Karnataka High Court
K.V. Krishnaiah Setty vs The Authorised Officer on 16 November, 2021
Author: Alok Aradhe
Bench: Alok Aradhe
IN THE HIGH COURT OF KARNATAKA AT BENGALURU
DATED THIS THE 16TH DAY OF NOVEMBER 2021
PRESENT
THE HON'BLE MR. JUSTICE ALOK ARADHE
AND
THE HON'BLE MR. JUSTICE ANANT RAMANATH HEGDE
W.P. NO.6723 OF 2017 (GM-DRT)
BETWEEN:
K.V. KRISHNAIAH SETTY
S/O LATE SRI VENKATA SUBBAIAH SETTY
NO.4/3, BINNY LAYOUT
ATHIGUPPE, VIJAYANAGAR II STAGE
BANGALORE-560040.
... PETITIONER
(BY MR. TULSI KUMAR B.N. ADV.,)
AND:
1. THE AUTHORISED OFFICER
STANDARD CHARTERED BANK
RAHEJA TOWERS, M.G. ROAD
BANGALORE-560001.
2. SRI. K. PANINDRANATH
S/O SRI. CHENCHAIAH CHETTY
R/S NO.1018/1, 002
13TH CROSS, MALLESWARAM
MARGOSA ROAD
BANGALORE-560003.
3. NR. IBRAHIM ARIF SAIT
NO.FF4, 1ST FLOOR
BENSON MANOR APARTMENTS
NO.75, BENSON CROSS ROAD
BANSON TOWN, BANGALORE-560046.
2
... RESPONDENTS
(BY MR. B.C. AVINASH, ADV., FOR R1
MR. ABHINAV, ADV., FOR R3
R2 D/W V/O/DTD 26.11.2018)
---
THIS WRIT PETITION IS FILED UNDER ARTICLE 226 & 227
OF THE CONSITUTION OF INDIA, PRAYING TO QUASH THE FINAL
ORDER DTD.15.11.2016 PASSED BY THE DEBT RECOVERY
APPELLATE TRIBUNAL AT CHENNAI IN RA(SA) NO.103/2010 AT
ANNEX-A AND THE FINAL ORDER 26.9.2007 PASSED BY THE
DEBTS RECOVERY TRIBUNAL, BANGALORE IN ASA.NO.346/2006
AT ANNEX-B. QUASH THE PROCEEDINGS INITIATED BY THE R-1
UNDER SECTION 13 OF THE SECURITISATION AND
RECONSTRUCTION OF FINANCIAL ASSETS AND ENFORCEMENT OF
SECURITY INTEREST ACT, 2002, AND AS CONSEQUENT RELIEF
SET ASIDE THE SALE CERTIFICATE DTD.31.7.2006 REGISTERED
AS DOCUMENT NO.25365/06-07 IN BOOK 1, STORED IN CD
NO.BLND 301 IN THE OFFICE OF THE SUB REGISTRAR,
BANGALORE NORTH TALUK & ETC.
THIS WRIT PETITION COMING ON FOR PRELIMINARY
HEARING IN 'B' GROUP, THIS DAY, ALOK ARADHE J., MADE THE
FOLLOWING:
ORDER
In this petition, the petitioner has assailed the validity of the order dated 15.11.2016 passed by the Debt Recovery Appellate Tribunal (hereinafter referred to as 'the tribunal' for short) as well as the order dated 26.09.2007 passed by the Debt Recovery Tribunal under the provisions of the 3 Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (hereinafter referred to as 'the Act' for short). In order to appreciate the grievance of the petitioner, few facts need mention, which are stated infra.
2. One Muniyappa was the owner of property bearing No. Khata No.143, Assessment No.57/2B and 58/2, Nagashettyhalli village, Kasaba Hobli, Bangalore North Taluk, Bangalore. The aforesaid Muniyappa gifted the aforesaid property by a gift deed to his daughter and Smt.Lakshmi Devi on 05.11.1999. Mr.K.Phanindranath (hereinafter referred to as 'the respondent No.2' for short) obtained financial assistance to the extent of Rs.11.65 Lakhs on 19.11.2001 for purchase of the property in question. The respondent No.2 by a registered sale deed dated 24.12.2001 purchased the property in question for a consideration of Rs.12,00,000/-. The respondent No.2 paid a consideration of Rs.35,000/- and remaining sale consideration was paid by the bank by way of release of loan. Thereafter, it appears 4 that the respondent No.2 sold the aforesaid property to the petitioner on 14.08.2003.
