision) Act, 1985, suggesting for winding up of “S&S
Power Switch Gear Limited” with immediate effect. Thereafter, the said
Company preferred an appeal Nos.140/03 and 173/05 before AAIFR (Appellate
Authority for Industrial and Financial Reconstruction), New Delhi, and the said
Appellate Authority, by order dated 30.03.2006, while granting interim stay, gave
an opportunity to the said Company to settle the claims of all the secured and
unsecured creditors. Pending the proceeding before the AAIFR, New Delhi, the
said M/s.S&S Power Switch Gear Limited preferred an appeal before the High
Court (Company Court) seeking for approval of their Scheme of agreement
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W.A.No.536 of 2015
under Section 391 of Companies Act, 1956, and the High Court, by order dated
26.04.2006, ordered to convene a meeting of the secured creditors for the purpose
of approving their scheme of arrangement under the Chairmanship of the
Hon'ble Mr.Justice Govindarajan, former Judge of Madras High Court.
Subsequently, in the meeting of the secured creditors held on 31.05.2006, it was
resolved by all the creditors to accept 20% of the Principal outstanding towards
full and final settlement of their outstanding debts. Based on the report
submitted by the Hon'ble Mr.Justice Govindarajan, the High Court, by order
dated 19.08.2006, approved the scheme of arrangement with an observation that
the scheme will come into force from 01.04.2006 and binding on all the creditors.
After the orders passed by the High Court, the said Company paid 20% of the
Principal Outstanding, namely, Rs.73,62,728/- . The respondent bank, by their
letter dated 26.10.2006, agreed to sanction Rs.30,000/- towards fees to the
appellant in the proposed application in C.P.No.119/06. The appellant also sent
bills claiming 5% incentives based on the letter dated 30.07.2004 of the
respondent bank read with the letter dated 25.08.2005 of the appellant.
6. By narrating the aforesaid facts, it is contended by the learned Senior
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W.A.No.536 of 2015
counsel for the appellant that it was a marathon fight for about 6 to 7 years for
securing the benefit of the respondent bank, but, unfortunately, the respondent
bank neglected to pay the incentives in terms of their offer made vide letter dated
30.07.2004. Finally, the respondent bank by their letter dated 13.07.2009
informed the appellant that the incentive of 5% cannot be accepted as the
recovery made through compromise settlement has not exceeded 25% of the
amount due in the account. When there was an agreement between the appellant
and the respondent bank for payment of 5% incentive to the appellant, which
works out to Rs.12,65,000/-, it is not open to the respondent bank to escape from
their commitment for making such payment.
7. Continuing further, it is submitted that now the respondent bank is
liable to pay 5% incentive as per their letter dated 30.07.2004, which works out to
Rs.12,65,000/-, with accrued interest of 20% on the incentives from March, 2009 to
June, 2011, which works out to Rs.5,48,167/-. This apart, they will have to settle
following payments:-
Pending bills = Rs.2,57,874/-
(+) accrued interest of 20% on pending bills = Rs.51,574/-
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W.A.No.536 of 2015
Litigation expenses = Rs.20000/-
Mental agony = Rs.5,00,000/-.
With these submissions, learned Senior counsel prayed for allowing the writ
appeal with a direction to the respondent bank to pay the aforesaid sum to the
appellant.
8. Per contra, learned counsel for the respondent bank, reiterating the
stand taken in their counter affidavit filed before the learned Single Judge,
submitted that the respondent bank had never agreed for payment of 5%
incentive on any amount recovered. As per the letter dated 30.07.2004 of the
respondent bank, it is clear that fee of Rs.60,000/- would be paid in three
installments; and an incentive of 5% would be paid from and out of the recovery
made provided recovery exceeds 25% of the amount due in the account. Thus, it
is clear that the Bank did not accept the claim of the appellant seeking payment of
such incentive on the recovery made, whereas it is on the total claim. As a matter
of fact, the Bank cannot accept any such claim against the recovery policy of the
Bank. It is further argued that the Central Office of the Bank, vide letter dated
30.03.2009, communicated the sanction of OTS at Rs.2,53,00,000/-. But, the
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W.A.No.536 of 2015
contractual dues to the Bank on the said date was Rs.20,81,30,369/-, hence, the
amount recovered was far below 25% of the dues. Therefore, the demand made
by the appellant for payment of 5% incentives was rightly refused by the Bank,
because, the Bank has never agreed for payment of 5% incentive from and out of
the recovery made. With these submissions, he has prayed for dismissal of the
writ appeal.
