Karnataka High Court
The Bangalore Bangalore Rural And vs The Asst. Commissioner on 25 July, 2024
Author: Suraj Govindaraj
Bench: Suraj Govindaraj
-1-
NC: 2024:KHC:29381
WP No. 29196 of 2014
C/W WP No. 17857 of 2015
WP No. 17858 of 2015
IN THE HIGH COURT OF KARNATAKA AT BENGALURU
DATED THIS THE 25TH DAY OF JULY, 2024
BEFORE R
THE HON'BLE MR JUSTICE SURAJ GOVINDARAJ
WRIT PETITION NO. 29196 OF 2014 (SCST)
C/W
WRIT PETITION NO. 17857 OF 2015 (SCST)
WRIT PETITION NO. 17858 OF 2015(SCST)
IN W.P.NO.29196/2014
BETWEEN
THE BANGALORE, BANGALORE RURAL AND
RAMANAGARA DISTRICT CENTRAL
CO-OPERATIVE BANK LTD.,
P B NO.1813, LAKSHMI SADANA
5TH MAIN ROAD
CHAMARAJPET
BANGALORE 560 018
REPRESENTED BY ITS CHIEF EXECUTIVE OFFICER
SRI B R LINGARAJU
Digitally signed
by ...PETITIONER
NARAYANAPPA
LAKSHMAMMA
(BY SRI. SOMASHEKAR., ADVOCATE)
Location: HIGH
COURT OF
KARNATAKA AND
1. THE ASST. COMMISSIONER
BANGALORE NORTH DIVISION
BANGLAORE.
2. SRI M B ARUN KUMAR
PROP M/S M B ENTERPRISES
NO.5, 2ND CROSS
SRIRAMAPURAM
BANGALORE 560 021
-2-
NC: 2024:KHC:29381
WP No. 29196 of 2014
C/W WP No. 17857 of 2015
WP No. 17858 of 2015
3. JAVAHAR HOUSE BUILDING CO-OPERATIVE LTD,
SESHADRIPURAM
BANGALORE 560 020
REPRESENTED BY SECRETARY
4. JOINT REGISTRAR OF CO-OPERATIVE SOCIETIES
PAMPA MAHAAKAVI ROAD
CHAMARAJAPET
BANGALORE 560018
5. THE ASSISTANT REGISTRAR OF CO-OPERATIVE
SOCIETY AND RECOVERY OFFICER
BANGALORE DISTRICT AND RURAL CO-OPERATIVE
CENTRAL BANK LTD.,
CHAMARAJAPET
BANGALORE 560018
6. SRI MUNIRAMA
S/O SRI DODDAIAH
NO.374, 65TH CROSS
5TH BLOCK
RAJAJINAGAR
BANGALORE 560010
7. THE SPECIAL DEPUTY COMMISSIONER
BANGALORE URBAN DISTRICT
BANGALORE.
...RESPONDENTS
(BY SMT. SAVITHRAMMA., AGA FOR R1 & R4, R5 & R7;
SRI. R. VIJAYAKUMAR., ADVOCATE FOR R2;
SRI. PRAVEEN S.L., ADVOCATE FOR
SRI. ANANDA K., ADVOCATE FOR R3;
SMT. ARCHANA K.M., ADVOCATE FOR R6)
THIS WRIT PETITION IS FILED UNDER ARTICLES 226 & 227
OF THE CONSTITUTION OF INDIA PRAYING TO QUASH THE
IMPUGNED ORDER NO.K.SC.ST.170/2007-08 DATED 26.08.2010
PASSED BY THE 1ST RESPONDENT AT ANNEXURE-C AND ETC.
BETWEEN
THE BANGALORE, BANGALORE RURAL AND
NC: 2024:KHC:29381
RAMANAGARA DISTRICT CENTRAL
CO-OPERATIVE BANK LTD.,
LAKSHMI SADANA
NO.6, 5TH MAIN ROAD
CHAMARAJPET
BANGALORE 560 018
REPRESENTED BY ITS CHIEF EXECUTIVE OFFICER
SRI B R LINGARAJU
...PETITIONER
(BY SRI. SOMASHEKAR., ADVOCATE)
AND
1. THE ASST. COMMISSIONER
BANGALORE NORTH DIVISION
BANGLAORE-560001.
2. SRI M B ARUN KUMAR
PROP M/S M B ENTERPRISES
NO.5, 2ND CROSS
SRIRAMAPURAM
BANGALORE 560 021
3. JAVAHAR HOUSE BUILDING CO-OPERATIVE LTD,
SESHADRIPURAM
BANGALORE 560 020
REPRESENTED BY SECRETARY
4. SRI. D. RAJANNA
MAJOR,
S/O LATE SRI. DASAPPA
NO. 169, 2ND CROSS, 2ND MAIN ROAD,
KAMALANAGAR,
BENGALURU-560079.
5. SMT. PREMA
MAJOR
D/O LATE SRI. DASAPPA
NO. 169, 2ND CROSS, 2ND MAIN ROAD,
KAMALANAGAR,
BENGALURU
PIN -560079.
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6. SRI. D. VENKATESHA MURTHY
MAJOR
S/O LATE SRI, DASAPPA
NO. 169, 2ND CROSS, 2ND MAIN ROAD,
KAMALANAGAR,
BENGALURU
PIN - 560079
7. SRI. D. VASUDEV
MAJOR,
S/O LATE SRI. DASAPPA
NO. 169, 2ND CROSS, 2ND MAIN ROAD,
KAMALANAGAR,
BENGALURU
PIN - 560079
8 . SMT. M.D. RAJESHWARI
MAJOR
D/O LATE SRI. DASAPPA
NO. 169, 2ND CROSS, 2ND MAIN ROAD,
KAMALANAGAR,
BENGALURU
PIN - 560079
9 . SMT. SAVITHRAMMA
MAJOR
D/O LATE SRI. DASAPPA
NO. 169, 2ND CROSS, 2ND MAIN ROAD,
KAMALANAGAR,
BENGALURU
PIN - 560079
10 . SMT. LALITHA
MAJOR
D/O LATE SRI. DASAPPA
NO. 169, 2ND CROSS, 2ND MAIN ROAD,
KAMALANAGAR,
BENGALURU
PIN - 560079
11 . THE SPECIAL DEPUTY COMMISSIONER
BANGALORE URBAN DISTRICT
BANGALORE-560001.
