CANARA BANK Vs. STATE OF KERALA

JUDGEMENT

(1.) THIS bunch of 5 cases -- 2 Writ Appeals and 3 Original Petitions -- has thrown up an important question for our consideration. Since the parties and issues involved are the same, we are disposing of these cases by this common judgment.

(2.) CAN the State claim precedence or primacy for its debts over the claims of a secured creditor? To be a little more specific -- Can the State enforce a statutory first charge on the property of a debtor, in preference to an existing mortgage in favour of a secured creditor?

(3.) M /s. Thomas Stephen and Company, Kollam (hereinafter referred to as "the Company") which was engaged in a manufacture and sale of roofing titles, bricks etc. had availed of various loans from Canara Bank at Thamarakkulam (for short, 'the Bank'). The company had furnished sufficient security for repayment of the debt, in addition to creating mortgage by deposit of title deeds of certain items of immovable property as a continuing collateral security. The mortgage was created, initially, on July 9, 1974 which was renewed from time to time. Since the Company defaulted in repayment of the loan, the Bank instituted a suit for recovery of money before the Subordinate Judge's Court, Kollam. Later the suit was transferred to the Debt Recovery Tribunal at Ernakulam (for short, 'the Tribunal'). By judgment dated February 17, 2000, the Tribunal directed the company to pay the plaintiff/Bank a sum of Rs.41,25,451.64 together with interest at the rate of 15% per annum from August 24, 1992. It was held that the plaintiff/Bank was entitled to realise the decree debt by sale of the mortgaged/hypothecated properties.