Karnataka High Court
Smt Jayanthi S Shetty vs State Of Karnataka on 29 October, 2025
Author: Suraj Govindaraj
Bench: Suraj Govindaraj
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WP No. 27349 of 2024
C/W WP No. 28076 of 2024
HC-KAR
IN THE HIGH COURT OF KARNATAKA AT BENGALURU
DATED THIS THE 29TH DAY OF OCTOBER, 2025
BEFORE
THE HON'BLE MR. JUSTICE SURAJ GOVINDARAJ
WRIT PETITION NO. 27349 OF 2024 (CS-RES)
C/W
WRIT PETITION NO. 28076 OF 2024 (CS-RES)
IN W.P.NO.27349/2024
BETWEEN
1. SMT JAYANTHI S SHETTY
AGED ABOUT 75 YEARS,
W/O LATE SADASHIVA SHETTY,
R/AT VENKIBOARDY MUNICIPAL SOCIETY,
BLOCK NO.6, NEAR DR BHARKAS DISPENSARY,
LALGATE, SURAT 395003
2. SMT SUREKHA RAJESH SHETTY
AGED ABOUT 47 YEARS,
D/O LATE SADASHIVA SHETTY,
R/A NO.34/4/4, 3RD CROSS,
Digitally signed
by SHWETHA SHAKTHI GANAPATHINAGAR,
RAGHAVENDRA 3RD STAGE, 4TH BLOCK BASAVESHWARANAGARA,
Location: HIGH BANGALORE 560079
COURT OF
KARNATAKA
3. SMT JYOTHI YATHISH SHETTY
AGED ABOUT 46 YEARS,
D/O LATE SADASHIVA SHETTY,
R/AT NO.191, DHOLE PATIL ROAD,
II KAMLTARA APARTMENTS,
NEAR GANESH TEMPLE, PUNE 411001
4. SRI SURESH SHETTY
AGED ABOUT 43 YEARS,
S/O LATE SADASHIVA SHETTY,
R/AT VENKIBOARDY MUNICIPAL SOCIETY,
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WP No. 27349 of 2024
C/W WP No. 28076 of 2024
HC-KAR
BLOCK NO.6, NEAR DR BHARKAS DISPENSARY,
LALGATE, SURAT 395003
PETITIONERS 1, 2 AND 3 ARE REPRESENTED BY THEIR
YOUNGER BROTHER AND GPA HOLDER, I.E.,
THE 04TH PETITIONER HEREIN
...PETITIONERS
(BY SRI. ASHOK HARANAHALLI., SR. ADVOCATE FOR
SRI. AJITH A SHETTY., ADVOCATE)
AND
1. STATE OF KARNATAKA
BY ITS PRINCIPAL SECRETARY,
DEPARTMENT OF CO OPERATIVE,
MS BUILDING, BENGALURU 560001
2. JOINT REGISTRAR OF CO-OPERATIVE SOCIETIES
MYSORE REGION
PUBLIC OFFICES BUILDING,
OPP CORPORATION OFFICE,
NEW SAYYAJI RAO ROAD,
MYSORE-570024.
3. THE DEPUTY REGISTRAR OF
CO OPERATIVE SOCIETIES
UDUPI, UDUPI DISTRICT 576104
4. THE ASSISTANT REGISTRAR OF
CO OPERATIVE SOCIETIES AND RECOVERY OFFICER
KUNDAPURA SUB DIVISION,
UDUPI TALUK AND DISTRICT 576201
5. THE GENERAL MANAGER
MANGALA CREDIT CO OPERATIVE SOCIETY,
KS RAO ROAD, KODIALBAIL,
MANGALORE 575003
(SOCIETY REGISTERED UNDER THE KARNATAKA
CO-OPERATIVE SOCIETIES ACT)
6. SRI K VAMANA BALIGA
S/O GOPALAKRISHNA BALIGA,
AGED ABOUT MAJOR,
BALIGA COMPOUND, KALYANAPURA,
UDUPI TALUK AND DISTRICT 576201
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WP No. 27349 of 2024
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HC-KAR
7. SRI VISHWANATHA BALIGA
S/O K LAXMINARAYANA BALIGA,
AGED ABOUT MAJOR,
BALIGA COMPOUND,
MALPE CROSS ROAD, SANTHEKATTE,
KALYANAPURAA,
UDUPI TALUK AND DISTRICT 576201
8. SRI NAGESHA NAYAK
S/O GOPALAKRISHNA NAYAK,
AGED ABOUT MAJOR,
R/AT NO.1-2-28, KALSANKA,
UDUPI TALUK AND DISTRICT 576101
9. SRI CHANDRAKANTH P SANU
S/O PURUSHOTHAMA SANU,
AGED ABOUT MAJOR,
R/AT MARUTHI LANE, ALIKE,
MANGALORE 575003
10.SMT SARIKA SHETTY
W/O SRI RATHNAKAR SHETTY,
AGED ABOUT MAJOR,
ROYAL SOFT DRINKS,
TENKABETTU, UPPAR VILLAGE AND POST,
UDUPI TALUK AND DISTRICT 576105
11.DR PRADEEP KUMAR SHETTY
S/O SARVENJA SHETTY,
AGED ABOUT MAJOR,
FLAT NO.301, OBEL RESIDENCY,
ARAKERE, VIJAYA LAYOUT,
BANNERUGATTA ROAD,
BENGALURU 576076
12.SRI RAJANIKANTH NAYAK
S/O KS THIRTHARAJ,
AGED ABOUT MAJOR,
R/AT SUBHASH ROAD, KOPPA TALUK,
CHIKAMAGALURU 577126
.... RESPONDENTS
(BY SRI. YOGESH D. NAIK., AGA FOR R1 TO R4;
SMT. LAKSHMI IYENGAR., SR. ADVOCATE FOR
SRI. N. GOUTHAM RAGHUNATH., ADVOCATE FOR R6 TO R9;
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WP No. 27349 of 2024
C/W WP No. 28076 of 2024
HC-KAR
SRI. JAYKUMAR S. PATIL., SR. ADVOCATE FOR
SRI. RAJESH SHETTIGAR., ADVOCATE FOR R10, R11 & R12;
SRI. VITTAL SHETTY., ADVOCATE FOR R5)
THIS WRIT PETITION IS FILED UNDER ARTICLES 226 & 227
OF THE CONSTITUTION OF INDIA PRAYING TO ISSUE A WRIT OF
CERTIORARI, THEREBY SETTING ASIDE THE ORDER DATED 02ND
SEPETEMBER, 2021, PASSED BY THE HON'BLE MINISTER FOR CO-
OPERATION IN REVISION PETITION/APPEAL NO.CO:31:CAP:2014, AS
PER ANNEXURE-X TO THE WRIT PETITION AND ETC.
IN W.P.NO.28076/2024
BETWEEN
1. SMT JAYANTHI S SHETTY
AGED ABOUT 75 YEARS,
W/O LATE SADASHIVA SHETTY,
R/AT VENKIBOARDY MUNICIPAL SOCIETY,
BLOCK NO.6, NEAR DR BHARKAS DISPENSARY,
LALGATE, SURAT 395003
2. SMT SUREKHA RAJESH SHETTY
AGED ABOUT 47 YEARS,
D/O LATE SADASHIVA SHETTY,
R/A NO.34/4/4, 3RD CROSS,
SHAKTHI GANAPATHINAGAR,
3RD STAGE, 4TH BLOCK BASAVESHWARANAGARA,
BANGALORE 560079
3. SMT JYOTHI YATHISH SHETTY
AGED ABOUT 46 YEARS,
D/O LATE SADASHIVA SHETTY,
R/AT NO.191, DHOLE PATIL ROAD,
II KAMLTARA APARTMENTS,
NEAR GANESH TEMPLE, PUNE 411001
4. SRI SURESH SHETTY
AGED ABOUT 43 YEARS,
S/O LATE SADASHIVA SHETTY,
R/AT VENKIBOARDY MUNICIPAL SOCIETY,
BLOCK NO.6, NEAR DR BHARKAS DISPENSARY,
LALGATE, SURAT 395003
PETITIONERS 1, 2 AND 3 ARE REPRESENTED BY THEIR
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WP No. 27349 of 2024
C/W WP No. 28076 of 2024
HC-KAR
YOUNGER BROTHER AND GPA HOLDER, I.E.,
THE 04TH PETITIONER HEREIN
..PETITIONERS
(BY SRI. ASHOK HARANAHALLI., SR. ADVOCATE FOR
SRI. AJITH A SHETTY., ADVOCATE)
AND
1. STATE OF KARNATAKA
BY ITS PRINCIPAL SECRETARY,
DEPARTMENT OF CO OPERATIVE,
MS BUILDING, BENGALURU 560001
2. JOINT REGISTRAR OF CO-OPERATIVE SOCIETIES
MYSORE REGION
PUBLIC OFFICES BUILDING,
OPP CORPORATION OFFICE,
NEW SAYYAJI RAO ROAD,
MYSORE-570024.
3. THE DEPUTY REGISTRAR OF
CO OPERATIVE SOCIETIES
UDUPI, UDUPI DISTRICT 576104
4. THE ASSISTANT REGISTRAR OF
CO OPERATIVE SOCIETIES AND RECOVERY OFFICER
KUNDAPURA SUB DIVISION,
UDUPI TALUK AND DISTRICT 576201
5. THE GENERAL MANAGER
ABHYUDAYA CO-OPERATIVE BANK LIMITED
FORMERLY KNOW AS
JANATHA CO-OPERATIVE BANK LIMITED
CAR STREET ROAD,
UDUPI-576101
6. SRI K VAMANA BALIGA
S/O GOPALAKRISHNA BALIGA,
AGED ABOUT MAJOR,
BALIGA COMPOUND, KALYANAPURA,
UDUPI TALUK AND DISTRICT 576201
7. SRI VISHWANATHA BALIGA
S/O K LAXMINARAYANA BALIGA,
AGED ABOUT MAJOR,
BALIGA COMPOUND,
MALPE CROSS ROAD, SANTHEKATTE,
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WP No. 27349 of 2024
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KALYANAPURAA,
UDUPI TALUK AND DISTRICT 576201
8. SRI NAGESHA NAYAK
S/O GOPALAKRISHNA NAYAK,
AGED ABOUT MAJOR,
R/AT NO.1-2-28, KALSANKA,
UDUPI TALUK AND DISTRICT 576101
9. SRI CHANDRAKANTH P SANU
S/O PURUSHOTHAMA SANU,
AGED ABOUT MAJOR,
R/AT MARUTHI LANE, ALIKE,
MANGALORE 575003
10.SMT SARIKA SHETTY
W/O SRI RATHNAKAR SHETTY,
AGED ABOUT MAJOR,
ROYAL SOFT DRINKS,
TENKABETTU, UPPAR VILLAGE AND POST,
UDUPI TALUK AND DISTRICT 576105
11.DR PRADEEP KUMAR SHETTY
S/O SARVENJA SHETTY,
AGED ABOUT MAJOR,
FLAT NO.301, OBEL RESIDENCY,
ARAKERE, VIJAYA LAYOUT,
BANNERUGATTA ROAD,
BENGALURU 576076
12.SRI RAJANIKANTH NAYAK
S/O KS THIRTHARAJ,
AGED ABOUT MAJOR,
R/AT SUBHASH ROAD, KOPPA TALUK,
CHIKAMAGALURU 577126
.... RESPONDENTS
(BY SRI. YOGESH D. NAIK., AGA FOR R1 TO R4;
SMT. LAKSHMI IYENGAR., SR. ADVOCATE FOR
SRI. N. GOUTHAM RAGHUNATH., ADVOCATE FOR R6;
SRI. JAYKUMAR S. PATIL., SR. ADVOCATE FOR
SRI. RAJESH SHETTIGAR., ADVOCATE FOR R10, R11 & R12;
SRI. HARSHITHA.S., ADVOCATE FOR R6 TO R9;
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WP No. 27349 of 2024
C/W WP No. 28076 of 2024
HC-KAR
R5-SERVED)
THIS WRIT PETITION IS FILED UNDER ARTICLES 226 & 227
OF THE CONSTITUTION OF INDIA PRAYING TO ISSUE A WRIT OF
CERTIORARI, THEREBY SETTING ASIDE THE ORDER DATED 02ND
SEPETEMBER, 2021, PASSED BY THE HON'BLE MINISTER FOR CO-
OPERATION IN REVISION PETITION/APPEAL NO.CO:32:CAP:2014, AS
PER ANNEXURE-N TO THE WRIT PETITION AND ETC.
THESE WRIT PETITIONS COMING ON FOR ORDERS AND
HAVING BEEN RESERVED FOR ORDERS ON 28.04.2025, THIS DAY,
THE COURT PRONOUNCED THE FOLLOWING:
CORAM: HON'BLE MR. JUSTICE SURAJ GOVINDARAJ
CAV ORDER
1. The Petitioners in W.P.No.27349/2024 are before this
court seeking for the following reliefs:
a. Issue a writ of certiorari, thereby setting aside the
order dated 02nd September, 2021 passed by the
Hon'ble Minister for Co-operation in Revision
Petition/Appeal No. CO:31:CAP:2014, as per
Annexure-X to this writ petition;
b. Issue a writ of certiorari, thereby setting aside the
order dated 03rd January, 2013 passed by R3 in
Appeal No.05/2012-13, as per Annexure-W to this
Writ Petition;
c. Issue a writ of certiorari, thereby setting aside the
awards dated 03rd January, 2004, passed in Dispute
Numbers 1049/2003-04 and 1050/2003-04, passed
by R2 as per Annexure-E and F respectively, to this
writ petition.
d. Issue a writ of certiorari, thereby setting aside the
auction sale dated 15th December, 2004 in CEP
NO.467/2004-05 and CEP NO. 468/2004-04 in
favour of R10 as per Annexure-G and H respectively.
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e. Issue a writ of certiorari, thereby setting aside the
confirmation of sale dated 01st September, 2005 as
per Annexure-J made in favour of R10;
f. Grant such other relief's as this Hon'ble Court would
be pleased to grant under the facts and
circumstances of the present case in the interest of
justice and equity.
2. The Petitioners in W.P.No.28076/2024 are before this
court seeking for the following reliefs:
a. Issue a writ of certiorari, thereby setting aside the
order dated 02nd September, 2021 passed by the
Hon'ble Minister for Co-operation in Revision
Petition/Appeal No. CO:32:CAP:2014, as per
Annexure-X to this writ petition;
b. Issue a writ of certiorari, thereby setting aside the
order dated 13th February, 2014 passed by R3 in
Appeal No.02/2013-14, as per Annexure-M to this
Writ Petition;
c. Issue a writ of certiorari, thereby setting aside the
awards dated 24th March, 2003, passed in Dispute
Numbers 412/2002-03, passed by R2 as per
Annexure-G, to this writ petition.
d. Issue a writ of certiorari, thereby setting aside the
auction sale dated 20th September, 2007 made in
Execution Petition No.CEP 39/2023-04;
e. Issue a writ of certiorari, thereby setting aside the
confirmation of sale dated 05th November, 2007 as
per Annexure-H made in favour of R10;
f. Grant such other relief's as this Hon'ble Court would
be pleased to grant under the facts and
circumstances of the present case in the interest of
justice and equity.
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Facts in WP No.27349/2024.
3. The Petitioners claim to be the children of late
Sadashiva Shetty. They claim that the lands in
survey No. 127/6, 130/14, 130/3, 127/3 and 126/4
of Shivalli village, Udupi Taluk and District belonged
to the ancestors of late Sadashiva Shetty on a
leasehold basis.
4. With the amendment to the Karnataka Land Reforms
Act 1971, the maternal uncle of late Sadashiva
Shetty, namely Sri. Ellappa Shetty had put forth a
claim for grant of occupancy rights, which was
granted on 12.10.1981. Subsequently, a deed of
partition came to be executed on 22.05.1990
between the family members, namely Ms Sunanda
Shetty and Sadashiva Shetty, whereunder the lands
bearing Survey Nos.130/3, 126/4, and 126/3,
measuring 2 acres 32 cents/guntas, were allotted to
Sadashiva Shetty, who had by then relocated himself
from Udupi to Surat in Gujarat. There was an error in
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the order of the Land Tribunal; by mistake, the land
in survey No.127/6 was mentioned, which was to be
replaced with Survey No.126/5.
5. A general power of attorney was executed on
15.04.1998 by late Sadashiva Shetty in favour of
Vamana Baliga in respect of the aforesaid property.
6. In pursuance of the aforesaid power of attorney, the
aforesaid Vamana Baliga, along with his business
associates, namely Vishwanath Baliga and Nagesh
Nayak [hereinafter referred to as 'borrowers'], are
stated to have availed a loan on 09.05.2000 from
Mangala Credit Cooperative Society-Respondent No.5
herein [hereinafter referred to as 'Mangala'].
Towards the said loan, the aforesaid properties
owned by Sadashiva Shetty were mortgaged by
relying upon the GPA.
7. On 02.08.2000, promissory notes were executed by
Vamana Baliga, Vishwanath Baliga and Nagesh
Nayak, in favour of Mangala. On 17.02.2003,
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Sadashiva Shetty expired. In the meantime, the
borrowers had defaulted in repaying their debts. On
03.01.2004, Mangala filed a proceeding under
Section 70 of the Karnataka Co-operative Societies
Act, 1959 [hereinafter referred to as the 'KCS Act
1959'], for recovery of the said moneys.
8. The Joint Registrar of Co-operative Societies
[hereinafter referred to as 'JRCS'] passed an award
in case No.1049 of 2003-04 and 1050 of 2003-04.