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...RESPONDENTS
(BY SMT. SAVITHRAMMA., AGA FOR R1 & R11;
SRI. R. VIJAYAKUMAR., ADVOCATE FOR R2;
SRI. PRAVEEN S.L., ADVOCATE FOR
SRI. ANANDA K., ADVOCATE FOR R3;
SRI C. RAJANNA., ADVOCATE FOR R4 TO R10)
THIS WRIT PETITION IS FILED UNDER ARTICLES 226 & 227
OF THE CONSTITUTION OF INDIA PRAYING TO QUASH THE
IMPUGNED ORDER NO.K.SC.ST.170/2007-08 DATED 26.08.2010
PASSED BY THE 1ST RESPONDENT AT ANNEXURE-C AND ETC.
BETWEEN
THE BANGALORE, BANGALORE RURAL AND
RAMANAGARA DISTRICT CENTRAL
CO-OPERATIVE BANK LTD.,
LAKSHMI SADANA
NO.6, 5TH MAIN ROAD
CHAMARAJPET
BANGALORE 560 018
REPRESENTED BY ITS CHIEF EXECUTIVE OFFICER
SRI B R LINGARAJU
...PETITIONER
(BY SRI. SOMASHEKAR., ADVOCATE)
AND
1. THE ASST. COMMISSIONER
BANGALORE NORTH DIVISION
BANGLAORE-560001.
2. SRI M B ARUN KUMAR
PROP M/S M B ENTERPRISES
NO.5, 2ND CROSS
SRIRAMAPURAM
BANGALORE 560 021
3. JAVAHAR HOUSE BUILDING CO-OPERATIVE LTD,
SESHADRIPURAM
BANGALORE 560 020
NC: 2024:KHC:29381
REPRESENTED BY SECRETARY
4. THE JOINT REGISTRAR OF CO-OPERATIVE SOCIETIES
PAMPA MAHAKAVI ROAD,
CHAMARAJPET,
BANGALORE 560018
5. THE ASSISTANT REGISTRAR OF CO-OPERATIVE
SOCIETY AND RECOVERY OFFICER,
BANGALORE DISTRICT AND RURAL CO-OPERATIVE
CENTRAL BANK LTD,
CHAMARAJAPET,
BANGALORE 560018
6. SMT. MUNIYAMMA
MAJOR,
W/O.LATE SRI. MUNIYAPPA,
128, 1ST MAIN ROAD,
"A" BLOCK, HEBBAL,
BENGALURU 560024
7. SMT. BHARATHI
MAJOR,
D/O LATE SRI. MUNIYAPPA,
NO.128, 1ST MAIN ROAD,
"A" BLOCK, HEBBAL,
BENGALURU 560024
8. THE SEPCIAL DEPUTY COMMISSIONER
BANGALORE URBAN DISTRICT,
BANGALORE-560001.
...RESPONDENTS
(BY SMT. SAVITHRAMMA., AGA FOR R1, R4, R5 & R8;
SRI. R. VIJAYAKUMAR., ADVOCATE FOR R2;
SRI. PRAVEEN S.L., ADVOCATE FOR
SRI. ANANDA K., ADVOCATE FOR R3;
SRI M.B. CHANDRA CHOODA., ADVOCATE FOR R6 & R7)
THIS WRIT PETITION IS FILED UNDER ARTICLES 226 & 227
OF THE CONSTITUTION OF INDIA PRAYING TO QUASH THE
IMPUGNED ORDER NO.K.SC.ST.170/2007-08 DATED 26.08.2010
PASSED BY THE 1ST RESPONDENT AT ANNEXURE-C AND ETC.
NC: 2024:KHC:29381
THESE WRIT PETITIONS COMING ON FOR ORDERS AND
HAVING BEEN RESERVED FOR ORDERS ON 21.06.2024, THIS DAY,
THE COURT PRONOUNCED THE FOLLOWING:
CORAM: HON'BLE MR JUSTICE SURAJ GOVINDARAJ
CAV ORDER
1. The petitioner in all the above writ petitions is
Bangalore, Bangalore Rural and Ramanagara District
Central Co-operative Bank Ltd.(hereinafter referred
to as the Bank or BBRRDCCB), seeking the
following reliefs in each of the petitions. Which reads
as hereunder:
In W.P. No.29196/2014:
a) Quash the impugned order
No.K.SC.ST.170/2007-08 dated
26.08.2010 passed by the 1st respondent
at ANNEXURE-C;
b) Set aside the order dated 25.10.2013
passed in Appeal No.SC.ST.(A)120/2010-
11 by the 7th respondent; at ANNEXURE-
E; and
c) Pass such other orders as deemed fit to
grant in the facts and circumstances of
the case; and-
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d) In the alternative the 6th respondent may
please be directed to refund to the
petitioner an amount of Rs.25,000/-
along with interest at 18% in the interest
of justice.
