Karnataka High Court
M/S The Karnataka State Financial ... vs N.Lakshmana on 3 January, 2020
Bench: Ravi Malimath, M.Nagaprasanna
1
IN THE HIGH COURT OF KARNATAKA AT BENGALURU
ON THE 03rd DAY OF JANUARY, 2020
BEFORE
THE HON'BLE MR. JUSTICE RAVI MALIMATH
AND
THE HON'BLE MR. JUSTICE M. NAGAPRASANNA
WRIT APPEAL No.3960 OF 2019 (GM-KSFC)
BETWEEN:
1. M/S THE KARNATAKA STATE FINANCIAL
CORPORATION
NO.1/2, THIMMAIAH ROAD,
BENGALURU - 560 052.
REPRESENTED BY ITS MANAGING DIRECTOR.
2. THE DEPUTY GENERAL MANAGER,
K.S.F.C., 8TH FLOOR, JAYANAGARA
SHOPPING COMPLEX,
4TH BLOCK, JAYANAGAR,
BENGALURU - 560 011.
APPELLANT NOs.1 AND 2 ARE
REPRESENTED BY
SENIOR MANAGER, K.S.F.C.
... APPELLANTS
(BY SRI BIPIN HEGDE, ADVOCATE)
AND:
N. LAKSHMANA,
SON OF LATE NARAYANAPPA,
2
AGED ABOUT 54 YEARS,
NO.5, GOVINDAPPA LANE,
THIGALARAPET,
BENGALURU - 560 002.
... RESPONDENT
THIS WRIT APPEAL IS FILED UNDER SECTION 4 OF
THE KARNATAKA HIGH COURT ACT PRAYING TO SET
ASIDE THE ORDER DATED 24.09.2019 PASSED BY THE
LEARNED SINGLE JUDGE IN WRIT PETITION NO.330 OF
2016 AND DISMISS THE WRIT PETITION NO.330 OF
2016 FILED BY THE RESPONDENT ETC.
THIS WRIT APPEAL HAVING BEEN HEARD AND
RESERVED FOR JUDGMENT ON 11.12.2019 COMING ON
THIS DAY, M.NAGAPRASANNA J., PRONOUNCED THE
FOLLOWING:-
JUDGMENT
Aggrieved by the order dated 24.09.2010 passed in Writ Petition No.330 of 2016 by the learned Single Judge in allowing the Writ Petition, the respondent-Corporation has preferred the instant writ appeal.
2. The parties will be referred to as per their ranking in the writ petition before the learned Single Judge.
3. Brief facts of the case are as follows: 3
One Sri Shekar @ B.S. Chandrashekar, owner of house property bearing No.8, situated at Periyanna Muniswammappa Lane, Sadara Patrappa Road, Thigalarpet, Bangalore, had availed loan from respondent No.1-Karnataka State Financial Corporation (Hereinafter referred to as 'the Corporation') and had mortgaged the house property as a collateral security to the Corporation. The borrower going in default, a notification was issued in the news paper for conducting an auction of the property, upon which the borrower instituted a suit on 12.1.2004 before the Court of City Civil Judge at Bangalore in O.S. No.325 of 2004. The Corporation was the 1st defendant in the said suit.
4. During the pendency of the suit and a status quo order being in operation, the Corporation issued e-auction tender notification on 27.10.2010 in 'Vijaya Karnataka', a Kannada daily newspaper, notifying to sell the property at item No.1, bearing No.8, (Old Nos.3, 4 and 5) situated at Sadara Patrappa Road, Periyanna 4 Muniswammappa Lane (Thigalarpet), Nagarthpet, Bangalore - 560 002. The bid amount that was fixed was Rs.34.00 lakhs and the earnest money deposit (EMD) was Rs.3.40 lakhs. This was notified in terms of Section 13(2) and (4) of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002, (hereinafter referred to as 'the Act') to recover the dues claiming that the Corporation had already taken the possession of the property in question.
