M/S. Valdel Engineers And ... vs M/S. Cfm Asset Reconstruction ...
2023 Latest Caselaw 5212 Kant

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                                             NC: 2023:KHC:27124
                                               WP No. 15038 of 2023



             IN THE HIGH COURT OF KARNATAKA AT BENGALURU

                 DATED THIS THE 3RD DAY OF AUGUST, 2023
                                                                      R

                                    BEFORE

                 THE HON'BLE MR JUSTICE KRISHNA S DIXIT

                WRIT PETITION NO. 15038 OF 2023 (GM-RES)

             BETWEEN:

             M/S. VALDEL ENGINEERS AND CONSTRUCTORS
             PRIVATE LIMITED
             A COMPANY INCORPORATION UNDER
             THE PROVISIONS OF THE COMPANIES ACT, 1956,
             HAVING ITS CORPORATE OFFICE AT NO. 27,
             KCN TOWERS, RACE COURSE ROAD,
             BENGALURU-560 001.
             REGISTERED OFFICE AT THE RESIDENCY,
             133 AND 133/1, 5TH FLOOR,
             RESIDENCY ROAD, BENGALURU-560 025,
             REPRESENTED BY ITS MANAGING DIRECTOR.
                                                        ...PETITIONER
             (BY SRI. S S NAGANAND., SENIOR COUNSEL A/W
                 MS. SUMANA NAGANAND., ADVOCATE)
Digitally
signed by
SHARADA
             AND:
VANI B
Location:
HIGH COURT   M/S. CFM ASSET RECONSTRUCTION PRIVATE LIMITED
OF           A COMPANY INCORPORATED UNDER THE
KARNATAKA
             PROVISIONS OF THE COMPANIES ACT, 2013
             HAVING ITS CORPORATE OFFICE AT 1ST FLOOR,
             WAKEFIELD HOUSE, SPROTT ROAD,
             BALLARD ESTATE, MUMBAI-400 038,
             REGISTERED OFFICE AT BLOCK NO. A/1003,
             WEST GATE, NEAR YMCA CLUB,
             SUR. NO. 835/1 3, S.G. HIGHWAY, MAKARBA,
             AHAMEDABAD-380 051.
             REPRESENTED BY AUTHORISED OFFICER/TRUST.
                                                       ...RESPONDENT
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                                     NC: 2023:KHC:27124
                                       WP No. 15038 of 2023



      THIS WRIT PETITION IS FILED UNDER ARTICLES 226
AND 227 OF THE CONSTITUTION OF INDIA, PRAYING TO CALL
FOR RECORDS AND ISSUE A WRIT OF CERTIORARI TO QUASH
THE DEMAND NOTICE UNDER SECTION 13(2) OF THE
SECURITISATION AND RECONSTRUCTION OF FINANCIAL
ASSETS AND ENFORCEMENT OF SECURITY INTEREST ACT,
2002 DATED 04/05/2023 ISSUED BY THE RESPONDENT TO
THE PETITIONER (ANNEXURE K) AND QUASH THE REPLY
UNDER SECTION 13(3) A OF THE SECURITISATION AND
RECONSTRUCTION OF FINANCIAL ASSETS AND ENFORCEMENT
OF SECURITY INTEREST ACT, 2002 DATED 20/06/2023 ISSUED
BY THE RESPONDENT TO THE PETITIONER (ANNEXURE N) AND
ETC.,

     THIS PETITION COMING ON FOR PRELIMINARY HEARING,
THIS DAY, THE COURT MADE THE FOLLOWING:

                          ORDER

Petitioner, a private limited company incorporated

under the provisions of the erstwhile Companies Act,

1956, is knocking at the doors of Writ Court for calling in

question the loan repayment demand notice dated

4.5.2023 issued u/s 13(2) at Annexure-K, and the reply

dated 20.6.2023 issued u/s 13(3) of the Securitization and

Reconstruction of Financial Assets and Enforcement of

Security Interest Act, 2002 at Annexure-N. Both these

communications have been issued by the respondent-

financial institution, for coercing the loan recovery which is

secured by the lands in question.

NC: 2023:KHC:27124 WP No. 15038 of 2023

2. Learned Sr. Advocate appearing for the

petitioner argues that the subject lands which are

furnished by way of security for the repayment being

agricultural in nature, the same are exempt from

proceeded against in view of section 31(i) of the Act. An

application is also moved seeking leave of the court to

amend the petition by adding two more grounds namely

12A & 17.5. The new ground 12A is an elaboration as to

the subject land continuing to be agricultural despite there

being conversion orders at Annexures-P, Q, R, S, T & U.

The other ground at paragraph 17.5 is as to violation of

principles of natural justice. Learned counsel for the

petitioner presses into service the Apex Court decision in

STATE OF KARNATAKA vs. SHANKARA TEXTILES MILLS

LIMITED, (1995) 1 SCC 295, in support of his submission.

