Karnataka High Court
Dr Mahesh Kumar Sahu vs The Malleshwaram Co Operative Bank Ltd on 23 January, 2024
Author: M.Nagaprasanna
Bench: M.Nagaprasanna
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NC: 2024:KHC:3194
WP No. 2168 of 2024
IN THE HIGH COURT OF KARNATAKA AT BENGALURU
DATED THIS THE 23RD DAY OF JANUARY, 2024
BEFORE
THE HON'BLE MR JUSTICE M.NAGAPRASANNA
WRIT PETITION NO. 2168 OF 2024 (GM-RES)
BETWEEN:
1. DR MAHESH KUMAR SAHU
S/O LATE SRI KAILASH CHANDRA SAHU
AGED ABOUT 70 YEARS
2. DR ISMATH AFSHAN
W/O DR MAHUSH KUMAR SAHU
AGED ABOUT 66 YEARS
3. MR SEEMA SAHU
D/O MAHESH KUMAR SAHU
AGED ABOUT 31 YEARS
4. MS SAMRA SAHU
Digitally signed by D/O MAHESH KUMAR SAHU
PADMAVATHI B K
AGED ABOUT 31 YEARS
Location: HIGH
COURT OF
KARNATAKA ALL ARE RESIDENTS OF NO.90
4TH CROSS, 36 MAIN BTM LAYOUT,
1 STAGE, DOLLAR'S SCHEME
BENGALURU - 560 068
...PETITIONERS
(BY SRI. JAYAKUMAR S. PATIL, SENIOR COUNSEL FOR
SRI. PRUTHVI WODEYAR, ADVOCATE)
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WP No. 2168 of 2024
AND:
THE MALLESHWARAM CO-OPERATIVE BANK LTD
NO.102, 7TH CROSS, EAST PARK ROAD
MALLESHWARAM
BANGALORE - 560003
REP. BY ITS MANAGER/AUTHORISED OFFICER
...RESPONDENT
(BY SRI. LOKESH K V, ADV. FOR C/R)
THIS WP IS FILED UNDER ARTICLES 226 AND 227 OF
THE CONSTITUTION OF INDIA PRAYING TO i) QUASH THE SALE
NOTICE REF. NO.1341 DATED 05/01/2024 AND E-AUCTION
SALE NOTICE ISSUED BY THE 1ST RESPONDENT BANK VIDE
ANNEXURE P AND P1: ii) DIRECTING THE 1ST RESPONDENT
BANK TO CONSIDER THE PROPOSAL GIVEN BY THE
PETITIONERS FOR ONE TIME SETTLEMENT SCHEME AS PER
ANNEXURE-N DATED 30/09/2023 AS PER THE GUIDELINES
ISSUED BY THE RESERVE BANK OF INDIA VIDE ANNEXURE-L
BEARING NO.DOR STR REC 20/21-04/2023-24 DATED
08/06/2023.
THIS PETITION, COMING ON FOR PRELIMINARY
HEARING, THIS DAY, THE COURT MADE THE FOLLOWING:
ORDER
The petitioners are before this Court calling in question a sale notice dated 05.01.2024 seeking to sell the subject property on 24.01.2024 and have sought a consequential direction by issuance of a writ in the nature of mandamus directing the Bank for consider a proposal for a One Time Settlement in terms of the guidelines of the Reserve Bank of India.
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2. Heard the learned Senior counsel Sri.Jayakumar S. Patil, appearing for the petitioners and the learned counsel Sri.K.V.Lokesh representing the respondent - Bank.
3. The petitioners are the borrowers from the respondent - Bank. The loan of Rs.3,80,00,000/- was borrowed from the respondent - Bank by the petitioners on 28.10.2014 against execution of an equitable mortgage of the subject property. The agreement to that effect was filed on the same day i.e., on 28.10.2024. The petitioners failed to make any payment. On 27.11.2015, the account of the petitioner declared to be a non-performing asset and a communication to that effect was made to the petitioners declaring the account to be a non-performing asset. When no amount came forward from the hands of the petitioners, a publication was made under Section 13(2) the Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (hereinafter referred to as 'SARFAESI Act' for short) directing payment of Rs.4,38,86,776/-. Even then, no payment comes about. The impugned possession notice was issued on 29.03.2017.
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4. Then begins the legal proceedings initiated by the petitioners against the steps taken by the petitioners under the SARFAESI Act. The first what was challenged was the Bank initiates proceedings under Section 14 of the SARFAESI Act and secures an order at the hands of the learned Magistrate on 25.04.2017 in Crl.Misc.No.2797/2017 and another order on 26.05.2017 against possession of the property. It transpires that the Bank took partial possession of the property and the petitioners were dispossessed from the ground, first and second floors of the property.
