The Authorised Officer Karnataka ... vs M/S R S Ram Properties Private ...
2022 Latest Caselaw 7437 Kant

IN THE HIGH COURT OF KARNATAKA AT BENGALURU

        DATED THIS THE 25TH DAY OF MAY 2022

                      PRESENT

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

                         AND

       THE HON'BLE MR. JUSTICE ASHOK S. KINAGI


       WRIT APPEAL NO.179 OF 2022 (GM-RES)

BETWEEN:

THE AUTHORISED OFFICER
KARNATAKA BANK
ASSET RECOVERY MANAGEMENT BRANCH
FIRST FLOOR, FKCCI BUILDING,
KEMPEGOWDA ROAD,
BENGALURU 560 009.
                                         ...APPELLANT
(BY SRI. PRASHANTH P N, ADVOCATE)

AND:

1.     M/S R. S. RAM PROPERTIES PRIVATE LIMITED
       REP. BY ITS MANAGING DIRECTOR
       MR. RAGHURAM R, AGED 48 YEARS,
       NO 27/1, 2ND FLOOR , 17TH CROSS,
       10TH MAIN ROAD, MALLESHWARAM,
       BENGALURU 560 086.

2.     MR. SURESH M
       S/O GALLAPPA, NO 187/1,
       SAMPIGE ROAD, DHANALAKSHMI LAYOUT,
       KODIGEHALLI, BENGALURU NORTH TALUK,
       KARNATAKA 560 097.
                                   ....RESPONDENTS
                              -2-



(BY SMT. KAVITHA D, ADVOCATE FOR R-1
    SRI. R.D. PANCHAM, ADVOCATE FOR R-2)


     THIS WRIT APPEAL IS FILED UNDER SECTION 4 OF
THE KARNATAKA HIGH COURT ACT, 1961, PRAYING TO
ALLOW THE WRIT APPEAL BY SETTING ASIDE THE
IMPUGNED ORDER DATE 07.10.2021 PASSED IN WP
No.17392/2021 (GM-RES) ON THE FILE OF THE LEARNED
SINGLE JUDGE OF THIS HONBLE COURT.

     THIS WRIT APPEAL COMING ON FOR PRELIMINARY
HEARING THIS DAY, ASHOK S. KINAGI, J., DELIVERED
THE FOLLOWING:

                        JUDGMENT

This intra-court appeal is filed challenging the

order dated 07.10.2021 passed in W.P.No.

17392/2021.

2. Brief facts leading rise to filing of this appeal

is as under:

The respondent No.1/petitioner availed overdraft

facilities for Rs.70,00,000/- at the appellant/bank and

mortgaged the schedule property. The respondent

No.1 did not clear the outstanding dues. The

appellant/bank issued a demand notice under Sub-

section (2) of Section 13 of the SARFAESI Act on

11.11.2019. Further, possession notice was issued

and authorized officer has taken the possession of the

vacant schedule property. The appellant/bank has

initiated proceedings to auction the schedule

property. The respondent No.1 requested to stop the

auction proceedings and undertook to remit the

requisite amount by 12.12.2021. On the

representation of respondent No.1, the appellant/

bank cancelled the auction proceedings. Thereafter,

second sale notice was issued by the appellant/bank

fixing the auction date on 24.06.2021. The

respondent No.1 requested the appellant/bank to

consider the application requesting to consider the

case of respondent No.1 for OTS, as per Annexure-D.

The appellant/bank accepted the request of the

respondent No.1 vide letter dated 21.05.2021. The

second auction was also deferred, since the OTS

proposal of respondent No.1 was approved by the

bank. The respondent No.1 did not comply with the

terms and conditions of the OTS. The appellant/bank

has issued a third sale notice fixing the auction date

on 15.09.2021. The appellant/bank held an auction

on 15.09.2021 and respondent No.2 herein was the

successful bidder and appellant/bank issued a sale

confirmation letter to the respondent No.2 and further

a sale certificate was registered on 18.09.2021, in

favour of respondent No.2. The respondent No.1

challenged the action of the appellant/bank in

initiating recovery proceedings before the Debt

Recovery Tribunal-I in S.A.No.265/2021, which is

pending for consideration. The petitioner filed this

writ petition seeking for a mandamus directing the

appellant/bank to consider the application dated

29.05.2021, and further sought for a direction not to

proceed further with any legal action against the

schedule property of the petitioner and also sought

for a direction to the DRT-I to consider Annexure-J

filed by respondent No.1. The respondent No.1 has

sought for an interim order. The learned Single Judge

was pleased to grant the impugned order of status

quo with regard to the possession of the mortgaged

site, till next date of hearing subject to the

respondent No.1 depositing with the appellant/bank a

sum of Rs.25,00,000/- within a week. The

appellant/bank aggrieved by the impugned order

dated 07.10.2021, filed this appeal.

3. Heard the learned counsel for the appellant

and learned counsel for respondent No.1 and learned

counsel for respondent No.2.

