Karnataka State Financial ... vs Sri Sudheerkumar P Hegde
2022 Latest Caselaw 663 Kant

                             1




       IN THE HIGH COURT OF KARNATAKA AT BENGALURU

         DATED THIS THE 14TH DAY OF JANUARY, 2022

                          PRESENT

          THE HON'BLE MRS. JUSTICE S. SUJATHA

                           AND

        THE HON'BLE MR. JUSTICE RAVI V. HOSMANI

                  M.F.A.No.8272/2015 (SFC)

BETWEEN:

KARNATAKA STATE FINANCIAL CORPORATION
HAVING ITS HEAD OFFICE AT
NO.1/1, THIMMAIAH ROAD
NEAR CANTONMENT RAILWAY STATION
BANGALORE-560 052.
BRANCH OFFICE AT 3RD AND 4TH FLOOR
ANANTHA TOWERS, COURT ROAD
UDUPI-576 101
REP. BY ITS ASST. GENERAL MANAGER.
                                             ...APPELLANT
(BY SRI.T.SOMASHEKAR, ADVOCATE)

AND:

1.     SRI SUDHEERKUMAR P.HEGDE
       59 YEARS, S/O PANDURANGA HEGDE
       RESIDENT OF OM SRI NIVAS
       JODUKATTE
       UDUPI TALUK & DISTRICT-576 101.

2.     SMT.VIJAYALAXMI S.HEGDE
       AGED 49 YEARS
       W/O SUDHEER KUMAR P.HEGDE
       RESIDENT OF OM SRI NIVAS
       JODUKATTE
       UDUPI TALUK & DISTRICT-576 101.
                               2




3.   M/s. MADHAVA BUILDERS PRIVATE LTD.,
     SY.NO.84/3, MODDANIDAMBOOR VILLAGE
     REP. BY ITS MANAGING DIRECTOR
     UDUPI TALUK AND DISTRICT-576 101.
                                         ...RESPONDENTS

(BY SRI. S.R.HEGDE HUDLAMANE, ADVOCATE FOR R1 AND R3)

     THIS MFA IS FILED UNDER SECTION 32(9) OF THE STATE
FINANCIAL CORPORATION ACT, AGAINST THE ORDER DATED
10.07.2015 PASSED IN M.C.NO.22/2003 ON THE FILE OF THE
PRINCIPAL DISTRICT JUDGE, UDUPI, DISMISSING THE CLAIM
PETITION U/S 31(aa) AND 32 OF SFC.


     THIS MFA COMING ON FOR ADMISSION THIS DAY, RAVI
V. HOSMANI J., DELIVERED THE FOLLOWING:

                      JUDGMENT

Challenging order dated 10.07.2015 passed by

Principal District Judge, Udupi District, Udupi in Misc.Case

No.22/2003, this appeal is filed. In the said proceedings,

appellant herein was petitioner, while respondents herein

were respondents no.1 to 3.

2. Brief facts as stated are that Appellant filed

petition under Section 31 (1) (aa) and 32 of the State

Financial Corporation Act, 1951 (hereinafter referred to as

'SFC Act') for recovery of term loan of Rs.39,07,794/-

along with interest from 11.03.2003 and also seeking for

direction that respondents no.1 and 2 as personally liable to

pay said amount. It is stated that said petition was earlier

allowed by order dated 03.03.2004, but was set-aside by

this Court by order dated 25.05.2005, in MFA No.5730/2004

filed by respondents herein, and remanded matter back to

trial Court for fresh enquiry in accordance with law from

stage of cross-examination of respondents' witnesses. It is

submitted that in pursuance of same, trial Court passed

impugned order.

3. Sri T.Somashekhar, learned counsel for appellant

submitted that appellant is a State Financial Corporation

established under Section 3 of SFC Act and carrying on its

functions under Section 25 read with Section 24 of said Act.

