Karnataka High Court
M/S Paramount Constructions Company vs The Authorized Officer & Chief Manager on 28 July, 2023
Author: M. Nagaprasanna
Bench: M. Nagaprasanna
1
IN THE HIGH COURT OF KARNATAKA AT BENGALURU
DATED THIS THE 28TH DAY OF JULY, 2023
R
BEFORE
THE HON'BLE MR. JUSTICE M. NAGAPRASANNA
WRIT PETITION No. 33034 OF 2019 (GM-RES)
BETWEEN:
M/S. PARAMOUNT CONSTRUCTIONS COMPANY
REGISTERED PARTNERSHIP FIRM
NO.18/23, PEENYA INDUSTRIAL AREA,
PHASE I, PEENYA,
BENGALURU - 560 058.
REPRESENTED BY ITS PARTNER
SRI MUKESH G. TALREJA.
... PETITIONER
(BY SRI VENKATESH P.DALWAI, ADVOCATE)
AND:
1. THE AUTHORIZED OFFICER &
CHIEF MANAGER,
THE PUNJAB NATIONAL BANK,
LARGE CORPORATE BRANCH,
CENTENARY BUILDING,
NO.28, M.G.ROAD,
BENGALURU - 560 058.
2. THE PUNJAB NATIONAL BANK,
LARGE CORPORATE BRANCH,
CENTENARY BUILDING,
NO.28, M.G.ROAD,
2
BENGALURU - 560 058.
REPRESENTED BY ITS
SENIOR MANAGER.
3. SMT. POONAM LAKHANI,
AGED ABOUT 54 YEARS,
W/O SRI VIJAY LAKHANI,
RESIDING AT NO.802,
NO.38, EMBASSY ORCHID,
11TH MAIN ROAD,
SADASHIVANAGAR,
BENGALURU - 560 003.
4. SRI A.SRINATH,
AGED ABOUT 73 YEARS,
S/O LATE RANGASWAMY IYENGAR,
RESIDING AT NO.1E,
SOUTH END APARTMENT,
75/2B, R.V.ROAD, BASAVANAGUDI,
BENGALURU - 04.
5. MR.G.VENKATARATHNAM,
AGED ABOUT 38 YEARS,
S/O VENKATASWAMY,
RESIDING AT NO.23, 15TH CROSS,
B.K.NAGAR, YESHWANTHPUR,
BENGALURU - 560 022.
... RESPONDENTS
(BY SRI VIKRAM HUILGOL, SENIOR ADVOCATE A/W.,
SRI S.R.HARISH KUMAR, ADVOCATE FOR R2;
SRI YESHU MISHRA AND SRI ANOOP HARANAHALLI,
ADVOCATES FOR R-4.
R-1 SERVED,
NOTICE TO R-3 IS HELD SUFFICIENT VIDE ORDER DATED
28.01.2021)
3
THIS WRIT PETITION IS FILED UNDER ARTICLES 226 AND
227 OF THE CONSTITUTION OF INDIA PRAYING TO QUASH
ANNEXURE-H SALE CERTIFICATE DATED 10.10.2014 ISSUED BY
THE AUTHORIZED OFFICER AND CHIEF MANAGER OF PUNJAB
NATIONAL BANK [R-1] IN FAVOUR OF THE PETITIONER AND ETC.,
THIS WRIT PETITION HAVING BEEN HEARD AND RESERVED
FOR ORDERS, COMING ON FOR PRONOUNCEMENT THIS DAY, THE
COURT MADE THE FOLLOWING:-
ORDER
The petitioner is before this Court calling in question sale certificate dated 10-10-2014 issued by the Authorised Officer of the 1st respondent/Punjab National Bank ('the Bank' for short) in favour of the petitioner and consequently seeks a mandamus for refund of a sum of `30,69,08,217 paid by the petitioner towards purchase of schedule property along with interest and expenses incurred by it.
2. Heard Sri Venkatesh P.Dalwai, learned counsel appearing for the petitioner, Sri Vikram Huilgol, learned senior counsel appearing for respondents 1 and 2 and Sri Ashok Haranahalli, learned senior counsel appearing for respondent No.4. 4
3. Facts, in brief, germane are as follows:-
One Madhava Iyengar was the absolute owner of property in Sy.No.19/A of Peenya Village, Yeshwanthpur Hobli, Bangalore North Taluk. He, at the relevant point in time, gets the property converted from agriculture to residential purposes. The property is what is described in the schedule to the petition. Respondents 1, 2 and 3/Authorized Officer of the Bank, Senior Manager of the Bank and one Smt. Poonam Lakhani claim that Madhava Iyengar had executed a General Power Attorney ('GPA' for short) in favour of one T.Selvaraju in respect of the property in the year 1989. On 19-01-2009 Madhava Iyengar represented by the GPA holder Mr.T.Selvaraju is said to have executed a sale deed in favour of the 3rd respondent/Smt. Poonam Lakhani in respect of the schedule property. On 20-01-2010 Mr. T.Selvaraju executes a rectification deed in respect of the deed that was executed on 19-01-2009.
4. M/s Awesome Clothing Company Private Limited ('the Company' for short) of which the 3rd respondent is the Director and one of the guarantors approached the 2nd respondent/Bank seeking 5 finance of `15/- crores for business development. The Bank sanctions the finance as sought in the month of March 2010 drawing up certain statutory conditions. The 3rd respondent was also one of the guarantors to the loan availed by the Company. Therefore, the 3rd respondent creates equitable mortgage by deposit of title deeds of the property in favour of the Bank as security to the loan. The documents that were deposited in exchange of loan were the GPA executed by Madhava Iyengar in 1989, sale deed dated 19-01-2009 which was executed in favour of the 3rd respondent by the GPA holder, rectification deed dated 20-01-2010 and a deed of confirmation dated 28-05-2011.