In W.P. No.17857/2015:
a) Quash the impugned order
No.K.SC.ST.30/2007-08 dated 26.8.2010
passed by the 1st respondent at
ANNEXURE-C;
b) Set aside the order dated 06.03.2014
passed in Appeal No.SC.ST.(A)122/2010-
11 by the 11th respondent; at
ANNEXURE-E; and
c) Pass such other orders as deemed fit to
grant in the facts and circumstances of
the case; OR
d) In the alternative the 4th and 10th
respondents may please be directed to
refund to the petitioners an amount of
Rs.1,05,000/- along with interest at 18%
from 3.4.1993 the date of agreement till
the date of payment in the interest of
justice.
In W.P. No.17858/2015:
a) Quash the impugned order
No.K.SC.ST.172/2007-08 dated
26.8.2010 passed by the 1st respondent
at ANNEXURE-C;
b) Set aside the order dated 01.07.2013
passed in Appeal No.SC.ST.(A)117/2010-
11 by the 1st respondent; at ANNEXURE-
E; and
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c) Pass such other orders as deemed fit to
grant in the facts and circumstances of
the case; OR
d) In the alternative the 6th and 7th
respondents may please be directed to
refund to the petitioners an amount of
Rs.75,000/- along with interest at 18%
from 3.4.1993 the date of agreement till
the date of payment in the interest of
justice.
2. The factual background in all the above petitions
more or less similar in that the petitioner-Bank
claims to be a financial institution registered under
the provisions of the Karnataka Co-operatives Act,
1959. The main sources of finance to the said Bank
are deposits from members and the public, loans
from Apex Bank, NABARD as also loan/share capital
from the Government of Karnataka. It is claimed
that the said Bank operates in Bangalore District,
Bangalore Rural and Ramanagara District.
3. It is further claimed that respondent No.3-Javahar
House Building Co-operative Society Ltd., having
approached the petitioner for sanction of a loan an
amount of Rs.2 crores, was sanctioned on
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06.01.1993 to enable the said Society to purchase
lands for the formation of layouts. There being a
default in repayment of the loan, the petitioner -
Bank raised a dispute before the Joint Registrar of
Co-operative Societies in Dispute No.908/1993-94
against the Society for recovery of Rs.2,38,00,497/-,
an award was passed on 01.03.1997 directing the
payment of the said amount with interest at the rate
of 22.5% and penal interest at 1% on defaulted
principal amount of Rs.1,99,98,500/- from
01.01.1994 till the date of realisation.
4. In pursuance thereof, the petitioner-Bank had
approached the Joint Registrar of Co-operative
Societies for the execution of the award by
attachment of the properties as regards which
respondent No.3 had entered into various
agreements of sale. By an order dated 22.09.2007,
the said properties came to be attached.
5. Respondent No.6 the original owner of the property
claiming to be a grantee of the land had filed a
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proceeding before the Assistant Commissioner under
Section 5 of the Karnataka Schedule Caste and
Schedule Tribes (prohibition of transfer of certain
lands) Act, 1978 (hereinafter referred as PTCL Act)
contending that respondent No.6 had been granted
an extent of 1 acre of 25 guntas in Sy. No.79, Block
No.15 of Machohalli village, Dasanapura Hobli,
Bangalore North Taluk, and that he received a notice
from respondents No.3 to 5 therein i.e., petitioners-
respondents No.4 and 5 herein that an award dated
01.03.1997 had been passed in Dispute
No.908/1993-94 and in pursuance of the said award
the land of respondent No.6 was proposed to be
auctioned by way of public auction.
6. The Assistant Commissioner after hearing the matter
came to a conclusion that the Society-respondent
No.3 herein had not acquired any right and title over
the land in question under a mere agreement of sale,
the agreement itself is in violation of the provisions
of Section 4(2) of PTCL Act. The grantee had not
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mortgaged the property with the petitioner-Bank.
The Society not having acquired any right, title and
interest over the land in question had unilaterally
mortgaged the land in favour of the Bank and as
such the award cannot be binding on respondent
No.6. and in those circumstances, all the
encumbrance in respect of the land in question were
discharged and the land restored to the grantee.
7. The petitioner challenged the said order of the
Assistant Commissioner before the Deputy
Commissioner in KSC/ST/Appeal No.120/2010. which
came to be disposed by Deputy Commissioner by his
order dated 25.10.2013 confirming the order passed
by the Assistant Commissioner. The Deputy
Commissioner also further came to a conclusion that
the Society, being an agreement holder and GPA
holder, had borrowed the money from the Bank
without the grantee having mortgaged the property.
The transaction between the Society and the grantee
was an independent transaction, and the transaction
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between the Bank and Society was also an
independent transaction.
8. The award passed in favour of the Bank against the
Society would not in any manner affect the claim of
respondent No.6 - grantee. If at all the Bank had
any dispute, it was only against the Society and not
against the grantee and as such, came to a
conclusion that no attachment of the land could be
made on an application made by the Bank. It is this
order which is under challenge before this Court.
9. Similar proceedings have been initiated in other
proceedings which are subject matter in W.P.
No.17857/2015, and W.P. No.17858/2015. Those
orders are also under challenge before this Court. In
the present petitions, it is the legal heirs of the
grantee who have come on record.
10. Sri. Somashekar, learned counsel for the petitioner -
Bank in all these matters would submit that:
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10.1. The Bank had advanced an amount of Rs.2
Crores to respondent No.3-Society. The Society
had defaulted on repayment of the loan
requiring the Bank to initiate proceedings under
Section 70 of the KCS Act, 1959 against the
said Society, wherein an award has been
passed in favour of the Bank and it is in
furtherance of execution of the said award that
the properties were attached and on this
ground he submits that the action taken by the
Bank cannot be faulted with and the orders
passed by the Joint Registrar of Co-operative
Societies also cannot be faulted with.
