Menkol Industries Private Limited vs. State Of Kerala - Kerala High Court, 25 January 2022

IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT THE HONOURABLE MR.JUSTICE N.NAGARESH TUE AY, THE 25TH DAY OF JANUARY 2022 / 5TH MAGHA, 1943 WP(C) NO. 22019 OF 2021 PETITIONERS: MENKOL INDUSTRIES PRIVATE LIMITED EARLIER KNOWN AS M/S BAUTECH GLOBAL INDUSTRIES PVT LTD, PLOT NO.134, KINFRA INDUSTRIAL PARK, KANJIKODE WEST, PALAKKAD-678621. REPRESENTED BY ITS MANAGING DIRECTOR, MRS.DEEPA MADANAKUMAR. BY ADVS. SANTHOSH MATHEW ARUN THOMAS JENNIS STEPHEN KARTHIKA MARIA ANIL SEBASTIAN PULICKEL JAISY ELZA JOE LEAH RACHEL NINAN MATHEW NEVIN THOMAS RESPONDENTS: 1 STATE OF KERALA REPRESENTED BY THE SECRETARY TO THE GOVERNMENT, DEPARTMENT OF FINANCE, GOVERNMENT SECRETARIAT, STATUE, TRIVANDRUM-695001. 2 KERALA FINANCIL CORPORATION REPRESENTED BY ITS MANAGING DIRECTOR, VELLAYAMBALAM, THIRUVANANTHAPURAM-695033. 3 BRANCH MANAGER PALAKKAD, KERALA FINANCIAL CORPORATION, BRANCH OFFICE, 1ST FLOOR, CENTURY COMPLEX, MATHAKOVIL STREET, SULTANPET, PLAKKAD-678001. BY ADVS. SHRI.M.R.VENUGOPAL, SC, KFC DHANYA P.ASHOKAN S. MUHAMMAD ALIKHAN SRI.APPU P S, GOVT. PLEADER THIS WRIT PETITION (CIVIL) HAVING COME UP FOR ADMISSION ON 25.01.2022, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING:

W.P.(C) No.22019/2021 : 2 : N. NAGARESH, J. ````````````````````````````````````````````````````````````` W.P.(C) No.22019 of 2021 ````````````````````````````````````````````````````````````` Dated this the 25th day of January, 2022 J U D G M E N T ~ ~ ~ ~ ~ ~ ~ ~ ~ The petitioner, a Private Limited Company, seeks to direct the 2nd respondent-Kerala Financial Corporation, to refund the amount wrongly charged by it as pre-closure charges and to declare that pre-closure charges as per Clause 18 of Ext.P2 will not apply in situations such as instant case wherein closure occurred due to the actions of the 2nd respondent.

The petitioner states that the 2nd respondent sanctioned a loan of ₹6,32,00,000/- as term loan and ₹1,00,00,000/- as working capital revolving fund loan on 02.04.2019, on the petitioner providing adequate security. Substantial portion of the sanctioned advances was availed

W.P.(C) No.22019/2021 : 3 : by the petitioner. Later, the 2nd respondent revalued the secured assets of the petitioner unilaterally and demanded additional security. The petitioner was not in a position to provide additional security. Therefore, at the instance of the petitioner, the Federal Bank Limited took over the loans from the 2nd respondent. The petitioner was forced to pay pre-closure charges of ₹13,41,046/- including GST.

The petitioner argued that the pre-closure of loan/advances by the 2nd respondent was warranted and forced by the 2nd respondent itself and hence no pre-closure charges can be imposed on the petitioner. The pre-closure charges are not only arbitrarily imposed but they are excessive also. The Apex Court in Ssangyong Engineering and Construction Company Ltd. v. National Highways Authority of India [(2019) 15 SCC 131] and in a number of other judgments has held that a unilateral addition or alteration of a term of contract can never be foisted upon an unwilling party. Hence, the 2nd respondent is compellable to refund the pre-closure charges extracted from the petitioner.

W.P.(C) No.22019/2021 : 4 :

The 2nd respondent contested the case. The 2nd respondent contended that paragraph V(6) of the loan agreement has given a right to the 2nd respondent to demand additional security, if the market value of the securities provided depreciates. The Corporation has only invoked the said paragraph V(6) of the agreement. The 2nd respondent did not ask the petitioner to get the loan/advances taken over by any Bank and the loan take over was voluntarily effected by the petitioner. Pre-closure premium was fixed as per Clause No.34.2 of the Credit Policy of the Corporation.

I have heard the counsel for the petitioner, the Government Pleader for the 1st respondent and the Standing Counsel for respondents 2 and 3. 6. The dispute between the petitioner and the 2nd respondent agitated in this writ petition, arises out of a commercial transaction. Though the 2nd respondent is an instrumentality of the State, the dispute revolves around the power of the 2nd respondent to levy pre-closure charges from the petitioner in respect of a loan account. The decision

W.P.(C) No.22019/2021 : 5 : thereon would depend on interpretation of the agreement clauses. A factual adjudication would also be necessary as the 2nd respondent has a case that there was depreciation of value of securities provided by the petitioner. In the circumstances, this Court is of the view that this is not a fit case to adjudicate in exercise of the powers under writ juri iction. The writ petition is hence dismissed. The petitioner may, however, resort to other legal remedies available for redressal of grievances, if the petitioner is so advised. N. NAGARESH, JUDGE aks/24.01.2022

W.P.(C) No.22019/2021 : 6 : APPENDIX OF WP(C) 22019/2021 PETITIONER'S EXHIBITS Exhibit P1OF THE TRIPARTITE AGREEMENT DATED 14.06.2018 PETITIONER ENTERED INTO THE PETITIONER WITH KIDC AND KINFRA INTEGRATED INDUSTRIAL AND TEXTILE PARK, PALAKKAD. Exhibit P2OF THE SANCTION LETTER ISSUED BY THE 2ND RESPONDENT DATED 02.04.2019 TO THE PETITIONER. Exhibit P3OF THE DEED OF HYPOTHECATION EXECUTED BETWEEN THE PETITIONER AND THE 2ND RESPONDENT DATED 22.05.2019. Exhibit P4OF THE COMMON LETTER DATED 14.12.2020 ISSUED BY THE 2ND RESPONDENT TO THE PETITIONER. Exhibit P5OF THE EMAIL COMMUNICATION SENT TO THE 3RD RESPONDENT BY THE FEDERAL BANK LTD. Exhibit P6OF THE REPRESENTATION DATED 30.03.2021 SUBMITTED BEFORE THE 3RD RESPONDENT BY THE PETITIONER. Exhibit P7OF THE LETTER DATED 09.07.2021 ISSUED BY THE 3RD RESPONDENT TO THE PETITIONER. Exhibit P8OF THE LETTER ISSUED BY THE 2ND RESPONDENT DATED 30.07.2021 TO THE PETITIONER. Exhibit P9OF THE REPRESENTATION DATED 14.09.2021 SUBMITTED BEFORE THE 2ND RESPONDENT BY THE PETITIONER.