5. The 3rd respondent defaults in repayment of loan so advanced by the Bank. It is, therefore, the Bank institutes proceedings under the SARFAESI Act and issues e-auction sale notice on 05-08-2014 inviting offers from desired for sale of the mortgaged asset for recovery of money due from the Company. The total debt as on 31-06-2014 was `21,29,50,462.00. The reserve price was fixed at `12.71 crores. The notice of e-auction depicted that the 1st respondent/Bank had already taken symbolic 6 possession of the property on 31-01-2013; that it has a right to sell the same under the SARFAESI Act, 2002 and therefore, e-auction notice was being issued.
6. The sale notice indicated that the property would be sold on "as is where is basis, as is what is basis and whatever there is basis". The petitioner being desirous of securing the property participated in the auction. The petitioner visited the site and it was assured by the Bank regarding clear and marketable title and thereafter the petitioner participated in the auction, emerged as successful bidder and paid a sum of Rs.15.21 crores towards the auction price of the property. The petitioner claims to have borrowed all the money from NBFC to fund auction purchase on certain rate of interest. The Bank executed a sale certificate on 10-10-2014 in favour of the petitioner acknowledging `15.21 crores towards auction sale price of the property and hands over possession of the property. After execution of sale certificate in favour of the petitioner, the petitioner files an application before the Bruhat Bengaluru Mahanagara Palike ('BBMP' for short) for change of khata by submitting necessary documents. The Bank, in the 7 meantime, hands over all title documents in its custody with physical possession of the property to the petitioner on 29-01-2015. It is the claim of the petitioner that the Bank did not disclose existence of any deed of confirmation dated 28-05-2011 and it did not hand over the said document to the petitioner. Before the BBMP where the petitioner had filed an application seeking transfer of khata, the 5th respondent one G.Venkatarathnam files his objections claiming to be an agreement holder from the hands of respondent No.4, one A.Srinath and the agreement was dated 29-12-2015. The BBMP did not transfer khata in favour of the petitioner but initiated proceedings under the Karnataka Municipal Corporations Act in the light of the objections filed by the 5th respondent.
7. The petitioner then approaches the Bank seeking information about the 5th respondent showing in the objections that title of the property was not free from all encumbrances. The Bank appears to have asserted that the claim of the 5th respondent is fake and the title of the property was very clear as it has done all due diligence. Even then, the khata was not transferred in favour 8 of the petitioner. This drives the petitioner to this Court in Writ Petition No.38932 of 2016 and this Court in terms of its order dated 19-07-2016 stayed all further proceedings before the BBMP. The said writ petition comes to be disposed of on 18-01-2017 directing the BBMP to pass appropriate orders with regard to the application for transfer of khata, as the petitioner had purchased the property under the SARFAESI Act. The 5th respondent challenges this order in Writ Appeal No.5671 of 2017 and the Division Bench clarified that the observations made in the order in Writ Petition No.38932 of 2016 shall not prejudice the 5th respondent in the subject petition in enforcing his right under the agreement to sell dated 29-12-2015.
8. Pursuant to the judgment passed in the writ appeal, BBMP transfers khata in the name of the petitioner four years after the date of auction. The petitioner could not put the property to development and decides to dispose of the property. On 18-10-2018 notice of sale of the schedule property was published in leading newspapers. After the notification in the newspapers, legal representatives of late Madhava Iyengar also issued a paper publication on 03-11-2018 informing the general public that the 9 property belongs to late Madhava Iyengar and after his demise the 3rd respondent has created fake, false and fabricated documents by forging the signature of late Madhava Iyengar. A crime then comes to be registered by those legal representatives of Madhava Iyengar in Crime No.593 of 2018 against the 3rd respondent and officials of the Bank. The petitioner learns that the 4th respondent has filed a complaint against the 3rd respondent, one Mr. T.Selvaraju, one Mr. P.Kannan and one Mr. Vijay Lakhani, husband of the 3rd respondent alleging creation of fake and fabricated documents. The Police seek to conduct investigation and communicated to Indian Bank requesting the details of cheques issued by the 3rd respondent and details of payments made towards the alleged sale consideration of the year 2009. The Police secured the documents and recorded statements in which all the persons whose statements were recorded admitted that the documents relating to the property were fabricated and forged.
9. On coming to know that the sale that took place in the year 2009 by which the 3rd respondent becomes owner of the property is itself fake and fabricated, the petitioner seeks refund of sum of 10 `30,69,08,217/- being the auction price, stamp duty and all other charges along with interest. It is then, the 4th respondent along with his brother Mr. A Bharath filed a suit for declaration of title and possession of the schedule property and the Bank is arrayed as defendant No.6 in the said suit. The suit is pending in O.S.No.1775 of 2019 and the concerned Court has directed status quo with regard to the property that the petitioner purchased in the auction. The Bank replies to the legal notice seeking refund of the entire amount by evasive reply. It is, therefore, the petitioner is before this Court in the subject petition seeking quashment of confirmation of sale of the year 2014 and for refund of sale consideration that it has paid along with interest. The figure is also quoted.
10. The learned counsel appearing for the petitioner would submit that officials of the Bank have played fraud on the petitioner. Knowing full well that the property was not free from encumbrances, have sold the property in public auction, received the entire amount and till date the petitioner has not been able to develop the property because of litigation over the property. It is his submission that Madhava Iyengar could not have registered GPA 11 pursuant to which the sale deed was registered, as Madhava Iyengar, the original owner of the property had died on 03-02-1976 and the GPA is said to have been executed by Madhava Iyengar in the year 1989. The petitioner who has invested close to `20/- crores in 2014 is not in a position to reap the benefits, as the Bank has played fraud with the auction purchaser/petitioner having delivered a property which is not free from all encumbrances. He would, therefore, seek refund of entire amount as claimed in the petition.
11. Learned senior counsel appearing for respondent No.2/ Bank would contend that the Bank comes into the picture only in the year 2010 when the 3rd respondent seeks finance from the hands of the Bank for business development and the Bank sanctions a loan of `15/- crores in favour of the Company. The Director of the Company, the 3rd respondent stood as guarantor to the loan and the property was mortgaged. While so doing, certain documents were handed over to the Bank including the confirmation deed of sale by Madhava Iyengar himself. Therefore, the officials of the Bank cannot be hauled into any proceedings as 12 they have acted bona fide in terms of SARFAESI Act, 2002 and brought the property to sale when the 3rd respondent became a chronic defaulter. It is his submission that the 3rd respondent had filed writ petition before this Court in Writ Petition No.14238 of 2014 challenging e-auction sale and e-auction sale did not take place on the same date but on a later date when the petitioner comes into the picture. It is his emphatic submission that equitable mortgage was created and the petitioner had verified everything prior to the payment of entire amount of sale consideration and it has delivered physical possession of the property even.
