Karnataka High Court
Smt Pushpa N P vs The Karnataka State Finance ... on 4 December, 2021
Author: Ritu Raj Awasthi
Bench: Ritu Raj Awasthi
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IN THE HIGH COURT OF KARNATAKA AT BENGALURU
DATED THIS THE 4TH DAY OF DECEMBER, 2021
PRESENT
THE HON'BLE MR. RITU RAJ AWASTHI, CHIEF JUSTICE
AND
THE HON'BLE MR. JUSTICE SACHIN SHANKAR MAGADUM
WRIT APPEAL CROB.NO.1 OF 2021 (GM-KSFC)
IN WRIT APPEAL NOS.35-36 OF 2016
BETWEEN:
SMT.PUSHPA N. P.
D/O LATE N.B. PRAKASH
AGED 50 YEARS
OCC:NIL, R/O #54B
17TH CROSS, MALLESHWARAM
BANGALORE - 560 055
...CROSS OBJECTOR
(BY SMT. VIJETHA R. NAIK, ADVOCATE)
AND:
1. THE KARNATAKA STATE FINANCE
CORPORATION, SHANKARANARAYANA
BUILDING, 5TH FLOOR, NO.25
M.G.ROAD, BANGALORE - 560 001
REP. BY ITS MANAGING DIRECTOR
2. SHRI CHAKRA ENGINEERING
EQUIPMENTS A PARTNERSHIP FIRM
HAVING ITS OFFICE AT PLOT NO.21A
11 PHASE, PEENYA INDUSTRIAL AREA
2
BANGALORE - 560 058
REPTD. BY ITS PARTNER
SRI.VIJAY RAGHAVAN
3. SRI. RAGHAVENDRA CONCRETE PRODUCTS
(PVT.) LIMITED, NO.1600 AND 1597/8
NAGAPPA BLOCK, BANGALORE - 560 021
REPTD. BY ITS FULL TIME DIRECTOR
SRI. K. N. RAJAGOPAL
... RESPONDENTS
(BY SRI.BIPIN HEGDE, ADVOCATE FOR R1;
SRI.VISWANATH SABARAD, ADVOCATE FOR R2)
THIS WRIT APPEAL CROB IS FILED UNDER SECTION 4 OF
THE KARNATAKA HIGH COURT ACT, 1961 READ WITH RULE 27 OF
THE WRIT PROCEEDINGS RULES, 1977 PRAYING TO ISSUE A WRIT
IN THE NATURE OF CERTIORARI OR ANY OTHER WRIT, ORDER OR
DIRECTION AND QUASH THE NOTICES DATED 12.10.2009
BEARING NO.KSFC/JBO/MB/01-781/R975 PRODUCED AS
ANNEXURE E AND E1 IN THE WRIT PETITION AND ETC.,
THIS WRIT APPEAL CROB HAVING BEEN HEARD AND
RESERVED FOR JUDGMENT ON 17.11.2021, COMING ON FOR
PRONOUNCEMENT OF JUDGMENT THIS DAY, SACHIN SHANKAR
MAGADUM J., DELIVERED THE FOLLOWING:
JUDGMENT
The captioned cross appeal is filed by the petitioner No.2 to the writ petition challenging the order dated 19.11.2015 passed in W.P.Nos.30433-30434/2009.
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2. The cross objector along with one Smt. Malini Prakash filed writ petition questioning the notices dated 12.10.2009. The present cross objector claiming to be the daughter of the guarantor for the loan transaction with the respondent No.1/Corporation questioned the impugned notices dated 12.10.2009. Pending writ petition, the respondent No.1/Corporation has proceeded against the secured assets and sold in favour of the respondent No.2 herein and accordingly sale certificate also came to be issued.
