Karnataka High Court
Karnataka State Financial Corporation vs M/S Alois Security Printers (P) Ltd on 3 July, 2024
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MFA No.3024/2016
IN THE HIGH COURT OF KARNATAKA AT BENGALURU
DATED THIS THE 3RD DAY OF JULY, 2024
PRESENT
THE HON'BLE MRS JUSTICE K.S.MUDAGAL
AND
THE HON'BLE MR JUSTICE VIJAYKUMAR A. PATIL
MISCELLANEOUS FIRST APPEAL No.3024/2016 (SFC)
BETWEEN:
KARNATAKA STATE FINANCIAL CORPORATION
HAVING ITS CORPORATE OFFICE AT NO.1/1
THIMMAIAH ROAD, BENGALURU - 560 052
AND BRANCH OFFICE AT S.L.N. COMPLEX
M B ROAD, NEAR K.S.R.T.C. BUS STAND
KOLAR-563 101
REP. BY ITS ASSISTANT GENERAL MANAGER ...APPELLANT
(BY SRI BIPIN HEGDE., ADVOCATE)
AND:
Digitally 1. M/S. ALOIS SECURITY PRINTERS (P) LTD.
signed by K S HAVING ITS REGISTERED OFFICE AT NO.9
RENUKAMBA
3RD CROSS, SRIPURAM
Location:
High Court of SESHADRIPURAM
Karnataka BENGALURU - 560 020
2. H.S.SRIKANTH
S/O H.D.SATHYAN
R/AT NO.9, 3RD CROSS, SRIPURAM
SESHADRIPURAM
BENGALURU - 560 020
3. B.K.SHESHADRI
LEGAL HEIR OF LATE JYOTHI SESHADRI
NO.160, EAST PARK ROAD
15TH CROSS, MALLESHWARAM
BENGALURU - 560 003
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MFA No.3024/2016
4. B.K.SHESHADRI
S/O B.KRISHNASWAMY IYER
NO.160, EAST PARK ROAD
15TH CROSS, MALLESHWARAM
BENGALURU - 560 003
5. B.S.KIRAN KUMAR
S/O B.K.SAMPATH KUMAR
PRAKASH APARTMENTS
SULTANPALYA MAIN ROAD
BENGALURU
6. G.P.NARAHARI
S/O LATE G.N.PARTHASARATHY
NO.1220, 4TH MAIN
E BLOCK, 2ND STAGE
RAJAJINAGAR
BENGALURU - 560 010
7. M.V.SRIDHAR
S/O M.R.VENKATANARASIMHAN
NO.6, 1ST CROSS
CHAKRAVARTHY IYENGAR LAYOUT
SHESHADRIPURAM
BENGALURU - 560 020
8. A.K.CHATTERJI
S/O ATAL BEHAR CHATTERJI
PLOT NO.41, CHITRAKUT APARTMENTS
18TH CROSS, MALLESHWARAM
BENGALURU - 560 003 ...RESPONDENTS
(BY SRI.G.S.VENKAT SUBBARAO, ADVOCATE FOR R1 & R2;
SRI.K.V.SATISH, ADVOCATE FOR R5, R6 & R8;
SRI.A SRIKANTH, ADVOCATE FOR R7; R3 & R4 ARE SERVED)
THIS MISCELLANEOUS FIRST APPEAL IS FILED UNDER
SECTION 32(9) OF THE STATE FINANCIAL CORPORATIONS ACT,
1951 PRAYING TO SET ASIDE THE ORDER DATED 21.01.2016
PASSED BY THE PRINCIPAL DISTRICT JUDGE, KOLAR IN
MIS.NO.8/2010 DISMISSING THE PETITION FILED UNDER SECTION
31(1)(aa) AND 32 OF STATE FINANCIAL CORPORATION ACT.
THIS MISCELLANEOUS FIRST APPEAL COMING ON FOR
FURTHER HEARING, THIS DAY, K.S.MUDAGAL J., DELIVERED THE
FOLLOWING:
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MFA No.3024/2016
JUDGMENT
Challenging the dismissal of its petition under Sections
31(1)(aa) and 32 of the State Financial Corporations Act,
1951 ('the Act' for short), the Karnataka State Financial
Corporation which was the petitioner in Misc.No.8/2010 on
the file of the Principal District Judge, Kolar has preferred this
appeal.
