Karnataka High Court
M/S Canara Tile Works vs M/S Canara Bank on 23 February, 2011
Equivalent citations: AIR 2011 KARNATAKA 110, 2011 (2) AIR KANT HCR 635, (2011) 3 KANT LJ 107, (2011) 3 KCCR 1892
Author: Mohan Shantanagoudar
Bench: Mohan Shantanagoudar
V/..
V-.
"=-M:-.w*""%
IN THE H!GH COURT OF KARNATAKA AT BANGALORE
DATED "mxs THE 23*" DAY or: FEBRUARY 24;oi§f1{'«--<_:"'-l,A
BEFORE :
"me HON'BLE MRJUSTICE MonxgrgsHA~1*AMG,dus:ARvl.V' "'
wan" PETITION No.2239;f/#g_g;g1;_g:\»a;':§£«sj* T 7
Bgtween :
1%
M/s.Canara Tile Works
Near Mukhyaprana Ter3'1ple,<'"" *
Bolar, Mangalore,
Represented by its Partner
Mr.P.Srim'vasaARai. '
P.Sriru'vasa §_2ai}1L~' _ _ .
S/0 Late §3';'A?;;«.a r'it:vi"';3a__ Ra-_ij--.__
Canara Tile Wozf_l<s, ' , «. A
Near VlD*721vkhya.pra"r*;.fa'--Tém';:>|e, '
Bolart, Mang'alQre_."«.% '
M rs.Ré'r:ag iéialé Naiwklg
W/0 late P.Chvar;ci-:ai*a.as"Naik,
Aged--»: _iViajor=,-. AA ' '
Fl_at.:.NQ.'4OV2, Fe'I'icEty:1,
* Bejai Nléwllkgad,
' 'Ma n.ga.l,Q're_; A" --.
'M«S';'.'3*o0_§a
D/'Q late 'P..VC3'handrahas Naik,
/-\gec:'..: 'Major,
Flat No..»~'iG2, Feliclty--1,
2 Bej"a..ié New Road,
A' -..lVia.ngaler@.
men-ea. nuwm wWlM"..n..m_....'_.... . .
This Writ Petition having been heard afid reserved for
orders on 1?" February 2011, pronounced the sametonthis
day.
ORDER
Petitioner has sought foequeeshiridg':'.1ih--e"'eiemlctieofi notice dated 116.2010 iss»ue.d by7.i_:'h'e published in The Hindu, (l\:'4l::an:_c,1a.Vi'ore"'Editionfi, dated 13.6.2910 and all foi'*th'er'A~.lo;~2;);'e'edvirig.»3_heici pursuant thereto.
2. thje17.;3ia.iéc'ti-on"sale notice is produced at petition. The property in questionigse 97 in T.S.l\io.503, R.S.No.193 of i\€;er"igalore"».__:Thote Village in Mangalore City :7.'Corptoratlloraéfazonsisting of building bearing Nos.97-4, The boundaries are also mentioned V «in the yevrVy"netice. The euction was scheduled te be lllhreliden }V."'5.)?'.2£3lC} at 3.30 pm. The reserve price was as $55 lakhs. However, as per the terms and V; 'T5 .5...» conditions, the intending béddere wotstd have to deposit earnest money (EMS) of $55,000/w being 10% ofthe reserve price.
3. The sate ootice is Questioned oer.-thee' that the reserve price fixed to the'...graleg'o-ot'io'e"':e,iaV5;vtr abnorrnaiiy iow and is Ees:;iV_'t.han'*i:he VGo:$?'e.t"n..hfrer§t'S valuation which has restilted iAE}_.._t°vi,iE3i?_i0wl,iS phrejijdioei to the petitioners; that the Ban'k't'i_s:- in showing 1% of the reServe.t.S:pr§vt_e that EMD though the same is shown as r55,0oo/>; inetead:'Q4f.V"§5',V.S5,OOO/~; that one of the partners_vdied'..suheeqtiein't~.--"'to the notice dated 8.7.2010 'and i:t1:e:re.fore thexa'u'Ction ought to have been postponed in.._or.de'rr opportunity to the petitioner to clear the derotsV_;.- ~::§p'.oiiV'that the petitioner has found out another '":l".'f--pi;ir§:hLaser.--twho has flied an affidavit before this Court to purchase the property for $85 iakhs.