12. The learned senior counsel Sri Ashok Haranahalli representing the 4th respondent would again seek to contend that the petitioner has secured no title as the petitioner's predecessor i.e., the 3rd respondent herself had no title. It is contended that the petitioner cannot seek quashment of the sale certificate or refund in a writ petition without proving and establishing forgery or fraud played by the respondents and others who have created the documents. The learned senior counsel would submit that all the allegations of fraud, forgery or impersonation are a matter of 13 evidence to be established before a competent Court of law and relief of recovery of money cannot be granted in a writ petition without any determination. He would submit that the sale certificate is of the year 2014 and the petitioner has now filed the subject petition in the year 2019 and, therefore, it is hit by gross delay and he has not come to the Court with clean hands. He would neither support the petitioner nor the Bank. It is his contention that since fraud has been played in the initial stage, it would unravel everything and the 4th respondent would be entitled to the property as he is the agreement holder from the hands of legal representatives of Madhava Iyengar.
13. I have given my anxious consideration to the submissions made by the respective learned counsel and have perused the material on record. In furtherance thereof, the only issue that false for consideration is, whether the petitioner is entitled for refund of the entire amount of sale consideration by setting aside confirmation of sale?
14
14. One Madhva Iyengar was the absolute owner of the property in Sy.No.19/4(a) measuring 44 acres and 7 guntas in Peenya Village, Yeshwanthpur Hobli, Bengaluru North Taluk. He had succeeded to the said property from his grandfather. The State acquired the said property in the year 1972-73 to an extent of 41 acres and 32 guntas by issuance of a notification under the Land Acquisition Act, 1894 belonging to Madhava Iyengar. Compensation was also enhanced in a Miscellaneous First Appeal filed by Madhava Iyengar before this Court. Madava Iyengar dies on 03-02-1976 leaving behind two sons one Kuppuswamy Iyengar and Rangaswamy Iyengar. The 4th respondent in the petition is the son of Rangaswamy Iyengar and grandson of Madhava Iyengar. The 3rd respondent along with T.Selvaraju is alleged to have created a GPA on 08-09-1989 which is said to have been executed by Madhava Iyengar 13 years after his death. Therefore, it is alleged that the said document was forged. The GPA is not executed or notarized in the State of Karnataka, but before the Notary Public in Tamilnadu. Therefore, Madhava Iyengar could not have executed a GPA in favour of T.Sevaraju on 08-09-1989, close to 14 years after his death.
15
15. Mr. T.Selvaraju is further alleged to have created a sale deed making it appear that the same is executed on behalf of Madhava Iyengar and the sale is in favour of the 3rd respondent /Poonam Lakhani. The land is 1 acre 19 guntas owned by Madhava Iyengar. The sale deed is executed on 19-01-2009. Khata is also changed in the name of the 3rd respondent as also the entry in the revenue records. It is averred that the 3rd respondent obtained conversion of the property by an order of the Deputy Commissioner on the basis of aforesaid documents. It is then, the Bank comes into the picture when the 3rd respondent seeks finance from the hands of the Bank claiming to be for business development of the Company in which the 3rd respondent was a Director. While submitting the documents to the Bank, one rectification deed is said to have been submitted which is executed by T.Selvaraju contending that he is the GPA holder of Madhava Iyengar. In the rectification deed it was corrected to make it read as 44 acres 07 guntas inclusive of 36 guntas of kharab due which the acreage in sale deed dated 19-01-2009 also comes to be included. The 16 rectification deed is registered. These documents are handed over to the Bank for creation of equitable mortgage.
16. The 3rd respondent defaults in payment, which forced the Bank to put the property into auction. It is then the petitioner comes into picture as auction purchaser. The petitioner bids for the property, emerges successful, pays `15.21 crores on the said date towards the sale of the property, approaches the BBMP for change of khata and objections springs from the hands of the 5th respondent contending that he is an agreement holder from the hands of the legal representatives of Madhava Iyengar i.e., the 4th respondent, his grandson. The BBMP does not change the khata but initiates proceedings in view of the said dispute. The petitioner then files Writ Petition No.38932 of 2016 before this Court. This Court on 30-08-2017 disposed the writ petition by the following order:
".... .... ....
7. Firstly, the said Authority - Joint Commissioner of BBMP has no jurisdiction to enter into the question of title of the property of private parties and decide it. He does not have any power of Civil Court to determine the validity of the title or otherwise of any party. Just a prima-facie satisfaction upon production of Title document is enough for him to record the khata entry in favour of the person who holds such title. The Sale Certificate under the provisions of the SARFAESI Act, 17 prima-facie, established that the present petitioner was a bona fide auction purchaser under the provisions of the SARFAESI Act and it was a proof sufficient for the said Respondent to record the 'khata' entries in favor of the petitioner. He could not have adjudicated the question of title himself. Even if he could advise the parties to get the document of title cleared by Civil Court, he could not been refused to record the khata entry in favour of the petitioner who produced the Sale Certificate in legal proceedings under SARFAESI Act. The said Sale Certificate was definitely a much superior and better evidence of title over the Agreement of Sale held by the 5th Respondent, who never obtained any decree in his favour, on the basis of such Agreement to perfect his title over the subject property.
