Karnataka High Court
Shruthi Shetty vs The State Of Karnataka on 18 November, 2013
Equivalent citations: AIR 2014 (NOC) 304 (KAR.), 2014 (1) AKR 335
Author: A.S.Bopanna
Bench: A S Bopanna
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®
IN THE HIGH COURT OF KARNATAKA AT BANGALORE
DATED THIS THE 18TH DAY OF NOVEMBER 2013
BEFORE
THE HON'BLE MR. JUSTICE A S BOPANNA
WRIT PETITION No.767/2013 (GM-KSFC)
BETWEEN:
SMT. SHRUTI SHETTY
D/O K ULHAS SHETTY
AGED ABOUT 25 YEARS
RENAISANCE APARTMENTS
PARK-3, BRIGADE GATEWAY
HOTEL SHERATON
DR. RAJKUMAR ROAD
YESWANTPUR
BANGALORE-560022 ... PETITIONER
(BY SRI N SURESHA, ADV. FOR
MS. SANDYA U PRABHU, ADV.)
AND:
1. THE STATE OF KARNATAKA
REP. BY ITS SECRETARY
REVENUE DEPARTMENT
M S BUILDING
BANGALORE - 560 001
2. THE SPECIAL TAHSILDAR
KARNATAKA STATE
FINANCIAL CORPORATION
3RD FLOOR, SOMAYAJI BUILDING
BUNTS HOSTEL ROAD
MANGALORE - 575 003
3. THE AUTHORIZED OFFICER
VIJAYA BANK
CATHOLIC CENTRE
HAMPANKATTA
MANGALORE - 575 001
2
4. ULLAS SHETTY
S/O LOKAIAH SHETTY
AGED ABOUT 60 YEARS
R/AT SHETTY'S COMPOUND
PINTOS LANE,
MANGALORE - 01. ... RESPONDENTS
(BY SRI VIJAYAKUMAR A. PATIL, HCGP. FOR R1
SRI GURURAJ JOSHI, ADV. FOR R2
MS. T.M. ASHA, ADV. FOR R3
SRI VENKATASATHYANARAYANA A., ADV. FOR R4)
THIS WRIT PETITION IS FILED UNDER ARTICLES 226 &
227 OF THE CONSTITUTION OF INDIA, WITH A PRAYER TO;
QUASH THE PAPER PUBLICATION DT.26.12.12 VIDE ANN-G
ISSUED BY THE R2.
THIS WRIT PETITION HAVING BEEN RESERVED FOR
ORDERS, COMING ON FOR PRONOUNCEMENT THIS DAY, THE
COURT PRONOUNCED THE FOLLOWING :
ORDER
The petitioner is before this Court seeking for issue of writ of certiorari to quash the paper publication dated 26.12.2012 (Annexure-G) by which the property belonging to the petitioner is brought to auction.
2. The petitioner claims to be the owner of the land bearing Sy.No.1573/1B in different bits situate at Kodialbail village, Mangalore Taluk, presently within the Mangalore City Corporation. It is stated that the property is ancestral property. Being governed under Aliyasanthana law, the petitioner's father's sister 3 Smt. Rajivi S. Shetty executed a WILL dated 11.09.2004 and bequeathed her property to the father of the petitioner. The father of the petitioner executed a settlement deed dated 01.09.2005 in favour of the petitioner. The khatha entries from the Mangalore City Corporation has been obtained in favour of the petitioner. The entry in the RTC was not changed since the land was used for non-agricultural purpose.
3. The petitioner has thereafter obtained housing loan from M/s Vijaya Bank, the third respondent by creating charge over the property. When this was the position, the petitioner noticed the impugned paper publication issued by the second respondent bringing the property to sale which has resulted in this petition. This Court on directing notice to the respondents has stayed the confirmation of the sale.
4. The second respondent has filed their objection statement and it is averred that the father of the petitioner Sri Ullas Shetty, who is impleaded as 4 fourth respondent to the petition has executed Personal Guarantee Deeds dated 17.06.1994 and 29.04.1999 to clear all dues in respect of loan advanced to M/s Mookambika Metal Finishers. The fourth respondent with his wife and brothers were partners of the firm. Term loan of Rs.7,50,000/- and working capital of Rs.1,20,000/- was advanced on 28.05.1994. This was secured by primary assets in the form of land, building, plant and machinery. Additional loan of Rs.5,62,000/- was also granted. Due to non-repayment, the land, building, plant and machinery of the firm was sold on 25.10.2005 for Rs.6,00,000/-. Thereafter the Personal Guarantee has been invoked and applications under Section 31(1) (a) and (aa) of the State Financial Corporations Act, 1951 ('SFC Act' for short) was filed against the Guarantors including the fourth respondent on 18.07.2008 which is pending. Thereafter, the second respondent on finding that the property in question belonged to the fourth respondent has invoked the right available under Section 32G of the SFC Act. It is contended that the alleged title of the petitioner is 5 fraudulent and is hit by Section 53 of the Transfer of Property Act.
