Point of Law: Corporate veil may be lifted where a statute itself contemplates lifting veil, or fraud or improper conduct is intended to be prevented.

JUDGMENT :

The facts of this case (to the extent they are required to be considered for the adjudication of the only point now arising) are brief -the 1st petitioner -PNB Vesper Life Science (P) Ltd., is a company incorporated under the Companies Act, 1956. The 2nd petitioner is stated to be a former Director of the 1st petitioner. An item of property belonging to her has been mortgaged to secure the repayment of a loan availed by the 1st petitioner from the erstwhile Thrissur District Co-operative Bank, which has now merged with the 1st respondent -the Kerala State Co-operative Bank Ltd. (‘the Bank’). On 30.3.2023, the 1st petitioner remitted an amount of Rs. 2,46,95,424/-to the 2nd respondent Bank in full and final settlement of its liabilities. [The amount to be paid by the 1st petitioner to settle the liability under a one-time settlement was intimated to the 1st petitioner through Ext P.20 letter dated 23.03.2023 and the amount was to be paid on or before 31.3.2023]. On account of the settlement of liability, as above, the only relief in the writ petition that survives for consideration is relief No. (vi) which reads as under:-

“(vi) Declare that when the loan, in respect of PNB Vesper Life Sciences Pvt. Ltd which the mortgage was created, is repaid in full, the bank has no right to retain the documents in respect of the petitioner's property.”

The 2nd respondent bank has, through its pleadings in this Writ Petition and the submissions of its counsel, opposed the grant of the aforesaid relief though it does not dispute the fact that the liability of the 1st petitioner stands completely settled as of date. According to the bank, a company named Cybele Herbal Laboratories (P) Ltd. (of which the 2nd petitioner and her husband are Directors/promoters) owes substantial amounts to the bank. The 2nd petitioner and her husband are also sureties in respect of the loan/loans extended to that company. It is the contention of the bank that it is entitled to exercise its right of general lien (Banker’s lien, as it is often referred to) under Section 171 of the Contract Act, 1872 over the documents of title deposited by the 2nd petitioner to secure the repayment of amounts advanced to the 1st petitioner. It is also the contention of the Bank that though the 1st petitioner availed a loan from the erstwhile Thrissur District Co-operative Bank and Cybele Herbal Laboratories (P) Ltd. had availed a loan from the erstwhile Ernakulam District Co-operative Bank, both these banks have now been merged and amalgamated with the 2nd respondent bank, and therefore it can legally exercise its right of lien.

2. The learned counsel for the petitioner states that since the 1st petitioner company and Cybele Herbal Laboratories (P) Ltd. are independent entities having separate and distinct legal statuses and personalities and since the property of the 2nd petitioner is not mortgaged for securing the repayment of amounts due from Cybele Herbal Laboratories (P) Ltd., it is not open to the Bank to contend that the documents relating to the property of the 2nd petitioner will not be released notwithstanding the fact that the liability of the 1st petitioner stands fully settled. The learned counsel places reliance on the judgments of this Court in Lonankutty Antony v. Joint Registrar of Cooperative Societies, 2016 (2) KHC 505; Vinu Madhavan v. State Bank of India, Judgment dated 17.03.2023 in W.P (C) 4806 of 2023; Shalini K.S v. Karuvannur Service Co-operative Bank Ltd., Judgment dated 06.02.2023 in W.P (C) 40778 of 2023; the judgment of the Karnataka High Court in Vijaya Bank & anr v. Naveen Mechanised Construction (P) Ltd. and ors, 2004 KHC 3838 and to the judgment of the Madras High Court in State Bank of India and anr v. Jayanthi & ors, 2011 KHC 2612 to contend that the stand taken by the Bank is arbitrary and illegal and contrary to the statutory provisions in the Transfer of Property Act, 1882.

3. The learned counsel for the 2nd respondent Bank, on the other