Karnataka High Court
Shri K Narayana Reddy vs M/S Msk Shelters on 21 February, 2024
Author: H.P.Sandesh
Bench: H.P.Sandesh
-1-
NC: 2024:KHC:7239
MFA No. 8638 of 2023
IN THE HIGH COURT OF KARNATAKA AT BENGALURU
DATED THIS THE 21ST DAY OF FEBRUARY, 2024
BEFORE
THE HON'BLE MR JUSTICE H.P.SANDESH
MISCELLANEOUS FIRST APPEAL NO. 8638 OF 2023 (CPC)
BETWEEN:
1. SHRI K. NARAYANA REDDY
S/O LATE KONAPPA REDDY
AGED ABOUT 65 YEARS
R/AT NO.141/7/8, 4TH MAIN
3RD STAGE, KATHRIGUPPE
BENGALURU-560085
...APPELLANT
(BY SRI. V.B.SHIVA KUMAR, ADVOCATE)
AND:
1. M/S. MSK SHELTERS
REPRESENTED BY ITS MANAGING PARTNER
SHRI. M. SURESH KUMAR
HAVING ITS OFFICE AT NO.2
Digitally signed
by SHARANYA T 3RD FLOOR, C.T. BED EXTENSION
Location: HIGH BSK 2ND STAGE
COURT OF BENGALURU-560070
KARNATAKA
2. SHRI. M. SURESH KUMAR
S/O LATE MUNISWAMY
AGED MAJOR, R/A FLAT NO.604,
SHOBHA DEW FLOWER APARTMENT
4TH CROSS, SARAKKI,
J.P. NAGAR I PHASE
BENGALURU-560078
...RESPONDENTS
(BY SRI. V.B.RAVISHANKAR, ADVOCATE FOR C/R1 & R2)
-2-
NC: 2024:KHC:7239
MFA No. 8638 of 2023
THIS MFA IS FILED U/O.43 RULE 1(q) OF THE CPC,
AGAINST THE ORDER DT.11.12.2023 PASSED ON IA NO.1 IN
O.S.NO.3703/2022 ON THE FILE OF THE XX ADDITIONAL CITY
CIVIL AND SESSIONS JUDGE, (CCH-32), BENGALURU CITY,
DISMISSING IA NO.1 FILED U/O.XXXVIII RULE 5 R/W SEC.151
OF CPC.
THIS APPEAL, COMING ON FOR ADMISSION THIS DAY,
THE COURT DELIVERED THE FOLLOWING:
JUDGMENT
Heard the learned counsel for the appellant and the
learned counsel for the respondent.
2. The factual matrix of the case of the appellant
before the Trial Court in a suit in O.S.No.3073/2022 is that
the plaintiff and defendants are known to each other since
many years on the acquaintance, the defendant being in
the business of purchasing converted lands from the land
owners for the purposes of forming layouts and putting up
constructions. The defendant was in need of funds for
investing and developing new projects and in that regard,
the defendant approached the appellant and sought for
financial assistance for a sum of Rs.3,00,00,000/- and
agreed to reward profits out of the said business from time
to time without committing any default, which was
NC: 2024:KHC:7239
mutually agreed and reduced into writing under
Memorandum of Understanding between the plaintiff and
defendant on 05.06.2017. The plaintiff has transferred an
amount of Rs.3,00,00,000/- through RTGS dated
05.06.2017. The defendant on receipt of the said amount
was pleased to issue three undated cheques for an amount
of Rs.1,00,00,000/- each. The aforementioned three
cheques issued by the defendant in favour of plaintiff was
drawn on Kotak Mahindra Bank, Bangalore and when the
cheque No.1350 issued by defendant had overwritten
made on the cheque, same was brought to the knowledge
of the defendant and the defendant has taken back the
said cheque and another fresh cheque was issued bearing
No. 001571 drawn on Kotak Mahindra Bank for an amount
of Rs.50,00,000/- only, the defendant was liable towards
Rs.1,00,00,000/-, for which defendant stated that
defendant will issue another cheque at the earliest for the
remaining amount of Rs.50,00,000/-. The plaintiff further
contended that as things stood, the plaintiff expressed his
willingness to take back the investment amount under the
NC: 2024:KHC:7239
Memorandum Of Understanding and informed the
defendant and the defendant agreed and instructed him to
present the aforesaid cheques for encashment and those
cheques are dishonored. It is also contended that as
assurance made by the defendant and as per the
defendant instructions the plaintiff had filled up the dates
in the cheques as 14.03.2022. The cheques were returned
with an endorsement 'funds insufficient' dated 15.03.2022
and when the notice was issued, an untenable reply was
given. It is contended that plaintiff initially paid a sum of
Rs.3,00,00,000/- to the defendant and out of the said
Rs.3,00,00,000/-, the defendant has paid a sum of
Rs.50,00,000/- by way of demand draft dated 16.11.2021
and 12.01.2022 each Rs.25,00,000/- and the defendant is
liable to pay a sum of Rs.2,50,00,000/-. The plaintiff
already set the law in motion by filing a criminal case in
C.C.No.6860/2022 and the same is pending consideration.
