Karnataka High Court
Sri. Paramanand Singh vs State Of Karnataka on 30 July, 2025
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NC: 2025:KHC:30202
CRL.P No. 8382 of 2018
HC-KAR
IN THE HIGH COURT OF KARNATAKA AT BENGALURU
DATED THIS THE 30TH DAY OF JULY, 2025
BEFORE
THE HON'BLE MS. JUSTICE J.M.KHAZI
CRIMINAL PETITION NO. 8382 OF 2018
(482(Cr.PC) / 528(BNSS))
BETWEEN:
1. SRI. PARAMANAND SINGH
S/O RAMAKRISHNA SINGH
AGED ABOUT 66 YEARS
2. SMT GAYATHRI P. SINGH
W/O PARAMANAND SINGH
AGED ABOUT 50 YEARS
BOTH ARE R/AT NO. 136, BAZZAR STREET,
ULSOOR, BENGALURU - 560008.
ALSO AT NO.12, 1ST MAIN, 3RD CROSS
ASHWINI LAYOUT EJIPURA
Digitally signed by BENGALURU-560047
REKHA R
Location: High
...PETITIONERS
Court of Karnataka
(BY SRI. JOSE SEBASTIAN, ADVOCATE)
AND:
1. STATE OF KARNATAKA
BY ULSOOR POLICE STATION
ULSOOR, BENGALURU-560038
REPRESENTED BY SPECIAL PUBLIC PROSECUTION
HIGH COURT OF KARNATAKA,
BANGALORE-01
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NC: 2025:KHC:30202
CRL.P No. 8382 of 2018
HC-KAR
2. INDIABULLS HOUSING FINANCIAL LTD.,
NO.81, TEMPLE ROAD, MALLESHWARAM,
BENGALURU - 560003
REPRESENTED BY MR.M.B.CHENAJAPPA,
AUTHORIZED OFFICER.
...RESPONDENTS
(BY SRI.VINAY MAHADEVAIAH, HCGP FOR R1;
SRI.CHINTAN CHINNAPPA, ADVOCATE FOR R2)
THIS CRL.P IS FILED U/S.482 CR.P.C BY THE ADVOCATE
FOR THE PETITIONER PRAYING TO QUASH OR SET ASIDE THE
ENTIRE PROCEEDING IN C.C.NO.50746/2013 OF THE FILE OF X
ADDITIONAL CHIEF METROPOLITAN MAGISTRATE, AT
MAYOHALL, BENGALURU INCLUDING THE COMPLAINT FIR AND
CHARGE SHEET.
THIS PETITION, COMING ON FOR DICTATING ORDERS,
THIS DAY, ORDER WAS MADE THEREIN AS UNDER:
CORAM: HON'BLE MS. JUSTICE J.M.KHAZI
ORAL ORDER
Petitioners who are arraigned as accused Nos.1 and 2 have filed these petitions under Section 482 Cr.P.C, with a prayer to quash criminal proceedings initiated against them in C.C.No.50746/2013 on the file of X ACMM, Mayohall, Bengaluru, for the offence punishable under Section 420 r/w Section 34 of IPC.
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2. In support of the petition, petitioners have contended that the uncontraverted allegations made in the complaint coupled with the documents relied on do not disclose or constitute the commission of offences alleged. Complainant i.e., India Bulls Housing Financial Limited ('IBHFL' for short) is a total stranger to the loan transaction which took place during March 2008. It is between petitioners and India Bull Financial Services Limited ('IBFSL' for short). Respondent No.2 IBHFL is a securitization company, who being alien to the loan transaction, claiming right subsequent to the materialization of loan transaction has filed complaint, wherein there is no interaction between it and petitioners, which will not make out a case for trial.
3. The allegations made in the complaint are absurd and inherently improbable to commit the offence. The allegations are invented by respondent No.2 IBHFL. There was no proximity or interaction or any friction or dealing so as to invent an offence of cheating against the -4- NC: 2025:KHC:30202 CRL.P No. 8382 of 2018 HC-KAR petitioners. The entire documents relied on and referred to in the complaint establishes that the loan transaction was between the petitioners and IBHFL. In the absence of respondent No.2 IBHFL being party to the transaction, complaint is not maintainable.