Execution petitions having been filed under Rule 30
and Sub-rule (1) and (2) of Rule 34 of the Karnataka
Corporative Societies Rules, 1960 [hereinafter
referred to as 'KCS Rules 1960'] on 03.01.2005
and 31.01.2005, auction notices were issued by
Mangala. An auction was held on 11.03.2005,
wherein Smt. Sarika Shetty, Respondent No.10, was
declared as the highest bidder [hereinafter referred
to as 'Purchaser'].
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9. On 07.05.2005, the borrowers questioned the
auction sale, which was rejected by an order dated
24.04.2006 by the Appellate Authority. Thereafter, a
revision petition was filed before the State
Government in CMW 64-CAP-2007, the State
Government confirmed the order of the Appellate
authority on 06.10.2010. Further, on 01.09.2005, a
sale confirmation had been issued in favour of the
purchaser with respect to the land bearing Survey
Nos.126/3, 126/4 and 126/5 of Shivalli Village,
Udupi. On 14.11.2007, a certificate of sale was
issued in favour of the purchaser. Then, on
07.08.2009, the purchaser executed two separate
deeds of sale, one in respect of lands under Survey
No.130/3 in favour of Respondent No.12-Rajnath
Nayak, and another as regards survey No.126/3, in
favour of Respondent No.11-Dr.Pradeep Kumar
Shetty, there being no order injuncting such sale
during the pendency of the appeal or revision.
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10. Claiming that the Petitioners only came to know
about this subsequently, they had filed a suit in
O.S.No.44/2009 seeking for declaratory and
injunctive reliefs, which came to be dismissed on
23.06.2015 on the ground that, what was challenged
were the orders which are subject matter of the
proceeding before the JRCS under the KCS Act, 1959
and before the Execution Court under the KCS Rules,
1960.
11. Appeal No.5 of 2012-13 was filed by the legal heirs
of late Sadashiva Shetty, which was rejected on
03.01.2013. The Petitioners also approached the
Hon'ble Minister for Cooperation by way of a revision
petition under Section 108 of the KCS ACT 1959,
which also came to be rejected by the order dated
02.09.2021 and in that background, the petitioner
had filed a writ petition in WP No.129/2024, which
came to be withdrawn by them on account of the
papers filed therein being flawed with liberty to file a
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fresh petition and in that background, WP
No.27349/2024 has been filed seeking for the
aforesaid reliefs.
Facts in WP 28076:
12. The facts in this matter are more or less similar,
except that in terms of the power of attorney
executed by Sadashiva Shetty in favor of Vamana
Baliga, the very same Vamana Baliga, Vishwanath
Baliga and Nagesh Nayak, who have been referred to
as borrowers had on 09.05.2000 availed a loan from
Janata Credit Co-operative Society [hereinafter
referred to as 'Janata'], and thereafter promissory
notes were executed by them.
13. Due to defaults in payment of the loan amount,
Janata, which is now taken over by Abhyudaya Co-
operative Bank Limited-Respondent No.5 [hereinafter
referred to as 'Janata/Abhyudaya'] filed a Petition
under Section 70 of the KCS Act for recovery of the
amount borrowed in Case No.412 of 2002-03,
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wherein an award came to be passed in favour of
Janata. On 15.12.2004, execution petitions were filed
under Sub-rule (1) and (2) of the KCS Rules 1960
and also on 03.01.2005 & 31.01.2005. Subsequently,
pre-auction notices were issued by the society.
14. The very same Smt.Sarika Shetty-purchaser, was
declared as the highest bidder for lands bearing
Survey Nos.126/5 and 130/3, totally measuring 1
acre 14 cents on 05.11.2007.
15. This sale and other auctions had also been
challenged in the aforesaid O.S.No.44/2009, the
details thereof having been stated with reference to
the facts in W.P.No.27349/2024. The petitioners had
filed an appeal No.02/2003, which came to be
dismissed. The review petition under Section 108 of
the KCS Act, 1959, having been filed before the
Hon'ble Minister for Cooperation, the same came to
be rejected vide order dated 02.09.2021. It is in that
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background that the Petitioners are before this Court
in W.P. No.28076/2024 seeking the aforesaid reliefs.
16. Sri. Ashok Haranahalli, learned Senior Counsel,
appearing for the Petitioners in both the matters,
would submit that,
16.1. The mortgage executed by the borrowers is
void ab initio. In this regard, he relies upon
Section 58 of the Transfer of Property Act 1982
[hereinafter referred to as 'TP Act']. Section 58
of the TP Act is reproduced hereunder for easy
reference:
58. Mortgage, mortgagor, mortgagee,
mortgage-money and mortgage- deed defined.
(a) A mortgage is the transfer of an interest in
specific immoveable property for the purpose of
securing the payment of money advanced or to be
advanced by way of loan, an existing or future debt,
or the performance of an engagement which may
give rise to a pecuniary liability.
The transferor is called a mortgagor, the transferee a
mortgagee; the principal money and interest of which
payment is secured for the time being arc called the
mortgage -money, and the instrument (if any) by
which the transfer is effected is called a mortgage -
deed.
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(b) Simple mortgage.-- Where, without delivering
possession of the mortgaged property, the mortgagor
binds himself personally to pay the mortgage-money,
and agrees, expressly or impliedly, that, in the event
of his failing to pay according to his contract, the
mortgagee shall have a right to cause the mortgaged
property to be sold and the proceeds of sale to be
applied, so far as may be necessary, in payment of
the mortgage-money, the transaction is called a
simple mortgage and the mortgagee a simple
mortgagee.
(c) Mortgage by conditional sale.-- Where the
mortgagor ostensibly sells the mortgaged property--
on condition that on default of payment of the
mortgage-money on a certain date the sale shall
become absolute, or on condition that on such
payment being made the sale shall become void, or
on condition that on such payment being made the
buyer shall transfer the property to the seller, the
transaction is called a mortgage by conditional sale
and the mortgagee a mortgagee by conditional sale:
[Provided that no such transaction shall be deemed
to be a mortgage, unless the condition is embodied
in the document which effects or purports to effect
the sale.]
(d) Usufructuary mortgage.-- Where the
mortgagor delivers possession 2[or expressly or by
implication binds himself to deliver possession] of the
mortgaged property to the mortgagee, and
authorises him to retain such possession until
payment of the mortgage -money, and to receive the
rents and profits accruing from the property 3[or any
part of such rents and profits and to appropriate the
same] in lieu of interest, or in payment of the
mortgage -money, or partly in lieu of interest 4[or]
partly in payment of the mortgage-money, the
transaction is called an usufructuary mortgage and
the mortgagee an usufructuary mortgagee.
(e) English mortgage.-- Where the mortgagor
binds himself to repay the mortgage-money on a
certain date, and transfers the mortgaged property
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absolutely to the mortgagee, but subject to a proviso
that he will re-transfer it to the mortgagor upon
payment of the mortgage-money as agreed, the
transaction is called an English mortgage.
(f) Mortgage by deposit of title-deeds.-- Where a
person in any of the following towns, namely, the
towns of Calcutta, Madras 6[and Bombay], 7*** and
in any other town which the 8[State Government
concerned] may, by notification in the Official
Gazette, specify in this behalf, delivers to a creditor
or his agent documents of title to immoveable
property, with intent to create a security thereon, the
transaction is called a mortgage by deposit of title-
deeds.
(g) Anomalous mortgage.-- A mortgage which is
not a simple mortgage, a mortgage by conditional
sale, an usufructuary mortgage, an English mortgage
or a mortgage by deposit of title-deeds within the
meaning of this section is called an anomalous
mortgage.]
16.2. He submits that a mortgage is a bipartite
agreement requiring the borrower to deposit his
interest in an immovable property with the
lender as security. In the present case, none of
the borrowers in the present matter had any
interest in the property. The only connection
that could be said to be held is by Vamana
Baliga, who is one of the borrowers, under a
power of attorney executed in his favour.
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16.3. The power of attorney not providing any
interest in the property, the question of
Vamana Baliga, along with the other borrowers,
having made available the property of
Sadashiva Shetty as security to Mangala or
Janata/Abhyudaya would not arise. There could
be no mortgage which could have been created
by the power of attorney for a loan borrowed by
the power of attorney without the Principal
Sadashiva Shetty having received any amounts.
16.4. He refers to Sections 182 and 183 of the Indian
Contract Act 1872 [hereinafter referred to as
'ICA 1872'], which are reproduced hereunder
for easy reference:
182."Agent" and "principal" defined.--An "agent"
is a person employed to do any act for another, or to
represent another in dealings with third persons. The
person for whom such act is done, or who is so
represented, is called the "principal".
183. Who may employ agent.--Any person who is
of the age of majority according to the law to which
he is subject, and who is of sound mind, may employ
an agent.
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16.5. By referring to the above provisions, he
submits that an agent is a person employed to
do any act for another or to represent another
in dealing with third persons. The principal is
the person for whom such an act is done or
who is so represented. Therefore, he submits
that in terms of Section 182, for Sadashiva
Shetty, to be deemed to be the principal, the
action of Vamana Baliga ought to have been in
the name of and for and on behalf of Sadashiva
Shetty, more particularly at the instruction of
Sadashiva Shetty, thus representing Sadashiva
Shetty in the present matter.
16.6. Vamana Baliga, being the power of attorney
and the other borrowers having borrowed
monies for their own businesses and not on
behalf of Sadashiva Shetty, hence the question
of there being any principal-agent relationship
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between Sadashiva Shetty, on the one hand,
and Vamana Baliga, on the other hand, let
alone the other borrowers, would not arise. The
borrowing, if any, could have been made only
in the name of Sadashiva Shetty, and the
borrowed money had to flow into the account of
Sadashiva Shetty, in the present case,
borrowing being made by the borrowers in their
individual capacity, a mortgage under a power
of attorney could not have been created by
them as regards the property of Sadashiva
Shetty.
16.7. He reiterates that all documents have been
signed only by Vamana Baliga and other
borrowers; no document has been signed by
Sadashiva Shetty in respect of the transaction
with Mangala or Janata/Abhyudaya.
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16.8. He relies upon Section 28 of the Negotiable
Instruments Act 1881, which is reproduced
hereunder for easy reference:
28. Liability of agent signing.--An agent who signs
his name to a promissory note, bill of exchange or
cheque without indicating thereon that he signs as
agent, or that he does not intend thereby to incur
personal responsibility, is liable personally on the
instrument, except to those who induced him to sign
upon the belief that the principal only would be held
liable.
16.9. By relying on Section 28, he submits that the
alleged agent-Vamana Baliga and the other
borrowers having executed a negotiable
instrument, namely a promissory note in their
own individual capacity without naming
Sadashiva Shetty and or stating that they were
executing the promissory note on behalf of
Sadashiva Shetty, they would themselves be
liable for any action on the said promissory
note, and no action could be taken against
Sadashiva Shetty on account of such
promissory note.
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16.10. He reiterates that all the borrowings having
occurred in the name of Vamana Baliga and
other borrowers, the charge, if any, not created
on behalf of Sadashiva Shetty, but on their own
behalf, Sadashiva Shetty would not be
responsible for any of the claims of Mangala or
Janata/Abhyudaya as regards the loan
borrowed by Vamana Baliga and other
borrowers.
16.11. A mortgage of a property having been created,
the property documents having been made
available to Mangala and Janata/Abhyudaya,
they were aware that the owner of the property
was Sadashiva Shetty, and yet the loan was
sanctioned in favour of Vamana Baliga and
other borrowers. Since Sadashiva Shetty has
not borrowed any money, the question of
Sadashiva Shetty being responsible for
servicing any loan would not at all arise.
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16.12. He relies upon Section 60 of the KCS Act 1959,
which is reproduced hereunder for easy
reference:
60. Restrictions on loans.
(1)A co-operative society shall not make a loan to any
person other than a member:
Provided that with the general or special sanction of
the Registrar, a co-operative society may make loans
to another co-operative society.
(2)Notwithstanding anything contained in sub-section
(1), a co-operative society may make a loan to a
depositor on the security of his deposit.
16.13. By relying on Section 60, he submits that a
cooperative society shall not lend any money to
a person other than a member. Sadashiva
Shetty not being a member, no loan could have
been or has been sanctioned in favour of
Sadashiva Shetty; however, it is Vamana Baliga
and other borrowers who are members, in
whose favour the loan had been sanctioned.
Thus, even according to law, no loan being
capable of being sanctioned in favour of
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Sadashiva Shetty by a cooperative
society/bank, loan having been sanctioned in
favor of Vamana Baliga and other borrowers,
the said cooperative banks could have only
proceeded against the borrowers and not as
regards the property of Sadashiva Shetty who
had neither mortgaged the property nor
borrowed any monies from the aforesaid bank.
In this regard, he relies on Section 33 of the
KCS Act 1959, which is reproduced hereunder
for easy reference:
33. Charge on land, owned by members or held
as tenants by members borrowing loans from
certain co-operative societies.
(1)Notwithstanding anything contained in this Act or
in any other law for the time being in force,-
(i)any person who makes an application to a co-
operative society of which he is a member for a loan
shall, if he owns any land, or holds any land as a
tenant make a declaration in the prescribed form.
Such declaration shall state that the applicant thereby
creates a charge on the land owned by him or on his
interest in the land held by him as tenant and
specified therein for the payment of the amount of the
loan which the society may make to the member in
pursuance of the application and for all future
advances, if any, required by him which the society
may make to the member as such member subject to
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such maximum as may be determined by the society
together with interest on such amount of the loan and
advances;
(ii)a declaration made under clause (i) may be varied
at any time by a member with the consent of the co-
operative society in favour of which such charge is
created;
(iii)no member shall alienate the whole or any part of
the land or any interest of his in the land specified in
the declaration made under clause (i) or varied under
clause (ii) until the whole amount borrowed by the
member together with interest thereon is paid in full:
Provided that standing crops on any such land may be
alienated with the previous permission in writing of
the society;
Provided further that it shall be lawful for a member to
mortgage such lands or any part thereof in favour of
the State Government or an [Agricultural and Rural
Development Bank] [Provisos inserted by Act 39 of
1975 w.e.f. 23.09.1975.]:
Provided also that if a part of the amount borrowed by
a member is paid, the co-operative society with the
approval of the financing bank to which it may be
indebted may, on an application from the member,
release from the charge created by the declaration
made under clause (i) or varied under clause (ii), such
part of the land or of the interest in the land specified
in the declaration as it may deem proper, with due
regard to the security for the balance of the amount of
loan outstanding from the member.]
(iv)any alienation made in contravention of the
provisions of clause (iii) shall be void;
(v)subject to the prior claims of the Government in
respect of land revenue or any money recoverable as
land revenue and the prior claims of any person in
whose favour alienation of the land or interest in such
land has been effected and duly registered, before the
date of the grant of the loan by the society, there shall
be a first charge in favour of the society on the land or
interest in the land specified in the declaration made
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under clause (i) or varied under clause (ii) for and to
the extent of the dues owing by him on account of the
loan.
(2)Notwithstanding anything contained in [the
Karnataka Land Revenue Act, 1964 (Karnataka Act 12
of 1964)] [Substituted by Act 39 of 1975 w.e.f.
23.09.1975.],-
(i)the record of rights maintained under the said Act
shall also include the particulars of every charge on
land or interest in land created under sub-section (1);
(ii)the co-operative society in whose favour a charge
is created under sub-section (1) shall communicate
the particulars of the charge, and when the loan is
discharged, the cessation of the charge, to the Deputy
Commissioner or the prescribed officer and he shall
cause necessary entries to be made in the record of
rights;
(iii)the State Government may, by notification in the
official Gazette, make rules to carry out the purposes
of clauses (i) and (ii).
Explanation. - For the purpose of this section,-
(1)'land' shall mean land to which [the Karnataka
Land Revenue Act, 1964 (Karnataka Act 12 of 1964)]
[Substituted by Act 39 of 1975 w.e.f. 23.09.1975.], is
applicable; and
(2)'co-operative society' shall mean a co-operative
society of which majority of the members are
agriculturists and which is,-
(a)a credit society the primary object of which is to
obtain credit for its members; or
(b)any other class of society specified in this behalf by
the State Government by general or special order.
16.14. By relying on Section 33, he submits that the
person who makes an application to a
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cooperative society of which he is a member for
a loan shall, if he owns the land, make a
declaration to that effect. If he holds the land
as a tenant, he has to make a declaration in the
prescribed form to such effect. While making
such a declaration, the borrower has to
categorically state the nature of the rights of
the borrower in the land over which such a
charge has been created.
16.15. In the present case, as per the documents
which have been produced by the bank, there is
no such declaration which has been made by
the borrowers. The mortgage has been created
as if the land belongs to the borrowers, which
has been accepted by the cooperative banks,
knowing fully well that the borrowers did not
own the land, they have not ascertained the
nature of interest of the borrowers in the said
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land, nor have they obtained a declaration in
that regard.
16.16. As such, Sri. Ashok Haranahalli submits that
the banks could not have proceeded against the
properties of Sadashiva Shetty, who had not
mortgaged the property or received any loan.
He therefore submits that neither the banks nor
the borrowers have complied with the
requirements of Clause (i) and Clause (ii) of
Subsection (1) of Section 33, and therefore the
banks cannot invoke any right in respect of the
property of Sadashiva Shetty.
16.17. He submits that Vamana Baliga, having acted
under a power of attorney, it is only the
authorised act on the part of the principal which
would bind the principal; the principal is not
vicariously responsible for the actions of the
power of attorney, and in that regard, he relies
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upon Section 230 of the ICA 1872, which is
reproduced hereunder for easy reference:
230.Agent cannot personally enforce, nor be
bound by, contracts on behalf of principal.--In the
absence of any contract to that effect, an agent cannot
personally enforce contracts entered into by him on
behalf of his principal, nor is he personally bound by
them.
Presumption of contract to contrary--Such a contract
shall be presumed to exist in the following cases:--
(1) where the contract is made by an agent for the sale
or purchase of goods for a merchant resident abroad;
(2) where the agent does not disclose the name of his
principal;
(3) where the principal, though disclosed, cannot be
sued.