The plaintiff further contends that as the defendant by way
of abundant caution has sent a caveat petition through his
counsel wherein certain admissions are made, thus the
NC: 2024:KHC:7239
defendant is liable to pay to the plaintiff the sum covered
under the above mentioned three cheques. It is also
contended that defendant being in the business of
purchasing converted lands from land owners for the
purpose of forming layouts and putting up construction
and own several properties in and around Bangalore City
and also other places and defendant capable of repaying
the amount, still the defendant has withheld the amount
without any reasonable cause. Hence, filed a suit for the
relief of recovery of money and also inter alia sought an
order of attachment by filing an application.
3. It is contended in the application and the
affidavit that item No.1 of the property is the undeveloped
immovable residential converted land bearing Sy.No.216
measuring to an extent of 3 acres and 9 guntas and
Kharab land thereon, situated at Kuduvathi Village, Nandi
Hobli, Chikkaballapura Taluk, Chikkaballapura District,
which is converted from agricultural to non-agricultural
residential purpose. The application schedule item No.2
NC: 2024:KHC:7239
property is vacant property bearing Site No.471, 5th Block,
Jayanagar, Bengaluru, Old No.471 New No.16, 39th 'C'
Cross Road, 5th Block, Jayanagar, Bengaluru, in all
measuring 2904 square feet. In support of the application,
an affidavit is sworn for having accepted a sum of
Rs.3,00,00,000/- and subsequently, refund of amount of
Rs.50,00,000/-, due is for an amount of Rs.2,50,00,000/-
and in order to secure the amount which is due from the
defendant, it is necessary to order for attaching the
property of defendant before judgment.
4. In pursuance of the suit summons and also the
application which has been received, the defendant
appeared and filed written statement contending that the
appellant has taken advantage of undated blank signed
cheques, which was secured for security purpose and after
a lapse of five years without the knowledge and consent of
the respondent, filed the present false suit. It is contended
that filing of private complaint against the respondent is
admitted and the applicant has not filed any documents in
NC: 2024:KHC:7239
support of the application, but had only caused the notice
on 22.03.2022 and the respondent has given reply on
30.03.2022 itself. The amount borrowed was not disputed
but contended that the properties sought for attachment
are not in the hands of respondent No.2. The
encumbrance certificate produced by the applicant which
shows that item No.1 of the property has already been
sold and in respect of item No.2 property, there exists a
bank loan and further contended that he has made the
repayment of Rs.4,31,00,000/- to the applicant and the
applicant has suppressed this fact and has not produced
the statement of account and the said repayment as a
matter of record and the same is well within the
knowledge of the applicant /appellant and hence, has not
made out any case.
5. The trial court having considered the pleadings
of the parties formulated the point and answered the point
in the negative in coming to the conclusion that there is no
supporting material to show that the defendant intends to
NC: 2024:KHC:7239
dispose of the property. The trial court also comes to the
conclusion that it is settled principle of law that before
exercising authority under Order 38 Rule 5 of Code of Civil
Procedure, 1908, the plaintiff must establish prima facie
case to show that his claim is genuine and valid and that
the defendant is about to remove or dispose of all or part
of his property with an intention of preventing or denying
the execution of any judgment. The trial court also comes
to the conclusion that no particulars are found about the
removal or disposal of the property by the defendant in
order to delay the execution of the judgments and the
application filed by the plaintiff does not disclose how and
when the defendant is trying to dispose of the property in
order to delay the execution of the decree and rejected the
same.
6. The learned counsel appearing for the appellant
would vehemently contend that the very approach of the
trial court is erroneous. The counsel also vehemently
contends that the trial court failed to appreciate the factual
NC: 2024:KHC:7239
aspects of the case. The trial court was incumbent to
notice that it should have secured the decreetal amount in
the amount when once the order of attachment is passed
and the said order could be diluted or dissolved by a
subsequent order, in which there is due amount of
Rs.2,50,00,000/-. There is no dispute with regard to the
MOU and also there is a term in the MOU that in the
investment, if the appellant wants to withdraw the same,
an opportunity has to be given and if properties are
disposed off, there is a chance of defeating the very fruits
of the decree, if the court is going to pass the same. The
trial court has jumped to an erroneous conclusion on the
statement made by the defendant that the case is barred
by limitation as per plaint paragraph No.6 that undated
cheques filled by the plaintiff was by authorization and no
such documents were produced to show that defendant
had authorized and consented to present the cheque, The
same was presented without the consent of the defendant
and the very written statement is taken as the gospel
- 10 -
NC: 2024:KHC:7239
truth and no proper reasons are assigned by the trial court
while rejecting the application.
