Karnataka High Court
Suryakanth K Shanbag vs Karnataka State Financil Corporation on 15 October, 2020
Author: Ravi.V.Hosmani
Bench: Ravi.V.Hosmani
1 R.F.A. No. 100024/2015
IN THE HIGH COURT OF KARNATAKA
DHARWAD BENCH
DATED THIS THE 15 T H DAY OF OCTOBER 2020
PRESENT
THE HON'BLE MR. JUSTICE N. K. SUDHINDRARAO
AND
THE HON'BLE MR.JUSTICE RAVI V. HOSMANI
R.F.A. NO. 100024/2015 (S.P.)
BETWEEN:
SRI SURYAKAN T K. SHANBHAG,
AGE: 52 YEARS, OCCUPATION: B USINESS,
R/O HO TEL UDAYA BHAVAN, 5/C,
KHANAPUR ROAD, TILAKWADI, BELAGAVI,
DISTRIC T: BELAGAVI-591 101.
- APPELLAN T
(BY SRI J.S. SHETTY, ADVOCA TE)
AND :
1. KARNA TAKA STATE FINANCIAL
CORPORATION REPRESEN TED
BY I TS MANAGING DIREC TOR,
KSFC BHAVAN NO.1/1,
THIMMAIAH ROAD, BANGALURU.
2. THE ASSIS TAN T GENERAL MANAGER,
KARNA TAKA STATE FINANCIAL
CORPORATION, BELGAUM BRANCH,
NEAR HO TEL SANMAN DELUXE,
COLLEGE ROAD, BELAGAVI,
DISTRIC T: BELAGAVI-591 101.
3. SRI RAMESH SRINIVAS HEDA,
AGE: MAJOR, OCC.: BUSINESS,
R/O 471, SHAHAPUR ROAD,
2 R.F.A. No. 100024/2015
VADAGAON, BELAGAVI-591 101.
4. SRI MUKUND VISHNULAL BANG,
AGE: MAJOR, OCC.: BUSINESS,
R/O 553, VI THALDEV GALLI,
SHAHAPUR, BELAGAVI.
5. SRI OMPRAKASH NARAYANDAS BHANDARI,
AGE: MAJOR, OCCUPA TION: BUSINESS,
R/O NO. 275, HULBA TTE COLONY,
SHAHAPUR, BELAGAVI.
6. SRI SHAMSUNDAR NARAYANDAS BHANDARI,
AGE: MAJOR, OCCUPA TION: BUSINESS,
R/O NO. 275, HULBA TTE COLONY,
SHAHAPUR, BELAGAVI.
- RESPONDEN TS
(BY SRI SHARAD V. MAGADUM,
ADVOCA TE FOR R1 & R2,
SRI C.S. PA TIL, ADVOC ATE FOR R3 TO R6)
THIS REGULAR FIRST APPEAL IS FILED UNDER
SEC TION 96 OF CPC AGAINS T THE JUDGMEN T &
DECREE DA TED 20.10.2014, PASSED IN O.S. NO.
139/2010 ON THE FILE OF THE LEARNED III
ADDI TIONAL SENIOR CIVIL JUDGE, BELGAUM & E TC.
THIS REGULAR FIRS T APPEAL COMING ON FOR
FINAL HEARING THIS DAY, N. K. SUDHINDRARAO, J.
DELIVERED THE FOLLOWING:
3 R.F.A. No. 100024/2015
JUDGMENT
The appeal is directed against the judgment and decree passed in O.S. No. 139/2010 dated 20.10.2014 wherein the suit for specific performance filed by the plaintiff came to be decreed in part with costs, defendants 1 and 2 were directed to refund deposited amount of Rs. 35 lakhs together with interest at the rate of 8% p.a. from the date of its deposit. Being aggrieved by the said judgment and decree, the plaintiff is in appeal.
Originally the suit was filed by the plaintiff for specific performance of the contract to direct the defendants to execute the registered sale deed of the schedule property in favour of the plaintiff confirmed in accordance with the sale by public auction dated 13.10.2006 under which the highest bid offered by the plaintiff was accepted by the defendant.