10.2. He refers to sub-section (3) of Section 4 of the
PTCL Act, and contends that the prohibition
under Subsection (1) and (2) of Section 4
would not apply to sale of any land in execution
of decree or order of the Civil Court or any
award or order passed by the any Authority and
in this regard he contends that the award
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passed under Section 70 of the KCS Act would
also come within the purview of Subsection (3)
of Section 4.
10.3. His further contention by referring to Section 7
of PTCL Act is that the transfer of granted land
in favour of the Government, Central
Government, Local Authority and or a Bank
either before or after the commencement of the
Act, is exempted.
10.4. His submission is that Section 7 of the PTCL
Act, is in furtherance of Subsection (3) of
Section 4 of PTCL Act, as such, if a Bank from
whom loans were to be obtained, the same
being defaulted with the Bank would have all
authority to proceed against the property even
if it is a granted land coming under PTCL Act.
10.5. The Registrar of Co-operative Societies vide
order dated 27.03.2008 had permitted the Bank
to recover the loans from the persons who had
entered into an agreement of sale with the
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Society to an extent of up to 15 lakhs, and it is
in that background that the Bank has initiated
proceedings. The order passed by the Registrar
Co-operative Societies favours the petitioner.
The petitioner-Bank has acted only to receive
the amounts which are owed to the Bank. In
this regard he relies on the decision of the
coordinate Bench of this Court dated
10.03.2016 in W.P. No.10933-10934/2016 [Sri
Byyanna and other -v- The Joint Registrar
of Cooperative Societies and others] more
particularly un numbered para-1 thereof, which
is reproduced hereunder for easy reference:
"The matters having come up for
preliminary hearing on an earlier date, it was
expressed by the learned counsel appearing for
the respondent that though the petitioners are the
owners of 12 acres of land, the third respondent-
Society which was holding a Power of Attorney on
behalf of the petitioners, had offered 4 acres of
land as security. However, since the second
respondent -Bank was seeking to proceed against
the entire extent of 12 acres, the petitioners are
before this Court."
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10.6. By referring to the decision in Byyanna's case
in (W.P.No.10933-10934/2016) his submissions
is that this Court had recognized the right of
the Bank to proceed against the land which had
been offered as a security and as such, the
Coordinate Bench of this Court has recognized
the right of the Bank to proceed against the
landowners, who have executed an agreement
of sale in favour of the Society by contending
that the agreement of sale itself is a security on
which basis the Bank has sanctioned the loan to
the Society.
10.7. A decision of another coordinate Bench of this
Court dated 04.03.2024 in W.P. No.16122/2016
[Bangalore, Bangalore Rural and
Ramanagara District Cooperative Bank
Limited [BBRRDCB] -v- The Joint Registrar
of Cooperative Societies and others] more
particularly para-2 thereof, which is reproduced
hereunder for easy reference:
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"It is submitted that during the pendency of the
proceedings, the petitioner-Bank has resolved and
it is willing to accept payment of Rs.12,00,000/-
per acre along with 5% interest as proposed by
respondent No.2 in a letter dated 03.03.2018 at
Annexure-'N' and accordingly release the
attachment in favour of respondent No.2."
10.8. By referring to decision in BBRRDCB's decision
he submits that another co-ordinate Bench of
this Court has accepted the transaction by
recording the settlement entered into in that
matter and as such the transaction cannot be
faulted with.
10.9. The decision of this Court dated 29.01.2009 in
W.A.No.1953/2008 [Bazm-E-Niswan
Charitable Trust and Others -v- Amanath
Co-operative Bank Limited and others]1
more particularly para-5, 8 and 9 thereof,
which are reproduced hereunder for easy
reference:
5. Learned Counsel appearing for the appellants
vehemently contended that as none of the
appellants are members of Bank, the dispute
1 2009(4)KarLJ633
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against non-members of the Bank cannot be
maintained; that merely because the appellant 2 is
the wife of the 3rd respondent who was a former
President of the 2nd respondent-Bank, the
transaction entered between the appellants and the
1st respondent-Bank cannot be made subject-
matter of dispute under Sub-Section (1) of Section
70; that the property in question has not been
purchased by the 2nd appellant in her individual
capacity but the same was purchased by a Public
Trust in which the 2nd appellant is the President
and the appellant 2 has no personal interest over
the property in question; that as the dispute was
raised against a non-member of the Society and as
the same is not touching upon the business or
activities of the Society, the interim order dated 3-
4-2008 passed by the 2nd respondent rejecting the
application filed by the appellants under Section
70(3) of the Act is liable to be set aside by allowing
the writ petition.
8. To decide the above question, it is just and
necessary to refer to the provisions of Sub-Section
of Section 70 and 70(2)(e) of the Act which reads
as under:
7.0 Disputes which may be referred to Registrar
for decision.-(1) Notwithstanding anything
contained in any law for the time being in force, if
any dispute touching the constitution,
management, or the business of a co- operative
Society arises.:
(a) among members, past members and persons
claiming through members, past members and
deceased members; or
(b) between a member, past member or person
claiming through a member, past member or
deceased member and the Society, its committee
or any officer, agent or employee of the Society; or
(c) between the Society or its committee and any
past committee, any officer, agent or employee, or
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any past officer, past agent or past employee or
the nominee, heirs, or legal representatives of any
deceased officer, deceased agent, or deceased
employee of the Society; or
(d) between the Society and any other co-operative
Society, or a credit agency,
such dispute shall be referred to the Registrar for
decision and no civil or Labour or Revenue Court or
Industrial Tribunal shall have jurisdiction to
entertain any suit or other proceeding in respect of
such dispute.
(2) For the purposes of Sub-Section (1), the
following shall be deemed to be disputes touching
the constitution, management or the business of a
co-operative Society, namely.:
(e) a claim by a co-operative Society for any
deficiency caused in the assets of a co-operative
Society by a member, past member, deceased
member or deceased officer, past agent or
deceased agent or by any servant, past servant or
deceased servant or by its committee, past or
present whether such loss be admitted or not.
