Karnataka High Court
Sree Shanmuga Morden Rice Mills Pvt Ltd vs The Competent Authority on 25 November, 2025
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NC: 2025:KHC:48915-DB
M.F.A. No.4029/2025
AND CONNECTED MATTERS
HC-KAR
IN THE HIGH COURT OF KARNATAKA AT BENGALURU
DATED THIS THE 25TH DAY OF NOVEMBER, 2025
PRESENT
THE HON'BLE MRS. JUSTICE ANU SIVARAMAN
AND
THE HON'BLE MR. JUSTICE VIJAYKUMAR A. PATIL
MISCELLANEOUS FIRST APPEAL NO.4029/2025
C/W
MISCELLANEOUS FIRST APPEAL NO.3898/2025
MISCELLANEOUS FIRST APPEAL NO.3985/2025
MISCELLANEOUS FIRST APPEAL NO.4033/2025
MISCELLANEOUS FIRST APPEAL NO.4065/2025 (KPIDFA)
IN M.F.A. No.4029/2025:
BETWEEN:
CANARA BANK
Digitally signed A PUBLIC SECTOR BANK
by ARSHIFA HAVING ITS BRANCH OFFICE AT
BAHAR KHANAM ARM I BRANCH
Location: High SPENCER'S TOWER
Court Of 86, MG ROAD, BENGALURU-560 001.
Karnataka REPRESENTED BY ITS CHIEF MANAGER
MR. RANJAN KUMAR.
...APPELLANT
(BY SRI. HEMANTH R. RAO, ADV.,)
AND:
1. THE COMPETENT AUTHORITY
FOR M/S SHRI SHANMUGA FINANCIERS
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NC: 2025:KHC:48915-DB
M.F.A. No.4029/2025
AND CONNECTED MATTERS
HC-KAR
OTHER GROUP OF COMPANIES
REP. BY ITS COMPETENT AUTHORITY
SMT. MANGALA S.M.
AGE 51 YEARS
DESIGNATED BY ADDITIONAL DEPUTY
COMMISSIONER, OFFICE OF THE DEPUTY
COMMISSIONER, JILLADALITHA BHAVANA
KUMBARAHALLI, MULABAGAL ROAD
NH-75, KOLAR 563 101.
2. R.N. SHANMUGAM
S/O SRI. R.K. NARAYANASWAMY
AGED ABOUT 69 YEARS
2770, SUMITRA NILAYA
OPP. CANARA BANK
BANGARPET-563114
KOLAR DIST.
3. SRI. SHANMUGA FINANCIERS AND
OTHER GROUP OF COMPANIES
NO.599, BAZAR STREET, BANGARPET
KOLAR DISTRICT-563114
REP. BY ITS MANAGING DIRECTOR
SHRI. R.N. SHANMUGAM
...RESPONDENTS
(BY SRI. VEERESH R. BUDHIHAL, ADV., FOR R1)
THIS MFA IS FILED U/S.16 OF THE KARNATAKA
PROTECTION OF INTEREST OF DEPOSITORS IN FINANCIAL
ESTABLISHMENT ACT, PRAYING TO SET ASIDE THE ORDER
DATED 03.05.2025 PASSED IN MISC.NO.1443/2024 PASSED
BY THE XCI ADDITIONAL CITY CIVIL AND SESSIONS JUDGE,
BENGALURU (CCH-92) IN MISC.NO.1443/2024 PRODUCED AT
ANNEXURE-A & ETC.
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NC: 2025:KHC:48915-DB
M.F.A. No.4029/2025
AND CONNECTED MATTERS
HC-KAR
IN M.F.A. NO.3898/2025:
BETWEEN:
SREE SHANMUGA MORDEN RICE MILLS PVT LTD
A COMPANY UNDER CIRP
HAVING ITS REGISTERED OFFICE AT
DESIHALLI, KASABA HOBLI, KGF ROAD
BANGERPET- 563114, KOLAR DISTRICT.
REP. BY ITS RESOLUTION PROFESSIONAL
MR. KANEKAL CHANDRASHEKAR.
...APPELLANT
(BY SRI. HEMANTH R. RAO, ADV.,)
AND:
1. THE COMPETENT AUTHORITY
FOR M/S SHRI SHANMUGA FINANCIERS
AND OTHER GROUP OF COMPANIES
REP. BY ITS COMPETENT AUTHORITY
SMT. MANGALA S.M.