5. In furtherance of the e-auction notification, the writ petitioner submitted his bid for the said property and was declared to be the highest bidder. Accordingly, he made payment of 25 percent of the bid amount i.e., Rs.8.50 lakhs and the payments were made by way of cheques drawn in favour of the Corporation. After making 25 percent of the payment, the petitioner came to know of O.S. No.325 of 2004 filed by Sri Shekar @ B.S Chandrashekar against the Corporation and others before 5 the City Civil Court, Bangalore, in respect of the very same property. Notwithstanding this, the Corporation demanded the balance sale consideration amount of Rs.25.50 lakhs in order to execute the sale deed in favour of the petitioner.
6. The petitioner refused to pay 75 percent of the remaining amount demanded by the Corporation. Hence, the Corporation issued a letter on 31.10.2015 blaming the petitioner that he had failed to make the payment of balance amount within the stipulated time. On that ground, the Corporation forfeited the amount of Rs.8.50 lakhs, being 25 percent of the bid amount, on the ground that the petitioner had not fulfilled his obligation in terms of the auction by not making an offer to purchase the petition schedule property which was brought to sale for the sum of Rs.34.00 lakhs. The balance sale consideration was to be made on or before 15.12.2010. A legal notice was issued on 28.9.2015 by the petitioner 6 seeking refund of the amount that he had paid and requested the Corporation to execute a sale deed in his favour, once the property becomes free of all encumbrances and gets a marketable title. This was replied by the Corporation on 31.10.2015 stating that the order of status quo was vacated and there was no impediment for the sale of the property and declined to accept the refund of 25 percent that was paid by the petitioner on the date of e-auction sale.
7. The petitioner filed Writ Petition No.330 of 2016 with a prayer either to direct the Corporation to register the sale deed with a clear marketable title or to refund 25 percent of the amount of Rs.8.50 lakh with interest. The Corporation contested the issue before the learned Single Judge on the ground that for the first time, the petitioner made a grievance in the year 2015 after the deposit of 25 percent of the bid amount in the year 2010. There was delay of 5 years in causing the legal notice 7 and 6 years in approaching this Court in the instant writ petition.
8. The learned Single Judge opining that there was suppression on the part of Corporation with regard to the pendency of litigation which amounted to Corporation playing fraud on the petitioner, ordered for refund of Rs.8.50 lakhs with interest at 6 percent per annum and also imposed the cost of Rs.1.00 lakh to be paid to the petitioner for driving him to unnecessary litigation. While passing the said order, the learned Single Judge also passed several strictures against the Corporation. Feeling aggrieved, the respondent-Corporation has preferred the instant writ appeal.
9. We have heard Sri Bipin Hegde, learned Counsel appearing for the appellants.
10. The facts that are not in dispute are that the borrower, who had borrowed certain sum from the 8 Corporation, challenged the action of the Corporation in notifying the property for e-auction on the ground that the borrower was in default for non payment of loan. On such cause of action, the borrower approached the City Civil Court at Bangalore in O.S. No.325 of 2004 for judgment and decree restraining the Corporation from auctioning the schedule property. The description of the schedule property reads thus:
"SCHEDULE All that piece and parcel of 4 property bearing Door No.8, situated at Periyanna Muniswamappa Lane, Sadara Patrappa Road, Thigalarpet, Bangalore - 560 002, measuring East to West 31 '7" and North to South 27' bounded on the:
East by : Vacant space and house
belonging to Sri Ramaiah.
West by : Vacant space and house
belonging to Sri Narasimachari.
North by : House belonging to
Muniswamappa & Chinnaiah.
South by : Perianna Muniswamappa
Lane Road.
Consisting of House."
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It transpires that the suit was instituted by the borrower on 12.1.2004 and the trial Court had granted an order of status quo in favour of the borrower.