16.18. By relying on Section 230, he submits that the
agent cannot personally enforce nor be bound
by contracts on behalf of the principal, where
the agent does not disclose the name of the
principal. He therefore submits that the
presumption under Section 230 would not be
applicable unless the name of the principal is
disclosed. If the principal remains undisclosed
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or in the case of a contract of an undisclosed
principal, such a principal cannot be made
liable. The contract or transaction can only be
said to be one which has been executed
between the agent and a third party in the
individual capacity of the agent and not as an
agent of a principal. This is clear from the fact
that in none of the documents Vamana Baliga
has represented himself to be an agent of
Sadashiva Shetty.
16.19. He further submits that despite the claim of
Janata/Abhyudaya being only Rs.12,51,049/-,
the property was sold for Rs.28,92,000/-,
whereas it could have been only Rs.12,51,049/,
which could have been sought to be
appropriated by Janata/Abhyudaya. Neither
Janata/Abhyudaya nor Vamana Baliga and the
borrowers have come forward to indicate what
has happened to the remaining money. If at all
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these monies have been given to Vamana
Baliga, that would also indicate that the
transaction was between Vamana Baliga and
Janata/Abhyudaya and not between Sadashiva
Shetty and Janata/Abhyudaya.
16.20. He makes similar submissions as regards
Mangala by stating that the amount due was
only Rs.8,54,016/- and the property was sold
for Rs.21,63,000/- and neither Mangala nor
Vamana Baliga have made it clear as to what
has happened to the balance amounts.
16.21. He submits that the appellate authority has not
discharged its obligation under Section 101 of
the KCS Act 1959. Section 101 is reproduced
hereunder for easy reference:
101. Execution of orders, etc.
Every order made by the Registrar under sub-section
[(1)] [Substituted by Act 19 of 1976 w.e.f.
20.01.1976.] of section 69 or under section 99, every
decision or award made under section 71, every order
made by the Liquidator under section 74 and every
order made by the Tribunal under sections 105 and
107, and every order made under section 106 or 108
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shall subject to any other provision of this Act be
binding on the person or co-operative society against
whom the order, decision or award has been obtained
or passed and shall, if not carried out,-
(a)on a certificate signed by the Registrar, or any
person authorized by him in this behalf, be deemed to
be a decree of a civil court and shall be executed in the
same manner as a decree of such court; or
(b)be executed according to the law and under the
rules for the time being in force for the recovery of
arrears of land revenue:
Provided that an application for the recovery in such
manner of any sum shall be made,-
(i)to the Deputy Commissioner and shall be
accompanied by a certificate signed by the Registrar or
by any person authorized by him in this behalf;
(ii)within twelve years from the date fixed, in the order,
decision or award, and if no such date is fixed, from the
date of the order, decision or award, as the case may
be; or
(c)be executed by the Registrar or any other person
subordinate to him empowered by the Registrar in this
behalf, by the attachment and sale or sale without
attachment of any property of the person or a co-
operative society against whom the order, decision or
award has been obtained or passed.
(2)[ (a) Notwithstanding anything contained in this Act
every question relating to the execution, discharge or
satisfaction of an order, decision or award referred to in
sub-section (1) or relating to the confirmation or
setting aside of a sale held in an execution of such
order, decision or award in pursuance of clause (c) of
sub-section (1), or relating to any claim or objection to
an attachment of any property made under section 103
or in execution in pursuance of the said clause (c), shall
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be determined, by an order of the Registrar or any
other person subordinate to him, empowered by the
Registrar under the said clause (c) (hereinafter in this
section referred to as "authorized person") before
whom such question arises.
(b)(i)Where any claim is preferred against, or any
objection is made to, the attachment of any property
made under section 103 or in execution in pursuance of
clause (c) of sub-section (1), on the ground that the
said property is not liable to such attachment, the
Registrar or the authorized person shall proceed to
investigate the claim or objection:
Provided that where the Registrar or the authorized
person considers that the claim or objection was
designedly or unnecessarily delayed, he shall make an
order refusing such investigation;
(ii)Where, upon the said investigation, the Registrar or
the authorized person is satisfied that for the reason
stated in the claim or objection, such property was not,
at the date of the attachment, in the possession of the
person or co-operative society against whom the order,
decision or award has been obtained or passed
(hereinafter in this section referred to as the
"judgment-debtor") or of some person in trust for the
judgement-debtor or in the occupancy of a tenant or
other person paying rent to the judgement-debtor or
that, being in the possession of the judgement-debtor
at the said date, it was so in his possession, not in his
own account or as his own property, but on account of
or in trust for some other person, or partly on his own
account and partly on account of some other person,
the Registrar or the authorized person shall make an
order releasing the property, wholly or to such extent
as he thinks fit, from attachment.
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(iii)Where the Registrar or the authorized person is
satisfied that the property was, on the said date, in the
possession of the judgement-debtor as his own
property and not on account of any other person, or
was in the occupancy of a tenant or other person
paying rent to him, the Registrar or the authorized
person shall disallow the claim;(iv)Where a claim or an
objection is preferred, the party against whom an order
is made may within a period of one year from the date
of such order, institute a suit in a civil court to establish
the right which he claims to the property in dispute;
but, subject to the result of such suit, if any, the order
of the Registrar or the authorized person shall be
conclusive.]
16.22. His submission is that the possession of the
property has been held in trust by Vamana
Baliga, and the said possession not being held
in the individual capacity of Vamana Baliga or
any of the borrowers, the appellate authority
ought to have verified and taken note of this
fact and allowed the appeal filed by the
Petitioners.
16.23. Similar is the submission made as regards the
orders passed by the Revisional Authority under
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Section 108, Section 108 of the KCS Act is
reproduced hereunder for easy reference:
108. Powers of revision of State Government.
- [Subject to the provisions of section 108A, the State
Government] [Substituted by Act 39 of 1975 w.e.f.
23.09.1975.] suo motu at any time, and, on application
of any person aggrieved, within a period of six months
from the date of any order, may call for and examine
the record of any case or proceedings of any officer
subordinate to it except those subject to appeal or
revision by the Tribunal or those in respect of which an
appeal has been made to the State Government under
section 106, and the State Government after such
enquiry as it deems fit is satisfied that the order of the
officer is contrary to law and has resulted in a
miscarriage of justice, pass such orders thereon as the
State Government deems just:
Provided that no order shall be made to the prejudice of
any person under this section unless he has been given
a reasonable opportunity of being heard.
16.24. He submits that the Revisional Authority also
ought to have taken into consideration the
above factors, which have not been so taken.
Merely because there is a mortgage created by
a power of attorney holder, the same cannot
bind the principal and his legal representatives
now. Moreso when the principal never
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authorised the mortgage of the land in the
individual capacity of the power of attorney, no
loan having been borrowed in the name of the
principal, the question of the principal's land
being sold on account of default by the agent-
borrower would not arise.
16.25. He relies upon the decision of the Hon'ble Apex
Court in Bharati Cellular Limited (Now
Bharati Airtel Limited) -v- Assistant
Commissioner of Income Tax1, more
particularly, para nos. 8 and 9 thereof, which
are reproduced hereunder for easy reference:
8. Agency is therefore a triangular relationship between
the principal, agent and the third party. In order to
understand this relationship, one has to examine the
inter se relationship between the principal and the third
party and the agent and the third party. When we
examine whether a legal relationship of a principal and
agent exists, the following factors/aspects should be
taken into consideration:
(a) The essential characteristic of an agent is the legal
power vested with the agent to alter his principal's legal
relationship with a third party and the principal's co-
relative liability to have his relations altered.
[2024] 02 SCR 1001
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(b) As the agent acts on behalf of the principal, one of
the prime elements of the relationship is the exercise of
a degree of control by the principal over the conduct of
the activities of the agent. This degree of control is less
than the control exercised by the master on the
servant, and is different from the rights and obligations
in case of principal to principal and independent
contractor relationship.
(c) The task entrusted by the principal to the agent
should result in a fiduciary relationship. The fiduciary
relationship is the manifestation of consent by one
person to another to act on his or her behalf and
subject to his or her control, and the reciprocal consent
by the other to do so.
(d) As the business done by the agent is on the
principal's account, the agent is liable to render
accounts thereof to the principal. An agent is entitled to
remuneration from the principal for the work he
performs for the principal.
9. At this stage, three other relevant
aspects/considerations should be noted. First is the
difference between 'power' and 'authority'. The two
terms though connected, are not synonymous.
Authority refers to a factual position, that is, the terms
of contract between the two parties. The power of the
agent however, is not, strictly speaking, conferred by
the contract or by the principal but by the law of
agency. When a person gives authority to another
person to do the acts which bring the law of agency
into play, then, the law vests power with the agent to
affect the principal's legal relationship with the third
parties. The extent and existence of the power with the
agent is determined by public policy. The authority, as
observed above, refers to the factual situation. The
second consideration is that the primary task of an
agent is to enter into contracts on behalf of his
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principal, or to dispose of his principal's property. The
factors mentioned in clauses (b) to (d) in paragraph 8
above flow, and are indicia of this primary task. Clauses
(b) to (d) of paragraph 8 are useful as tests or
standards to examine the true nature or character of
the relationship. Lastly, the substance of the
relationship between the parties, notwithstanding the
nomenclature given by the parties to the relationship, is
of primary importance. The true nature of the
relationship is examined by reference to the functions,
responsibility and obligations of the so-called agent to
the principal and to the third parties.
16.26. By relying on Bharati Cellular's case, he
submits that the agent acts in a fiduciary
capacity and, as such, the agent is required to
act in the name of the principal, so that it is the
principal's legal relationship with the third party
that is affected by such action. There being no
such legal relationship created between the
principal, Sadashiva Shetty, and Mangala or
Janata/Abhyudaya, there is no binding contract
or agreement which has been entered into by
Vamana Baliga on behalf of Sadashiva Shetty
with the said banks; therefore, there is no
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action taken by Vamana Baliga on behalf of
Sadashiva Shetty.
16.27. He relies upon the decision of the Hon'ble
Madras High Court in Sivagurunatha Pillai -
v- Padmavathi Ammai and another2, more
particularly Para No.28 thereof, which is
reproduced hereunder for easy reference:
28. An Agent who signs his name to a promissory
note, bill of exchange or cheque without indicating
thereon that he signs as agent or that he does not
intend to incur personal responsibility, is liable
personally on the instrument, except to those who
induced him to sign upon the belief that the principal
only would be held liable.
16.28. By relying on Sivagurunatha Pillai's case, he
submits that if an agent were to sign his name
on a promissory note, bill of exchange or
cheque without indicating that he signs as an
agent or that he does not intend to incur
personal responsibility, the agent shall be
personally responsible and liable on the
instrument except to those who induced him to
AIR 1941 MADRAS 417
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sign upon the belief that the principal only
would be held liable. In this case, he submits
that the banks, being clearly aware that the
property belonged to Sadashiva Shetty, could
not have lent monies to Vamana Baliga and
other borrowers based on a charge created on
Sadashiva Shetty's property. Since the bank
has lent the money without Sadashiva Shetty
being a party to the said transaction, and it is
Vamana Baliga and other borrowers who have
signed the promissory note, the bank could
only proceed against Vamana Baliga and other
borrowers.
16.29. He relies upon the decision of this Court in Shri
J. Ramaraj S/o Sri.Jyothi Raj vs Iliyaz
Khan S/o Janab Mohammed Ismail3, more
particularly para nos. 12 to 19 thereof, which
are reproduced hereunder for easy reference:
ILR 2006 KAR 4672
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12. In so far as discharge of initial burden on the part
of the complainant is concerned, he has specifically
stated as to supply of potatoes on various dates but,
the details of the same has not been furnished which is
the only grouse according to the petitioner. But,
according to practise, as a Commission Agent when the
complainant used to supply the goods through the
possession of the farmers, on commission basis and if
it is kept in cold storage and supplied to the accused
directly as noted by the learned Magistrate, there
would not be any record available in the APMC for
having supplied the potatoes to the petitioner. If really
the petitioner was serious, he would have sought the
complainant to produce the records in this regard and
the account books maintained by him nor has he
himself produced any account books maintained by
him in his regard. It appears as an alternative defense,
petitioner has tried to shift the burden stating that it is
the company which is the Principal and the petitioner is
only a commission agent and relying upon S. 28 of the
Negotiable Instruments Act, contended that the
principal is liable and not the commission agent. In this
regard, the petitioner has also sought the assistance of
various provisions under the Negotiable Instruments
Act to stand by his contention that primarily the
principal is liable and not the agent. Even as per S. 141
of the Negotiable Instruments Act, the petitioner being
an agent who had transacted the business on behalf of
the company and much less he is signatory to the
cheque renders himself liable and shall be liable to be
proceeded against. It is well settled that company
alone or the person in charge of business of company
alone or both can be prosecuted for offence under S.
138 of the Negotiable Instruments Act.
13. In so far as contract of agency is concerned, might
be the principal is liable for the act of the agent. S. 222
of the Indian Contract Act, 1872 provides that the
agent can be indemnified against consequences of all
lawful acts and for which the principal is liable. If the
agent wants to take the shelter that it is the principal
who is liable and not the agent and of course, for his
acts or breach committed by him, the principal would
be liable, but it does not necessarily convey the
meaning that primarily the principal alone could be
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proceeded with and not against the agent. More over,
there are certain obligations cast upon the agent as
duties towards the principal. As is well settled, the
principal is liable for all lawful acts of the agent.
Similarly, the agent is bound to render proper accounts
to his principal and to communicate to the principal
and he has to use all reasonable diligence in doing so.
It appears, nowhere the petitioner has placed any
material nor brought to the notice of the complainant
that the transaction is directly between the company
and the complainant and that the petitioner has got
nothing to do with the transactions. Even if it is taken
as a fact that petitioner has acted as an agent of the
company of the principal, then necessarily the issuance
of notice to this petitioner by the complainant and
failure on the part of this petitioner to reply to the
same or not intimating the complainant the fact that
the primary liability is on the principal for the amount
due if any, will estopp the petitioner from taking up
such a contention that he is not liable and rather the
principal is liable. It really the petitioner has acted on
behalf of the principal as an agent, as matter of
indemnification, ultimately it is for the petitioner to
step into the shoes of the complainant to recover the
amount from the principal.
14. When the petitioner did not avail the opportunity
of calling for the records nor produced the records from
his end to show that no transcation has taken place
and when he could not duly discharge the burden, the
presumption under S. 139 of the Negotiable
Instruments Act goes against the petitioner and
presumption stand unrebutted.
15. It is seen, the respect of three cheques issued, the
Trial Court has only convicted and sentenced the
petitioner to pay the amount of the cheque and a fine
of Rs. 3,000/- each and to undergo simple
imprisonment for one year each of these cases. The
transaction is of the year 2001 and now we are in the
fag end of 2006. From a perusal of the impugned order
passed by the Courts below and also on hearing the
arguments advanced by the counsel for the respective
parties and on going through the ration laid down in
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various decisions cited by the petitioner's counsel, I am
of the view that those decisions are of no help to the
petitioner. Even S. 28 of the Negotiable Instruments
Act clearly lays down the liability of the maker of the
instrument. In the case on hand, the drawer of the
cheque is not the principal, the petitioner has drawn
the cheque and that part cannot be disputed. As rightly
noted by both the Courts below, no element of
coercion is established by the petitioner against the
complainant nor is it even brought to the notice of the
complainant that he is only acting as an agent on
behalf of the company. No such endorsement is being
made by him nor replied in the legal notice issued in
this regard.
16. In the ration laid down in the case of M.
Mahadevan Pillai v. Smt. Vedavalli Ammal [AIR 1992
SC 183.] , the Madras High Court has held thus:
Knowledge of agency to other party does not free the
agent from liability, if he does not disclose on the
instrument that he signed as an agent. The principle is
that unless the maker has clearly affixed his signature
to the instrument as agent or on account of or on
behalf of a principal whose name is disclosed or, unless
those he has signed unconditionally, he has
unequivocally and clearly disclaimed in some portion of
the document his own responsibility and mentions the
name of the person really liable, he cannot escape
liability.
17. Further, S. 28 of the Negotiable Instruments Act
reads thus:
Liability of agent signing: An agent who signs his
name to a promissory note, bill of exchange or cheque
without indicating thereon that he signs as agent, or
that he does not intend thereby to incur personal
responsibility, is liable personally on the instrument,
except to those who induced him to sign upon the
belief that the principal only would be held liable.
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18. The above ratio as well as the legal position makes
it clear that the agent will be liable in the absence of
any such endorsement being made and also when he
fails to establish that he has been induced to sign the
cheques on the assurance that the complainant will
only proceed against the principal and not against the
petitioner/agent. The finding of both the Courts below
that the petitioner did not discharge his responsibility
by way of rebuttal evidence cannot be faulted with.
19. For the foregoing reasons, as I do not find any
illegality in the impugned order of conviction passed by
both the Courts below, appeals are dismissed.
However, in the interest of justice, the order of
sentence to undergo imprisonment for one year in each
of these case would be modified and the same shall not
be executed if the petitioner pays the amount within
three months from the date of receipts of the copy of
this order, while maintaining the order of the learned
Magistrate as well as the Sessions Judge regarding
compensation/fine amount imposed. In the event, the
amount is deposited or paid to the complainant within
three months from the date of receipt of this order,
there shall not be any order to execute the sentence of
imprisonment and it shall be treated as deleted or
modified or else the petitioner may have to suffer the
order in its entirety.
16.30. By relying on Ram Raj's case, he submits that
the principal would be liable only if the agent
had categorically indicated that he has acted on
behalf of the principal, where the agent has
acted on his own without indicating that he is
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acting on behalf of a principal, not intimating
the other party that the transaction is being
entered into on behalf of the principal, the
principal cannot be held to be responsible and it
would be the agent alone who would be
responsible for the same.