3. Having heard the learned counsel for the

petitioner and having perused the Petition Papers, this

court declines indulgence in the matter for the following

reasons:

NC: 2023:KHC:27124 WP No. 15038 of 2023

(a) There is absolutely no dispute about the

subject borrowing of money in crores of rupees and the

same remaining unrepaid; there is also no dispute as to

the land in question having been mortgaged and the

repayment of debt in question is thereby secured.

Admittedly, all these lands have been converted to non-

agricultural user by the orders of jurisdictional Deputy

Commissioner made under the provisions of Sec.95 of the

Karnataka Land Revenue Act, 1964. These Conversion

Orders are dated 16.04.1992, 29.04.1992 (2 nos.),

15.05.2004 (2 nos.) & 19.07.2004; copies thereof are

produced as Annexures-P to U to the Amendment

Application, which is taken along with the main matter

itself. It hardly needs to be stated that on the basis of

these Conversion Orders, the subject lands cease to be

agricultural in nature; it is not disputed by the learned Sr.

Counsel appearing for the petitioner, amongst other, these

Conversion Orders have been handed to the respondent-

financial institution while mortgaging the property for

securing repayment of the loan. It is a matter of common

NC: 2023:KHC:27124 WP No. 15038 of 2023

knowledge that the availability of security for repayment

figures as a dominant factor whilst processing the loan

applications. In fact, there are RBI Guidelines which to an

extent shun lending sans securities. Thus but for the

Conversion Orders, the subject lands would not have been

taken by way of security for the repayment of loan.

(b) The vehement submission of learned Sr.

Counsel for the petitioner that despite the Conversion

Orders, lands have not lost their agricultural character

since the conditions incorporated therein have not been

complied with, is too farfetched an argument, and reasons

for saying it are apparent: Firstly, it is not the case of

petitioner that any inkling was given to the financial

institution that these lands could still be agricultural, the

subject Conversion Orders notwithstanding. Secondly, it

is true that ordinarily such orders are conditioned;

however, the object of incorporating the conditions is to

bind the beneficiaries of such orders with some

responsibility to put the land for to the purpose for which

NC: 2023:KHC:27124 WP No. 15038 of 2023

conversion is obtained; even if there is non-compliance of

these conditions, the land does not get reconverted to

agricultural character, on its own. Sub-section (2) of

Sec.96 of the 1964 Act, supports this view. The same

reads as under:

"(2) If any land assessed or held for the purpose of agriculture has been diverted for any other purpose in contravention of an order passed or of a condition imposed under Section 95, the Deputy Commissioner may serve a notice on the person responsible for such contravention directing him, within a reasonable period to be stated in the notice, to use the land for its original purpose or to observe the condition; and such notice may require such person to remove any structure, to fill up any excavation or to take such other steps as may be required in order that the land may be used for its original purpose, or that the condition may be satisfied. Subject to the orders of the State Government, the Deputy Commissioner may also impose on such person a penalty not exceeding one thousand rupees for such contravention and a further penalty not exceeding twenty-five rupees for each day during which such contravention continues."

The said provision specifically empowers the Deputy

Commissioner to serve a notice on the person responsible

for contravention of the conditions of conversion, requiring

him to use the land for agricultural purpose or to comply

NC: 2023:KHC:27124 WP No. 15038 of 2023

with the condition. It is not the case of petitioner that any

such notice was issued to him when the subject lands were

mortgaged to the bank. If there is any notice issued

subsequent to the mortgage, the protection granted to the

farmers in terms of Sec.31(i) of the 2002 Act, cannot be

availed.

(c) The reliance of petitioner's counsel on the

decision in SHANKARA TEXTILES supra does not come to

his aid. Paragraph 9 of the decision which was heavily

banked upon, reads as under:

"...The consistent stand taken by the authorities is that the land was never converted for non-agricultural use as required by the provisions of Section 95(2) of the Revenue Act. The mere fact that at the relevant time, the land was not used for agricultural purpose or purposes subservient thereto as mentioned in Section 2(18) of the Act or that it was used for non- agricultural purpose, assuming it to be so, would not convert the agricultural land into a non-agricultural land for the purposes either of the Revenue Act or of the Act, viz., Karnataka Land Reforms Act. To hold otherwise would defeat the object of both the Acts and would, in particular, render the provisions of Section 95(2) of the Revenue Act, nugatory. Such an interpretation is not permissible by any rule of the interpretation of statutes. What is further,

NC: 2023:KHC:27124 WP No. 15038 of 2023

the respondent-Company had itself filed a declaration under Section 79-B(2)(a) of the Act stating therein that the entire disputed land was agricultural land and had claimed exemption from the provisions of the said Section 79- B under Section 109 of the Act on the ground that the land was mortgaged to the Mysore State Financial Corporation. We are, therefore, unable to agree with the view taken by the High Court on the point".