5. After the said event, it transpires that the petitioners preferred W.P.No.23932-935/2017. This Court on 07.06.2017, had passed the following order:
"The respondent has entered caveat. Pending consideration of the petitions, in order to enable the respondent to receive the outstanding and also to aid the petitioners to make attempts to settle the matter with the respondent, keeping in view that though the claim as made is in respect of the entire loan, the petitioners in any event will have to make efforts to pay the EMI dues and seek for regularization of the amount. In that view, the petitioners shall deposit a sum of Rs.25,00,000/- (Rupees Twenty Five Lakhs) initially with the respondent within three weeks from this date.-5-
NC: 2024:KHC:3194 WP No. 2168 of 2024 On such deposit being made, the possession shall be handed back to the petitioners. Within a further period of eight weeks thereafter the entire balance of EMI dues shall be paid to the respondent and the loan shall be regularized.
It is made clear that if the deposit of Rs.25,00,000/- is made the respondent should not be obliged to hand back possession to the petitioners If the first condition is complied and the possession is taken by the petitioners but if the condition of repayment of the EMI dues in eight weeks is not complied, the respondents at the end of eight weeks would be entitled to repossess the premises without resorting to any other procedure under Section 14 of the Act or by seeking clarifications herein."
The order was conditional that the petitioners shall deposit a sum of Rs.25,00,000/-, within three weeks from 07.06.2017 and it was directed that the account was also to be regularize within eight weeks, after which the respondents who are directed to restore possession in favour of the petitioners. Rs.25,00,000/- payment was made and the petitioner was restored possession in terms of the order of the Court dated 07.06.2017. The regularization of the account as was directed by the Court did not happened.
6. Therefore, the respondent - Bank took possession of the property, yet again. This again makes the petitioner to -6- NC: 2024:KHC:3194 WP No. 2168 of 2024 move the Court and an order comes to be passed on 08.02.2018, which reads as follows:
" The learned Senior counsel appearing for the petitioners would bring to the notice of this Court the orders passed by the Hon'ble Supreme Court in Civil Appeal No.5674/2009 and C.C.Nos.8471- 8472/2013. The Hon'ble Supreme Court in the said proceedings being ceased of the consideration as to whether the provision of the SARFAESI Act should be applicable to a Co-operative Bank, has thought it fit to refer the matter to a Larger Bench on taking note of the differing decisions on the said point.
Accordingly, in C.C.Nos.8471-8472/2013, the Hon'ble Supreme Court had stayed further proceedings in connection with the notice issued under Section 13(4) of the SARFAESI Act. It is in that light, the petitioners herein are seeking that the respondent-Co-operative Bank would have to be restrained from proceeding with the sale since, the very action as initiated under the SARFAESI Act is being called in question.
The learned counsel for the respondent- Bank seeks to rely on the judgment dated 30.01.2018 passed by the Hon'ble Supreme Court in Civil Appeal No.1281/2018 to contend that the writ petitions of the present nature would not be maintainable.
In the instant facts, though in that context it is contended by the learned counsel for the respondent that in view of the alternate remedy available under Section 17 of the SARFAESI Act, the writ petitions are to be rejected and the petitioners should be relegated to the appellate remedy, having taken note that the contention urged is with regard to the very applicability of the SARFAESI Act to the Co-operative-Bank, the matter would require detailed consideration in that regard since the Hon'ble Supreme Court has -7- NC: 2024:KHC:3194 WP No. 2168 of 2024 found it necessary to be considered. On that aspect, in any event, further arguments could be addressed, if need be.
For the present, having taken note of the order passed by the Hon'ble Supreme Court staying the proceedings under Section 13(4) of the SARFAESI Act in the case before it and the issue is pending before it, the respondents are directed to defer the proposed sale in the instant case, until further orders are made herein.
The order directed the Bank to hold its hands in the light of the matter pending before the Apex Court, whether the Co-operative Banks would come within the ambit of the SARFAESI Act, 2002. This interim order so granted on 08.02.2018 was called in question by the Bank before the Division Bench.
7. The Division Bench of this Court in W.A.No.799/2018 and W.A.Nos.935-937/2018 on 28.11.2018 set aside the order of the learned single judge granting stay of the sale that was sought to be conducted by the respondent - Bank. The order of the Division Bench reads as follows:
" 1. By consent of the learned Counsel on both sides, these intra Court appeals are finally heard on merits and are being disposed of by this judgment.-8-
NC: 2024:KHC:3194 WP No. 2168 of 2024 These appeals are directed against an interlocutory order dated 08.02.2018 passed in W.P.Nos.23932- 23935/2017 whereby the learned Single Judge has directed the appellant to defer the proposed sale of the mortgaged property until further orders.