2. The appellant was the petitioner and respondent
Nos.1 to 8 were respondent Nos.1 to 8 before the Trial Court.
For the purpose of convenience, the parties are referred to
henceforth according to their ranks before the Trial Court.
3. The petitioner is a Corporation owned by the
Government and established under the Act for the purpose of
lending financial assistance to industrial concerns.
Respondent No.1 is the Private Limited Company. Respondent
No.2 was the Managing Director and respondent Nos.3 to 8
were the Directors.
4. Respondent No.1 availed term loan of
Rs.62,50,000/- from the petitioner agreeing to repay the
same with interest at 19.5% per annum. On 10.11.1992
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respondent No.1 further availed soft loan of Rs.4,00,000/-
with interest at 3.5% per annum. Respondent Nos.2 to 8
executed guarantee deed dated 28.05.1993 for repayment of
loan granted to respondent No.1. The properties were
mortgaged to the petitioner as security for payment of
money. Respondent No.1 committed default in payment of
loan. Therefore the petitioner issued notice dated 08.01.2001
to respondent No.1 for initiation of the proceedings under
Section 29 of the Act. Requisition of respondent No.1 under
its letter dated 14.12.2001 to reschedule of the loan was
rejected and respondent No.1 was called upon to pay overdue
amount of Rs.28,82,000/- with interest.
5. Petitioner issued notice dated 30.03.2002 invoking
guarantee and called upon the respondents to pay the
overdue amount with interest. On 14.06.2002 petitioner filed
Misc.No.456/2002 before the City Civil Court, Bangalore
against the respondents under Sections 31(1)(aa) and 32 of
the Act for recovery of Rs.82,89,680/- on the term loan
account and Rs.4,31,890/- on the soft loan. The City Civil
Court by order dated 11.09.2009 ordered to return the said
petition to the petitioner for presentation before the
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appropriate Court on the ground that the said Court lacked
jurisdiction as mortgaged properties situated within the
jurisdiction of Kolar Court. Petitioner presented the same on
03.02.2010 before the Principal District Judge, Kolar which
was registered in Misc.No.8/2010 out of which the
proceedings of this appeal arise.
6. Respondent Nos.3, 4 and 7 did not contest the
petition. Respondent Nos.1, 2, 5, 6 and 8 contested the
petition by filing their statement of objections. They admitted
availment of loan and execution of the guarantee deed by
respondent No.1 for business purpose. They contended that
their signatures were taken on the guarantee deed in blank
forms. They denied service of notice, their request to
reschedule the loan and the claim made in the petition. They
contended that respondent No.1 suffered loss in the business
due to burglary in their premises and theft of computer
stationery and other material instruments. They contended
that though the petitioner took possession of the mortgaged
and hypothecated properties, did not sell and realize the same
for longtime due to which those properties lost their value and
ultimately sold to one Devi Industries. Even the said sale
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proceeds were not adjusted for the dues. They claimed that
the petition was barred by time and their liability was
disputed.
7. In support of its claim, the petitioner got
examined one T.Z.Baba Sab, Manager (Recovery) in the
petitioner/Corporation as PW.1 and got marked Exs.P1 to P24.
Respondent Nos.5, 8 and 6 were examined as RWs.1 to 3
respectively and on their behalf, Exs.R1 to R8 were marked.
8. The Trial Court on hearing the parties, by the
impugned judgment and order dismissed the petition on the
following grounds:
(i) PW.1 had no authority to tender evidence on
behalf of the petitioner;
(ii) The petition was barred by time;
(iii) The guarantees were discharged due to negligence
of the creditors in protecting the mortgaged assets;
(iv) The statement of accounts Exs.P8 and P24 were
not proved and they were not admissible for want of
certification under Section 65B of the Indian Evidence Act,
1872 ('the Evidence Act' for short); &
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(v) The petition was filed belatedly and lacks
bonafides.