AGED 51 YEARS
DESIGNATED BY ADDITIONAL DEPUTY
COMMISSIONER, OFFICE OF THE DEPUTY
COMMISSIONER, JILLADALITHA BHAVANA
KUMBARAHALLI, MULABAGAL ROAD
NH-75, KOLAR 563 101.
2. MR. R.N. SHANMUGAM
S/O SRI. R.K. NARAYANASWAMY
2776, SUMITRA NILAYA
OPP. CANARA BANK
BANGARPET-563114
KOLAR DIST.
3. SRI. SHANMUGA FINANCIERS
AND OTHER GROUP OF COMPANIES
NO.599, BAZAR STREET, BANGARPET
KOLAR DISTRICT-563114
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NC: 2025:KHC:48915-DB
M.F.A. No.4029/2025
AND CONNECTED MATTERS
HC-KAR
REP. BY ITS MANAGING DIRECTOR
SHRI. R.N. SHANMUGAM
AGED 69 YEARS.
...RESPONDENTS
(BY SRI. VEERESH R. BUDHIHAL, ADV., FOR R1)
THIS MFA IS FILED U/S.16 OF THE KARNATAKA
PROTECTION OF INTEREST OF DEPOSITORS IN FINANCIAL
ESTABLISHMENT ACT, 2004, PRAYING TO SET ASIDE THE
ORDER DATED 03.05.2025 PASSED IN MISC.NO.249/2025
PASSED BY THE XCI ADDITIONAL CITY CIVIL AND
SESSIONS JUDGE, BENGALURU (CCH-92) IN MISC
NO.249/2025 PRODUCED AT ANNEXURE-A INSOFAR AS
THE SCHEDULED PROPERTY SL.NO.8, 9, 10, 11, 12
CONCERNED.
IN M.F.A. NO.3985/2025:
BETWEEN:
CANARA BANK
A PUBLIC SECTOR BANK
HAVING ITS BRANCH OFFICE AT
ARM 1 BRANCH, SPENCER'S TOWER
NO.86, M.G. ROAD, BENGALURU- 560 001
REPRESENTED BY ITS CHIEF MANAGER
MR. RANJAN KUMAR.
...APPELLANT
(BY SRI. HEMANTH R. RAO, ADV.,)
AND:
1. THE COMPETENT AUTHORITY
FOR M/S SHRI SHANMUGA FINANCIERS
AND OTHER GROUP OF COMPANIES
REP. BY ITS COMPETENT AUTHORITY
SMT. MANGALA S.M.
AGED 51 YEARS
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NC: 2025:KHC:48915-DB
M.F.A. No.4029/2025
AND CONNECTED MATTERS
HC-KAR
DESIGNATED BY ADDITIONAL DEPUTY
COMMISSIONER, OFFICE OF THE
DEPUTY COMMISSIONER
JILLADALITHA BHAVANA, KUMBARAHALLI
MULABAGAL ROAD, NH-75, KOLAR 563 101.
2. SRI. SHANMUGA FINANCIERS AND
OTHER GROUP OF COMPANIES
NO.599, BAZAR STREET
BANGARPET, KOLAR DISTRICT-563114
REP. BY ITS MANAGING DIRECTOR
SHRI. R.N. SHANMUGAM
AGED 69 YEARS.
3. MR. R.N. SHANMUGAM
S/O SRI. R.K. NARAYANASWAMY
2776, SUMITRAMMAL NILAYAM
OPP. CANARA BANK, BANGARPET
KOLAR DIST-563114.
4. MS. GUNASHEKARI
W/O SRI. R.N. SHANMUGAM
2776, SUMITRAMMAL NILAYAM
OPP. CANARA BANK, BANGARPET
KOLAR DISTRICT-563114.
...RESPONDENTS
(BY SRI. VEERESH R. BUDHIHAL, ADV., FOR R1)
THIS MFA IS FILED U/S.16 OF THE KARNATAKA
PROTECTION OF INTEREST OF DEPOSITORS IN FINANCIAL
ESTABLISHMENT ACT, 2004, PRAYING TO SET ASIDE THE
ORDER DATED 03.05.2025 PASSED IN MISC.NO.162/2025
PASSED BY THE XCI ADDITIONAL CITY CIVIL AND
SESSIONS JUDGE AND SPL. JUDGE, BENGALURU (CCH-92)
IN MISC.NO.162/2025 PRODUCED AT ANNEXURE-A,
INSOFAR AS THE SCHEDULED PROPERTY ITEAM NO.1 AND
ITEAM NO.3 CONCERNED & ETC.
