Disposed

M/S Ssjv Projects Private Limited v. Canara Bank

Karnataka HC1 Feb 2021WA/577/2020

Case brief

AI extract

What is this about?

Appeal against an order dismissing redemption petitions where borrowers sought to repay only the auction bid value. The single judge held redemption requires full dues. The High Court upheld this legal position but deleted the costs component in the interest of justice, disposing of the appeal.

What did the court decide?

Appeal disposed; costs of Rs.5,00,000/- imposed by lower court deleted; IA.1 of 2020 for stay disposed.

M/S Ssjv Projects Private Limited Vs Canara Bank — Company and Corporate | Karnataka HC (2021)

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IN THE HIGH COURT OF KARNATAKA AT BENGALURU

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DATED THIS THE 1^st DAY OF FEBRUARY, 2021

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PRESENT

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THE HON’BLE MRS.JUSTICE B.V. NAGARATHNA

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AND

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THE HON’BLE MRS.JUSTICE M.G.UMA

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WRIT APPEAL NO.577 OF 2020 (GM-RES)

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BETWEEN:

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M/S SSJV PROJECTS PRIVATE LIMITED A COMPANY REGISTERED UNDER THE PROVISIONS OF THE COMPANIES ACT, 1956 HAVING ITS REGISTERED OFFICE AT 631, 3^RD CROSS, 3^RD BLOCK KORAMANGALA BENGALURU-560 034. EARLIER ADDRESS: NO.25/2, 12^TH FLOOR S.N.TOWERS, M.G.ROAD BENGALURU-560 001. REPRESENTED BY ITS DIRECTOR SRI.SOMASHEKAR SALIMATH

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MR.MANOHAR SHETTY DIRECTOR OF M/SSJV PROJECTS PRIVATE LIMITED AGED ABOUT 60 YEARS 631, 3^RD CROSS, 3^RD BLOCK S.T.BED, KORAMANGALA BENGALURU-560 034.

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MRS.HARINI SHETTY WIFE OF MR.MANOHAR SHETTY AGED ABOUT 56 YEARS RESIDING AT NO.861, 13^TH MAIN

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3^RD BLOCK, KORAMANGALA BENGALURU-560 034.

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... APPELLANTS

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(BY SRI:S.S.NAGANAND, SENIOR COUNSEL FOR SRI: SRIRANGA S., ADVOCATE (VC))

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AND:

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CANARA BANK A BODY CORPORATE CONSTITUTED UNDER THE BANKING COMPANIES (ACQUISITION AND TRANSFER OF UNDERTAKINGS) ACT, 1970 HAVING ITS HEAD OFFICE AT NO.112, J.C.ROAD, BENGALURU-560 002. AND ONE OF ITS BRANCH OFFICES AT ARM BRANCH, NO.86, II FLOOR, SPENCERS BUILDING BENGALURU-560 001. REPRESENTED BY ITS ASSISTANT GENERAL MANAGER

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SRI.SYED ABRAR NO.456, M.M.LAYOUT, 2^ND CROSS 2^ND MAIN, KAVAL BYRASANDRA BENGALURU-560 032.

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SRI.VINAY N NO.51, MATHUR MANDIRA PRASHANT NAGAR CHIKBALLAPUR-562 101.

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... RESPONDENTS

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(BY SRI:G.KRISHNAMURTHY, SENIOR COUNSEL FOR SRI:V HARIDAS BHAT FOR C/R1 (PH) SRI:PRABHUGOUD B TUMBAGI, ADV FOR R2 & R3 (PH))

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THIS WRIT APPEAL IS FILED UNDER SECTION 4 OF THE KARNATAKA HIGH COURT ACT PRAYING TO SET ASIDE THE ORDER DATED 18.11.2020 PASSED BY THE LEARNED SINGLE JUDGE IN W.P.NO.47565/2014 (GM-RES) AND ALLOW THE WRIT PETITION AND I.A.NO.1/2014 THERETO.

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THIS WRIT APPEAL COMING ON FOR PRELIMINARY HEARING THIS DAY, M.G.UMA J., DELIVERED THE FOLLOWING:

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J U D G M E N T

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The legality and correctness of order dated 18/11/2020 passed in Writ Petition No.47565 of 2014 connected with Writ Petition No.59430 of 2014 is called in question in this appeal.

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Brief facts of the case are that, the borrowers and guarantors who have transacted with respondent No.1-Canara Bank had filed separate writ petitions, inter alia, to direct the Bank to permit them to exercise their right of redemption of mortgaged properties. The first appellant M/s SSJV Projects Private Limited (for short ‘the Company’) obtained bank guarantee facility upto Rs.210 crores from Canara Bank and appellant Nos.2 and 3 being husband and wife are the Directors of the said company and they have mortgaged their coffee estate situated in Chickmagaluru District by depositing the title deeds. The petitioners in Writ Petition No.59430 of 2014 have

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mortgaged their respective coffee estates guaranteeing repayment of the amount lent in favour of the Company.