3.1 The complaint averments coupled with documents do not make out a case to go on with the trial. Respondent No.2 IBHFL has not established any offence against the petitioners. It is respondent No.2 IBHFL which has played fraud and stratagem in stealthily claiming to have taken over loan transaction. Posing as a secured creditor, it has initiated proceedings under SARFAESI Act and taken physical possession of the property. It has resisted the petitioners by filing writ petition, application before DRT and comprehensive suit. Due to similarity of the names, charge sheet is filed and without examining the same, the trial Court has ordered for framing of charge. Though it is claimed that loan of Rs.1,37,00,000/- was granted, only Rs.33,16,854/- was released and remaining -5- NC: 2025:KHC:30202 CRL.P No. 8382 of 2018 HC-KAR Rs.1,00,00,000/- was appropriated by IBFSL in collusion with City Financial. Thereafter, with the assistance of IBHFL, it has invoked provisions of SARFESI Act. The alleged sale agreement purported to have obtained by Dr.Thambaiah Sundaram is only a hand loan transaction which is also time barred. No triable case is made out against the petitioners. Continuation of the proceedings would amount to abuse of the process of the Court and hence, the petition.
4. In support of his arguments learned counsel representing petitioners has relied upon the following decisions:
(i) State of Haryana Vs. Bhajan Lal (Bhajan Lal)1
(ii) Hamza Haji Vs. State of Kerala (Hamza Haji)2
(iii) Poorti Rent a Car and Logistics Pvt. Ltd. Vs. Kotal Mahindra Bank Ltd. & Ors. (Poorti Rent)3 1 AIR 1992 SC 604 2 AIR 2006 SC 3028 3 2022 SCC Online Bom 4950 -6- NC: 2025:KHC:30202 CRL.P No. 8382 of 2018 HC-KAR
5. On the other hand, learned counsel representing respondent No.2 IBHFL has filed statement of objections stating that the petition is not maintainable either in law or on facts and liable to be dismissed in limini. Petitioners are claiming for quashing the criminal proceedings initiated against them on the ground that Respondent No.2 IBHFL is a securitization company and alien to the loan transaction and claiming subsequent to materialization of the transaction has no locus standi to file the complaint.
5.1 IBFSL was incorporated on 10.01.2000 under Companies Act, 1956. On 18.04.2005, it was granted certificate under Section 45-I(a) of Reserve Bank of India Act, 1934 and thus, act as a financial institution under the said Act.
6. Respondent No.2 IBHFL was incorporated on 10.05.2005. IBFSL and Respondent No.2 IBHFL are sister concerns. Respondent No.2 IBHFL was granted registration certificate on 28.12.2005 to commence the business of -7- NC: 2025:KHC:30202 CRL.P No. 8382 of 2018 HC-KAR housing finance institution. In the Central Government Notification dated 19.09.2007, issued under Section 2(1)(m) of SARFESI Act, it is specified as Financial Institution for the purposes of the SARFESI Act. The original lender i.e., IBFSL by way of amalgamation, amalgamated with Respondent No.2 IBHFL (now known of Samman Capital Ltd.).
7. During 2008, petitioners approached IBFSL for sanction of loan and apprised that they are having existing loan from City Financial and in order to foreclose the said loan, they are in need of financial assistance/loan. They assured that after closure of City Financial loans, they shall create equitable mortgage on the property with IBFSL. After considering their request, loan of Rs.1,37,00,000/- was sanctioned on 27.03.2008. Pursuant to it, petitioners also executed equitable mortgage in respect of item No.1 northern portion of property bearing Corporation No.24/11 (old No.2 and new No.24) and item No.2 northern portion -8- NC: 2025:KHC:30202 CRL.P No. 8382 of 2018 HC-KAR of ground floor (back portion) of constructed house bearing present Corporation No.24/11 (old No.2 and new No.24) both situated at Haudin Road, Ulsoor Road Cross, Bengaluru in favour of IBFSL. At the time of availing loan, petitioners assured that the property is free from any encumbrance and undertook not to sell or transfer the property without the written consent of IBFSL. Based on the said undertaking, loan was disbursed. At the request of petitioners, part of the loan amount was transferred in favour of City Financial to foreclose the loan on 25.03.2008. After foreclosure of the loan with City Financial, petitioners produced original property documents to IBFSL.
