Allowed

K. Nagaraj v. Karataka State Financial Corporation

DRT28 Nov 2025SA/271/2024

Case brief

AI extract

What is this about?

The Tribunal allowed the application challenging a Section 14 order procured against a deceased owner. Recognizing the order as a nullity for proceeding against a dead person and establishing the applicant as an 'affected person' via revenue records, the Tribunal quashed the order and restrained execution, while leaving other recovery measures undisturbed.

What did the court decide?

SA allowed; Section 14 order declared unenforceable; respondent directed not to execute the order.

K. Nagaraj versus Karataka State Financial Corporation — Banking and Recovery | DRT (2025)

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IN THE DEBTS RECOVERY TRIBUNAL-II, BANGALORE

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Dated this 28^st Day of November, 2025

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PRESENT: SHRI T. RAJESH Hon’ble Presiding Officer

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S.A. No. 271 of 2024

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Sri. K. Nagaraj, S/o. Late Sri. Kapil Rao, No. 467, 45^th Cross, 8^th Block, Jayanagara, Bangalore -560082.

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. . . Applicant

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Versus

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M/s. Karnataka State Financial Corporation, KSFC, Bhavan, No.1/1, Thimmiah Road, Near Cantonment Railway Station, Bangalore -560052.

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. . . Respondent

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Ld. Counsels on record / appeared :- Counsel for Applicant :- B. N. Tulsi Kumar Counsel for Respondent :- T. Somashekar

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: - O R D E R - :

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The measures initiated by the respondent as per the provisions of the

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"Securitization and Reconstruction of Financial Assets and Enforcement

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of Security Interest Act, 2002 herein after been referred to as SARFAESI

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SA No. 271/2024

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Act leading to the procurement of section 14 order from the Ld. Magistrate is under challenge.

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The Applicant claims to be in absolute ownership and possession of the schedule property, which was originally allotted to one T. K. Sanjeev Rao, who constructed a building thereon. He was succeeded by his wife Smt. Meena Bhai and two daughters, namely— Mrs. Padmavathi, the mother of the Applicant, and Ms. Sindhu, who, according to the Applicant, was deaf and dumb. It is further contended that the Bangalore Development Authority had executed a sale deed in favour of Sindhu on 07.04.1983, who subsequently died on 13.11.1993 (Copy of death certificate is dated 06.02.2016).

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It is the further case of the applicant that after the death of Sindhu, the

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applicant succeeded the property paying Basic Tax and also got the Khatha in his name.

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It is further contented by the applicant that late Ramachandra Gowda was a defaulter of the respondent resulting the respondent initiating measures under section 29 of the state Financial Corporation Act. It is

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also stated that the possession notice issued was earlier under challenge in SA.396 of 2014.

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SA No. 271/2024

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It is stated that the applicant filed a complaint u/s 120B, 419, 420, 564, 468, 471 r/w section 34 of IPC and the case in respect of the same is pending before the 8^th Additional Chief Judicial Magistrate Court. It is also admitted that the SA filed by the applicant came to be dismissed by the Tribunal, observing that the contention of applicant is to be decided by competent Civil Court.

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The section 14 measures are challenged contending that the same is procured by playing fraud, that the order is procured against dead person and also that the measures are continued without issuing notice

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to the Legal Representatives of the deceased persons. The applicant had produced the following documents.

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i. Death certificate.

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ii. Khatha.

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iii. Tax paid Receipt.

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iv. Deposit receipts.

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v. Complaint.

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vi. FIR.

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vii. Order in SA.396/2014.

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viii. Order of Chief Metropolitan Magistrate dated 10.10.2018.

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ix. Sale deed.

SA No. 271/2024

x. Demand notice.

xi. Possession notice.

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xii. Sale deed.

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xiii. Certified copy of section 14 order.

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The respondent filed its statement of objections, contending that the respondent-corporation had sanctioned a factoring loan and an additional factoring facility of Rs. 20 lakhs and Rs. 10 lakhs, respectively, to M/s Alphen Hausen Electronic System Pvt. Ltd., represented by its Directors, Sri Ramakrishna Gowda and Sri Vijendra Babu. It is further contended that the said loan was secured by the mortgage of the schedule properties and that the borrowers had committed default. The applicant has admitted that the property was allotted to Mr. Sajeeva Rao, and after his death, it was transferred to his wife and later to Sindhu. However, the respondent does not admit the applicant’s contention that Sajeeva Rao had two daughters, nor does it admit the

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other related averments. The respondent also asserts that the applicant’s claim that Sindhu was a spinster is false, as she has been described as “Mrs. Sindhu” in the sale deed and possession certificate. Apart from the above, the respondent has specifically denied all other contentions raised by the applicant in the S.A. The respondent further

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SA No. 271/2024

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contends that the orders passed by the learned Magistrate under Section 14 are in accordance with the statute. The respondent has also produced a copy of the order in S.A. No. 396 of 2014.

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Heard the Ld. counsel for both sides the following points arise for consideration in the light of pleadings and documents.

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i) Whether the applicant is an affected party, who can maintain the application?

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ii) Whether the applicant is having any right over the property to sustain his challenge?

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iii) Whether the proceedings initiated and continued by the respondent leading to the procurement of section 14 order is in accordance with statute?

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iv) Whether the order in SA.396 of 2014 operate as res judicata in entertaining the challenge of the applicant against the measures?

