Karnataka High Court
M/S Nagaveni Enterprises vs Karnataka State Industrial on 12 September, 2017
1
M.F.A.NO.7119/2016
IN THE HIGH COURT OF KARNATAKA AT BENGALURU
DATED THIS THE 12th DAY OF SEPTEMBER, 2017
PRESENT
THE HON'BLE MR. JUSTICE H.G.RAMESH
AND
THE HON'BLE MRS. JUSTICE K.S.MUDAGAL
MISCELLANEOUS FIRST APPEAL NO.7119/2016(SFC)
BETWEEN :
1. M/S.NAGAVENI ENTERPRISES
NEAR SHASTRI CIRCLE
NH 17, KUNDAPURA
UDUPI DISTRICT
(A FIRM CONSTITUTED UNDER THE
PROVISIONS OF INDIAN PARTNERSHIP ACT)
REPRESENTED BY ITS MANAGING PARTNER
H.GANGADHARA SHETTY
2. H.GANGADHARA SHETTY
S/O SANKAPPA SHETTY
AGED ABOUT 50 YEARS
RESIDING AT CHURCH ROAD
KUNDAPURA-576 201
NOW RESIDING AT KUTEERA
NEAR HUNGULUR
KUNDAPUR TALUK
UDUPI DISTRICT
3. SMT. NAGAVENI G. SHETTY
W/O H.GANGADHARA SHETTY
AGED ABOUT 46 YEARS
RISIDING AT CHURCH ROAD
KUNDAPURA-576 201
NOW RISIDING AT KUTEERA
NEAR HUNGULUR
KUNDAPUR TALUK
UDUPI DISTRICT
2
M.F.A.NO.7119/2016
4. H.VIJAYA KUMAR SHETTY
S/O RAMANNA SHETTY
AGED ABOUT 42 YEARS
RESIDING AT HOSABETTU POST
MANGALURU-570 002
NOW RESIDING AT KUTEERA
NEAR HUNGULUR, KUNDAPUR TALUK
UDUPI DISTRICT
5. SAMARTHA G. SHETTY
S/O H.GANGADHARA SHETTY
AGED ABOUT 34 YEARS
RESIDING AT CHRUCH ROAD
KUNDAPURA-576 201
NOW AT KUTEERA
NEAR HUNGULUR, KUNDAPUR TALUK
UDUPI DISTRICT ...APPELLANTS
(BY SRI S.SHAKER SHETTY, ADVOCATE)
AND :
KARNATAKA STATE INDUSTRIAL
INFRASTRUCTURE & DEVELOPMENT
CORPORATION, HAVING ITS REGD.,
OFFICE AT NO.49, EAST WING
4TH FLOOR, KHANIJA BHAVAN
RACE COURSE ROAD
BENGALURU-560 001, ALSO
HAVING ITS ZONAL OFFICE AT NO.407
408, III FLOOR, MAHENDRA ARCADE
KUDMAL RANGA RAO ROAD
KARANGALAPADY, MANGALORE-575 068
REPRESENTED BY ITS MANAGER
G.C.KEMPAHONNAIAH ...RESPONDENT
(BY SRI V.F.KUMBAR , ADVOCATE)
I.A.NO.1/2017 IS FILED UNDER SECTION 41 RULE 5 R/W
SECTION 151 OF CODE OF CIVIL PROCEDURE, TO STAY ALL
FURTHER PROCEEDINGS IN RESPECT OF THE ORDER PASSED BY
THE LEARNED PRINCIPAL DISTRICT JUDGE, UDUPI, IN MISC.
CASE NO.28/2010, PASSED ON 09.09.2016.
3
M.F.A.NO.7119/2016
I.A.NO.1/2017 HAVING BEEN HEARD AND RESERVED ON
30.08.2017 AND COMING ON FOR PRONOUNCEMENT OF
ORDERS THIS DAY, K.S.MUDAGAL.J., DELIVERED THE
FOLLOWING:
ORDERS ON IA 1/2017
K.S.MUDAGAL, J. :
The appellants have filed the above application seeking stay of the operation of the order in Miscellaneous Case No.28/2010 dated 9.9.2016 passed by the Principal District Judge, Udupi.
2. By the impugned order, the learned District Judge allowed the petition of the respondent - Corporation under sections 31(1)(a)(aa) and 32 of the State Financial Corporations Act, 1951 (Hereinafter referred to as the 'SFC Act', for brevity) and ordered to issue Recovery Certificate against the appellants for recovery of Rs.8,61,70,531.
3. Shri S.Shaker Shetty, learned Counsel for the appellants contends that appellants are entitled to interim stay since the impugned order suffers apparent illegality for the following reasons.
4M.F.A.NO.7119/2016
(1) The fifth appellant was minor at the time of his admission to the partnership firm and the Trial Court failed to appreciate the legal consequences.
(2) The primary assets of the firm were worth Rs.3,00,00,000/- and the respondent sold them only for Rs.70,00,000/- which is illegal and the Trial Court failed to consider the same.
(3) The respondent discharged the secured co-
obligant by recovering only Rs.1,09,00,000/- though the property furnished as security by him was worth Rs.3,00,00,000/-.
