Karnataka High Court
Canara Bank vs The Competent Authority on 25 November, 2025
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M.F.A. No.4029/2025
AND CONNECTED MATTERS
HC-KAR
IN THE HIGH COURT OF KARNATAKA AT BENGALURU
DATED THIS THE 25TH DAY OF NOVEMBER, 2025
PRESENT
THE HON'BLE MRS. JUSTICE ANU SIVARAMAN
AND
THE HON'BLE MR. JUSTICE VIJAYKUMAR A. PATIL
MISCELLANEOUS FIRST APPEAL NO.4029/2025
C/W
MISCELLANEOUS FIRST APPEAL NO.3898/2025
MISCELLANEOUS FIRST APPEAL NO.3985/2025
MISCELLANEOUS FIRST APPEAL NO.4033/2025
MISCELLANEOUS FIRST APPEAL NO.4065/2025 (KPIDFA)
IN M.F.A. No.4029/2025:
BETWEEN:
CANARA BANK
Digitally signed A PUBLIC SECTOR BANK
by ARSHIFA HAVING ITS BRANCH OFFICE AT
BAHAR KHANAM ARM I BRANCH
Location: High SPENCER'S TOWER
Court Of 86, MG ROAD, BENGALURU-560 001.
Karnataka REPRESENTED BY ITS CHIEF MANAGER
MR. RANJAN KUMAR.
...APPELLANT
(BY SRI. HEMANTH R. RAO, ADV.,)
AND:
1. THE COMPETENT AUTHORITY
FOR M/S SHRI SHANMUGA FINANCIERS
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M.F.A. No.4029/2025
AND CONNECTED MATTERS
HC-KAR
OTHER GROUP OF COMPANIES
REP. BY ITS COMPETENT AUTHORITY
SMT. MANGALA S.M.
AGE 51 YEARS
DESIGNATED BY ADDITIONAL DEPUTY
COMMISSIONER, OFFICE OF THE DEPUTY
COMMISSIONER, JILLADALITHA BHAVANA
KUMBARAHALLI, MULABAGAL ROAD
NH-75, KOLAR 563 101.
2. R.N. SHANMUGAM
S/O SRI. R.K. NARAYANASWAMY
AGED ABOUT 69 YEARS
2770, SUMITRA NILAYA
OPP. CANARA BANK
BANGARPET-563114
KOLAR DIST.
3. SRI. SHANMUGA FINANCIERS AND
OTHER GROUP OF COMPANIES
NO.599, BAZAR STREET, BANGARPET
KOLAR DISTRICT-563114
REP. BY ITS MANAGING DIRECTOR
SHRI. R.N. SHANMUGAM
...RESPONDENTS
(BY SRI. VEERESH R. BUDHIHAL, ADV., FOR R1)
THIS MFA IS FILED U/S.16 OF THE KARNATAKA
PROTECTION OF INTEREST OF DEPOSITORS IN FINANCIAL
ESTABLISHMENT ACT, PRAYING TO SET ASIDE THE ORDER
DATED 03.05.2025 PASSED IN MISC.NO.1443/2024 PASSED
BY THE XCI ADDITIONAL CITY CIVIL AND SESSIONS JUDGE,
BENGALURU (CCH-92) IN MISC.NO.1443/2024 PRODUCED AT
ANNEXURE-A & ETC.
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M.F.A. No.4029/2025
AND CONNECTED MATTERS
HC-KAR
IN M.F.A. NO.3898/2025:
BETWEEN:
SREE SHANMUGA MORDEN RICE MILLS PVT LTD
A COMPANY UNDER CIRP
HAVING ITS REGISTERED OFFICE AT
DESIHALLI, KASABA HOBLI, KGF ROAD
BANGERPET- 563114, KOLAR DISTRICT.
REP. BY ITS RESOLUTION PROFESSIONAL
MR. KANEKAL CHANDRASHEKAR.
...APPELLANT
(BY SRI. HEMANTH R. RAO, ADV.,)
AND:
1. THE COMPETENT AUTHORITY
FOR M/S SHRI SHANMUGA FINANCIERS
AND OTHER GROUP OF COMPANIES
REP. BY ITS COMPETENT AUTHORITY
SMT. MANGALA S.M.
