(R)
IN THE HIGH COURT OF
AT BANGALORE j_
Dated this the 13"? day Q£ANe\4rem-bet'
BEFORIE: I I I _ _ .
THE HON'BLE MR JUs'm;_1s: DOV "
Writ Petition No. 291%? 2902;
BETWEEN A
1. C JAGADISH
s/0 LATE _ - '
for Petitioner;
__ "K_ Ra11};1eI:a11cIra1"1,« ..A;I\_r as Amieus Curiae]
AND
1 . KAR;_\iA:m1{A. SI'l"A'I'EI
AN'D"OTI-IERS RESPONDENTS
I I 'IE';-3r,_MI/s. Rudragowda, Gururaj Joshi
and Anitha. Advs. for R1 & R2;
Sri B M Siddappa, Adv. for R3]
._ IS FILED UNDER ARTICLES 226 AND
227 OF '~CONS'l'ITUTiON OF INDIA PRAYING TU QUASH THE
_ LEGAL JNOTEICE DT. 22/27-02-2002 ISSUED BY THE 13'?
4 we RESPONDENT TO THE 2ND PETITIONER AS PER ANN EXURE-E AND
I PETITION IS COMING ON FOR FURTHER ORDERS,
' DAY, THE COURT MADE THE FOLLOWING:
3.». ,4'
DVSKJ: W.P.NO.29182/2002
13.1 1.2009
ORDER
This is a story of the suffering of
borrowers from the KSFC who .particnIarigf’;V dd”
they are belonging to the lowerzstrata of
and reveals as to what.rc4’p””~~3{indV’ of –..phvar’aVssment, ”
humiliation and disas_tro1its'”f’1n:anei_a1 consequences
are heaped on them, are a}.–17’Ve:’_3(_ttV1ie}1′ ‘demonstrated
in the present “E’?.’~”1 p€:tit.ie&:. at d
2: A__ pers’on_v”whor,_ha_d- a driving licence with the
fond hope’ * of transport vehicle, had
bor.r§fifedV a” of Rs.5.66 laiihs from the
‘res’por1dent§:C’corporation on 20.12.1996 under the
scheme mooted by the
V’-.Corpo’1″_ation.
‘ The petitioner-borrower had made an initial
T “investment of Rs.2,34,000/- for the purchase of
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(41
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chassis of Ashok Leyland Lorry and the balanee was
funded by the Corporation by funding
self–en:1ployment scheme and it is the
petitioner that the petitioner”
expenditure of Rs.1,53,0002;;__
body on the chassis and for’
transport operatioyi 1. of the
Vehicle. if 0 if 0 if if if
4. It_ was unable to
of the loan as
per the had defaulted in making
payment’ a. fewl’in’st;alments, which gave cause for
the’}’«:.Corporati’on. ….. to re–possess the vehicle and
i1l:ti’:navteiy}’~ Vehicle itself was sold on 09.04.2001
forga ‘of Rs.2.80 lakh after going through a
farcela procedure for notifying the public at large
the Vehicle in an open competition/ auction.
-~-Tlhis is the allegation of the petitioner against the
a/
respondent Financial Corporation as an
advertisement on 15.02.2001 about the sale of such
seized vehicles was carried out in a non~vde:seript
vernacular newspaper by the name _
published at Chitradurga, the pplace oft
and the mainstay of which newspaéper
only such advertiseinvents the-0′
Corporation. 0
5. The even after
adjustin’g”Atlf1ve the Vehicle, which
according had been undersold. as
thegversioln the ‘petitioner is that the Vehicle was
. less Rs.6 lakh on that day, even as
by the Insurance agency, the
loan having not been cleared, the
it Corporation took steps to realize the balance, which
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according to the Corporation was a sum of
Rs.2,36,:’543/~ as on 09.04.2001.
