Karnataka High Court
Sri. B.G. Prakash vs The Authorised Officer on 26 July, 2024
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WP No. 11565 of 2021
IN THE HIGH COURT OF KARNATAKA AT BENGALURU
DATED THIS THE 26TH DAY OF JULY, 2024
BEFORE
THE HON'BLE MR. JUSTICE VIJAYKUMAR A. PATIL
WRIT PETITION NO.11565 OF 2021 (GM-CPC)
BETWEEN:
1. SRI. B.G. PRAKASH
AGED ABOUT 55 YEARS
SON OF SRI. GURURAJ RAO
R/AT NO.18, 12TH CROSS
NAGAPPA REDDY LAYOUT
RAMAMURTHYNAGAR
BENGALURU-560016.
Digitally signed
by RUPA V 2. SRI. P.M. NARAYANASWAMY
Location: HIGH S/O SRI. MUNIYAPPA
COURT OF AGED ABOUT 56 YEARS
KARNATAKA R/AT NO.328, V.B. LAYOUT
MAIN ROAD, KRISHNARAJAPURAM
BANGALORE-560036.
3. SRI. K. GURURAJA RAO
S/O SRI. KRISHNA RAO
AGED ABOUT 56 YEARS
R/AT "JANAKI KRISHNA NILAYA"
2ND CROSS, RAJEEV GANDHI ROAD
OLD EXTENSION, K.R. PURAM
BANGALORE-560036.
...PETITIONERS
(BY SRI. S. KALYAN BASAVARAJ, ADV.,)
AND:
1. THE AUTHORISED OFFICER
AXIS BANK LIMITED
SOUTHERN RECOVERY CELL
2ND FLOOR, NO.192
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KARUMUTHU NILAYAM
ANNA SALAI, CHENNAI-600002.
ALSO AT:
AXIS BANK LIMITED
CORPORATE OFFICE
INDIAN EXPRESS BUILDING
QUEENS ROAD, BANGALORE-560001
BY ITS AUTHORIZED SIGNATORY.
2. SRI. N. RAJESH ACHARY
S/O V.K. NAGARAJACHARI
AGED ABOUT 37 YEARS
R/AT NO.2/15, 1ST MAIN ROAD
II CROSS, S. NARAYANAPURA
4TH BLOCK, AKASHNAGAR
BENGALURU-560016.
3. SRI. ASHOK PORWAL
S/O SRI GHEVERCHAND
AGEDA BOUT 52 YEARS
R/AT NO.401, 8TH MAIN
1ST FLOOR, 4TH BLOCK
JAYANAGAR
BENGALURU-560011.
4. SMT. LOUISA RODRIGUES
W/O LATE MANUEL RODRIGUES
AGED ABOUT 85 YEARS
NO.1, HARA HOUSE
SRI GUTTE ANAJANEYA TEMPLE STREET
HOSUR MAIN ROAD
WILSON GARDEN
BANGALORE-560027.
...RESPONDENTS
(BY SRI. DHIRENDRA N. KATTI, ADV., FOR R1
NOTICE TO R2 TO R4 DISPENSED WITH V/O/D:08.12.2021)
---
THIS WRIT PETITION IS FILED UNDER ARTICLE 227 OF
THE CONSTITUTION OF INDIA, PRAYING TO QUASH THE
IMPUGNED ORDER ON I.A.NO.03 FILED UNDER ORDER 1 RULE
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10 OF THE CODE OF CIVIL PROCEDURE, 1908 DTD. 24.02.2020
PASSED BY THE XXVI ADDL. CITY CIVIL AND SESSIONS JUDGE
AT MAYO HALL UNIT BANGALORE IN O.S.NO.25760/2017
(PRODUCED AT ANNX-A). DIRECT THE XXVI ADDL. CITY CIVIL
AND SESSIONS JUDGE AT MAYO HALL UNIT BANGALORE TO
ALLOW THE APPLICATION NO.03 FILED BY THE PETITIONERS
UNDER ORDER I RULE 10 OF THE CODE OF CIVIL PROCEDURE,
1908 (PRODUCED AT ANNX-E) AS PRAYED & ETC.