AGED 51 YEARS
DESIGNATED BY ADDITIONAL DEPUTY
COMMISSIONER, OFFICE OF THE DEPUTY
COMMISSIONER, JILLADALITHA BHAVANA
KUMBARAHALLI, MULABAGAL ROAD
NH-75, KOLAR 563 101.
2. MR. R.N. SHANMUGAM
S/O SRI. R.K. NARAYANASWAMY
2776, SUMITRA NILAYA
OPP. CANARA BANK
BANGARPET-563114
KOLAR DIST.
3. SRI. SHANMUGA FINANCIERS
AND OTHER GROUP OF COMPANIES
NO.599, BAZAR STREET, BANGARPET
KOLAR DISTRICT-563114
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M.F.A. No.4029/2025
AND CONNECTED MATTERS
HC-KAR
REP. BY ITS MANAGING DIRECTOR
SHRI. R.N. SHANMUGAM
AGED 69 YEARS.
...RESPONDENTS
(BY SRI. VEERESH R. BUDHIHAL, ADV., FOR R1)
THIS MFA IS FILED U/S.16 OF THE KARNATAKA
PROTECTION OF INTEREST OF DEPOSITORS IN FINANCIAL
ESTABLISHMENT ACT, 2004, PRAYING TO SET ASIDE THE
ORDER DATED 03.05.2025 PASSED IN MISC.NO.249/2025
PASSED BY THE XCI ADDITIONAL CITY CIVIL AND
SESSIONS JUDGE, BENGALURU (CCH-92) IN MISC
NO.249/2025 PRODUCED AT ANNEXURE-A INSOFAR AS
THE SCHEDULED PROPERTY SL.NO.8, 9, 10, 11, 12
CONCERNED.
IN M.F.A. NO.3985/2025:
BETWEEN:
CANARA BANK
A PUBLIC SECTOR BANK
HAVING ITS BRANCH OFFICE AT
ARM 1 BRANCH, SPENCER'S TOWER
NO.86, M.G. ROAD, BENGALURU- 560 001
REPRESENTED BY ITS CHIEF MANAGER
MR. RANJAN KUMAR.
...APPELLANT
(BY SRI. HEMANTH R. RAO, ADV.,)
AND:
1. THE COMPETENT AUTHORITY
FOR M/S SHRI SHANMUGA FINANCIERS
AND OTHER GROUP OF COMPANIES
REP. BY ITS COMPETENT AUTHORITY
SMT. MANGALA S.M.
AGED 51 YEARS
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M.F.A. No.4029/2025
AND CONNECTED MATTERS
HC-KAR
DESIGNATED BY ADDITIONAL DEPUTY
COMMISSIONER, OFFICE OF THE
DEPUTY COMMISSIONER
JILLADALITHA BHAVANA, KUMBARAHALLI
MULABAGAL ROAD, NH-75, KOLAR 563 101.
2. SRI. SHANMUGA FINANCIERS AND
OTHER GROUP OF COMPANIES
NO.599, BAZAR STREET
BANGARPET, KOLAR DISTRICT-563114
REP. BY ITS MANAGING DIRECTOR
SHRI. R.N. SHANMUGAM
AGED 69 YEARS.
3. MR. R.N. SHANMUGAM
S/O SRI. R.K. NARAYANASWAMY
2776, SUMITRAMMAL NILAYAM
OPP. CANARA BANK, BANGARPET
KOLAR DIST-563114.
4. MS. GUNASHEKARI
W/O SRI. R.N. SHANMUGAM
2776, SUMITRAMMAL NILAYAM
OPP. CANARA BANK, BANGARPET
KOLAR DISTRICT-563114.
...RESPONDENTS
(BY SRI. VEERESH R. BUDHIHAL, ADV., FOR R1)
THIS MFA IS FILED U/S.16 OF THE KARNATAKA
PROTECTION OF INTEREST OF DEPOSITORS IN FINANCIAL
ESTABLISHMENT ACT, 2004, PRAYING TO SET ASIDE THE
ORDER DATED 03.05.2025 PASSED IN MISC.NO.162/2025
PASSED BY THE XCI ADDITIONAL CITY CIVIL AND
SESSIONS JUDGE AND SPL. JUDGE, BENGALURU (CCH-92)
IN MISC.NO.162/2025 PRODUCED AT ANNEXURE-A,
INSOFAR AS THE SCHEDULED PROPERTY ITEAM NO.1 AND
ITEAM NO.3 CONCERNED & ETC.
