Karnataka High Court
Mr.Naved Hassan vs The Deputy Commissioner on 16 March, 2023
Author: M.Nagaprasanna
Bench: M.Nagaprasanna
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WP No. 301 of 2021
IN THE HIGH COURT OF KARNATAKA AT BENGALURU
DATED THIS THE 16TH DAY OF MARCH, 2023
BEFORE
THE HON'BLE MR JUSTICE M.NAGAPRASANNA
WRIT PETITION NO. 301 OF 2021 (GM-KSFC)
BETWEEN:
1. MR. NAVED HASSAN,
AGED ABOUT 55 YEARS,
S/O SYED HASSAN,
NO. 99, SUNNI BROOKS,
SARJAPURA ROAD,
BENGALURU - 560 035.
2. MRS. LUBNA NAVED HASSAN,
AGED ABOUT 37 YEARS,
W/O NAVED HASSAN,
NO. 99, SUNNI BROOKS,
SARJAPURA ROAD,
BENGALURU - 560 035.
Digitally signed ...PETITIONERS
by PADMAVATHI
BK (BY SRI NAGARAJ R. C., ADVOCATE)
Location: HIGH
COURT OF AND:
KARNATAKA
1. THE DEPUTY COMMISSIONER,
BANGALORE URBAN DISTRICT,
BANGALORE - 01.
2. THE SPECIAL TAHSILDHAR,
KARNATAKA STATE FINANCE CORPORATION,
CIRCLE - 2, P NO. 9/A,
SOWKAR CHANNAIAH ROAD,
IN FRONT OF SRI KRISHNADHAMA,
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WP No. 301 of 2021
SARASWATHIPURAM,
MYSORE - 560 009,
BENGALURU GRAMANTHARA CIRCLE.
3. THE KARNATAKA STATE
FINANCIAL CO-OPERATION,
HAVING ITS PRINCIPAL
OFFICE NO. 1/1, THIMMAIAH ROAD,
BENGALURU - 560 052,
REPRESENTED BY ITS
DEPUTY GENERAL MANAGER
AND BRANCH OFFICE AT CIRCLE - 2,
P NO. 9/A, SOWKAR CHANNAIAH ROAD,
IN FRONT OF SRI KRISHNADHAMA,
SARASWATHIPURAM,
MYSORE - 560 009.
4. MR. SULAIMAN JAMAL,
S/O ABDUL JAMAL,
NO. 137, DEFENCE COLONY,
INDIRANAGAR,
BENGALURU - 560 038.
...RESPONDENTS
(BY SMT. SHWETHA KRISHNAPPA, AGA FOR R1 AND R2,
SRI P.S.MALIPATIL, ADVOCATE FOR R3;
SRI VEERESH M., ADVOCATE FOR R4)
THIS W.P. IS FILED UNDER ARTICLES 226 AND 227 OF
THE CONSTITUTION OF INDIA PRAYING TO-QUASH IMPUGNED
ORDER DATED 20.10.2011 QUASH IMPUGNED ORDER DATED
28.09/6.10.2020 MARKED AS ANNEXURE-D AND ETC.,
THIS PETITION, COMING ON FOR FURTHER HEARING,
THIS DAY, THE COURT MADE THE FOLLOWING:
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WP No. 301 of 2021
ORDER
The petitioners are before this Court seeking the following prayer:
"WHEREFORE it is respectfully prayed that this Hon'ble Court be pleased to:
(a) Issue writ in the nature of certiorari or any other writ or direction to quash impugned order bearing No.MSC/REC(KSFC)Cr.53/11-12, Dt.20.10.2011.
(b) Issue writ in the nature of certiorari or any other writ or direction to quash impugned order bearing No.Ka.Ra.Ha.Sam/Mai/Vitha/67/2020-
21, 643/R-144/2020-21, dated 28.09/06.10.2020 marked as ANNEXURE - D.
(c) Grant such other order or relief as deemed fit under the facts and circumstance of the case."
2. Heard Sri Nagaraj R.C., learned counsel for the petitioners, Smt. Shwetha Krishnappa, learned Additional Government Advocate for respondent Nos.1 and 2, Sri P.S.Malipatil, learned counsel for respondent No.3 and Sri Veeresh M., learned counsel for respondent No.4.
3. Facts in brief, germane for consideration of the lis, are as follows:
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The petitioners are borrowers of finance from respondent Nos.2 and 3 - the Karnataka State Financial Corporation ('the Corporation' for short) on 21.03.1981. On 08.01.1991, on the ground that the petitioners had defaulted in repayment of the loan, the Corporation initiated proceedings under Section 29 of the State Financial Corporations Act, 1951 ('the Act' for short).