16.31. On the basis of all the above submissions,
Sri.Ashok Haranahalli, learned senior counsel,
submits that the petitions are required to be
allowed and the reliefs sought are granted.
17. Shri. Jayakumar S. Patil, learned Senior counsel
appearing for Respondent No.10-purchaser Sarika
Shetty submits that;
17.1. Akku Shetty, Anthu Shetty, Durgi Shetty,
Thimmappa Shetty, Kokra Shetty and Ellappa
Shetty are brothers and sisters. It is Ellappa
Shetty who had filed the proceedings before the
Land Tribunal on behalf of the family.
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17.2. Akku Shetty expired without marrying, Anthu
Shetty had three children, namely Sadashiva
Shetty, Bachcha Shetty, Ammanni Shetty.
Smt.Durgi Shetty had five children, namely
Usha, Chandra, Vijaya, Sushma and Sulochana.
Kukra Shetty expired without any legal heirs.
Timmappa Shetty expired leaving behind his
wife Sundari Shetty. Ellappa Shetty did not
have any legal heirs.
17.3. He submits that the aforesaid Sundari Shetty
was represented by a power of attorney holder
Ratnakar Shetty who is none other than the
husband of the purchaser Sarika Shetty.
17.4. The Land Tribunal had granted occupancy rights
cents, survey No. 126/4 measuring 96 cents,
Survey no. 130/3 measuring 60 cents and
survey no. 126/5 measuring 54 cents, totally
measuring 2 acres 86 cents of Shivalli Village,
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Udupi Taluk in the name of Ellapa Shetty, son
of Suru Shetty.
17.5. As aforementioned, Anthu Shetty, Akku Shetty
and Kukra Shetty expired without any legal
heirs. Hence, it was Antu Shetty, Durgi Shetty
and Timmappa Shetty who became the owners
of the properties of the Aliya Santhana family,
the present family being governed by 'Alia
Santhana' law, being a matrilineal system.
17.6. A partition was entered into on 22.05.1990 and
registered as document No.241/1990 between
Sadashiva Shetty and Sundari Shetty, the other
children of Antu Shetty, namely Bachcha Shetty
and Ammani Shetty, were not made parties to
the said partition.
17.7. Thereafter, Sadashiva Shetty on 24.12.1994
executed an agreement of sale of the properties
which came to his share, namely survey No.
126/3 measuring 76 cents, 126/4 measuring 96
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cents, 130/3 measuring 60 cents, 126/5
measuring 54 cents in favour of Vamana Baliga
for a sum of Rs.8,20,000/- of which, a sum of
Rs.5,00,000/- was paid on 24.12.1994,
Rs.2,20,000/- was paid on 19.01.1995 and
Rs.1,00,000/- was paid on 8.02.1995. Thus, he
submits that the entire consideration agreed
upon in the agreement of sale dated at
24.12.1994 had been paid by Vamana Baliga to
Sadashiva Shetty during his lifetime.
17.8. He submits that Petitioner No.4-Suresh Shetty
is also one of the witnesses to the agreement of
sale and therefore is categorically aware of the
agreement of sale, the rights created
thereunder and the effect of the agreement of
sale coupled with the power of attorney, which
has been suppressed in the present
proceedings.
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17.9. He submits that on 08.02.1995, a Will had also
been executed by Sadashiva Shetty in respect
of the aforesaid properties, bequeathing the
properties to Vamana Baliga. There is no other
Will subsequent to 08.02.1995, which has been
placed on record indicating otherwise and or of
Sadashiva Shetty having revoked the Will dated
08.02.1995. Thus, he submits that even under
that Will, Vamana Baliga would be entitled to
the properties as a legatee.
17.10. It is in pursuance thereof that on 14.02.1995,
the subject GPA was executed by Sadashiva
Shetty in favor of Vamana Baliga, wherein
Vamana Baliga was provided with right to sell,
mortgage, etc. This being so, for the reason
that an agreement of sale had been executed,
whereunder the entire consideration had been
received, the sale deed could not be executed
since it was within the prohibited period from
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the date of the passing of the order of the Land
Tribunal and it is in that background that a Will
has been executed by Sadashiva Shetty in
favour of Vamana Baliga, as also a power of
attorney has been executed by Sadashiva
Shetty in favor of Vamana Baliga.
17.11. The transaction was for Vamana Baliga to
purchase the entire holding of the family and as
such, Bachcha Shetty's wife Shusheela Shetty
and her children, namely Pramila, Vidya,
Santosh, Harish and Bharat, had on 13.03.1995
executed an agreement of sale of their
properties in favor of Vamana Baliga for a
consideration of Rs.3,60,000/-, out of which
Rs.60,000/- was paid on 13.03.1995,
Rs.1,00,000/- on 19.05.1995, Rs.90,000/- on
16.06.1995, Rs.1,10,000/- on 23.08.1995.
Thus, the entire consideration of Rs.3,60,000/-
had been paid in the year 1995 itself.
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Thereafter, the said Susheela Shetty and her
children executed a GPA in favour of Vamana
Baliga on 26.04.2000, empowering him to sell,
mortgage, etc., their properties.
17.12. Similarly, Ammanni Shetty and her children
Sabita, Udaya, Anita, Sharada and Shantha
executed an agreement of sale on 26.12.1994
to sell their property in favour of Vamana Baliga
for a sum of Rs.7,50,000/- out of which an
amount of Rs.1,00,000/- was paid on
26.12.1994, Rs.1,00,000/- on 13.01.1995,
Rs.1,50,000/- on 06.09.1995, Rs.4,00,000/- on
13.06.1997. Thus, the entire sum of
Rs.7,50,000/- had been paid by 1997. On
14.02.1996, a GPA was executed by Sabita and
Shanta in favour of Vamana Baliga. Another
power of attorney was executed on 14.02.1996
by Ammani, Udaya, Anita and Sharada in
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favour of Vamana Baliga, empowering him to
sell, mortgage, etc.
17.13. Sunanda Shetty had also executed an
agreement of sale on 14.11.1997 on behalf of
herself and her family to sell her right in the
property for a sum of Rs.4,00,000/- which was
paid on 04.11.1997 itself. A GPA came to be
executed by Sunanda, Usha, Chandra, Vijaya,
Pushpa, Sulochana in favour of Vamana Baliga
on 26.4.2000 in respect of those properties
authorising Vamana Baliga to sell mortgage,
etc.
17.14. All these transactions were contemporaneous,
which have not been brought to the knowledge
of this Court by the Petitioners. Only document
which has been placed on record by the
petitioners is the power of attorney without
referring to the agreement of sale and the Will
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executed by Sadashiva Shetty in favor of
Vamana Baliga.
17.15. The other agreements of sale and GPA
executed by the other family members as
regards the properties of the family, the receipt
of valuable consideration of Rs.8,20,000/- by
Sadashiva Shetty, Rs.3,60,000/- by Sushila
Shetty and family, Rs.7,50,000/- by Ammani
Shetty and her family, Rs.4,00,000/- by
Sunanda Shetty and her family, he submits that
the transactions having occurred in the years
between 1994 to 1997, the entire family
wanted to sell the property belonging to the
family in favor of Vamana Baliga and as
aforesaid it is only on account of the prohibitory
period, post the order of the Land Tribunal that
the sale deed could not be executed and
registered and it is in that background, the
power of attorney had been executed, the
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property was put in possession of by Vamana
Baliga.
17.16. His submission, therefore, is that the entire sale
consideration having been received by the
owners, the agreements of sale having been
entered into and executed, so also powers of
attorneys being executed, the powers of
attorney is one coupled with interest and as
such, the power of attornies being entitled to
execute sale deeds, mortgage deeds, etc.,
there was no need to do so in the name of
Sadashiva Shetty and others.
17.17. Vamana Baliga having all right, title and
interest in the property, there was only a
formal registration of sale deed which was
required to be made. The family members
having lost their right in the properties on
execution of the agreement of sale, receipt of
the entire consideration and handing over of
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possession, had no subsisting right when a loan
was borrowed by Vamana Baliga and others
from Mangala, Janata/Abhyudaya. The
agreement of sale, the power of attorney
continues to be valid and binding between the
parties and the same cannot be terminated.
17.18. He submitted that the claim of the Petitioner is
hopelessly barred by limitation, delay and
latches as also acquiescence.
17.19. In furtherance of the GPA which had been
entered, executed, mutation entry was made in
the RTCs which had MR No.302 of 2000-2001,
way back on 1999-2000. The said RTC being a
public document, being to the knowledge of one
and all including the petitioners from the year
2000, neither Sadashiva Shetty nor the
petitioners challenged the same or took any
action.
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17.20. Firstly, therefore, there is an acquiescence on
their part that the action taken by Vamana
Baliga is as per the agreement of sale and
power of attorney. Secondly, since no action
has been taken from the year 2000, no action
could be taken, challenging all these aspects.
No suit could have been filed challenging all
these aspects in the year 2009 nor could any
appeal be filed in the years 2013-14 and
revision petition in the year 2021. The appeal
had been rejected in the year 2014, thus he
submits that there is a delay at each stage.
17.21. The agreement of sale and GPA had been
executed in the year 1995, loan had been
availed in the year 2000, entries had been
made in the RTCs in the year 2000,
Proceedings had been initiated under the KCS
Act in the year 2000-2001, Decree having been
passed in the year 2003, Sale having been
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confirmed in the year 2007, the suit was filed in
the year 2009, an appeal was filed in the year
2013, which came to be dismissed on
13.02.2014.
17.22. Revision petition was filed on later, which came
to be dismissed on 2.9.2021. Earlier writ
petitions were filed on 14.12.2023, which was
withdrawn on 5.8.2024 and the present writ
petitions were filed on 17.9.2024.
17.23. His submission is that the purchaser has acted
bonafide, has participated in auction conducted,
has been declared as the highest bidder, and
has made payments of the said amounts,
therefore no fault can be found with the
purchaser, nor can the purchaser's rights be
sought to be challenged in the manner as done.
The auction having been conducted publicly to
the knowledge of one and all, the auction notice
having been published in the daily newspaper,
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auction conducted on 11.03.2005, the suit was
filed in the year 2009 after lapse of four years,
the said suit is barred by Article 126, 128, 129
or under the Residuary Article 137 of the
Limitation Act. The said Articles are reproduced
hereunder for easy reference:
Sl. Description of Period of Time from
No. suit limitation which period
begins to run
126. For the payment Thirty The date of the
of the amount of days. decree.
a decree by
instalments.
128. For possession by Thirty The date of the
one dispossessed days. dispossession.
of immovable
property and
disputing the
right of the
decree-holder or
purchaser at a
sale in execution
of a decree.
129. For possession Thirty The date of
after removing days. resistance or
resistance or obstruction.
obstruction to
delivery of
possession of
immovable
property decreed
or sold in
execution of a
decree.
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137. Any other Three When the right
application for years. to apply accrues.
which no period
of limitation is
provided
elsewhere in this
Division.
17.24. The said suit having been dismissed on
23.06.2012, RFA No. 1126 of 2016 was filed on
05.07.2016 which is after a lapse of 4 years
from the date of judgement in OS No. 44 of
2009, which is barred by Article 116 of the
Limitation Act, the said article is reproduced
hereunder for easy reference:
Sl. Description of Period of Time from
No. suit limitation which
period
begins to
run
116 Under the Code of
Civil Procedure,
1908 (5 of 1908)--
(a) to a High Court
from any
decree or order. Ninety Days
Ninety days. The
date of the decree The date of
or order. the decree
or order.
(b) to any other
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court from any Thirty Days
decree or order.
The date of
the decree
or order.
17.25. He submits that the sale confirmation dated
01.09.2005 was challenged before the Deputy
Registrar Co-operative Societies, Udupi in
appeal No. 5 of 2012-13 on 3.1.2013 after
more than 7 years which is also barred by
limitation. The revision petition in revision
appeal No.31 of 2014 was dismissed on
02.09.2021. Earlier writ petition in WP No.129
of 2024 having been withdrawn, he submits
that the entire proceedings which have been
filed are only to harass the purchaser Sarika
Shetty, who is a bona fide purchaser for value.
17.26. The Petitioners have been taking out frivolous
paper publication as regards the developments
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being carried out by her by way of a joint
development agreement. Sarika Shetty had
entered into a partnership with Jerry Vincent
Dias and others in forming Mandavi
infrastructure for construction of buildings, the
launch ceremony took place on 2.3.2024, the
partnership deed had been entered into on
13.7.2022, the aforesaid properties were
brought in as capital by Sarika Shetty and a
Mall has been constructed on the said property
which has been sold to several persons who are
in occupation of the same and carrying on their
business.
17.27. The present petition was filed when the
remaining property was sought to be developed
as a residential apartment complex. Initially, an
order of restraint from selling the property was
passed by this court in WP 27349/2024,
pursuant to which the petitioners published
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various notifications in newspapers, totally
Numbering 11 (eleven) trying to mislead the
purchasers and threaten the purchasers with
litigation.
17.28. Thus, he submits that the conduct of the
petitioners has only been to harass the
purchaser and the developers to try and force
the purchaser and developers to accede to the
unlawful demands of the Petitioners. This
conduct of the Petitioners would disentitle them
from any equitable consideration in the present
writ petition.
17.29. He submits that one of the family members has
not been made party to the present
proceedings, namely Satish Sadashiva Shetty.
As such, the present petition is defective for
non-joinder or necessary parties.
17.30. His submission is that the loan has been availed
of by Vamana Baliga in his personal capacity.
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Vamana Baliga having rights in terms of the
agreement of sale and power of attorney being
entitled to mortgage the property has
mortgaged the same. There is a separate
memorandum of agreement which has been
executed which has not been produced by the
petitioners along with the petition, wherein
Vamana Baliga has acted as an agent of
Sadashiva Shetty and his family members.
17.31. There is suppression of material fact by the
petitioners. Vamana Baliga being entitled to
mortgage the properties under the power of
attorney has exercised his rights and powers
under the power of attorney in mortgaging the
property by providing it as security to the loan
borrowed by Vamana Baliga.
17.32. There is no requirement for the loan amount to
have been credited to the account of Sadashiva
Shetty. There is no such embargo under the
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power of attorney. All these actions, having
taken place long ago have not been challenged
in time. The entries made in the RTCs have not
been challenged. Vamana Baliga, being entitled
to act on the power of attorney, having acted
thereon, in the name of Sadashiva Shetty, the
said power of attorney continuing to be in force,
no fault can be found with the actions of
Vamana Baliga.
17.33. He relies on Section 202 of the ICA 1872, which
is reproduced hereunder for easy reference:
202. Termination of agency, where agent has an
interest in subject-matter.--
Where the agent has himself an interest in the property
which forms the subject-matter of the agency, the
agency cannot, in the absence of an express contract,
be terminated to the prejudice of such interest.
Illustrations
(a)A gives authority to B to sell A's land, and to pay
himself, out of the proceeds, the debts due to him from
A. A cannot revoke this authority, nor can it be
terminated by his insanity or death.
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(b)A consigns 1,000 bales of cotton to B, who has
made advances to him on such cotton, and desires B to
sell the cotton, and to repay himself out of the price the
amount of his own advances. A cannot revoke this
authority, nor is it terminated by his insanity or death.
17.34. By referring to Section 202, he submits that
there is an agency, created in favour of
Vamana Baliga which is coupled with interest,
the entire consideration having been paid,
Vamana Baliga having been put in possession,
a power of attorney has been executed in his
favour, the transaction is between the same
parties under two or more documents, the
power of attorney being coupled with interest,
neither the agreement nor the power of
attorney has been terminated, the action taken
thereon cannot be questioned in the manner as
done.
17.35. In this regard he relies upon the decision of the
Hon'ble Apex Court in S.Chattanatha
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Karayalar -vs- The Central Bank of India
Ltd.,4, more particularly, para no. 3 thereof
which is reproduced hereunder for easy
reference:
3. The first question presented for determination in
this case is whether the status of the 3rd defendant in
regard to be transaction of overdraft account is that of
a surety or of a co-obligant. It was argued by Mr Desai
on behalf of the appellant that the High Court has
misconstrued the contents of Exs. A and B in holding
that the 3rd defendant has undertaken the liability as a
co-obligant. It was submitted that there was an
integrated transaction constituted by the various
documents -- Exs. A, B and G executed between the
parties on the same day and the legal effect of the
documents was to confer on the 3rd defendant the
status of a surety an not of a co-obligant. In our
opinion, the argument put forward on behalf of the
appellant is well-founded and must be accepted as
correct. It is true that in the promissory note -- Ex. B
all the three defendants have "jointly and severally
promised to pay Central Bank of India Ltd. or order a
sum of Rs 4 lakhs only together with interest on such
sum from this date", but the transaction between the
parties is contained not merely in the promissory note
-- Ex. B -- but also in the letter of continuity dated
November 26, 1946--Ex. A which was sent by the
defendants to the plaintiff Bank along with promissory
note -- Ex. B on the same date. Their is another
document executed by Defendant 1 on November 26,
1946 -- Ex. G -- Hypothecation agreement. The
principle is well established that if the transaction is
contained in more than one document between the
AIR 1965 SC 1856
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same parties they must be read and interpreted
together and they have the same legal effect for all
purposes as if they are one document. In Manks v.
Whiteley [1912, 1 Ch 735 at p 754] Moulton, L.J.
stated:
"Where several deeds form part of one transaction and
are contemporaneously executed they have the same
effect for all purposes such as are relevant to this case
as if they were one deed. Each is executed on the faith
of all the others being executed also and is intended to
speak only as part of the one transaction, and if one is
seeking to make equities apply to the parties they
must be equities arising out of the transaction as a
whole."