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M.F.A. No.4029/2025
AND CONNECTED MATTERS
HC-KAR
IN M.F.A. NO.4033/2025:
BETWEEN:
SREE SHANMUGA MODERN RICE MILLS
A COMPANY UNDER CIRP
HAVING ITS REGISTERED OFFICE AT
DESIHALLI, KASABA HOBLI
KGF ROAD, BANGERPET- 563114
KOLAR DISTRICT
REP. BY ITS RESOLUTION PROFESSIONAL
MR. KANEKAL CHANDRASHEKAR.
...APPELLANT
(BY SRI. HEMANTH R. RAO, ADV.,)
AND:
1. THE COMPETENT AUTHORITY
FOR M/S SHRI SHANMUGA FINANCIERS
AND OTHER GROUP OF COMPANIES
REP. BY ITS COMPETENT AUTHORITY
SMT. MANGALA S.M.
AGE 51 YEARS
DESIGNATED BY ADDITIONAL DEPUTY
COMMISSIONER, OFFICE OF THE DEPUTY
COMMISSIONER, JILLADALITHA BHAVANA
KUMBARAHALLI, MULABAGAL ROAD
NH-75, KOLAR 563 101.
2. SRI. R.N. SHANMUGAM
S/O R.K. NARAYANASWAMY
AGED 69 YEARS
2776, SUMITRA NILAYA
OPP. CANARA BANK
BANGARPET-563114
KOLAR DIST.
3. SMT. GUNASHEKARI
W/O R.N. SHANMUGAM
2776, SUMITRA NILAYA
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M.F.A. No.4029/2025
AND CONNECTED MATTERS
HC-KAR
OPP. CANARA BANK
KOLAR ROAD, BANGARPET-563114
KOLAR DISTRICT.
4. SRI. SHANMUGA FINANCIERS AND
OTHER GROUP OF COMPANIES
NO.599, BAZAR STREET
BANGARPET, KOLAR DISTRICT-563114
REP. BY ITS MANAGING DIRECTOR
SRI. R.N. SHANMUGAM
AGED 69 YEARS.
...RESPONDENTS
(BY SRI. VEERESH R. BUDHIHAL, ADV., FOR R1)
THIS MFA IS FILED U/S.16 OF THE KARNATAKA
PROTECTION OF INTEREST OF DEPOSITORS IN FINANCIAL
ESTABLISHMENT ACT, PRAYING TO SET ASIDE THE ORDER
DATED 03.05.2025 PASSED IN MISC.NO.162/2025 PASSED
BY THE XCI ADDITIONAL CITY CIVIL AND SESSIONS
JUDGE AND SPL. JUDGE, BENGALURU (CCH-92) IN
MISC.NO.162/2025 PRODUCED AT ANNEXURE-A, INSOFAR
AS THE SCHEDULED PROPERTY ITEAM NO.1 AND ITEAM
NO.3 CONCERNED & ETC.
IN M.F.A. NO.4065/2025:
BETWEEN:
CANARA BANK
A PUBLIC SECTOR BANK
HAVING ITS BRANCH OFFICE AT
ARM I BRANCH, SPENCER'S TOWER
NO.86, M.G. ROAD, BENGALURU-560 001
REP. BY ITS CHIEF MANAGER
MR. RANJAN KUMAR.
...APPELLANT
(BY SRI. HEMANTH R. RAO, ADV.,)
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M.F.A. No.4029/2025
AND CONNECTED MATTERS
HC-KAR
AND:
1. THE COMPETENT AUTHORITY
FOR M/S SHRI SHANMUGA FINANCIERS
AND OTHER GROUP OF COMPANIES
REP. BY ITS COMPETENT AUTHORITY
SMT. MANGALA S.M.
AGED 51 YEARS
DESIGNATED BY ADDITIONAL DEPUTY
COMMISSIONER, OFFICE OF THE DEPUTY
COMMISSIONER, JILLADALITHA BHAVANA
KUMBARAHALLI, MULABAGAL ROAD
NH-75, KOLAR 563 101.
2. SRI. DILIP KUMAR R.S.
AGED ABOUT 40 YEARS
S/O SRI. R.N. SHANMUGAM
2770, SUMITRA NILAYA
OPP. CANARA BANK, KOLAR ROAD
BANGARPET, KOLAR DIST-563114.
