Karnataka High Court
Canara Bank vs Mysore Mercantile Company Limited on 6 November, 2020
Author: B.M.Shyam Prasad
Bench: B.M.Shyam Prasad
IN THE HIGH COURT OF KARNATAKA AT BENGALURU
DATED THIS THE 06th DAY OF NOVEMBER 2020
BEFORE
THE HON'BLE MR. JUSTICE B.M.SHYAM PRASAD
CIVIL REVISION PETITION NO. 281/2020
BETWEEN:
CANARA BANK
PRIME CORPORATE BRANCH
SHANKAR NARAYANA BUILDING
25, M. G. ROAD
BENGALURU - 560 001.
... PETITIONER
(BY SRI. B.C. THIRUVENGADAM, ADVOCATE)
AND:
1. MYSORE MERCANTILE COMPANY LIMITED
A COMPANY REGISTERED UNDER
THE COMPANIES ACT HAVING ITS
REGISTERED OFFICE AT 201 AND 202
"SHREESTA BUMI" NO.4, K. R. ROAD
BASAWANAGUDI, BENGALURU - 560 004.
REPRESENTED BY ITS MANAGING DIRECTOR
MR H S SHETTY.
2. MR H. S. SHETTY
AGED MAJOR
S/O SHETTY RAJEEVA
R/AT 571, 21ST MAIN
4TH T BLOCK, JAYANAGAR
BENGALURU - 560 041.
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3. DR. SUMANA SHETTY
AGED MAJOR
W/O MR. H. S. SHETTY
R/AT 571, 21ST MAIN
4TH T BLOCK, JAYANAGAR
BENGALURU - 560 041.
... RESPONDENTS
(BY SRI. H. MUJTABA., ADVOCATE FOR R1;
SRI. P.S. RAJAGOPAL., SENIOR ADVOCATE FOR
SRI. A.V. BAGUR., ADVOCATE FOR R2 AND R3)
THIS CIVIL REVISION PETITION FILED UNDER
SECTION 115 R/W SECTION 151 OF THE CPC, 1908,
AGAINST THE ORDER DATED 13.03.2020 PASSED ON IA
NO. 1 IN OS.NO. 8533/2019 ON THE FILE OF THE XXXVII
ADDITIONAL CITY CIVIL JUDGE, (CCH-38) BENGALURU
DISMISSING THE IA NO.1 FILED UNDER ORDER XXXVIII
RULE 5 OF CPC PRAYING TO GRANTEX PARTE AD-
INTERIM ORDER ATTACHING THE SUIT SCHEDULE
PROPERTY.
THIS PETITION COMING ON FOR ORDERS, THIS
DAY, THE COURT MADE THE FOLLOWING:
ORDER
The plaintiff in O.S.No.8533/2019 on the file of the XXXVII Additional City Civil and Sessions Judge, Bangalore has preferred this revision petition calling in question the order dated 13.3.2020 whereby, the Civil Court has rejected the petitioner's application under 3 Order XXXVIII Rule 5 of the Code of Civil Procedure, 1908 (for short, 'the CPC') imposing a cost of Rs.2,000/.
2. Sri Thiruvengadum, learned Counsel for the petitioner, Sri P.S.Rajagopal, learned Senior Counsel for the second and third respondents and Sri. H. Mujtaba, the learned counsel for the first respondent are heard. The question that arises for consideration in this revision petition is:
"Whether there is any jurisdictional error or irregularity in the Civil Court's order rejecting the petitioner's application under Order XXXVIII Rule 5 of CPC."
3. It is obvious from the rival submissions that certain facts are either undisputed or beyond dispute, and such facts would be that:
[a] The first respondent has availed certain financial assistance from the petitioner in the year 2013 as against the security of different immovable properties 4 including the third respondent's immovable property in No.571/31 (Old No.571), 21st Main, 4th T Block, Jayanagar, Bengaluru [the Subject Property]. The second and the third respondents, who are the directors of the first respondent, have also executed documents to personally guarantee repayment by the first respondent. Subsequently, the third respondent has availed housing loan from the petitioner, and the third respondent has again executed certain documents to secure the petitioner's charge over the subject property even for this housing loan.
