Karnataka High Court
Mr.Dilip Kumar A Shah vs Union Of India on 18 February, 2026
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NC: 2026:KHC:10390
WP No. 3317 of 2023
HC-KAR
IN THE HIGH COURT OF KARNATAKA AT BENGALURU
DATED THIS THE 18TH DAY OF FEBRUARY, 2026
BEFORE
THE HON'BLE MR. JUSTICE ASHOK S.KINAGI
WRIT PETITION NO. 3317 OF 2023 (GM-DRT)
BETWEEN:
1. MR.DILIP KUMAR A SHAH
S/O LATE ANANTH SHAH
AGED ABOUT 74 YEARS,
R/AT: NO. 519, 11th A CROSS,
RJMAHAL VILAS EXTENSION,
BNEGALURU - 560 080.
2. MR. ASHOK BALSARA
S/O LATE NAROTHAM
AGED ABOUT
NO. 34, 2ND CROSS,
BELLARY RAOD,
GANGANAGAR,
BENGALURU - 560 032.
Digitally ...PETITIONERS
signed by
SUNITHA K S (BY SRI. SHREYAS JAYASIMHA.,ADVOCATE)
Location:
HIGH COURT AND:
OF
KARNATAKA
1. UNION OF INDIA
MINISTRY OF FINANCE,
NORTH BLOCK,
NEW DELHI -110 001.
2. INDUSTRIAL DEVELOPMENT BANK OF
INDIA PRIVATE LIMITED,
IDBI HOUSE NO.58
MISSION ROAD,
BENGALURU -560 027.
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NC: 2026:KHC:10390
WP No. 3317 of 2023
HC-KAR
3. RECOVERY OFFICER - II
DEBT RECOVERY TRIBUNAL BANGALORE II
NO.4 RESIDENTY ROAD,
LIC JEEVAN MANGAL BUILDING,
HAYES ROAD,
BENGLAURU 560 025.
4. M/S MASTER STRIPES PRIVATE LTD.,
A COMPANY REGISTERED UNDER
THE COMPANIES ACT, 1956
REG. OFFICE AT NO.68 B,
BOMMASANDRA INDUSTRIAL AREA,
ANEKAL TALUK,
BENGALURU 562 158.
5. COATWELL STRIPS PVT LTD.,
A COMPANY REGISTERED UNDER
THE COMPANIES ACT, 1956
REGD. OFFICE AT NO. 68A,
BOMMASANDRA INDUSTRIAL AREA
ANEKAL TALUK,
BENGALURU 562 158.
6. UNION OF INDIA
MINISTRY OF LAW AND JUSTICE
4TH FLOOR, A WING, SHASTRI BHAWAN
NEW DELHI- 110 001.
REPRESENTED BY ITS SECRETARY
(AMENDED/IMPLEADED AS PER ORDER DATED
16.10.2024)
...RESPONDENTS
(BY SRI. SHANTHI BHUSHAN H.,DSGI FOR R1,
SRI.T.P. MUTHANNA, ADVCOATE FOR R2,
R3-SERVED)
THIS WP IS FILED UNDER ARTICLES 226 AND 227 OF
THE CONSTITUTION OF INDIA PRAYING TO-QUASH THE
SECTION OF 21 AND SECTION 30-A OF THE RECOVERY OF
DEBTS TO BANKS AND FINANCIAL INSTITUTIONS ACT, 1993
(RDBI ACT) AS BEING ULTRA VIRES THE CONSTITUTION OF
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NC: 2026:KHC:10390
WP No. 3317 of 2023
HC-KAR
INDIA.CQUASH THE DEMAND NOTICE DATED 16/03/2022
ISSUED BY THE R-2 ANNEXED AS ANNEXURE-D.