3. SRI. SHANMUGA FINANCIERS AND
OTHER GROUP OF COMPANIES
NO.599, BAZAR STEET, BANGARPET
KOLAR DISTRICT-563114
REP. BY ITS MANAGING DIRECTOR
SHRI. R.N. SHANMUGAM
AGED ABOUT 69 YEARS.
...RESPONDENTS
(BY SRI. VEERESH R. BUDHIHAL, ADV., FOR R1)
THIS MFA IS FILED U/S.16 OF THE KARNATAKA
PROTECTION OF INTEREST OF DEPOSITORS IN FINANCIAL
ESTABLISHMENT ACT, 2004, PRAYING TO SET ASIDE THE
ORDER DATED 03.05.2025 PASSED IN MISC.NO.37/2025
PASSED BY THE XCI ADDITIONAL CITY CIVIL AND
SESSIONS JUDGE BENGALURU (CCH-92) IN
MISC.NO.37/2025 PRODUCED AT ANNEXURE-A, INSOFAR
AS THE SCHEDULED PROPERTY ITEAM NO.1 AND ITEAM
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M.F.A. No.4029/2025
AND CONNECTED MATTERS
HC-KAR
NO.3 CONCERNED & ETC.
THESE APPEALS, COMING ON FOR ADMISSION, THIS
DAY, JUDGMENT WAS DELIVERED THEREIN AS UNDER:
CORAM: HON'BLE MRS. JUSTICE ANU SIVARAMAN
and
HON'BLE MR. JUSTICE VIJAYKUMAR A. PATIL
ORAL JUDGMENT
(PER: HON'BLE MR. JUSTICE VIJAYKUMAR A. PATIL)
These appeals are filed by the Canara Bank and the
Resolution Professional of Sree Shanmuga Modern Rice
Mills Private Limited challenging the orders passed in the
miscellaneous cases by the XCI Additional City Civil and
Sessions Judge and Special Judge for KPIDFE Cases,
Bengaluru (CCH-92) as under:
MFA No. Misc.No. and date Claimant
MFA No.4029/2025 Misc.No.1443/2024 Canara Bank
dated 03.05.2025
MFA No.3898/2025 Misc.No.249/2025 Sree Shanmuga
dated 03.05.2025 Modern Rice Mills
Pvt. Ltd.
MFA No.3985/2025 Misc.No.162/2025 Canara Bank
dated 03.05.2025
MFA No.4033/2025 Misc.No.162/2025 Sree Shanmuga
dated 03.05.2025 Modern Rice Mills
Pvt. Ltd.
MFA No.4065/2025 Misc.No.37/2025 Canara Bank
dated 03.05.2025
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2. Sri.Hemanth R.Rao, learned counsel appearing
for the appellants submits that the appellants were not
arrayed as parties before the Special Court and hence,
they were not aware about the passing of the order by the
Special Court under Section 5(2) of the Karnataka
Protection of Interest of Depositors in Financial
Establishments Act, 2004 (hereinafter referred to as 'the
Act'). It is submitted that the Canara Bank is a secured
creditor and its charge is prior than the attachment order.
It is further submitted that the proceedings were initiated
under the provisions of the Insolvency and Bankruptcy
Code, 2016 (IBC) and an order under Section 14 of the
IBC came to be passed on 17.03.2023 and in view of the
said order, the impugned order of the Special Court is
liable to be set aside. It is also submitted that both the
appellants have filed writ petitions in W.P.Nos.1880/2022
and 16377/2021. The learned Single Judge of this Court,
considering the rival contentions allowed the writ petitions
holding that the attachment order insofar as the secured
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properties as regards which any mortgage or security
interest has been created in favour of any member of the
Committee of Creditors, shall stand vacated. It is
contended that in view of the aforesaid orders of the
learned Single Judge, the appeals are required to be
allowed.
3. Per contra, Sri.Veeresh R.Budihal, learned
counsel for the respondent No.1 supports the impugned
order of the Special Court and submits that there is no
dispute with regard to the orders passed by the learned
Single Judge in the aforesaid writ petitions. However, as
there is a law declared by the Hon'ble Supreme Court in
the case of NATIONAL SPOT EXCHANGE LIMITED VS.