5. The third respondent-Vijaya Bank have filed their objection statement and the housing loan of Rs.11,00,000/- advanced to the petitioner has been referred and the entire details relating to the same is disclosed. The nature of due diligence conducted by them before advancing the loan to ascertain the ownership of the property by the petitioner is referred. The third respondent thus having interest in the property towards the charge in their favour have contended that the further process with regard to the property be stopped.
6. In addition to the pleadings on factual aspects, the question also arose regarding the scope of the different provisions and remedy thereunder. This was noticed in the order sheet dated 07.08.2013 and opportunity was provided to argue on the question of law which was raised.
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7. Heard Sri M.V.V. Ramana, learned counsel for the petitioner, Sri Vijayakumar A. Patil, learned Government Advocate, Sri Guruaj Joshi, Ms. T.M. Asha and Sri Venkatasathyanarayana, respective learned counsel for respondents No. 1 to 4 and perused the petition papers.
8. The basic fact noticed from the contentions is that though the loan was advanced by KSFC to M/s Mookambika Metal Finishers and the fourth respondent who is the father of the petitioner has executed a Personal Guarantee is the position, the fact is also that the immovable property in issue to which the petitioner claims ownership is not a property regarding which mortgage or charge is created. The impugned auction sought to be made by the second respondent is since according to the second respondent, the property is belonging to the Personal Guarantor and power of such recovery is available under Section 32G of the SFC Act. In respect of the charge created on the land, building, plant and machineries of the industrial concern, the procedure under Section 29 of the SFC Act has been 7 invoked and it has been sold on 25.10.2005. Thereafter the remedy provided under Section 31(1)(a) and (aa) of the SFC Act has been invoked against the Personal Guarantors after nearly three years on 18.07.2008 in Misc.Case.No.50/2008 which is still pending consideration. After four years thereon, the present action has been initiated on 26.12.2012 under Section 32G of the SFC Act.
9. The Hon'ble Supreme Court on considering all the said provisions contained in the SFC Act, through its judgment in the case of Karnataka State Financial Corporation -vs- N. Narasimhaiah and Others [(2008) 5 SCC 176] has no doubt stated that the Corporation would have four remedies i.e., to file a suit; to take recourse to Section 29; to take recourse to Section 31 and to take recourse to Section 32G of the Act. In the said decision, the Hon'ble Supreme Court has referred to the decision in the case of A.P. State Financial Corporation -vs- M/s GAR Re-Rolling Mills and Another (AIR 1994 SC 2151) relied on by the learned counsel for the second respondent. 8
10. In the case of M/s GAR Re-Rolling Mills, the Hon'ble Supreme Court while considering the option of the SFC to elect any of the reliefs under the Act has considered the situation wherein the SFC had at the first instance initiated proceedings under Section 31 of the Act against the industrial concern and on abandoning the same had initiated proceedings under Section 29 of the Act. In that circumstance, the Hon'ble Supreme Court on taking note of the expression "without prejudice to the provisions of Section 29 of this Act" contained in Section 31 of the Act was of the view that any action initiated under the other provisions is without prejudice to the right under Section 29. As such, the Court approved the action of resorting to the procedure of recovery under Section 29 of the Act though the proceedings under Section 31 of the Act had been initiated earlier. But, what cannot be lost sight is that the Hon'ble Supreme Court has indicated that even though either of the remedies could be elected, the Corporation cannot simultaneously pursue two remedies at the same time.
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11. On taking note of the said decision, the Hon'ble Supreme Court in the subsequent decision in the case of N. Narasimhaiah (supra) while considering as to whether the procedure contemplated under Section 29 could be invoked against the properties belonging to the guarantor has held that it is not permissible. In the course of the said consideration, the Hon'ble Supreme Court has also taken note of the provision that is available under Section 31 of the Act and the scope of consideration therein, more particularly with regard to the property of the guarantor which would be the subject matter therein. The relevance of the said procedure is adverted to by keeping in view the right to the property which is also a human right and the manner provided for deprivation of the same. In that regard, it has been observed as hereunder:
"42. Interpretation of a statue would not depend upon a contingency. It has to be interpreted on its own. It is a trite law that the court would ordinarily take recourse to the golden rule of literal interpretation. It is 10 not a case where we are dealing with a defect in the legislative drafting. We cannot presume any. In a case where a court has to weigh between a right of recovery and protection of a right, it would also lean in favour of the person who is going to be deprived therefrom. It would not be the other way round. Only because a speedy remedy is provided for that would itself (sic not) lead to the conclusion that the provisions of the Act have to be extended although the statute does not say so. The object of the Act would be a relevant factor for interpretation only when the language is not clear and when two meanings are possible and not in a case where the plain language leads to only one conclusion."