», The writ petitien re opposed by learned advocates appearing on behalf of the respondents on the greund that the loan is outstaneing Since 1990 and is notjre'e..a'i~r§ by the petitioner since then in spite of reoeatee ' and the decree ef the Debt Recover~y"'T~ribufiait"€ii€a_t'VVti*é'.ee.re'-.A it is no hard and fast rule that the El'4l.Di"awh'oule'V_..ijAeat only and that it could be 1% reeerv.ej".=pr§'eeV"also; that the reserve pric:e'~~..js _«fi'§r'e:tJ~:';._b'ai'e.ed on the two valuation reports submitted' i-s*i~c:l.eAo_en.£1ent Valuers; that both theif:Vaijieers"-.'hav'e .jta.i{e.e'v-----irnAto account the situationfiof_thAe'i'i'pro_oert3!:Vi'\aIvhil_e_' evaluating the property; that the comes under CRZ and Vtherefeifre no const_roction activity can be carried over the A'=,r;ireoerty'.eviAn%«.evAti['uestion and therefore necessarily the pro'per--ty fetch ?1 lakh per cent as centencied ipetéitiener; that the Governrrient's vaiuatieri r'e"iieoi"e_.pon by the petitioner will not come to the aid of Vi."-etihe'épetitiener, inasmuch as, the eroperty is not situated §::"' -
N;-"
_g},m at Heige Bazar aeea, but is situated at Boiar area; that the property is already auctioned and that __ the respondent No.2 is the highest bidder; and tha.'t'=if=..tii.e property is allowed to be auctioned again ' same would fetch lesser price than""th.e p'_4resentjauc:.tjiuori_A amount. A memo is filed on 17.2.i2{)J:1sV_Al:§ef'o':feA.Athis by respondent No.2 and resoo--ifi:Ci~eht nae Eiiffered to l' V increase the bid amou'n..t u"of._ theé"oi"%gVinai bid amount and that such int-ireaseid:'V b_.i.t_ilV"a§jefi'o'i;nt would be %68,40,00o/-.
4. :"Att_he of interim order in this writ petivtioei,""~ith'is. CoAu--.;?'t"~~:1KVad directed the petitioner to ot'V?'2:'S','OO,0OO/-- within four weeks from said amount or %25,oo,ooo/M was _depos«.i._ted__v't>yithe petitioner before this Court. .. iinough during the course of arguments, Sri 4'_'_'a&l__}d?§'Va""«Hoila, learneé Senior Counsel has filed a memo ig/,:\;l stating that respondent No.2 offers to increase the bid amount by 20% of the erigiiiai bid, the sa;ririeV"-i"s'~Vi.'qri{3t accepted by the petitioners' counsel. Aceotr._:diiijg.:Vto'% petitioners' counsel, the proper'f:ffetches-1'a<i_ii'ch_;i'TiVore than ?68,40,000/~«, which is _sou§'ht'--to be,'..".i;;~ia..i'c3"' ."t'i"ie:'g successful bidder. Since""'i'the _ prop.o_sai tjiiven by respondent No.2 isrinnot matter is considered and dAecidedA.0.n'_me'rVits. 'V V
6. As" 'the' impugned auction notice re'v'eaiV.$:;t'haht~:i3the.;feserQ'e"'pVrice fixed is €55 iakhs. The saidvflreserveip'rice~isi"'fix~ed based on two valuation reports_i.e.i"daVted'a*«2G'?"V"ii?iay 2008 and 315' December Vi/aii'iJ'a'tiori reports are Drepared on the the property in question is an agriictz-ii:turai'ieroperty which is net converted or diverted AAre}sici.evriAtiai purposes. In both the valuation reports, is valued at %'53,49,000/~. On the said ':_ba»si*s, the Bank has fixed the reserve price at $55 lakhs. As could be eeeo from the valuation report dated 20*' of May 2008, it ta clear that the postat address of____the property is Soiar Cross; Road, Bolas", Mahgalore ar:jt§--tt'h_a"t.r'< the iocatioo of the property is Hoige Mahgatore Thota véitage, Maagaiore'4.(;t'tpy._fl'«'jr1r3i't§';ex7; vaiuation report dated 31.12.2.0O9,:4'i,t:r'aA.state_ttthat'V property Ea situated at Manhgafiore Thotaerhfviétihivapte in Mangaiore aha that theptggtai.'_VAa'oidvre§;e"_t'ofthe vproxperty is Boiar Cross Road, pf)/IangaE.o,re;..V situated atMangValo're:VTh_ot:a"yithiage, Mangaiore. It may be either atV'tEoIarVVC:.to'ee.Road or at 3-Eoige Bazar Ward. ,f'JS'ivhce~-i.t'E':e,.re is a xttohfosioh on that aspect, this Court ti"oe'VS__hottifwratrfitfto_j..wish to probe into that aspect of the matter, as Asame does not make much difference so as thttisrrvrit petition is concerned. From the reports it t:}Vear"Athat the Vatuers have observeo that the {and in T feaestioh is not corwerted for nohwagricultarai purposes. 56.9' E? .. "' si}-
Thus; they have tteated the land as an agtécuitural eroperty and vaiuee the same. It is also not in disgute that the Eand comes within the Eimits of mdustriai zj<3efe..p_E':=t_ CDP and that the same is in CR2, and is Nettavathé river. Based on these :fa'ft:::::s.,, the 'V vaiued.
