Dismissed

B S Varadaraj v. Karnataka State Financial Corporation

Karnataka HC23 Jul 2021MFA/7994/2015

Case brief

AI extract

What is this about?

In this appeal, the guarantor challenged a trial court order declaring him liable for a loan default. The High Court upheld the trial court's finding, ruling that the petition was filed within the limitation period and dismissing the appeal against the Karnataka State Financial Corporation.

What did the court decide?

The appeal was dismissed, upholding the trial court's judgment declaring the appellants liable to pay the outstanding loan amount and future interest.

B S Varadaraj 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 23^RD DAY JULY, OF 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 E.S. INDIRESH

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MISCELLANEOUS FIRST APPEAL NO.7994 OF 2015 (SFC)

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BETWEEN

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B S Varadaraj S/o late Srinivasa Subramanya Aged about 47 years R/o Puradamane Village Bellur Post N R Pura Taluk-577 134 Chikkamagalur District.

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...Appellant

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(By Shri P N Harish, Advocate)

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AND

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Karnataka State Financial Corporation Body Corporate, Established under the provisions of the State Financial Corporation Act, 1951 having its office at No.1/1 Thimmaiah Road Bengaluru-560 001. and one of branch office at Chikkamagaluru. Represented by its Branch Manager.

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M/s. Abhiman Products Regd.

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Partnership Firm Puradamane Village Bellur Post, N R Pura Taluk Chikkamagaluru District-577 101. Rep. by its Partners

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a. Lakshmamma W/o Srinivasa Subramanya Aged about 80 years

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b. P B Sunitha W/o B S Balachandra Aged about 46 years

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c. B S Balachandra S/o Srinivasa Subramanya Aged about 54 years

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d. Srividya W/o B S Varadaraj Aged about 43 years

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No.(a) to (d) are R/of Puradamane Village Bellur Post N R Pura Taluk-577 134 Chikkamagalur District.

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K R Sharadamma Since dead by LRs

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a. Vijaya Rathna D/o Late Ranga Rao Aged about 43 years Subhash Road Koppa Town-577 126.

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b. Nirmala D/o Late Ranga Rao Aged about 38 years Subhash Road

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Koppa Town-577 126.

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c. Shamala D/o Late Ranga Rao Aged about 37 years Subhash Road Koppa Town-577 126.

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d. Bharathi D/o Late Ranga Rao Aged about 36 years Subhash Road Koppa Town-577 126.

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e. Revathi

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D/o Late Ranga Rao Aged about 35 years Subhash Road Koppa Town-577 126.

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f. Radhika

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D/o Late Ranga Rao Aged about 34 years Subhash Road Koppa Town-577 126.

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R Suresh S/o K Ranganna Aged about 62 years R/o Puradamane Village Bellur Post N R Pura Taluk-577 134 Chikkamagalur District.

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….Respondents

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(By Shri P S Malipatil, Advocate for R1; vide order dated 09.06.2021 notice to R2 (a) to (d), 3(a) to (f) and 4 is dispensed with)

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This Miscellaneous First Appeal is filed under Section 32(9) of the State Financial Corporations Act, against the judgment and award dated 09.09.2015 passed in Civil Misc.Case No.23 of 2007 on the file of the I Additional District

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Court, Chikkamagaluru, allowing the petition filed under Section 31 (1) (a) and (aa) and Section 32 of the State Financial Corporation.

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This Miscellaneous First appeal coming on for admission, this day, INDIRESH J., delivered the following:

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J U D G M E N T

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The appellant has assailed the judgment dated 09^th September, 2015 passed in Civil Misc.No.23 of 2007 on the file of the I Additional District Court, Chikkamagaluru, (for short, hereinafter referred to as the ‘trial Court’).

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For the sake of convenience, the parties in this appeal are referred to with their status and rank before the trial Court.

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The petitioner-Karnataka State Financial Corporation (for short, hereinafter referred to as 'KSFC’) is the Statutory Public Financial Institution established by the State of Karnataka to advance funds to enterprenuers. It is the case of the petitioner-KSFC that the respondent No.1 is a Partnership Firm and respondents No.1(a) to 1(d) are the Partners of the respondent No.1. The respondent No.1 availed loan assistance of Rs.2,30,000/- towards term loan and Rs.12,70,000/towards working capital, in all,

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Rs.15,00,000/from the Petitioner-KSFC subject to repayment of loan in 25 quarterly instalments with interest at 19.50% per annum compounded quarterly. Respondents 2 to 4 are the sureties, executed a Deed of Guarantee on 31^st July, 1996 agreeing to be personally liable to pay the amount due by the respondent No.1-Partnership Firm. It is the case of the petitioner-KSFC that respondent No.1(a), who was the owner of house property bearing No.832/84-85 has created mortgage of said property as security for repayment of the amount by depositing the original title deed and also hypothecated the machineries. It is the case of the petitioner-KSFC that the respondent No.1 and its partners have failed to clear the loan and become defaulters and as such, caused notice dated 25^th April, 2007 requesting the respondent-Partnership Firm and its partners to clear the outstanding amount. It is further stated in the Miscellaneous Petition that the respondent Firm neither intended to clear the outstanding amount nor taken steps to contact the petitionerKSFC and as such the petitioner-KSFC filed Miscellaneous Petition under Section 31(1)(a) and (aa) and Section 32 of

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the State Financial Corporation Act, 1951, against the respondents in Civil Misc. No.23 of 2007.