8. When things stood thus, on 04.02.2009, IBFSL entered into an assignment agreement with Respondent No.2 IBHFL. Under the said agreement, IBFSL has unconditionally and irrevocably sold, assigned, transferred and released all receivables arising from the loan -9- NC: 2025:KHC:30202 CRL.P No. 8382 of 2018 HC-KAR agreement with the borrowers to Respondent No.2 IBHFL. It has full right to receive and recover these receivables from the borrowers and may also initiate legal proceedings. As per the various decisions of the Hon'ble Supreme Court, assignee qualifiers as a secured creditor under Section 2(zd) of SARFAESI Act for the purpose of enforcing pre-existing security interest. Accordingly, Respondent No.2 IBHFL is empowered to step into the shoes of IBFSL and recover the amount under SARFAESI Act.
9. Petitioners were not regularly paying EMIs and their account was classified as MPA. Notice under Section 13(2) of SARFAESI Act was issued on 06.03.2009. When Respondent No.2 IBHFL went to take physical possession of mortgage property, it came to know that after receiving notices from the IBFSL, petitioners in collusion with Dr.Thambaiah Sundaram, with an intention of cheating the original lender i.e., IBFSL have concocted sale agreement
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NC: 2025:KHC:30202 CRL.P No. 8382 of 2018 HC-KAR in old date and filed a suit in O.S.No.640/2009 for specific performance on 07.10.2009. Petitioners have set up Dr.Thambaiah Sundaram to file a false suit to escape from the liability of repaying the loan.
10. Though in the plaint, IBFSL was arraigned as defendant No.6, later, just before issuing notice, it was deleted as not necessary party by filing a memo and secured ex-parte injunction. Thereby a fraud was played on the Court by the petitioners in collusion with Dr.Thambaiah Sundaram, as they did not want IBFSL to know about the suit and injunction. Despite service of notice, petitioners did not contest the suit and at the time of cross-examination, their counsel retired from the case on the ground that he has no instructions and suit came to be decreed. After coming to know about the same, IBFSL filed RFA.No.524/2011 along with Misc.Civil.No.6315/2011 and secured interim order dated 05.04.2011. RFA.No.524/2011 is pending.
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11. Respondent No.2 IBHFL being a secured creditor holds a prior first charge over the mortgage property and therefore, petitioners are not supposed to enter into any agreement or create any third party interest over the mortgage property. In order to deceive and cheat Respondent No.2 IBHFL, a sale agreement is concocted by back dating it. The petitioners have neither repaid the loan or allowed Respondent No.2 IBHFL to recover the same by selling mortgaged property. The intention of the petitioners is to deceive Respondent No.2 IBHFL. The total amount due is Rs.7,91,10,526/- In the light of these developments, Respondent No.2 IBHFL has filed the complaint. There is prima facie material to proceed against them. This petition is misconceived and it is not a case for quashing the criminal proceedings and pray to dismiss the same.
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12. In support of his arguments learned counsel representing petitioners has relied upon the following decisions:
(i) Indiabulls Housing Finance Ltd Vs. Deccan Chronicals Holdings Ltd and Ors. (Indiabulls Housing Finance)4
(ii) ARF SV 1 Sarl Vs. Suresh Tulsidas Bhatia and Ors. (ARF SV)5
(iii) ICICI Bank Ltd. Vs. Official Liquidator of APS Star Industries Ltd (ICICI Bank)6