9. We heard both sides.
Submissions of Sri Bipin Hegde, learned Counsel for the
appellant/petitioner:
10. The findings of the trial Court that the petition is
barred by limitation is erroneous as the deed of guarantee
was continuing one and the petition was filed within three
years from the date of invocation of the guarantee. More over
PW.1 has given evidence before the City Civil Court and he
has produced authorization letter in that proceedings. The
statement of accounts Exs.P8 and P24 have presumptive
value under Section 4 of the Bankers' Books Evidence Act,
1891 ('the Bankers Act' for short) read with Section 44 of the
Act. The said presumption was not rebutted. The finding that
the petitioner was negligent in protecting the mortgaged
properties or taking timely action to auction them is
unsustainable. Even on adjusting the proceeds of sale of
mortgaged properties, the respondents were due to pay the
amount claimed in the petition. Hence, the impugned
judgment and order is liable to be set aside.
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Submissions of Sri G.S.Venkat Subba Rao, learned
Counsel for respondent Nos.1 and 2, Sri K.V.Satish,
learned Counsel for respondent Nos.5, 6 and 8 and Sri
A.Srikanth, learned Counsel for respondent No.7:
11. The authority of PW.1 to depose on behalf of the
petitioner was not proved. His evidence shows that he was
totally ignorant of the transaction of this case or entries in the
alleged statement of accounts. Exs.P8 and P24 were not
proved as per the provisions of the Bankers Act. Therefore
they cannot claim presumption under Section 4 of the said
Act. Absolutely there was no explanation for not proceeding
against respondent No.1 and its assets in time. Therefore the
claim against respondent No.1 was time barred and
consequently the claim against the guarantors was also time
barred. There was no evidence to show that the proceeds
recovered from the sale of the mortgaged properties were
adjusted to the loan account. Therefore the Trial Court was
justified in holding that the liability was not proved. The
appeal has no merits and shall be dismissed.
12. On considering the submissions of the parties and
on perusal of the records, the point that arises for
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determination of the Court is "whether rejection of the
petition by the Trial Court is sustainable in law?"
Analysis
13. The respondents though in their statement of
objections denied availment of the loan and execution of the
guarantee deed as per Ex.P3, during the course of evidence,
they did not dispute availment of the term loan of
Rs.62,50,000/- and soft loan of Rs.4,00,000/- for their
industrial purpose. Though they contended that their
signatures were taken on Ex.P3 the deed of guarantee on
blank form, the said contention was not established. In para
26 of the petition itself it was contended that respondent No.1
committed default in payment of overdue amount. It was
further contended that cause of action arose on the date of
invocation of the guarantee deed under the notice Ex.P9
dated 30.03.2002.
14. The Hon'ble Supreme Court in the judgment in
Syndicate Bank v. Channaveerappa Beleri1 held that notice
invoking guarantee shall be issued before the claim against
principal borrower gets barred by time. It was held that, if by
AIR 2006 SC 1874
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the time the notice invoking guarantee was issued and liability
of principal borrower suppose was not live, then issuance of
notice does not revive the limitation. Therefore in the present
case, the petitioner was required to prove that as on the date
of issuance of notice, the loan account of respondent No.1
was live and that was not barred by time. To establish that
the petitioner was required to prove its statements of
accounts and should have shown that the notice Ex.P8 was
issued within three years from the date of last transaction of
the said account. To prove that the petitioner relied on the
evidence of PW.1 who claimed to be Manager (Recovery) in
the petitioner Corporation at Kolar. But no documents were
produced or admitted in the evidence to show that he was
authorized to give evidence.
15. Learned Counsel for the appellant/petitioner
submits that before return of petition by City Civil Court,
Bangalore, evidence was adduced before the said Court and in
the said case, authorization letter was marked as Ex.P1. The
Hon'ble Supreme Court in para 17 of the judgment in ONGC
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Ltd. v. Modern Construction & Co.2 in that regard held as
follows:
"17. Thus, in view of the above, the law on the
issue can be summarized to the effect that if the court
where the suit is instituted, is of the view that it has no
jurisdiction, the plaint is to be returned in view of the
provisions of Order VII Rule 10 CPC and the plaintiff
can present it before the court having competent
jurisdiction. In such a factual matrix, the plaintiff is
entitled to exclude the period during which he
prosecuted the case before the court having no
jurisdiction in view of the provisions of Section 14 of
the Limitation Act, and may also seek adjustment of
court fee paid in that court. However, after
presentation before the court of competent jurisdiction,
the plaint is to be considered as a fresh plaint and the
trial is to be conducted de novo even if it stood
concluded before the court having no competence to try
the same."
