[Cites 1, Cited by 0]
Karnataka High Court
Corporation Bank Ltd vs Kingswood Suppliers Pvt Ltd on 6 January, 2026
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WA No. 3680 of 2019
IN THE HIGH COURT OF KARNATAKA AT BENGALURU
DATED THIS THE 6TH DAY OF, JANUARY, 2026
PRESENTS
THE HON'BLE MR. JUSTICE JAYANT BANERJI
AND
THE HON'BLE MR. JUSTICE UMESH M ADIGA
WRIT APPEAL NO. 3680 OF 2019 (GM-RES)
BETWEEN:
1. CORPORATION BANK LTD,
A PUBLIC SECTOR SCHEDULED
COMMERCIAL BANK,
HAVING ITS REGISTERED OFFICE AT
MANGALADEVI TEMPLE ROAD,
PANDESHWAR,
MANGALORE-575 001,
AND HAVING ITS CORPORATE
BANKING BRANCH AT,
BHARATH HOUSE, # 104
GROUND FLOOR, MS MARG,
MUMBAI-400 023,
NOW REPRESENTED BY C MOHAMMED,
AUTHORIZED REPRESENTATIVE.
2. ORIENTAL BANK OF COMMERCE,
A PUBLIC SECTOR SCHEDULED
COMMERCIAL BANK,
HAVING ITS REGISTERED OFFICE AT
HARSHA BHAWAN, E-BLOCK
CONNAUGHT PLACE,
NEW DELHI-110 001.
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WA No. 3680 of 2019
AND HAVING ITS LARGE CORPORATE,
BRANCH AT
MAKER TOWER, F-WING,
14TH FLOOR, CUFFE PARADE,
MUMBAI-400 005,
NOW REPRESENTED BY
MR.C.RAMACHANDRA RAO,
CHIEF MANAGER - LAW AND
AUTHORIZED REPRESENTATIVE.
3. BANK OF BARODA,
A PUBLIC SECTOR SCHEDULED
COMMERCIAL BANK,
HAVING ITS HEAD OFFICE AT
SURAJ PLAZA 1,
SAYAJI GUNJ,
BARODA-390 005.
AND HAVING ITS
CORPORATE FINANCIAL SERVICE
BRANCH AT 4TH FLOOR, 10/12,
MUMBAI SAMACHAR MARG,
HERNIMAN CIRCLE, FORT,
MUMBAI-400 001.
NOW REPRESENTED BY
MR.DINESH BHARDWAJ,
AUTHRIZED REPRESENTATIVE
...APPELLANTS
(BY SRI.CYRIL AMARCHAND MANGALDAS, ADVOCATE)
AND:
KINGSWOOD SUPPLIERS PRIVATE LIMITED,
(NOW KNOWN AS KINGSWOOD
INDUSTRIES PRIVATE LIMITED)
HAVING ITS REGISTERED OFFICE AT
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WA No. 3680 of 2019
NO.400, 1ST FLOOR, 1ST BLOCK,
2ND MAIN ROAD, R.T. NAGAR,
BANGALORE-560 032,
REPRESENTED BY ITS DIRECTOR
MRS.MUBEEN
...RESPONDENT
(BY SRI.K.G.RAGHAVAN SENIOR COUNSEL FOR
SRI.SIVARAMAKRISHNAN.M.S, ADVOCATE)
THIS WRIT APPEAL IS FILED U/S 4 OF THE KARNATAKA
HIGH COURT ACT, PRAYING TO SET ASIDE THE ORDER DATED
27/06/2019 PASSED IN WRIT PETITION NO.48360/2018
(GM-RES) PASSED BY THE LEARNED SINGLE JUDGE OF THIS
HONB'LE COURT AND CONSEQUENTLY DISMISS WRIT
PETITION NO.48360/2018.
THIS APPEAL HAVING BEEN HEARD AND RESERVED FOR
JUDGMENT ON 10.09.2025, COMING ON FOR
'PRONOUNCEMENT OF JUDGMENT' THIS DAY, JAYANT
BANERJI J., DELIVERED THE FOLLOWING:
CORAM: HON'BLE MR. JUSTICE JAYANT BANERJI
AND
HON'BLE MR. JUSTICE UMESH M ADIGA
CAV JUDGMENT
(PER: HON'BLE MR. JUSTICE JAYANT BANERJI)
This appeal has been filed seeking to challenge the order
dated 27.06.2019 passed by the learned Judge in
W.P.No.48360/2018 (GM-RES). It appears from the record of
this appeal that the aforesaid writ petition was filed seeking a
writ of certiorari for quashing the Letter of Intent (LOI) dated
11.09.2018. A writ of mandamus is also sought for a direction
to issue a fresh LOI, etc. The writ petition was filed by the
respondent herein and the appellants herein represent a
consortium of Banks who are the respondents in the writ
petition.
2. The respondent is a Private Limited Company. It
appears that on 20.03.2018, a meeting of the appellant - Banks
was held wherein it was discussed that the Company accounts
of a Company by the name of Associate Decor Limited
(hereinafter referred to as the Company) with the appellants
are Non-Performing Assets (NPA) since 1 to 2 years and that
company needs to bring in about Rs.186 Crores to upgrade the
accounts and in the absence of any concrete plan proposed to
the Company, the appellant - Banks decided to initiate for sale
of the pledged shares of the Company by inviting Expression of
Interest (EOI).