8. The objections of 5th Respondent claiming under the alleged Agreement of Sale in his favour vide Annexure - R7 executed by Mr.A.Srinath in favour of him, did not entitle him to raise any such objection at this stage before the Joint Commissioner in this regard. The said person has not at all fortified his rights by instituting a suit for specific performance nor he has perfected his title of the said property, before raising any objection against the recording of the 'khata' entries in favour of the present petitioner who is absolutely a bona fide auction purchaser under the legal proceedings and the special enactment known as "SARFAESI Act" whereby, the equitable mortgagee Ms.Poonal Lakhani has mortgaged the said property in favour of Punjab National Bank and the possession of the said property was taken over and put to an auction under the provisions of the said Act. The conveyance of the said title under the provisions of the said Act to the bona fide auction purchaser confers title on such person free from any encumbrance.
9. If any third party wants to raise an objection against that, he/she has to approach the competent Civil Court and establishing his/her own right over such property there upon only, he can raise any objection before the concerned Authorities of the BBMP or any public bodies who are responsible of recording of the 'khata' entries in favour of the auction purchaser like the present petitioner.
10. So long as such effective civil remedy is not availed by the 5th Respondent, who is nothing but a busy body in the 18 matter and therefore, his objections could not carry any weight before the Respondent - Joint Commissioner. The said Joint Commissioner therefore was unnecessarily misled by the objections raised by the 5th Respondent and passed the impugned order which is wholly without jurisdiction. The said order therefore deserves to be quashed. The same is accordingly quashed. The 2nd Respondent - Joint Commissioner is directed to effect the 'khata' entries in favour of the petitioner within a period of four weeks from today.
11. The petition is allowed with costs of Rs.10,000/- each to be paid by the said 2nd Respondent - Joint Commissioner, Raja Rajeshwari Nagar Zone, BBMP, Bangalore and the Respondent No.5 Mr.G.Venkatarathnam to the present petitioner within three months from today."
The proceedings before the BBMP were quashed and the Joint Commissioner was directed to effect khata entries in favour of the petitioner. This was challenged by the 5th respondent in Writ Appeal No.5671 of 2017. The Division Bench by its judgment dated 04-06-2018 disposed of the writ appeal by making the following observation:
".... .... ....
3. In view of the above, we make the following:
(i) None of the observations made in the order dated 30.08.2017 in WP.No.38932/2016 shall prejudice the appellant in enforcing his right under the agreement of sale dated 29.12.2015 executed by one Sri A.Srinath in favour of the appellant.
19
(ii) This order shall not be construed as respondent No.5 having admitted the aforesaid agreement of sale dated 29.12.2015.
The writ appeal is disposed of in the above terms. In view of disposal of the appeal, IA.No.1/2017 does not survive for consideration; it stands disposed of accordingly.
Appeal disposed of."
It is later with all these chequered problems the petitioner could not develop the property and, therefore, wanted to sell the property, puts up the property for sale by issuance of a public notice only to receive a counter public notice from the legal representatives of Madhava Iyengar. The public notice issued by the legal representatives would read as follows:
"PUBLIC NOTICE The General public are hereby noticed that the property bearing No. 19/4A2, Totally Measuring 1 acre 19 guntas, situated at Peenya Village Yeshwanthpura Hobli Bengaluru North Taluk now coming under BBMP PID No.1-45-25, Jalahalli Ward No. 16, vide its Conversion Order ALN.NY.SR.64/2009-10, dated 24.12.2009, by the Deputy Commissioner, Bengaluru, originally belongs to Late Sri. Madhava Iyengar, and after his demise, some persons viz. Smt. Poonam Lakhani W/o Vijay Lakhani and others have allegedly created the false and fabricated forged documents in respect of the Schedule Property and they have allegedly mortgaged the Schedule Property in favour of bank, only on the basis of the false and fabricated, forged documents with an intention to grab the Valuable property, as they have no manner of Right, title and interest or share over the said 20 property and the said fact came the knowledge of the legal heirs of the deceased Madhava Iyengar, in this regard the Legal representatives of Late Madhava Iyengar have filed the complaint in Crime No. 593/2018 at Rajagopal Nagar Police Station, Bengaluru. (VII A.C.M.M Court, Bengaluru) under sections 34, 419, 465, 471, 420 and 468 of IPC, filed against Smt. Poonam Lakhani, W/o Vijay Lakhani, R/at Flat No. 503, No. 38, Embassy Orchid, Sadashivanagara, Bengaluru and others for forgery, cheating and creating fabricated documents etc., and the enquiries are going on and in this regard the Hon'ble Court send some persons for Judicial custody and the case is pending for Adjudication and also the LRs of deceased Madhava Iyengar are intending to file a Civil suit before the competent court of law. Therefore, hereby inform the general public not to enter into any type of transaction with any person/s in any manner at any point of time in respect of the Schedule Property which is lawfully belongs to LRs of late Madhava Iyengar. In case if anybody proceed further, you will be held liable or responsible for the same. In case if anybody purchase the said property, they have proceed the matter by knowing all the legal hurdles.
SCHEDULE PROPERTY All that piece and parcel of the property Bearing No. 19/4A2, Totally Measuring 1 Acre 19 Guntas, situated at Peenya Village, Yeshwanthpura Hobli, Bengaluru North Taluk, now comes under B.B.M.P PID No. 1-45-25, Jalahalli Ward No. 16 vide its conversion Order No. ALN.NY.SR.64/2009.10, dated 24.12.2009, by the Deputy Commissioner, Bengaluru, and bounded on: East by:
remaining portion of same Survey number, West by:
Private land belongs to Prabhakar Nayak and Parameshwar Nayak North by: Peenya Plantation, South by: Road and Pipeline."
(Emphasis added) The property is the same. The relationship is quoted and several criminal and civil cases pending are narrated. After issuance of the public notice, the legal representatives, go on filing criminal cases 21 and the petitioner gets fed up of the legal proceedings that are shrouded with the property. One strange circumstance comes about. The Police while conducting investigation into the crime registered by the legal representatives of Madhava Iyengar seek details of cheques issued by the 3rd respondent at the time when sale took place in the year 2009. After receiving the information, the Police issued a notice directing the 3rd respondent to appear before them. The statements are now given by the 3rd respondent admitting fraud and forgery before the Police. The relevant statements read as follows:
".... .... ....