THIS WRIT PETITION HAVING BEEN HEARD AND
RESERVED ON 19.07.2024, COMING ON FOR
PRONOUNCEMENT OF ORDER, THIS DAY, THE COURT MADE
THE FOLLOWING:
CORAM: HON'BLE MR JUSTICE VIJAYKUMAR A. PATIL
CAV ORDER
The plaintiffs / petitioners have filed this petition assailing
the order dated 24.02.2020 passed on I.A.No.3 filed under
Order I Rule 10 of the Code of Civil Procedure, 1908 in
O.S.No.25760/2017 on the file of the XXVI Addl. City Civil and
Sessions Judge, Mayo Hall, Bengaluru and further direction to
allow the application in I.A.No.3.
2. Sri.S.Kalyan Basavaraj, learned counsel appearing
for the petitioners submits that the proposed defendant is a
necessary party as the respondent Nos.2 and 3 have created
security interest in its favour. It is submitted that without
arraying the proposed defendant in the pending suit, the Trial
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Court would not be in a position to adjudicate the dispute
involved between the parties. It is further submitted that the
petitioners filed a suit for recovery of unpaid sale consideration
against the defendants based on the Cheques issued by them.
The right of the petitioners is a statutory right recognised under
Section 55(4)(b) of the Transfer of Property Act, 1882
(hereinafter referred to as 'the TP Act') and there is a statutory
charge on the property in question. It is also submitted that the
defendants have created security interest in favour of the
proposed defendant Bank, later in point and the petitioners have
a first charge over the property in question by virtue of Section
55(4)(b) of the TP Act. It is submitted that the Trial Court
erroneously rejected the application on the ground that there is
a bar under Section 34 of the Securitisation and Reconstruction
of Financial Assets and Enforcement of Security Interest Act,
2002 (hereinafter referred to as 'the SARFAESI Act') against the
Civil Court taking any action in the matter. It is contended that
Section 31 of the SARFAESI Act does not apply to certain cases
and in addition Section 31(a) of the said Act provides a lien
under any other law for the time being in force, and lien created
under the TP Act, cannot be gone into by the Debts Recovery
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Tribunal or the Appellate Authority. Therefore, the proposed
defendant is a proper and necessary party. It is contended that
if the proposed defendant is not arrayed as the defendant in the
suit, it would proceed to sell the property in question in public
auction which would lead to multiplicity of the proceedings and
the plaintiff would be put to hardship. Hence, he seeks to allow
the writ petition.
3. Per contra, Sri.Dhirendra N.Katti, learned counsel
for the respondent No.1 supports the impugned order of the
Trial Court and submits that there is a clear bar under Section
34 of the SARFAESI Act to entertain any matter, which is
covered under the provisions of SARFAESI Act. It is submitted
that Section 17 of the SARFAESI Act empowers any person to
approach the Debts Recovery Tribunal aggrieved by any
measures taken by the secured creditor under the SARFAESI
Act. Hence, the suit against the proposed defendant cannot be
maintained and the proposed defendant is neither proper nor
necessary party to the suit. He seeks to dismiss the petition.
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4. I have heard the submissions of the learned counsel
for the petitioners, learned counsel for the respondent No.1 and
meticulously perused the material available on record.