At the request of 3rd respondent, appellant sanctioned term

loan of Rs.25,00,000/- on 31.07.1998 subject to terms and

conditions under sanction letter dated 05.08.1998, with

interest at 17.5% per annum and in default additional

interest at the rate of 2.5% per annum. And for said loan,

respondents no.1 and 2 executed deed of guarantee dated

06.08.1998.

4. As there was default in repayment, appellant

issued notice dated 01.07.2002, to respondents no.1 and 2

invoking personal guarantee and calling upon them to pay

dues of respondent no.3. As on 10.03.2003, respondents

no.1 and 2 were personally liable to pay sum of

Rs.39,07,794/- with future interest. For recovery of said

sum, Misc.Case No.22/2003 was filed, on 11.04.2003.

5. On service of notice, respondents entered

appearance. Respondent no.1 filed objections, which was

adopted by Respondent no.2 also, contending that petition

was filed with sole object of getting unlawful gain from

them, by suppressing material facts and misleading Court.

It was contended that though appellant was required to

sanction loan only to industrial concerns, without verifying

that respondent no.3 was not an industrial concern and was

not involved in industrial activities, claims to have

sanctioned loan. As they were not directors of respondent

no.3 - company, petition filed against them was opposed to

law. It was also stated that appellant had taken over

possession of property and building situated at Sy.No.84/3A

of Moodanidamboor village, Udupi taluk, by invoking Section

29 of SFC Act, and sold it prior to initiating present

proceedings. And as said building was worth more than

Rs.40,00,000/- liability of respondents was cleared off. They

also denied sanction of term loan to respondent no.3 and

contended that loan agreement and deed of guarantee were

concocted.

6. Based on contentions, trial Court framed

following points for its consideration:

(1) Whether petition filed by petitioner is barred by limitation?

(2) Whether petitioner proves that respondents no.1 and 2 who are guarantors to the loan of 3rd respondent are liable to pay the amount in respect of loan of respondent no.3? If so, to what extent?

(3) What order?

7. In support of their case, appellant had earlier

examined Ravi Shankar, Manager as PW1. His evidence was

however discarded as per order dated 06.04.2015.

Thereafter Senior Manager of appellant- Sri K.Vittal Kharvi

was examined as PW2. Exhibits P1 to P8 were marked. On

behalf of respondents, respondent no.1 was examined as

RW1. Exhibits D1 to D5 were marked.

8. On consideration, trial Court answered points

no.1 and 2 in the negative and point no.3 by dismissing the

petition.

9. While answering point no.1, trial court observed

that as per Ex.P2 - deed of guarantee, liability of guarantors

(respondents no.1 and 2) would arise upon principal debtor

committing default. As per Ex.P3, notice dated 01.07.2002,

issued to guarantors, notice of default issued to principal

debtor (respondent no.3) on 27.11.2000. Further, as period

of loan was six and half years, debt of respondent no.3 was

live as on date of issuance of notice at Ex.P3, therefore,

limitation would begin to run from date of invocation of

guarantee i.e. 01.07.2002, date of notice - Ex.P3. Since

petition was filed on 11.04.2003, it was not barred by

limitation.

10. Insofar as point no.2, trial court observed that

though respondents no.1 and 2 contended that Exs.P1 -

loan agreement and P2 - deed of guarantee were forged

and concocted documents, during cross-examination, RW1

admitted that such contention was not taken in their

objections to main petition, which amounted to admission of

Exs.P1 and P2.

11. While arriving at such conclusion, it also

observed that RW1 deposed that when they went to

appellant for obtaining loan of Rs.25,00,000/-, they were

told that loan of Rs.25,00,000/- would be sanctioned and

released in instalments to be credited to their account in

Karnataka Bank, Kunjibetta branch, Udupi and therefore

they affixed signatures on printed forms. But thereafter sum

of Rs.12,00,222/- was credited on 10.08.1998 and

Rs.1,75,000/- was credited on 24.08.1998 i.e. a total of

Rs.13,75,222/- only and remaining amount of

Rs.11,24,778/- was not credited and therefore respondents

were not responsible for this amount.

