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111 Tim HIGH COURT OF KARHATAKA,
DATED THIS THE 26TH DAY 09' NOVEMBER _
BEFORE
THE HON'BLI3 MR. JUSTICE !!}I(5Ei}K§'«f:'fQ'EV£5I3)j?»?v_:.
WRIT PETYPION NO. s;=}227_ or (G§fi¥K_§FC}§
BETWEEN A C C
SMI' D VIJAYALAKSHIVH _
W/O D DANDAPANI ~
AGED ABOUT S()_YEARS-- _ '
RESIDENT 0E14o.'--17o,; I
MURPHY To§§(N,;5'LsooR' V V
BANGALORE PETITIONER
(By sxim &.A*rMCCAi%s;-)'
AND:C"v_ '' 4' CC
1 THE'L2\aA.~:Ai;1_1§iG% D1}ie'EcToR
_ -THE KEiRNRTAi{A. STATE
.. FINANCIAL-CORPORATION.
'H-EA!) .OFF'ICE, TI-IIMMFLIAH ROAD
C BANe6h0RE
GENERAL MANAGER
KARNATAKA WATE FINANCEAL CORPORATION
IVE-.A(3'r.R"OAD BRANCH, NOA8, I FLOOR
CHURCH STREET, BANGALORE 560 001
C if 3' '@;M/s NODES TECHNOLOGIES
" REGiSTERE{) OFFICE AT 390.6/18
FIRST FLOOR, II CROSS,
CAMBRIDGE LAYOUT
ULSOGR, BANGALORE 8
4 SR! D JAYACHANDRAN
S/O DANAPAL NAIDU
AGED ABOUT 49 YEARS
RESIDING AT rm. 19,
SHAKTHINAGAR, T.'i'. K. COMPOUND SIDE
DOORAVANINAGAR POST
BANGALORE» 16
(By Sxi: B RUDRAGOWDA, ADV FOR R1 &--R2 If )3: ~ _
(BY SMT. K GAYATHRI MALLYA, ADV FOR R3), % _ V :
(BY PR 65 PR A/S. FOR R4) 2 I .
THIS WRIT PETITION Is FILEI5' .1._J N'DER 22:?' »
AND 227 01? THE CONSTITUTION op INi3IA~,PRAY'IIIcI T0 '
QUASH ANX-E EXECUTED BY*'I!_'HE R1 ENDI '2 IPLFAVOUR
OF THE R4 85 VIBE NO, 151 OF.I-SOOK. I DATEDAFRIL 2006
AND DIRECT THE RE' 'AND72 T9.' SETTLE THEIR CLAIM
AGAINST THE PETI'I'i0NEF€--_ EN ; COMPLIANCE OF THE
ORDER PASSED BY THIS HON"~BLE H.IG.I~'i.CQURT IN ANX~A.
THIS ?E%2iIf1*IoNI coLI1NGI'r3N %EfoR PRELIMINARY
HEARING I4N)V'B';II;IGR0UP;:.'I'I-11$ ji'1)AY' THE comm' MADE
THE ,'
ow W
The" p;¢I:ti¢xIer,I owner of certain immovable
for the financial assistance
3rd respondent by the Karnataka State
for short ‘KSFC’ – respondents 1
S&;v:”A’;.Rospondent 3 having become a dc-faulter in
A 5 of monies, KSFC initiated action under Section
V’ of the State Financial Corporation Act 1951, for
. u short the ‘Act’ and issuodnotioe for sale of the secured
asset; belongng to the petitioner which was called in
question in WP 51925/O3. In the said petition, the
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KSFC arraigned as party respondents 1
represented by Sri.B Rudragowda,
whose statement that the 1
was not gven effect to, was andtV.’by’..oriief’;
15.03.2006 Annexure—A, wasagsposea that
as the petitioner tne KSFC,
permitting the
within six H ‘KSt§C for one fime
settlement to the KSFC to
precipitate the matter
unti1tl’A1’en,4′ . t’ A’
2,t:11;% that by letter dtd.25.02.2006
“fiuring the pendency of Writ Petition
51925 /03′; tieie KSFC informed the petitioner that the
‘I-oifered as collateral security was taken over on
“ii invoking section 29 of the Act and was
‘ V. to sale by advertisement in “The Hindu” and
‘Vijaya Karnataka” on 14.0 1.2006 which was responded
to, by two offers to purchase the property and in the
sale negotiated on 16.02.2006, received the highest ofi’er
ti.