4 R.F.A. No. 100024/2015
2. In order to avoid confusion and overlapping parties are hereinafter addressed in accordance with ranks held by them before the trial Court.
3. The plaintiff is in appeal. He has preferred the appeal seeking specific performance by executing the registered sale deed of the schedule property in his favour as his offer was accepted and that resulted in obligation on the part of the defendant No.1(KSFC) to execute the sale deed in his faovur. It is also stated, the entire sale consideration of Rs. 35 lakhs was promptly deposited by the plaintiff. All these things arose with the schedule property was a security offered by its owner one Smt.Bhanumati Arun Kumar Pense (not a party to the suit) when she borrowed loan amount of Rs.35 lakhs and executed the mortgage by way of security for the repayment of the loan amount with interest.
5 R.F.A. No. 100024/2015
When she became defaulter in repayment of the said loan, the defendant No.1-KSFC brought the schedule property for sale. In this connection, the auction was proposed to be conducted and also held for 13 times, however, of no avail. It was scheduled to be conducted for 14 t h time and a notification was issued in this connection on 01.07.2006 to be held at KSFC Office, Belgaum. It is also stated, the auction sale also consisted of negotiation and it is titled as "auction-cum- negotiation". The highest bid or offer from the plaintiff was Rs.35 lakhs beyond which no other offer or negotiation came up for consideration. The defendant No.1-KSFC accepted the said offer and the same is evidenced by the letter dated 13.10.2006 (Ex.P.1). Thereafter, the time went on, registered sale deed was not executed in favour of the plaintiff. However, correspondence under proceedings in the form of Writ Petition by Belgaum Industrial Co-Operative Bank (for short 'Bank'), again also Writ Appeal by the plaintiff were 6 R.F.A. No. 100024/2015 filed and disposed off and finally it resulted in filing of O.S. No. 139/2010 by the plaintiff and it was resisted by the defendant. The suit came to be decreed in part wherein the plaintiff was held entitled for refund of purchase money together with interest at 8% p.a. from the date of its deposit. His prayer for specific performance in principle was rejected by the trial Court. He being aggrieved by the said judgment has come in appeal.
The learned trial Judge was accommodated by oral evidence of plaintiff-Syrtakant K. Shanbhag as PW1 and got marked documents as per Exs.P.1 to P11, i.e., Ex.P.1-acceptance letter by KSFC dated 13.10.2006, Ex.P.2-pay-in-slip issued by KSFC dated 07.11.2006, Ex.P.3-Certified Copy of the order of Hon'ble High Court dated 30.08.2007, Ex.P.4-Letter of sale negotiation issued by KSFC, Ex.P.5-Office copy of legal notice dated 20.04.2007, Ex.P.6-Office copy of the legal notice dated 07.01.2008, Ex.P.7-Advertisement bill, 7 R.F.A. No. 100024/2015 Ex.P.8-Public notice issued in Vijay Karnataka, Ex.P.9-Certified copy of order of Hon'ble High Court in W.P. No. 3429/2008, Ex.P.10-Certified copy of Hon'ble High Court order in Writ Appeal, Ex.P.11-Certified Copy of order of Hon'ble High Court dated 04.12.2003 in M.F.A. No. 24934/2012 and Ex.P.12-Extract of statement of account by SBI. so also the oral evidence of the defendant No.3-Ramesh Shrinivas Heda as DW1, and one Sri Hanumanthaiah C.H.- Managing Director of respondent No.1and documents as per Exs.P.1 to P20, i.e., Ex.D.1-Receipt issued by KSFC, Ex.D.2- Pay Slip, Ex.D.3-Letter given to KSFC, Ex.D.4- Letter of KSFC, Ex.D.5-Receipt, Ex.D.6-Bank Challan, Ex.D.7-Letter given to KSFC, Ex.D.8- Letter given to KSFC, Ex.D.9-Letter given to Mr. Ramesh Heda by KSFC, Ex.D.10-Letter given to KSFC, Ex.D.11-Letter given to KSFC, Ex.D.12- Letter given to KSFC, Ex.D.13-Order Copy, Ex.D.14-Letter issued by KSFC, Ex.D.15-Sale Deed, Ex.D.16-Tax paid receipt, Exs.D.17 to Ex.D.19- 8 R.F.A. No. 100024/2015 Letter correspondence and Ex.D.20-Possession Certificate.