5. The petitioners / plaintiffs have filed
O.S.No.25760/2017 seeking prayer to pass judgment and
decree of permanent injunction directing the respondents /
defendants to pay the plaintiffs a sum of Rs.2,10,00,000/- being
the value of the Cheques all dated 18.08.2012 along with
interest at 18% p.a. from the date of return of the Cheques till
the date of filing of the suit and in default of such payment by
the respondents, order for sale of suit property and out of the
sale proceeds, further order to pay the plaintiffs the aforesaid
sum along with interest. The case of the plaintiffs before the
Trial Court is that they have entered into an agreement of sale
dated 20.04.2007 with respondent No.4 to purchase the
property bearing Sy.No.18/1 measuring 31 guntas and
Sy.No.18/2 measuring 1 acre 31 guntas along with 5 guntas of
kharab, both situated at Basavanapura Village,
Krishnarajapuram Hobli, Bangalore East Taluk. It was agreed
that the sale consideration of the property is Rs.3,00,00,000/-
and on the date of agreement of sale, a sum of Rs.50,00,000/-
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was paid by agreeing to pay remaining amount as per the terms
of the agreement. The agreement of sale provides nominee
clause wherein the vendor has agreed to execute the sale deed
either in the name of plaintiffs or their nominees. Based on the
nominee clause, the plaintiffs have transacted with the
respondent Nos.2 and No.3 to sell the schedule property and
after negotiating the terms of contract, it was agreed that the
sale deed be executed by the respondent No.4 as per the
assignee clause for agreed sale consideration of
Rs.4,00,00,000/-. It is further agreed that the plaintiffs being
agreement holders under the agreement of sale dated
20.04.2007 were to stand as consenting witnesses to the
registered sale deed. It was agreed that portion of the sale
price would be paid in favour of the consenting witnesses i.e.
plaintiffs. Accordingly, the respondent Nos.2 and 3 paid the
price to the consenting witnesses through 5 Cheques all dated
18.08.2012 totally for a sum of Rs.2,10,00,000/-. However, the
Cheques issued by the respondent Nos.2 and 3 came to be
dishonoured with an endorsement 'no funds available' and
thereafter, the plaintiffs filed a suit to recover the unpaid sale
consideration.
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6. The material available on record indicates that the
Trial Court vide order dated 11.07.2017 passed an exparte order
of temporary injunction against the respondent Nos.2 and 3
restraining them from alienating the suit schedule property
pending disposal of the suit. In the aforesaid suit, the plaintiffs
moved an application under Order I Rule 10 of the CPC to
implead the Authorized Officer, Axis Bank Ltd. as an additional
defendant in the suit on the ground that during the pendency of
the suit, the proposed defendant brought the suit schedule
property on sale by exercising the power under the provisions of
SARFAESI Act. It is averred in the affidavit accompanying the
application that the property appears to have been mortgaged
with the Bank by creating simple mortgage by way of deposit of
title deeds. It is further averred that the proposed defendant
ought to have verified the fact as to whether unpaid sale
consideration as referred in the sale deed has been paid or not.
Having failed to do so, enforcing the security interest by the
proposed defendant is subsequent to the charge of the plaintiffs.
Hence, the proposed defendant is a necessary and proper party
to the suit. The Trial Court rejected the application on the
ground that since loan was availed of by mortgaging the suit
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property and there was a default in repayment of the loan, the
proposed defendant - Bank has initiated proceedings under the
SARFAESI Act. Hence, the Civil Court has no jurisdiction to
decide the dispute which the plaintiffs are trying to raise against
the proposed defendant - Bank.
7. The finding of the Trial Court appears to be prima
facie contrary to Section 34 of the SARFAESI Act. Section 34 of
the SARFAESI Act reads as under:
"34. Civil Court not to have jurisdiction.- No civil
court shall have jurisdiction to entertain any suit
or proceeding in respect of any matter which a
Debts Recovery Tribunal or the Appellate Tribunal
is empowered by or under this Act to determine
and no injunction shall be granted by any court or
other authority in respect of any action taken or
to be taken in pursuance of any power conferred
by or under this Act or under the Recovery of
Debts Due to Banks and Financial Institutions Act,
1993 (51 of 1993)."