THIS PETITION, COMING ON FOR ORDERS, THIS DAY,
ORDER WAS MADE THEREIN AS UNDER:
CORAM: HON'BLE MR. JUSTICE ASHOK S.KINAGI
ORAL ORDER
1. The petitioners filed this writ petition challenging the demand notice dated 16.03.2022 issued by the respondent No. 2 vide Annexure-D.
2. Brief facts, leading rise to the filing of this writ petition are as follows:
3. Respondent No.4 is a company registered under the Companies Act, 1956. The petitioners and respondent No.5 are the guarantors for the loan transaction. Respondent No.4 executed a loan agreement dated 09.02.1993 in favour of respondent No.2 in connection with the grant of loan of ₹ 474 lakhs to respondent No.4. In pursuant to the aforesaid loan agreement in order to create security, respondent No.4 as security for the said loan, by -4- NC: 2026:KHC:10390 WP No. 3317 of 2023 HC-KAR executing the deed of hypothecation dated 09.02.1993 in favour of respondent No.2 in connection with the first loan agreement. The petitioners and respondent No.5 have jointly guaranteed the repayment and discharge of the amount due under the aforesaid first loan agreement for consideration and on the terms executed deeds of guarantee dated 11.02.1993 and deed of Corporate Guarantee Agreement dated 11.02.1993 executed by respondent No.5 in favour of respondent No.2 regarding the first loan agreement.
4. Respondent No.4 executed second loan agreement dated 30.11.1994 in favor of respondent no. 2 and subsequently, in pursuance of second loan agreement, respondent no. 4, to create a security for the said loan hypothecated on first charge basis, the whole of the involved properties described in the Schedule A hypothecated property in favour of -5- NC: 2026:KHC:10390 WP No. 3317 of 2023 HC-KAR respondent no.2. By executing the deed of hypothecation dated 30.11.1994.
5. The petitioners and respondent no. 5 have jointly guaranteed the repayment and discharge of the amounts due under the aforesaid second loan agreement for the consideration and on the terms and conditions executed a deed of guarantee dated 30.11.1994 and deed of corporate guarantee agreement dated 30.11.1994 executed by respondent no. 5 in favour of respondent no. 2 regarding second loan agreement.
6. Respondent No.4 defaulted in re-payment of loan and therefore, respondent No. 2 recalled the entire loan vide notice dated 07.04.2000 as a result, respondent No. 2 issued a letter of demand dated 18.04.2000 to respondent Nos. 4 and 5 and the petitioners.
7. Meanwhile the Hon'ble High Court of Karnataka in company petition No.159 of 1998, vide its order dated -6- NC: 2026:KHC:10390 WP No. 3317 of 2023 HC-KAR 23.09.2002, the official liquidator attached to the High Court was appointed as the official liquidator of the company wherein respondent No. 2 has received ₹8.55 from the official liquidators on 20.11.2006 after the sale of assets/properties of respondent No.2 company in liquidation towards the full and final settlement of the loan amount extended to respondent No. 4.
8. Respondent No. 2 filed a recovery application before the Learned Debts Recovery Tribunal, Bengaluru in O.A.No.210/2003 against the petitioners and respondent Nos. 4 and 5 claiming an aggregate sum of ₹ 23,90,45,507/- wherein the application in O.A. No. 210 of 2003 was allowed vide Order dated 31.08.2007. Thereafter, on the same day i.e., on 31.08.2007, the recovery certificate was issued to respondent No.2. Respondent No.3 acting under Sections 25, 26, 27 and 28 of RDBI Act issued a demand notice dated 16.03.2022 against the -7- NC: 2026:KHC:10390 WP No. 3317 of 2023 HC-KAR petitioner directing them to pay the amount of ₹23,90,45,507/-. Petitioner No. 1 submitted a reply to the said demand notice through the reply dated 07.04.2022 objecting to the demand notice issued on the ground that the said demand notice is time barred and the same is not maintainable. Thereafter, respondent No.2 replied to the reply dated 20.07.2022. The petitioners filed the rejoinder dated 27.10.2022 seeking the recovery officer to reject the demand notice on the ground that the demand notice is barred by time and hit by the provisions of Limitation Act. The recovery officer of debt recovery Tribunal 2 rejected the objection and rejoinder filed by the petitioners vide order dated 20.12.2022. Respondent No. 2- Recovery officer, on 12.10.2023 was on leave and the office of the recovery officer fixed the date on 27.01.2023, and intimated the same to the petitioners. However, the recovery officer without any intimation posted the matter on -8- NC: 2026:KHC:10390 WP No. 3317 of 2023 HC-KAR 24.01.2023 instead of 27.01.2023. At the instance of respondent No.4 bank and behind the back, has passed a coercive orders against the petitioner.
