Karnataka High Court
M Narayana vs The Karnataka State Financial ... on 8 April, 2013
Bench: K.L.Manjunath, Ravi Malimath
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IN THE HIGH COURT OF KARNATAKA AT BANGALORE
DATED THIS THE 8TH DAY OF APRIL, 2013
PRESENT
THE HON'BLE MR. JUSTICE K.L.MANJUNATH
AND
THE HON'BLE MR. JUSTICE RAVI MALIMATH
WRIT APPEAL NO.620 OF 2009 (GM-KSFC)
BETWEEN:
1. M NARAYANA
S/O LATE MUNISHAMAPPA
R/O NO 177/1, 2ND MAIN
2ND CROSS, BOVIPALYA
MAHALAKSHMIPURAM
BANGALORE-560 086
2. M/S PRECISIION ENGINEERING WORKS
HAVING ITS OFFICE AT NO 177/1
2ND MAIN, 2ND CROSS, BOVIPALYA
MAHALAKSHMIPURAM
BANGALORE 560 086
REPRESENTED BY ITS
PARTNER SRI. M NARAYANA ... APPELLANTS
(BY SRI.DIVAKAR, ADVOCATE FOR SRI. K SUMAN,
ADVOCATE)
AND
1. THE KARNATAKA STATE FINANCIAL CORPORATION
NO 1/1/ THIMMAIAH ROAD
VASANTH NAGAR
BANGALORE 52
BY ITS GENERAL MANAGER
2
2. DEPUTY GENERAL MANAGER
KARNATAKA STATE FINANCIAL CORPORATION
RAJAJINAGAR BRANCH
NO 197, I FLOOR, 2ND STAGE
WEST OF CHORD ROAD
BANGALORE 86
3. ASSISTANT GENERAL MANAGER
KARNATAKA STATE FINANCIAL CORPN
RAJAJINAGAR BRANCH
NO 197 I FLOOR 2ND STAGE
WEST OF CHORD ROAD
BANGALORE 86
4. SMT A LAKSHMI RAVI KUMAR
AGED ABOUT 29 YEARS
D/O SRI P RAVIKUMAR
R/AT GOWRAV NAGAR, PUTTENAHALLI
J P NAGAR 7TH PHASE
BANGALORE-560 078
5. SMT.BHUVANESHWARI
W/O.SRI.T PRAVEEN KUMAR
AGED ABOUT 32 YEARS
R/A.NO.4/1, 15TH MAIN
J.C.NAGAR, KURUBARAHALLI
BANGALORE-560 059 ... RESPONDENTS
(BY SRI. GURURAJ JOSHI, ADVOCATE FOR R1-R3)
WRIT APPEAL FILED U/S 4 OF THE KARNATAKA HIGH
COURT ACT PRAYING TO SET ASIDE THE ORDER PASSED IN
THE WRIT PETITION NO.16643/2005 DATED 28/01/2009.
THIS APPEAL COMING ON FOR ADMISSION, THIS DAY,
MANJUNATH J, DELIVERED THE FOLLOWING:
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JUDGMENT
The learned counsel for the appellants has no objection to allow I.A.No.1/2013. Accordingly, I.A.No.1/2013 is allowed. The impleading applicant shall be added as respondent No.5. The appellant's counsel shall carry out the amendment. By consent, the appeal is heard on merits and disposed of by the following order:
The legality and correctness of the order passed by the learned Single Judge in W.P.No.16643/2005 dated 20.01.2009 is called in question in this appeal. The appellants were the writ petitioners before the learned Single Judge. A writ petition was filed initially requesting the Court to issue a writ of mandamus to direct the KSFC to consider their case for one time settlement under the OTS policy of the first respondent/corporation and to permit the writ petitioners to clear the loan raised by them on behalf of M/s.Precision Engineering Works.