[Emphasis supplied]
8. The aforesaid Section clearly indicates that no Civil
Court shall have jurisdiction to entertain any suit or proceeding
in respect of any matter which a Debts Recovery Tribunal or
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Appellate Tribunal is empowered by or under this Act to
determine and no injunction shall be granted in respect of any
action taken or to be taken pursuant to the power conferred
under the Act or Debts Recovery Tribunal to the bank and
financial institutions. Admittedly, the prayer in the suit was for
permanent injunction directing the respondent Nos.2 to 4 to pay
the plaintiffs a sum of Rs.2,10,00,000/- which is unpaid sale
consideration and consequential prayer was to sell the suit
schedule property if the respondent Nos.2 to 4 failed to make
the payment. Prima facie it appears that the Debts Recovery
Tribunal is not empowered to grant the relief sought in the
plaint. However, the bar under Section 34 of SARFAESI Act
relating to ousting of jurisdiction of Civil Court comes into play
only when relief is sought against the proposed defendant as on
the date. Since no substantive relief is sought against the
proposed defendant - Bank, the question of commenting on the
scope and applicability of Section of 34 of SARFAESI Act is
premature. Accordingly, the finding of the Trial Court as
regards Section 34 of SARFAESI Act is required to be set aside.
Therefore, the question of invoking Section 34 or right of the
plaintiff to sue the Bank is a matter kept open to be adjudicated
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at the appropriate stage, when such a relief is claimed against
the proposed defendant - Bank.
9. The contention of the petitioners that their charge is
superior and first charge over the suit schedule property and the
security interest created by the respondent Nos.2 and 3 in
favour of the proposed defendant is subservient to his charge,
cannot be gone into at this stage as there is no adjudication
with regard to the priority of charge by any forum. There may
be a statutory charge in favour of the plaintiffs, however there is
no adjudication whatsoever with regard to his claimed statutory
charge under Section 55(4)(b) of the TP Act in the pending suit
and unless the said adjudication takes place, this Court cannot
record any finding with regard to the alleged right of the
plaintiffs in the suit. Admittedly, the petitioner has neither
amended the plaint seeking prayer against the proposed
defendant nor there is any attempt made to seek declaration
that the security interest created on the suit schedule property
by the proposed defendant is subservient to the charge of the
plaintiffs. In the absence of any pleading and consequential
prayer in the plaint, the proposed defendant is neither a proper
nor necessary party in the suit. This Court is required to
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consider the application of the plaintiffs for impleadment
keeping in mind the settled principles of law that in the absence
of proposed defendant whether the Civil Court would be able to
effectively adjudicate upon the question involved in the suit.
The necessary party is the one without whom no order can be
effectively made. The proper party is the one who is necessary
for the final decision of the question involved in the proceedings.
Therefore, adding of the parties would depend upon the judicial
discretion of the Court which has to be exercised in the facts
and circumstances of a particular case.
10. In the instant case, the proposed defendant is
neither necessary nor proper party to the suit as there must be
nexus between the case made out against the proposed
defendant and the prayer in the suit. In the absence of prayer
against the proposed defendant - Bank, there is no nexus
between the prayer in the suit and the proposed defendant as
per the present pleading. Hence, at this stage, the proposed
defendant is neither necessary nor proper party to the suit. The
entire pleading and prayer in the suit is pointing towards the
respondent Nos.2 and 3 and there is no impediment for the Civil
Court to decide the real issue involved in the suit in the absence
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of proposed defendant. Hence, the proposed defendant is
neither necessary nor proper party to the suit. It is always open
for the plaintiffs to seek amendment of the plaint by making
necessary prayers against the respondents / defendants if law
permits and if such amendment is allowed, then the plaintiffs
can move an application for impleadment in accordance with
law. The observations made by this Court are only with regard
to the correctness of the impugned order and not on the merits
of the suit.
11. For the aforementioned reasons, I proceed to pass
the following:
ORDER
The writ petition is dismissed.
No order as to costs.
Sd/-
(VIJAYKUMAR A. PATIL)
JUDGE
RV