9. On a careful consideration of the entire facts and
circumstances of the case, it is clear that the
property of the first respondent-Bank was
purchased by the first appellant-trust represented
by the second appellant who is none else than the
wife of erstwhile President of the first respondent-
Bank. The said transaction squarely attracts
Section 70(2)(e) of the Act, which has caused
deficiency in the assets of the first respondent-
Bank.
Under these circumstances, we do not find any
illegality or error in the impugned order and there
is no good grounds to interfere with such well-
reasoned order and consequently, the writ appeal
is liable to be dismissed. Accordingly, the writ
appeal is dismissed.
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10.10. By referring to the decision in Bazm-E-Niswan
Charitable Trust's case, his submission is that
the Bank can proceed not only against the
member of the Bank or Society but against any
third party. On this basis he submits that the
action taken by the Bank is proper and correct.
The Assistant Commissioner and Deputy
Commissioner have erred in coming to a
conclusion that the Bank cannot proceed
against the persons who had entered into an
agreement of sale with respondent No.3-
Society, since, it is from and out of the amount
advanced by the Bank to the Society that
amounts have been disbursed to said land
owners under the agreement of the sale. Thus,
the amount paid to the land owners coming out
of the funds advanced by the Bank, he submits
that the Bank can proceed against the
agreement holder.
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11. Sri. M.B. Chandrachooda, learned counsel for the
legal heirs of the grantee in W.P. No.17858/2015
would submit that,
11.1. There is no transaction which has been entered
into by the grantee or legal heirs in favour of
the Society much less the Bank. The
transaction even if accepted, being of the year
1993, no steps have been taken by the Society
against the land owners or grantee for
enforcement of the said agreement. The
agreement has continued to remain at the
stage of an agreement which does not confer
any right, title or interest in favour of the
Society, who was to purchase the property and
in this regard he relies upon Section 54 of the
Transfer of Property Act., to contend that a
mere agreement of sale does not confer any
right, title or interest to the purchaser.
11.2. In so far as the alleged payment of advance
under the agreement of sale, his submission is
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that neither the grantee nor legal heirs of the
grantee have received any such amount, on
that basis he further seeks to contend that if at
all such payments had been made, the Society
would have taken action which it has not.
11.3. His further submission is that the entire
transaction is a make-believe, got up
transaction by the Bank and the Society to
usurp the funds of the Government and other
Banks and the proceedings have been initiated
only to give a sense of legality to the said illegal
actions. There being serious issues on the
functioning of the Bank and the Society enquiry
by the C.B.I had been ordered, after such
enquiry the C.B.I. has filed a charge sheet and
proceedings are pending trial before the C.B.I.
Court.
11.4. On the above grounds he submits that there is
no authority on part of respondent No.3-
Society to mortgage or offer as security the
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land of the grantee. Thus, Subsection (3) of
Section 4 could not come into play nor would
Section 7 come into play. In that background
he submits that order passed by the Assistant
Commissioner and Deputy Commissioner are
proper and correct do not require any
interference.
12. Ms. Archana K.M., learned Amicus Curiae, who has
been appointed to assist this Court in view of non
appearance of anybody on behalf of the grantee in
W.P. No.29196/2014 adopts the submission of the
Sri. M.B. Chandrachuda, learned counsel in W.P.
No.17858/2015 and additionally submits that
12.1. There is no permission which had been obtained
prior to execution of agreement of sale, hence
agreement of sale itself is a non est, on which
basis no right can be claimed there being no
prior permission obtained from the Deputy
Commissioner.
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12.2. Even this agreement of sale has been executed
within the period of prohibition of 15 years,
which cannot also be cured by obtaining
permission of the Deputy Commissioner. As
such, on the basis of records she submits that
no transaction could have been legally entered
into for the Bank to claim any interest.
12.3. She relies upon Section 11 of PTCL Act to
contend that the PTCL Act overrides the KCS
Act, and any award passed under the KSCS Act,
would have to comply with and be in conformity
with PTCL Act.
13. Sri. C. Rajanna, learned counsel appearing for the
legal heirs of the grantee in W.P. No.17857/2015
adopts the submissions of Sri. M.V. Chandrachuda,
learned counsel and Ms.Archana K.M., learned
counsel.
14. Sri.R.Vijay Kumar, learned counsel appearing for
respondent No.2, who is stated to be the agent of
the Society and as such procurement agent on behalf
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of Society who had entered into various agreements
with the grantees submits that
14.1. The grantees being in pari delicto in as much as
the grantees having entered into an agreement
knowing fully well that they could not have
entered into such an agreement are equally
responsible.
14.2. Alternatively he submits that at least the
amounts received by them is required to be
returned to the Society, since all the records
have been handed over by respondent No.2 to
respondent No.3 and all the interest of
respondent No.2 has been assigned to
respondent No.3 way back in year 1993.
14.3. The agreements have been entered into and
amount received, the amounts cannot be
retained by the grantee which would be unjust
enrichment under Section 73 of Indian Contract
Act, 1972 which would be liable to be returned
to respondent No.2 and since respondent No.3
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have assigned his rights in favour of respondent
No.3 which enure to the befit of the petitioner-
Bank.
15. Learned counsel for respondent No.3 submits that he
has no instructions, respondent No.3 has already
been directed to be wound up and an administrator
has been appointed and proceedings are going on
before C.B.I court.
16. Heard Sri. Somashekar, learned counsel for the
petitioner, Smt. Savithramma, AGA for respondent
Nos.1, 5 and 7, Sri. R. Vijaya Kumar, learned counsel
for respondent No.2., Sri. Praveen S.L. for Sri.