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NC: 2025:KHC:48915-DB
M.F.A. No.4029/2025
AND CONNECTED MATTERS
HC-KAR
IN M.F.A. NO.4033/2025:
BETWEEN:
SREE SHANMUGA MODERN RICE MILLS
A COMPANY UNDER CIRP
HAVING ITS REGISTERED OFFICE AT
DESIHALLI, KASABA HOBLI
KGF ROAD, BANGERPET- 563114
KOLAR DISTRICT
REP. BY ITS RESOLUTION PROFESSIONAL
MR. KANEKAL CHANDRASHEKAR.
...APPELLANT
(BY SRI. HEMANTH R. RAO, ADV.,)
AND:
1. THE COMPETENT AUTHORITY
FOR M/S SHRI SHANMUGA FINANCIERS
AND OTHER GROUP OF COMPANIES
REP. BY ITS COMPETENT AUTHORITY
SMT. MANGALA S.M.
AGE 51 YEARS
DESIGNATED BY ADDITIONAL DEPUTY
COMMISSIONER, OFFICE OF THE DEPUTY
COMMISSIONER, JILLADALITHA BHAVANA
KUMBARAHALLI, MULABAGAL ROAD
NH-75, KOLAR 563 101.
2. SRI. R.N. SHANMUGAM
S/O R.K. NARAYANASWAMY
AGED 69 YEARS
2776, SUMITRA NILAYA
OPP. CANARA BANK
BANGARPET-563114
KOLAR DIST.
3. SMT. GUNASHEKARI
W/O R.N. SHANMUGAM
2776, SUMITRA NILAYA
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NC: 2025:KHC:48915-DB
M.F.A. No.4029/2025
AND CONNECTED MATTERS
HC-KAR
OPP. CANARA BANK
KOLAR ROAD, BANGARPET-563114
KOLAR DISTRICT.
4. SRI. SHANMUGA FINANCIERS AND
OTHER GROUP OF COMPANIES
NO.599, BAZAR STREET
BANGARPET, KOLAR DISTRICT-563114
REP. BY ITS MANAGING DIRECTOR
SRI. R.N. SHANMUGAM
AGED 69 YEARS.
...RESPONDENTS
(BY SRI. VEERESH R. BUDHIHAL, ADV., FOR R1)
THIS MFA IS FILED U/S.16 OF THE KARNATAKA
PROTECTION OF INTEREST OF DEPOSITORS IN FINANCIAL
ESTABLISHMENT ACT, PRAYING TO SET ASIDE THE ORDER
DATED 03.05.2025 PASSED IN MISC.NO.162/2025 PASSED
BY THE XCI ADDITIONAL CITY CIVIL AND SESSIONS
JUDGE AND SPL. JUDGE, BENGALURU (CCH-92) IN
MISC.NO.162/2025 PRODUCED AT ANNEXURE-A, INSOFAR
AS THE SCHEDULED PROPERTY ITEAM NO.1 AND ITEAM
NO.3 CONCERNED & ETC.
IN M.F.A. NO.4065/2025:
BETWEEN:
CANARA BANK
A PUBLIC SECTOR BANK
HAVING ITS BRANCH OFFICE AT
ARM I BRANCH, SPENCER'S TOWER
NO.86, M.G. ROAD, BENGALURU-560 001
REP. BY ITS CHIEF MANAGER
MR. RANJAN KUMAR.
...APPELLANT
(BY SRI. HEMANTH R. RAO, ADV.,)
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NC: 2025:KHC:48915-DB
M.F.A. No.4029/2025
AND CONNECTED MATTERS
HC-KAR
AND:
1. THE COMPETENT AUTHORITY
FOR M/S SHRI SHANMUGA FINANCIERS
AND OTHER GROUP OF COMPANIES
REP. BY ITS COMPETENT AUTHORITY
SMT. MANGALA S.M.
AGED 51 YEARS
DESIGNATED BY ADDITIONAL DEPUTY
COMMISSIONER, OFFICE OF THE DEPUTY
COMMISSIONER, JILLADALITHA BHAVANA
KUMBARAHALLI, MULABAGAL ROAD
NH-75, KOLAR 563 101.
2. SRI. DILIP KUMAR R.S.
AGED ABOUT 40 YEARS
S/O SRI. R.N. SHANMUGAM
2770, SUMITRA NILAYA
OPP. CANARA BANK, KOLAR ROAD
BANGARPET, KOLAR DIST-563114.