2. It appears that the learned Single Judge has passed the aforesaid interim order on the ground that the question as to whether the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (SARFESI Act) is applicable to Co-operative Banks or not is pending consideration before the Hon'ble Supreme Court.
3. It is not brought to our notice any order of the Supreme Court staying the applicability of the SARFESI Act to Co-operative Banks. It is relevant to state that a Division Bench of this Court in Karnataka Rajya Kaigarika Sahakara Bank Niyamita vs. V.Krishnaswamy [ILR 2012 KAR 4638] has held that the provisions of the SARFESI Act are applicable to Co-operative Banks constituted under the Karnataka Co- operative Societies Act, 1959. The effect of the aforesaid Division Bench judgment has not been considered by the learned Single Judge Hence, in our opinion, the matter requires to be reconsidered by the learned Single Judge. Accordingly, we make the following order:
The impugned order dated 08.02.2018 passed in W.P.Nos.23932-23935/2017 is set aside. The matter is remitted to the learned Single Judge for reconsideration. All contentions of both the parties are kept open. The appeals are accordingly disposed of. In view of disposal of the appeals, I.A.No.1/2018 does not survive for consideration; it stands disposed of accordingly.
Appeals disposed of."-9-
NC: 2024:KHC:3194 WP No. 2168 of 2024 This order of the Division Bench was challenged by the very petitioners before the Apex Court. The Apex Court while entertaining the petition, granted an interim order of stay in the light of certain civil appeals pending with regard to applicability of the SARFAESI Act to co-operative Bank. The interim order granted by the Apex Court reads as follows:
"Upon hearing the counsel the Court made the following ORDER Leave granted.
List this Civil Appeal alongwith Civil Appeal No. 5674 of 2009.
Interim stay on the same terms as order dated 26.02.2016 passed in Civil Appeal No.5674 of 2009. In other words, the appellant shall deposit 50% of the dues within four months from today, failing which the interim stay shall stand vacated forthwith without further reference to the court.
Status quo, as of today, shall be maintained by the parties with regard to the suit property subject to fulfillment of the above condition."
8. The Apex Court granted an interim order of stay on the ground that the present petitioners shall deposit 50% of the dues, within four months from the granting of the interim order i.e., on 18.02.2019. The order of status quo that was granted
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NC: 2024:KHC:3194 WP No. 2168 of 2024 by the Apex Court was conditional, that if deposit of 50% would not come about, the interim order would automatically get vacated without reference to the Court.
9. Learned counsel Sri.K.V.Lokesh submits that not even a rupee was paid to the Bank in terms of what was directed by the Apex Court. Therefore, the order of the Apex Court is also flouted, is the submission of the learned counsel appearing for the respondent - Bank
10. In all these proceedings, it is not a stranger who had knocked at the doors of this Court, it is the very petitioner and in the entire petition the filing of the Special Leave Petition and the order (supra) is suppressed.
11. The learned Senior counsel would submit that the submission of the learned counsel appearing for the respondent - Bank that no amount was paid to the bank is incorrect as despite hectic efforts made by the petitioner, 50% amount that was in due could not be paid. Therefore, he admits that though the Apex Court order was not completely complied with, it was partially complied. But the fact that it is not complied is admitted.
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12. In the teeth of the aforesaid orders, what now brings the petitioners to this Court at this juncture is the representation given by the petitioners for grant of a One Time settlement scheme to them. A representation is submitted on 24.07.2023. The offer is not acceded to and the petitioners raise the offer to Rs.5.5 Crores. No reply is furnished to the said OTS proposal submitted by the petitioner. It is therefore the petitioners now seeking a mandamus for consideration of the OTS. The learned counsel for the petitioner submits that the amount due as on today is Rs.12,59,35,900/-.
13. The Apex Court in the case of State Bank of India vs. Arvindra Electronics Private Limited1 has held that the High Court in exercise of its jurisdiction under Article 226 of the Constitution of India cannot direct the Bank to grant an OTS settlement by directing consideration of any representation for OTS. The Apex Court has held as follows:
" 19. In the present case in the sanctioned letter dated 21.11.2017 it was specifically provided that the entire payment to be made by 21.05.2018. The Schedule to make the payment under the instalments was also mentioned. It is 1 2022 SCC Online SC 1522
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NC: 2024:KHC:3194 WP No. 2168 of 2024 an admitted position that the borrower did not make the payment due and payable under the sanctioned OTS Scheme on or before the date mentioned in the sanctioned letter. The prayer of the borrower for extension of nine months came to be rejected as far as back on 16.05.2018 and the borrower was directed to make the payment of Rs.2.52 crores by 21.05.2018, the borrower failed to make the payment.