4. Learned counsel for the appellant/bank

submits that the writ petition filed by respondent No.1

is not maintainable as the respondent No.1 has

availed the remedy by filing S.A.No.265/2021 before

the DRT-I at Bengaluru. He submits that during the

pendency of the S.A. before the DRT-I, the

respondent No.1 has no right to file a writ petition.

He further submits that the appellant/bank has

already created third party interest in the schedule

property. He further submits that inspite of granting

sufficient time to respondent No.1 to clear the

outstanding dues, the respondent No.1 failed to clear

the outstanding dues. He further submits that the

appellant/bank has initiated recovery proceedings

under the SARFAESI Act. He further submits that the

learned Single Judge has committed an error in

passing the impugned order. Hence on these

grounds, prays to allow the appeal.

5. Per contra, learned counsel for respondent

No.1 submits that if reasonable time is granted to

respondent No.1, the respondent No.1 is ready to

deposit the entire outstanding dues. She further

supports the impugned order and prays to dismiss the

appeal.

6. Learned counsel for respondent No.2 adopts

the arguments of learned counsel for the appellant.

7. Perused the records and considered the

submissions of the learned counsel for the parties.

8. There is no dispute that the respondent No.1

has availed overdraft facilities for Rs.70,00,000/-

from the appellant/bank and also created a charge

over the schedule property. It is also not in dispute

that the respondent No.1 has failed to repay the

outstanding dues. The appellant/bank issued a

demand notice under Sub-section (2) of Section 13 of

the SARFAESI Act to respondent No.1 and called upon

the respondent No.1 to clear the outstanding amount

of Rs.76,37,074.09. The respondent No.1, inspite of

service of notice, has not repaid the outstanding dues.

The appellant/bank issued possession notice and the

authorized officer has taken the possession of the

vacant schedule property. The appellant/bank has

issued sale notices on three different occasions. At

the request of respondent No.1, the appellant/bank

could not conduct the auction. Inspite of granting

sufficient opportunity, the respondent No.1 has not

repaid the outstanding dues. On 15.09.2021, the

appellant/bank has auctioned the schedule property.

The respondent No.2 was the successful bidder and

made payment of Rs.1,12,10,000/- and sale

certificate dated 15.09.2021, was registered on

18.09.2021. The respondent No.1 was well aware

about the said facts. Respondent No.1 filed the

petition in S.A.No.265/2021 before the DRT-I,

Bengaluru. During the pendency of the said petition,

the respondent No.1/petitioner filed this writ petition

and the learned Single Judge was pleased to grant an

interim order of status quo with regard to possession

of the mortgaged site property, till next date of

hearing, subject to respondent No.1 depositing with

the appellant/bank Rs.25,00,000/- within one week.

9. Learned counsel for respondent No.1 submits

that respondent No.1, in terms of the impugned

order, has deposited Rs.25,00,000/- with the

appellant/bank. The impugned order effectively

resulted in staying of all further proceedings under

the SARFAESI Act and defeats the object of SARFAESI

Act. Filing of writ petition by respondent No.1 during

the pendency of S.A.No.265/2021 before the DRT-I, is

nothing but an abuse of process of court.

10. In identical matter, this court in

W.P.Nos.35564-35566/2015 passed an ex-parte ad-

interim order on 26.08.2015, directing status quo to

be maintained with regard to possession of the

mortgaged properties subject to the borrowers

making a payment of Rs.1 Crore with respondent-

Phoenix. The said order was challenged before the

Hon'ble Apex Court. The Hon'ble Apex, in CIVIL

APPEAL NOS.257-259/2022 in the case of PHOENIX

ARC PRIVATE LIMITED VS. VISHWA BHARATI VIDYA

MANDIR & ORS., vide judgment dated 12.01.2022,

observed as under:

"If proceedings are initiated under the SARFAESI Act and/or any proposed action is tobe taken and the borrower is aggrieved by any of the actions of the private bank/bank/ARC, borrower has to avail the remedy under the SARFAESI Act and no

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writ petition would lie and/or is maintainable and/or entertainable."

11. The said judgment is aptly applicable to the

present case in hand. As observed above, the

impugned order passed by the learned Single Judge is

contrary to the law laid down by the Hon'ble Apex

Court in the case of PHOENIX ARC PRIVATE LIMITED

(SUPRA). Considering the law laid down by the

Hon'ble Apex Court, we are of the view that the

impugned order is arbitrary and erroneous and same

is liable to be set aside. Accordingly, we proceed to

pass the following:

ORDER

The writ appeal is allowed.

            The       impugned       order      dated
     07.10.2021,         passed       in      W.P.No.

17392/2021, is hereby quashed and set aside.

The ex-parte ad-interim order dated 07.10.2021, stands vacated.

- 11 -

12. Learned counsel for respondent No.1/

petitioner seeks liberty to make an application to the

appellant/bank to reconsider the proposal of the

petitioner for settlement of the outstanding dues. It

is needless to say that if such a representation is

made by the petitioner, the appellant/bank may

consider the same, in accordance with law.

Sd/-

CHIEF JUSTICE

Sd/-

JUDGE RD