Ananda K., learned counsel for respondent No.3 and
Smt. Archana K.M., learned counsel for respondent
No.6. Perused papers.
17. Having heard the learned counsels and perused the
papers, the points that would arise for consideration
of this Court are:
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1. Whether a Bank can claim benefit of
Subsection (3) of Section 4 without the
grantee having mortgaged the property in
favour of the Bank and without the
grantee having received any money from
the Bank?
2. Whether the Bank can on the basis of an
award passed against a third party
execute the same in respect of a land
owned by the grantee and would the
exemption under Section 7 of the PTCL
Act, apply in relation thereto?
3. In the present case, whether the orders
passed by the Assistant Commissioner and
Deputy Commissioner are proper and
correct or would they suffer from legal
infirmity requiring interference in hands of
this Court?
4. What Order?
18. I answer the above points as under:
19. ANSWER TO POINT NO.1: Whether a Bank can
claim benefit of Subsection (3) of Section 4
without the grantee having mortgaged the
property in favour of the Bank and without the
grantee having received any money from the
Bank?
19.1. Clause (a) of Subsection (1) of Section 3
defines Bank as under:
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3. Definitions- (1) In this Act, unless the context
otherwise requires-
(a) "bank" means,-
(i) a co-operative society (including a co-operative
bank);
(ii) the Reserve Bank of India constituted under the
Reserve Bank of India Act, 1934;
(iii) a banking company as defined in the Banking
Regulation Act, 1949;
(iv) the State Bank of India constituted under the
State Bank of India Act, 1955;
(v) a subsidiary bank as defined in the State Bank of
India (Subsidiary Banks) Act, 1959;
(vi) a corresponding new bank constituted under
section 3 of the Banking Companies (Acquisition and
Transfer of Undertakings) Act, 1970;
(vii) the Agricultural Refinance and Development
Corporation constituted under the Agricultural
Refinance Co-operation Act, 1963;
(viii) the Karnataka State Agro-Industries
Corporation, a company incorporated under the
Companies Act, 1956;
(ix) the Agricultural Finance Corporation Limited, a
company incorporated under the Companies Act,
1956;
(x) any other financial institution owned or controlled
by the Government or the Central Government and
notified by the Government as a bank for the purpose
of this Act;
19.2. Thus, any of the above which qualify to be a
Bank can be taken into consideration for the
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purpose of the PTCL Act. A co-operative
Society including a co-operative Bank is also a
Bank. Thus, the petitioner being a co-operative
Bank would qualify within that meaning.
19.3. Clause (b) of Subsection (1) of Section 3
defines granted land as under:
(b) "Granted Land" means any land granted by the
Government to a person belonging to any of the
Scheduled Castes or the Scheduled Tribes and
includes land allotted or granted to such person
under the relevant law for the time being in force
relating to agrarian reforms or land ceilings or
abolition of inams, other than that relating to
hereditary offices or rights and the word "granted"
shall be construed accordingly;
19.4. Thus, any land granted to a person belonging to
Schedule Caste or Schedule Tribe would be
covered under the Act.
19.5. Section 4 of the Act deals with prohibition of
transfer of granted land and reads as under:
4. Prohibition of transfer of granted lands.- (1)
Notwithstanding anything in any law, agreement,
contract or instrument, any transfer of granted land
made either before or after the commencement of
this Act, in contravention of the terms of the grant of
such land or the law providing for such grant, or sub-
section (2) shall be null and void and no right, title or
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interest in such land shall be conveyed or be deemed
ever to have conveyed by such transfer.
(2) No person shall, after the commencement of this
Act, transfer or acquire by transfer any granted land
without the previous permission of the Government.
(3) The provisions of sub-sections (1) and (2) shall
apply also to the sale of any land in execution of a
decree or order of a civil court or of any award or
order of any other authority.
19.6. By virtue of Subsection (1) of Section 4, there
is a prohibition for a grantee to transfer the
land either before or after the commencement
of the Act in contravention of the terms of the
grant. However, in terms of Subsection (2) of
Section 4, no person shall after commencement
of the Act transfer or acquire by transfer any
granted land without the previous permission of
the government.
19.7. Subsection (3) of Section 4 creates an
exception to Subsection (1) and Subsection (2)
of Section 4 and mandates that the said
Subsection would not apply to the sale of any
land in execution of decree or order of a Civil
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Court or of any award or order of any other
Authority.
19.8. Section 6 of the Act prohibits the registration of
any document relating to transfer or creation of
any interest in any granted land, thus creating
an embargo for registration of a transfer of a
granted land.
19.9. Section 7 of the Act deals with the exemption
and reads as under:
7. Exemption.- Nothing in this Act shall apply to the
transfer of granted lands in favour of the
Government, the Central Government, a local
authority or a bank either before or after the
commencement of this Act.
19.10. A perusal of Section 7 would indicate that
nothing in the Act would apply to the transfer of
granted lands in favour of the Government, a
local Authority or a Bank either before or after
the commencement of the Act. Thus, the
restriction which has been imposed in
Subsection (1) and (2) of Section 4, as also
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under Section 6 would not apply if the sale is in
furtherance of a decree or order of a Civil Court
or of any award or order of any Authority in
terms of Subsection (3) of Section 4 and or if
there is a transfer in favour of the Government,
local Authority or a Bank in terms of Section 7
of the PTCL Act.
19.11. From the above, it is clear that a grantee of the
land though is prohibited from alienating the
property or transferring the property, such
grantee is not prohibited from raising a loan on
the said property from an entity qualifying to be
a Bank under Subsection (1) of Section 3. It
cannot be presumed that the loan would be
repaid by the grantee, thus an exception has
been made out under Subsection (3) of Section
4 that in the event of any decree or order
passed by a Civil Court or any award or order
passed by any Authority, Subsection (1) and
Subsection 2 of Section 4 would not apply.