6. With the only source of
with the petitioner and
person, having been lost; “eras
petitioner generating any 0′ the
balance instalments’..V:é’and.__ while the
arnount reniained according
to the merrily went
already bruised borrower
with interest,’ penal interest and
wh.-fa.’i;’v not interest swelled the amount to a sum
on 30.04.2002 and recovery
~pi:oceedi’ngsg’v{rere resorted to by the Corporation for
reaiizaiion of this amount by enforcing the surety
itaki.ng recourse to enforcement of the amount on
the surety and it is at this stage, the petitioner has
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approached this Court by filing the above
W.P.No.29}_82/2002 contending inter alia that the
respondent–~Corporation has taken the petition:eI’.for
a ride; that though the petitioner had
total sum of Rs.6,91,’7i9/– ”
Vehicle as sold by the Corpora’tion_”for
), the Corporation any
unreasonable dem.and»='”” = ‘*2. _ pp repayment of
Rs.5,83,835/– and i it therefore, for the
fouowmg
1. issue “ceItioI9ari by quashing the legal
n(mi¢ei dated.iA22f2’7}o2.2oo2 issued by the first
respondent tolthie second petitioner/ surety;
Issu”e._ a in the nature of mandamus
the second respondent to consider
petitioners representation dated
..2’V?,.OZl.2002 by the Waving simple and penal
overdue interest at the rate of 22.5% and 30%
respectively p.m.;
7,.
3. issue writ in the nature of declaration,
declaring the sale of the vehicle Ashok Leyl,and
Truck bearing No.KA-166825
respondent in favour of the third
illegal and void; it t
4. And pass such other ord’ers:1’of:
7. This writ petition the’
Corporation on amongst
which is thgiiggi nature is not
tenable under Articles
226 of India, even in
termlsolf by the Hon’ble Supreme
Court as”pe’r .th.eljud~grnent in the case of GUJARAT
– _ rFi3\iANc1;AL l””C’ORPORATlON vs. LOTUS
etc. (AIR 1983 so 848).
Writ petition is taken up for scrutiny and
received consideration at the hands of this
id ~. _.;§Court for quite sometime, mainly for the reason that
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when once the Corporation has taken over the asset
of the borrower which was an income producing
asset and by working it the borrower
repaid the amount and in fact, because
selling it in a so-called iv
according to the petitionier isllaglxain
under-sale only resulting’ borrower,
Whether the Corpol£atiopn%.:_»’A it after that
continue to4_:’rnulct”‘ interest,
compound etc., on the
pre1nise–. is not realized even after
sale of .re~posses.sed asset and it is such an
of Rs;2.,..3.6’,543/– said to be due as on that
has now swollen to a sum of
said to be the amount outstanding
as on.V_.l’l3O.09.2OO9 as per a memo placed before this
today by the Corporation.
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9. This is as per the intimation issued by the
Corporation in the context of a suggestion
the Court, when the Corporation
there are certain governmer1_ta1.__sch.e’rnes’.’;V
available, for extending V
borrowers and as per 1
placed along with which
is placed before to which is
rrirriunicated by the
attached sheet “c
Corporation:-«lwionan to the
borroyver, borrower that he should pay
a sum along with a VAT liability of
._ :’Co’rporation, While is inclined to close the
loan of the petitioner as fully paid, if the
2 » ipetitioner should pay the amount now, would at the
‘same time seek further instructions from the
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borrower as to the manner in which a sum of
Rs.1.29 lakh which is- due to the borro4WVeii:’_:”and
which is in deposit in an account
account in the very Banlg: can
proceeds paid or otherwise
Coflloration will take lave
etc. This communic4ation;;h’it followed
by a further that action
in persuaded for
recoveryo.f0V0,25,739.82/*~, if the
b01.1.€}vWe1._00 -0 comply with the
possibillity/pajnnlent»:’:_”..* has indicated in this
n coIi3..n1§.inicat:ionV.. ….. _. e
copies of the memo and
coriinitinications is attached a Government
ip’r’oceedings of the Government of Karnataka in
‘V’No’.0AE:56:GFC 2009, Bangalore, dated 26.09.2009,
ll
10
extending concession in the matter of rate of
interest to borrowers falling in different ca._te_éoi’.ies
such as those who have borrowed
in (249) Category, in between
Er? category and between:lanidV
Q category etc.
12. The available to a
borrower in terms out by
the corp:oiettiorili3c;ii the petitioner-
being a borrower
of a Rs.5 lakh and Rs.lO
lal<;l'1."