13. Heard arguments and perused the record.
14. It is not in dispute that petitioners being the owners of the mortgage property secured loan of Rs.1,37,00,000/- from IBFSL. It is also not in dispute Prior to availing loan from IBFSL, petitioner had secured loan from city financial. Out of the loan granted by IBFSL, the said loan was repaid. It is also an undisputed fact that Respondent No.2 IBHFL is notified as financial institution 4 (2018) 14 SCC 783 5 2024 SCC Online Bom 2680 6 (2010) 10 SCC 1
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NC: 2025:KHC:30202 CRL.P No. 8382 of 2018 HC-KAR under Section 2(1) (m) SARFAESI Act. The document produced by Respondent No.2 IBHFL established the fact the IBFSL has assigned all the receivable arising from loan agreement with the petitioners in favour of Respondent No.2 IBHFL and therefore, it is at liberty to take action against the petitioners under SARFAESI Act.
15. Accordingly, respondent No.2 has initiated recovery proceeding under SARFAESI Act and secured attachment of the mortgage property.
16. The argument submitted by learned counsel for petitioners is that respondent No.2 IBHFL is a total stranger to the loan transaction which took place during March 2008. It is between petitioners and IBFSL. Since respondent No.2 IBHFL is an alien to the transaction, claiming right subsequent to the materialization of loan transaction, is not having locus standi to file the complaint and prosecute the petitioners. Undisputedly IBFSL has
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NC: 2025:KHC:30202 CRL.P No. 8382 of 2018 HC-KAR unconditionally and irrevocably sold, assigned, transferred and released all the receivables arising from the loan transaction agreement with the petitioners in favour of respondent No.2 IBHFL. Consequently, it is a secured creditor as defined under Section 2(zd) of the SARFAESI Act for the purpose of enforcing pre-existing security interest, even though the original lender i.e., IBFSL is not covered by SARFAESI Act.
17. In several judgments, the Hon'ble Supreme Court has clarified this aspect. In Indiabulls Housing Finance Limited Vs. Deccan Chronicle Holdings Ltd and Ors (Indiabulls)7, the Hon'ble Supreme Court held that even when the original financer not covered by SARFAESI Act, transferring loans, securities, etc, but transferee covered by the SARFAESI Act, is applicable qua all debts owing and live when SARFAESI Act became applicable and not only to debts created after coming into force of SARFAESI Act. On facts, the Hon'ble Supreme Court further held that upon 7 2018 14 SCC 783
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NC: 2025:KHC:30202 CRL.P No. 8382 of 2018 HC-KAR High Court sanctioning said arrangement of amalgamation under Section 391 to 394 of Companies Act 1956, successor company, Held - become financial institution under Sections 2(1)(d) and (m). In the respect of respondent borrowers of predecessor, company and actions of successor company against said respondent borrowers under Section 13 of SARFAESI Act is valid. At para 14, the Hon'ble Supreme Court accepted the arguments of the learned Senior counsel representing IBHFL that this issue is already addressed in M.D.Frozen Foods Exports Private Ltd Vs Hero Fincorp Ltd (M.D.Frozen Foods)8 that even successor in interest like IBHFL would be authorised to invoke provisions of SARFAESI Act, even if the original lender was not a financial institution covered by the SARFAESI Act.
18. In ICICI Bank Ltd Vs Official Liquidator of APS Star Industries Ltd (ICICI Bank)9, at para No.46, the Hon'ble Supreme Court held as under:
8
(2017) 16 SCC 741 9 (2010) 10 SCC 1
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NC: 2025:KHC:30202 CRL.P No. 8382 of 2018 HC-KAR "46. An outstanding in the account of a borrower(s) (customer) is a debt due and payable by the borrower(s) to the bank. Secondly, the bank is the owner of such debt. Such debt is an asset in the hands of the bank as a secured creditor or mortgagee or hypothecatee. The bank can always transfer its asset. Such transfer in no manner affects any right or interest of the borrower(s) (customer). Further, there is no prohibition in the BR Act, 1949 in the bank transferring its assets inter se. Even in the matter of assigning debts, it cannot be said that the banks are trading in debts, as held by the High Court(s). The assignor Bank has never purchased the debt(s). It has advanced loans against security as part of its banking business. The account of a client in the books of the bank becomes non-performing asset when the client fails to repay. In assigning the debts with underlying security, the bank is only transferring its asset and is not acquiring any rights of its client(s). The bank transfers its asset for a particular agreed price and is no longer entitled to recover anything from the borrower(s). The moment ICICI Bank Ltd. transfers the debt with underlying security, the borrower(s) ceases to be the borrower(s) of the ICICI Bank Ltd. and becomes the borrower(s) of Kotak Mahindra Bank Ltd. (assignee)."