Taking the proceedings to its logical end, the Corporation sold all the machinery, building and the land mortgaged to the Corporation from which they recovered a sum of Rs.24/- lakhs as against the loan that was borrowed i.e., Rs.12.5/- lakhs and it is averred that the amount due as on the date of sale was Rs.18,15,875/-. Therefore, the amount that was recovered from the sale was far beyond what was due in that point in time.
4. After such proceedings, in the year 1998, the Corporation invoked Sections 31(1)(aa) and 32 of the Act, for recovery of a sum of Rs.46,15,730/-, on approaching the District Court. This petition comes to be dismissed by an order of the concerned Court, on 10.03.2010. Challenging the said order of dismissal, the Corporation approaches this Court in -5- WP No. 301 of 2021 M.F.A.No.3137/2010, only to be dismissed by a judgment of the Division Bench dated 28.09.2010. On 10.06.2011, a third proceeding is instituted by the Corporation under Section 32G of the Act, seeking recovery of Rs.3,30,74,788/- from the petitioners as arrears of land revenue, all for a loan that was taken on 21.03.1981, of Rs.12.5/- lakhs. The petitioners claim that they had no notice of the said proceedings instituted even, and have come to know only in the month of October, 2020 when on, 28.09.2020 / 06.10.2020, the second respondent - the Special Tahsildar orders forfeiting of the properties of the petitioners in furtherance of the proceedings instituted by the Corporation to recover the aforesaid amount of Rs.3,30,74,788/- as arrears of land revenue. It is these actions that drive the petitioners to this Court in the subject petition.
5. Sri Nagaraj R.C., learned counsel for the petitioners would contend with vehemence that the Corporation has recovered the entire loan amount way back in the year 1996-97 by sale of the properties of the petitioners - machinery, land and building and the amount so recovered was far excess at that point in time. Several proceedings that were sought to be -6- WP No. 301 of 2021 initiated by the Corporation have all been rejected by this Court. After dismissal of M.F.A.No.3137/2010, the third proceeding is instituted by the Corporation on the same cause of action seeking to recover the certain amount left over as arrears of land revenue and that too, for an amount of Rs.3,30,74,788/-. He would contend that it is a clear abuse of the process of the law and misuse of the provisions of the Act which empowers the Corporation, for initiating proceedings. He would seek quashment of the entire proceedings.
6. Sri P.S.Malipatil, learned counsel representing respondent No.3 - Corporation would refute the submissions of the learned counsel for the petitioners, to contend that under Section 32G of the Act, the Corporation can initiate proceedings at any time, when the borrowers are in default; amount is in arrears and have not paid the amount in its entirety. Therefore, the proceedings are instituted and would submit that those proceedings should be permitted to be taken into its logical conclusion as the petitioners are due of certain amount as is indicated in the impugned proceedings. -7- WP No. 301 of 2021
7. Learned Additional Government Advocate would toe the lines of the learned counsel for respondent No.3, contending that she is a formal party.
8. I have given my anxious consideration to the submissions made by the respective learned counsel and have perused the material on record.
9. The afore-narrated facts are not in dispute. The petitioners secure a loan of Rs.12.5/- lakhs from the Corporation on 21.03.1981. On 08.01.1991, ten years after the grant of loan, proceedings are instituted by the Corporation invoking Section 29 of the Act and in furtherance of the same, after about 5 years, the Corporation sell the machinery, building and land properties of the petitioners that was mortgaged in favour of the Corporation and recovered an amount of Rs.24/- lakhs as against the amount due then at Rs.18,15,875/-. The issue did not end there. A second proceeding is instituted by the Corporation invoking Sections 31(1)(aa) and 32 of the Act, for recovery of a sum of Rs.46,15,730/- before the District Court. This comes to be -8- WP No. 301 of 2021 dismissed by the District Court in Misc.Case No.76/1998, in terms of its order dated 10.03.2010. Challenging the said order, respondent No.3 - Corporation knocks at the doors of this Court in M.F.A.No.3137/2010. The Division Bench in terms of its judgment dated 28.09.2010, affirmed the order of rejection of the District Court, by the following order:
"6. Being aggrieved by the said order, the present appeal is filed.
7. Reiterating the grounds urged before the Court below, the learned counsel appearing for the appellant contends that the petition filed by the appellant was well in time, since the Hon'ble Supreme Court confirmed the sale of property of the loanee on 3rd June 1996 and later on a notice was issued by the appellant on 20-3-1998 invoking the liability of respondents 2 to 4. Therefore, he requested the court to set aside the order passed by the court below.