3. SRI. SHANMUGA FINANCIERS AND
OTHER GROUP OF COMPANIES
NO.599, BAZAR STEET, BANGARPET
KOLAR DISTRICT-563114
REP. BY ITS MANAGING DIRECTOR
SHRI. R.N. SHANMUGAM
AGED ABOUT 69 YEARS.
...RESPONDENTS
(BY SRI. VEERESH R. BUDHIHAL, ADV., FOR R1)
THIS MFA IS FILED U/S.16 OF THE KARNATAKA
PROTECTION OF INTEREST OF DEPOSITORS IN FINANCIAL
ESTABLISHMENT ACT, 2004, PRAYING TO SET ASIDE THE
ORDER DATED 03.05.2025 PASSED IN MISC.NO.37/2025
PASSED BY THE XCI ADDITIONAL CITY CIVIL AND
SESSIONS JUDGE BENGALURU (CCH-92) IN
MISC.NO.37/2025 PRODUCED AT ANNEXURE-A, INSOFAR
AS THE SCHEDULED PROPERTY ITEAM NO.1 AND ITEAM
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NC: 2025:KHC:48915-DB
M.F.A. No.4029/2025
AND CONNECTED MATTERS
HC-KAR
NO.3 CONCERNED & ETC.
THESE APPEALS, COMING ON FOR ADMISSION, THIS
DAY, JUDGMENT WAS DELIVERED THEREIN AS UNDER:
CORAM: HON'BLE MRS. JUSTICE ANU SIVARAMAN
and
HON'BLE MR. JUSTICE VIJAYKUMAR A. PATIL
ORAL JUDGMENT
(PER: HON'BLE MR. JUSTICE VIJAYKUMAR A. PATIL) These appeals are filed by the Canara Bank and the Resolution Professional of Sree Shanmuga Modern Rice Mills Private Limited challenging the orders passed in the miscellaneous cases by the XCI Additional City Civil and Sessions Judge and Special Judge for KPIDFE Cases, Bengaluru (CCH-92) as under:
MFA No. Misc.No. and date Claimant MFA No.4029/2025 Misc.No.1443/2024 Canara Bank dated 03.05.2025 MFA No.3898/2025 Misc.No.249/2025 Sree Shanmuga dated 03.05.2025 Modern Rice Mills Pvt. Ltd.
MFA No.3985/2025 Misc.No.162/2025 Canara Bank dated 03.05.2025 MFA No.4033/2025 Misc.No.162/2025 Sree Shanmuga dated 03.05.2025 Modern Rice Mills Pvt. Ltd.
MFA No.4065/2025 Misc.No.37/2025 Canara Bank dated 03.05.2025
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NC: 2025:KHC:48915-DB M.F.A. No.4029/2025 AND CONNECTED MATTERS HC-KAR
2. Sri.Hemanth R.Rao, learned counsel appearing for the appellants submits that the appellants were not arrayed as parties before the Special Court and hence, they were not aware about the passing of the order by the Special Court under Section 5(2) of the Karnataka Protection of Interest of Depositors in Financial Establishments Act, 2004 (hereinafter referred to as 'the Act'). It is submitted that the Canara Bank is a secured creditor and its charge is prior than the attachment order. It is further submitted that the proceedings were initiated under the provisions of the Insolvency and Bankruptcy Code, 2016 (IBC) and an order under Section 14 of the IBC came to be passed on 17.03.2023 and in view of the said order, the impugned order of the Special Court is liable to be set aside. It is also submitted that both the appellants have filed writ petitions in W.P.Nos.1880/2022 and 16377/2021. The learned Single Judge of this Court, considering the rival contentions allowed the writ petitions holding that the attachment order insofar as the secured
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NC: 2025:KHC:48915-DB M.F.A. No.4029/2025 AND CONNECTED MATTERS HC-KAR properties as regards which any mortgage or security interest has been created in favour of any member of the Committee of Creditors, shall stand vacated. It is contended that in view of the aforesaid orders of the learned Single Judge, the appeals are required to be allowed.
3. Per contra, Sri.Veeresh R.Budihal, learned counsel for the respondent No.1 supports the impugned order of the Special Court and submits that there is no dispute with regard to the orders passed by the learned Single Judge in the aforesaid writ petitions. However, as there is a law declared by the Hon'ble Supreme Court in the case of NATIONAL SPOT EXCHANGE LIMITED VS. UNION OF INDIA AND ORS.1, wherein it was held that the Maharashtra Protection of Interest of Depositors (in Financial Establishments) Act, 1999, has an overriding effect on the proceedings initiated under the Securitisation and Reconstruction of Financial Assets and Enforcement of 1 W.P.(Civil) No.995/2019 dt. 15.05.25
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NC: 2025:KHC:48915-DB M.F.A. No.4029/2025 AND CONNECTED MATTERS HC-KAR Security Interest Act, 2002 as well as the IBC and therefore, the question of interference would not arise. Hence, he seeks dismissal of the appeals.
