Smt Pushpa N P vs The Karnataka State Finance ...
2021 Latest Caselaw 5433 Kant

                              1


        IN THE HIGH COURT OF KARNATAKA AT BENGALURU

          DATED THIS THE 4TH DAY OF DECEMBER, 2021

                          PRESENT

       THE HON'BLE MR. RITU RAJ AWASTHI, CHIEF JUSTICE

                            AND

     THE HON'BLE MR. JUSTICE SACHIN SHANKAR MAGADUM

         WRIT APPEAL CROB.NO.1 OF 2021 (GM-KSFC)
            IN WRIT APPEAL NOS.35-36 OF 2016

BETWEEN:

SMT.PUSHPA N. P.
D/O LATE N.B. PRAKASH
AGED 50 YEARS
OCC:NIL, R/O #54B
17TH CROSS, MALLESHWARAM
BANGALORE - 560 055
                                          ...CROSS OBJECTOR

(BY SMT. VIJETHA R. NAIK, ADVOCATE)

AND:

1.     THE KARNATAKA STATE FINANCE
       CORPORATION, SHANKARANARAYANA
       BUILDING, 5TH FLOOR, NO.25
       M.G.ROAD, BANGALORE - 560 001
       REP. BY ITS MANAGING DIRECTOR

2.     SHRI CHAKRA ENGINEERING
       EQUIPMENTS A PARTNERSHIP FIRM
       HAVING ITS OFFICE AT PLOT NO.21A
       11 PHASE, PEENYA INDUSTRIAL AREA
                               2


     BANGALORE - 560 058
     REPTD. BY ITS PARTNER
     SRI.VIJAY RAGHAVAN

3.   SRI. RAGHAVENDRA CONCRETE PRODUCTS
     (PVT.) LIMITED, NO.1600 AND 1597/8
     NAGAPPA BLOCK, BANGALORE - 560 021
     REPTD. BY ITS FULL TIME DIRECTOR
     SRI. K. N. RAJAGOPAL
                                              ... RESPONDENTS

(BY SRI.BIPIN HEGDE, ADVOCATE FOR R1;
    SRI.VISWANATH SABARAD, ADVOCATE FOR R2)

     THIS WRIT APPEAL CROB IS FILED UNDER SECTION 4 OF
THE KARNATAKA HIGH COURT ACT, 1961 READ WITH RULE 27 OF
THE WRIT PROCEEDINGS RULES, 1977 PRAYING TO ISSUE A WRIT
IN THE NATURE OF CERTIORARI OR ANY OTHER WRIT, ORDER OR
DIRECTION AND QUASH THE NOTICES DATED 12.10.2009
BEARING    NO.KSFC/JBO/MB/01-781/R975     PRODUCED    AS
ANNEXURE E AND E1 IN THE WRIT PETITION AND ETC.,

     THIS WRIT APPEAL CROB HAVING BEEN HEARD AND
RESERVED FOR JUDGMENT ON 17.11.2021, COMING ON FOR
PRONOUNCEMENT OF JUDGMENT THIS DAY, SACHIN SHANKAR
MAGADUM J., DELIVERED THE FOLLOWING:

                         JUDGMENT

The captioned cross appeal is filed by the petitioner No.2

to the writ petition challenging the order dated 19.11.2015

passed in W.P.Nos.30433-30434/2009.

2. The cross objector along with one Smt. Malini

Prakash filed writ petition questioning the notices dated

12.10.2009. The present cross objector claiming to be the

daughter of the guarantor for the loan transaction with the

respondent No.1/Corporation questioned the impugned notices

dated 12.10.2009. Pending writ petition, the respondent

No.1/Corporation has proceeded against the secured assets

and sold in favour of the respondent No.2 herein and

accordingly sale certificate also came to be issued.