UNION OF INDIA AND ORS.1, wherein it was held that
the Maharashtra Protection of Interest of Depositors (in
Financial Establishments) Act, 1999, has an overriding
effect on the proceedings initiated under the Securitisation
and Reconstruction of Financial Assets and Enforcement of
W.P.(Civil) No.995/2019 dt. 15.05.25
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Security Interest Act, 2002 as well as the IBC and
therefore, the question of interference would not arise.
Hence, he seeks dismissal of the appeals.
4. We have heard the arguments of the learned
counsel for the appellants, learned counsel for the
respondent No.1 and meticulously perused the material
available on record. We have given our anxious
consideration to the submissions advanced on both sides.
5. In these appeals, the secured creditors-Canara
Bank and the Resolution Professional of Sree Shanmuga
Modern Rice Mills Private Limited filed appeals assailing
the orders of the Special Court, wherein the Special Court
has passed an order under Section 5(2) of the Act
confirming the attachment orders dated 24.02.2022. It is
noticed that the appellants were not parties to the
proceedings before the Special Court. It is also noticed
that in the writ petitions filed by the appellants before this
Court, the Competent Authority was not arrayed as a
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party. In W.P.No.1880/2022 filed by the Canara Bank
against the State of Karnataka and others, the learned
Single Judge vide order dated 13.12.2024 partly allowed
the writ petition. The operative portion of the said reads
as under:
"i. The writ petition is partly allowed;
ii. The proceeding under the KPID Act though
shall continue the attachment order passed in
respect of the properties as regard which the
security interest as been created in favor of the
petitioner - bank shall stand vacated;
iii. The question of any release of the said
properties to the petitioner - bank would not arise."
6. The writ petition filed by the Resolution
Professional of Sree Shanmuga Modern Rice Mills Private
Limited in W.P.No.16377/2021 came to be disposed of on
13.12.2024 by the learned Single Judge. The operative
portion of the said reads as under:
"i. The writ petition is allowed, thought the
proceedings under the KPID Act shall continue, the
same shall be subject to the outcome of the
insolvency proceedings undertaken in respect of the
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petitioner. The attachment order in so far as any
secured properties as regards which any mortgagee
or security interest has been created in favour of
any member of the committee of creditors shall
stand vacated.
ii. The secured creditors in respect of those
properties could be entitled to deal with them in
accordance with law and as per the security interest
credited in favour of the secured creditor, as
regards which there is any attachment but no
security interest which is created the attachment
order is quashed, subject to any amount being
received being over and above the requirement of
discharging all the creditors of the petitioner
company to be deposited with the authorities
ceased of the proceedings under the KPID Act."
7. We have perused the orders passed by the
learned Single Judge in the aforesaid writ petitions. The
said orders make it very clear that the attachment order
insofar as any secured creditors as regards which any
mortgage or any security interest has been created in
favour of any member of the Committee of the Creditors,
shall stand vacated. In view of the specific finding and
direction, we are of the considered view that there was
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nothing before the Special Court to pass the order of
confirmation. It cannot be lost sight of the fact that the
Competent Authority was not arrayed as a party before
the learned Single Judge in both the petitions. Hence, the
interest of justice would be met if express liberty is
reserved to the Competent Authority to take appropriate
steps including the challenge to the orders of the learned
Single Judge or to seek review of the said order in view of
the decision of the Hon'ble Supreme Court in the case of
NATIONAL SPOT EXCHANGE, referred supra.
8. With the aforesaid observation and liberty, the
appeals are allowed.
The impugned orders dated 03.05.2025 passed in
Misc.Nos.1443/2024, 249/2025, 162/2025, 162/2025 and
37/2025, respectively passed by the XCI Additional City
Civil and Sessions Judge and Special Judge for KPIDFE
Cases, Bengaluru (CCH-92) are set aside.
It is needless to observe that if the Competent
Authority succeeds in its endeavour to seek the review or
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modification of the order of the learned Single Judge, it is
open for the Competent Authority to seek continuation of
further proceedings under the Act insofar as the properties
concerned under these proceedings.
In view of the disposal of the appeals, the pending
applications, if any, are also disposed of.
Sd/-
(ANU SIVARAMAN)
JUDGE
Sd/-
(VIJAYKUMAR A. PATIL)
JUDGE
RV