4. To support his contentions, he relies upon following judgements:
1) Vijayalakshmamma and another vs. B.T.Shankar, (2001)4 SCC 558
2) Raheja Universal Limited vs. NRC Limited and Others, (2012) 4 SCC 148
3) Rajkot Distt. Co-operative Bank Ltd vs. State of Gujarat & Ors, AIR 2015 SC 489 5 M.F.A.NO.7119/2016
4) Devasahayam (dead) by LRS vs. P. Savithramma and Others, (2005) 7 SCC 653
5) Arundhati @ Harshana vs. Iranna @ Veerendra, 2008(3)KCCR 1287
6) Shanta Genevienve Pommerat and another vs.Sakal Papers Pvt. Ltd and others, AIR 1983 SC 269
7) Union of India vs. K.V.Lakshman and Ors, AIR 2016 SC 3139
8) The Gujarat State Financial Corporation vs. M/s. Natson Manufacturing Co.Pvt. Ltd. and Others, AIR 1978 SC 1765
9) Everest Industrial Corporation and others vs. Gujarat State Financial Corporation, AIR 1987 SC 1950
10) Maganlal vs. M/s. Jaiswal Industries, Neemach and others; Ramnarayan and others vs. Maganlal and others, AIR 1989 SC 2113
11) Rahima Beevi vs. Kerala Financial Corporation, AIR 1987 Kerala 126
12) The Maharashtra State Financial Corporation vs. M/s.
Jaycee Drugs and Pharmaceuticals Pvt. Ltd. and others, AIR 1991 Bombay 96 6 M.F.A.NO.7119/2016
13) M/s Bharat Chemical Works and others vs. Gujarat State Financial Corporation, Ahmedabad, AIR 1983 Gujarat 104
14) M/s Parkash Playing Cards Manufacturing Co., Delhi and others vs. Delhi Financial Corporation, New Delhi, AIR 1980 Delhi 48
15) M/s Amar Cold Storage and Ice Factory and another vs.Punjab Financial Corporation, AIR 1994 Punjab and Haryana 235
16) The Maharashtra State Financial Corporation vs .M/s. Jaycee Drugs and Pharmaceuticals Pvt. Ltd and others, AIR 1991 Bombay 96
17) Central Bank of India vs. Ravindra and Others, 2002 (1) SCC 367
18) Mool Chand Yadav and another vs. Raza Buland Sugar Company Limited, Rampur and Others, 1982 (3) SCC 484
19) Vasu.P.Shetty vs Hotel Vandana Palace and others 2014 (5) SCC 660
20) Dharam Vir vs. Jagan Nath and others, AIR 1968 Punjab 84 7 M.F.A.NO.7119/2016
21) Uttam Singh Khorana & Sons vs. Income-Tax Department of Jammu, 1956 30 I.T.R.821 J K
5. Shri V.F.Kumbar, learned Counsel for the respondent opposes the application on the ground that it is an attempt to delay the fruits of the order. He contends that if at all interim stay is to be granted, the appellants be put to terms.
6. Shri Shaker Shetty, learned Counsel submits that there is no provision for passing conditional order under the SFC Act.
7. The Trial court after conducting full-pledged investigation has passed the impugned order. The merits of the said order has to be tested at the final hearing. So far as the allegation of minority of the fifth appellant, the Trial Court has held that the fifth appellant has not taken such plea in his objection statement, has only examined his power of attorney and has not entered the witness box.
8. There is nothing to show that the fifth appellant after attaining majority sought declaration that his 8 M.F.A.NO.7119/2016 admission to the firm is void. It is not his case that as on the date of the availment of the loan, he was minor. He has not produced any document in proof of his date of birth.
9. So far as the allegation of the sale of the primary assets of the firm at lower value, the records show that the appellants challenged the same in WP 12170/2007 before this court on the same grounds and failed.
10. So far as the discharge of the collateral security, Dr.Surendernath Shetty, receiving only Rs.1,09,00,000/-, the Trial Court says that the appellants have not produced any material to show that the value of the property furnished by him as collateral security was Rs.3,00,00,000/-.
11. So far as the contention that this is not a proceeding under Order XLI, therefore security cannot be sought, the appellants' application itself is under Order XLI Rule 5 of the Civil Procedure Code, 1908 (hereinafter referred to as the 'CPC', for brevity). That goes to show that, the impugned order if not a decree literally is in the 9 M.F.A.NO.7119/2016 nature of decree for money recovery, that is why the appellants have filed their application under Order XLI Rule 5 of the CPC. In addition to that, a perusal of Section 32(6), 32(8) and 32(8A) of the SFC Act shows that, the Act makes CPC applicable to proceedings under Sections 31 and 32 of the SFC Act for the purposes referred to therein.
12. Order XLI Rule 5 of the CPC requires to seek security from the applicant for due performance of the decree or order and that may ultimately be binding on him. Even otherwise, Section 32(9) of the SFC Act, empowers the High Court to pass such orders on hearing the parties as it thinks proper. Therefore, there is no merit in the contention that this court cannot impose any terms for granting interim stay.
13. The records show that the loan in question is availed in the year 1999 itself. The appellants are none else, but the partners of the firm which availed the loan. The court has to strike the balance between rights of the parties. Appeal is already admitted. If order is enforced, the purpose of filing appeal gets defeated. At the same 10 M.F.A.NO.7119/2016 time, if appeal fails, respondent should have some security to execute the orders.
14. The judgments relied upon by the learned Counsel for the appellants are not applicable to the issues raised on this application.
For the aforesaid reasons, the interim stay requires to be granted on terms. The operation and execution of the impugned order is hereby stayed subject to the appellants depositing 25% of the decretal amount and furnishing security of unencumbered immovable property for the remaining amount before the Trial Court, within four weeks from the date of this order. Failing which, this order shall stand vacated automatically.
Sd/-
JUDGE Sd/-
JUDGE nv