8. Per contra, learned counsel appearing for the respondents submits that in view of the judgment passed by this Court in MFA No.4754/2008 between the KARNATAKA STATE FINANCE CORPORATION v/s. SRI.M.SURESH AND OTHERS contended that the contentions urged by the appellant are untenable. According to them, the assets of the loanee was sold in a public auction on 25-1-1993 for a sum of Rs.24.00 lakhs. On the date of sale of assets of the loanee, it was well within the knowledge of the appellant that an amount of Rs.24.00 lakhs being the value received by selling the assets of the loanee would be insufficient to meet the claim of the appellant. Therefore, the cause of action has arisen for the appellant to proceed against the guarantors from 25-1-1993. They further contend that -9- WP No. 301 of 2021 the sale of assets of the loanee held on 25-1-1993 was not challenged by the guarantors and it was challenged only by the loanee, Therefore, mere challenging the sale by the loanee would not get the limitation extended. Therefore, they requested the court to dismiss the appeal.
9. Having heard the learned counsel for the parties, the only point to be considered by us in this appeal is as to whether the Trial Court is justified in dismissing the claim petition as barred by limitation?
10. It is not in dispute that respondents 2 to 4 stood as guarantors and their guarantee can be invoked. The remaining assets of the first respondent-Company is sold in a public auction in respect of the balance amount fell due. It is not in dispute that the property of the Company was sold on 25-1-1993 and the suit if filed on 31-10-1996 as per Article 137 of the Limitation Act, the limitation to file a petition would only 3 years from the date of cause of action arisen for the appellant. Therefore, what is to be considered is as to when the cause of action has arisen to file a petition under Section 31 by the appellant?
11. Admittedly, the property of the company was sold on 25-1-1993 and the amount realized from the sold assets was found insufficient to meet the actual due to the appellant-Corporation. In the circumstances, we are of opinion that the cause of action to proceed against the guarantors has arisen to the appellant on the date on which the Company's assets were sold. Merely because the loanee had challenged the sale, that would not be a ground to extend the limitation.
12. In the circumstances, we do not find any merit in the appeal. Accordingly, We dismiss the appeal."
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WP No. 301 of 2021The Division Bench was affirming the order passed by the District Court in Misc.Case No.76/1998. The Division Bench considered the entire spectrum of the issue between the petitioners and the Corporation and also had observed that the Corporation had recovered the entire amount wayback in the year 1997, when the properties were sold. After suffering the order at the hands of the District Court as affirmed by this Court in the aforesaid M.F.A.No.3137/2010, the Corporation does not stop. It initiates a third proceeding invoking under Section 32G of the Act.
10. Section 32G of the Act, reads as follows:
"32G. Recovery of amounts due to the Financial Corporation as an arrear of land revenue.--Where any amount is due to the Financial Corporation in respect of any accommodation granted by it to any industrial concern, the Financial Corporation or any person authorised by it in writing in this behalf, may, without prejudice to any other mode of recovery, make an application to the State Government for the recovery of the amount due to it, and if the State Government or such authority, as that Government may specify in this behalf, is satisfied, after following such procedure as may be prescribed, that any amount is so due, it may issue a certificate for that amount to the Collector, and the Collector shall proceed to recover that amount in the same manner as an arrear of land revenue."
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WP No. 301 of 2021Section 32G of the Act empowers a Financial Corporation to recover any arrears payable to the Corporation as arrears of land revenue. The provision itself notices that it is without prejudice to any other mode of recovery. This provision is misused by the Corporation in the case at hand as the Corporation has recovered the entire loan amount wayback in the year 1997, at that point in time what was due to them was an amount of Rs.18,15,875/- and the sale proceeds amounted to Rs.24/- lakhs, which was far beyond the outstanding amount. There was no outstanding amount as such that has to be paid to the Corporation. All this was gone into by the concerned Court in Misc.Case No.76/1998, when the Corporation invoked Sections 31(1)(aa) and 32 of the Act to recover the amount. The appeal in M.F.A.No.3137/2010, preferred by the Corporation was also dismissed by the Division Bench by confirming the findings of the District Court.
11. After the aforesaid proceeding, it was not open for the Corporation to have invoked Section 32G of the Act to recover the amount as arrears of land revenue on an imaginary
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WP No. 301 of 2021figure of Rs.3,30,74,788/- notwithstanding its entire recovery of the amount, that too, which was taken 2.5 decades ago. The actions and the proceedings instituted by the Corporation in gross abuse and misuse of Section 32G of the Act, and therefore, I deem it appropriate to obliterate the entire proceedings initiated by the Corporation as unsustainable in law.
12. For the aforesaid reasons, the following:
ORDER a. The writ petition is allowed.
b. The impugned orders dated 20.10.2011 and 28.09.2020/06.10.2020 stand quashed.
Sd/-
JUDGE NVJ List No.: 1 Sl No.: 87