The Civil Court on Monday dismissed a lawsuit filed by Palm Beach Resort seeking to halt its auction by the State Bank of India (SBI).
Palm Beach Resort, located in Lhaviyani Atoll, was mortgaged to SBI for a loan taken by Guardian Agency Pvt Ltd and Monaza Construction Pvt Ltd.
Following failure to repay the credit facility, SBI had initially filed a lawsuit against the borrowers and guarantor, the latter being Ibrahim Ali Manik who owns the Head Lease Rights of Palm Beach Resort. The Civil Court ruled in favour of the bank and ordered the borrowers and guarantor to settle the repayments.
However, upon further failure to do so, SBI filed an enforcement case, resulting in the Civil Court permitting the bank to sell the mortgaged resort. The bank announced the auction on October 15, 2020.
The latest lawsuit was filed by Ibrahim Ali Manik to halt the auction proceedings. He requested the Civil Court to order SBI to honour a written out-of-court agreement between himself and the bank, which details a loan settlement of USD 5.5 million without resort foreclosure.
Furthermore, Manik stated that MVR 1,708,620 (approximately USD 111,000) out of the total loan was repaid on May 27, 2020. Hence, he requested the court to rule the remaining USD 5.39 million as an absolute debt owed by the borrowers to SBI.
In turn, the bank mainly raised a procedural issue, pointing out that the Civil Court had already issued two rulings previously, first ordering the borrows to repay the credit facility to SBI and the other permitting SBI to sell Palm Beach Resort.
SBI stated that the new lawsuit, concerning the same issue filed at the same court, hindered the execution of the previous two verdicts, thus violating the principle of 'res judicata'. This principle refers to a case already adjudicated by a court and hence cannot be re-litigated by the same parties except on appeal.
In the verdict declared on November 30, the Civil Court ruled in favour of SBI, stating that pursuing the new lawsuit filed by Manik would infringe upon the execution of the court's previous verdicts, in violation of the principle of res judicata. Hence, the Civil Court dismissed the case in a ruling signed by Judge Ali Naseer.
Upon SBI’s announcement of the court verdict, The Edition reached out to Palm Beach Resort for their comment.
A source from Palm Beach's legal team stated that the latest lawsuit did not violate res judicata. They noted that while the first two cases concerned the establishment of a debt owed to SBI as well as enforcement, this third case concerned the out-of-court agreement and the figure settled upon as their debt.
According to the source, Palm Beach and SBI had agreed on USD 5.5 million after the first case, and paid the aforementioned MVR 1,708,620 as a deposit. However, the source stated that the bank later claimed the amount to be USD 8.2 million, to be paid within six months which proved impossible over the economic repercussions of the ongoing COVID-19 pandemic.
"We suggested an independent accounts audit to evaluate how the figure suddenly came to be MVR 8.2 million but the bank refused", they added.
The case between Palm Beach Resort and SBI first came to public attention after the resort raised serious allegations against the bank in early October, including foregoing best practices, malice, and "predatory foreclosure".
Palm Beach Resort maintained that SBI's decision to seize the resort despite their out-of-court agreement on settling the loan debt was an attempt to secure benefits for a third party, among other accusations.
Although The Edition reached out to SBI on October 9 with queries concerning the matter, SBI did not issue a formal response to the allegations aside from the auction sale notice, noting that the sale was permitted by the Civil Court.