Karnataka High Court
Canara Bank vs M/S N R Kulkarni Nrk on 3 December, 2024
-1-
NC: 2024:KHC-D:17765
CRL.P No. 103369 of 2024
IN THE HIGH COURT OF KARNATAKA, DHARWAD BENCH
DATED THIS THE 3RD DAY OF DECEMBER, 2024
BEFORE
THE HON'BLE MS. JUSTICE J.M.KHAZI
CRIMINAL PETITION NO.103369 OF 2024
(482(Cr.PC)/528(BNSS))
BETWEEN:
CANARA BANK
REPRESENTED BY ITS AUTHORISED OFFICER
SHRI YADAV PRAN DAS, STRESSED ASSET RECOVERY
MANAGEMENT BRANCH, CENTRUM BUILDING, 2ND FLOOR,
GOKUL ROAD, HUBBALLI-580008.
...PETITIONER
(BY SRI MALLIKARJUNASWAMY B.HIREMATH, ADV.)
AND:
1. M/S. N.R. KULKARNI NRK
CONSTRUCTION COMPANY
REPRESENTED BY ITS MANAGING PARTNERS
SHRI N.R. KULKARNI, SHRI LAKSHMI NIVASA,
8TH CROSS, VIDYAGIRI, BAGALKOTE-587102.
2. NARAYANA RAMAKRISHNA RAO KULKARNI
S/O. LATE SHRI RAMAKRISHNA RAO,
SHRI LAKSHMI NIVASA, 8TH CROSS, VIDYAGIRI,
Digitally signed by
MOHANKUMAR B BAGALKOTE-587102, PRESENT ADDRESS
SHELAR SRI NARAYANA R.KULAKARNI
Location: HIGH SY NO.105/B, PLOT NO.28,
COURT OF
KARNATAKA GANIGER LAYOUT, BAGALKOT-597103.
...RESPONDENTS
(BY SRI M.A. RAJENDRA, ADVOCATE FOR R1 AN R2)
THIS CRIMINAL PETITION IS FILED UNDER SECTION 528 OF
BNSS SEEKING TO QUASH THE INITIATION OF PROCEEDINGS IN
CRL.MISC. NO.48/2024 ON THE FILE OF PRINCIPAL SENIOR CIVIL
JUDGE AND CJM COURT, BAGALKOT FOR OFFENCES PUNISHABLE
UNDER SECTION 340 OF CRPC R/W SECTION 195 OF IPC AND
ISSUANCE OF NOTICE DATED 30.08.2024 AND ETC.,
-2-
NC: 2024:KHC-D:17765
CRL.P No. 103369 of 2024
THIS CRIMINAL PETITION, COMING ON FOR DICTATING
ORDERS, THIS DAY, THE COURT MADE THE FOLLOWING:
CORAM: THE HON'BLE MS. JUSTICE J.M.KHAZI
ORAL ORDER
(PER: THE HON'BLE MS. JUSTICE J.M.KHAZI) Petitioner who is arraigned as accused has filed this petition under Section 528 of Bharatiya Nagarik Suraksha Sanhita, 2023 (BNSS) with a prayer to quash the proceedings initiated against him in Crl.Misc.48/2024 on the file of Principal Senior Civil Judge and CJM, Bagalkot under Section 340 of Cr.P.C. alleging offence punishable under Section 195 of IPC.
2. In support of the petition, the petitioner has contended that registration of the case against him and issuance of notice is bad in law, without even going through the relevant records which manifest that no such offence is committed. Petitioner is working as authorized officer in Stressed Asset Recovery Management Branch of Canara Bank, Centrum Building, Gokul Road, Hubballi. The Canara bank has taken steps for recovery of dues against -3- NC: 2024:KHC-D:17765 CRL.P No. 103369 of 2024 the respondent under the provisions of the Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (for short 'Securitization Act'). The said action has been challenged by the respondents in various writ petitions, wherein the action taken by the bank is upheld by this court. The entire exercise by the petitioner is within the parameters of the Securitization Act and any prosecution is hit by Section 32 of the Securitization Act. Therefore, continuation of the proceedings against the petitioner would amount to abuse of the process of law.