Firstly, the question canvassed before this court was not

involved and therefore not examined in the above

decision; secondly, the pith of ratio of the said decision is:

a land does not cease to be agricultural regardless of its

user for non-agricultural purpose, unless an order

converting it to non-agricultural user has been obtained

under the provisions of Sec.95 of the 1964 Act. That

proposition has no invocability in the fact matrix of this

petition. A case is an authority for the proposition that is

directly and substantively laid down therein, and not for all

that which logically follows from what has been so laid

down. Lord Halsbury more than a century ago, in the

celebrated case of Quinn v Leathem (1901) A.C. 495,

506 has observed as under:

NC: 2023:KHC:27124 WP No. 15038 of 2023

"Now before discussing the case of Allen v. Flood, (1898) A.C. 1 and what was decided therein, there are two observations of a general character which I wish to make, and one is to repeat what I have very often said before, that every judgment must be read as applicable to the particular facts proved, or assumed to be proved, since the generality of the expressions which may be found there are not intended to be expositions of the whole law, but governed and qualified by the particular facts of the case in which such expressions are to be found. The other is that a case is only an authority for what it actually decides. I entirely deny that it can be quoted for a proposition that may seem to follow logically from it. Such a mode of reasoning assumes that the law is necessarily a logical Code, whereas every lawyer must acknowledge that the law is not always logical at all."

(d) It becomes apparent from the reading of Apex

Court decision in the cognate case that it had repelled the

contention of the litigant company therein that the land

was no longer agricultural, because the company had

projected to the authorities that the land was agricultural;

same is the case here inasmuch as petitioner company had

represented to the financial institution that the subject

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NC: 2023:KHC:27124 WP No. 15038 of 2023

lands were converted to non-agricultural user and thereby

driven the financial institution to lend money by taking

mortgage of the subject lands. Thus, it has altered its

position to its own detriment and to the advantage of

petitioner company. That being the position, the doctrine

of estoppel comes in the way of any relief being granted to

him by this court. There is also no scope for the argument

of "no estoppel against law" either, in the fact matrix of

the case.

(e) Except producing copies of Conversion Orders,

petitioner has not placed on record the Record of Rights to

show that entries relating to crops grown post conversion

could have been seen; such entries enjoy presumptive

value u/s 133 of the1964 Act. Petitioner has not produced

any other material such as APMC records to prima facie

show that the lands are being used for agricultural

purpose. The structure of the petitioner's pleadings and

the arguments advanced on its behalf, gives a lot of scope

to assume that an 'afterthought' is being tried to defeat or

delay the loan recovery proceedings.

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NC: 2023:KHC:27124 WP No. 15038 of 2023

(f) It needs no research to know the undesirable

consequences of countenancing an argument to the contra

above: There have been umpteen number of cases

wherein land converted to non-agricultural purpose have

been mortgaged to the banks/financial institutions for

securing repayment of the debt. If contention of the kind

is accepted, that would render several such loans

unsecured, if not bad debts. This court has to keep in mind

that it is the public money which the banks and financial

institutions deal with. The submission of learned Sr.

Advocate Mr. Naganand that the financial institution

concerned ought to have taken precaution while accepting

the subject lands as security for repayment of loans, is

tainted with unconscionability, to say the least. Petitioner

is not a poor farmer, an agricultural labourer or a naïve

person hailing from rural background with less exposure to

the outer world. It is "a company incorporated under the

provisions of the Companies Act, 1956 and is a part of the

Valdel Group of Companies". This is how the first

paragraph of the petition describes the petitioner. It is a

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NC: 2023:KHC:27124 WP No. 15038 of 2023

common knowledge that companies of the kind are

promoted by persons having education & exposure to the

outer world. For such litigants, an argument of the kind

does not avail. Added, countenancing such a contention

not only amounts to placing premium on illegality but also

playing fraud on the statute. Law cannot be permitted to

be used as an instrument of fraud.

(g) The averment taken up in the amendment

application as to violation of principles of natural justice

does not much come to the aid of Petitioner Company;

these principles ordinarily do not apply in cases involving

loan transactions that are largely animated by private law

elements. Secondly, they cannot be invoked ritualistically;

had the petitioner been given an opportunity of hearing,

the impugned action would not have followed, has to be

demonstrated; that requirement remains unsubstantiated.

Even otherwise, the issue of validity of impugned reply

dated 20.06.2023 does not much go to the root of the

matter and therefore the arguable violation of principles of

natural justice pales into insignificance.

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NC: 2023:KHC:27124 WP No. 15038 of 2023

In the above circumstances, this writ petition being

thoroughly devoid of merits is liable to be rejected in

limine and accordingly it is.

The Registry shall send a copy of this judgment to

the respondent by Speed Post, immediately.

Sd/-

JUDGE

Bsv