8. It is the contention Vofrt~he |eVa.fined coua--n'se~E 'tor the petitioner that t3othV:ti:!i1.e vatiu'att§oa""repotts"*can:not be accepted, inasmuch as; t'he'AVsa'Vr:§e" ,A';',;:fe};)ared on the assumption tha"t"';t}%:~e ::_oroeertyA«:""'%i£3at..._(jV.§éIestion is not converted°>_ia"no,' bVLi~tj*-is=an-._:a'g.riCu|turaE iand. He relies upon the' do'C'a.m'enVt'v._aAt~-,_}5\i<:'nexure~'P' to show that the ,f"ia«n._d isiek//):j--xze;<tted for"no'n-agr%cuiturai purposes, z:io«:T;L:i_ia.T1ent at Annexureé' P dated 6.10.2008 'V"r:%eariAy'-..__ te.v~e:aE.~sA that the property in question is .4,UI".A £3fi§'i\f8FiI€3C3'/--i.f§\/£3Ftééd for aowagrécultorai parposes under 4'_the"A._hp"ro§xisEons of Karnataka Land Revenue Act, 1964, Eaeds, wet tends and garden iarrds of Dakshine Kannada District, Seceed previse te Sectieh 95(2) 01' the __ACt makes it eiear that the occupant ef dry Eancf, wet'~.E:a.at!.Vv' and garden lead situated at Dakshirza Kaheacéa subject to building laws, fer the;'tE'me. being}jA§'s'4_terr:fe,"t'~.t u may without obtaining the permiss1iO_I"t"fremp't;fa.e~».F)«8£55;it3¥»:V"
Commissioner as required 3 at Section 95, divert such vieed o_r'pVaArt;thV'e-reef tehahhy other purposes after seeding j.g3;~:VVt§*aat behaif in the prescribed' paying in the prescribed hf2aré'r{er,.__the *fi:Vh~e.._DFescribed. Thus, it is clear that the lahri-es sit'u'aterjA' ahtfialishéna Kannada District are 4__.exemptjedfrom--stahkirrg permission of the Deputy "CV0nj'm_issiCe.ervA:'fer conversion. The eccupants of the lahds.'-atx.Vifia'%<.s3f§iVha Kannada District may divert such ieeds ferV"'e:ee:--agr§cuEtura¥ purpeses after sending prier :':?fO'tAree"'*%«h the prescribed term to the Tahsildar. Thus, for V. Vpracticai purposes, the jurisdictéenai Tahsétdar is the concerned authority for grant of permission in Dakshiraa Kannada District; In this context, it is relevant to quote Section 95(2) of the Karnataka Land Revenue Act reads thus :
"' Section 95 [22 : If land assessed or he/ofbawfor the."purpos€=.'A'of agriculture wishes to diverf"s,uch"iahd.o}: part thereof to any otherjjuroose, hhevshaill notwithstanding ah;.rth.;'r:.g_ in any law for the.v.time:_.be:,ih:g for permissioh :E?e,i'3u"ry "Com'm.,i.ssioner who may,' of this section and"-.the this Act, refuse permissions on such conditions as 'may th¥n.l.§:fr't.' XXX XXX XXX program further that in Dakshina District. subject to any /aw for the .. __.tin.7e; being in force regard erection of "r.,.oui/dings or the construction of wells or terzks, en occueerzt of dry (',our7;ie) feed, wet /and er oerden /and who is riot,-
(a) a person registered or /ieb/e to be registered as an occupant ef' sucfifhh __ /erzo' under Becrtion 48% Of in % Kei'netai<e Leno' Reformé ;Aie::f;_ (Kerneteke Act 10 of "or 'I
(b) e grantee of Seth. fetid urit3:ei:'={_f~v-..