_ 11.1.3.:.4Mr.’Ramachandra, learned Amicus Curiae,
‘tor the petitioner–borroWer, points out
no that the classification of the petitioner as 9hLcategory
it tlalso wrong; that even as admittedly if the
l V’ “borrowed amount which was the outstanding
lél
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amount based on which further calculation was
made was Rs.2,36,543/~ as on 9.4.2001,p–“‘~.after
selling away the re~possessed
borrower and this is shown as
amount on the date of sale
the purpose of this notifi’ca_tion’*of’ the
this amount of taken
to be the initial borrower fitted
into(g%/fl’.:l’.\4l) categojiy the rate of
interest to borrowing should be
exteridecj’ in this’ cornputation/ premise.
4:. ., learned Counsel appearing
theWCAorporation along with Ms.Anitha.
that the categorization is not based
0:1” theasubsequent outstanding , but on the original
etc., I am of the opinion that for the present
purpose, it can definitely be taken to be the amount
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outstanding, starting with the year 200}, as the
Corporation had already worked out its remedies by
then, and it is on the outstanding amount of
Rs.2,36,543/», the present
Rs.6o,25,739.s2 has been worked up.rrrj!l_ ‘
15. Smt.Anitha, Counsel Zinplaces
court a memo dated 13. 1″
are 8152
1. A letterj-was petitioner on
2:1;e1o.2o09,f~.._’
2; In pursrijanc–e_ll”of~*’the order passed by this
Honivble. Co’urt;e, details are furnished to
_ the e.petitioner, and also informed to avail
the b’e\n_e_fit of Government order. The
:’p]iab._ility is Rs.60,25,74.-0/~ as on
_ ‘-._lo’7.rry11.2009. Awaiting the benefit of the
«llfrovgernment order, petitioner required to
V. Rs.5.55 lakhs and VAT Rs.69,375/~~.
. The amount of Rs.1.29 lakhs paid by
1’ petitioner is kept in A R P A and that
amount would be deducted from Rs.5.5
lakhs. Petitioner also served along with
copy of letters and order.
Copy of Government order.
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16. While this is an option open tosgthe
Corporation to work out on such
indicate to the petitioner as to
amount that has to be paid’
taking advantage of and
settlement of they by
Ms.Anitha, learned? for the
Corporatio3§;;..t;here as to Why
the Corp’oV1’atio’ii”:V’ii_s: adding VAT liability
of on a scaled down
amodnt: V on the borrowing in terms
of 4;L’he_ s¢heme, levy of tax under the VAT is
anly olnmsale of goods and by no stretch of
._iina;gi11a§i_on””or wisdom one can understand the
logio jtistification for treating a borrowing from a
2 ifinanolial institution or any loan facility extended by
IS”
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‘ the Bank to a borrower, to be in the nature of sale
of any goods.
17. Be that as it may, even it is
the Counsel that their
to their counselling
responsible Officer of to be
present come Hlerrplain the
rationale of the” the habit of
heaping pa borrowers.
4′ “the” irrational approach and
aCtiQnSVVV”Q1:’i the Financial Corporation,
wh’at;_sho_cks one7.s«’conscience and sensitivity is, and
taken aback, that a small time
is selfmemployed and who has sought
ii for some financial assistance from the Corporation
A’ who has already been heaped with misery and
C V “harassment by re–possessing and selling away of
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the vehicle for the purchase of which the
Corporation had financed, the Corpora’tionL:’._V_is
coming up with the version that E ‘
Rs.2,36,5-43/– outstanding C”
swollen to
borroWer/ petitioner is ‘pay ad”
total sum of Rs.60,2:”:’:x.,_7 due
in terms of the and that an
amount of “‘o–utstanding as on
interim orders
passed in and matter pending
before this $2002 and Corporation now
up \i\fit1i…a._.v”ersion, which is, to say the least,
:.Corporation has shown such temerity and
place before this Court that an amount
of’ Rxs…A2,36,543/~ outstanding as on 9.4.2001 can
to a staggering amount of Rs.60,25,739.82/-
C it ” “Within eight years or so.