11. During the pendency of the suit, the Corporation again notified the very same property for e- auction through its notification dated 27.10.2010 (Annexure-A) notifying to sell the property at item NO.1, bearing No.8, (Old Nos.3, 4 and 5) situated at Sadara Patrappa Road, Periyanna Muniswammappa Lane (Thigalarpet), Nagarthpet, Bangalore - 560 002. This notification was issued under Section 13(2) and (4) of the Act fixing the bid amount at Rs.34.00 lakhs and the EMD at Rs.3.40 lakhs. The petitioner submitted his bid and was declared to be the highest bidder. On such declaration, he was directed to pay 25 percent of the bid amount which the petitioner complied by making the payment of Rs.8.50 lakhs i.e., 25 percent of the bid amount in the following manner:
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"(i) Rs.3,40,000/- was deposited
through bankers cheque No.126668
dated 4.11.2010 issued by Sri Charan Co-operative Bank Ltd., Bengaluru;
(ii|) Rs.5,10,000/- was deposited
through bankers cheque No.127718
dated 10.11.2010 issued by Sri Charan Co-operative Bank Ltd., Bengaluru."
12. It is after making the aforementioned payment, the petitioner came to know of the pendency of O.S. No.325 of 2004 instituted by the borrower and an order of status quo being operated in favour of the borrower. The property that was in the schedule of the original suit was the same that was brought to sale in terms of the e-auction notification dated 27.10.2010, which the Corporation deliberately suppressed in the said e-auction notification, notwithstanding the fact that the Corporation was the first defendant in the said suit and the suit was pending since 2004, six years prior to auction notification. Immediately, thereafter, the petitioner gave a representation on 21.1.2011 11 (Annexure-D) demanding the refund of 25 percent of the amount that was paid by him in terms of the bid on the ground that the property that was sold to him did not have a clear marketable title free from all encumbrances.
13. In reply to the representation of the petitioner, the Corporation stated that the remaining 75 percent of the amount i.e., Rs.25.50 lakhs ought to have been paid by the petitioner on or before on 15.12.2010 and for not paying the balance amount, the amount of Rs.8.50 lakh was forfeited. The petitioner caused a legal notice upon the Corporation either to refund the amount or to sell the property to the petitioner with a marketable title free from all encumbrances. That, having declined by the Corporation through its reply to the legal notice, the petitioner approached this Court in Writ Petition No.330 of 2016.
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14. The learned Single Judge, in the light of the objections filed by the Corporation, came to conclusion that the Corporation had played fraud on the petitioner as knowing fully well of the pendency of the suit and a status quo order in operation, e-auction was conducted six years after the institution of the suit without disclosing the pendency of the suit in the e-auction notification. It was the contention of the Corporation that the petitioner had to avail the alternative remedy of filing an appeal under Section 17 of the Act before the Debt Recovery Tribunal.
15. The learned Single Judge considered every aspect of the matter and came to conclusion that the e- auction notification issued by the Corporation notifying the property without mentioning the details of the pendency of the litigation amounted to suppression of facts and on that ground, it was correct on the part of the petitioner for not having paid the remaining 75 percent of the bid amount and it was wrong on the part 13 of the Corporation to have forfeited 25 percent of the bid amount.
16. The learned Single Judge further relied on the judgments of the Apex Court to conclude that suppression of material facts would amount to fraud being played by the Corporation on society. Accordingly, the learned Single Judge allowed the writ petition and issued a mandamus to the Corporation to refund the sum of Rs.8.50 lakh with interest at 6 percent per annum and also awarded expenses and the cost of the litigation to the petitioner of Rs.1.00 lakh and passed several strictures against the Corporation.
17. When the writ appeal came up for its consideration on 11.12.2019, the Corporation filed a memo, which reads thus:
"It is submitted that the above appeal is filed seeking to set aside the order dated:24/09/2019 passed by the learned single judge in W.P.330/2016. 14
The appellant herein submits that, the appellant Corporation is ready to refund a sum of Rs.8,50,000/- received from the respondent in furtherance of e- auction dated 10/10/2010 along with interest at 6% p.a. The appellant herein is limiting his writ appeal to the strictures passed against the appellant Corporation in the course of the impugned order and to the cost which has been levied by the Hon'ble Single Judge.