4. Though it is a regular first appeal u/s 96 of the Code of Civil Procedure, it is necessary to mention that the point of law is also involved and the moot point would be whether KSFC is bound to execute the sale deed in favour of the plaintiff regardless of the subsequent sale may be for higher consideration and also as to the plaintiff will have to get himself satisfied with the refund with interest by virtue of the auction or negotiation that was held in a proceeding that was filed for recovery of money by KSFC.
5. Sri J.S. Shetty, learned counsel appearing for the appellant-plaintiff would submit that the plaintiff fulfils all the qualities of a legal and perfect purchaser. He participated in the proceedings dated 13.10.2006 and offered his bid for the schedule property. It was not challenged or countered by any other better offer and there was 9 R.F.A. No. 100024/2015 no illegality or irregularity in the auction sale nor was any default on the part of the plaintiff. He would further submit that the delay was conducted by the defendant alone. Even the total price of the schedule property was also deposited by the plaintiff. The delay in execution of the sale deed by the plaintiff on the ground of second charge existing in favour of the Bank has no bearing on the plaintiff.
6. Learned counsel submits that when once the contract is completed and fulfils all the features of a valid contract, such as, offer and acceptance, legal relationship, lawful consideration, capacity of the parties, legality of object, the plaintiff is entitled for enforceability of the contract in principle in the form of getting the registered sale deed. Any other relief would be short of legality and the nature of right held by the plaintiff.
7. Learned counsel would further submit, the defendant No.1 has sold the schedule property to 10 R.F.A. No. 100024/2015 defendants 3 to 6 in the auction dated 17.01.2008 for a sum of Rs.57,81,000/-. In this connection, it was submitted, consideration might have been more than what was offered by the plaintiff but the moment it was accepted, it becomes concluded contract and the defendant was estopped from entering into a fresh contract with any other persons much less defendants 3 to 6.
8. Learned counsel for defendants 1 and 3 to 6 are present before the Court would submit that the proceedings regarding sale of the schedule property emanated in view of the recovery of the loan amount that was defaulted by the borrower one Smt.Bhanumati. Further, apart from the Deed of Mortgage by way of mortgage executed by the said Bhanumati was being in force as there was default by her. In this connection, it is also stated that in the later circumstance of the case, the Bank came into picture stating that there was a charge created in its favour by Smt.Bhanumathi, owner of the property. 11 R.F.A. No. 100024/2015
9. Thus, the circumstances were legally justified in paving way for second auction that was conducted by the defendant No.1 and that the property was sold for Rs.57.81 lakhs in favour of defendants 3 to 6 in the auction held on 17.01.2008.
10. Borrowing of loan by the owner of the schedule property Smt.Bhanumati is not in dispute. She mortgaged the schedule property in favour of defendant No.1 to secure repayment of loan of Rs.35 lakhs with interest also is not in dispute. The said Bhanumati has not come before the Court nor she is a defendant in the present suit. For all the practical purposes stated that she has no issue against sale of property. In the later circumstance, it was entry of the Bank, came up for consideration.
Ex.P.1 is the acceptance letter written by defendant No.1 to the plaintiff wherein it discloses regarding participation of plaintiff in the auction proceedings and his bid for Rs.35 lakhs for the schedule property. The said letter is dated 13.10.2006. The amount of Rs.35 lakhs was deposited in two installments was complied with in 12 R.F.A. No. 100024/2015 accordance with the letter dated 13.10.2006. Thus, it is the primary claim of the plaintiff that the total consideration amount has been paid and the formality of execution of the registered sale deed was due. The Bank is not a party to the case. However, its entry into the domain of the case came up through the writ petition filed by them (marked as Ex.P.3) wherein it claim that it has a charge over the schedule property and property could not have been brought to sale to frustrate its right.