19. Thus from these decisions, it is clear that respondent No.2 IBHFL, who is the assignee of the debt from IBFSL is at liberty to proceed against the petitioners and it is not open to them to claim that since IBFSL was
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NC: 2025:KHC:30202 CRL.P No. 8382 of 2018 HC-KAR not covered under the definition of financial institution under the SARFAESI Act, it cannot proceed against them.
20. It is pertinent to note that when petitioners applied for loan on 06.03.2008, entered into loan agreement and executed various documents, they have not claimed that there was a sale agreement dated 05.07.2006 in favour of Dr.Thambaiah Sundaram. They have given declaration that the property is free from any encumbrance. In fact, according to the IBFSL, as per the declaration given by the petitioners, except the loan which was due from City financial the schedule properties were not encumbered. They have also given an undertaking that they shall not alienate, sell, transfer, mortgage, lease, surrender, or in any other manner, whatsoever transfer and/ or alienate, or create any third-party interest in the property or any part there of. It is not in dispute that petitioners have not repaid the loan and as such it has become NPA.
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21. Only when respondent No.2 IBHFL initiated proceedings under SARFAESI Act and made enquiry on 22.02.2011 about the registration and other miscellaneous charges, they came to know about the decree passed by the Civil Court in favour of accused No.3. On collecting certified copy of the judgment and decree passed by the Civil Court in O.S.No.6402/2009, respondent No.2 IBHFL came to know about the collusive suit and decree between the petitioners and accused No.3. As rightly claimed by respondent No.2 IBHFL, though the properties were worth Crores of rupees, they have entered into an alleged agreement for a sum of ₹37 lakhs, which itself goes to show that petitioner and accused No.3 are colluding with each other to defraud respondent No.2 IBHFL.
22. If at all there was an agreement between petitioners and accused No.3, when petitioners availed loan from IBFSL, they could have disclosed the same in their loan application. The very fact that the said fact is
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NC: 2025:KHC:30202 CRL.P No. 8382 of 2018 HC-KAR not brought to the notice of IBFSL clearly indicates that it is a concocted document to throttle the respondent No.2 IBHFL from realising the loan amount due by selling the properties in question. Even if for argument sake, it is accepted that there was a sale agreement dated 05.02.2006 between petitioners and accused No.3, then the petitioners are guilty of giving a false declaration that the properties were free from any encumbrances.
23. The manner in which petitioners and accused No.3 have acted and got the property disposed off for a paltry sum of ₹37 lakhs, when it was worth more than ₹1 crore clearly indicate that they are colluding and secured a collusive decree. In the light of above facts and circumstances, the respondent No.2 IBHFL is justified in filing complaint and initiating criminal proceedings against the petitioners and accused No.3. After conducting detailed investigation, the concerned police filed charge sheet against them. It makes out a strong prima facie case to proceed against the petitioners as well as accused No.3.
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NC: 2025:KHC:30202 CRL.P No. 8382 of 2018 HC-KAR Certainly the continuation of the proceedings would not amount to abuse of process of the Court calling for reference by this Court.
24. In the result, petition fails and accordingly the following:
ORDER
(i) Petition filed by the petitioners/accused Nos.1 and 2 under Section 482 Cr.P.C is hereby rejected.
(ii) The Registry is directed to send a copy of this order to the trial Court through e-mail.
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(J.M.KHAZI) JUDGE RR List No.: 1 Sl No.: 41