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19.12. Thus, to qualify for the exemption under
Subsection (3) of Section 4, it is required that
there should be a valid loan transaction with a
Bank, the Bank obtain necessary decree or
order from the Civil Court or of any award or
order of any Authority.
19.13. In the present cases, the grantee has not
borrowed any loan from an organization
qualifying the requirement of Bank under
Subsection (1) or Section 3. The grantee had
only entered into an agreement of sale with the
Society, and it is the Society who has allegedly
mortgaged the property in favour of the Bank
at the time of borrowing monies from the Bank.
19.14. Needless to reiterate that the grantee is not a
party to the agreement between the Society
and the Bank nor has any money flowed from
the Bank to the grantee. In these cases, the
grantee is not a borrower nor is the Bank a
lender to the grantee. If at all the loan
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transaction is between the Bank and the
Society, as regards which the grantee has no
role to play except that the grantee has entered
into an agreement of sale with the borrower or
Society.
19.15. When a grantee has not received any benefit of
the loan, the question of there being any privity
of contract between the Bank and the grantee
would not arise. The exemption under
Subsection (3) of Section 4 and that under
Section 7 of the Act is only applicable as
regards a transaction made by the grantee and
not made by anyone else as regards the land
belonging to the grantee.
19.16. The Society not being the owner but only an
agreement holder, the said agreement not
having fructified into a sale deed has remained
an incohate document and confers no title or
interest in the said land in terms of Section 54
of the Transfer of Property Act, 1872.
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19.17. The Society not having any right in the property
has mortgaged the property to the Bank and
the Bank has accepted the said mortgage
knowing fully well that the Society is not the
owner and does not have any right, title or
interest.
19.18. Interest of the Society, if any, would only be
limited to a right to seek for specific
performance of the agreement of sale and not
to deal with the property subject matter of the
agreement of sale. Thus, any transaction
entered into by the agreement holder would not
bind the grantee.
19.19. Hence, I answer Point No.1 by holding that the
Bank cannot claim the benefit of Subsection (3)
or Section 4 of the PTCL Act without the
grantee having mortgaged the property in
favour of the Bank which needless to say would
imply that the grantee has not received any
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money from the Bank, there being no privity of
contract between the Bank and the grantee.
20. ANSWER TO POINT NO.2: Whether the Bank
can on the basis of an award passed against a
third party execute the same in respect of a
land owned by the grantee and would the
exemption under Section 7 of the PTCL Act,
apply in relation thereto?
20.1. Subsection (3) of Section 4 deals with a
situation where Subsection (1) and Subsection
(2) of Section 4 would not apply to a sale of
any land in execution of a decree or order of a
Civil Court or of any award or order of any
other Authority.
20.2. In the present case, there is no decree which
has been passed nor is there any order passed
by the Civil Court, however, the Bank claiming
to be a cooperative Bank has raised a dispute in
terms of Section 70 of the Karnataka Co-
operative Societies Act, 1959 [KCS Act] which
provides for disputes among members and the
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Society to be settled by way of the mechanism
prescribed under Section 70.
20.3. In terms of Section (2) of Section 70, a claim
by the Society for any debt or demand due by
the member or by a principal debtor would be a
dispute which could be settled in terms of the
said provision.
20.4. The manner of disposal of the dispute is
detailed out in Section 71 of the KCS Act, which
reads as under:
71. Disposal of disputes.- (1) The Registrar may,
on receipt of the reference of a dispute under section
70,--
(a) decide the dispute himself, or
(b) transfer it for disposal to any person who has
been invested by the State Government with powers
in that behalf, or
(c) refer it for disposal to one arbitrator appointed by
the Registrar.
(2) The Registrar may withdraw any reference
transferred under clause (b) of sub-section (1) or
referred under clause (c) of that sub-section and
decide it himself.
(3) The Registrar or any other person to whom a
dispute is referred for decision under this section
may, pending the decision of the dispute, make such
interlocutory orders as he may deem necessary in the
interests of justice.
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(3A) When a dispute is referred to an arbitrator under
clause (c) of sub-section (1), the award shall, subject
to such rules as may be prescribed, include the fee
payable to the arbitrator and the fees and expenses
payable to the Registrar. Such an award shall not be
invalid merely on the ground that it was made after
the expiry of the period fixed for deciding the dispute
by the Registrar, and shall, subject to appeal or
revision, be binding on the parties to the dispute.]
(4) Notwithstanding anything contained in section 70,
when any dispute under clause (a) or (b) of sub-
section (1) of the said section is referred for decision
to the Registrar, and the Registrar is satisfied on an
application by the society concerned that in the
interest of the society it is necessary for an effective
decision of the dispute to implead persons who
cannot be made parties to the dispute in proceedings
before him, he may permit the society to institute a
regular suit in a Civil Court having jurisdiction and the
Civil Court shall be competent to entertain such suit.
(5) The dispute under sub-section(1) shall be decided
within a period of twelve months excluding the period
of stay granted by the Court if any. However, the
Registrar may for reasons to be recorded in writing
extend the said period not exceeding eighteen
months.
[Provided that the State Government shall, on a
report made by the Registrar, may extend the period
beyond eighteen months if it is satisfied that, there
are genuine/valid grounds for such extension]
20.5. A dispute can be decided by the Registrar of
Societies, transfer it to any person who has
been invested by the State Government with
powers in that regard or refer it for disposal to
an Arbitrator appointed by the Registrar. An
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award passed by an Arbitrator can be enforced
in terms of said act.
20.6. Section 71B deals specifically with a credit
agency to proceed against members of the
cooperative Society for recovery of the money
due to the Society.