It should be noted in the present case that the
promissory note -- Ex. B -- was enclosed by the
defendants along with the letter of continuity -- Ex. A
before sending it to the plaintiff Bank. In the letter --
Ex. A it is clearly stated that the promissory note Ex. B
was given to the plaintiff Bank "as security for the
repayment of any overdraft to the extent of Rs
4,00,000". It is further stated in Ex. A that "the said
promissory note is to be a security to you for the
repayment of the ultimate balance or sum remaining
unpaid on the overdraft". In the hypothecation
agreement -- Ex. G it is stated that the plaintiff Bank
has agreed to open a cash credit account to the extent
of Rs 4 lakhs at the request of Cashew Products
Corporation Ltd., Quilon. According to para 15 of the
hypothecation agreement it operates as a security for
the balance due to the plaintiff Bank on the cash credit
account. Para 12 of the hypothecation agreement
states that if the net sum realised be insufficient to
cover the balance due to the plaintiff Bank, Defendant
1 should pay the balance of the account on production
of a statement of account made out from the books of
the bank as provided in the 14th clause. Under this
clause Defendant 1 agreed to accept as conclusive
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proof of the correctness of any sum claimed to be due
from it to the bank a statement of account made out
from the books of the Bank and signed by the
Accountant or other duly authorised officer of the Bank
without the production of any other document. If the
language of the promissory note -- Ex. B is interpreted
in the context of Exs. A & G it is manifest that the
status of the 3rd defendant with regard to the
transaction was that of a surety and not of a co-
obligant. This conclusion is supported by letters -- Exs.
AF dated November 27, 1947, AM dated December 17,
1947 in which the chief agent of the plaintiff Bank has
addressed Defendant 3 as the "guarantor". There are
similar letters of the plaintiff bank, namely, Exs. CE
dated December 28, 1947, CG dated January 13, 1948,
AS dated February 23, 1949, V dated October 21,
1949, III dated December 16, 1949, IV dated January
12, 1950 and 'O' dated March 29, 1950 in which
Defendant 3 is referred to either as a "guarantor" or as
having furnished a guarantee for the loan. Our
concluded opinion, therefore, is that the status of the
3rd defendant with regard to the overdraft account was
that of a surety and not of co-obligant and the finding
of the High Court on this issue is not correct.
17.36. By relying on S.Chattanatha Karayalar's
case, he submits that when a transaction is
contained in more than one document between
the same parties, they must be read and
interpreted together as if they are one
document. In that view of the matter, he
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submits that Section 28 of the Negotiable
Instruments Act would not be applicable.
17.37. On the basis of the above, he submits that both
the writ petitions are required to be dismissed.
18. Ms.Lakshmi Iyengar, learned senior counsel,
appearing for Respondent No. 6-Vamana Baliga,
adopts the submission of Sri.Jayakumar S. Patil,
learned senior counsel. She further submits that,
18.1. Under the strength of the power of attorney
dated 01.04-1995, Vamana Baliga had on
31.03.2001 sold an extent of 10 cents in survey
No. 126/4 to one Mr. Nagesh Nayak, which has
not been challenged. What has been challenged
is only the public auction which has been
conducted. The fact that no challenge has been
made to the said sale of 10 cents in survey No.
126/4 would indicate that the Petitioners have
no grievance as regards the sale.
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18.2. She submits that a suit in OS No.155/2002 had
been filed by Sundari Shetty against Sadashiva
Shetty and Nagesh Nayak where the aforesaid
sale in favour of Nagesh Nayak has been
mentioned. During the pendency of the said
suit, Sadashiva Shetty had expired and the
legal heirs, who were the Petitioners herein
except for Suresh Shetty, were brought on
record on 1.4.2003.
18.3. Notices having been issued, Jayanti, Satish,
Sureka and Jyoti did not appear. Suresh Shetty
had appeared through a counsel, however, did
not file his written statement. Thereafter, the
suit came to be withdrawn on 21.07.2006.
Thus, she submits that the petitioners being
aware of the suit in OS No. 155 of 2002 did not
appear in the said proceedings, one of them,
Suresh Shetty, having appeared did not contest
the same. The said Suresh Shetty is petitioner
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No.4 in WP 28076/2024 and respondent No.4 in
WP 27349/2024, thus, no contra stand can be
taken by Suresh Shetty in these proceedings.
18.4. Vamana Baliga has acted in the interest of
everyone concerned. The award and the auction
in favour of Sarika Shetty having been
challenged by him in an appeal which came to
be allowed subject to condition of deposit of 5%
of the award amount. Despite the best efforts
of Vamana Baliga, he could not deposit such
amounts resulting in the matter being
proceeded with.
18.5. She submits that the decision relied upon by
Sri.Ashok Haranahalli in Suraj Lamp and
Industries Pvt. Ltd. Vs. State of Haryana
and Ors5. is not applicable to the present case,
the said judgment being rendered on
11.10.2011 is operative prospectively and not
AIR 2012 SC 206
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retrospectively. The power of attorneys in the
present matter having been executed between
1995 to 2000 would not come within the
mischief of Suraj Lamp Industries's case and
all the transactions which have been entered
into prior to the said judgment are required to
be considered to be valid between the parties.
18.6. She therefore submits that the writ petitions
are required to be dismissed.
19. Sri.Ashok Haranahalli, learned senior counsel, in
reply would submit that,
19.1. The Petitioners were not parties to suit in OS
No.155/2002. Sundari Shetty, the plaintiff
therein was represented by her power of
attorney holder, Ratnakar Shetty. Sadashiva
Shetty was stated to be represented by his
power of attorney holder, Vamana Baliga.
Sadashiva Shetty was not served with notice in
the said proceedings. Even if it were to be
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accepted that Petitioner No.4 had entered
appearance through a counsel, such
appearance had been made on 9.09.2003, the
period of limitation could only be said to
commence from 09.09.2003 and not the date
of filing of the suit. The aspect of mortgage had
not been mentioned anywhere until 2006 when
Ratnakar Shetty acting as the power of
attorney holder of Sundari Shedthi had
withdrawn the suit. Thus, as on the date of
withdrawal of the suit by filing of the above
memo, the period of limitation could at the
most be set to commence. The withdrawal
being on 21.07.2006, the suit filed by the
petitioners in OS No.44/2009 is within the
period of limitation.
19.2. Petitioners have been diligent in following up
and have taken all steps necessary by filing of
the suit, by filing of an appeal and the revision
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petition. The fraud coming to the notice of the
petitioners only on the filing of the memo, he
submits that there is no acquiescence on part of
petitioner No.4 as being signatories to the
agreement of sale.
19.3. His submission is that the agreement of sale
and the Will, which had been produced, had not
been produced at any point in time in any
proceedings except in these proceedings. The
originals of the said documents have also not
been produced. He denies that Suresh Shetty
has signed the same.
19.4. Insofar as the will is concerned, he submits that
the Will refers to a loan transaction, not to a
sale transaction, and the said Will cannot confer
any right, title or interest on Vamana Baliga. He
seeks to contend that the date of the sale,
being 24.12.1994 was a Saturday, which is
considered to be an inauspicious day among
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Gouda Saraswati Brahmins to which the
petitioners belonged to, he submits that there
is collusion between Ratnakar Shetty, who is
the husband of Sarika Shetty and Vamana
Baliga. All of them have sought to see to it that
the property is purchased by Sarika Shetty to
the detriment of the other family members,
there being a dispute between the family
members. Vamana Baliga has helped the other
family members in not contesting the matter,
not paying the amounts, bringing the property
to auction and thereafter having sought to
make feeble attempts at such challenge, has
provided all the documents to Ratnakar Shetty
and Sarika Shetty, which could never have
been in their possession if not for Vamana
Baliga giving them. Respondent No. 6 and 10,
having contested OS No.155/2002,
subsequently they have patched up their
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disputes to cause detriment to the petitioners
and as such, he submitted that malafides is on
part of Respondent No.10 Sarika Shetty and
her husband Ratnakar Shetty, which is clearly
visible from the manner in which the
transactions have been conducted.
19.5. His submission is that even if there is any right
title or interest created in favour of the
purchaser under an agreement of sale and
power of attorney, the only action that could
have been taken was to bring a suit for specific
performance and get a sale deed executed in
favor of Vamana Baliga instead of Vamana
Baliga acting as the owner of the property.
Thus, he again invokes the dicta laid down by
the Hon'ble Apex Court in Suraj Lamp
Industries case to contend that the
transactions do not confer any right, title or
interest on Vamana Baliga.
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19.6. As regards the Mall which has been
constructed, he submits that the said Mall has
not been constructed on the subject property
but on a different property, and as such, the
construction of the said Mall has not created
any third-party rights.
19.7. What is in question is the residential
apartments which are under construction,
which have been so permitted to be constructed
by this court subject to the result of the writ
petition. As such, the same cannot be said to
confer any equitable right on the respondents;
the petitioners being entitled for the relief
sought for, any construction which has been
carried out by the respondents would enure to
the benefit of the petitioners, since the said
construction has been carried out having full
knowledge of the pendency of the above
proceedings.
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19.8. He therefore submits that the writ petitions are
required to be allowed and the relief sought for
granted.
20. Heard Sri. Ashok Haranahalli, learned Senior Counsel
for the Petitioner, Sri. Jayakumar S. Patil, learned
Senior Counsel, appearing for Respondent No.10-
Sarika Shetty, the purchaser, Ms. Lakshmi Iyengar,
learned Senior Counsel for Respondent No.6,
Vamana Baliga.
21. After the matter was reserved for judgment, it was
taken up for 'Being spoken to', on account of a new
judgment passed by the Hon'ble Apex Court in
Ramesh Chand (D) Thr. LRs. and others vs
Suresh Chand and anr.,6.
22. Sri.Ajit Anand Shetty, learned counsel appearing for
the petitioners, submitted that
22.1. In Ramesh Chand's case, Plaintiff claimed title
over the suit property by virtue of four
Civil Appeal No.6377/2012 dated 1.9.2025
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documents, namely general power of attorney,
agreement to sell, affidavit, a receipt and a Will
said to have been executed. Based on all of
which, the plaintiff had sought for possession
and declaration of title over the suit property
against his other siblings.
22.2. Initially, the suit was decreed on the ground
that the plaintiff had derived title over the suit
property, which came to be confirmed by the
Hon'ble High Court of Delhi in a Regular First
Appeal.
22.3. In the Special Leave Petition, the Hon'ble Apex
Court had remanded the matter to the High
Court for fresh disposal in light of the law laid
down in Suraj Lamp & Industries Pvt., Ltd.,
vs. State of Haryana7.
22.4. The Hon'ble Delhi High Court on remand,
confirmed its earlier order, which was again
challenged before the Hon'ble Apex Court. The
(2012) 1 SCC 656
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Hon'ble Apex Court held that an agreement of
sale would not convey any title in favour of the
beneficiary unless there is a conveyance. Under
a power of attorney, the donee can only act for
and on behalf of the donor, he cannot use the
power of attorney for his own benefit. A mere
power of attorney is not an instrument of
transfer. A claim under a Will would have to be
established in a court of law and the receipt
would only acknowledge the receipt of the
money and would not confer title.
22.5. He submitted that the said decision would help
the petitioners inasmuch as acting under the
power of attorney Vamana Baliga has borrowed
a loan from a Cooperative Society of which
Sadashiva Shetty was not a member nor was
he a signatory to any loan document as a
borrower or a guarantor. The amount advanced
by the society has not been received by
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Sadashiva Shetty. The amount was received by
Vamana Baliga and his associates which have
been used by them for their own benefit. The
power of attorney could not have been used for
the own benefit of Vamana Baliga and his
associates.
22.6. The mortgage which has been created in favour
of the cooperative society is without any basis
and as such illegal. Any further action including
the auction which has taken place is again
contrary to law and not binding on Sadashiva
Shetty and his family members. He therefore
submits that the recent decision of the Hon'ble
Apex Court in Ramesh Chand's case helps the
petitioners.
22.7. He also relies upon the decision of the Hon'ble
Apex Court in the case M.S.Ananthamurthy
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and anr vs. J.Manjula8, more particularly
Paras 6, 7, 8, 16, 17, 18, 40, 46, 47, 48, 55
and 57, which are reproduced hereunder for
easy reference.
6. It is the case of the appellants that on 04.04.1986,
the Suit Property was sold by the original owner one A.
Saraswathi (hereinafter referred to as "holder") for
total sale consideration of Rs. 10, 250/- by executing
an irrevocable power of attorney (hereinafter referred
to as "POA") and an unregistered agreement to sell.
The contents of the said POA and agreement to sell are
extracted hereinbelow:--
"GENERAL POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS THAT, I,
Muniyappa urf Ruttappa Son of Ragallappa, Major,
residing at Vajarahalli village, Uttarahalli Hobli,
Bangalore South Taluk do hereby appoint, nominate
and constitute Smt. A. Saraswathi W/O M. S. Anantha
Murthy, residing at No. 155, 5th Cross, Wilsongarden,
Bangalore - 560 027 as my General Power of Attorney
holder to do the following acts, deeds and things on
my behalf that is to say:
1) To look after, maintain, manage the Schedule
Property in the best manner as my attorney deems fit.
2) To enter into any type of agreements in respect of
the Schedule property with any person for any
amount, receive advance amount, issue proper
receipts, apply to the competent authority seeking
permission to execute any type of deeds, in favour of
any persons, and to execute such deeds in favour of
such persons, receive full consideration amount, issue
Civil Appeal Nos.3266-3267/2025
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proper discharge thereof, sign all deeds, forms etc.,
etc.,
3) To apply for transfer of Khata and to pay all future
taxes and to receive proper receipts.
4) To apply for sanctioned plan for construction of any
type of building on the property and to construct such
building, utilise the same as my attorney deems fit and
to get all profits therefrom.
5) To represent me in respect of the Schedule property
in all Government offices, BDA, BWSSB, KEB,
Corporation etc., etc., apply for any type of
documents, receive the same, and approach BDA for
reconvey of Schedule property, to pay all betterment
charges and to do all connected things.
6) In case of complications to sue such matters in
proper courts, of law by engaging the service of
advocates or advocate, sign all forms, vakalath, suits,
petitions, etc, produce any documents in court, take
any documents from the court, give evidence, obtain
decree, execute the sale or enter into compromise.
7) The Schedule property is in my peaceful possession
and enjoyment thereof as absolute owner thereof.
8) My Attorney is ge11erally entitled to do all such
acts, deeds and things, in respect of the Schedule
property, which are not specifically written hereunder
and I do hereby agree to ratify confirm all such acts,
deeds and things done by my attorney as the acts,
deeds and things done by me in person and this G.P.A.
is irrevocable in nature.
SCHEDULE
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Site No. 10, out of Sy. No. 55/1, situated at
Chunchaghatta Village, Uttarahalli Hobli, Bangalore
South Taluk, measuring East to West 30 feet and
North to South (40-6? + 42-3?)/2 feet and bounded as
follows:--
North by: Road &
South by: Private Property
In witnesses whereof I the executant above named
signed this General Power of Attorney on this 4th day of
April 1986 at Bangalore.
Identified by me
Executant
Execution admitted before me
S.B. Chandrasekhar
Bangalore Metropolitan Area
Notary
Bangalore
Date: 4-4-1986
SALE AGREEMENT
This Deed of Sale Agreement is made on this 4th day of
April, 1986 at Bangalore and executed by Sri.
Muniyappa urf Ruttappa, Son of Ragallappa, residing at
Chunchaghatta village, Uttarahalli Hobli, Bangalore
South Taluk hereinafter called the "VENDOR" (which
term shall mean and include all his heirs, executors,
administrators and assignees) of the one part and in
favour of Srimathi. A. Saraswathi W/O,
th
Ananthamurthy, residing at No. 155, 5 Cross, Wilson
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Garden, Bangalore-560 027 hereinafter called the
"PURCHASER" (which term shall mean and include all
heirs, executors, administrators and assignees) of the
other part witnesseth as follows:--
WHEREAS the Vendor is the absolute owner in peaceful
possession and enjoyment of the Schedule Property
more fully described in the Schedule hereunder.
And whereas the Vendor is in need of funds for the
maintenance of his family and other legal necessities
he desired to sell the Schedule Property in favour of
the purchaser for a sum of Rs. 10,250/- (Rs. Ten
thousand two hundred fifty only) to which the
Purchaser duly agreed to purchase the same for the
said sum of Rs. 10,250/- only. In pursuance of this
Sale agreement the purchaser paid a sum of Rs.
5,000/- on 20-5-1985 through a Cheque No. 0861556
of Syndicate Bank, Wilsongarden Branch, Bangalore
529/243 dated 3.4.86 of Syndicate Bank Wilson
Garden, Bangalore total the Vendor received the full
sale consideration of Rs. 10,250/- only. This day the
Vendor handed over the vacant possession of the
Schedule property to the purchaser to have and to
hold the same as absolute owner. As there is a
prohibition of selling the revenue sites by the
Government of Karnataka the Vendor could not
execute the sale deed. As and when the Government
of Karnataka revokes the fragmentation act the Vendor
execute the sale deed.
This day the Vendor handed over the vacant
possession of the Schedule property to the purchaser,
the Vendor have no objection to construct a dwelling
house on the Schedule property the Vendor have no
objection to transfer the Khata of the Schedule
Property to the name of the purchaser.
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The Vendor assures the purchaser that the schedule
property is free from all kinds of encumbrances and it
is free from all taxes.
SCHEDULE:- Site No. 10, out of Sy. No. 55/1, situated
at Chunchaghatta Village, Uttarahalli Hobli, Bangalore
South Taluk, measuring East to West 30 feet and
North to South (40-6? + 42-3?)/2 feet and bounded as
follows:--
North by: Road &
South by: Private Property
In witnesses whereof both the parties have affixed
their signatures to this sale agreement on the day,
month and the year above first written.