12. Trial court further observed that after

examination of RW1, appellant examined PW2, by getting

evidence of PW1 discarded. It noted that even after specific

deposition by RW1 about appellant not releasing amount of

Rs.11,24,778/-, PW2 did not substantiate release of entire

sanctioned loan amount of Rs.25,00,000/-. It also took note

of suggestion denied by RW1 that out of sanctioned loan of

Rs.25,00,000/-, a sum of Rs.10,72,278/- was given to Tulu

Nadu Finance Corporation and remaining amount was

credited to their account. PW2 deposed that

acknowledgement given by respondent no.1 while receiving

cheque for Rs.10,72,278/- was available. Strangely, it was

not produced. Therefore, it held that Ex.P8, extract of loan

account did not disclose disbursement of entire sanctioned

amount.

13. Trial court further noted deposition of RW1 that

appellant had taken over building belonging to respondent

no.3 and sold it on 22.06.2006 for a sum of Rs.40,52,974/-

and thereafter another building worth Rs.30,00,000/- was

sold. But PW2 did not depose about sale and amount

realized from such sale.

14. In view of above, trial Court arrived at a

conclusion that appellant failed to establish point no.2 and

dismissed the petition.

15. Though learned counsel for appellant submitted

that after having come to conclusion that respondents no.1

and 2 had executed deed of guarantee, trial court could not

have dismissed petition on basis of presumption that entire

loan amount was not disbursed, despite deposition that

Rs.10,72,278/- was handed over to M/s Tulu Nadu Finance

Corporation by cheque as per request of respondents. It

was further contended that total sum realized from sale of

primary assets was Rs.53,36,937/- which was duly given

credit to loanee's account but debt was far in excess of sum

realized and therefore appellant had filed petition.

16. Learned counsel for appellant further submitted

that it had filed an application under Order LXI Rule 27 of

CPC for leading additional evidence by way of production of

documents and sought consideration of application. It was

submitted that contents of these documents would

substantiate contentions of appellant and submitted that

impugned order passed without considering these aspects

called for interference in this appeal.

17. On the other hand, Sri S.R.Hegde Hudalmane,

learned counsel for respondents no.1 to 3 supported

impugned order and sought dismissal of appeal. Insofar as

application for additional evidence, it was submitted that

documents now sought to be produced namely alleged

acknowledgment/receipt of cheque for Rs.10,72,728/- by

M/s Tulu Nadu Finance Corporation and loan account

statement were available with appellant at the time of trial

and assertion of appellant that these documents were not

readily available at time of evidence was false. It was

submitted that appellant has not made out a case for

allowing additional evidence and sought for rejection of

application.

18. From above submission, it is not in dispute that

appellant sanctioned loan of Rs.25,00,000/- to respondent

no.3 and respondents no.1 and 2 executed deed of

guarantee for said loan. While appellant contends that after

receiving loan amount, respondent no.3 defaulted in

repayment even after issuance of notice and therefore

appellant was constrained to initiate proceedings for

recovery of amount in debt, respondents contend that very

fact of disbursal of entire amount of loan sanctioned was

not established. Appellant failed to disclose amount realized

from sale of primary assets and manner of adjustment of

amount realized against total debt. The trial Court on

consideration held that appellant failed to establish liability

of respondents to repay amount to appellant. Therefore,

points that arise for consideration in this appeal are:

"1. Whether I.A.No.1/2016 filed under Order XLI Rule 27 for leading additional evidence requires consideration?

2. Whether finding of trial Court about failure of appellant to establish liability of respondents to repay loan amount, calls for interference?"