20.7. In the present case, the Society had borrowed
money from the Bank and as such any dispute
between the Bank and the Society would be a
dispute within the purview of Section 70 to be
resolved in terms of Section 71 and 71B of the
KCS Act. It is exercising these rights that the
Bank had approached the Registrar of
Cooperative Society with a claim against the
Society which came to be allowed and the
Society was directed to make payment of
certain monies by way of an award. In
furtherance of said award, the properties which
had allegedly been mortgaged by the Society
were sought to be attached and auctioned.
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20.8. The Judgment in Byyanna's case having been
pressed into service to contend that a Co-
ordinate Bench of this court has recognised the
right of the Bank to proceed against the
mortgaged property, I am of the considered
opinion that the said decision did not consider
all that aspects as that considered in the
present matter upon argument by the
respective counsel. There has been no
mortgage of the property created by the
grantee, the question of the Bank proceeding
against the grantee would not arise.
20.9. There cannot be any dispute in the decision of
[Bazm-E-Niswan Charitable Trust's case, a
Bank or Society can proceed against the third
party but such a proceeding to be initiated,
there must be some relationship between the
Bank and the third party to be liable to make
payment.
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20.10. From the above conspectus of facts and law, it
is clear that the Bank could always have
initiated proceeding against Society for
recovery of money, but the Bank could not
have proceeded against the property, which
was not owned by the Society inasmuch as, as
answered to point No.1, there was no right
vested with the Society to mortgage the
property of the grantee to the Bank. The award
passed under Section 71 or 71B could only be
enforced against the judgment debtor therein,
that is the Society, the grantee not being a
party to the said proceedings, let alone being
party to the loan transaction between the Bank
and the Society, the said award cannot be
executed against the grantee who is a third
party to the proceedings.
20.11. Bazm-E-Niswan Charitable Trust's case
was not one which dealt with PTCL grant but
was one where the Bank initiated proceedings
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against the wife of the erstwhile President of
the Bank and it is in that background that the
Division Bench of this Court came to a
conclusion that Section 70 would apply even to
the wife of erstwhile President even though she
may not be a member since the issue related to
transfer of a property of the Bank to a Trust of
which the wife of the erstwhile President was a
Trustee and in that background the Division
Bench of this Court came to a conclusion that
such action would amount to creating deficiency
in the assets of the Bank attracting Clause (e)
of Subsection (2) of Section 70 of the KCS Act.
In the present case, there is no such allegation
insofar as the grantee is concerned.
20.12. In the present case it is not the contention of
the Bank that there is collusion between the
Society and the grantee or that the society and
grantee are together sought to defraud the
Bank. As aforesaid, the transaction between
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the Bank and the Society is independent of the
transaction between the Society and the
grantee, both these transactions could never
have been clubbed together and proceedings
initiated by the Bank in execution of the award
passed against the Society to enforce it against
the grantee.
20.13. In that view of the matter, though the award
passed by the Registrar would qualify to be an
award under Subsection (3) of Section 4 that
award will not be capable of being enforced
against the grantee who is not a party to the
proceedings.
20.14. The exemption under Section 7 would also not
apply since there is no transfer to the Bank
made and the proposed attachment and auction
dehors any transaction entered into between
the Bank and the grantee.
20.15. Hence, I answer Point No.2 by holding that the
Bank cannot on the basis of the award passed
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against a third party execute the same in
respect of a land owned by the grantee and the
exemption under Subsection (3) of Section 4 as
also that under Section 7 of the PTCL Act would
not apply in relation thereto.
21. ANSWER TO POINT NO.3: In the present case,
whether the orders passed by the Assistant
Commissioner and Deputy Commissioner are
proper and correct or would they suffer from
legal infirmity requiring interference in hands
of this Court?
21.1. As answered to points No.1 and 2, the grantee
was not part of any transaction between the
Bank and the Society and it is in that
background, when the Bank sought to attach
the property of the grantee in furtherance of an
award passed against the Society in execution
of such award, the grantee filed proceedings
before the Assistant Commissioner under
Section 5 of the PTCL Act for resumption of
land. Though technically there is no sale or
transfer in favour of the Bank and the property
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continued to be vested with the grantee, there
would be no requirement for setting aside any
sale and or for order of resumption, the fact
remains that the grantee did not have any
other alternate efficacious remedy in as much
as it was not required for the grantee to have
gone ahead and filed a civil suit or the like for
declaration that the award is not binding on the
grantee.
21.2. The PTCL Act being a beneficial enactment to
provide safety and security to a person
belonging to Schedule Caste Or Schedule Tribe
in respect to the property granted to him. The
grantee apprehending that his property would
be taken over by the Bank had approached the
Assistant Commissioner. The Assistant
Commissioner has acted on the said application
and directed that the land be restored to the
grantee by discharging all encumbrances. This
order has also been confirmed by the Deputy
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Commissioner who has gone on to hold that the
Society being a GPA holder had borrowed the
money from the Bank without the grantee
having mortgaged the property and as such
came to a conclusion that both the transactions
are independent transactions.
21.3. In view of my answers to Points No.1 and 2, as
also for the reason that the Assistant
Commissioner and Deputy Commissioner had
necessary powers under Section 5 and 5A of
the PTCL Act which has been properly exercised
by discharging any alleged encumbrance
created by the Society as regard the land
belonging to the grantee and restored the
property without any encumbrance to the
grantee is proper and correct, does not suffer
from any infirmity requiring interference at the
hands of this court.
22. ANSWER TO POINT NO.4: What Order?
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22.1. In view of my answers to points No. 1, 2 and 3
above, I find no infirmity in the order of the
Assistant Commissioner and The Deputy
Commissioner. The relief sought for by the
petitioner are bereft of merits, are not
sustainable. No grounds are being made out in
the present petitions, the petitions stand
dismissed.
Sd/-
JUDGE
TMP,LN