2. During the pendency of the writ petition, the property of the first appellant which was given as a 4 guarantee to the loan received by the aforesaid firm was sold in a public auction in favour of Mrs.Lakshmi Ravi Kumar and the regular sale deed was executed on 05.10.2005. Therefore, it was requested by the writ petitioner to cancel the sale and subsequent documents.
3. The learned Single Judge dismissed the writ petition on the premise that no ground is made out to interfere with the action initiated under Section 29 of the Act. Accordingly, the writ petition is dismissed. Challenging the same, the present appeal is filed.
4. During the pendency of this appeal, the 4th respondent has purchased the property under a public auction which has been subsequently sold in favour of the 5th respondent. Therefore, the 5th respondent has come on record on her own.
5. The main contention of the appellants' counsel before us is that the judgment of the learned Single Judge is contrary to the judgment of this Court in the case of KARNATAKA STATE FINANCIAL CORPORATION vs. 5 N.NARASIMHAIAH AND OTHERS which has been confirmed by the Hon'ble Apex Court reported in 2008 (5) SCC 176. Therefore, he requests the Court to allow the appeal and set aside the order of the learned Single Judge and so also the sale deed executed by the KSFC in favour of the 4th respondent and to hold the sale deed executed by the 4th respondent in favour of the 5th respondent as null and void and he also requests the Court to direct the Sub-Registrar to make necessary corrections in the registers maintained by him.
6. On perusal of the papers, it is clear that property bearing No.177/1, Bovipalya, Mahalakshmipura in Bangalore was given by the first appellant M.Narayana as a security in favour of the KSFC for the loan advanced in favour of the 2nd appellant. Mr.Gururaja Joshi, learned counsel for the KSFC does not dispute that the auction was initiated under Section 29 of the SFC Act, 1951 and the property of the first appellant was sold under Section 29 of the Act. He also does not dispute that the judgment rendered by the Division Bench of this Court in 6 Narasimhaiah's case has been affirmed by the Hon'ble Supreme Court of India wherein it was held that invoking Section 29 of the SFC Act, the property given by the guarantor cannot be sold in a public auction unless and until financial corporation exhausts its remedy at the first instance proceeding against the principal borrower. The judgment of this Court has been confirmed by the Hon'ble Supreme Court. When the matter was pending before the Hon'ble Supreme Court, the property in question has been sold in a public auction by the KSFC in favour of the 4th respondent. In similar circumstances, this Court consistently is setting aside the order of sale by the KSFC under Section 29 of the Act.
7. In view of the aforesaid submission, we are of the view that the learned Single Judge has committed an error in dismissing the writ petition. As a matter of fact, the very same learned Single Judge subsequently in the case of H.I.SHAMSHUDDIN vs. KARNATAKA STATE FINANCIAL CORPORATION and others reported in ILR 2010 KAR 3578 has taken a different view holding that the KSFC 7 cannot invoke Section 29 and sell the property offered as a guarantee by guarantor. Therefore, following the aforesaid judgment and in view of the judgment of the Hon'ble Supreme Court in Narasimhaiah's case, this appeal is required to be allowed. Accordingly, the appeal is allowed.
The order passed by the learned Single Judge in dismissing the writ petition in W.P.No.16643/2005 dated 28.01.2009 is hereby set aside.
The sale made by the KSFC in favour of the 4th respondent dated 05.10.2005 registered on 06.10.2005 and sale deed executed by the KSFC on 05.02.2005 are held as illegal and is hereby declared as null and void and also the subsequent sale deed executed by the 4th respondent in favour of the 5th respondent on 24.03.2010 is held as null and void and it is for the sub-Registrar to make necessary corrections in the Registers maintained by him.
It is open for the KSFC to take action to recover the loan in accordance with law. If the application filed by the 8 appellants under OTS scheme is not yet considered and if such a scheme is still in force, the same shall be considered in accordance with law. It is left to the 5th respondent to recover the sale consideration from the 4th respondent and similarly the KSFC shall refund the sale consideration and the expenditure incurred by the 4th respondent to get the sale deed in her favour.
Sd/-
JUDGE Sd/-
JUDGE VG