3. Registration of the case against the petitioner is highly illegal. The filing of the compliant alleging violation of Rule 8 is with a malafide intention, that too, after the respondents having knocked the doors of this court and giving an undertaking to abide by the order of the jurisdictional Magistrate to handover the possession. The respondents have tried to give civil proceedings, a colour of criminal act to pressurize the bank to settle the matter. -4-
NC: 2024:KHC-D:17765 CRL.P No. 103369 of 2024
4. After coming into force of BNSS, 2023 and BNS, 2023 registering of case under the provisions of Cr.P.C. is not maintainable. Securitization Act is complete code in itself which provides for procedure to be followed by the secured creditor and also the remedy to the aggrieved parties including the borrower. If there is any discrepancy in the action taken by the bank as alleged, the DRT is vested with power to consider the same. Instead of approaching the same, as an arm twisting tactics, respondents have filed the complaint under Section 340 of Cr.P.C. It is clearly an abuse of the process of the court as held by the Supreme Court in the case of K.Virupaksha and Another vs State of Karnataka and Another (K.Virupaksha)1 and Coordinate Bench of the Delhi High Court in the case of Cholamandalam Investment and Finance Company Limited vs Mahesh Taneja and Others (Cholamandalam)2 hence, the petition. 1 (2020) 4 SCC 440 2 2024 SCC Online Del 4546 -5- NC: 2024:KHC-D:17765 CRL.P No. 103369 of 2024
5. On 12.11.2024, even before the notice was issued, respondents have appeared through counsel and sought for shot accommodation. On that day, stay was granted, staying further proceedings in Crl.Misc.48/2024 on the file of the Principal Senior Civil Judge and CJM, Bagalkot, till the next date.
6. Respondent has filed I.A.No.2/2024 with a prayer to vacate the interim order, contending that respondents have borrowed loan and the petitioner has classified the same as NPA on 30.08.2021. The demand notice dated 17.02.2022 has two NPA dates, i.e., 30.08.2021 and 13.10.2021 which are contrary to their own notices and dates. The petitioner has also failed to comply with Rule 8(2) of Securitization Act. Suppressing these facts, petitioner has sworn to an affidavit in Crl.Misc.6/2022. Without withdrawing earlier notices, the issue of fresh notice is contrary to law, which is admitted by the petitioner in the statement of objections filed to S.A.No.408/2024 before DRT-I, Bengaluru. -6-
NC: 2024:KHC-D:17765 CRL.P No. 103369 of 2024 6.1 The paper publication dated 05.05.2022 as per the possession notice dated 28.04.2024 is not within a period of 7 days as required under Rule 8(2) of Securitization Act and to this effect, petitioner has sworn a false affidavit and secured an order to sell the secured assets of respondents. Therefore, respondents have filed complaint under Section 340 of Cr.P.C. in Crl.Misc.48/2024 to take action against the petitioner. Section 32 of Securitization Act saves only those actions which are taken in good faith. Only to harass the respondents, repeatedly their assets are brought on sale. The petitioner is at liberty to put forth his defence before the trial court and sought for dismissal of the petition.
7. Heard arguments and perused the record.
8. The undisputed facts are that, petitioner being a nationalized bank has sanctioned financial assistance to the respondents by way of credit limits since 2005. Initially, loans were borrowed in the individual name of respondent No.2 in a sum of Rs.12.75 crores and in the -7- NC: 2024:KHC-D:17765 CRL.P No. 103369 of 2024 name of one proprietorship firm M/s Amareshwar Stone Crusher with a limit of Rs.5 crores. Later, in view of financial stress faced by the firm, respondents requested for Micro Small and Medium Enterprises MSME ORT (one time restructuring). The petitioner-bank was pleased to permit restructuring by merging the above limits in the name of respondent No.1-partnership firm vide order dated 16.01.2020. The excess overdrawing in the OD limit was converted into WCTL (working capital term loan) and FITL (funded interest term loan) and allowed respondents to come out of the stress.
9. The petitioner-bank has also permitted enhancement cum reassessment of WCL limit from Rs.725 lakh to 875 lakh vide order dated 23.06.2021 and respondents have availed the same. The petitioner-bank also provided sufficient liquidity of funds to respondents to come out of the stress. Despite the same, respondents could not repay the loans and the account appearing under stressed asset. The petitioner-bank has also sent reminder -8- NC: 2024:KHC-D:17765 CRL.P No. 103369 of 2024 letters to the respondents dated 09.08.2021 and 23.08.2021 and also made personal visits on 27.08.2021, 12.08.2021 and 30.08.2021 with a stress to repay the overdue arrears, without any results. Consequently, due to non-payment of loan, the accounts turned to non- performing asset (NPA) on 30.08.2021. Therefore, proceedings were initiated under Securitization Act.