Thereafter Mali @ Marudavanan, who was working with Vijay Lakhani brought an aged person told that he is Madhava Iyengar. Then I prepared the document purported to be a Confirmation Deed being executed by Madhava Iyengar in favour of Smt.Poonam Lakhani, W/o Vijay Lakhani and the confirmation deed has been registered in the Office of the Sub Registrar, Peenya on 28/05/2011.
Afterwards, on the request of the Police of Rajagopalanagar Police Station have asked me to appear for an enquiry, I have appeared before the Rajagopalanagar Police Station and I was told about the case. Except Vijay Lakhani got prepared the absolute sale deed, rectification deed and the confirmation deed for which I was paid a fee of Rs.50,000/- I had no knowledge about their creation of forged GPA.
Subsequent thereto, a person in the Rajagopalanagar Police Station was shown to me and asked whether I can identify him, I have told that he is Madhava Iyengar and he is 22 the person who has got the document registered in respect of 1 acre 19 guntas of land on 19/01/2009 in the office of the Sub Registrar, Peenya, by putting thumb impression. Thereafter on enquiry regarding his name and address I came to know that his name is Yallappa S/o. Late Gurappa,94 years, R/o No.472/2, Sorahunise Varthur, Bangalore city and the original Madhava Iyengar was expired during the year 1976.
By creating false documents relating to the property of Madhava Iyengar, to an extent of 1 acre 19 guntas in Old Sy.No. 19/4A1 and New Sy.No.19/4A2 of Peenya village, Vijay Lakhani has by utilising Mali who were working with him, his brother-in-law Selvaraj and Yallappa @ Madhava Iyengar, got the property registered in the name of his wife and has made himself an illegal gain of about 1.5 Crores.
Therefore, I request that action may be initiated in accordance with against Vijay Lakhani, Mali @ Marudavanan and his brother-in-law Selvaraj, Yallappa @ Madhava Iyengar and Smt. Poonam Lakhani.
I have seen Vijay Lakhani, Mali @ Marudavanan and his brother-in- law Selvaraj, Yallappa @ Madhava Iyengar and Smt. Poonam Lakhani and if I see them again I can identify them."
(Emphasis added) The husband of the 3rd respondent Vijay Lakhani and the 3rd respondent admit that by creating false documents relating to Madhava Iyengar by using a person by name Mali who was working with him, his brother-in-law T.Selvaraju got the property registered in the name of his wife and T.Selvaraju had made an illegal gain of `1.5 crores. Later, the 3rd respondent gives her voluntary 23 statement again admitting the fraud. Forensic opinion was also sought on the signatures of all the aforesaid documents and the opinion was that they are different. The present case does not concern the veracity of any of those proceedings.
17. It is later, the petitioner causes a legal notice upon the Bank seeking refund of the entire amount alleging that the Bank has played fraud upon the petitioner. The notice insofar as it is germane reads as follows:
".... .... ....
My client states that when the matter stood thus, even after transfer of khata in favour of my client, For the greatest shock of client one Mr.A.Srinath who is said to be grand son of one A.Madhav Iengar started threatening my client stating that the his grandfather had not sold the said property to any one else and your customer Mrs.Poonam Lakhani, who had mortgaged the property to your bank have created fake and fabricated documents. My client shocked to know this, since it has invested crores of Rupees with the impression and great belief that the property is having marketable title, as the public Sector Govt bank had lent money Rupees against the said property. My client also saw a public notice which was published in Daily news paper Deccan Herald 03.11.2018 and shocked to see the same. In the said notice, A Srinath had informed the public that the which your bank has sold to my Client was originally belongs to one Sri Madhavaiynagar and after his demise, some persons namely Poonam Lakhani and other have created the false, fabricated, forged documents in respect of the said property and mortgaged the same to your bank. Further it is also notified that the said A.Srinath has initiated the criminal complaint in crime No.593/2018 at Rajagopalnagar Police 24 station under section 34, 419, 465, 471, 420 and 468 IPC for forgery, cheating and creation documents etc., against Mrs.Poonam lakhani and others, and further it is informed to the public not to deal with the property in any manner. It is also informed in the public notice that your bank colluding with the said mortgagors have got the said property mortgaged by forging the documents. Further my client was also informed that the Mr.Madhava Iyengar Died on 3.2.1976, GPA Executed by him in 1989 was a fake document. The said Poonam Lakhani and others colluding with your bank officials have also got the Deed of Confirmation in 2011 in the absence of the original owner A. Madhav lengar who died on 3.2.1976.
My client states that at the time of purchasing the above property, my client had taken utmost care and when my client had enquired about the documents, your bank informed my client that the said Sri. Madhava lyengar himself had executed the GPA and confirmation deed confirming the sale deed in favour of Mrs. Poonal Lakhani who had mortgaged the said property which has been purchased by my client and your bank had made my client to believe that the title deeds are genuine and proper and also the said Sri. Madhava Iyengar was alive and conformation deed had been executed by him of which your bank was also aware of the same. Now my client shocked to know about the defect of the title and your bank has also made my client to believe that the documents were Genuine and since you had informed my client that the said Sri.Madhava lyengar was alive while executing GPA in the year 1989 and confirmation deed in the year 2011 had to be executed there was no reason to disbelieve your version. Had my client aware of the said facts, it would not have purchased the said property by paying huge amount of sale consideration. Further, my client had also negotiated with many buyer to sell the property, the proposed buyers have collected the documents provided by your bank and after having seen the public notice and came to know about the filing of the criminal case in respect of the aforesaid property, the buyers are not coming forward to purchase the property.
My client states that it has purchased the land with the purpose of developing the same by paying huge sale 25 consideration with an honest intention of putting the asset for business development and earn profits. My Client entire capital had stuck in this auction sale, which has caused huge losses to my client and also caused irreparable damage to the business of my client. My client states that they suffered following losses on account of purchasing the auction property from your bank.