WITNESSES:
1.
2.
3.
VENDOR
PURCHASER"
7. On the same day, the said POA was duly notarized.
On 30.01.1997, the original owner, executant of the
POA died. On 01.04.1998, the holder of POA executed
a registered sale deed with respect to the Suit Property
in favour of her son, i.e., the appellant no. 2, in
exchange of sale consideration of Rs. 84,000/-.
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8. On the other hand, several years after the death of
the original owner, his legal heirs through a registered
sale deed dated 21.03.2003 sold the same Suit
Property to the respondent no. 7 for total sale
consideration of Rs. 76,000/-. Subsequently,
respondent no. 7 sold the Suit Property to the
respondent no. 8 vide another registered sale deed
dated 29.09.2003 for total sale consideration of Rs.
90,000/-. Then, on 06.12.2004, the respondent no. 8
executed a registered gift deed in favour of her
daughter, i.e., the answering respondent.
16. Ms. Farhat Jahan Rehmani, the learned counsel
appearing for the appellants submitted that the
present case relates to the scope, interpretation and
construction of the POA and the agreement to sell
dated 04.04.1986 executed by the original owner in
favour of holder. Hence, the limited question for our
determination is whether the POA, which was coupled
with interest is irrevocable as per Section 202 of the
Contract Act or it stood terminated upon the death of
the original owner as per Section 201 of the Contract
Act?
17. Ms. Rehmani submitted that the fact of execution
of the POA and the agreement to sell in favour of the
holder by the original owner in exchange of sale
consideration is not disputed. Since both the POA and
the agreement to sell are in favour of the same
person, they should be read together and construed
harmoniously. The holder of POA executed the
registered sale deed dated 01.04.1998 in favour of the
appellant no. 2. Further, there is no challenge to the
validity of the GPA and agreement to sell dated
04.04.1986 and the registered sale deed dated
01.04.1998. The GPA specifies that it had been
executed for the purpose of the Suit Property. It
specifically mentions that it is 'irrevocable' and the
schedule to the GPA references the particulars of the
Suit Property. The GPA read with the agreement to sell
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would indicate that it had been executed for a valid
sale consideration, and possession of the Suit Property
was also delivered to the holder of POA. Thus, she had
an interest in the subject-matter of the agency being
irrevocable. By placing reliance on Section 202 of the
Contract Act, he submitted that where the agent
himself has interest in the property which forms a
subject-matter of the agency, the agency cannot be
terminated to the prejudice of such interest of the
agent. In the facts of the case, Section 202 of the
Contract Act is applicable and not Section 201.
18. It was further submitted that the High Court erred
in holding that the purpose for which the GPA and the
agreement to sell was executed was not mentioned in
either of the documents and therefore, even though
the two documents are contemporaneous yet it cannot
be inferred that the holder of the two documents would
derive an interest in the subject-matter of the GPA.
Ms. Rehmani asserted that it has to be inferred that
the original owner executed the agreement to sell as a
consequence of executing the GPA in favour of the
holder, hence, the said POA is not irrevocable merely
for the reason that in the said documents the purpose
for executing the GPA and agreement to sell has not
been mentioned.
40. In the present case, it is evident from para 1 of
the GPA executed by the original owner in favor of the
holder that the POA was to look after, maintain,
manage the Scheduled Property. Para 2 states that the
attorney can enter into any agreement with any person
with respect to the Scheduled Property for any
amount, receive advance amount, to execute deeds in
favor of such persons, issue proper discharge. Para 3
states that attorney has the power to apply for transfer
of khata and to pay all future taxes and receive
receipts. Further, para 4 states that the attorney can
apply for sanctioning of plan for the purpose of
construction, utilize the Scheduled Property as the
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holder deems fit and receive all profits therefrom. Para
5 states that the attorney has the power to represent
the holder in all Government Offices and do all things
connected. Para 6 states that the attorney can pursue
matters in courts, give evidence, obtain decree,
execute the same. Further, para 7 states that the
Scheduled Property is in owner's peaceful possession
and enjoyment. Lastly, para 8 states that the attorney
is generally entitled to do all acts required in respect of
the Suit Property which are not specifically mentioned
and that the GPA is irrevocable.
46. Applying the above exposition of law in the facts of
the present case, it is evident from the tenor of POA
that is not irrevocable as it was not executed to
effectuate security or to secure interest of the agent.
The holder of POA could not be said to have an interest
in the subject-matter of the agency and mere use of
the word 'irrevocable' in a POA would not make the
POA irrevocable. The High Court was right in holding
that the holder did not have any interest in the POA.
When the High Court observes that the power of
attorney does not explicitly state the reason for its
execution, it implies that its nature is general rather
than special.
47. It is a settled law that a transfer of immovable
property by way of sale can only be by a deed of
conveyance. An agreement to sell is not a conveyance.
It is not a document of title or a deed of transfer of
deed of transfer of property and does not confer
ownership right or title. In Suraj Lamp (supra) this
Court had reiterated that an agreement to sell does
not meet the requirements of Sections 54 and 55 of
the TPA to effectuate a 'transfer'.
48. From the independent reading of the POA and the
agreement to sell, the submissions of the appellants
fail on two grounds, first, the POA is general in nature
and does not secure agent's right in the subject-matter
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of the agency, and secondly, an agreement to sell
simpliciter does not confer ownership in the immovable
property so as to transfer a better title to anyone else.
55. The High Court rightly held that even though the
GPA and the agreement to sell were contemporaneous
documents executed by the original owner in favour of
the holder, this alone cannot be a factor to reach the
conclusion that she had an interest in the POA. Thus,
even though the GPA and the agreement to sell were
contemporaneous documents executed by the original
owner in favour of the same beneficiary, this cannot be
the sole factor to conclude that she had an interest in
the subject-matter. Even if such an argument were to
persuade this Court, the document must have been
registered as per Section 17(1)(b) of the Registration
Act. In the absence of such registration, it would not
be open for the holder of the POA to content that she
had a valid right, title and interest in the immovable
property to execute the registered sale deed in favour
of appellant no. 2.
57. The appellants submitted that the answering
respondent had not challenged the validity of the GPA
and the agreement to sell dated 04.04.1986 executed
in favour of the holder and registered sale deed dated
01.04.1998 executed in favour of appellant no. 2. The
appellants' submission does not hold good, as the
absence of a separate suit for declaration or even a
specific prayer to that effect does not alter the legal
position of either party in the facts of this case. The
legal standing of both parties remains unaffected, for
want of a distinct challenge to the instruments in
question.
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22.8. By relying on Ananthamurthy's case, he
submits that, in that case, an unregistered
agreement to sell and a power of attorney was
executed. Subsequently, the original owner
having expired, the power of attorney who
executed a registered sale deed in favour of her
son. The legal heirs of the original owner sold
the property to one other person under a
registered sale deed, who in turn executed a
gift deed in favour of his daughter. It is in that
background that the daughter had filed a suit in
OS No.133/2007 for a permanent injunction
against the earlier purchasers from interfering
with her possession. The earlier purchasers had
filed a suit in OS No.4045/2008, against the
legal heirs of the original owner and the
subsequent purchaser, as also the daughter for
a declaration that the sale deeds and the gift
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deeds are null and void. Both the suits were
consolidated and tried together.
22.9. The trial court vide its judgment decreed the
suit in O.S.No.133/2007 and dismissed the suit
in O.S.No.4045/2008. Aggrieved by the same,
a first appeal was filed before the High Court.
The Hon'ble High Court of Karnataka dismissed
the appeal on the ground that the earlier
purchasers had not disputed the sale deeds and
the gift deeds in the suit filed by the daughter.
The earlier purchasers had admitted that the
original owner had expired on 30.1.1997 and it
is subsequently that a registered sale deed
came to be executed by the power of attorney.
22.10. This High Court came to the conclusion that
though the General Power of Attorney and
agreement to sell were executed by the same
executor on the same day, yet they could not
be treated as a single transaction since the
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General Power of Attorney did not make any
mention of the agreement of sale. The
execution of an irrevocable power of attorney
and an agreement to sell does not
automatically transfer any right or interest to
the beneficiary. The holder of the power of
attorney and an agreement to sell did not
enforce the same against the legal
representatives of the executed, but made use
of the power of attorney to transfer the
property on his own. In that background, this
Court held that Section 202 of the Contract Act
would not be applicable. Lastly, this Court held
that the aspect of limitation would be covered
under Article 65, providing 12 years' time to
sue. It is the judgment of this Court, which was
challenged before the Hon'ble Apex Court in the
aforesaid matter.
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22.11. The Hon'ble Apex Court vide the aforesaid
judgment held that a transfer of immovable
property by way of sale can only be by a deed
of conveyance and agreement to sell is not a
conveyance. The power of attorney not having
made a mention of the agreement to sell was a
general power of attorney and as such could
not be said to be irrevocable and in that
background came to a conclusion that the
General Power of Attorney and agreement to
sell could not, having been executed on the
same day, being contemporaneous documents,
cannot be a sole factor to conclude that an
interest was created in the said property unless
a sale deed was registered in terms of Section
17 (1)(b) of the Registration Act and dismissed
the appeal which had been filed.
22.12. By relying on both the judgments of the Hon'ble
Apex Court in Ramesh Chand and
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Ananthamurthy's cases, Sri.Ajit Shetty,
learned counsel for the petitioners would
submit that the agreement of sell executed by
Sadashiva Shetty as also the power of attorney
would not create any irrevocable interest in
favour of Vamana Baliga and his associates,
and as such the writ petitions are required to
be allowed.
23. Sri.Rajesh Shettigar, learned counsel for Respondent
No.10 would submit that:
23.1. The power of attorney specifically confers
power on Vamana Baliga to execute any
document in favour of any person and to
receive consideration and register documents
as also to complete the process, to pledge,
mortgage, sell, exchange the scheduled
property and raise amount on charge of the
property from any individuals, persons, firms,
banks, either nationalized or private scheduled
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banks, cooperative societies, financial
institutions or from any other firms to invest
any amount in the property and improve the
same, etc.
23.2. Similar power of attorneys were executed by
the other family members as earlier submitted.
The agreement of sale specifically makes a
mention of the intention to sell and or the
difficulty / impediment in getting the sale deed
registered immediately. The handing over of
the original documents pertaining to the
property and the receipts which was
subsequently issued evidences that the entire
consideration has been paid to the family of
Sadashiva Shetty. Similarly, under other
agreements and power of attorneys, a similar
statement has been made and
acknowledgement made under the receipt of
the entire consideration.
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23.3. There is no amount which is due and payable to
the family of Sadashiva Shetty and or any other
family members and hence, he submits that the
agreement of sale evidences the intention to
sell the receipts, which evidence the receipt of
the entire consideration. The power of attorney
clearly and categorically authorises the donee
to mortgage the properties, in pursuance of
which, a mortgage was effected in favour of
Mangala and Janatha.
23.4. The loan amount not being paid by the power
of attorney, the same was brought to sale by
way of auction, where Respondent No.10 has
purchased the same. The auction which has
been conducted, has been so conducted in a
proper manner. The Petitioners cannot
challenge the said auction in the manner as
done, having failed in all earlier proceedings,
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and those proceedings have been filed
belatedly.
23.5. The decisions in Ramesh Chand and
Ananthamurthy's cases would not be
applicable in the present matter, since that was
a sale executed under the power of attorney
voluntarily by the parties. In the present
matter, a mortgage having been affected, a
charge having been created on the property,
the property was brought to sale in pursuance
of an order of the DRCS passed under the KCS
Act, 1959. Hence, those decisions would not be
applicable to the present matter.
23.6. He relies upon another recent judgment of the
Hon'ble Apex Court, in the case of
Dastagirisab vs. Sharanappa @
Shivasharanappa Police Patil (D) by LRs
and others., more particularly, Paras 12, 16
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and 18 thereof, which are reproduced
hereunder for easy reference:
12. Plaintiff-coparcener has assailed the sale
transaction undertaken by 1st defendant-Karta on the
ground it was not made for legal necessity but to meet
his expensive and wasteful habits. Evidence has come
on record 1st defendant-Karta had previously sold
various properties of the HUF. Though it is the
plaintiff's case that such sales were not for legal
necessities, he has not challenged any of these
transactions. To justify his present claim, the plaintiff
asserts the 1st defendant assured him money derived
from such sales would be settled in favour of the sons
including the plaintiff and that no other properties
would be sold. It is further the plaintiff's case, no
money was settled in his favour or that of the 2nd
defendant but substantial sums were settled in favour
of 3rd and 4th defendant. Though the plaintiff alleges
1st defendant acted in a biased and unfair manner,
admittedly the plaintiff has not taken any steps for
recovery of such outstanding dues earlier or even in
the present suit.
16. High Court held as 5th defendant had not made
enquiries regarding the source of title or the manner in
which the sale consideration was distributed among
coparceners, hence he cannot be held to be a bona
fide purchaser. We are conscious that the onus to
prove that a sale made by the Karta on behalf of other
coparceners of HUF for legal necessity lies on the
alienee/purchaser11. The 5th defendant-purchaser,
through deft cross examination of the plaintiff and
other evidence, has established a clear nexus between
the sale transaction and the expenses undertaken for
Kashibai's marriage and has thereby discharged the
onus. In these circumstances, his case cannot be
disbelieved on the score that all the coparceners had
not received the sale consideration. This fact Page 12
of 13 is in the special knowledge of the plaintiff and
other coparceners. Onus of proof on the stranger-
purchaser cannot run counter to the principle of
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reverse burden enshrined in Section 106 of the
Evidence Act, 1872 and saddle him with the liability to
prove facts which are within the special knowledge of
the coparceners of the HUF.
18. On the contrary, conduct of the plaintiff in
belatedly challenging the sale transaction after five
years in the year 2000 raises grave doubt regarding
his bona fides. Plaintiff sought to justify the delay by
contending he was unaware of the sale since
possession of the suit land was not parted with. Such
explanation is wholly facetious as ample evidence in
the form of mutation certificate, land record entries
standing in the name of 5th defendant have come on
record establishing his continued possession of the suit
land. High Court not only ignored these facts
improbabilising the plaintiff's case but made up a third
case that the plaintiff was working for gain elsewhere
and could not have been aware of the sale transaction.
No such case was either pleaded or probabilised by the
plaintiff during trial.
23.7. By relying on Dastagirisab's case, his
submission is that a sale agreement, along with
a power of attorney having been executed by
the Kartha of the family, the entire sale
consideration having been received by the
Kartha and the sale being affected on the
ground of legal necessity, the transactions
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which have been entered into pursuant thereto
are all valid.
23.8. In the present matter the entire sale
consideration has been paid. There is no other
claim that Sadashiva Shetty and or his legal
heirs, that is the petitioners, can have as
regards the property. All obligations on the part
of Vamana Baliga having been discharged, and
the power of attorney authorising the donee to
mortgage the property, the actions taken by
Vamana Baliga are proper and correct. On
these grounds he submits that the writ petitions
are required to be dismissed.
24. Further heard Sri.Ajit Shetty, learned counsel for the
petitioners and Sri.Rajesh Shettigara, learned
counsel for Respondent No.10.
25. The points that would arise for the consideration of
this Court are:
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I. POINTS RELATING TO AUTHORITY, MORTGAGE,
AND AGENCY
1. Whether the Power of Attorney (PoA)
holder, Vamana Baliga, had the legal
authority to mortgage the properties of
Sadashiva Shetty?
2. Whether the mortgage executed by the
PoA holder without express authority from
the principal (Sadashiva Shetty) is void ab
initio?
3. Whether there existed a valid principal-
agent relationship between Sadashiva
Shetty and Vamana Baliga under Section
182 of the Indian Contract Act, 1872?
4. Can a PoA be construed as a document
coupled with interest in view of the
alleged agreement of sale and the Will
executed by Sadashiva Shetty?
5. Does the execution of promissory notes
and loan documents by the borrowers
(who were not the owners of the property)
create any enforceable right against the
property of Sadashiva Shetty?
6. Whether the banks/cooperative societies
were negligent or complicit in accepting a
mortgage from persons who had no
ownership or title in the properties?
II. POINTS RELATING TO THE VALIDITY OF THE
SALE AND AUCTION PROCESS
7. Whether the auction sales dated
15.12.2004 (Mangala Society) and
20.09.2007 (Janatha Society) and their
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confirmations are valid and legally
sustainable?
8. Whether the execution proceedings under
the Karnataka Co-operative Societies
Rules, 1960, were conducted in
compliance with Rule 34?
9. Whether the purchasers derived any valid
title to the properties through the
execution sale?
III POINTS RELATING TO COMPLIANCE WITH THE
KARNATAKA CO-OPERATIVE SOCIETIES ACT,
10. Whether Section 60 of the KCS Act
prohibits loans to non-members, and if so,
whether the loans in question are contrary
to the Act?
11. Whether the provisions of Section 33
(regarding the charge on the land of
members) were complied with by the
borrowing parties and the societies?
12. Whether the appellate and revisional
authorities under Sections 101 and 108 of
the KCS Act failed to consider the legal
infirmities in the underlying mortgage and
auction proceedings?
IV. POINT RELATING TO LIMITATION, DELAY AND
ACQUIESCENCE
13. Is the challenge to the awards, auction
sales, sale confirmations, and orders of the
appellate/revisional authorities barred by
limitation?
14. What order?
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26. I answer the above points as under:-
27. Answer to Point No.1: Whether the Power of
Attorney (PoA) holder, Vamana Baliga, had the
legal authority to mortgage the properties of
Sadashiva ShettY?
27.1. The power of attorney executed by Sadashiva
Shetty in favour of Vamana Baliga reads as:
GENERAL FOWER OF ATTORNEY.