(Emphasis supplied)
16. Reading of the above judgment shows that in case
of return of the plaint for want of jurisdiction after
presentation before the Court of competent jurisdiction, the
plaint has to be considered afresh. De-novo evidence has to
be adduced and the evidence adduced before the Court which
has no jurisdiction, carries no evidentiary value.
(2014) 1 SCC 648
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17. First of all the documents produced before the
Principal City Civil Judge, Bengaluru had no evidentiary value.
The petitioner itself did not make any attempt to get the
documents marked which was already on record and admitted
in the proceedings before the Trial Court. Therefore the Trial
Court was justified on holding that PW1's authorization was
not proved.
18. Further PW.1 was not the author of Exs.P8 and
P24. Section 4 of the Bankers Act was sought to be pressed
into service to claim that they carry presumptive value. To
claim benefit of Section 4 of the Bankers Act, the documents
should be certified copy in conformity with Section 2(8) of the
Bankers Act. The provision reads as follows:
"2. Definitions.-- In this Act, unless there is
something repugnant in the subject or context,--
......................................................................................................
(8) "certified copy" means when the books of a
bank,--
(a) are maintained in written form, a copy of
any entry in such books together with a
certificate written at the foot of such copy
that it is a true copy of such entry, that
such entry is contained in one of the
ordinary books of the bank and was made
in the usual and ordinary course of
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business and that such books is still in the
custody of the bank, and where the copy
was obtained by mechanical or other
process which in itself ensured the
accuracy of the copy, a further certificate
to that effect, but where the book from
which such copy was prepared has been
destroyed in the usual course of the bank's
business after the date on which the copy
had been so prepared, a further certificate
to that effect, each such certificate being
dated and subscribed by the principal
accountant or manager of the bank with
his name and official title; and
(b) consists of printouts of data stored in a
floppy, disc, tape or any other electro-
magnetic data storage device, a printout of
such entry or a copy of such printout
together with such statements certified in
accordance with the provisions of section
2A;
(c) a printout of any entry in the books of a
bank stored in a micro film, magnetic tape
or in any other form of mechanical or
electronic data retrieval mechanism
obtained by a mechanical or other process
which in itself ensures the accuracy of such
printout as a copy of such entry and such
printout contains the certificate in
accordance with the provisions of section
2A. ..................................................................."
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19. Reading of the above provision shows that, it
should be proved that the document produced is certified
copy and bears certification that the entries shown in the said
documents are in accordance with the entries in the books of
accounts which was maintained in the ordinary course of
business and still in the custody of the petitioner. It should
also be shown that document is the printout of the data,
floppy disk or any other electronic device. Ex.P24 does not
bear such certification at all.
20. Ex.P8 is purportedly certified by Deputy General
Manager, but the author of that certification was not
examined. PW.1 does not say that he had certified that
document or he had seen or compared the same with original
account book. In the cross-examination he expressed his total
ignorance about the entries in Exs.P8 and P24. He was not
the person working in Deputy General Manager's office at the
relevant time. Absolutely nothing was produced to show that
account of respondent No.1 was live as on the date of
issuance of notice Ex.P9 invoking guarantee.
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21. The loan was sanctioned as long back as
10.11.1992. Absolutely there was no material to show when
claim of Rs.28,82,000/- became due. The burden was on the
petitioner to prove that claim was in time. But no evidence
was adduced to establish that account was live as on the date
of issuance of notice dated 08.01.2001 under Section 29 of
the Act. Even otherwise, the petitioner was bound to establish
the petition claim of Rs.82,89,680/- + 4,31,890/-.
22. As already noted, statement of accounts produced
by the petitioner was not proved. Admittedly pending the
proceedings before the City Civil Court in Misc.No.456/2002
mortgaged assets were auctioned in the year 2005. Nothing
was produced to show how much was realized from the said
sale and how that was adjusted to the loan account. Under
the aforesaid facts and circumstances, the Trial Court was
justified in holding that the petition claim was not proved and
the claim was time barred and stale. For the aforesaid
reasons, we do not find any illegality or impropriety in the
order of the Trial Court in rejecting the petition. Hence, the
following:
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ORDER
The appeal is dismissed.
Sd/-
JUDGE
Sd/-
JUDGE
KSR