9. The issuance of a demand notice dated 16.03.2022 by respondent No.2 as against the petitioners after the lapse of 15 years is a coercive step and the petitioners as per Sections 20 and 21 of RBI Act are barred from filing an appeal against the order of DRT without the payment of 50% of the amount, and also as per Section 30 and 30A Of RDBI Act, without payment of 50% of the amount, the petitioners are barred from challenging the coercive action taken by the respondent No. 2 of issuing time bar demand notice. Hence, this writ petition.
10. Respondent No.2 filed a statement of objections contending that the petitioners and respondent No. 5 stood as guarantors for the loan obtained by respondent No. 4 company and they executed a deed of guarantee. Respondent No. 4 committed a default. -9-
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11. Respondent No.2 initiated proceedings under the SARFAESI Act. In the company petition No. 159 of 1998, vide order dated 23.09.2022, Hon'ble High court passed the orders for winding up of respondent No. 4 and the official liquidator attached to the High Court of Karnataka was appointed as the official liquidator of respondent No.4. The office of the official liquidator has thereafter invited the claims from the creditors and workmen of the company in liquidation. As per the order dated 15.09.2006 passed in OLR No. 655 of 2006, the official liquidator of the High Court of Karnataka took the possession of the assets of Respondent No. 4 and sold the same for a sum of ₹ 17.10 crore. The respondent bank filed O.A.No. 210 of 2003 against the respondent No.4, the petitioners and other guarantors before the debt recovery tribunal to Bengaluru for recovery of the amount due to the bank. The said OA was allowed. It was held that the petitioners and respondent No.4 and
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NC: 2026:KHC:10390 WP No. 3317 of 2023 HC-KAR respondent No.5 are jointly and severally liable to pay the amount of ₹ 23,90,45,507/- along with the costs and interest at the rate of 21.91% per annum from the date of application till the date of realisation subject to the deduction of ₹ 8.55 crores paid by the official liquidators on behalf of respondent No.4. Subsequently, recovery certificate was issued on 31.08.2007 issued by the presiding officer, DRT Bengaluru, in the lines of final order of OA dated 31.08.2007. It is contended that respondent No. 2 received a letter dated 09.07.2021 from the office of the official liquidator stating that respondent No.4 was dissolved vide order dated 10.01.2018 passed in CA No. 519 of 2017 in COP No. 159 of 1998 by the High Court of Karnataka. It is contended that the petitioner alleges that any action in law must be initiated within 3 years and impugned demand notice was issued nearly after 15 years, is not maintainable. Hence, on these grounds, prays to dismiss the writ petition.
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12. Respondent No.1 filed a counter-affidavit stating that the writ petition filed by the petitioner is not maintainable, and the petitioner has an equal efficacious alternative remedy. The petitioner without exhausting the efficacious remedy filed this repetition. Hence, on this ground, prays to dismiss the writ petition.
13. Heard the arguments of the learned counsel Sri. Shreyas Jayasimha for the petitioners, learned counsel Sri. Shanti Bhushan, Deputy Solicitor General of India for Respondent No.1, and the learned counsel, Sri. T.P. Muthanna for Respondent No.2.
