Partly allowed

Sri. J K Nagaraj v. the Karnataka State Financial Corporation

Karnataka HC18 Feb 2020WP/3986/2020

Case brief

AI extract

What is this about?

Petitioner challenged an order of DRAT that upheld a possession notice for a mortgaged property, arguing improper service. After ascertaining the secured creditor agreed to issue fresh notices and proceed, the High Court partially allowed the petition, set aside the impugned order, and directed fresh notice issuance.

What did the court decide?

Writ petition allowed in part; Impugned DRAT order set aside; Respondent directed to initiate proceedings only after issuing notice to petitioner and borrowers as promised.

Sri. J K Nagaraj Vs the Karnataka State Financial… — Banking and Recovery | Karnataka HC (2020)

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IN THE HIGH COURT OF KARNATAKA AT BENGALURU

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DATED THIS THE 18^TH DAY OF FEBRUARY, 2020

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PRESENT

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THE HON’BLE MR. JUSTICE ARAVIND KUMAR

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AND

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THE HON’BLE MR. JUSTICE E.S. INDIRESH

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WRIT PETITION NO.3986 OF 2020(GM-DRT)

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BETWEEN:

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SRI. J.K. NAGARAJ AGED ABOUT 81 YEARS S/O LATE J. KOLLA RAMA SETTY RESIDING AT NO.236/2, SILICON CORNER APT, BEHIND: SILK BOARD BANK OFFICERS COLONY 38^TH MAIN, I CROSS, BTM II STAGE BENGALURU - 560 068. ...PETITIONER (BY SRI. SEETHA RAMA RAO B.C, ADVOCATE)

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AND:

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1 . THE KARNATAKA STATE FINANCIAL CORPORATION, JAYANAGAR BRANCH 8^TH FLOOR, JAYANAGAR SHOPPING COMPLEX, 4^TH BLOCK, JAYANAGAR BENGALURU - 560 011 REP BY ITS ASST GENERAL MANAGER.

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2 . M/S B.K.N. FOOD PRODUCTS NO.2-A GIDDENAHALLI HOSUR MAIN ROAD ATTIBELE, ANEKAL TALUK – 562 101 REP BY ITS PROPRIETOR SRI. B.N. DILIP.

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3 . SMT. USHA MAJOR IN AGE W/O LATE B.K. NATARAJ.

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4 . SRI. B.N. RAGHU MAJOR IN AGE S/O LATE B.K. NATARAJ.

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5 . SRI. B.N. DILIP MAJOR IN AGE S/O LATE B.K. NATARAJ.

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RESPONDENTS 3, 4 & 5 ARE RESIDENTS OF ATTIBELE VILLAGE, ANEKAL TALUK BENGALURU DISTRICT – 562 101.…RESPONDENTS

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(BY SRI. BIPIN HEGDE, ADVOCATE FOR R-1)

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THIS WRIT PETITION IS FILED UNDER ARTICLE 226 OF THE CONSTITUTION OF INDIA PRAYING TO QUASH THE ORDER DATED:15.11.2009 MADE IN RA(SA) NO.3/2018 IN (TSA.NO.53/2017 ON THE FILE OF THE DRT-II, BANGALORE) MADE BY THE DEBT RECOVERY APPELLATE TRIBUNAL AT CHENNAI AS PER ANNX-L.

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THIS PETITION COMING ON FOR PRELIMINARY HEARING THIS DAY, ARAVIND KUMAR J, MADE THE FOLLOWING:

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O R D E R

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Petitioner has sought for quashing of the order

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dated 15.11.2019 Annexure ‘L’ passed by the Debt Recovery Appellate Tribunal at Chennai (for short ‘DRAT’) in RA(SA)3/2018 whereunder appeal filed by respondent No.1 herein under Section 18 SARFAESI Act

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came to be allowed and order dated 10.02.2017 Annexure ‘K’ passed by the Debt Recovery Tribunal-II, Karnataka at Bangalore in TSA 53/2017 came to be set aside whereunder, Tribunal had allowed the application filed by the petitioner herein under Section 17 of SARFAESI Act by arriving at a conclusion that respondent No.1 herein had failed to prove the possession notice dated 21.6.2012 was served on the petitioner (appellant) and secured creditor had also failed to prove that it was properly affixed on the conspicuous place of the subject property.

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Essentially this lis revolves around petitioner

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and respondent No.1 and as such issuance of notice to respondents 2 to 4 stands dispensed with.

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The residential property bearing Kaneshumari No.62, VP Assessment No.137, Attibele village, Anekal, Bengaluru District consisting of ground and first floor came to be purchased by the petitioner under a registered sale deed dated 20.5.2011 from wife and children of Sri.B.K.Nataraj i.e., respondent Nos.2 to 4

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Prior to the purchase of the said property it is said to have been mortgaged by deceased Sri.B.K.Nataraj in favour of Syndicate Bank by deposit of title deeds of subject property by executing the deed of mortgage dated 11.10.2004. On the demise of said Sri.B.K.Nataraj on 17.10.2009 petitioner is said to have agreed to purchase the subject property and has also agreed to discharge the mortgage debt with the syndicate bank. Pursuant to same, sale deed dated 20.5.2011 came to be executed by the wife and children of deceased Sri.B.K.Nataraj and petitioner is said to have discharged the mortgage debt with the Syndicate Bank and took possession of the original title deeds of the property from Syndicate Bank and also possession of the subject property from the legal representatives of deceased Sri.B.K.Nataraj.