3. The learned Single Judge having verified the

records was of the view that the principal borrower instituted a

suit against the respondent No.1/Corporation and the

Corporation suffered a decree against which an appeal is

already preferred by the respondent No.1/Corporation and this

compelled the respondent No.1/Corporation to proceed against

the guarantor and therefore, the learned Single Judge was of

the view that no fault can be attributed against the

Corporation for having taken recourse to proceed against the

secured assets of the guarantor. However, the learned Single

Judge was of the view that it was bounden duty of the

respondent No.1/Corporation to bring it to the notice of the

Court where the matter is seized. Learned Single Judge,

however, held that the respondent No.1/Corporation and the

auction purchaser cannot interfere with the possession of the

cross objector till the appeal pending before the Appellate

Court in RFA.No.1402/2008 is heard and disposed of on

merits. On these set of grounds, the learned Single Judge

disposed of the writ petition by taking judicial note of the sale

consideration paid by the auction purchaser to the tune of

Rs.7.30 Crores. The learned Single Judge has also observed

that Rs.4.75 Crores is the excessive amount recovered over

and above the loan transaction and the present cross objector

is entitled for refund in respect of the excess amount of sale

price which is in deposit.

4. The order passed by the learned Single Judge in

W.P.Nos.30433-30434/2009 was challenged by the auction

purchaser who was arrayed as respondent No.2 in the writ

petition in W.A.No.35/2016. The respondent No.2 filed a

memo seeking leave of the Court to withdraw the writ appeal

and the same was dismissed as not pressed on 08.06.2021.

During the pendency of W.A.No.35/2016, the present cross

objector has filed a cross appeal questioning the action of the

respondent No.1/Corporation in auctioning the property of the

guarantor without exhausting the assets of the principal

debtor.

5. Learned counsel appearing for the cross objector

would vehemently argue and contend before this Court that

when the properties of the principal debtor were very much

available, the respondent No.1/Corporation ought to have

exhausted the assets of the principal debtor before proceeding

with the assets offered by the guarantor. It is also contended

that the property owned by the cross objector is worth more

than Rs.12 Cores but the same is auctioned by the respondent

No.1/Corporation for Rs.7.30 Crores and this has caused

immense financial loss. She would strenuously argue and

contend that the cross objector and her mother were kept in

dark by the respondent No.1/Corporation and there are

serious infractions in the procedure adopted by the respondent

No.1/Corporation while auctioning the property of the cross

objector. She also submits to this Court that the entire sale

negotiation proceedings conducted on 13.10.2009 are illegal

and fraudulent.

6. To buttress her arguments, learned counsel has

placed reliance on the following judgments:

1) Vasu P.Shetty vs. Hotel Vandana Palace and Others reported in (2014) 5 SCC 660;

2) Mathew Varghese vs. M.Amritha Kumar and Others reported in (2014) 5 SCC 610;

3) M/s. Deepak Apparels Pvt. Ltd., and Others vs. City Union Bank Ltd., and Others reported in ILR 2016 Kar 1805;

4) S.P. Chengalvaraya Naidu (Dead) by LRs. vs. Jagannath (Dead) by LRs. and Others reported in (1994) 1 SCC 1.

7. Placing reliance on the above said judgments, she

would vehemently argue and contend before this Court that

the proper procedure while auctioning the property is not

followed and in absence of individual notice to the borrower

specifying clear 30 days time gap for effecting any sale of

immobile sale assets would vitiate the entire proceedings and

therefore, the cross objector can maintain a writ petition.

Placing reliance on the Full Bench judgment, she would

contend that since there are serious infractions and the

respondent No.1/Corporation has not acted in accordance with

the provisions of the Securitisation and Reconstruction of

Financial Assets and Enforcement of Securities Interest Act,

2002 (for short 'the SARFAESI Act') and the fundamental

principles of judicial procedure have been violated, the writ

petition before the learned Single Judge was very much

maintainable and therefore, the grounds urged in the writ

appeal needs to be examined by this Court.

8. Per contra, learned counsel appearing for the

respondent No.1/Corporation would place reliance on the

judgment rendered by this Court in RFA No.1402/2008. By

taking this Court through the judgment rendered in RFA

No.1402/2008, he would contend that the judgment and

decree passed in O.S.No.3337/1994 declaring the notices and

the statement of accounts issued by the respondent No.1/

Corporation as untenable and unenforceable in law and

consequent perpetual injunction granted was set aside by this

Court by judgment and decree dated 28.01.2021. On these

set of defence, learned counsel for the respondent No.1 would

submit to this Court that the suit filed by the principal

borrower is dismissed in RFA No.1402/2008 and therefore, the

observations made by the learned Single Judge at paragraph 5

of the judgment would not survive for consideration.