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It is stated that the Company has committed

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default and the Bank initiated action under Section 13(2) of the Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (hereinafter referred to as the “SARFAESI Act” for the sake of brevity) by issuing the demand notice dated 24/07/2010. It also initiated proceedings against the borrowers and guarantors by filing O.A.No.313 of 2011 before the Debts Recovery Tribunal (DRT) to recover the mortgaged amount of Rs.69,41,62,722/-. The appellants filed Writ Petition No.29317 of 2011 challenging the possession notice issued under Section 13(4) of the SARFAESI Act, which came to be disposed of vide order dated 04/08/2011 reserving liberty in favour of the appellants to approach DRT. The petitioners moved DRT in S.A.No.611 of 2011 and the same came to be dismissed vide judgment dated 31/01/2013 which was challenged

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before this Court in Writ Petition Nos.13972-985 of 2013. The said writ petitions came to be dismissed vide order dated 28/03/2013 again reserving liberty to approach Debts Recovery Appellant Tribunal (DRAT) for necessary orders.

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The appellants again moved DRAT by filing AIR

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(SA) No.280 of 2013. The said appeal came to be rejected vide order dated 11/07/2013 on the ground of delay. The appellants filed Writ Petition Nos.38455-57 of 2014 before this Court challenging the order of DRAT, dismissing their appeal. This Court vide order dated 19/09/2013 disposed of the writ petitions with a direction to DRAT to consider

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the appeals on merits. DRAT, vide its order dated 20/11/2013 directed the appellants to deposit 50% of the amount due. The said order came to be challenged before this Court in Writ Petition Nos.56877-79 of 2013 which also came to be dismissed vide order dated 08/01/2014. Being aggrieved by the dismissal of the writ petitions, the appellants preferred the Special Leave Petition (Civil)

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Nos.5428-30 of 2014 before the Hon’ble Supreme Court of India, but the same came to be dismissed as withdrawn on 07/03/2014.

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It is stated that during this period, the Bank issued sale notice on 21/02/2014 which was again challenged by the appellants in Writ Petition Nos.11355-57 of 2014 before this Court which was dismissed vide order dated 27/03/2014 against which Writ Appeal No.1121 of 2014 was preferred, but the said appeal was also dismissed vide order dated 08/04/2015. In the meantime, e-auction of the mortgaged properties was fixed on 26/09/2014. The highest bidder who participated in the e- auction quoted Rs.19,60,30,000/-.

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The appellants approached the Assistant

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General Manager of Canara Bank and offered to pay Rs.19.75 crores for the purpose of redeeming the mortgage. The Bank did not accept the said proposal and therefore, the appellants filed the writ petitions seeking permission to exercise their right of redemption in relation

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to the schedule property and to set aside the auction proceedings conducted on 26/09/2014 by the Bank. The learned Single Judge vide order dated 18/11/2020 dismissed Writ Petition No.47565 of 2014 along with Writ Petition No.59430 of 2014 filed by other guarantors of the loan with cost of Rs.5,00,000/-, observing that the dispute is having a checkered history and the short point that is involved is, whether, the mortgager can seek redemption of mortgage by offering to pay only the auction bid value after the auction being conducted.

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The learned Single Judge after taking into consideration Section 13(8) of SARFAESI Act and also Section 60 of the Transfer of Property Act, 1882 (hereinafter referred to as “the TP Act” for the sake of brevity) came to the conclusion that the first prayer to direct the Bank to permit the appellants to exercise their right of redemption by offering only 19.75 crores is devoid of any merit. The learned Single Judge also held that there was no illegality or legal infirmity that was pointed out in

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conducting the auction and therefore, the petitioners are not entitled for any relief. The learned Single Judge further noticed that the company is successful in stalling recovery proceedings initiated by the Bank since 2010 and the writ petitions came to be dismissed with costs.

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Being aggrieved by the dismissal of Writ Petition No.47565 of 2014, the present appeal is filed.

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We have heard Sri.S.S.Naganand, learned

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senior counsel for the appellants, Sri.G.Krishnamurthy, learned senior counsel for respondent No.1 and Sri.Prabhugoud B.Tumbagi, learned counsel for respondent Nos.2 and 3 and perused the material on record.

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Learned senior counsel for the appellants submitted that the appellants are ready and willing to offer an amount of Rs.19.75 crores in favour of the Bank as the highest bid in the auction is only Rs.19,60,30,000/(Rupees Ninteen Crores Sixty Lakhs and Thirty Thousand only) which the Bank is going to get. When the appellants

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are ready and willing to pay the said amount, the learned Single Judge was not right in rejecting the prayer seeking a direction to the Bank to accept the same permitting the petitioners to redeem the mortgage and to set aside the auction proceedings in question.