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v) What order are to be passed?

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All these points are gone into and decided together.

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The applicant claims to be in possession and occupation of the property. It is further contended that the applicant had obtained Khata in his name. The applicant also contends that he is the son of Padmavathi, who

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SA No. 271/2024

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is the sister of the owner, Mrs. Sindhu. Applicant is also claiming that Sindhu was spinster and after her death the applicant succeeded the property. The respondent disputes the said facts. In view of the above, any right of the applicant over the property, if it exists, must be established by approaching a competent Civil Court. Despite the specific findings to that effect in the order in S.A. 396 of 2014, the applicant has not made any effort to do so. In view of the above, this Tribunal is of the view that, the right of the applicant if any over the property cannot be gone in to in the present proceedings.

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Even though this Tribunal is of the view that right of the applicant

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if any to be established in appropriate proceedings, the applicant had produced proof as to his interest over the property sought to be proceeded against as Khatha in his favour and tax paid receipts are also produced. It is true that the Revenue Records hardly sufficient to prove the ownership, however the same is sufficient to prover that the applicant is a person affected by the measures and hence can be construed as a person ‘affected’ by the measures. Hence this Tribunal is of the view that though there cannot be any finding as to the right if any of the applicant over the property, the applicant can maintain this SA as an ‘affected person’

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SA No. 271/2024

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In respect of validity of measures, it is the case of the applicant that the measures are continued without following the procedure. The contention of the applicant that the owner of the property Sindhu was a spinster is denied by the respondent. The respondent is also denying the contentions of the applicant that the applicant is the son of the sister of the owner is denied by the respondent. In view of the disputed facts as above, this Tribunal if of the view that the said issue whether the applicant is entitled to inherit the estate of deceased Sindhu cannot be gone into and decided by this Tribunal.

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In contesting the legality of the measures, the applicant contends that the measures are invalid on the ground that no notice was issued to the legal heirs of the deceased owner, Mrs. Sindhu. In the absence of evidence as to whether the applicant is a legal representative, or whether the deceased owner had any legal representatives, these issues cannot be adjudicated in the present proceedings in view of the rival contentions. In view of the above, the applicant’s challenge to the measures cannot be entertained, as this Tribunal had already taken the same view in the earlier round of litigation in S.A. 396 of 2014.

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Now the question is whether the order in SA.396 of 2014 operate as res judicata or not. In view of the fact that this Tribunal is not going 7

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SA No. 271/2024

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into any finding as to the legality of measures the question of res judicata does not arise.

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Since this Tribunal had declined to go into the legality of measures, the question of res judicata does not arise. The Ld. counsel for the applicant placing reliance on Civil Appeal 2027-2028 of 2012 where in the Hon’ble Supreme Court reiterated the decision in “ Hope plantation Ltd v/s Taluk Land Board” (1999) 5 SCC 590 where in the Hon’ble Apex Court held that

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“31. Law on res judicata and estoppel is well understood in India and there are ample authoritative pronouncements by various courts on these subjects. As noted above the plea of res judicata, though technical, is based on public policy in order to put an end to litigation. It is, however, a different if an issue which had been decided in earlier litigation again arises for determination between the same parties in a suit based on a fresh cause of action or where there is continuous cause of action. The parties then may not be bound by the determination made earlier if in the meanwhile law has changed or has been interpreted differently by higher forum. But that situation does not exist here. Principles of constructive res judicata apply with full force. It is the subsequent stage of the same proceedings. If we refer to Order XLVII of the Code (explanation to Rule 1) review is not permissible on the ground "that the decision on a question of law on which the judgment of the Court is based has been reversed or modified by the subsequent decision of a superior Court in any other case, shall not be a ground for the review of such judgment"

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Having found that the applicant is an affected party, now the

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question to be decided is whether the applicant is entitled for any relief.

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The prayer sought for in this SA is against the orders procured under section 14 of the Act. The applicant, who is in possession of the

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SA No. 271/2024

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property and has obtained Khata and other revenue records in his name, certainly has a lis against the attempted dispossession. It is clear from the order and proceedings that the same is filed and order is passed against a dead person. It is trait law that the proceeding against dead person is nullity. Whether the applicant is a legal representative of late owner of the property, or late owner is having any other legal representative is immaterial in deciding the legality of the order. The applicant being in possession of the property is entitled for protection against eviction pursuant to the said order.

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In the result

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i) SA.271 of 2024 stands allowed.

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ii) The order passed by the 2^nd Additional Chief Metropolitan Magistrate Bangalore in Crl Misc. no.2059 of 2018 found to be unenforceable and accordingly the respondent is directed not to execute the order.

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iii) The measures taken by the respondent other than Section 14 is not interfered with.

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iv) It will be open for the respondent to continue the measures in accordance with statue.

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v) All pending IA’s closed.

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SA No. 271/2024

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vi) No orders as to cost.

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vii) Issue copies in accordance with rule 16 of the Debt Recovery Tribunal (procedure) rule.

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(Dictated to PY directly on the Computer, after its transcription, corrected and pronounced by me in the open Court on this the 28^th day of November, 2025)

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Sd/-

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(T. RAJESH) PRESIDING OFFICER

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K. Nagaraj v. Karataka State Financial Corporation

Case brief

What is this about?

What did the court decide?

K. Nagaraj v. Karataka State Financial Corporation

Case brief

What is this about?

What did the court decide?

What the court decided

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