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On service of notice, respondent No.1(b)(c), R2(a), (c), (d) and (e) unrepresented and therefore, placed ex-parte. Respondents 1(a)(d), 2(b), 3 and 4 have contested the matter, however, respondent No.4 has filed objection to the miscellaneous petition. The trial Court, based on the pleadings on record, formulated points for its consideration. Official of plaintiff-KSFC was examined as PW1 and produced 14 documents and same were marked as Exhibits P1 to P14. Respondent No.4 was examined as RW1 and no documents were produced on behalf of respondents. The trial Court, on considering the materials on record by its judgment date 09^th September, 2015, allowed the Civil Miscellaneous Petition and thereby directed the respondents 1(a) to (d), respondents 2 to 4 to pay a sum of Rs.88,38,352.26/- together with future interest, failing which the petitioner has got right to take out steps to recover the amount from respondents 1 to 4 and also to proceed personally against them and further proceed against the assets of the deceased Srinivasa Subramanya in the hands of respondents 1(a), (c) and respondent No.4.

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Being aggrieved by the judgment dated 09^th September, 2015, the fourth respondent has preferred this appeal, challenging the impugned judgment passed by the trial Court.

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We have heard Sri P.N. Harish, learned counsel for the appellant and Sri P.S. Malipatil, learned counsel appearing for the respondent No.1-KSFC.

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Sri P.N. Harish, learned counsel appearing for the appellant contended that though the respondent No.4 in the Miscellaneous petition filed objection and deposed before the trial Court that the claim made by the KSFC was barred by time, the said aspect of the matter was not considered by the trial Court. He further contended that the first respondentPartnership Firm was seized for default in repayment and machineries were also auctioned long back, however, the petition was filed on 21^st August, 2007 after inordinate delay and therefore, the finding recorded by the trial Court at paragraph 15 of the impugned judgment is incorrect which requires to be set right in this appeal by dismissing the petition filed by the petitioner-KSFC.

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On the other hand, Sri P.S. Mali Patil, Learned counsel appearing for KSFC argued that the borrowers have committed default in payment of the principal amount, inter alia, were irregular in payment of interest as per the terms of the agreement entered into with KSFC and therefore, the impugned judgment passed by the trial Court is just and proper. He further contended that in order to realise the principal amount, KSFC has issued paper publication for the sale of machinery and the same were sold on 20^th January, 2015 for a sum of Rs.27,000/- and thereafter, KSFC has issued notice on 26^th October, 2004 to the appellant herein to bring better offer to satisfy the outstanding amount. He also argued that on 28^th January, 2005, the respondent No.1-KSFC addressed letter for sale of machinery to the Partnership Firm. However, the respondent No.1-KSFC, in order to close the account of Partnership Firm, caused notice dated 25^th April, 2007 to the Partnership Firm, Partners and guarantors and the said letter was marked as Exhibit P4. Since, respondents have not taken any steps to clear the outstanding amount, KSFC filed Miscellaneous Petition on 12^th August, 2007 within the period of limitation and therefore, the contentions raised

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by the learned counsel appearing for the appellant cannot be accepted and accordingly, sought for dismissal of the appeal.

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Having heard the learned counsel appearing for the parties, we have perused the finding recorded by the trial Court and formulate the following points for determination in this appeal:

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Whether the petition is filed within the limitation period?

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Whether the finding recorded by the trial Court is just and proper?

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What Order?

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Perusal of the impugned judgment indicate that the first defendant-Partnership Firm availed loan in an extent of Rs.15,00,000/- from the KSFC agreeing to repay the same in 25 quarterly instalments with interest at 19.50% per annum compounded quarterly. Respondents 1(a) to (d) along with respondents 2 to 4 and late Srinivasa Subramanya had executed a deed of guarantee on 31^st July, 1996, agreeing and undertaking that they are also personally liable to repay the loan amount with accrued interest to KSFC. Exhibits P1 to P3 are the agreements marked before the trial Court. Except

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the appellant herein, i.e. respondent No.4 before the trial Court, none of the borrowers or the guarantors contested the matter before the trial Court. The only contentions raised by the appellant was that the petition was filed beyond the period of limitation and therefore, the trial Court ought to have dismissed the petition as barred by limitation. In this regard, we have carefully examined the finding recorded by the trial Court at paragraphs 14 and 15 of the impugned judgment. Perusal of the legal notice dated 25^th April, 2007 marked as Exhibit P4 indicate that the petitioner-KSFC addressed legal notice to the Partnership Firm, Partners and the Guarantors to clear the outstanding amount on the ground that the respondents before the trial Court are liable to clear the dues after deducting the sale proceeds of plant and machinery of the Partnership Firm. Undisputably, the suit was filed on 12^th August, 2007 in terms of Article 137 of the Limitation Act and the petition is filed in time and therefore, we do not find any merit in the submission made by the learned counsel appearing for the appellant and we are of the considered view that the trial Court, after considering the material on record, inter alia, assessing the evidence on

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record in the right perspective, has rightly dismissed the petition. Accordingly, we answer the points formulated for consideration in this appeal, in favour of the respondentKSFC. In the result, appeal is liable to be dismissed, accordingly, dismissed.

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Sd/JUDGE

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Sd/JUDGE

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lnn

B S Varadaraj v. Karnataka State Financial Corporation

Case brief

What is this about?

What did the court decide?

B S Varadaraj v. Karnataka State Financial Corporation

Case brief

What is this about?

What did the court decide?

What the court decided

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