7. This court earlier heard the matter in part and
directed the appellant to produce the documents for
having received the amount and accordingly the learned
counsel for the appellant has produced the statement of
accounts of the appellant for having made the payment
and also for having received the amount and also the
payment made to the tune of Rs.1,56,00,000/- as loan,
which is not included in the aforesaid account statement. A
separate suit for recovery of the said amount of
Rs.1,56,00,000/- is paid. The learned counsel for the
appellant in support of his statement also produced the
sworn statement of the PW1 and cross-examination of
PW1 and contended that that PW1 categorically stated
with regard to the payment, which he has received
towards the profit.
8. Per contra, the learned counsel appearing for
the respondent would vehemently contend that the
- 11 -
NC: 2024:KHC:7239
plaintiff has suppressed the fact for having received the
amount of Rs.4,31,00,000/- as against the investment or
Rs.3,00,00,000/-. The counsel also would vehemently
contend that the trial court has taken note of the
transaction taken place between them and in the
statement of account also, learned counsel contends that
an amount of Rs.4,31,00,000/- was paid was not disputed
and though contends that the same is in respect of the
profit and there was no any recital in the Memorandum Of
Understanding with regard to the payment as profit and
only payment was made towards the interest. The learned
counsel has also produced the bank statement for having
paid the amount of Rs.4,31,00,000/-. He has also
produced a copy of the plaint in O.S.No.672/2023 wherein
a separate suit is filed for recovery of Rs.1,56,00,000/-. In
the plaint, it is stated that no other suit is filed and
suppressed the material fact before the trial court and has
not approached the court with clean hands. The counsel
also would vehemently contend that when the payment is
made to the tune of Rs.4,31,00,000/- as against
- 12 -
NC: 2024:KHC:7239
Rs.4,56,00,000/- and the due amount is Rs.25,00,000/-
and the respondent is ready to deposit the due of
Rs.25,00,000/- before the court.
9. Having heard the learned counsel for the
appellant and learned counsel for the respondent, there is
no dispute with regard to the receipt of Rs.3,00,00,000/-
by the respondent-defendant. There is also no dispute with
regard to the Memorandum of Understanding entered into
between the parties. It is also not in dispute that an
amount of Rs.1,56,00,000/- is received and also a
separate suit is filed to the tune of Rs.1,56,00,000/- and
the present suit is filed for the recovery of
Rs.2,50,00,000/-, since, Rs.50,00,000/- was repaid by
way of Rs.25,00,000/- each and there is no dispute with
regard to the payment of Rs.50,00,000/- also. It is the
contention of the appellant / plaintiff that he has got two
properties and if those properties are sold, it is highly
difficult to recover the amount which is due. It is also not
in dispute that the item No.1 which is shown in the
- 13 -
NC: 2024:KHC:7239
application has already been sold according to the
defendant and item No.2, which is also shown in the
application has been mortgaged while getting the loan
from the Bank of India by executing a memorandum of
deposit of title deed. There is no dispute with regard to the
aforesaid fact as stated in the application. The fact of
receipt of Rs.3,00,00,000/- in terms of the Memorandum
Of Understanding is also not in dispute and the court has
to look into the document of memorandum of agreement.
10. Having perused the memorandum of
agreement, it clearly discloses that both the parties are
having acquaintance with each other and the same is
came into existence on 05.06.2017 and the investment is
also for the purpose of business and the first party i.e., the
respondent herein is doing the business of purchasing
converted lands forming Layouts and apartments at
various places and he was also in need of money for the
said business and hence the second party personally
knows the first party and was keen to invest in the project
- 14 -
NC: 2024:KHC:7239
initiated by first party and accordingly the amount was
paid. Clause No.4 of the Memorandum of agreement is
very clear that first party has given three cheques, as
guarantee for investment and the same is accepted by the
second party. The clause No.5 is very clear that if the
second party wants to take back his investment amount
within the stipulated period as agreed above, then returns
of investment is calculated on prorata basis . In that case,
the second party should inform the first party three
months in advance i.e., for taking back the amount of
investment and no doubt, the documents which have been
placed before the court clearly discloses with regard to the
payment of Rs.3,00,00,000/- and also repayment of
Rs.4,31,00,000/- and also a separate suit is filed for the
amount of Rs.1,56,00,000/- paid to the defendant and the
said suit is pending consideration. The respondent has
categorically stated he has in total made the payment of
Rs.4,31,00,000/- as against Rs.4,56,00,000/- and when
the separate transaction has also taken place with regard
to the additional payment of Rs.1,56,00,000/- and also the
- 15 -
NC: 2024:KHC:7239
adjustment is not with regard to the refunding of the
investment and there is a clause in Memorandum of
Understanding in clause No.5 regarding the repayment is
on the prorata basis. Hence, the very contention of the
respondent that whatever the amount paid is almost
refunded only an amount of Rs.25,00,000/- is due cannot
be accepted.