3. The learned Single Judge having verified the records was of the view that the principal borrower instituted a suit against the respondent No.1/Corporation and the Corporation suffered a decree against which an appeal is already preferred by the respondent No.1/Corporation and this compelled the respondent No.1/Corporation to proceed against the guarantor and therefore, the learned Single Judge was of the view that no fault can be attributed against the Corporation for having taken recourse to proceed against the 4 secured assets of the guarantor. However, the learned Single Judge was of the view that it was bounden duty of the respondent No.1/Corporation to bring it to the notice of the Court where the matter is seized. Learned Single Judge, however, held that the respondent No.1/Corporation and the auction purchaser cannot interfere with the possession of the cross objector till the appeal pending before the Appellate Court in RFA.No.1402/2008 is heard and disposed of on merits. On these set of grounds, the learned Single Judge disposed of the writ petition by taking judicial note of the sale consideration paid by the auction purchaser to the tune of Rs.7.30 Crores. The learned Single Judge has also observed that Rs.4.75 Crores is the excessive amount recovered over and above the loan transaction and the present cross objector is entitled for refund in respect of the excess amount of sale price which is in deposit.
4. The order passed by the learned Single Judge in W.P.Nos.30433-30434/2009 was challenged by the auction 5 purchaser who was arrayed as respondent No.2 in the writ petition in W.A.No.35/2016. The respondent No.2 filed a memo seeking leave of the Court to withdraw the writ appeal and the same was dismissed as not pressed on 08.06.2021. During the pendency of W.A.No.35/2016, the present cross objector has filed a cross appeal questioning the action of the respondent No.1/Corporation in auctioning the property of the guarantor without exhausting the assets of the principal debtor.
5. Learned counsel appearing for the cross objector would vehemently argue and contend before this Court that when the properties of the principal debtor were very much available, the respondent No.1/Corporation ought to have exhausted the assets of the principal debtor before proceeding with the assets offered by the guarantor. It is also contended that the property owned by the cross objector is worth more than Rs.12 Cores but the same is auctioned by the respondent No.1/Corporation for Rs.7.30 Crores and this has caused 6 immense financial loss. She would strenuously argue and contend that the cross objector and her mother were kept in dark by the respondent No.1/Corporation and there are serious infractions in the procedure adopted by the respondent No.1/Corporation while auctioning the property of the cross objector. She also submits to this Court that the entire sale negotiation proceedings conducted on 13.10.2009 are illegal and fraudulent.
6. To buttress her arguments, learned counsel has placed reliance on the following judgments:
1) Vasu P.Shetty vs. Hotel Vandana Palace and Others reported in (2014) 5 SCC 660;
2) Mathew Varghese vs. M.Amritha Kumar and Others reported in (2014) 5 SCC 610;
3) M/s. Deepak Apparels Pvt. Ltd., and Others vs. City Union Bank Ltd., and Others reported in ILR 2016 Kar 1805;
4) S.P. Chengalvaraya Naidu (Dead) by LRs. vs. Jagannath (Dead) by LRs. and Others reported in (1994) 1 SCC 1.7
7. Placing reliance on the above said judgments, she would vehemently argue and contend before this Court that the proper procedure while auctioning the property is not followed and in absence of individual notice to the borrower specifying clear 30 days time gap for effecting any sale of immobile sale assets would vitiate the entire proceedings and therefore, the cross objector can maintain a writ petition. Placing reliance on the Full Bench judgment, she would contend that since there are serious infractions and the respondent No.1/Corporation has not acted in accordance with the provisions of the Securitisation and Reconstruction of Financial Assets and Enforcement of Securities Interest Act, 2002 (for short 'the SARFAESI Act') and the fundamental principles of judicial procedure have been violated, the writ petition before the learned Single Judge was very much maintainable and therefore, the grounds urged in the writ appeal needs to be examined by this Court.
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8. Per contra, learned counsel appearing for the respondent No.1/Corporation would place reliance on the judgment rendered by this Court in RFA No.1402/2008. By taking this Court through the judgment rendered in RFA No.1402/2008, he would contend that the judgment and decree passed in O.S.No.3337/1994 declaring the notices and the statement of accounts issued by the respondent No.1/ Corporation as untenable and unenforceable in law and consequent perpetual injunction granted was set aside by this Court by judgment and decree dated 28.01.2021. On these set of defence, learned counsel for the respondent No.1 would submit to this Court that the suit filed by the principal borrower is dismissed in RFA No.1402/2008 and therefore, the observations made by the learned Single Judge at paragraph 5 of the judgment would not survive for consideration.