20. At this stage, it is required to be noted that during the pendency of the writ petition there were as many as three different OTS floated by the Bank and the Bank offered the Respondent-borrower to settle the outstanding payment under the OTS Scheme. However, the borrower did not opt for any of the scheme.
21. By the impugned Judgment and Order the High Court has granted further six weeks' time from 10.03.2022 which would be beyond even the time prayed by the borrower in the year 2018. As observed above earlier period of 8 to 9 months was sought in the year 2018 and by the impugned judgment and order the borrower has got time upto May, 2022.
22. Even otherwise as rightly submitted on behalf of the Bank directing the Bank to reschedule the payment under OTS would tantamount to modification of the contract which can be done by mutual consent Under Section 62 of the Indian Contract Act. By the impugned judgment and order rescheduling the payment under the OTS Scheme and granting extension of time would tantamount to rewriting the contract which is not permissible while exercising the powers Under Article 226 of the Constitution of India.
23. It is required to be noted that under the OTS Scheme which was originally sanctioned in the year 2017 the borrower was required to
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NC: 2024:KHC:3194 WP No. 2168 of 2024 pay Rs. 10,53,75,069.74 against the outstanding of Rs. 13,99,89,273.99. Therefore, under the original sanctioned OTS Scheme the borrower was getting the substantial relief of approximately 3 crores. The Bank agreed and accepted the OTS offer on the terms and conditions mentioned in the letter dated 21.11.2017. In the sanctioned letter dated 21.11.2017 it was specifically mentioned in Clause (iv) that the entire payment under the OTS Scheme was to be made by 21.05.2018, otherwise OTS would be rendered infructuous. Therefore, borrowers were bound to make the payment as per the sanctioned OTS Scheme. Therefore, the High Court ought not to have granted further extension de hors the sanctioned OTS Scheme while exercising the powers Under Article 226 of the Constitution of India.
24. The submissions on behalf of the borrower that in case of some other borrowers the time was extended is concerned, the same is neither here nor there. The Bank mutually can agree to extend the time which is permissible Under Section 62 of the Indian Contract Act. The borrower as a matter of right cannot claim that though it has not made the payment as per the sanctioned OTS Scheme still it be granted further extension as a matter of right. There cannot be any negative discrimination claimed. The borrower has to establish any right in their favour to claim the extension as a matter of right.
25. Now so far as the reliance placed upon the decision of Punjab and Haryana High Court in the case of Anu Bhalla2 is concerned, in view of the direct decision of this Court in Meenal Agarwal3, the decision of this Court would be binding on the High Court.2
Anu Bhalla v. Distt, Magistrate, Pathankot, 2020 SCC Online P&H 4387 3 Bijnor Urbal Coop. Bank Ltd. v. Meenal Agarwal, (2023) 2 SCC 805
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26. In view of the above and for the reason stated above, the impugned judgment and order4 passed by the High Court granting further time to the Respondent-borrower to make the balance payment under the OTS Scheme in exercise of powers Under Article 226 of the Constitution of India is unsustainable and the same deserves to be quashed and set aside and is accordingly quashed and set aside. Consequently, the original writ petition filed by the Respondent-borrower stands dismissed.
27. The present appeal is accordingly allowed. However, in the facts and circumstances of the case there shall be no order as to costs."
In the light of the judgment of the Apex Court that no OTS can directed to be granted, the prayer of seeking a mandamus to consider the proposal for OTS is to be declined. The declining of the grant of mandamus for OTS would however not preclude the Bank, if it wants to consider the settlement proposal that is submitted by the respondent, it shall do so at its own discretion.
14. In the light of the journey of the issue from 2014 to 2024 and the amount due as on today is projected at Rs.12,59,00,000/- and no amount coming forward from the petitioners to a substantial extent, as is necessary for showing 4 Arvindra Electronics (P) Ltd. v. SBI, 2022 SCC Online P&H 3144
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NC: 2024:KHC:3194 WP No. 2168 of 2024 any indulgence, the sale that is slated to be held on 24.01.2024 is not interfered with.
15. The petition lacking in merit stands rejected.
Sd/-
JUDGE KG List No.: 1 Sl No.: 28