Therefore, it is prayed that this Hon'ble Court may be pleased to expunge the strictures passed against the appellant Corporation and waive the cost, in the interest of justice."
In terms of the afore-extracted memo, the Corporation restricts its challenge to the stricture passed by the learned Single Judge in the course of the order and the cost of Rs.1.00 lakh imposed upon them. The Corporation has conceded to refund the sum of Rs.8.50 15 lakh along with interest at 6 percent per annum from 10.10.2010 till the date of payment.
18. In the light of the memo and the totality of the circumstances, the points that would arise for our consideration are:
(1) Whether the learned Single Judge was justified in passing strictures against the Corporation and imposing the cost of Rs.1.00 lakh to be payable to the petitioner ?
(2) Whether the order of the learned Single Judge requires interference to that extent ?
19. Re. Point No.1:
To consider this, the conduct of the petitioner requires to be noticed. The e-auction was notified on 27.10.2010 and 25 percent of the bid amount was made by the petitioner on 4.11.2010 and 10.11.2010 and he was required to make the remaining payment within 15.12.2010. On 21.1.2011, the petitioner gave a 16 representation seeking refund of the deposited amount to which the Corporation had replied on 2.2.2011. The next communication from the petitioner to the Corporation was by causing a legal notice on 28.9.2015, which is close to 4½ years thereafter. Even in the notice, the petitioner states that he is ready and willing to pay the remaining sum subject to condition that the Corporation gives a clear and marketable title free from all encumbrances. The legal notice was replied by the Corporation, after which the petitioner herein preferred the writ petition and the prayer in the writ petition reads thus:
"PRAYER Wherefore, the petitioner most respectfully prays for the following reliefs.
i) Issue a writ of certiorari or any other writ, order or direction quashing the impugned notice No.KSFC/JBO/23-
2208/Sec-29/Sr(R) HD - 845 dated 30.11.2010 which is produced at Annexure 'B'.
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ii) Issue a writ of mandamus directing the
respondent to make out the
marketable title in respect of the
schedule property and to execute the sale deed in favour of the petitioner against the receipt of the balance sale consideration amount of Rs.25,50,000/- in terms of E-auction dated 10.10.2010.
iii) Alternatively issue a writ of mandamus or any other writ, order or direction, directing the respondents to refund the sum of Rs.8,50,000/- received by them from the petitioner in furtherance of the E-auction dated 10.10.2010 along with interest at the rate of 18% per annum from the date of receipt till the date of payment of the full amount.
iv) Grant cost of this petition. v) And also grant such other and further
reliefs as this Hon'ble Court deems fit considering the facts and circumstances of the case, to meet the ends of justice."
18In terms of the prayer sought in the writ petition, it is to be seen that the petitioner still wanted the property as his second prayer was to issue mandamus to the respondent therein to execute a sale deed in his favour after making out a marketable title and he was prepared to pay the balance of the bid amount. In the alternative, the petitioner, in his third prayer, sought for a writ of mandamus to the respondent to refund the sum of Rs.8.50 lakhs received by the Corporation with interest at 18 percent per annum from the date of receipt till the date of payment of the full amount. The learned Single Judge granted the alternate prayer which was for refund of the amount. While granting the prayer, the alternate prayer of the petitioner that the strictures that were passed against the Corporation were all unnecessary in the light of the observations made hereinabove. Insofar as imposition of cost of Rs.1.00 lakh on the Corporation is concerned, on consideration of the totality of circumstances as also the conduct of the writ petitioner, we feel that cost of Rs.1.00 lakh on the Corporation is on 19 the higher side. Hence, we deem it appropriate to modify the order imposing cost of Rs.50,000/- on the Corporation as against Rs.1.00 lakh.
Hence, we answer point No.1 partly in favour of the Corporation.