10. As rightly argued by the learned counsel for petitioner, every steps taken by the petitioner under the provisions of the Secularization Act was challenged by the respondents in various writ petitions. W.P.No.104166/2021 filed by respondents was allowed with a direction to reconsider the representation of the respondents. In W.P.No.105114/2021, the respondent challenged notice under Section 13(4). However, it came to be dismissed. Petitioner issued fresh notice dated 28.04.2022 under Section 13(4). On 30.08.2022, petitioner filed Cril.Misc.6/2022 under Section 14 of Securitization Act before the Principal Senior Civil Judge -9- NC: 2024:KHC-D:17765 CRL.P No. 103369 of 2024 and CJM, Bagalkot. It was allowed on 07.01.2023 with a direction to the CMO/officer to take possession of 12 properties. On 01.02.2023 notice was issued by the Court Commissioner to vacate the properties mentioned in Section 14 order. Respondents filed W.P.No.103387/2023 on 29.05.2023. Though initially interim order was granted, it came to be dismissed on 23.11.2023. Against the said order, respondents field W.A.No.100670/2023 which came to be dismissed on 13.12.2023. The SLP 3211/2024 filed against the said order also came to be dismissed on 12.02.2024.
11. On 01.04.2024 respondents filed W.P.No.102088/2024 challenging the order dated 09.02.2024 in Crl.Misc.6/2022. It came to be disposed off on an undertaking by respondent No.1 that he would vacate the house property on or before 30.04.2024. W.P.No.103848/2024 filed by respondents challenging the order dated 07.01.2023 in Crl.Misc.6/2022 was dismissed without reserving any liberty to the respondents.
- 10 -
NC: 2024:KHC-D:17765 CRL.P No. 103369 of 2024
12. On 08.07.2024 respondents filed Crl.Misc.48/2024 under Section 340 of Cr.P.C. alleging offence under Section 195 of IPC. Thereafter, respondents filed S.A.No.408/2024 before DRT, Bengaluru challenging the order dated 07.01.2023 in Crl.Misc.6/2022 after inordinate delay of 560 days.
13. It is pertinent to note, that after unsuccessfully challenging various orders, after suffering all the aforesaid orders before this court as well as Hon'ble Supreme Court, the respondents have chosen to prosecute the petitioner in Crl.Misc.48/2024 filed under Section 340 of Cr.P.C. alleging offence punishable under Section 195 of IPC, contending that the petitioner has sworn to a false affidavit that the possession notice published on 05.05.2024 as per the notice under Section 13(4) dated 28.04.2022 is incompliance to Rule 8(2) of Securitization Act.
14. It is a question of interpretation whether Rule 8(2) of Securitization Act is complied with or not. If at all
- 11 -
NC: 2024:KHC-D:17765 CRL.P No. 103369 of 2024 the Principal Senior Civil Judge and CJM, Bagalkot has erred in accepting that there is proper compliance of Rule 8(2), the respondents are at liberty to challenge the same before the proper forum. In fact, they have done so in S.A.No.408/2024. Since there is inordinate delay of 560 days in filing the same, it appears, to pressurize the petitioner to yield to their dictates, the complaint in question is filed.
15. In (K.Virupaksha), the Hon'ble Supreme Court quashed the criminal proceedings initiated on the basis of the complaint under Section 200 of Cr.P.C. by observing that Securitization Act is a complete code in itself and any person aggrieved by the orders passed are at liberty to challenge the same before the proper forum and in the light of protection given under Section 32 of Securitization Act, the borrower cannot resort to criminal action against the bank and its officials. In (Cholamandalam) also, the Coordinate Bench of Delhi High Court held that the function performed by the Magistrate under Section 14 of
- 12 -
NC: 2024:KHC-D:17765 CRL.P No. 103369 of 2024 the Securitisation Act is only ministerial and not adjudicatory and therefore, it cannot entertain an application under Section 340 of Cr.P.C.
16. In the light of the above facts and circumstances and the discussion made, this court is of the considered opinion that the respondents have initiated proceedings under Section 340 of Cr.P.C. against the petitioner with a malafide intention and the trial court has erred in entertaining the same and issued notice to the petitioner. Continuation of the same would amount to abuse of the process of the court and liable to be quashed and accordingly, the following;
ORDER
i) Petition filed by the petitioner/accused under Section 528 of BNSS is allowed.
ii) The proceedings initiated against the petitioner/accused in Crl.Misc.48/2024 on the file of Principal Senior Civil Judge and CJM, Bagalkot under Section 340 of Cr.P.C.
- 13 -
NC: 2024:KHC-D:17765 CRL.P No. 103369 of 2024 alleging offence punishable under Section 195 of IPC is hereby quashed.
Sd/-
(J.M.KHAZI) JUDGE MBS, CT: UMD List No.: 1 Sl No.: 36