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19. If such is the rate of interest the
Corporation is charging on its borrowers, X dognot
think any borrower carrying on any
activity on any legitimate lines can _
with interest rates of this
most of the borroWers»’o.f__
defaulting and many of xyhen the
Corporation resorts proceedings
using its statutory
_ pfiiposed of” oomputing the amount
payabAIe__ by for the Corporation to
close” the ‘acco’unt as fully paid / satisfied by the
‘hor1*o1i&ierV;4A”«-the Corporation is further directed to
‘dedu”ot’a”theV’.;;.Si.im of Rs.4,00,000/– deposited by the
petitioners. with the Corporation as per the interim
A order passed by this court on 30.8.2002, and by
Cédeducting this amount from the outstanding
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balance of Rs.2,36,5-4-3/~ as on 5.4.2001 and
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treating the outstanding capital amount
date of deposit of this one Iakh to be Rs;
and compute interest on this .arnotunt,”‘:
even in terms of the scheme refer’;_ed to”a1f>oVe. ”
21. This apart: it is from
the Corporation amounts
were outstafldjm-Q the overall,
as on and as to the
has realised such
outstar1ding this date which amount
was due to the ‘Corporation till now and if any such
C ‘aiinoigrit Wi1iCh was an amount due on this day has
fzrepaid till today, as to how such
outstandyiéng amount has worked out in the present
A 57 and the Corporation is directed to furnish such
‘factual information before this Court for
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appreciating the manner in which the Corporation
is functioning and as to Whether the Corporatio_11._pVis
adopting a uniform and fair method
transactions, as to Whether I-arfair” “ll
treatment is meted out
particularly the Corporation:”being’* the!’
meaning of Article’ to explain
its conduct and when the
query is, :su.e’h”””i’questions. The
CorpQratiAon::”i1§s: to place before this
Court»y’tl’ie / outstanding amounts
Which, off as bad debts and as
i:r,fieeoy.ei’ableA’ during the past eight years, i.e.
1.
, 2e2..’$(3orporation to place all these materials
A iblefore this Court within a reasonable time and
. though Ms.Anitha, learned Counsel would seek for
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two to four weeks, they are given six weeks time
from today to place all that material
apprise the petitioner, in the meanWhile3_..l’_:as’:
precise amount has to be paid.
the loan amount for OTS is on
that the borrower falls “riot
category, and by of: interest
waiver/ concession ‘AA–l.:éz(__3l.l-n1eII1€3 of the
Governmen_tlai.rd in this order.
It is ayail this facility and
to clear’– Without prejudice to his
contentionlsvrin petition and without waiting
fofiarry perrrlission or orders by this court on this
lthiepfmatter.
.. a copy of this order to the learned
A x_Clot_1nse1 for the Corporation and the Registry is
gciirected to forward copies of this order to the
ax
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Managing Director, Karnataka State Financial
Corporation and to the Principal Secretary..VVto_:’ithe
Government of Karnataka, Finance
also the Chief Secretary.
24. This Court may to
desirability of it State
Government the Corporation
itself, if the its borrowers
for a borrowers with
on the borrowings,
resu1lii1’1:g” ill harassment to small time
borrowers’; off loans availed by big
,’ ‘borro”w*ers”..by treating their loans as irrecoverable,
xsti_cl:1’~,”actions and management rather
milsrnanagement of the affairs of the Corporation is
x_dlefi,nitely detrimental to the larger public interest
léand particularly as the Corporation is funded and
V. ..
&§\
started with an initial investment by public funds
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drawn from the State Exchequer.
Registry to furnish copies of this ordier
cost to the Amicus Curiae.»~~aappearin§:’.jV “‘
petitioner, to the learned
Corporation and also to for§V’ard ha ‘cop.yj’veaeh”to: the”
Principal Secreta1jf’;~..é_ of” “Finance,
Government of :jChief Secretary
to ” forthwith for their
tievelopments in the
management of7§ 5t:§_.§’e Corporations
and also for remedial
n1eas1_;re._s_ farti”ier___.oorders by this court.
Sd/~
JUDGE