Know ALL MEN BY TIESE PRESENS THAT, I,
SADASHIVA SHETTY aged about 55 years son of Anthu
Sheathy, Agriculturist, and residing at kunjibetty of
Udupl taluk, hereby make my Power of Attorney as
follows:
WHEREAS I am in Possession and enjoyment of the
immoveable Properties more fully described in
schedule 'n' hereto which were allotted to my share
under the terms and conditions of a Partition Deed
entered into between me and my relative Sunanda
Shedthi, dated 22.5.1990. Now I am in effective
management of the property.
AND. WHEREAS I am now residing at Surat in
connection with my Hotel Business and I am not in a
position to manage the properties effectively and
efficiently. Therefore, I have decided to appoint, an
attorney for the said purpose and also requested our
well-wisher Sri (K. Vamana Baliga) Son of Sri Gopala
Krishna Baliga, Proprietor, Dwadashi Hotel. Kalganka
for the same.
Whereby virtue of this deed, I appoint, nominate and
constitute and had appointed, nominated and
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constituted the K. Vaman Baliga son of Shri. Gopal
Krishan Baliga in the following other matters viz.
1. To appear before all Civil. Criminal and Revenue
Courts either original. revisional or Appellate including
High Court of Karnataka at Bangalore and to file Suits
or any other cases, petitions in respect of the Schedule
properties on my behalf or to defend any cases and to
do all required deed acts and things including
appointment of Advocates, Pleaders or other attorneys
on my behalf.
2. To appear before the Sub-Registrar's Office and
execute any documents in favour of any persons and
to receive consideration and register the documents
and also complete the process.
3. To pledge, mortgage, sell, exchange the "A'
schedule and raise amount on the charge of 'A'
schedule from any Individuals, persons, firms, Banks,
either nationalized or Private schedule Banes, Co-
operative Societies, Financial institutes or from any
other firms as my attorney thinks proper to do so.
4. To invest any amount in 'A' schedule and: improve
the same and also to construct any constructions.
5. To apply for permission or License for any
construction in 'A' schedule from Town Municipality,
Panchayath offices, Town Planning Authority or any
other offices.
6. To appear before any Private or Public Offices or
behalf and to do all acts, deeds and things.
7. And generally, to do all acts, deeds and things that
are required to be done in the matter.
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8. To apply for conversion of A schedule and to do all
acts, deeds and things required to be done in this
behalf on my behalf and complete the work.
I hereby agreed and ratify and confirm all such lawful
acts of ou attorney as if they were done by me
personally by virtue of this deed.
A Schedule
Immovable properties situated in shivally village Udupi
taluk with Udupi town municipality.
S.No S.D Kissam Extent Asst
130 3 Nanja 0.60 5.67
126 4 " 0.96 9.67
27.2. A reading of the power of attorney by itself,
would indicate that under the power of
attorney, the donee has the right to pledge,
mortgage, sell, exchange the 'A' scheduled
property and raise amount on the charge of 'A'
scheduled from any individuals, persons, firms,
banks, either nationalized or private scheduled
banks, cooperative societies, financial
institutions or from any other firms as the
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attorney thinks proper to do so. The power of
attorney clearly and categorically mandates
that it can pledge, mortgage, sell, or exchange
the property, with no restrictions in this regard.
27.3. On the very reading of the power of attorney, I
have no doubt in answering Point No.1 by
holding that the power of attorney holder
Vamana Baliga had the legal authority to
mortgage the properties of Sadashiv Shetty.
28. Answer to Point No.2: Whether the mortgage
executed by the PoA holder without express
authority from the principal (Sadashiva Shetty)
is void ab initio?
28.1. It has been sought to be contended by
Sri.Ashok Haranahalli, learned Senior Counsel
for the Petitioners that the mortgage required
the express authority from Sadashiva Shetty.
There being no such authority, the mortgage is
void ab initio. Apart therefrom, it was
contended that even if a mortgage were to be
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created and amounts raised, those amounts
had to be credited to the account of Sadashiva
Shetty. The amounts having been received by
Vamana Baliga and not by Sadashiva Shetty
cannot be said to be in pursuance of the power
of attorney and in this regard, reference has
been laid on Section 58 of the Transfer of
Property Act to contend that Vamana Baliga did
not have any power to mortgage the property,
since he did not have an interest in the
property, at the most, he could only be an
agreement holder.
28.2. Though at first blush this argument sounds
convincing, what would have to be considered
is that this argument has been addressed in
isolation without referring to the
contemporaneous transactions entered into by
other family members. As submitted by
Sri.Jayakumar S.Patil, learned senior counsel,
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Sadashiva Shetty for the purpose of sale of his
share in the property received a sum of
Rs.8,20,000/-, Sushila Shetty and her family
received a sum of Rs.3,60,000/-, Ammani
Shetty and her family received a sum of
Rs.7,50,000/-, Sunanda Shetty received a sum
of Rs. 4,00,000/-.
28.3. What is more important is that all these
persons had executed similar agreement of sale
as well as a power of attorney in favour of
Vamana Baliga. That is, it is not only Sadashiv
Shetty but all the other family members who
had executed agreements of sale, powers of
attorney as well as issued receipts for having
received the consideration.
28.4. The entire consideration having been received
by Sadashiva Shetty, even as per the
agreement of sale, there were impediments in
execution of a sale deed, but for those
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impediments, a sale deed would have been
executed. This would clearly and categorically
indicate that the entire sale consideration
having been received by Sadashiva Shetty, on a
mortgage being created of the property as
authorised under the power of attorney, there
is no requirement for any monies to be made
available to Sadashiva Shetty as sought to be
contended. Which would amount to Sadashiva
Shetty receiving more than the value of the
property, which he had already received.
28.5. It would also amount to grant of a premium on
the actions of Sadashiva Shetty and his family
who have ex facie acted dishonestly inasmuch
as Sadashiv Shetty as the father having
executed an agreement of sale, power of
attorney, having received the entire
consideration, the wife and children cannot
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later contend that there is no power for
Vamana Baliga to mortgage the property.
28.6. Hence, I answer Point No.2 by holding that the
mortgage executed by the power of attorney
holder, Vamana Baliga is proper and correct
and within the scope of his powers.
29. Answer to Point No.3: Whether there existed a
valid principal-agent relationship between
Sadashiva Shetty and Vamana Baliga under
Section 182 of the Indian Contract Act, 1872?
29.1. Reference has been made to Section 182 of the
Indian Contract Act to contend that an 'agent' is
a person employed to do any act for another or
to represent another in dealings with third
person. On that basis, it is submitted that the
mortgage which has been executed by Vamana
Baliga was so done in his own name and
therefore not as an agent of Sadashiva Shetty
under the power of attorney.
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29.2. Insofar as the mortgage is concerned, the
submission made is that the mortgage being
executed in the individual name of Vamana
Baliga and not as the power of attorney cannot
bind Sadashiva Shetty since the agent himself
has not adverted to the principal-agent
relationship.
29.3. By referring to Section 28 of the Negotiable
Instruments Act 1881, submission made is that
if an agent were to execute a document on his
own, then he would be personally liable on the
instrument. The principal cannot be made
liable. References is also made to Section 230
of the Indian Contract Act to contend that the
agent cannot personally enforce nor be bound
by contracts on behalf of the principal. The said
protection under Section 230 would be available
only to an agent who has disclosed the name of
the principal.
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29.4. In the present case, Vamana Baliga having
executed a mortgage in his own name and as
also in the name of his associates, it's a
personal mortgage executed by Vamana Baliga
as regards which Sadashiva Shetty and or his
family members would not be liable. Reference
is also made to Bharati Cellular's case to
contend that agent acts in a fiduciary capacity
and is required to act in the name of the
principal. Vamana Baliga not having executed
the mortgage in the name of Sadashiva Shetty,
Sadashiva Shetty or his family members, are
not bound by it. Again, reference has also been
made for a similar purpose on the decision of
the Hon'ble Madras High Court in
Sivagurunatha Pillai's case.
29.5. These contentions would have to be considered
in the context of the matter. The context
having already been stated hereinabove,
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Sadashiva Shetty and his other family members
had entered into multiple agreements of sale,
multiple powers of attorney were issued in
favour of Vamana Baliga, and the family had
received the entire consideration. Under each of
the powers of attorney which had been
executed, Vamana Baliga was permitted to
create a mortgage, receive monies etc., as
indicated supra.
29.6. This would have to be, read in juxtaposition to
Section 202 of the Indian Contract Act, 1872
(ICA), which provides for an agent who himself
has an interest in the property which forms the
subject matter of the agency. In the present
matter, Vamana Baliga having made payment
of the entire consideration to Sadashiva Shetty
and his other family members, having been put
in possession of the property, there being an
agreement of sale and a power of attorney
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which has been executed; under the power of
attorney, Vamana Baliga being authorized to
mortgage the property, the action taken by
Vamana Baliga, though could have been in the
name of Sadashiva Shetty, the fact still remains
that the family of Sadashiva Shetty has
received the entire consideration and thereafter
has no role to play or no rights which are
subsisting in the said properties, except for a
formal execution and registeration of a Sale
Deed which also has been authorised under the
powers of Attorney.
29.7. If the context is not considered and law applied,
I am afraid there could be injustice which could
be done to the bona fide purchasers who have
purchased the property in an auction
proceeding. What would also have to be seen is
that there was an impediment in execution of a
registered sale deed and it is for that reason
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that in the agreement of sale, it has been
stated that an agreement of sale is being
executed. Only under an agreement of sale or a
power of attorney, no purchaser would have
paid the entire consideration as has been paid
in the present matter nor would the owner hand
over the possession as also the original title
documents.
29.8. The terms of the powers of attorney have been
extracted hereinabove, similar being the terms
of the power of attorney executed by other
family members in favour of Vamana Baliga, I
answer point No.3 by holding that there existed
a valid principal agent relationship between
Sadashiva Shetty and Vamana Baliga under
Section 182 of the ICA and the non-naming of
Sadashiva Shetty in the mortgage document
would not have any adverse effect on the
exercise of the rights by Vamana Baliga.
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30. Answer to Point No.4: Can a PoA be construed
as a document coupled with interest in view of
the alleged agreement of sale and the Will
executed by Sadashiva Shetty?
30.1. This point has been specifically framed, though
there is an overlap with other points, to
specifically answer the issue of Vamana Baliga's
agency being one coupled with interest.
30.2. As indicated supra, Section 202 of the ICA
provides for, an agent who himself has an
interest in the property which forms the subject
matter of the agency. In the present matter,
the agency is created under the power of
attorney and the subject matter of the power of
attorney is the property, which is also the
subject matter of an agreement of sale.
30.3. The contention of Sri.Ashok Haranahalli,
learned senior counsel in this regard is twofold.
Firstly, that the agreement of sale and power of
attorney by itself do not make the agency
coupled with interest. Secondly, the action
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taken by Vamana Baliga in his own name and
not on behalf of the principal cannot be brought
under the purview of Section 202 of ICA.
30.4. Both these arguments, I am afraid, cannot be
accepted, again for the simple reason that
Sadashiva Shetty had executed the agreement
of sale and power of attorney during his lifetime
and had received the entire sale consideration.
Similarly, the other family members have also
executed similar agreements of sale and
powers of attorney and received the entire
consideration. None of those other family
members has challenged the actions taken by
Vamana Baliga in mortgaging the property,
except the family of Sadashiva Shetty.
30.5. This would again indicate the context in which
these documents have been executed and the
rights conferred under those documents by the
other family members on Vamana Baliga. The
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agreement of sale makes it clear that the
property is to be sold. The impediment in the
execution of a sale deed is contained therein.
30.6. A power of attorney having been
contemporaneously executed authorising the
agreement holder to mortgage, deal with, or
sell the property.
30.7. The entire consideration under the agreement
of sale having been received by the agreement
holder, I am of the considered opinion that the
decisions in Ramesh Chand and
Ananthmurthy would not be applicable. In
both those cases, the power of attorney had
executed a document. In Ramesh Chand case,
sale deed came to be executed in pursuance of
the power of attorney and it is in that
background that the Hon'ble Apex Court was
considering the aspect of whether the
agreement of sale and power of attorney by
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itself confer any title on the agreement holder
and the Hon'ble Apex Court came to a
conclusion that they do not.
30.8. In Ananthamurthy's case, the sale deed was
executed after the death of the executor of the
agreement of sale and power of attorney.
Again, the issue raised in that matter was as
regards whether the agreement of sale and
power of attorney by itself transfer the
property. The Hon'ble Apex Court in both the
matters has categorically held that a mere
agreement of sale with the power of attorney
would not convey any title and would not act as
a conveyance. The Hon'ble Apex Court in
Ananthamurthy's case has also held that
execution of the agreement of sale and power
of attorney contemporaneously cannot be a
sole factor to determine whether there is an
agency coupled with interest.
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30.9. The facts in the present matter are completely
different and as indicated in all the answers
above, the entire family of Sadashiva Shetty
including his, aunts, sisters, uncles etc had
executed agreements of sale and powers of
attorney in favour of Vamana Baliga. It is these
factors if taken into consideration with the
further factor that there was an impediment to
execute a sale deed would categorically and
unimpeachably establish that multiple
agreements of sale were executed by the family
members of Sadashiva Shetty in favour of
Vamana Baliga. Each of them had also executed
powers of attorney in favour of Vamana Baliga
and all of them had received the entire sale
consideration.
30.10. Thus, when the entire sale consideration has
been received, the question of making payment
of any monies to Sadashiva Shetty, as claimed
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by the petitioner, would not arise. The power of
attorney, along with the agreement of sale, by
way of grant of possession, handover of original
title documents and receipt of the entire sale
consideration, contemporaneous with other
agreement of sale by the other family
members, in my considered opinion, has
created an agency coupled with interest in
favour of Vamana Baliga.
30.11. Hence, I answer Point No.4 by holding that the
present power of attorney executed by
Sadashiv Shetty in favour of Vamana Baliga is
one coupled with interest not only in view of
the agreement of sale and the Will executed but
also on account of possession and original title
documents having been handed over, the entire
consideration having been received as also all
other family members having executed similar
agreement of sale and power of attorney,
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handed over possession, and received the
entire consideration.
31. Answer to Point No.5: Does the execution of
promissory notes and loan documents by the
borrowers (who were not the owners of the
property) create any enforceable right against
the property of Sadashiva Shetty?
31.1. The submission of Sri.Ashok Haranahalli,
learned senior counsel, is that the promissory
note and the mortgage document have been
executed by Vamana Baliga and his associates
in their individual capacity. Sadashiva Shetty is
not a member of the Co-operative Society as
also no amount has been received by Sadashiva
Shetty under the said loan transaction.
Therefore, the same would not create any
enforceable right against the property of
Sadashiva Shetty. All these aspects have been
dealt with in respect of the above points and I
have come to the conclusion that the power of
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attorney provided the power to create a
mortgage. The power of attorney is one coupled
with interest, and there was a principal-agent
relationship between Sadashiva Shetty and
Vamana Baliga.
31.2. What is only required to be considered is
whether the mortgage created without referring
to the name of Sadashiva Shetty is enforceable
by the bank. A mortgage can be created in
terms of Section 58 of the Transfer of Property
Act, 1882 by several modes and methodologies.
31.3. A simple mortgage could be created without
delivery of possession; a mortgage could be
created by way of a conditional sale; a
usufructuary mortgage could be created by
handing over possession and permitting the
mortgagee to receive the usufructs and English
mortgage could be created by transfer of the
mortgage property, and one of the most
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common modes of creating a mortgage is by
way of deposit of title deeds.
31.4. In the present matter, it is a mortgage by way
of deposit of title deeds, which has been
resorted to by the parties. The original
documents relating to the property have been
handed over by Sadashiva Shetty and all other
family members to Vamana Baliga, including
the physical possession of the property. It is
these title deeds/documents which have been
deposited by Vamana Baliga with the concerned
co-operative banks. The mere deposit of the
title deeds would by itself confer a right with
the bank to bring the property for sale.
31.5. The submission of Sri.Ashok Haranahlli, learned
senior counsel would have to be considered in a
two-fold manner. The first is as regards the
right of Vamana Baliga to mortgage and the
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second is as regards the bank enforcing the
mortgage.
31.6. Insofar as the right of Vamana Baliga to
mortgage the property are dealt with in the
earlier points. As regards the bank to enforce
the mortgage, it is clear that firstly, when the
mortgager had the right to mortgage the
property, the mortgagee would have a right to
enforce the mortgage. Secondly, the original
title deeds having been deposited with the
bank, the bank could enforce the mortgage in
respect of those original title deeds. The bank
having advanced monies, the monies,
admittedly not having been paid, the right of
the bank to enforce the mortgage cannot be
assailed by the petitioners in the manner as
done by setting up various claims against the
power of attorney.
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31.7. There being a valid mortgage which has been
created by way of deposit of title deeds, the
bank, in my considered opinion, could enforce it
and as such, I answer Point No.5 by holding
that the execution of promissory notes and loan
documents by the borrowers, namely Vamana
Baliga and his associates, who are not the
owners of the property, by creation of a
mortgage by way of deposit of title
deeds/documents has created an enforceable
right with the banks against the property of
Sadashiva Shetty and other family members,
the entire property of the family having been
mortgaged.
32. Answer to Point No.6: Whether the
banks/cooperative societies were negligent or
complicit in accepting a mortgage from persons
who had no ownership or title in the
properties?
32.1. Much has been sought to be made out that the
banks were complicit with Vamana Baliga in
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accepting a mortgage of the property of
Sadashiva Shetty knowing fully well that the
property belonged to Sadashiva Shetty,
mortgage was created in the name of Vamana
Baliga and his associates and therefore,
negligence and or complicity is sought to be
attributed with reference to the banks, by
contending that the bank has accepted a
mortgage from persons who did not have
ownership or title to the property, some of the
aspects relating to this point have been dealt
with in answer to Point No.5.