3. The respondent No.2 did not repay the loan to the Bank. Thereupon, the respondent-Bank initiated proceedings under Section 13 of the Act and a notice under Section 13(2) of the Act dated 31.08.2005 was issued to respondent No.5. In a proceeding under Section 14 of the Act, the Chief Metropolitan Magistrate by an order dated 28.12.2005 directed that the possession be delivered to respondent No.1 with the assistance of the police. It is the case of the respondent that the possession of the property has been taken on 01.04.2006. Thereafter, an auction notice was issued on 13.05.2006 and the auction was scheduled to be held on 14.06.2006. The respondent No.3 who was the highest bidder in the aforesaid auction purchased the property in question for an amount of Rs.39,50,000/-. Thereafter, a sale certificate was issued by a bank in favour of respondent No.3 on 25.07.2006, which was registered on 31.07.2006. The respondent No.3 filed a suit seeking the relief of injunction, which was dismissed on 01.04.2014. 5
4. The petitioner filed an appeal under Section 17 of the Act before the Debt Recovery Tribunal in which challenge was made to the action taken by the Bank under Section 13(4) of the Act as well as a declaration was sought that the sale deed dated 25.07.2006 is invalid. The aforesaid appeal was dismissed by the Debt Recovery Tribunal by an order dated 26.09.2007, inter alia, on the ground that the petitioner has no locus to challenge the sale and he should work out the remedy available to him under the law.
5. The aforesaid order was challenged in an appeal before the tribunal. The tribunal by an order dated 15.11.2016 inter alia held that respondent No.2 was a defaulter who did not pay the amount taken as a loan from the Bank and thereupon the Bank has sold the property in the proceedings under Section 13 of the Act. It was further held that respondent No.3 is a bona fide purchaser. In the aforesaid factual background, this appeal has been filed.
6. Learned counsel for the appellant submitted that under Section 59(a) of the Transfer of Property Act, 1881, 6 the appellant has a right to seek the redemption and without affording an opportunity to the petitioner to seek redemption, the secured asset could not have been sold. It is further submitted that the petitioner is covered under the definition of borrower as defined under Section 2(f) of the Act and therefore, the notice under Section 13(2) of the Act ought to have been issued to the petitioner. It is further submitted that since no notice was issued to the petitioner under Section 13(2) of the Act, the entire action of the bank leading to execution of the sale deed in favour of the respondent No.3 is bad in law. In support of aforesaid submissions, reliance has been placed on decision in 'MATHEW VERGHESE VS. M.AMRITHA KUMAR AND OTHERS', (2014) 5 SCC 610.
7. On the other hand, learned counsel for respondent No.3 submitted that the right to redeem the mortgage is extinguished once the sale takes place. It is further submitted that the respondent No.3 is a bonafide purchaser for a valuable consideration in an auction held by the Bank. Therefore, his interest should be protected. In support of 7 aforesaid submissions, reliance has been placed on decision in DWARIKA PRASAD VS STATE OF UTTAR PRADESH (2018) 5 SCC 491.
8. We have considered the submissions made by learned counsel for the parties and have perused the record. The pivotal issue, which arises for consideration in the instant case is with regard to validity of the action taken by the Bank under Section 13 of the Act. Admittedly, the respondent No.2 had availed financial assistance from the Bank and had created a mortgage in respect of the property in question in favour of the Bank on 19.11.2001. The petitioner has purchased the property on 14.08.2003 during the subsistence of the mortgage created in favour of the Bank. Section 2(f) of the Act which is relevant for our consideration reads as under:
Section 2 - (f) "borrower" means any person who has been granted financial assistance by any bank or financial institution or who has given any guarantee or created any mortgage or pledge as security for the financial assistance granted by any bank or financial institution and includes a person 8 who becomes borrower of asset reconstruction company consequent upon acquisition by it of any rights or interest of any bank or financial institution in relation to such financial assistance or who has raised funds through issue of debt securities.
9. From perusal of the Section 2(f) of the Act, it is evident that the petitioner is not covered under the definition of the borrower. It is pertinent to note that it is not the case of the petitioner that he is a borrower. Section 13(2) of the Act envisages a notice only to the borrower. The petitioner is not covered under the category of persons to whom notice is contemplated under Section 13(2) of the Act. Therefore, the contention of the petitioner that the notice ought to have issued to him before initiating the proceedings under Section 13 of the Act does not deserve acceptance.
10. The Supreme Court in DWARIKA PRASAD SUPRA has held that the right to redeem the mortgage interest till the sale deed is executed. In the instant case, the property was sold on 14.06.2006 and a sale certificate was issued in favour of respondent No.3 on 25.07.2006 which was 9 registered on 31.07.2006. Therefore, on 25.07.2006 right to redeem the property ceases to exist. In any case, the respondent No.3 is a bonafide purchaser for a valuable consideration in auction have to be protected.
For the aforementioned reasons, we do not find any infirmity with the orders passed by the tribunal as well as the Debt Recovery Tribunal. Needless to state that the petitioner is at liberty to take recourse to such remedy as may be available to him under the law with regard to redressal of his grievance against respondent No.2.
In the result, we do not find any merit in this petition, the same fails and is hereby dismissed.
Sd/-
JUDGE Sd/-
JUDGE SS