11. The contention of the appellant is also very
clear that the investment is made when the first party
is procuring and converting the land and doing the
business of property and no person will invest the money
without any profit. The counsel appearing for the appellant
also relied upon the deposition of PW1 wherein, in the
cross-examination he has stated that the amount
whatever he has received in the statement which is
mentioned in the additional statement was received
towards the profit and counsel appearing for the
respondent also brought to the notice of this court in the
cross-examination of PW1 i.e., the appellant herein has
- 16 -
NC: 2024:KHC:7239
admitted with regard to the receipt of different amount
and there is no dispute with regard to the receipt of the
different amount also. When such being the case when the
transaction is for the investment and repayment is only
towards the amount which he has invested as contended
by the respondent cannot be accepted. The trial court has
committed an error in dismissing the application and ought
to have taken note of the fact that in the written
statement, the defendant has specifically contended that
the item No.1 of the property was already sold and the
other property, which was shown in the application was
hypothecated by executing the deposit of title deeds in
favour of the bank while availing the loan. If that is the
case, it is very difficult to recover the amount, which has
been sought in the suit. When such admission is there with
regard to the receipt of the amount and also no doubt
some payments are made and when the plaintiff contend
that the payment, which has been made is towards the
profit and the same is also periodically made and when
there is a claim made to the tune of Rs.2,50,00,000/-
- 17 -
NC: 2024:KHC:7239
which is due and also the plaintiff has stated the same in
the plaint itself for having it was due and defendant is due
for a sum of Rs.2,50,00,000/-. No doubt, in the plaint he
has not stated with regard to the profit, which he has
received in the plaint, but in the statement of account it is
clearly mentioned for having received the amount and it is
his claim that it is same in respect of investment he had
made from 05.06.2017 and periodically made the payment
and the matter requires adjudication whether the same is
towards the profit in the investment made by him or it is
towards the interest as contended by the respondent and
when they due amount is there and also cheques are
bounced and criminal prosecution is also initiated under
Section 138 of Negotiable Instruments Act, 1881 and
whether cheques are presented with consent or not, the
same also has to be adjudicated in respective case and the
very approach of the trial court in coming to the
conclusion that it is settled principle of law that before
exercising authority under Order 38 Rule 5 of CPC the
plaintiff must establish prima facie that his claim is
- 18 -
NC: 2024:KHC:7239
genuine and valid. There is no dispute with regard to the
transaction is concerned. The defendant is about to
remove or dispose of all or part of his property with the
intention of preventing or delaying the execution of any
judgments. The trial court has not discussed anything
about the very contention of the defendant that already
property item No.1 was sold and item No.2 also already
mortgaged and the same has not been discussed
regarding contentions of the plaintiff and defendants
defence is discussed in paragraph No. 14 to 17 and as
rightly contended by the appellant counsel that the trial
court comes to the conclusion that nothing is stated about
the removal or disposal of all or part of his property and
when the plaintiff has made out a case that if those two
properties are also sold, nothing remains for recovery and
when the very specific pleading is that already item No.1
was disposed of and item No.2 is also secured for the debt
which has been availed and the said fact has to be taken
note of and the very pleading itself is nothing but the
removal of disposal of the entire properties and the same
- 19 -
NC: 2024:KHC:7239
has been lost sight of by the trial court while rejecting the
application under Order 38 Rule 5 of CPC and the very
conclusion of the trial court that no material is placed is
not correct and proceeded in an erroneous approach not
invoking Order 38 Rule 5 of CPC, when the property which
has been sought for attachment also already there is a
charge and taken note of the said fact into consideration
with regard to the item No.1 is concerned already sold and
item No.2 is concerned ought to have considered as
second charge. A charge is created in favour of the bank
while availing the loan and additional charge ought to have
been created in respect of item No.2 and the same has not
been done and the trial court has committed an error in
rejecting the application under Order 38 Rule 5 of CPC in
entirety and hence, it requires interference. In view of the
discussions made above, I pass the following:
ORDER
(i) The appeal is allowed. The impugned
order is set aside.
- 20 -
NC: 2024:KHC:7239
(ii) The application filed under Order 38 Rule
5 of CPC is allowed in respect of item
No.2 of the property as additional charge
in favour of the appellant.
(iii) However, liberty is given to the
respondent to offer for security. If any
such application is filed before the Trial
Court, the Trial Court is directed to
consider the same in accordance with
law for security instead of charge.
Sd/-
JUDGE
SS