1. Sale consideration paid to you on 1.2.2015 Rs. 15,21,00,000/-
2. Stamp Duty paid 85,17,600/-
3. Registration Charges 15,21,000/-
4. Legal expenses incurred for katha transfer 20,00,000/- Interest 15% PA compounding quarterly From 1.2.2015 to 28.2.2019 on Rs.16,41,38,600. 14,27,69,617/-
Total 30,69,08,217/-
My client to believe that the documents which your bank had furnished to my client were Genuine and proper. Since there is a defect in the title of the property which you have not disclosed the same at the time of my client participating in the said sale, which you would have aware, same tentamout to cheating my client and my client also would be entitle for the payment of Rs.30,69,08,2017 of which your bank is liable to pay.
WHEREFORE, I hereby call upon you to refund a sum of Rs.30,69,08,2017/- (sic) along with further interest from 1.3.2019 at the rate of 15% per annum till the date of payment from the date of this notice, failing which my client would be constrained to initiate appropriate legal proceedings both civil and criminal to recover the same.
You are also liable to pay a sum of Rs.25,000/- towards the cost of this notice."
(Emphasis added) 26 It is replied to by the Bank on 10-05-2019 with no concrete answers. All that the Bank says is that it has done its due diligence prior to the sale and the allegations made were baseless. The issue now is whether the petitioner would be entitled to seek refund of the amount in a petition filed before this Court under the writ jurisdiction on the aforesaid facts.
18. In the teeth of the aforesaid facts what would unmistakably emerge is that an innocent auction purchaser is made to bear the brunt of unnecessary litigation all for the acts of the Bank in not delivering a property which was free from all encumbrances. If the Bank has done due diligence at the time of grant of loan in the year 2010 to the Company, the situation now would not have arisen. The Bank is now seeking to wash off its hands by contending that it is not responsible for any problem that would crop up after the sale, as the e-auction notice clearly indicated that the property is being sold "as is where is basis, as is what is basis". That would not mean that an auction purchaser could be put in possession of the property which is not free from encumbrance. 'As is where is' cannot mean that the property did 27 not have title itself for it to be sold in a public auction. The responsibility undoubtedly rests on the part of the Bank to have not conducted any due diligence either while granting the finance or while putting the property to sale or even at a time when the petitioner was delivered documents and possession of the property. It appears, all that the Bank wanted was to redeem its charge over the property and somehow finds its way in getting back the amount. Several litigations have emerged after the sale of the property to the petitioner and the petitioner having invested huge amount in 2014 is yet to reap the benefits of the said sale all for the reason that litigations galore. Therefore, it is for the Bank now to refund the amount as is claimed by the petitioner.
19. The contention of the respondents, in unison, that a writ petition for the sake of recovery of money would not be maintainable is noted only to be rejected, as the Apex Court in plethora of cases has recognized the jurisdiction of this Court to consider even in money claims. The Apex Court right from the judgment in the case of K.N. GURUSWAMY v. STATE OF MYSORE AND OTHERS - AIR 1954 SC 592 has held that on 28 given set of facts, if the State acts in an arbitrary manner, even in a matter of contract, an aggrieved party can approach the Court under Article 226 of the Constitution of India and depending upon the facts of the case the Courts are empowered to grant such relief. This principle is reiterated by the Apex Court in the case of ABL INTERNATIONAL LIMITED AND ANOTHER v. EXPORT CREDIT GUARANTEE CORPORATION OF INDIA AND OTHERS1 wherein the Apex Court has held as follows:
"23. It is clear from the above observations of this Court, once the State or an instrumentality of the State is a party of the contract, it has an obligation in law to act fairly, justly and reasonably which is the requirement of Article 14 of the Constitution of India. Therefore, if by the impugned repudiation of the claim of the appellants the first respondent as an instrumentality of the State has acted in contravention of the above said requirement of Article 14, then we have no hesitation in holding that a writ court can issue suitable directions to set right the arbitrary actions of the first respondent. In this context, we may note that though the first respondent is a company registered under the Companies Act, it is wholly owned by the Government of India. The total subscribed share capital of this Company is 2,50,000 shares out of which 2,49,998 shares are held by the President of India while one share each is held by the Joint Secretary, Ministry of Commerce and Industry and Officer on Special Duty, Ministry of Commerce and Industry respectively. The objects enumerated in the memorandum of association of the first respondent at para 10 read:
"To undertake such functions as may be entrusted to it by the Government from time to time, including grant of credits and guarantees in foreign currency for the purpose of 1 (2004) 3 SCC 553 29 facilitating the import of raw materials and semi-finished goods for manufacture or processing goods for export."
Para 11 of the said object reads thus:
"To act as agent of the Government, or with the sanction of the Government on its own account, to give the guarantees, undertake such responsibilities and discharge such functions as are considered by the Government as necessary in national interest."
24. It is clear from the above two objects of the Company that apart from the fact that the Company is wholly a Government- owned company, it discharges the functions of the Government and acts as an agent of the Government even when it gives guarantees and it has a responsibility to discharge such functions in the national interest. In this background it will be futile to contend that the actions of the first respondent impugned in the writ petition do not have a touch of public function or discharge of a public duty. Therefore, this argument of the first respondent must also fail.
25. The learned counsel for the respondent then contended that though the principal prayer in the writ petition is for quashing the letters of repudiation by the first respondent, in fact the writ petition is one for a "money claim" which cannot be granted in a writ petition under Article 226 of the Constitution of India. In our opinion, this argument of the learned counsel also cannot be accepted in its absolute terms. This Court in the case of U.P. Pollution Control Board v. Kanoria Industrial Ltd. [(2001) 2 SCC 549] while dealing with the question of refund of money in a writ petition after discussing the earlier case-law on this subject held:
(SCC pp. 556-58, paras 12 & 16-17) "12. In the para extracted above, in a similar situation as arising in the present cases relating to the very question of refund, while answering the said question affirmatively, this Court pointed out that the courts have made distinction between those cases where a claimant approached a High Court seeking relief of obtaining refund only and those where refund was sought as a consequential relief after striking down of the order of assessment etc. In these cases also the 30 claims made for refund in the writ petitions were consequent upon declaration of law made by this Court. Hence, the High Court committed no error in entertaining the writ petitions.