11. It is also necessary to place on record that prior to the auction sale in favour of the plaintiff it is stated that 13 times the property was brought to sale, however, things did not materialize, as such, auction proceedings in favour of the plaintiff was a 14th one. The Bank also claimed on 07.08.2007, that the property would have fetch a sizeable amount more than the amount of bid of the plaintiff. It was brought to the notice of the Court that an amount of Rs.85 lakhs would have been fetched by the schedule property and it was default of the defendant No.1-KSFC not allowing the purchaser for inspection of the schedule 13 R.F.A. No. 100024/2015 property. However, in the circumstances of the case, the Court observed as under:
"6. Apparently the petitioner is a second charge holder and if ultimately any money remains after adjusting the amount towards the loan of respondent No.1, the excess amount would be certainly given to the petitioner. As the petitioner is a second charge holder the question of he having any superior right to that of respondent No.1 does not arise. Consequently, I am of the view that the relief which is sought for by the petitioner cannot be granted."
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Through Ex.P.4 the defendant No.1-KSFC informed the plaintiff they are having an offer for purchaser of schedule property for auction for consideration of Rs.50,61,000/-. Plaintiff was invited for a meeting on 26.12.2007 at 11 am without fail. It was thereafter a legal notice came to be issued by the plaintiff to the defendant No.1 sticking to the ground of compliance would acceptance of the bid amount. Ex.P.6 is the second letter dated 07.01.2008 in similar lines.
14 R.F.A. No. 100024/2015
12. In the further circumstances of the case auction notice was issued by KSFC as per Ex.P.8 dated 20.08.2008 through paper publication. Learned counsel for the plaintiff would submit that plaintiff did not attend the meeting on 26.12.2007 as there was no auction for the plaintiff in law to go away from the legal duty to see that the sale deed is executed in favour of the plaintiff. It is in this connection, KSFC claim that the auction notice was issued.
13. Learned counsel for plaintiff would submit that plaintiff is not bound by such kind of notice for auction of the property which was also sold in favour of the plaintiff. As stated, the defendant No.1-KSFC in pursuance of the paper publication Ex.P.8 dated 20.08.2007 went ahead with the auction sale dated 03.11.2009 and auction sale was conducted. The sale deed was executed for a consideration of Rs.57,81,000/- in favour of defendants 3 to 8. Apparently, the plaintiff claims a priority right of getting the sale deed of the schedule property of Rs.35 lakhs by virtue of the auction dated 01.07.2006. 15 R.F.A. No. 100024/2015
14. The plaintiff questioned the genuineness of the auction conducted by the defendant in respect of the schedule property dated 17.01.2008 and the sale deed being executed in favour of defendants 3 to 6 on 22.03.2010. It is necessary to mention that under Ex.P.4 the defendant No.1 had made its intention clear for going ahead with auction of the property as there was a better bidder in the matter for consideration. However, plaintiff claims that his auction proceedings wherein he was the highest bidder was cancelled. It was in this connection the writ petition was filed by the plaintiff in W.P. No. 3429/2008 wherein he only sought quashing the letter / notice dated 04.01.2008 and also direction to KSFC to execute the registered sale deed. This Court observed in paragraph No.5 of the order dated 24.02.2010 as under:
"5. Petitioner has offered only Rs.35 lakhs and opportunity was given to the borrower to negotiate. In the meanwhile, the Corporation got a better offer at Rs.57.81 lakhs apart from other liability. In the circumstances, the Corporation found that when there was a better offer, it has accepted the said bid. I find that the sale was at the stage of negotiation. It was 16 R.F.A. No. 100024/2015 not finalized, since there was a better offer, the Corporation has accepted. However, if the petitioner has suffered any loss due to the offer made by the Corporation, it is open to him to sue for damages."