9. Learned counsel appearing for the respondent No.2 arguing in the same vein would submit to this Court that the respondent No.1/Corporation has invoked the provisions of the 9 SARFAESI Act and has sold the secured assets. The learned Single Judge of this Court while allowing RFA No.1402/2008 has referred to the definition of 'guarantee' as defined under Section 126 of the State Finance Corporation Act and has recorded a categorical finding that the liability of the surety is co-extensive with that of the principal debtor and the financial institution has an unfettered right either to proceed against the principal borrower or the guarantor. Learned counsel would further bring to the notice of this Court that the conduct of the cross objector is not fair and the present cross appeal is filed on 15.04.2021 after lapse of 5 years and the grounds urged in the present cross appeal cannot be entertained in the light of the latest judgment rendered by the Hon'ble Apex Court relating to recovery proceedings initiated by the secured creditor under the SARFAESI Act.
10. Heard the learned counsel for the cross objector and learned counsel appearing for respondent Nos.1 and 2. 10
11. The short question that arises for consideration before us is, whether the grounds urged in the cross appeal can be entertained by this Court in the light of the judgment rendered by the Hon'ble Apex Court in the case of M/s. Sree Anandhakumar Mills Ltd. vs. M/s. Indian overseas Bank & Others1. The cross objector is assailing the correctness of the order passed by the learned Single Judge which was disposed of on 19.11.2015. The present cross appeal is filed on 15.04.2021. Though the cross objector was the second petitioner, the said order was not immediately challenged before this Court. On the contrary, the respondent No.2 who is the auction purchaser approached this Court questioning the order of the learned Single Judge in W.A.Nos.35-36/2016. Therefore, we are of the view that the present cross objector having kept quite for almost 5 years has made a feeble attempt alleging that the respondent No.1/Corporation has committed fraud while auctioning the property owned by her father.
1(2018) 2 BC 510 11
12. It is not in dispute that the respondent No.1/secured creditor has initiated proceedings under the provisions of the SARFAESI Act. It is trite law that remedy of any person aggrieved by the initiation of proceedings under the SARFAESI Act lies under Section 17 which provides for a efficacious remedy for the party aggrieved. Time and again the Hon'ble Apex Court in catena of judgments has cautioned High Courts exercising writ jurisdiction and entertaining the petitions questioning the orders squarely falling within the ambit of the SARFAESI Act.
13. The Hon'ble Apex Court in the case of United Bank of India vs. Satyawati Tondon and Others2, while interpreting the scope of remedy under Section 17(1) has held that the expression 'any person' used in Section 17(1) is of wide import. The Apex Court was of the view that it takes within its fold, not only the borrower but also the guarantor or any other person who may be affected by the action under 2 (2010) 8 SCC 110 12 Section 13(4) or Section 14. In the very same judgment, the Hon'ble Apex Court has come down heavily on High Courts entertaining the writ petitions ignoring the availability of statutory remedy under the DRT Act and the SARFAESI Act.
14. The Hon'ble Apex Court in the case of Authorized Officer, State Bank of Travancore and Another vs. Mathew K.C.3, reiterating the principles laid down by the Apex Court in the case of Commissioner of Income Tax and Others vs. Chhabil Dass Agarwal4, was of the view that the High Courts should not entertain a writ petition under Article 226, if alternative statutory remedies are available, except in cases falling within the well-defined exceptions carved out in the judgment cited supra. Therefore, in the light of the principles laid down by the Hon'ble Apex Court, we are not inclined to overlook the settled principles laid down by the Hon'ble Apex Court. Therefore, no exception can be taken in the present case on hand also. The judgments relied on the 3 (2018) 3 SCC 85 4 (2014) 1 SCC 603 13 by the cross objector would not come to the aid of the cross objector and the same are not at all applicable to the present facts and circumstances of the case. In that view of the matter, we are not inclined to entertain the grounds urged in the cross appeal.
15. For the foregoing reasons, the cross appeal is devoid of merits and accordingly stands dismissed.
The pending interlocutory applications, if any, stand disposed of.
Sd/-
CHIEF JUSTICE Sd/-
JUDGE CA