Section $77 of the seh4id.V",%§ct{ 2 V may, without c5btein;ii;rof:? theVI%gAp'ermi'5sion i"ecIuii'ed uhderV.=""th:i;-3 V".e:,;t_};,~fise.r§:tion and notwi'thst?en¢iii7'q yithinqu §;;._ohteir'i'ed therein, oi~Ce'artA_th'ei:eof to any other Dutpose 'prior notice in that beha/'flu "in Jf€$CFi'befi form to the _ paying in the prescribed . _ "i*2%e}iii2ei",~~._ I"hewt'ir2e prescribed under sub» t (Emphasis Supplied) °Riuie" 10£;3-A of the Karnataka Land Revenue Ruies .___"t}ee.is with the notice to be given by the occupant of the :/''> §8E"éd to the Taheiidar for diversion 01' dry (pL:n;i.3.)V land and the same reeds thug :
"Rule 196-A .- Noticefer di;rers:§)_r1'V"of"' dry (Punja) Land.- They' j; r€rQtfce«.
ovvgrsion of dry (Punja) unTe'eA%~V,i;/'re proviso to sub~secti'oh»(;'2)» ef.VSec't:'or_'7r_: it the Act shall be if: Forh7.._§j:'~~A';'}_The "0cc1_1pent shall enclose tovthié' ;=;a:.id s.rir)ti'ce.e'chal/an for having credited in accordance: ~ concerned Trees Li!'}r'; _'f'._ "=- V" * 1' Form 2=.'L--A ivstiieii'Eo4rnq:"preScribed reiating to notice to be issued'r«--hyVO:cu.i5ant of the Iand praying for V,..cV9'hver:§;i;'r)hEbefore""i:he--«"Tahsildar. In this matter, the avi':ter"'c:C>iéjpletioh of the entire procedure, has ."V"=._Vissuedthe vorcie-:'i:;as per Annexure~'P' dated 6.10.2008 ..%.iii'_j3;:>_er-mittingthe petitioner to divert/convert the land for r2e'ra:a'gri§f;'aiturai purposes.
M§:'\__ :1. If it is so; the Bank is hot justified ire ignoring the eohversioh order. As aforemehtiorzed, the petitioner has paid the conversion fees and got the_,V.ejh.t'r~i.es mutated to show that the property is coever_t~e~d'to'r§'y:;*:«t'>r;--~.T' ~ agriceiturai ptsrpeses. The entries.4ere_rht£4a'e'e'.'i"h.4_'_}th'eV revenue records, The Bank shotiid 7h_e"ye Tgo_Ahe_ the entries made in the '~v..t.reVvyer1Li'ev...re.ct;r<§sV"V"'before'V' proceeding further. It 'sh'ot:Id""ha§je xV§Je._rifie<i:|'the"revenue records to find out the actgtiaiiiitaot .--e.i:t'Li.'e__~t'i_o.n. Instead of doing so, the hes theiritwoiyaluation reports from Ve'h;i'e.f!f_s rrrovoerty as an agricultural pro;3erty.A't_tad th._e""'knew that the property in V question is corrveprted t=3r.hon--agrécu|tural purposes, they h_vié1'i're.v:iv«eVEued the property differently and wouid he2re'--._\riaVl'ue.d«_t'h'e""property for much higher price. Since [the ihiyeiuetéoih is made at ?53y49,000/~ oh the "{asser'e.ption that the property is an egrtcuitural Eand, the has fixed the reserve price as $55 iakhs. If the $7;
E, 3 -36- vaitiation was made by the Vaiuers based en the acttiai fact siteatipri considering the preperty as a CGi1\:'.€_F't€Ed property; the valuation woeid have been much 1.2. In the matter on hand,iAAiVth'a..reseryVe'«.prVice fixed at $55 iakhs and the h§ghest"..bi'd.. amount"y*;'as'~r?Si?"=.p' iakhs. If the reserve price wasi'r»tp'he for~.ho:r¥aericoiturai property, then the gotiithxe higher price. In View of being the owners of the t#it§AiVpre3uaice.
