Partly allowed

Smt. Sushmitha v. Karnataka State Financial Corporation

Karnataka HC25 Aug 2021MFA/6964/2015

Case brief

AI extract

What is this about?

In an appeal against a recovery petition, the High Court held that legal representatives of a deceased guarantor are liable only to the extent of the estate inherited from the deceased and ordered the appeal accordingly.

What did the court decide?

The impugned order is modified to hold appellants liable only to the extent of the estate inherited from the deceased guarantor.

Smt. Sushmitha Vs Karnataka State Financial… — Civil Procedure and Limitation | Karnataka HC (2021)

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IN THE HIGH COURT OF KARNATAKA AT BENGALURU

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DATED THIS THE 25^TH DAY OF AUGUST, 2021

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PRESENT

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THE HON’BLE MRS.JUSTICE S.SUJATHA

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AND

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THE HON’BLE MR. JUSTICE RAVI V. HOSMANI

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M.F.A.No.6964/2015 (SFC)

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BETWEEN :

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SMT.SUSHMITHA D/O LATE SAROJA AGED ABOUT 35 YEARS

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SMT.RASHMITHA D/O LATE SAROJA AGED BOUT 3O YEARS

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BOTH ARE R/AT No.726, R.B.I. COLONY, J.P. NAGAR BANGALORE-560078.

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...APPELLANTS

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(BY SRI KRISHNAMURTHY.G HASYAGAR, ADV.)

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AND :

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KARNATAKA STATE FINANCIAL CORPORATION A BODY CORPORATE ESTABLISHED UNDER RTHE STATE FINANCIAL CORPORATIONS ACT 1951, [CENTRAL ACT, No.LXIII OF 1951] HAVING ITS HEAD OFFICE AT KSFC BHAVAN No.1/1, THIMMAIAH ROAD NEAR CANTONMENT RAILWAY STATION BENGALURU-560052 REP. BY ITS DEPUTY GENERAL MANAGER [RECOVERY-1].

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M/S. RASHMITHA CASTINGS PRIVATE LTD., A PRIVATE LIMITED COMPANY INCORPORATED UNDER THE COMPANIES ACT, 1956, CARE OF No.726, R.B.I. COLONY J.P. NAGAR, BENGALURU-560078 REP. BY ITS MANAGING DIRECTOR.

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SHRI.A.RAMESH RAO S/O LATE ANANDA RAO MAJOR, R/AT No.726 R.B.I COLONY, J.P. NAGAR BENGALURU-560078.

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SHRI.P.BALAKRISHNA S/O P.PARAMESHWARAIAH MAJOR, R/AT PRIYADARSHINI APPAJAPPA AGRAHARA CHAMARAJPET, BENGALURU-560018. …RESPONDENTS

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(BY SRI BIPIN HEGDE, ADV. FOR R-1;

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VIDE ORDER DATED 25.08.2016, R-2 & R-3 ARE DELETED; R-4 – SERVED.)

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THIS M.F.A. IS FILED UNDER SECTION 32(9) OF STATE FINANCIAL CORPORATIONS ACT, AGAINST THE ORDER DATED 12.06.2015 PASSED IN MISC. PETITION No.7/2010 ON THE FILE OF THE PRINCIPAL DISTRICT JUDGE, BENGALURU RURAL DISTRICT, BENGALURU, PARTLY ALLOWING THE PETITION FILED UNDER SECTION 31[1] [aa] OF THE STATE FINANCIAL CORPORATIONS ACT.

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THIS APPEAL COMING ON FOR HEARING, THIS DAY, S. SUJATHA, J ., DELIVERED THE FOLLOWING:

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J U D G M E N T

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This appeal is directed against the judgment and order dated 12.06.2015 passed in Miscellaneous Petition No.7/2010 by the Court of the Principal District

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Judge, Bengaluru Rural District at Bengaluru [‘Trial Court’ for short].

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For the sake of convenience, the parties are

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referred to as per their status before the Trial Court.

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Miscellaneous petition was filed by the Karnataka State Financial Corporation [‘Corporation’ for short] under Section 31[1][aa] of the State Financial Corporations Act, 1951 [‘Act’ for short] against the respondent Nos.2 to 4 – the guarantors for the loan, for the recovery of the loan amount of Rs.3,66,07,833/with interest thereon towards the balance loan, said to have been availed by the second respondent – company after appropriating the sale proceeds of Rs.42.5 lakhs pursuant to the steps taken under Section 29 of the Act.