14. Learned counsel for the petitioner submits that the respondent No.2 issued an impugned demand notice based on the order passed in O.A.No.210/2003 which was disposed of on 31.08.2007. The impugned notice issued by respondent No.2 is barred by time. The petitioner filed a reply to the said notice and thereafter, also filed the rejoinder. He submits that
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NC: 2026:KHC:10390 WP No. 3317 of 2023 HC-KAR the demand notice which is issued on 16.03.2022 is barred by Limitation. He submits that the said demand notice was issued after lapse of 15 years from the date of passing of an order in O.A.No. 210 of 2003.
15. To buttress his arguments, he has placed reliance on the judgments of the Hon'ble Apex Court in the following cases:
A. Tottempudi Salalith V. State Bank Of India and ors, reported in (2024) 1 SCC 24.
B. Kotak Mahindra Bank Ltd v. A. Balakrishnan reported in (2022) 9 SCC 186 C. Whirlpool Corporation v. Registrar of Trade Marks reported in (1998) 8 SCC 1
16. Learned Deputy Solicitor General of India submits that the impugned demand notice issued by respondent No.2 is well within time. He submits that the proceedings were pending before this court in the
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NC: 2026:KHC:10390 WP No. 3317 of 2023 HC-KAR company petition and the company petition was disposed of vide order dated 23.09.2002 and the official liquidator attached to the High Court was appointed as an official liquidator of defendant No.1 company i.e., respondent No.4 and the official liquidator deposited ₹ 8.55 crores on 20.11.2006 after the sale of assets/properties of respondent No.2 company in liquidation towards the full and final settlement of the loan amount extended to respondent No. 4. Hence, on these grounds, he prays to dismiss the writ petition.
17. Learned counsel appearing for respondent No. 2 bank, submits that the action taken by respondent no. 2 bank is in accordance with the provisions of the Act and the impugned notice issued to the petitioners is well within time. Hence, on these grounds, he prays to dismiss the writ petition.
18. Perused the records, and considered the submissions of the learned counsel for the parties.
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19. It is an undisputed fact that respondent No.4 is a registered company under the Companies Act. Respondent No. 4 approached the respondent No. 2 for financial assistance for expansion scheme by setting up a new plant for the manufacture of CRCA steel strips at Bommasandra Industrial Area, Bengaluru under the project finance scheme. Based on the representation made by respondent No.4, respondent No.2 agreed to lend and advance the financial assistance. Respondent No.4 executed a loan agreement dated 09.02.1993 in favour of respondent No. 2 in connection with grant of loan of ₹ 474 lakhs to respondent No.4 and executed a first loan agreement.
20. Respondent No.4 was liable to repay the principal amount of loan as described in Amortization schedule in Schedule V of the said first loan agreement in quarterly instalment starting from 01.07.1995 and ending on 01.04.2001 to respondent No.2 bank.
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NC: 2026:KHC:10390 WP No. 3317 of 2023 HC-KAR Respondent No.4 to create security for the aforesaid loan amount hypothecated on the first charge basis, the whole of the movable properties of respondent No. 4. The petitioners and respondent No. 5 have jointly executed and guaranteed the repayment and discharge of amount by executing deeds of guarantee dated 11.02.1993 and 28.05.1993.
21. Respondent No.4 again approached respondent No. 2 for additional financial assistance. Accordingly, respondent No.2 advanced additional financial assistance to respondent No. 4. The petitioners and respondent No. 5 jointly executed deed of guarantee on 30.11.1994 in favour of respondent No.2 regarding the second loan agreement, and the deed of corporate guarantee agreement dated 30.11.1994 was executed by respondent No.5 in favour of respondent No.2 regarding the second loan agreement. Respondent No.4 failed to pay the loan amount accordingly. Respondent No.4 requested for one time settlement
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NC: 2026:KHC:10390 WP No. 3317 of 2023 HC-KAR and Respondent No.2 agreed and issued a communication dated 02.11.2000. However, due to the reasons best known to them, the respondent No. 2 vide letter dated 31.03.2003 revoked the OTS facilities.