The flgéhts iofithe against male fide action V (in any 'given c'a.s_e')V in the process of saEe of assets are lftoi 'be; p_rete«r;t'ed_ since the secured creditor has been gi'y~e:r§._t'he' effect saie by certain modes. Such 'rhodes. 'ef" sate in a given case may iack tf*ansp'--arevhcy/ebjectivity and may thereby cause ""~'i...1p're';Tiuciéce to the borrower as the property may be ~§.7e undervalued, "ihus, the balance betweee the reseective rights ef the berrewer and the secured Creditor hes ice be struck by ensuring fairness and ei:)je<:tivityif"i--i:'f"~7if'rie borrewer does not participate ih the ;3reCessTefVi%i§>%:'at'io.ri"eé"
of reserve price and coesequehtly;"'tr'ie.re.Serve'-v§3riee;'.e iii; a given case, may be fixedet a1".io"wer actuai vaiuatiori of the ;3r'o§erties :3:e'cL"i.veci;; The apprehension in the jberroweir that the reserve price hasbeen fixed' atifhe"~~iovi£er'«'~~side so as to ensure quick sale .c;:i:i'nh_otAV be .rLi'iVei"d----e:ut. In 'my yeenei¢i;ie.{eesieeii;ion, to strike the baiance in these conriiméig it is desirable that in the 30 ,*'"[email protected]:eti,_Ci9 sa'|'e~t--e-Vbe issued to the borrower under should be informed about the reseivje priijeefixed and the basis on which the reserve is fixed and the mode of saie to be adopted by the s'e»::_Lire.ti creditor. It is for the iaw makers to Eook inte "jg-
that aspect ef the matter by amending law suitable te bring transparency ih such sale transactions. The general tendency of the euctien purci*i.e'eegrs"'vi,s to bid at the same arrieunt of reserve price higher price: Thus, the amount es plays a vital rote in the eueteien pr'<:>c:e--ss. price is fixed at a Eower rate,"V'de"finitely'.pre3.;3di.c;e iivill be caused to the berrowet4g"'~%i.has.;'Aing.:'ciiii«..eisi;'*«his preeerties are undervaitied by the sewretzi. <;'lfwet§gite'r,livtse-it'. No one can expect the bc}.rfro'}{girie_.r's.v:'troiseil_etlfie'"§.3r0'1i§erty for a lesser price. 1B'ahl_< interested to get higher price. in "0f:the'..,ebe:ve, this Court is of the opinion "V"thati-':the;g_'--Ba:<1l< hesprdceeded to get the valuation done ignoring the actual recerds and the fact reiVtue.tirjri'..--\}tihich has resuited in serious prejudice and ihj.gLisgtice'i.t€> the petitioners.
m1<;_
13. Ever: assuming that the property in question is an agricuiturei property, then, the same Couiti net have been soid under the provisions of Secur§tVi.sa.tio_e aed Reconstruction of Finaeciai Assets and E;"ri*fort:Tei.:}ii'eih"tt ' of Security Interest Act, 2002 it Act'). Section 31 of the suRFAEsi St'E.E1::§S».thEEit:'t'h:é~.VV provisions of the said Act wiii"'iio'ti.appEy'*-- .§_n'=ce.=rtaa"f;nuVEases, V incieding in the case efthe _sie"t:_u;¥§i2}'s\i»"i'nteresticrvedited in agricuiturai iand. it is notv'i'in_._the property in question is a .p~rope£?:ty'i" .::VIi+'V.'it'--iSf'SO, the property couid not under the provisions of suRFAEs:¢'ictiraft'5the""i«s.i§iéperty in question is an _vVagricu%ftiji'ai On that ground aiso, the °~._impu,qraeVoV.saie~.shotéce and subsequent actions are iiabie to beqru ' ' "."i4.'?:."'D;uring the course of arguments, it is if"4"';;ente«n.'deti by Sri Udaya Hoiia, that though the ___'~«i«'pet§ti'oAeers were present at the time of auction, they did .