\
of Rs.32.6O Lakhs, while calling upon the petition? to
so
inter alia contending that despite giant of
opportunity to the petitioner calling upon her’
one-line ors facility, having not done ‘V
lefi: with no other option but
favour of the 431 respengienf’ Ca u
confirmation letter I’n it is
contended that RP; e%1eg4 firoeeoy KSFC to
recall the ordeljdtd. was
allowed by Anxiexm-e–R4 and the
writ liberty to the
the sale in the present writ
peuuoo’e3{ 12.2006. It is further stated
thaxt_;then.4*h eeepoodem deposited Rs.32.601akhs as sale
which was adjusted towards the amounts
‘eVx’oess of Rs.14.28 Iakhs is lying with the
§ A .k K815i} ,,j M’iec. case 370/05 filed by KSFC invokmg
to enforce the security was withdrawn
o;o%1i.o7.2ooo, in the light of the loan having been fully
up by adjustments out of the sale proceeds. In
paragaphué of the statement of objections, it is stated
that the Indian Overseas Bank filed OS No. 16941/O6
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before the City cm: Court, Mayo Hail,
again’ st the petitioner and KSFC, with ”
restrain KSFC from ref1mding”fhe’ o excess of
Rs.14.00 lakhs and also for “o1_*zdcr
injunction. The City Chm’ ” of V’
temporary injunction’: z A .Cof’fjor:iifion from
refunding the the Indian
Overseas Ba.f1k:’«A;.is said 211/O6 before
the Debt.’ Bangalore against
V was disposed off on
l7.04.§O(§8 “the amount due to the bank
is lyi11g”iiI2é: h:21:i1d?.§’of’.the KSFC and an order under
% k% °*Rg1e’:’2é:~”(c):”o3f._the mom Tax Act, is passed prohibiting
handing over the amounts to the
dofa1flt¢r’af§d that the sale itself being subject matter of
o’%oom>%3c$277/05 and that the prohibitoxy order is subject to
‘ the’ docision in the said writ petition. Liberty was
VT -“mfserved to the bank as an interested party to implmd
themselves in the Writ petition. It is lastly contended
that the Division Bench of this court in the case of
Karnataka State Financial Corporation wvs-T H’
ov9;;<fl
Narasimahaiah & Others reported in 2008 (5) SCC{ 1'i?6,
held that collateral security cannot be "
Section 29 of the Act, which is subjet'-.t. H
challenge before the Apex Court
by an interim order, the Apex in osL;é'e%1'54;23~e
427/zoos permitted the KSF(;u'::s¢e1_I the other
than that of the n new having
thus permitted the Section
29 of the respondent is
fhe petitioner at the very
threshold dismissal of writ pefition,
eeenonsxezés/Q3 _by I'evies.vi11g the order am. 15.o3.2m
"iea subsequent event during the paldency
of and that has not been brought on
emendment of the pleadings. According to
' counsel, the contention that the sale deed
. is in violafion of the order dtd. 15.03.2006
» '4 Annexure—A, is no more availabkz to the petitioner. The
learned counsel for the petitioner places reliance upon
the decision of the Apex (hurt in Narasimahaiah's case
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9. Having heard the learned counsel for
and perused the plwdings, what is
fact that the petitioner being on”e”Aoi”i:he”~.$uretiesV
financial assistance ‘extended A
3111 respflndent, has of V’
bfiflfing to sale the 1. Vviilhhvvquestion,
offered as security by tioubt true that
See. 29 of the’ ‘it: Book was
for the opinion in
that the said
sectioztdtd ‘ixivestillg a jurisdiction in
the State .hCoi’pora1:ion to proceed against a
if properties were mortgaged or
it and that the right of the KSFC in
terms of 29 of the Act, was to be exercised only on
t W H ma d.efat1it’1I1g party. Therefore, a surety or guarantor not
a defaulting party, liability of the said surety or
Vt to repay the loan of the principal debtor
arises only when a default is made by the latter. Thus,
Section 29 did not empower the KSFC to put up for sale,
by public auction, the property belonging to the surety
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or guarantor. The Apex Court having considere:éit.the
effect of Sec.31 of the Act, more appropI’i,gte}3f,’_~ _
(aa; of sub-Sec.(1) of Sec.31 of the ‘V
No.43 of 85, heid that it provides ta
Apex Court further observed” Actgf o
consists of properties of Sec.31
takes within its and
that of the surety provisions
control Z: of the reported
opinioI1_,_.__it .3§ into force of See.
33(g) is Ieit with four
to (2) to take recourse to
29 ;V(3’}~ recourse to Sec.31 and (4)110 take
‘V Sec.32(g) of the Act.
10; é II”1″.the instant case, the KSFC initiated action
31(1)(a), (aa) of the Act, by fi1mg’ Misc.
% ptgtitien 370/05 before the City civil Court to enforce
‘ ” of the petitioner ~– surety and in View of zmvexy
of amount by sale of the immovable property in
question, withdraw the same, which, that action of the
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KSFC is necessarily to be held invalid in the the
law laid down by the Apex Court in
case. In other words the KSFC is entitlezi~»to: 2
proceeding before the Civi} Couirt. i
11. The action of ih’b_fingihugd’:.VtoV’f3sub1icVV
auction the sale of the the
offer of 4th respondentdthe’ acceptance of
431 mspondenfs of the sale
deed possession of the
Vtdespondent, cannot but
be hexdm be am void.
a’vt-eonseejiieiice the KSFC is directed to repay
together with the stamp duty and
‘charges on the document Annexure–E
:with interest at 6% 13.3., from the date of
of the said sum upto the date of payment in any
..e:*}ent within a period of four weeks fiom today to the 4″!
‘ respondent, who in tmn is ditectxad to return the
orignals of all the documents (title deeds) to the KSFC
and deliver vacant possession of the propel?’ in
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question to the petitioner within two weeks
In addition the KSFC and the 4* _
execute necessary deed of cance1lation_.c.f ‘V
which the KSFC shall bear the T23
reserved to KSFC to seek’ are-opefixg of v
No.870/O5 before the City com, for
which the and persue its
remedy to to jithe question, in
accordanee_V\«%?;it1§;;1§eié§,f;=s2′.. :. ‘
in the thcifwxat -‘petition is allowed, in the
light of “j, ‘ “ens.
IV …..
Judge