32.2. Suffice it to say that Vamana Baliga being a
power of attorney, being authorised to act on
behalf of Sadashiva Shetty, the original
documents being available with Vamana Baliga.
Those documents have been deposited with the
bank. What the bank was required to do was
only to see if the original documents are made
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available to it and an intent to create a
mortgage by way of such documents. These
aspects are established categorically by the
manner in which the130ortgagee has been
created. Whether Sadashiva Shetty was a
member of the cooperative society or loan was
taken in the name of Sadashiva Shetty or
Sadashiva Shetty was a guarantor of the loan
or not would lose their significance when an
agreement of sale with power of attorney have
been executed in favour of Vamana Baliga; the
entire sale consideration has been received by
Sadashiva Shetty, the original documents
available with Vamana Baliga have been
deposited to create a mortgage by way of
deposit of title deeds. These aspects having
been looked into by the bank, I do not find any
negligence or complicity on part of the bank.
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32.3. A bank would be interested in securing its
interest by way of mortgage which the bank
has done in the present matter. Thus, I answer
Point No.6. by holding that the banks / co-
operative societies cannot be said to have been
negligent and or acted in a complicit manner by
accepting mortgage from Vamana Baliga. There
being a right with Vamana Baliga under the
power of attorney to mortgage the property,
the original documents having been deposited,
a valid mortgage has been created in favour of
the banks / co-operative societies.
33. Answer to Point No.7: Whether the auction
sales dated 15.12.2004 (Mangala Society) and
20.09.2007 (Janatha Society) and their
confirmations are valid and legally sustainable?
33.1. The auctions have been carried out by issuing
public notices except to contend that the
mortgage is not valid, there is no other
infirmity which has been pointed out in the
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process of the auction which has been
conducted and the confirmation of the sale.
33.2. Without any lacunae being pointed out and or
any infirmity or violation of a particular
provision of law, the auction sale, if conducted
in a proper manner, would be valid and binding
on all. In that view of the matter, I answer
Point No.7 by holding that the auction sale
dated 15.12.2004 conducted by Mangala and
auction sale dated 20.9.2007 conducted by
Janata / Abhyudaya and the subsequent
confirmation of the auction are proper and
valid.
34. Answer to Point No.8: Whether the execution
proceedings under the Karnataka Co-operative
Societies Rules, 1960, were conducted in
compliance with Rule 34?
34.1. Rule 34 is reproduced hereunder for easy
reference:
3. Application for execution to the Recovery
Officer.- (1) Every decree-holder requiring
execution of a decree under the provisions of
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clause I of Section 101, shall apply to the
Recovery Officer within whose jurisdiction the
judgment-debtor resides or has property and
shall deposit the probable cost of execution as
may be fixed by such officer.
(2) Every such application shall be made in the
form specified by the Registrar and
shall be signed by the decree-holder. The
decree-holder may indicate whether he wishes
to proceed against the immoveable property
mortgaged to the decree-holder or other
immoveable property or to secure the
attachment of moveable property. Where he
wishes to proceed against immoveable property,
he shall give in the applications such description
of the property as is sufficient for its
identification.
In case such property can be identified by
boundaries or numbers in a record of rights,
settlement or survey, the specification of such
boundaries or numbers and the specification of
the judgment-debtor's share or interest in such
property to the best of the belief of the decree-
holder and so far as he has been able to
ascertain, shall be given in the application.
(3) On receipt of such application, the Recovery
Officer shall verify the correctness and
genuineness of the particulars set forth in the
application with the records, if any, in the office
of the Registrar and prepare a demand notice, in
writing in duplicate in the form specified by the
Registrar, setting forth the name of the
judgment-debtor and the amount due and
forward it to the Sales Officer. In case the
execution is against immoveable property, the
amount shall include the expenses, if any, and
the batta to be paid to the person who shall
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serve the demand notice, the time allowed for
payment; and in case of non-payment, the
particulars of the immoveable properties, if any,
to be attached and sold or to be sold without
attachment as the case may be:
Provided that where the Recovery Officer is
satisfied that a judgment-debtor with intent to
defeat or delay the execution proceedings
against him is about to dispose of the whole or
any portion of his property, the demand notice
issued shall not allow any time to the judgment-
debtor for payment of the amount due by him
and the property of the defaulter shall be
attached forthwith.
34.2. Though it has been contended that the
execution proceedings under the KCS Act and
KCS Rules, more particularly in terms of Rule
30 and Rule 34 have not been conducted in a
proper manner, there is nothing which has been
placed on record to substantiate the same. Rule
34 only provides for every decree holder
requiring execution of a decree to apply to the
recovery officer and the manner in which the
recovery officer is to take up the application
and register it.
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34.3. As indicated supra, there is nothing which has
been placed on record indicating non-
compliance with Rule 34, the burden and onus
of proof lying on the person who alleges that
the procedure has not been followed.
34.4. The decree having been passed, execution
proceedings were initiated, and no fault can be
found in relation thereto. Hence, I answer Point
No.8 by holding that the execution proceedings
initiated under Rule 34 of the Karnataka
Cooperative Societies Rules, 1960 are proper
and correct.
35. Answer to Point No.9: Whether the purchasers
derived any valid title to the properties through
the execution sale?
35.1. A mortgage having been validly created,
proceedings having been taken up under
Section 70 of the KCS Act, 1959, an award
having been passed, the same having been
brought in execution, and in the execution,
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auction having been conducted under which the
purchaser has purchased the property, in
pursuance of which, sale deeds have been
executed in favour of the purchaser, can only
lead to a simple categorical finding that the
auction purchaser would derive a valid title over
the properties which are brought to auction.
35.2. Hence, I answer Point No.9, by holding that the
auction purchasers in the present matter have
derived valid title to the properties subject
matter of the execution sale.
36. Answer to Point No.10: Whether Section 60 of
the KCS Act prohibits loans to non-members,
and if so, whether the loans in question are
contrary to the Act?
36.1. By referring to Section 60, it is sought to be
contended that a loan has been made to
Vamana Baliga and not to Sadashiva Shetty
and the mortgaging of the property of
Sadashiva Shetty could not have been done
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since Sadashiva Shetty was not a member of
the society.
36.2. Section 60 is reproduced hereunder for easy
reference:
60. Restrictions on loans.- (1) A co-operative
society shall not make a loan to any person
other than a member:
Provided that a co-operative society may make
loans to another co-operative society.
(2) Notwithstanding anything contained in sub-
section (1), a co-operative society may make a
loan to a depositor on the security of his
deposit.
36.3. A perusal of Section 60 would indicate that a
cooperative society shall not make a loan to
any person other than a member. In the
present case, the loan has been advanced to
Vamana Baliga who admittedly is a member of
the society. The security which has been
offered for the said loans, are the properties of
Sadashiv Shetty. There being no dispute that
the loan has been granted to a member,
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Vamana Baliga, the question of invoking
Section 60 would not arise.
36.4. A member of a Cooperative Society can borrow
a loan under the security of a property even
though the same may not belong to him.
Collateral security could be offered in respect of
the said loan. In the present matter, as
observed supra, a mortgage by way of deposit
of title deeds has been created. On the security
of which, a loan has been granted to Vamana
Baliga, and his associates, who are members of
the Cooperative Society. There is no embargo
under section 60 for such a security being
provided, the embargo is only on who the
borrower can be and not as regards whose
property can be given as security.
36.5. Thus, I answer Point No.10, by holding that
there is no violation of Section 60 of the KCS
Act 1959, the loan which has been sanctioned
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in favour of Vamana Baliga, he being a member
of the Cooperative Society, is proper and
correct. Mortgaging of a property of a person
who is not a member of the Cooperative
Society would not take away the right of the
Cooperative Society to sanction a loan in favour
of the member by taking on security of a
person who is not a member.
37. Answer to Point No.11: Whether the provisions
of Section 33 (regarding the charge on the land
of members) were complied with by the
borrowing parties and the societies?
37.1. References is made to Section 33 of the KCS
Act, 1959 to contend that the borrower has to
make a declaration as to whether he owns the
land, he is a tenant of the land, as regards the
nature of his rights on the property, etc., and
on that basis, it is contended that Vamana
Baliga and his associates ought to have made a
declaration that the property did not belong to
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them. No such declaration having been made,
Section 33 has been violated.
37.2. Section 33 of the KCS Act 1959 is reproduced
hereunder for easy reference:
33. Charge on land, owned by members or
held as tenants by members borrowing
loans from certain co-operative societies.-
(1) Notwithstanding anything contained in this
Act or in any other law for the time being in
force,--
(i) any person who makes an application to a
co-operative society of which he is a member for
a loan shall, if he owns any land, or holds any
land as a tenant make a declaration in the
prescribed form. Such declaration shall state
that the applicant thereby creates a charge on
the land owned by him or on his interest in the
land held by him as tenant and specified therein
for the payment of the amount of the loan which
the society may make to the member in
pursuance of the application and for all future
advances, if any, required by him which the
society may make to the member as such
member subject to such maximum as may be
determined by the society together with interest
on such amount of the loan and advances;
(ii) a declaration made under clause (i) may be
varied at any time by a member with the
consent of the co-operative society in favour of
which such charge is created;
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(iii) no member shall alienate the whole or any
part of the land or any interest of his in the land
specified in the declaration made under clause
(i) or varied under clause (ii) until the whole
amount borrowed by the member together with
interest thereon is paid in full:
Provided that standing crops on any such land
may be alienated with the previous permission
in writing of the society; [Provided further that it
shall be lawful for a member to mortgage such
lands or any part thereof in favour of the State
Government or an Agricultural and Rural
Development Bank.
Provided also that if a part of the amount
borrowed by a member is paid, the co-operative
society with the approval of the financing bank
to which it may be indebted may, on an
application from the member, release from the
charge created by the declaration made under
clause
(i) or varied under clause
(ii), such part of the land or of the interest in
the land specified in the declaration as it may
deem proper, with due regard to the security for
the balance of the amount of loan outstanding
from the member.]
(iv) any alienation made in contravention of the
provisions of clause (iii) shall be void;
(v) subject to the prior claims of the
Government in respect of land revenue or any
money recoverable as land revenue and the
prior claims of any person in whose favour
alienation of the land or interest in such land
has been effected and duly registered, before
the date of the grant of the loan by the society,
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there shall be a first charge in favour of the
society on the land or interest in the land
specified in the declaration made under clause
(i) or varied under clause (ii) for and to the
extent of the dues owing by him on account of
the loan.
(2) Notwithstanding anything contained in
(i) the record of rights maintained under the
said Act shall also include the particulars of
every charge on land or interest in land created
under sub-section (1);
(ii) the co-operative society in whose favour a
charge is created under sub-section (1) shall
communicate the particulars of the charge, and
when the loan is discharged, the cessation of the
charge, to the Deputy Commissioner or the
prescribed officer and he shall cause necessary
entries to be made in the record of rights;
(iii) the State Government may, by notification
in the official Gazette, make rules to carry out
the purposes of clauses (i) and (ii).
Explanation.--For the purpose of this section,--
(1) ‗land' shall mean land to which 1
(2) ‗co-operative society' shall mean a co-
operative society of which majority of the
members are agriculturists and which is,--
(a) a credit society the primary object of which
is to obtain credit for its members; or
(b) any other class of society specified in this
behalf by the State Government by general or
special order
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37.3. A perusal of clause (1) of subsection (1) of
Section 33 would only indicate that the same
applies if a person who makes an application to
a cooperative society, of which he is a member
for a loan, if he owns any land or holds any
land as a tenant, make a declaration in the
prescribed format and when such a declaration
is made under clause (3) of subsection (1) of
Section 33, the said land cannot be alienated.
Section 33 applies in a situation where there is
no mortgage which has been created, and the
borrower has to make a declaration about the
lands owned by the borrower and undertaking
that he would not alienate the property. The
second proviso providing that even if such a
declaration has been made, such a member
could mortgage the lands in favour of the State
Government or Agriculture and Rural
Development Bank. This is a salutary provision
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which has been brought about to enable
agriculturists to avail of a loan on a declaration
that they would not alienate the land but also
receive loans from the State Government.
37.4. The same does not apply to a mortgage of a
property since what is contemplated under
Section 33 is only a declaration. In the present
matter, there being a mortgage of the property
by way of deposit of title deeds, Section 33
would not be applicable to the present matter.
Hence, I answer Point No.11 by holding that the
provision of Section 33 are not applicable to the
present matter. Hence, the question of
compliance with the same would not arise.
38. Answer to Point No.12: Whether the appellate
and revisional authorities under Sections 101
and 108 of the KCS Act failed to consider the
legal infirmities in the underlying mortgage and
auction proceedings?
38.1. Though it has been contended that the
appellate and the revisional authorities have
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failed to consider the legal infirmities of the
mortgage, I have dealt with all the aspects
relating to mortgage in answer to the various
points raised above. Even the appellate and
revisional authorities have considered the fact
of a mortgage by way of deposit of title deeds
having been made and the auction proceedings
have been taken up. It is those aspects which
are material to the present matter. Be that as it
may, the other incidental aspects which have
been raised by the petitioners have also been
dealt with hereinabove. Those incidental
aspects have been raised only to confuse and
confound the matter and as indicated supra the
petitioners even after having received the
entire consideration have sought to assert right
over the property which they do not have any
right over.
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38.2. The entire family having sold the entire
property, the petitioners have tried to in a
dishonest manner usurp the property
purchased by the auction purchaser in an
auction at the market value of the said
property. Hence, for all the reasons as indicated
by the appellate and revisional authorities as
also that indicated by me in the present matter,
I answer Point No.12 by holding that the
appellate and revisional authorities under
Section 101 and 108 of the KCS Act, 1959 have
considered all the allegations which have been
made, by the petitioners. The mortgage being
valid, the auction conducted is also valid and
there is no infirmity in the same.
39. Answer to Point No.13: Is the challenge to the
awards, auction sales, sale confirmations, and
orders of the appellate/revisional authorities
barred by limitation?
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39.1. The events are not in dispute inasmuch as the
agreement of sale, execution of power of
attorney and payment of the entire sale
consideration occurred between the year 1994
to 1997. The entries in the revenue records
were made in the year 1999-2000. The loan
had been availed in the year 2000. The right of
the banks were entered in the revenue records
in the year 2000. Default on the loan amount
having occurred in the year 2001, proceedings
were initiated. An award/decree had been
passed in the year 2003. Auction was
conducted and confirmed in the year 2007. A
suit had been filed by the petitioners in the year
2009 which came to be subsequently
dismissed, and it is thereafter that an appeal
had been filed in the year 2013 which also
came to be dismissed on 13.2.2014. A revision
petition was filed which came to be dismissed
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on 2.9.2021 and thereafter, writ petitions were
filed on 14.12.2023 which were withdrawn on
5.8.2024 and the present writ petitions have
been filed on 17.9.2024.
39.2. From the above sequence of events, it is clear
that the entries made in the year 1999-2000
were not challenged. The decree/award, which
had been passed in the year 2003 was finally
challenged in the year 2013 after the auction
having taken place and the sale had been
confirmed. The said appeal having been
dismissed on 13.2.2014, the revision petition
that was filed came to be dismissed on
2.9.2021. Thus, between the decree to the
appeal, there is a gap of 10 years, between the
sale confirmation and appeal there's a gap of
six years, between the dismissal of the revision
petition and filing of the first set of writ
petitions the gap of two years and with the
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second set of writ petition it is more than three
years.
39.3. What is required to be seen is the limitation
period for filing of the appeal which under
Section 105 of the KCS Act, 1959 is 60 days
and for filing of a revision is 180 days in terms
of Section 108. Insofar as the writ petition is
concerned a writ petition would have to be filed
within a reasonable period of time otherwise
the petitioner would be held to be guilty of
acquiescence and latches. In the present case
revision petition having been dismissed in the
year 2021; one set of writ petition having been
filed and withdrawn the present petition having
been filed in the year 2024 is in my considered
opinion only to wake up dead issues. The award
having been passed in year 2003 and the sale
had been confirmed in the year 2007 and
thereafter, the auction purchaser having put up
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construction of multi-storied residential dwelling
units after obtaining permission from all
concerned authorities as could be seen from the
documents which had been produced by
respondent No.10 including the photographs as
also taking into consideration the newspaper
publications and caution notices issued by the
petitioners would only indicate that the
petitioners have sought to abuse the process of
this Court to try and coerce the auction
purchaser to come to the terms of the
petitioners.
39.4. This Court cannot allow itself to be used and
the process be abused in such a manner for the
purpose of settling scores by private litigants.
The present petition is hopelessly barred by
limitation as also petitioners are guilty of
acquiescence and latches and abuse of the
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process of this Court as regards which costs
would have to be imposed.
39.5. I answer Point No.13 by holding that the
challenge to the award, auction sale, sale
confirmation and the orders of the appellate
and revisional authorities is apart from being
barred by limitation, the petitioners are also
guilty of acquiescence and latches.
40. Answer to Point No.14: What order?
40.1. In view of my finding on all the above points,
there are absolutely no merits in the present
matter and as held supra, the present writ
petitions are an abuse of the process of Court
and as such I pass the following:
ORDER.
i) Writ petitions are dismissed.
ii) Petitioners would be liable to make
payment of cost of Rs.2 lakhs payable to
the Karnataka State Legal Service
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Authority within a period of 30 days from
the date of receipt of a copy of this order.
In the event of such payment not being
made, KSLSA would be free to enforce this
order for recovery of the costs as arrears
of land revenue.
iii) Registrar (Judicial) is directed forward a
copy of this order to the Member Secretary
KSLSA for necessary action.
SD/-
(SURAJ GOVINDARAJ)
JUDGE
LN,PRS