M iii} M i"iO'{ bring to the riotice of the Bank that the property is converted for noewagriceitorai purposes anc:1_____that therefore, the auction may be stopped.
contention cannot be accepted. The auction 137.2010 at 3,30 p.m. The 1" ipeititirorieyr iiagraeiis fetter on 15.7.2010 at 10.35. a.m:f..itseAif reo.oesvti'nc£;'=«4'.tiwe"--, Bank to postpone the auction"Vi'ti<iJvEew of~.ti!"eo--i:-'h one of the partner, in the ietter;:«ijti,:is..%stateAtithat the reserve price shown Ai.n.i:'_t--he'v..4eyyuc':'t-irons'isaie notice is considerabiy 4_VieVssA}5"a_s .VCo;'iipVareti:i. t'o""t'he Government's VaiLiafiOi,_i. the petitioners wotiid not be knt;w'i'ng "th_at~ii.'t--he'-reserve price is fixed based on the two" X/a|i,ier*sV_V'r"epoVrtvwhich were prepared on the Htiiat the property in question is an aéjrit*'t!_ittiVVra«i"'_';preoerty. Had the respondent-Bank made 'known 'the "petitioners that the reserve price is fixee tfireatirig the property as an agricuiturai property, then ii»____'the§petitioners wouid have definitely intimated the Bank xvi?
a i J that the preperty in qeeetien is het the agrécuiturai property, but it is a eeeverted property, Evlerecnzeh, the revenue records cleariy reveal that the pre;.jer§:y.VT"'*i.a$ converted tang back in the year 2098 iteeif. A
15. The State Governmenthaso"'faixreefrr.thhe:"vah.§'a_t%e:hA of the property at [3akShifla'k_vEt'{].fla€1'i'El'-1%Or.tfietf§t:F{)QS§e guidance of the public, asVA,wVe"H._'a_e, for-..tAhe,t:§off§cers concerned. The cepy'fl'o_.f'*t'i1_g§=hhioitiafieatéoh reiating to guidance marktet: \§aiu6:'Ais;"pq;:odVuc'edV at.,5.nnexure--'G' to the writ Said document relates to The same reveals that the Govem_meht=,%g'uicja._nc;e"'ealue is 31 iakh per cent in "VV'respee't eenver'tee"'%ands and ?22 Iakhs per acre in "r.eeo_aect:t;f:a§;ti:e_;.21turai land. Thus, it is clear that the pr0Ap--e_rtyV_.rmro't':--%e have fetched at least ?97 lakhs since the measures 97 cents even according to a._C5~ov'ernment's vatuatioh. If the property is in Boiar area, T the Geveremente vaiuatieh is €80,000/~ per cent. Thus,
-77?"
even if the property is treated as to be is Solar area, the Governmer1t's vafuation of' the said property is about €177,000/~ to $89,000/-, if it is so; the vaIuatio\.hw~.V_r:n_:a_ci.e by the Vafuers and consequentiy the reserve.A4«'§§ri'ce'*.iFIE'xTé{Ej--'--Té* by the Bank in respect of the property' 'in iow as compared to the actual property. In View of the the.pet§'tioh:ers are 'V ciefiniteiy prejudiced, inas.muct1""as;I'jthVe.._Aproe'eVr't~;'has not fetched the proper vafue
16. 'i§t_e';fiocas..,.:;pfej~.udl:vceV_ caused to the petitioners who of the property which is sought to virtue of wrong fixation of p«rAiceA based «««« on wrong facts, the impugned a'u_ct'§o:_h<.:hQVtic'e.:'a.nd consequehtiy at? other actions ' pursuaéht are Habie to be quashed. Accordingly, Afolloxrvvisig order is made :
--33--
The impugned auction sale natice Vida Anne_xure~ 'C' flared 12.62010, stands Quashed, AJE G'€?i€"¥+V:"é§i.'§4?§I§.:'E:ii'?.S pursuant theretc) aiso stand quashed. It is iaw after obtaining fresh vaiua>Aii§Q§i'*.V'Ai"epc;ikf:i:A fi'C*rr§*; i:'E*:?§'a competent Vaiuers.
Writ petition is alibaé}ed*.§¢:igf:fEi'iV:1;giy; _