20. Re. Point No.2:
In our considered view, since the prayer of the petitioner while filing the writ petition was to secure the property and alternatively prayed for refund, the strictures passed by the learned Single Judge against the Corporation in the course of the order was wholly unnecessary and unwarranted and hence, the order of the learned Single Judge calls for appropriate interference.
21. In the light of the observations hereinabove, we expunge all the strictures/remarks made by the learned Single Judge against the Corporation in the 20 course of his order at paragraph Nos.33 to 36, which reads thus:
33. In view of the Dictum of the Hon'ble Supreme Court stated supra the contention of the learned counsel for respondents that the petitioner has for alternative remedy cannot be accepted. Admittedly, at the inception, KSFC proceeded to notify e-auction Tender Notification, suppressing the pendency of the original suit in respect of Item No.1 i.e. schedule property morefully described in the schedule to the writ petition and therefore, the intention of KSFC was not clean in notifying e-
auction. Therefore, the contention of the learned counsel for the respondents cannot be accepted and when the petitioner has brought to the notice of this court that injustice is done by KSFC while notifying e- auction procedure and they have not mentioned the pendency of the original suit. No person in the world purchases litigation property ignoring his mental peace and at the cost of loosing his health and money. Since, it was brought to the notice of KSFC, in all fairness, KSFC ought to have refunded the deposited amount 21 with interest to avoid further litigation, but the same has not been done by KSFC in the present case.
34. Even after hearing the matter for sometime on 29/5/2019 this Court provided an opportunity to KSFC to come forward and show their fairness and refund the amount. Still KSFC has not come forward and wanted the litigation to continue and contended that the writ is not maintainable which clearly indicates that KSFC is not before this Court with clean hands, clean mind and clean heart in notifying e-auction proceedings. Therefore, the very action initiated by KSFC is nothing but fraud on the Society including the petitioner and the same is not sustainable and the petitioner has made out statutory and enforceable right, accordingly, the point No.2 raised in the writ petition has to be answered in the affirmative in part holding that the petitioner has made out a case to issue of mandamus, directing the respondents-KSFC to refund a sum of Rs.8,50,000/- with 6% p.a. from the date of 22 receipt of the same amount by the respondents-KSFC.
VIII CONCLUSION:
35. In view of the above, writ petition is allowed insofar as petitioner is concerned and Writ of mandamus is issued to the respondents-KSFC to refund a sum of Rs.8,50,000/- received from the petitioner in furtherance of e-auction dated 10/10/2010 along with interest at 6% p.a. from the date of the amount received i.e. from 10/11/2010 till its payment.
36. The respondents-KSFC has unnecessarily encouraged for the litigation and abused the process of law on its own fault notifying e-auction Tender to the general public suppressing the pendency of the litigation i.e., O.S No.325/2004 and driven the petitioner before this Court. Therefore, the petitioner is entitled to the expenses and cost of the litigation. In view of 23 the aforesaid facts and peculiar circumstances of the case, respondents - KSFC have to pay the litigation expenses and costs Rs.1,00,000/-(Rupees one lakh) payable to the petitioner within a period of one month from the date of the receipt of this order, failing which, it is always open for the petitioner steps to recover the same take appropriate action in accordance with law."
22. For the aforementioned reasons, we pass the following order:
(i) Writ appeal is allowed in part.
(ii) The strictures passed by the learned Single
Judge in the order dated 24.09.2010 passed in Writ Petition No.330 of 2016 against the Corporation are hereby expunged.
(iii) The imposition of cost of Rs.1.00 lakh payable to the petitioner is modified to Rs.50,000/-, payable within four weeks from the date of the receipt of the copy of this order.
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(iv) The Corporation is directed to refund the amount of Rs.8.50 lakh received from the petitioner with interest at 6 percent per annum from the date of its receipt till the date of its payment, as expeditiously as possible, at any rate within a period of four weeks from the date of receipt of a copy of this order.
Sd/-
JUDGE Sd/-
JUDGE Cs