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Per contra, learned senior counsel for

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respondent No.1 opposed the submission contending that the appellant-company obtained Bank guarantee facility upto Rs.100 crores and later the credit facility upto Rs.10 crores on 24/12/2004. Appellant Nos.2 and 3 stood as guarantors and there was mortgage of plantation owned by them. Even though it is a secured debt, the appellantcompany is stalling the recovery of the amount due all these years. Finally when the properties were brought for sale, several attempts were made to stall the same and now the appellants are offering only Rs.19.75 crores and seeking redemption of the mortgage which is unknown to law. No illegality or infirmity is highlighted in holding e- auction and under such circumstances, no relief could be

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granted in favour of the appellants. Therefore, he prayed for dismissal of the appeal as being devoid of any merit.

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Learned counsel representing respondent Nos.2 and 3 submitted that the respondents being the highest bidders have already deposited the bid amount and under such circumstances, the auction already held could not be reversed at this stage, in this appeal.

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We have considered the rival contentions of the parties in light of the material placed before us. It is not in dispute that the coffee estates owned by the guarantors is mortgaged in favour of the Bank and it is an equitable mortgage by deposit the title deeds. It is also not in dispute that it is not only Rs.19.75 crores, but huge amounts are due to the Bank by the appellants. When the property was brought for auction sale, respondent Nos.2 and 3 being the highest bidders offered Rs.19.60 crores and they have also deposited the amount. When the properties were brought for sale, the appellants

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approached the Bank with an offer to pay Rs.19.75 crores and in turn to redeem the mortgage.

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Chapter III of SARFAESI Act deals with enforcement of security interest. Section 13(8) of the Act requires the secured creditor to tender the amount that is due together with all costs, charges, expenses to the secured creditor at any time before the date of publication of notice for public auction or inviting quotations or tender from public or private treaty. Then the secured assets shall not be transferred by way of lease, assignment or sale by the secured creditor. What is important to be noted is that the amount due together with all costs, charges, expenses is to be tendered to the secured creditor by the borrower to stall transfer of the secured assets.

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In this regard Section 60 of the TP Act is also to be taken into consideration, where it states that where the principal money has become due, the mortgager will have the right to get the delivery of possession of mortgaged property or to get re-transfer of the same only

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upon payment or tender of the mortgage money to the mortgagee. Section 58 of the TP Act defines the word ‘mortgage money’ as the principal money and interest on which payment is secured for the time being. Therefore, under both the enactments, what the mortgager has to pay or tender to the mortgagee is the entire amount that is due that is, the principal amount along with interest, costs, charges etc., and not the highest bid amount offered by the bidder in the auction sale which is by way of recovery of the outstanding dues and not what was offered by both the appellants to the Bank. The appellants sought to redeem the mortgage by offering a part of the amounts due which cannot be held to be a valid offer from the point of view of redemption of the mortgage. Therefore, we do not find any merit in the contentions taken by the appellants in this appeal.

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During pendancy of the writ petitions, the interim order dated 09/10/2014 came to be passed directing the Bank not to confirm the sale in favour of the

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auction purchaser and to permit the Bank to appropriate Rs.19.75 crores paid by the appellants towards the mortgage debt.

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Having regard to the aforesaid discussion, we are of the view that the interim order dated 09/10/2014 is in consonance with Section 13(8) of the SARFAESI Act. It would also be apposite to refer to Section 58 of the TP Act. In the circumstances, we do not find any merit in this appeal.

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At this stage, learned senior counsel submitted that the learned Single Judge has imposed exorbitant and unreasonable cost of Rs.5,00,000/- (Rupees five lakh only) payable by appellant No.1-Company to respondent No.1Bank. This Court may interfere atleast on that aspect of the matter.

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Learned Senior counsel appearing for the respondent-Bank objected to any interference being made even on the aspect of imposition of cost by contending that

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this is the third round of litigation and the appellant has been remiss in payment of their outstanding payment to the Bank.

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However, we find that the interest of justice would be subserved in deleting that portion of the order of the learned Single Judge, by which the cost of Rs.5,00,000/- has been imposed on the appellantCompany.

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Appeal is disposed in the aforesaid terms.

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In view of the disposal of the appeal, IA.1 of 2020

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filed for stay stands disposed.

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Sd/JUDGE

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Sd/JUDGE

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*bgn/-

M/S Ssjv Projects Private Limited v. Canara Bank

Case brief

What is this about?

What did the court decide?

M/S Ssjv Projects Private Limited v. Canara Bank

Case brief

What is this about?

What did the court decide?

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