19. In order to establish burden cast on it, appellant

examined its Senior Manager as PW2. The earlier deposition

of Manager as PW1 was got discarded by appellant. PW2 in

his deposition stated that on request of respondent no.3,

appellant sanctioned term loan of Rs.25,00,000/- into loan

account no.08124700 on 31.07.1998, for construction of

commercial complex under name and style of M/s Madhava

Builders Private Limited, as per terms and conditions

mentioned in Sanction letter dated 05.08.1998. Letter of

sanction was got marked as Ex.P1 and loan agreement was

got marked as Ex.P2. For securing said loan, respondents

no.1 and 2 executed deed of guarantee dated 06.08.1998

as per Ex.P3. PW2 further deposed upon default by

respondent no.3, appellant invoked personal guarantee of

respondents no.1 and 2 by issuing legal notice dated

01.07.2002 under postal acknowledgment. The same were

marked as Exs.P4 to P7. In order to establish amount due,

statement of account as on 10.03.2003 was got marked as

Ex.P8. As per Ex.P8, amount due was Rs.39,07,794/-.

During cross-examination, PW2 states that all documents

pertaining to loan account were produced before Court.

PW2 specifically denies suggestion that all

documents/records of loan transaction were not produced.

A specific suggestion that document to substantiate

payment of amount to Tulu Nadu Finance Corporation is not

produced is also denied and PW2 states that it was reflected

in ledger extract. Volunteer statement of PW2 that

acknowledgment given by respondent no.1 for having

received cheque for Rs.10,72,278/- on behalf of Tulu Nadu

Finance Corporation was available with them and they could

produce it, was also recorded. A suggestion that entire due

amount was realized by sale of assets and there was no due

from respondents was denied.

Contents of Ex.P8, are as follows:

"Statement of account in respect of M/s Madhava Builders (P) Limited Udupi

i. Account No. : 08127400 ii. Amount sanctioned : Rs.25,00,000/-

iii. Amount disbursed : Rs.25,00,000/-

    iv.    Rate of interest           :      17.50% + 2.5%
    v.     Dues position as on 10.03.2003
                                             08127400
            Loan balance                 :          00.00
            Principle dues               :   13,82,550.00
            Interest dues                :   24,93,564.00
            Other debits                 :      31,680.00
                        Total            :   39,07,794.00"

20. In a petition filed for recovery of loan amount,

burden to establish loan and indebtedness of respondents is

on petitioner. Point no.2 also cast burden on appellant. It is

on record that initially appellant had examined its manager

as PW1. After cross-examination of PW1, his deposition is

got discarded by appellant and thereafter Senior Manager

was examined as PW2. As noted by trial Court despite

specific suggestion casting doubt about disbursement of

entire loan amount sanctioned, appellant failed to produce

document to substantiate said aspect. It also failed to give

particulars of amounts realized from sale of primary assets.

There is glaring failure to establish disbursement of portion

of loan amount to third party at the instance of debtor

despite specific cross-examination in that regard. As

observed by trial Court, PW2 was examined after recording

of evidence of RW1.

21. In view of specific statement of PW2 that

acknowledgment of payment of amount to Tulu Nadu

Finance Corporation was available with appellant, statement

of deponent in support of I.A. No.1/2016, would be false.

The same would also apply in case of other document

sought to be produced namely loan account statement.

Therefore, indulgence sought for by appellant for availing

recourse to Order 41 Rule 23(A) to remand the matter for

recording of additional evidence would not be justified. The

appellant has failed to make out a case for allowing

application under Order XLI Rule 27.

22. On perusal of impugned order, it is seen that

trial Court has appreciated entire oral and documentary

evidence on record to arrive at its conclusion. Conclusions

drawn are well reasoned and justified. They are neither

perverse nor capricious, therefore, there is no merit in the

grounds urged. Accordingly, points no.1 and 2 are answered

in negative.

In the result, we pass the following:

ORDER

1. Appeal stands dismissed.

2. In view of dismissal of the appeal, all the pending I.A.s stand disposed of accordingly.

No order as to costs.

Sd/-

JUDGE

Sd/-

JUDGE

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