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15. The Writ Petition came to be disposed off in terms with the said observation. Being aggrieved by the same, the plaintiff filed W.A. No. 6102/2010, which came to be disposed off on 26.03.2010. In the said appeal their Lordships have observed as under:
"8. Be that as it may, we are not inclined to interfere with the discretionary order passed by the learned Single Judge declining to exercise discretion to issue a writ in a matter of this nature. Assuming that the precise reasoning mentioned by the learned Single Judge for dismissing the Writ Petition is not very apt, we find there were more reasons to dismiss the Writ Petition than to issue a writ. A writ jurisdiction is not one meant for enforcing specific performance of a contract and a fortiori is so dismissed. It is open for the appellant to take all such legal contentions as are open to him in law."
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17 R.F.A. No. 100024/2015
16. Thus, it was disposed off by observing that the appellant therein (plaintiff herein) was open to take all such legal contentions as are open to him in law. It is in this connection, this Court had held it clear that writ remedy is not meant for the relief sought for specific performance. In this connection, the plaintiff filed O.S. No. 139/2010 which came to be decreed in part granting the relief of refund of purchase money of Rs.35 lakhs with interest at the rate of 8% p.a.
17. Now the question would be, whether was it a contract that was capable of being specifically performed in principle as per the provisions of Specific Relief Act, also will have to be considered.
18. Basically there was no existing contract between the plaintiff and the defendant No.1, however, a contractual remedy may be created by obligation which are similar to contractual one though a specific contract is not entered into. The enforceability of a contract will have to be ascertained from the attending circumstances, more importantly whether property brought belonging to a 18 R.F.A. No. 100024/2015 particular person (borrower) or mortgager which is being brought to sale in a public auction or negotiation wherein auction purchaser offered highest bid that is accepted by the auctioneer could have been stepped back. In this background the facts and context of the case are, the auction was held on 17.01.2008 and the bid amount or the offer that was made by defendants 3 to 6 said to be Rs.57,81,000/- that was accepted by the defendant no.1- KSFC. The date of auction was notified through a public notice, i.e., paper publication, in Vijaya Karnataka dated 20.08.2008.
19. Learned counsel appearing for the defendant No.1 submits that earlier deposit amount was offered to be given back together with interest at 8% p.a. and thereafter purchased money of Rs.35 lakhs was offered to be refunded together with additional amount of Rs.16,96,363/- and subsequent to the filing of the suit two cheques were issued to the plaintiff bearing No. 289471 for Rs. 35 lakhs and cheque No. 284972 for Rs.16,96,363/- 19 R.F.A. No. 100024/2015 drawn on Canara Bank, Khade Bazar Branch, Belgaum in favour of the plaintiff.
20. Regard being had to the fact that the suit or proceedings in the original suit was in progress. It is necessary to distinguish a suit for specific performance based on a contract and a Court sale. No doubt, in both the cases, the seller conveys the title or interest over the property to the extent which he holds. Insofar as sale of a property widening from a Court auction also depends on the saleable interest of the seller in the schedule property but the question is the specific performance of a contract ripens from a contract that was existing wherein the terms applicable to buyer and the same are brought to writing regarding the sale, sale price, terms on the seller, terms on the purchaser and the time of contract.
Now the question of Court sale arises because of the default of a person to repay the loan or to perform his part of legal obligation. Thus it emanates apart from the intention of a owner to sell the property, it is one of the coercive steps under which the property belonging to him 20 R.F.A. No. 100024/2015 or the one that was secured for repayment is sold. In the circumstances, it may be necessary to mention Order XXI Rule 89 of CPC, which reads as under:
89. Application to set aside sale on deposit.- (1) Where immovable property has been sold in execution of a decree, any person claiming an interest in the property sold at the time of the sale or at the time of making the application, or acting for or in the interest of such person,] may apply to have the sale set aside on his depositing in court,--
(a) for payment to the purchaser, a sum equal to five per cent of the purchase money, and
(b) for payment to the decree holder, the amount specified in the proclamation of sale as that for the recovery of which the sale was ordered, less any amount which may, since the date of such proclamation of sale, have been received by the decree holder.
(2) Where a person applies under rule 90 to set aside the sale of his immovable property, he shall not, unless he withdraws his application, be entitled to make or prosecute an application under this rule.21 R.F.A. No. 100024/2015
(3) Nothing in this rule shall relieve the judgment debtor from any liability he may be under in respect of costs and interest not covered by the proclamation of sale.