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Admittedly, during the pendency of the petition proceedings respondent No.4 Smt.P.Saroja died. Her legal representatives arrayed as respondent Nos.4[a]

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and 4[b] were brought on record. Respondent No.2 A.Ramesh Rao also died during the pendency of the petition.

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The appellants herein, the daughters of late Smt.P.Saroja, respondent No.4 filed their objections contending inter alia that they have not succeeded to

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any estate of the deceased respondent No.4 and hence they cannot be implemented as legal

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representatives/parties to the petition besides raising other objections. The Trial Court held that despite the death of the guarantor/surety the guarantee continues and that the appellants therein being the legal representatives of the deceased respondent No.4 are liable to pay the petition claim amount with interest as awarded.

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appellants/respondent Nos.4[a] and [b] placing reliance on the judgment of the Hon'ble Apex Court in the case

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of Custodian of Branches of BANCO National Ultramarino V/s. Nalini Bai Naique [AIR 1989 SC 1589 (1)] and the Co-ordinate Bench decision of this Court in MFA.No.21762/2010 [D.D 12.11.2019] , submitted that the legal representatives of the deceased respondent No.4 are not liable to make any payment of the amount in question since they have not inherited any estate of the deceased respondent No.4.

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Learned counsel appearing for the petitioner

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– Corporation submitted that re-call notice was issued

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by the Corporation to the respondent No.4 on 28.01.2000 and the personal guarantee was invoked against the respondent No.4 on 08.12.2004. In order to

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avoid the payment liable to be made by her as a guarantor, respondent No.4, has sold the property No.726 standing in her name to one Sri.M.Dhruva Raj on 09.06.2000 for the sale consideration of Rs.4,95,000/- and the said Dhruva Raj has executed a

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gift deed dated 27.12.2005 in favour of the appellants herein/respondent Nos.4[a] and [b] bequeathing the very same property sold by Smt.P.Saroja in his favour. The corporation has filed an application in the Miscellaneous Petition No.7/2010 seeking for an order of injunction to restrain the appellants herein from alienating the said property. The Trial Court by an order dated 16.03.2015 has granted an order of interim injunction as prayed. However, the relief sought for confirming the order of injunction with respect to the petition schedule property was rejected by the Trial Court on a wrong notion that no such order appears to have been passed in the Miscellaneous Petition. Learned counsel fairly submitted that the appellants herein are liable to make the payment towards the balance loan amount to the extent to which they have inherited the estate of the deceased respondent No.4.

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It is well settled law that the legal

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representatives are liable to make the payment to the

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- 7 -

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extent of the estate of the deceased inherited by them. This legal principle is extensively explained by the Hon'ble Apex Court in Custodian of Branches of BANCO National Ultramarino , supra as well as by the Coordinate bench of this Court in MFA.No.21762/2010 supra.

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It is not in dispute that the present appellants are admittedly the legal representatives of the deceased respondent No.4 Smt.P.Saroja. In the circumstances, they shall be liable to make payment of the amount to the petitioner – Corporation only to the extent of estate which they have inherited from the deceased respondent No.4. Thus, the impugned judgment and order dated 12.06.2015 is modified to the aforementioned extent, insofar it pertains to the respondent Nos.4[a] and [b]/appellants herein are concerned.

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For the aforesaid reasons, we pass the

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following:

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ORDER

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The impugned order dated 12.06.2015 passed by the Principal District Judge, Bengaluru Rural District, Bengaluru, in Miscellaneous Petition No.7/2010 is modified holding that the appellants herein, shall be liable to make payment of the amount due to respondent No.1 only to the extent of estate which they have inherited from the deceased respondent No.4 - Smt.P.Saroja.

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The appeal stands disposed of accordingly.

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Sd/JUDGE

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Sd/JUDGE

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NC.

Smt. Sushmitha v. Karnataka State Financial Corporation

Case brief

What is this about?

What did the court decide?

Smt. Sushmitha v. Karnataka State Financial Corporation

Case brief

What is this about?

What did the court decide?

What the court decided

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