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When this was the factual scenario, petitioner is said to have faced the proceedings initiated by the respondent No.1 herein ultimately being prevented from entering the property and as such, a police complaint is said to have been lodged by the petitioner. Petitioner also

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approached this Court seeking direction to respondent No.1 herein in W.P.No.23818/2017 to withdraw the security guard posted before subject property. Said writ petition came to be disposed by order dated 27.3.2019 Annexure ‘J’ reserving liberty to the petitioner to make a representation to respondent No.1, who in turn was directed to dispose of the said representation by a speaking order with an outer limit of four months from the date of receipt of such representation. It is thereafter, respondent No.1 herein is said to have issued a public notice by pasting copy of the said notice outside the subject property which reflect subject property was mortgaged to 1^st respondent. Petitioner is said to have made enquiries and came to know that respondent No.1 in collusion with the legal heirs of late Sri.B.K.Nataraj had depicted as though subject property had been mortgaged to it as security for the loan borrowed and exercising their power under Section 13 of the SARFAESI Act proceedings are said to have been initiated.

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Hence, Challenging the said notice, an

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application was filed under Section 17 of the SARFAESI Act before the Debt Recovery Tribunal raising several grounds including the ground relating to possession notice dated 21.6.2012 having not been served on the appellant/writ petitioner. This received attention of the Debt Recovery Tribunal and after considering the objections filed by respondent No.1 herein, by order dated 10.2.2017 DRT allowed the application. The observation or the basis on which the application filed by petitioner came to allowed could be traced to the order of the Tribunal itself and reads:

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“9. Hence, restricting myself to examine compliance with the provisions of the act by the respondent. The Respondent has filed in Annexure R9 a copy of the demand notice, but does not produce proof of service of such notice on the addressees mentioned therein. Therefore, the respondent has failed to prove service of statutory demand notice on the addressees mentioned therein and hence the notice is to be set-aside for want of proper service.

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Similarly, the respondent has filed a copy of possession notice dated 21.6.2012 in R10 and the respondent has not only failed to prove service of the said possession notice on the appellant, but also failed to

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prove that the same has been properly affixed on the conspicuous place of the subject property. Hence, on this ground the possession notice also required to be setaside and is accordingly, set aside. Leaving it open to the parties to educate the respective rights over the title or identification regarding the subject property before proper forums. The SA is allowed. But however under the circumstances of the case, there will be no order as to costs.”

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Respondent No.1 herein being aggrieved by said order filed an appeal under Section 18 of the SARFAESI Act before DRAT which culminated in the impugned order being passed by allowing the appeal filed by 1^st respondent herein.

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Having heard Sri.B.C.Seetharama Rao, learned counsel appearing for petitioner and Sri.Bipin Hegde, learned counsel appearing for respondent No.1, we notice from the memo filed today by the learned counsel appearing for respondent No.1 that 1^st respondent has agreed to proceed under the provisions of SARFAESI Act after issuing fresh notice to the borrowers and petitioner herein.

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As could be seen from the order of the Tribunal dated 10.2.2017, the relevant portions of which have been extracted hereinabove disclose that

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application filed by petitioner under Section 17 of the SARFAESI Act which came to be allowed was on the ground of possession notice dated 21.6.2012 having not been served on the appellant therein i.e., writ petitioner herein and also on the ground that it was not properly affixed in a conspicuous place of subject property. This order has been set aside by the appellate Tribunal and it came to be held that petitioner-appellant not being a borrower, no notice was required to be issued. Though DRAT has proceeded to hold that possession notice had been served on borrowed as per prescribed procedure and provisions of law, intriguingly, the manner in which the possession notice was served or otherwise has not been delved upon in detail by DRAT and it same seems to have been ignored by the appellate Tribunal under the impugned order.

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Be that as it may. In the light of memo filed by respondent No.1 today as noticed hereinabove agreeing to proceed by initiating proceedings after issuing appropriate notice to petitioner as well as borrowers, by placing the said memo on record, this petition is disposed of by the following:

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ORDER

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(i) Writ petition is hereby allowed in part. (ii) Order dated 15.11.2019 Annexure ‘L’ passed by DRAT/Recovery Appellate Tribunal, Chennai in RA(SA)3/2018 is hereby set aside.

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(iii) Respondent No.1 herein is at liberty to initiate proceedings against petitioner under SARFAESI Act and necessarily after issuing notice to the petitioner and the borrowers as undertaken in the memo filed today.

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(iv) Petitioner is at liberty to raise all such grounds including the grounds urged in the present writ petition, in the

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event of such notice being served and petitioner challenging the same, it is made clear that observations made by the DRAT as well as the DRT under the impugned orders will not prejudice the rights of both parties and contentions of both parties are kept open and no opinion is expressed with regard to merits of the claim.

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SD/JUDGE

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SD/JUDGE

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bkp

Sri. J K Nagaraj v. the Karnataka State Financial Corporation

Case brief

What is this about?

What did the court decide?

Sri. J K Nagaraj v. the Karnataka State Financial Corporation

Case brief

What is this about?

What did the court decide?

What the court decided

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Issues for consideration

Statutes considered

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