Dismissed

Nalanda Cultural Education Society v. Shri Basaveshwar Urban Credit

Karnataka HC13 Dec 2022WP/100436/2022

Case brief

AI extract

What is this about?

The High Court of Karnataka dismissed a writ petition challenging the auction and sale of mortgaged properties. The court held that the petitioner failed to deposit the interim order security, lacked bona fides, and raised no valid ground regarding market value or procedural violation under the Karnataka Souharda Rules. The sale in favor of the successful bidder was upheld.

What did the court decide?

The writ petition was dismissed, upholding the auction proceedings and the sale deed executed in favour of Respondent No. 3.

Nalanda Cultural Education Society Vs Shri… — Banking and Recovery | Karnataka HC (2022)

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WP No. 100436 of 2022

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IN THE HIGH COURT OF KARNATAKA, DHARWAD BENCH

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DATED THIS THE 13^TH DAY OF DECEMBER, 2022

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BEFORE

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THE HON'BLE MR JUSTICE HEMANT CHANDANGOUDAR

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WRIT PETITION NO. 100436 OF 2022 (CS-RES)

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BETWEEN:

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NALANDA CULTURAL EDUCATION SOCIETY REP BY ITS SECRETARY SHRI. NINGAPPA S/O. FAKIRAPPA RAJAVANSHI, AGE.78, OCC.NIL R/O. HANUMAN NAGAR, 2ND STAGE, BELAGAVI-590021

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(BY SRI. MADAN DESHPANDE, ADVOCATE)

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AND:

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SHRI BASAVESHWAR URBAN CREDIT SOUHARADHA SAHAKARAI LTD SANKESHWAR, TQ. HUKKERI DIST. BELAGAVI REPRESENTED BY ITS CHAIRMAN SHRI. SAVANT S/O. ALLAPPA CHOUGULA, R/O. PLOT NO. 36, SECTOR12, M M EXTENSION MAHANTESH NAGAR, SHIVAJI NAGAR BELAGAVI-590016

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RECOVERY OFFICER REP BY ITS ASSISTANT REGISTRAR OF CO-OPERATIVE SOCIETY OFFICE ADDRESS AT. SAHAKAR BHAVAN

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…PETITIONER

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WP No. 100436 of 2022

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IN FRONT OF KHB HERITAGE JAKKERI HONDA, NEAR RAILWAY STATION, BELAGAVI-590001

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SHRI DASHARATH S/O. TUKARAM BAMANE, AGE: 55 YEARS, OCC. DOCTOR, R/O. PLOT NO.424, SCHEME NO.47, SAHYADRI NAGAR, NEAR BAUXITE ROAD, HINDALGA, BELAGAVI 590019.

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…RESPONDENTS

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(BY SMT.CHETANA S. BIRAJ, ADV. FOR R1, SRI. V.S.KALASURMATH, HCGP FOR R2, SRI.MRUTYUNJAY TATA BANGI, ADV. FOR SRI.MAHANTESH MATHAD & DEEPA J., ADVS. FOR R3)

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THIS WRIT PETITION IS FILED UNDER ARTICLES 226 & 227 OF THE CONSTITUTION OF INDIA PRAYING TO DIRECT TO SET ASIDE AUCTION PROCEEDINGS DATE 27.12.2021, CONDUCTED BY THE RESPONDENT NOS.1 AND 2 AND TO ISSUE ANY ORDER, DIRECTION OR WRIT IN THE NATURE OF CERTIORARI BY QUASHING THE SALE CERTIFICATE BEARING NO.BEL-1-12547/2021-22 DATE 31.12.2021 ISSUED BY THE RESPNODENT NOS.1 AND 2 IN FAVOUR OF THE RESPONDENT NO.3 UNDER THE AUCTION PROCEEDINGS DATED 27.12.2021 VIDE ANNEXURE D AND ETC.

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THIS PETITION COMING ON FOR ORDERS, THIS DAY, THE COURT MADE THE FOLLOWING:

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WP No. 100436 of 2022

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ORDER

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The petitioner had borrowed loan from the respondent No.1 by mortgaging the subject properties and since the subject properties were already mortgaged in favour of State Bank of India, additional charges was created in favour of the respondent No.1 Bank. The petitioner failed to pay the installments and thereby became defaulter which constrained the respondent No.1 Bank to initiate proceedings under Section 41 of the Karnataka Souharda Sahakari Act, 1997 (‘Act’ for short). The Competent Authority passed three awards dated 10.10.2011 for recovering a sum as enumerated in the awards from the petitioner. Since the petitioner did not come forward to repay the loan amount due, the respondent No.1 Bank issued auction notices on seven occasions. However, the said auctions did not come through since the petitioner obstructed to the auction to be conducted by the respondent No.1 Bank, thereby constraining the respondent No.1 Bank to approach the Competent Authority to transfer the mortgaged properties in its favour as specified under Rule 18(3) of the Karnataka Souharda Rules, 1997 (‘Rules’ for short).