4. We have heard the arguments of the learned counsel for the appellants, learned counsel for the respondent No.1 and meticulously perused the material available on record. We have given our anxious consideration to the submissions advanced on both sides.
5. In these appeals, the secured creditors-Canara Bank and the Resolution Professional of Sree Shanmuga Modern Rice Mills Private Limited filed appeals assailing the orders of the Special Court, wherein the Special Court has passed an order under Section 5(2) of the Act confirming the attachment orders dated 24.02.2022. It is noticed that the appellants were not parties to the proceedings before the Special Court. It is also noticed that in the writ petitions filed by the appellants before this Court, the Competent Authority was not arrayed as a
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NC: 2025:KHC:48915-DB M.F.A. No.4029/2025 AND CONNECTED MATTERS HC-KAR party. In W.P.No.1880/2022 filed by the Canara Bank against the State of Karnataka and others, the learned Single Judge vide order dated 13.12.2024 partly allowed the writ petition. The operative portion of the said reads as under:
"i. The writ petition is partly allowed; ii. The proceeding under the KPID Act though shall continue the attachment order passed in respect of the properties as regard which the security interest as been created in favor of the petitioner - bank shall stand vacated;
iii. The question of any release of the said properties to the petitioner - bank would not arise."
6. The writ petition filed by the Resolution Professional of Sree Shanmuga Modern Rice Mills Private Limited in W.P.No.16377/2021 came to be disposed of on 13.12.2024 by the learned Single Judge. The operative portion of the said reads as under:
"i. The writ petition is allowed, thought the proceedings under the KPID Act shall continue, the same shall be subject to the outcome of the insolvency proceedings undertaken in respect of the
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NC: 2025:KHC:48915-DB M.F.A. No.4029/2025 AND CONNECTED MATTERS HC-KAR petitioner. The attachment order in so far as any secured properties as regards which any mortgagee or security interest has been created in favour of any member of the committee of creditors shall stand vacated.
ii. The secured creditors in respect of those properties could be entitled to deal with them in accordance with law and as per the security interest credited in favour of the secured creditor, as regards which there is any attachment but no security interest which is created the attachment order is quashed, subject to any amount being received being over and above the requirement of discharging all the creditors of the petitioner company to be deposited with the authorities ceased of the proceedings under the KPID Act."
7. We have perused the orders passed by the learned Single Judge in the aforesaid writ petitions. The said orders make it very clear that the attachment order insofar as any secured creditors as regards which any mortgage or any security interest has been created in favour of any member of the Committee of the Creditors, shall stand vacated. In view of the specific finding and direction, we are of the considered view that there was
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NC: 2025:KHC:48915-DB M.F.A. No.4029/2025 AND CONNECTED MATTERS HC-KAR nothing before the Special Court to pass the order of confirmation. It cannot be lost sight of the fact that the Competent Authority was not arrayed as a party before the learned Single Judge in both the petitions. Hence, the interest of justice would be met if express liberty is reserved to the Competent Authority to take appropriate steps including the challenge to the orders of the learned Single Judge or to seek review of the said order in view of the decision of the Hon'ble Supreme Court in the case of NATIONAL SPOT EXCHANGE, referred supra.
8. With the aforesaid observation and liberty, the appeals are allowed.
The impugned orders dated 03.05.2025 passed in Misc.Nos.1443/2024, 249/2025, 162/2025, 162/2025 and 37/2025, respectively passed by the XCI Additional City Civil and Sessions Judge and Special Judge for KPIDFE Cases, Bengaluru (CCH-92) are set aside.
It is needless to observe that if the Competent Authority succeeds in its endeavour to seek the review or
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NC: 2025:KHC:48915-DB M.F.A. No.4029/2025 AND CONNECTED MATTERS HC-KAR modification of the order of the learned Single Judge, it is open for the Competent Authority to seek continuation of further proceedings under the Act insofar as the properties concerned under these proceedings.
In view of the disposal of the appeals, the pending applications, if any, are also disposed of.
Sd/-
(ANU SIVARAMAN) JUDGE Sd/-
(VIJAYKUMAR A. PATIL) JUDGE RV List No.: 1 Sl No.: 16