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21. Right of a party has to studied or assessed from the circumstances which existed at the time of sale. In the present case, the property was brought to sale because of the default of the borrower, mortgager Smt. Bhanumati. The property was auctioned and the highest bidder in the first auction is the plaintiff. The amount can be treated only as offer and it was accepted, it cannot be taken exactly in a congruent manner to that of a specific performance of the contract, more particularly the acceptance of sale by the first defendant-KSFC is dated 22.03.2010 under the sale in favour of defendants 3 to 6.
22. In the overall circumstances of the case, the plaintiff cannot compel the sale of property perfectly equal to that of a regular and perfect right of specific performance. It cannot be stated in accordance with the agreement that 22 R.F.A. No. 100024/2015 enter with consensus ad idem with the owner of the schedule property.
It cannot be forgotten for a while it was brought to sale, because of the debt with interest that was existing with interest. It cannot be for a while equated to a purchase amount which is generally entered into between purchaser and seller who were relationship of default borrower and the creditor and at the instance of the creditor the property was brought to sale. Admittedly, the loan amount and the liabilities of the default borrower has to be settled. In this connection, it is also brought to the notice that the borrower had one more loan entered into with the Bank.
23. In the circumstances, a normal rule that out of the proceeds of sale, the creditors on the basis of priority has to be satisfied. In this connection, the schedule property that was stated to have been sold for Rs.51,81,000/- to defendants 3 to 6. Per contra, the letter of acceptance cum sale deed was executed on 13.10.2006.
23 R.F.A. No. 100024/2015
24. Even as stated above, Procedural Code provides for an opportunity for the judgment debtor for postponement of sale. If he produce reliability for payment of the decreetal amount and even it goes to the further question under Order 21 Rule 89 CPC for revocation of the sale that was already effected upon payment of 5% of the sale amount which is recorded as solatium.
25. When such being the case, from the texture of the language under Order XXI Rule 89 CPC shows, the transaction made on auction they are not congruent to that of a pre existing contract. Thus, in a recovery proceeding when the property is brought to sale, the aspect of discharge of debt is of paramount consideration rather than to equate and treat as a contractual obligation.
26. At this stage, learned counsel appearing for the appellant-plaintiff Sri J.S. Shetty submits that he would forego interest and allow amount of Rs.35 lakhs as the amount paid towards sale consideration by him and ready to pay the difference sale consideration of Rs.32,81,000/- to the defendants 3 to 6 and sale deed to be executed in his 24 R.F.A. No. 100024/2015 favour. In this connection, it is to be noted that the said point or the statement was neither finds place in the plaint nor in the evidence. However, in the circumstances it amounts to expression of the intention of the appellant- plaintiff.
27. It is necessary to mention that the amount of Rs.57,81,000/- is not of today but as on 22.03.2010. As such, the amount of Rs.22,81,000/- if it is taken along with Rs.35 lakhs does not equal to this amount, which we find either viable or equitable besides not being appropriate. Moreover, the same cannot be domain of the Court and the subject matter, as well.
28. In the overall contentions and circumstances of the case, the suit for specific performance as claimed by the plaintiff is rightly refused by the trial Court. It is not a contract and the transaction cannot be expected to be specifically performed in principle. However, the amount of Rs.35 lakhs payable to the plaintiff by the defendant No.1 shall be paid along with interest at the rate of 9% p.a. is just, proper and equitable.
25 R.F.A. No. 100024/2015
29. We do not find any irregularity, infirmity or miscarriage of justice in the judgment and decree passed by the learned trial judge except enhancing the rate of interest at 9% p.a. The appeal is devoid of merits and liable to be dismissed thereby confirming the judgment and decree passed by the trial Court except enhancing the rate of interest at 9% p.a. In the result, we pass the following order.
ORDER Appeal is dismissed except enhancing the rate of interest at 9% p.a. on the amount of Rs.35 lakhs payable to the plaintiff by the defendant No.1 No order as to costs.
SD/-
JUDGE SD/-
JUDGE bvv