***
16. In support of the submission that a writ petition seeking mandamus for mere refund of money was not maintainable, the decision in Suganmal v. State of M.P. [AIR 1965 SC 1740] was cited. In AIR para 6 of the said judgment, it is stated that 'we are of the opinion that though the High Courts have power to pass any appropriate order in the exercise of the powers conferred under Article 226 of the Constitution, such a petition solely praying for the issue of a writ of mandamus directing the State to refund the money is not ordinarily maintainable for the simple reason that a claim for such a refund can always be made in a suit against the authority which had illegally collected the money as a tax'.
17. Again in AIR para 9, the Court held:
'We, therefore, hold that normally petitions solely praying for the refund of money against the State by a writ of mandamus are not to be entertained. The aggrieved party has the right of going to the civil court for claiming the amount and it is open to the State to raise all possible defences to the claim, defences which cannot, in most cases, be appropriately raised and considered in the exercise of writ jurisdiction.' This judgment cannot be read as laying down the law that no writ petition at all can be entertained where claim is made for only refund of money consequent upon declaration of law that levy and collection of tax/cess is unconstitutional or without the authority of law. It is one thing to say that the High Court has no power under Article 226 of the Constitution to issue a writ of mandamus for making refund of the money illegally collected. It is yet another thing to say that such power can be exercised sparingly depending on facts and circumstances of each case. For instance, in the cases on hand where facts are not in dispute, collection of money as cess was itself without the authority of law; no case of undue enrichment was made out and the amount of cess was paid under 31 protest; the writ petitions were filed within a reasonable time from the date of the declaration that the law under which tax/cess was collected was unconstitutional. There is no good reason to deny a relief of refund to the citizens in such cases on the principles of public interest and equity in the light of the cases cited above. However, it must not be understood that in all cases where collection of cess, levy or tax is held to be unconstitutional or invalid, the refund should necessarily follow. We wish to add that even in cases where collection of cess, levy or tax is held to be unconstitutional or invalid, refund is not an automatic consequence but may be refused on several grounds depending on facts and circumstances of a given case."
26. Therefore, this objection must also fail because in a given case it is open to the writ court to give such monetary relief also.
27. From the above discussion of ours, the following legal principles emerge as to the maintainability of a writ petition:
(a) In an appropriate case, a writ petition as against a State or an instrumentality of a State arising out of a contractual obligation is maintainable.
(b) Merely because some disputed questions of fact arise for consideration, same cannot be a ground to refuse to entertain a writ petition in all cases as a matter of rule.
(c) A writ petition involving a consequential relief of monetary claim is also maintainable.
28. However, while entertaining an objection as to the maintainability of a writ petition under Article 226 of the Constitution of India, the court should bear in mind the fact that the power to issue prerogative writs under Article 226 of the Constitution is plenary in nature and is not limited by any other provisions of the Constitution. The High Court having regard to the facts of the case, has a discretion to entertain or not to entertain a writ petition. The Court has imposed upon itself certain restrictions in the exercise of this power. (See Whirlpool Corpn. v. Registrar of Trade 32 Marks [(1998) 8 SCC 1] .) And this plenary right of the High Court to issue a prerogative writ will not normally be exercised by the Court to the exclusion of other available remedies unless such action of the State or its instrumentality is arbitrary and unreasonable so as to violate the constitutional mandate of Article 14 or for other valid and legitimate reasons, for which the Court thinks it necessary to exercise the said jurisdiction."
(Emphasis supplied) The said judgment is followed by the Apex Court in SURYA CONSTRUCTIONS v. STATE OF UTTAR PRADESH AND OTHERS2 wherein the Apex Court has held as follows:
"2. By an order dated 21-10-2013 [Surya Construction v. State of U.P.,2013 SCC OnLine All 14604], the High Court asked the appellant to make a representation and finally, in a contempt petition moved on 7-2-2014, directed [Surya Construction v. Rajendra Kumar, 2014 SCC OnLine All 16549] Uttar Pradesh Jal Nigam to answer this representation. The representation so made was answered by Uttar Pradesh Jal Nigam as follows:
"Due to aforesaid facts and description it is clear that Rs 113.29 lakhs has to be released by Government/Mela Administration against the Budget presented by U.P. Jal Nigam, Magh Mela 2008 of 2009. There is no money available under account of Magh Mela 2008 of 2009 of U.P. Jal Nigam. And could not obtain the rest of amount from the Mela Administration/Government. Therefore, payment regarding M/s Surya Construction, 323/3, Alopibagh, Allahabad will be paid after availability of the money from the Government."2
(2019) 16 SCC 794 33
3. It is clear, therefore, from the aforesaid order dated 22-3-2014 that there is no dispute as to the amount that has to be paid to the appellant. Despite this, when the appellant knocked at the doors of the High Court in a writ petition being Writ Civil No. 25216 of 2014, the impugned judgment dated 2-5-2014 [Surya Construction v. State of U.P., 2014 SCC OnLine All 6071] dismissed the writ petition stating that disputed questions of fact arise and that the amount due arises out of a contract. We are afraid the High Court was wholly incorrect inasmuch as there was no disputed question of fact. On the contrary, the amount payable to the appellant is wholly undisputed. Equally, it is well settled that where the State behaves arbitrarily, even in the realm of contract, the High Court could interfere under Article 226 of the Constitution of India (ABL International Ltd. v. Export Credit Guarantee Corpn. of India Ltd. [ABL International Ltd. v. Export Credit Guarantee Corpn. of India Ltd., (2004) 3 SCC 553])
4. This being the case and the work having been completed long back in 2009, we direct Uttar Pradesh Jal Nigam to make the necessary payment within a period of four weeks from today. Given the long period of delay, interest @ 6% p.a. may also be awarded."
(Emphasis supplied) The aforesaid principle is again followed by the Apex Court in its later judgment in the case of UNITECH LIMITED AND OTHERS v.