3. Accordingly, a notice was issued and EOI from
investors was invited to submit their offers on or before
21.04.2018 for taking over majority equity stake along with
management control in the Company. The stake was for the
sale of 73.71% equity of the aforesaid Company - Associate
Decor Limited. The respondent submitted its EOI for purchase
of the equity stake and taking over management control of the
Company. On submission of the EOI, the brief timelines of the
process were finalized with discussion with the consortium
represented by the appellants. Signed copy of a non-disclosure
agreement was also submitted by the respondent who also
remitted a sum of Rs.1 lakh. The respondent also submitted on
18.06.2018, a Resolution plan offer and a refundable Earnest
Money Deposit (EMD) amount of
Rs.5 Crores for acquisition of the equity stake and taking over
the management control of the Company.
4. It is stated that the Company and the majority
shareholders along with majority guarantors had approached
this Court in a writ petition in which an interim order was
passed. During a meeting held on 21.06.2018, the bid was
revised without any pre-condition to the earlier bid offer
submitted on 18.06.2018 and the final bid was submitted by
the petitioner on 13.07.2018. It is stated that a draft of a
share pledge agreement was also exchanged through email.
5. The LOI that was impugned in the petition was then
issued.
6. By means of the order impugned passed by a
learned Single Judge, relying upon the submission made by the
learned counsel for the respondent that the circular of the
Reserve Bank of India dated 12.02.2018 had already been
quashed by the Supreme Court in Dharani Sugars &
Chemicals Ltd. vs. Union of India and others1, which was
stated not to be disputed by the learned counsel for the Bank,
the writ petition was disposed of with a direction that the EMD
shall be refunded to the respondent within a period of three
weeks.
7. It is submitted on behalf of the appellants that the
LOI itself provided that the same had to be accepted by the
respondent within one day, that is by 12.09.2019 without any
condition and by signing the LOI it was further provided that an
upfront amount of Rs.110 Crores was to be deposited in a
designated account within 30 days of the LOI. Since the
respondent failed to accept the LOI within the time specified
and in the manner stipulated, the appellants were entitled to
(2019) 5 SCC 480
invoke the EMD under the relevant clause of the Process
Memorandum which provided for forfeiture/return of earnest
money from the prospective investor.
8. It is stated that proceedings under the Insolvency
and Bankruptcy Code, 20162 were initiated by appellant No.2
before the National Company Law Tribunal3 under Section 7
thereof. It is contended that in the Process Memorandum that
was accepted by the respondent, the fact of filing of the
Company Petition before the NCLT was disclosed. This fact
evinced that the respondent was interested in purchasing the
shares of the Company despite being aware of the pendency of
the Company Petition before the NCLT and had continued to
participate in the officer process. It is emphatically contended
that the decision to invoke the pledged shares was not
pursuant to the circular of the RBI dated 12.02.2018 and that
decision was taken much prior to the notification of that RBI
circular. Therefore, it is stated, the judgment of the Supreme
Court in Dharani Sugars would not apply to the present case.
9. It is further contended that the RBI circular of
12.02.2018 has nothing to do with the invocation of pledge
IBC
NCLT
under the pledge agreements and therefore, quashing of the
said RBI circular by the Supreme Court in Dharani Sugars
would have no bearing on the sale of the pledged shares.
10. Learned counsel for the appellants has placed for
perusal Annexure-B to the writ petition which is the invitation
for Expression of Interest which encloses the process
memorandum in respect of the Company. It is stated that
though reference in the Process Memorandum has been made
to the RBI circular dated 12.02.2018, in the facts and
circumstances of the present case, the said RBI circular has no
bearing.
11. A perusal of the RBI circular of 12.02.2018 that
appears at page 170 of the writ appeal reflects that it pertained
to the revised framework with respect to resolution of stressed
assets. It provided for substitution of the existing guidelines
with a harmonized and simplified generic framework for
resolution of stressed assets in view of the enactment of the
IBC. Sub-heading 'D' of the said circular provided for timelines
for large accounts to be referred under IBC. This provided that
in respect of accounts with aggregate exposure of the lenders
at Rs.20 billion and above, on or after 01.03.2018, including
accounts where resolution may have been initiated under any
of the existing schemes, as well as accounts classified as
restructured standard assets, the resolution plan shall be
implemented in terms of the specified timelines. It is further
mentioned under that sub-heading that for other accounts with
aggregate exposure of the lenders below Rs.20 billion and, at
or above Rs.1 billion, the Reserve Bank of India intends to
announce, over a two year period, reference dates for
implementing the RP to ensure calibrated, timebound resolution
of all such accounts in default.
12. The instant case provides for sale of pledged shares
by the consortium which comprises the appellants herein. The
amount of the sale value of the pledged shares that are sought
to be sold and which was the subject matter of the process
memorandum is well below the sum of Rs.20 billion. As such,
the RBI circular would be inapplicable to the facts and
circumstances of the instant case. Such being the case, the
quashment of the circular by the judgment of the Supreme
Court in Dharani Sugars would have little bearing on the
maintainability of the writ petition aforesaid.
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13. In view of the aforesaid, we set aside the impugned
order passed by the learned Judge dated 27.06.2019 in
W.P.No.48360/2018 and remand the matter to a learned Judge
for consideration. The Writ Appeal is accordingly allowed.
Sd/-
(JAYANT BANERJI)
JUDGE
Sd/-
(UMESH M ADIGA)
JUDGE
KG