[b] The first respondent's loan with the petitioner is taken over by M/s HDFC and thus the first respondent's entire loan with the petitioner is discharged. The petitioner has issued 'No Due Certificate' and has executed necessary release deed. However, the third respondent's housing loan from the petitioner is continued, and the third respondent has 5 been paying EMIs regularly and this loan has not been declared a non-performing asset.
[c] The petitioner, with the financial assistance to the first respondent being discharged with the issuance of "No Due Certificate" and execution of the appropriate release deed, has also parted with the title documents of the Subject property. The genesis of the dispute between the petitioner and the respondents could be related to the petitioner parting with the original documents of the Subject Property.
4. Sri Thiruvengadum, the learned counsel for the petitioner, submits that after the loan to the first respondent is discharged the officials have inadvertently handed over the original title documents of this property on 16.10.2018 to the third respondent but under a written acknowledgement. There cannot be any dispute that the third respondent has received the original documents, but she, with the fraudulent intention, has 6 responded to the petitioner's correspondence stating that she has not created any charge over the subject property for the housing loan and that the original documents are deposited with the HDFC Bank as part of the charge for the financial assistance extended by the M/s HDFC Bank in clearing the first respondent's dues to the petitioner.
5. Sri. P S Rajagopal, learned Senior Counsel, refutes these submissions relying upon the averments in the written statement wherein the third respondent has categorically stated asserting that the third respondent is only a signatory to the documents executed at the time of the transfer of the financial assistance availed by the first respondent to M/s HDFC Bank. The petitioner of its own motion and volition has transferred all the documents, including the title documents to the subject property to M/s HDFC Bank. Sri. P S Rajagopal further submits that the allegations 7 of fraudulent intent against the respondents is unjustified in the undisputed circumstance that the third respondent has been paying the loan dues and is making every effort to ensure that the housing loan is transferred to another banker because of the recalcitrant conduct of the petitioner's officials.
6. Sri Thiruvengadum further argues that there is unrighteous assertion by the respondents that there is not even a collateral charge over this property when it is indisputable that a primary charge is created by the third respondent over the subject property for the housing loan. Sri Thiruvengadum, while emphasizing that there cannot be a housing loan without a primary charge on such property, relies upon the memorandum of sanction as well as the subsequent undertaking executed by the third respondent in support of his submission that the respondents cannot deny primary 8 charge over the subject property as against the housing loan.
7. Sri. P.S. Rajagopal relying upon these very documents and the respective written statements, canvasses that the real thrust of the defense by the respondents, including the third respondent is not denial of charge over the subject property in favour of the petitioner but it is their contention that the charge over the subject property in favour of the petitioner is only a continuing charge with the primary charge over the subject property being for the loan availed by the first respondent; and with the loan now transferred to M/s HDFC, such primary charge over the subject property would be in favour of M/s HDFC.
8. The controversy between the petitioner and the respondents would involve questions as to whether the documents of title to the schedule property are transferred as part of the loan takeover arrangement 9 inter se the first respondent/other respondents and M/s HDFC Bank and whether there should be primacy of charge for the subject property for the housing loan with the Petitioner for the financial assistance availed by the first respondent initially with the petitioner and later transferred to M/s HDFC.
9. It is in the context of this controversy, the petitioner has filed this application under Order XXXVIII Rule 5 of CPC asserting that the petitioner has reasons to believe that the title documents of the subject property, though with M/s HDFC, may be secured by the respondents with the deceitful intention of depriving the petitioner of its primary security over the subject property and that the respondents may create further encumbrance over the subject property in favour of the third parties frustrating the petitioner's rights including the rights under a decree that may be passed in their favour.
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10. Sri Thiruvengadum, relying upon these circumstances, submits that necessary ingredients contemplated under order XXXVIII Rule 5 of CPC are established. The Civil Court has misdirected itself in not appreciating the petitioner's case based on reasonable apprehension as aforesaid. If the respondents were to create further charge detrimental to the petitioner's interest the petitioner would be put to irreparable loss and injury. Per contra, Sri. P S Rajagopal submits that the petitioner has transferred the original documents to M/s HDFC consequent to the transfer of the financial assistance extended to the first respondent as per the Banking Regulations, and the petitioner cannot dispute that the documents are with M/s HDFC as part of the security in its favour for the financial assistance extended in securing the transfer of the loan from the petitioner.