9. Learned counsel appearing for the respondent No.2

arguing in the same vein would submit to this Court that the

respondent No.1/Corporation has invoked the provisions of the

SARFAESI Act and has sold the secured assets. The learned

Single Judge of this Court while allowing RFA No.1402/2008

has referred to the definition of 'guarantee' as defined under

Section 126 of the State Finance Corporation Act and has

recorded a categorical finding that the liability of the surety is

co-extensive with that of the principal debtor and the financial

institution has an unfettered right either to proceed against

the principal borrower or the guarantor. Learned counsel

would further bring to the notice of this Court that the conduct

of the cross objector is not fair and the present cross appeal is

filed on 15.04.2021 after lapse of 5 years and the grounds

urged in the present cross appeal cannot be entertained in the

light of the latest judgment rendered by the Hon'ble Apex

Court relating to recovery proceedings initiated by the secured

creditor under the SARFAESI Act.

10. Heard the learned counsel for the cross objector

and learned counsel appearing for respondent Nos.1 and 2.

11. The short question that arises for consideration

before us is, whether the grounds urged in the cross appeal

can be entertained by this Court in the light of the judgment

rendered by the Hon'ble Apex Court in the case of M/s. Sree

Anandhakumar Mills Ltd. vs. M/s. Indian overseas Bank

& Others1. The cross objector is assailing the correctness of

the order passed by the learned Single Judge which was

disposed of on 19.11.2015. The present cross appeal is filed

on 15.04.2021. Though the cross objector was the second

petitioner, the said order was not immediately challenged

before this Court. On the contrary, the respondent No.2 who

is the auction purchaser approached this Court questioning the

order of the learned Single Judge in W.A.Nos.35-36/2016.

Therefore, we are of the view that the present cross objector

having kept quite for almost 5 years has made a feeble

attempt alleging that the respondent No.1/Corporation has

committed fraud while auctioning the property owned by her

father.

(2018) 2 BC 510

12. It is not in dispute that the respondent

No.1/secured creditor has initiated proceedings under the

provisions of the SARFAESI Act. It is trite law that remedy of

any person aggrieved by the initiation of proceedings under

the SARFAESI Act lies under Section 17 which provides for a

efficacious remedy for the party aggrieved. Time and again

the Hon'ble Apex Court in catena of judgments has cautioned

High Courts exercising writ jurisdiction and entertaining the

petitions questioning the orders squarely falling within the

ambit of the SARFAESI Act.

13. The Hon'ble Apex Court in the case of United Bank

of India vs. Satyawati Tondon and Others2, while

interpreting the scope of remedy under Section 17(1) has held

that the expression 'any person' used in Section 17(1) is of

wide import. The Apex Court was of the view that it takes

within its fold, not only the borrower but also the guarantor or

any other person who may be affected by the action under

(2010) 8 SCC 110

Section 13(4) or Section 14. In the very same judgment, the

Hon'ble Apex Court has come down heavily on High Courts

entertaining the writ petitions ignoring the availability of

statutory remedy under the DRT Act and the SARFAESI Act.

14. The Hon'ble Apex Court in the case of Authorized

Officer, State Bank of Travancore and Another vs.

Mathew K.C.3, reiterating the principles laid down by the

Apex Court in the case of Commissioner of Income Tax

and Others vs. Chhabil Dass Agarwal4, was of the view

that the High Courts should not entertain a writ petition under

Article 226, if alternative statutory remedies are available,

except in cases falling within the well-defined exceptions

carved out in the judgment cited supra. Therefore, in the light

of the principles laid down by the Hon'ble Apex Court, we are

not inclined to overlook the settled principles laid down by the

Hon'ble Apex Court. Therefore, no exception can be taken in

the present case on hand also. The judgments relied on the

(2018) 3 SCC 85

(2014) 1 SCC 603

by the cross objector would not come to the aid of the cross

objector and the same are not at all applicable to the present

facts and circumstances of the case. In that view of the

matter, we are not inclined to entertain the grounds urged in

the cross appeal.

15. For the foregoing reasons, the cross appeal is

devoid of merits and accordingly stands dismissed.

The pending interlocutory applications, if any, stand

disposed of.

Sd/-

CHIEF JUSTICE

Sd/-

JUDGE

CA