(emphasis supplied)
12. In that light, the manner in which the SFC has invoked both the reliefs under Section 31(1) (a) and (aa) on the one hand and under Section 32G of the Act on the other against the personal guarantor requires to be considered even if the property in issue was construed to be the property belonging to the fourth respondent herein. Insofar as the manner of exercising 11 the right against the guarantor, Section 31 (1) (aa) provides for applying to the District Judge within the limits of whose jurisdiction the industrial concern carries on the whole or a substantial part of its business for enforcing the liability of any surety. The procedure to be followed by the District Judge in such situation is provided in Section 32 (1A) wherein an opportunity of showing cause as to why the liability should not be enforced is provided to such surety. It would also be open to the District Judge to examine the Officer of Financial Corporation even before issuing notice as contemplated under Sub-section (3). Sub-section 4(A) provides the procedure if no cause is shown and Sub- section (6) provides that if cause is shown, the District Judge shall proceed to investigate the claim in accordance with the provisions contained in the Code of Civil Procedure. After making such investigation, the District Judge may direct the enforcement of liability of the surety or reject the claim made in this behalf as contemplated under Sub-section (7) (da). As against the order passed by the District Judge, an appeal is also 12 provided to the High Court under Sub-section (9) of Section 32 of the SFC Act. The said provisions would indicate that before enforcing the liability of the surety, a detailed procedure is contemplated and opportunity is also available to such surety to show cause and it is only thereafter the liability of the surety would get crystallized for the purpose of recovery.
13. The above noticed provision contemplated in Section 31 and 32 of the SFC Act is distinct from the right provided to the Financial Corporation under Section 29 of the SFC Act. The right under Section 29 is no doubt without the intervention of the Court but is limited to be exercised only in respect of the property pledged, mortgaged, hypothecated or assigned to the Financial Corporation. In that light, if Section 32G of the SFC Act is considered, though a right is granted to the Financial Corporation to recover the amount without prejudice to any other mode of recovery by making an application to the State Government, the said provision would not enable the Financial 13 Corporation to proceed in such manner in respect of the alleged liability against the surety, more particularly in a circumstance where no charge is created by such surety in respect of any particular property. After determination of the liability by the District Judge and the same attains finality on conclusion of the statutory appeal if preferred, the said procedure prescribed under Section 32G of the SFC Act could be resorted to as an expeditious mode of recovery instead of the regular process of execution. Even in such circumstance, the certificate to be issued to the Collector, by the State Government would be on satisfaction of the property undisputedly belonging to the surety.
14. In this backdrop, in the instant facts, it is not in dispute that the proceedings initiated by the State Financial Corporation by filing the petition under Section 31 (1)(a) and (aa) in Misc.Case No.50/2008 is still pending before the District Judge, Dakshina Kannada. The cause shown by the fourth respondent herein and the other sureties who have been arrayed as 14 respondents to the said petition is to be considered and a decision is yet to be rendered. In such circumstance, the first respondent could not have all of a sudden in the year 2012 invoked the provision contained in Section 32G of the SFC Act. It does not also refer to the proceedings where the State Government has considered and issued a certificate to the Collector. Further, as already noticed, the property which is the subject matter of auction had not been mortgaged in favour of the first respondent. In that circumstance, when the petitioner claims right in respect of the said property based on a Deed of Settlement dated 01.09.2005 and contention is also put forth with regard to the property being governed under the Aliyasanthana Law, even though the first respondent disputes these aspects and contends that the Settlement Deed is contrary to Section 53 of the Transfer of Property Act, 1882, these disputed questions relating to the ownership of the property itself is an issue which may require consideration at the relevant stage in such appropriate proceedings. Therefore, even before the 15 liability of the surety is crystallized, the property in any event cannot be brought to sale in an arbitrary manner so as to deprive the property without complying due process of law. Further, even though the learned counsel for the first respondent contends that the objection if any, by the petitioner could have been raised before the Tahsildar himself since the Karnataka Land Revenue Act provides for the said procedure, I am unable to accede to such contention since the Revenue Authority cannot decide such intricate issues for the reasons already noticed above and also since even the preceding procedure prior to invoking power under Section 32G of the SFC Act is not shown to have been complied. That apart, the interest of the third respondent in respect of a property which did not suffer from prior charge is also involved.
15. For all the above stated reasons, I am of the opinion that the impugned publication dated 26.12.2012 (Annexure-G) is not sustainable. Hence, I pass the following:
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ORDER
(i) W.P.No.767/2013 is allowed.
(ii) The impugned publication dated
26.12.2012 (Annexure-G) stands
quashed.
(iii) Parties to bear their own costs.
Sd/-
JUDGE
hrp/bms