9. Heard the learned counsel appearing on either side and perused the
materials available before this Court.
10. It is not in dispute that the services of the appellant were engaged for
initiation of insolvency proceedings against the Directors/Guarantors of
M/s.S&S.Power Switch Gear Limited, a Sick Unit. As per the letter dated
30.07.2004 of the respondent bank, the engagement of the appellant was subject to
the condition of payment of Rs.60,000/- towards his fees to be paid in three
installments, besides incentive of 5% from and out of the recovery made
provided recovery exceeds 25% of the amount due in the account. The Central
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W.A.No.536 of 2015
Office of the Bank, by letter dated 30.03.2009, communicated sanction of OTS
(One Time Settlement) amount of Rs.2,53,00,000/- to the Zonal Manager, Zonal
Office, Central Bank of India, Chennai. It is averred in the counter affidavit that
the contractual dues to be paid by the M/s.S.S.Power Switchgear Limited to the
respondent bank as on 30.03.2009 were Rs.20,81,30,369/-. Whileso, as per the
agreed terms of letter dated 30.07.2004, an incentive of 5% has to be paid from
and out of the recovery made provided if the recovery exceeds 25% of the amount
due in the account. But, in the present case, the amount so recovered represents
only 12% of the total dues i.e. Rs.20,81,30,369/- as averred in the counter affidavit
without any supporting document and if such sum is taken into consideration,
then the amount so recovered is far below 25% of the contractual dues as offered
in the letter dated 30.07.2004 of the respondent bank.
11.Secondly, it is a contract between the private parties, namely, the
appellant and the respondent bank. As per the letter dated 30.07.2004 of the
respondent bank, the appellant was engaged for initiation of insolvency
proceedings against Directors/Guarantors of M/s.S&S.Power Switch Gear
Limited, a Sick Unit, but, the engagement was subject to the payment of
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W.A.No.536 of 2015
Rs.60,000/- towards his fees and an incentive of 5% from and out of the recovery
made provided recovery exceeds 25% of the amount due in the account. Whether
such payment has to be payable to the appellant or not on the basis of contract
entered between them is a disputed question of fact. However, the Bank claims
that the amount so recovered represents only 12% of the total dues which is far
below 25% of the contractual dues, but, it was disputed by the appellant stating
that no such document has been produced to substantiate the total contractual
dues. Thus, in our considered view, they should have gone before the Civil
Court to adjudicate upon the disputed question of fact, as it is settled law that the
disputed questions of fact cannot be determined in a writ petition. Therefore,
since the issue in hand is being contract in nature, the same has to be decided
only by the Civil Court, not by way of filing writ petition under Article 226 of the
Constitution of India as rightly decided by the learned Single Judge.
12. In fine, for the reasons stated above, we do not find any error or
illegality in the impugned order passed by the learned Single Judge and
accordingly, the writ appeal stands dismissed giving liberty to the appellant to
approach the Civil Court for appropriate relief. No Costs.
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W.A.No.536 of 2015
(T.R., J.) (D.B.C., J.)
21.06.2022
rkm
Index:yes
speaking
T.RAJA, J.
and
D.BHARATHA CHAKRAVARTHY, J.
rkm
To
1.The General Manager,
Central Bank of India,
48/49, Montieth Road,
Egmore, Chennai – 8.
2.Central Bank of India,
Asset Recovery Cell,
Rep. By its Assistant General Manager,
Regional Office,
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W.A.No.536 of 2015
48/49, Montieth Road,
Egmore, Chennai – 8.
W.A.No.536 of 2015
21.06.2022
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