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WP No. 100436 of 2022

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In exercise of the power conferred under Rule 18(3)

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of the Rules, the mortgaged properties were transferred in favour of the respondent No.1 Bank and the same has attained finality. Thereafter, the respondent No.1 Bank issued the impugned auction notice dated 20.12.2021 by giving seven days time fixing the date of auction on 27.12.2021. In the said auction, the respondent No.3 was the successful bidder and the sale in favour of the respondent No.3 was confirmed on 31.12.2021 for a sum of Rs.6,03,00,00,000/-. After the said amount was deposited by the respondent No.3, the subject properties were conveyed in favour of the respondent No.3 by executing a registered sale deed dated 31.12.2021.

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Section 43 of the Act deals with the execution of

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orders and Rule 17 deals with the procedure for auctioning of the mortgaged properties and Rule 17(2)(g) of the Rules specifies that 30 days minimum notice should be provided for conducting the auction from the date of publication of the notice. Rule 18 of the Rules deals with the transfer of mortgaged properties which have not been conveyed in a public auction. Rule 18(5) of the Rules specifies that if the mortgaged properties are not conveyed in a public auction, the respondent

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WP No. 100436 of 2022

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No.1 Bank can apply with the competent authority for transferring the mortgaged properties in favour of the Bank.

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In the instant case, the subject properties were not conveyed in the public auction conducted on seven occasions, since there was obstruction from the petitioner and as such, in exercise of power conferred under Section 18(5) of the Rules, the subject properties transferred in favour of the respondent No.1 Bank and the said order transferring the mortgaged properties in favour of the Bank has attained finality, since the challenge to the same by the petitioner has been negated by the Karnataka Appellate Tribunal.

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Thereafter, in terms of Rule 13(8) of the Rules, the subject properties were brought to auction on 27.12.2021 in light of the auction notice dated 20.12.2021. In the said auction, the respondent No.3 was the successful bidder and upon deposit of the sale consideration of Rs.6,03,00,00,000/-, the subject properties were conveyed in favour of the respondent No.3 by executing two registered sale deeds dated 31.12.2021. The confirmation of the sale in favour of the respondent No.3 is impugned in this writ petition.

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WP No. 100436 of 2022

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This Court by order dated 16.03.2022 granted an interim order subject to the condition that the petitioner deposited a sum of Rs.4,45,00,000/- within a period of two weeks. It is undisputed that the said sum was not deposited or part thereof, though the time was extended and by order dated 03.03.2022 it was made clear that if the said amount was not deposited on or before 14.02.2022, the interim order granted on 14.02.2022 shall stand automatically vacated. Since then the petitioner has not made any effort to either deposit the entire amount or part thereof to show his bona fide that he is willing to satisfy the loan amount in favour of the respondent No.2 Bank. The petitioner having not shown any bona-fides to save the subject properties, this Court is not inclined to interfere with the auction proceedings conducted by the respondent No.1 culminating in executing the sale deed in favour of the respondent No.3.

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The contention of the petitioner that the auction proceedings stands vitiated since the market value of the subject properties was not reflected in the auction notice cannot be accepted for the following reasons:

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WP No. 100436 of 2022

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(i) Rule 18 of the Rules unlike the provisions of SARFAESI Act does not specify that the reserve price of the subject properties has to be reflected in the auction notice.

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(ii) The petitioner has not produced any material before this Court to substantiate his claim that the subject properties conveyed was lesser than the actual market value as on the date of the execution of the sale deed.

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(iii) The subject properties having been transferred in favour of the respondent No.1 Bank in exercise of the power conferred under Rule 18(5) of the Rules, the contention of the petitioner that the auction proceedings conducted was in violation of the 17 of the Rules is not acceptable, since there is no mandatory requirement in Rule 18 of the Rules that minimum of 30 days should be provided for conducting auction from the date of publication of sale notice. Further, the

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WP No. 100436 of 2022

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petitioner has not stated the prejudice caused

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to him.

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(iv) I.A. No.4/2022 stands disposed of reserving liberty to the respondent Nos.1 and 3 to initiate contempt proceedings in accordance with law.

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Accordingly, the petition stands dismissed.

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Sd/JUDGE

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RSH

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LIST NO.: 1 SL NO.: 89

Nalanda Cultural Education Society v. Shri Basaveshwar Urban Credit

Case brief

What is this about?

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Nalanda Cultural Education Society v. Shri Basaveshwar Urban Credit

Case brief

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What did the court decide?

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