TELANGANA STATE INDUSTRIAL INFRASTRUCTURE CORPORATION AND OTHERS3 wherein the Apex Court has held as follows:
"E.1. Maintainability of the writ petition under Article 226 3 2021 SCC OnLine SC 99 34
38. Much of the ground which was sought to be canvassed in the course of the pleadings is now subsumed in the submissions which have been urged before this Court on behalf of the State of Telangana and TSIIC. As we have noted earlier, during the course of the hearing, learned Senior Counsel appearing on behalf of the State of Telangana and TSIIC informed the Court that the entitlement of Unitech to seek a refund is not questioned nor is the availability of the land for carrying out the project being placed in issue. Learned Senior Counsel also did not agitate the ground that a remedy for the recovery of moneys arising out a contractual matter cannot be availed of under Article 226 of the Constitution. However, to clear the ground, it is necessary to postulate that recourse to the jurisdiction under Article 226 of the Constitution is not excluded altogether in a contractual matter. A public law remedy is available for enforcing legal rights subject to well- settled parameters.
39. A two judge Bench of this Court in ABL International Ltd. v. Export Credit Guarantee Corporation of India [ABL International] analyzed a long line of precedent of this Court to conclude that writs under Article 226 are maintainable for asserting contractual rights against the state, or its instrumentalities, as defined under Article 12 of the Indian Constitution. Speaking through Justice N Santosh Hegde, the Court held:
"27. ...the following legal principles emerge as to the maintainability of a writ petition:
(a) In an appropriate case, a writ petition as against a State or an instrumentality of a State arising out of a contractual obligation is maintainable.
(b) Merely because some disputed questions of fact arise for consideration, same cannot be a ground to refuse to entertain a writ petition in all cases as a matter of rule.
(c) A writ petition involving a consequential relief of monetary claim is also maintainable."
40. This exposition has been followed by this Court, and has been adopted by three-judge Bench decisions of this Court in State of UP v. Sudhir Kumar and Popatrao Vynkatrao Patil v. State of 35 Maharashtra. The decision in ABL International, cautions that the plenary power under Article 226 must be used with circumspection when other remedies have been provided by the contract. But as a statement of principle, the jurisdiction under Article 226 is not excluded in contractual matters. Article 23.1 of the Development Agreement in the present case mandates the parties to resolve their disputes through an arbitration. However, the presence of an arbitration clause within a contract between a state instrumentality and a private party has not acted as an absolute bar to availing remedies under Article 226. If the state instrumentality violates its constitutional mandate under Article 14 to act fairly and reasonably, relief under the plenary powers of the Article 226 of the Constitution would lie. This principle was recognized in ABL International:
"28. However, while entertaining an objection as to the maintainability of a writ petition under Article 226 of the Constitution of India, the court should bear in mind the fact that the power to issue prerogative writs under Article 226 of the Constitution is plenary in nature and is not limited by any other provisions of the Constitution. The High Court having regard to the facts of the case, has a discretion to entertain or not to entertain a writ petition. The Court has imposed upon itself certain restrictions in the exercise of this power. (See Whirlpool Corpn. v. Registrar of Trade Marks [(1998) 8 SCC 1].) And this plenary right of the High Court to issue a prerogative writ will not normally be exercised by the Court to the exclusion of other available remedies unless such action of the State or its instrumentality is arbitrary and unreasonable so as to violate the constitutional mandate of Article 14 or for other valid and legitimate reasons, for which the Court thinks it necessary to exercise the said jurisdiction."
(emphasis supplied)
41. Therefore, while exercising its jurisdiction under Article 226, the Court is entitled to enquire into whether the action of the State or its instrumentalities is arbitrary or unfair and in consequence, in violation of Article 14. The jurisdiction under Article 226 is a valuable constitutional safeguard against an arbitrary exercise of state power or a 36 misuse of authority. In determining as to whether the jurisdiction should be exercised in a contractual dispute, the Court must, undoubtedly eschew, disputed questions of fact which would depend upon an evidentiary determination requiring a trial. But equally, it is well-settled that the jurisdiction under Article 226 cannot be ousted only on the basis that the dispute pertains to the contractual arena. This is for the simple reason that the State and its instrumentalities are not exempt from the duty to act fairly merely because in their business dealings they have entered into the realm of contract. Similarly, the presence of an arbitration clause does oust the jurisdiction under Article 226 in all cases though, it still needs to be decided from case to case as to whether recourse to a public law remedy can justifiably be invoked. The jurisdiction under Article 226 was rightly invoked by the Single Judge and the Division Bench of the Andhra Pradesh in this case, when the foundational representation of the contract has failed. TSIIC, a state instrumentality, has not just reneged on its contractual obligation, but hoarded the refund of the principal and interest on the consideration that was paid by Unitech over a decade ago. It does not dispute the entitlement of Unitech to the refund of its principal."
(Emphasis supplied) The Apex Court in the case of UNITECH, formulates a specific issue of maintainability of a writ petition under Article 226 of the Constitution of India and answers it by following ABL International and holding that in certain circumstances, even on a money claim, the writ would be maintainable, if the action of the State smacks arbitrariness. The case at hand would form a classic illustration for entertainment of a writ petition allowing a money claim, as the Bank, a State under Article 12 of the Constitution of India, has 37 conducted itself which would not behove its status. Therefore, even though a claim is made for money, I deem it appropriate to entertain the writ petition and grant the prayer that is sought for by the petitioner, as there is no determination necessary of any amount payable, as the petitioner is an auction purchaser and has paid certain amount to the Bank and is seeking refund of the said amount in the same manner a Bank would charge interest on borrowals.
20. For the aforesaid reasons, I pass the following:
ORDER
(i) Writ petition is allowed.
(ii) Sale certificate dated 10-10-2014 issued by the 1st respondent/Punjab National Bank stands quashed.
(iii) Respondents 1 and 2 are directed to refund `30,69,08,217 to the petitioner being the purchase price of the schedule property along with interest at the lending rate of the Bank, from the date of deposit of the amount till date of disbursement and incidental charges.38
(iv) The Punjab National Bank/respondent No.2 is at liberty to avail all such remedies as are available to it in law to safeguard its interest.
(v) Time for refund of the amount is fixed at three months from the date of receipt of a copy of this order.
Sd/-
JUDGE bkp CT:SS