22. Meanwhile, this Court in the Company Petition No. 159 of 1998 appointed the official liquidator attached to the High Court as the official liquidator for Respondent No.4 vide order dated 23.09.2002. In the official liquidation proceedings, Respondent No.2 received ₹ 8.55 crores from the official liquidator. Respondent No. 2 filed O.A. No. 210/2003 under Section 19 of the Recovery of Debts and Bankruptcy Act, 1993. (hereinafter referred to as 'the Act, 1993'). The said application was allowed vide order dated 31.08.2007. The directions were issued to the petitioners, respondent No.4 and respondent No.5 to pay an amount of ₹23,90,45,507/-. Further, the DRT has issued a recovery certificate to respondent No.2
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NC: 2026:KHC:10390 WP No. 3317 of 2023 HC-KAR on 31.08.2007. Since from the date of issuing a recovery certificate, respondent No.2 has not taken any steps to recover the said amount till issuing a demand notice dated 16.03.2022. Respondent No. 2 has not taken any steps for more than 14 years from the date of issuing a recovery certificate and order passed in the aforesaid OA. The demand notice issued by respondent No.2 is only after 14 years based on the order passed in the original application. As per Section 24 of the Act, 1993, the provisions of the Limitation Act 1963, shall so far as may be apply to an application made to a tribunal. According to Section 19(22A) Act, 1993, any recovery certificate issued by the Presiding Officer under sub-section (22) shall be deemed to be decree or order of the Court.
23. To consider the case on hand, it is necessary to examine Article 136 of the Schedule to the Limitation Act, 1963 which reads as follows:
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NC: 2026:KHC:10390 WP No. 3317 of 2023 HC-KAR 136 For the execution of Twelve [When] the decree or any decree (other than years. order becomes a decree granting a enforceable or where mandatory injunction) the decree or any or order of any civil subsequent order court. directs any payment of money or the delivery of any property to be made at a certain date or at recurring periods, when default in making the payment or delivery in respect of which execution is sought, takes place:
Provided that an application for the enforcement or execution of a decree granting a perpetual injunction shall not be subject to any period of limitation.
24. If a decree is not executed within 12 years from the date it becomes enforceable, the right to execute it is barred by limitation. The provision ensures that decree-holders have a long, yet finite, period to enforce their rights.
25. The period of limitation for the execution of a recovery certificate (decree) passed by the Debt Recovery Tribunal (DRT) in an Original Application
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NC: 2026:KHC:10390 WP No. 3317 of 2023 HC-KAR (OA) is twelve years. This is governed by Article 136 of the Schedule to the Limitation Act, 1963, which applies to the execution of decrees or orders of civil court. 12-years period begins to run from the date the decree becomes enforceable. Admittedly, the DRT has allowed the Original application on 31/08/2007, Recovery Certificate issued by the DRT constitutes a decree that remains valid for execution for 12 years under the Limitation Act. Respondent No.2 did not execute the order within 12 years from the date of the order passed by the DRT. The impugned demand notice issued by the respondent No.2 is based on the order passed by the DRT in O.A. and it is barred by time. Hence, the impugned demand notice is liable to be quashed on the ground that it is barred by the limitation.
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26. Accordingly, I proceed to pass the following:
ORDER i. The writ petition is allowed.
ii. The impugned demand notice dated 16.03.2022 issued by respondent No.2, and all subsequent proceedings thereto, are hereby quashed.
iii. Learned counsel for petitioners submits that the petitioners will not press the relief sought at prayer A. iv. The Submission is placed on record. The writ petition insofar as relief sought at prayer A is dismissed as not pressed. v. Pending IA(s), if any, shall stand disposed of accordingly.
Sd/-
(ASHOK S. KINAGI) JUDGE SKS (Online)