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11. Significantly, Sri. P.S. Rajagopal is also categorical that even as of this date, the third respondent is paying the EMIs regularly and the third respondent is coordinating efforts for takeover of even this loan. As such, the third respondent is not only bona fide in repaying the loan without any default and ensuring that the loan accounts remains healthy, the third respondent is also making alternative arrangements for the transfer of the housing loan. In these circumstances, the ingredients necessary for establishing a case for attachment before judgment is not made out.
12. The controversy inter se the petitioner and the respondents as regards the circumstances under which the original title documents to the subject property is transferred to M/s HDFC, the primacy of the charge over the subject property either in favour of M/s HDFC or the petitioner, as rightly observed by the Civil 12 Court, will have to be decided on merits after trial. At this point, it would be relevant to make a useful reference to the decision of the Honourable Supreme Court in Raman Tech and Process Eng. Com. v. Solanki Traders1 wherein it is held that:
"The power under Order 38 Rule 5 CPC is drastic and extraordinary power. Such power should not be exercised mechanically or merely for the asking. It should be used sparingly and strictly in accordance with the Rule. The purpose of Order 38 Rule 5 is not to convert an unsecured debt into a secured debt. Any attempt by a plaintiff to utilize the provisions of Order 38 Rule 5 as a leverage for coercing the defendant to settle the suit claim should be discouraged."
This Court, in the facts and circumstances of this case, is of the considered opinion that if the petitioner's application for attachment before judgement is considered favourably in favour of the petitioner would 1 (2008) 2 Supreme Court Cases page 302 13 tantamount deciding on the priority of charges against the subject property either in favour of the petitioner or M/s HDFC. But, because the respondents accept that there is 'continuing charge' [as mentioned in the Memorandum of Sanction of loan dated 02.02.2015] over the subject property in favour of the petitioner for the housing loan availed by the third respondent, it would prima facie be that the charge in favour of the petitioner would be subject only to the charge in favour of M/s HDFC for the financial assistance availed to discharge the liability of the first respondent.
13. The Hon'ble Supreme Court in Raman Tech and Process Eng. Com. v. Solanki Traders supra has also held that:
"A plaintiff should show, prima facie, that his claim is bona fide and valid and also satisfy the court that the defendant is about to remove or dispose of the whole or part of his property, with the intention of obstructing or 14 delaying the execution of any decree that may be passed against him, before power is exercised under Order 38 Rule 5 CPC".
It is undisputed that the housing loan with the petitioner is being serviced by the third respondent without default, and the third respondent is categorical that she would continue to ensure that the loan is serviced without default while making arrangements for pre-closure of this loan either by the loan being taken over by any Bank or otherwise. The petitioner in exercise of its right to lien2, has frozen a sum of Rs.1,11,60,861/- credited to the first respondent's current account after the loan is taken over by M/s HDFC.
14. The reasonableness of the petitioner's apprehension that the third respondent or the other respondents would ensure that the title documents are obtained from M/s HDFC and third party rights created 2This court is not expressing any opinion on the merits of the petitioner exercising such right of lien. 15 prejudicing the petitioner's rights will also have to be examined in the light of the aforesaid facts: an apprehension expressed in the affidavit without other circumstances justifying the same when juxtaposed with the respondents' conduct, does not persuade this Court to conclude that there is prime facie case for grant of the extraordinary remedy of attachment before judgment. Therefore, this Court is of the considered opinion that the Civil Court has not committed any error in exercise of its jurisdiction in rejecting the application under Order XXXVIII Rule 5 of CPC. It must be observed that the rejection of the petitioner's application and the confirmation thereof by this Court will not prejudice the petitioner in pursuing any other remedy that would otherwise be available in law in the facts and circumstances of the case, and that the Civil Court will have to consider the merits of the rival claims after trial independent of any observation made by this court in the course of this order.
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However, the order of the XXXVII Additional City and Civil Judge, Bengaluru on I.A. under order XXXVIII Rule 5 of CPC is modified only insofar as the costs, and there shall be no costs. The Civil Revision Petition is accordingly disposed of.
SD/-
JUDGE nv