Dismissed

Spl Tahasildar v. Shambulingappa

Karnataka HC17 Aug 2023RSA/5356/2008

Case brief

AI extract

What is this about?

The High Court of Karnataka dismissed the second appeal filed by the Karnataka State Financial Corporation (Defendant/Appellant). The court affirmed the first appellate order declaring that a discharge certificate issued by the bank created an estoppel, barring the bank from auctioning mortgaged property after it had recognized the dissolution of the partnership firm and assumed all liabilities by

What did the court decide?

The appeal was dismissed; the judgment and decree of the first appellate court were confirmed.

Spl Tahasildar Vs Shambulingappa — Contract and Commercial Disputes | Karnataka HC (2023)

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NC: 2023:KHC-D:9059 RSA No. 5356 of 2008

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IN THE HIGH COURT OF KARNATAKA, DHARWAD BENCH

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DATED THIS THE 17^TH DAY OF AUGUST, 2023

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BEFORE

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THE HON'BLE MR JUSTICE HANCHATE SANJEEVKUMAR

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REGULAR SECOND APPEAL NO.5356/2008(INJ)

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BETWEEN:

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SPECIAL TAHASILDAR, KARNATAKA STATE FINANCIAL CORPORATION, ZONAL OFFICE S. B. HAVANNAVAR BUILDING CLUB ROAD BELGAUM – 580 001.

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…APPELLANT

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(BY SRI SHARAD V. MAGADUM, ADVOCATE)

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AND:

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SHAMBULINGAPPA H. TIMASANI. SINCE DECEASED BY HIS LRS.

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Digitally signed by SUJATA SUBHASH PAMMAR

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1A. SMT. LAXMIBAI W/O BHIMAPPA DEVAR, AGE: 58 YEARS, OCC: HOUSEWIFE, R/O: RAMPUR GALLI, MUDHOL, TQ: MUDHOL, DIST: BAGALKOT.

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1B. SMT. GOURADEVI W/O SIDDAPPA WALLIGOUDAR, AGE: 50 YEARS, OCC: HOUSEWIFE, R/O: MANTUR ROAD, MUDHOL, TQ: MUDHOL, DIST: BAGALKOT.

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1C. SMT. SHANKUNTALA W/O SADASHIV KAMAKERI, AGE: 45 YEARS, OCC: HOUSEWIFE, R/O: SANGALI MIRAJ ROAD SANGALI, TQ:SANGALI, DIST: SANGALI, STATE: MAHARASTRA.

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1D. RAJENDRA S/O. SHAMBILINGAPPA TIMMASANI, AGE: 43 YEARS, OCC:AGRICULTURE, R/O: MANTUR ROAD MUDHOL, TQ: MUDHOL,

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DIST: BAGALKOT.

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1E. SMT PREMAWATI W/O RAJENDRA NYAMAGOUDAR, AGE: 41 YEARS, OCC; HOUSEWIFE, R/O: BELLARY, TQ AND DIST: BELLARY.

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MALLIKARJUN S/O SHAMBULINGAPPA TIMASANI, AGE: 43 YEARS, OCC:AGRICULTURE, R/O: MANTUR, TQ: MUDHOL.

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…RESPONDENTS

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(BY SRI K. L. PATIL, ADVOCATE FOR R1(A – E) AND R2)

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THIS MFA IS FILED UNDER SECTION 100 OF CPC., PRAYING TO SET ASIDE THE JUDGMENT AND DECREE DATED 25.09.2008 PASSED BY THE ADDITIONAL CIVIL JUDGE (SR DN) JAMKHANDI, SITTING AT MUDHOL IN R.A.NO.235/2005 REVERSING THE JUDGMENT AND DECREE DATED 06.09.2005 PASSED BY THE PRL CIVIL JUDGE (JR DN) MUHDOL IN O.S.NO.197/2001 AND ALLOW THE INSTANT APPEAL, IN THE INTEREST OF JUSTICE AND EQUITY.

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THIS APPEAL, COMING ON FOR FINAL HEARING, THIS

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DAY, THE COURT DELIVERED THE FOLLOWING:

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NC: 2023:KHC-D:9059 RSA No. 5356 of 2008

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JUDGMENT

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The present regular second appeal is filed by the defendant-KSFC challenging the judgment and decree dated 25.09.2008 in RA.No.135/2005 passed by the Addl. Civil Judge (Sr.Dn.), Jamkhandi, sitting at Mudhol reversing the judgment and degree dated 06.09.2005 in OS.No.197/2001 passed by Prl. Civil Judge (Jr.Dn.), Mudhol.

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The ranks of the parties, is as stated before the trial Court for easy reference and convenience.

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The plaintiffs have filed the suit for injunction against the defendant-KSFC (appellant herein) that when the defendant has issued auction publication in respect of mortgage of the property of the plaintiffs, which was given as a collateral security despite the defendant-KSFC has discharged the plaintiffs from all liabilities of the defendant-KSFC and when D.W.2 who is also one of the partner with the plaintiffs has agreed for the dissolution of

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partnership firm agreeing to take all the responsibilities of liabilities payable to the defendant-KSFC. Therefore, the plaintiff has filed the suit for perpetual injunction restraining the defendant-KSFC from alienating, auctioning and to create charge on the suit property. The trial Court has dismissed the suit on the reason that the plaintiffs were partners in the partnership firm and they offered their property as a collateral security and it was mortgaged and the said mortgage is still subsisting even after dissolution of partnership firm. Hence, the defendant-KSFC is having right to put the suit property into auction.

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Being aggrieved by the dismissal of the suit, the plaintiffs had preferred the regular appeal before the First Appellate Court and the First Appellate Court has reversed the judgment and degree passed by the trial Court and decreed the suit as prayed for by the plaintiffs, for the reason that the partnership firm was dissolved and Sri A.B.Patel is continued to be the sole proprietor of the

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firm and plaintiff No.1 has come out from the partnership

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firm and in the said deed of dissolution the said Sri A.B.Patel has taken the responsibility of clearing all the liabilities of the defendant-KSFC and the defendant-KSFC has recognized this dissolution of partnership firm and discharged the plaintiffs from all liabilities accepting Sri A.B.Patel is alone responsible for clearing all the responsibilities. Therefore, as per Ex.P.16- discharge certificate, the First Appellate Court has come to the opinion that the defendant-KSFC has discharged the plaintiffs from all liabilities. Therefore, the defendant-KSFC estopped from contending that still the plaintiffs are liable. Hence, allowed the regular appeal and decreed the suit filed by the plaintiffs.

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Being aggrieved by decreeing the suit and granting perpetual injunction by the First Appellate Court, defendant-KSFC has preferred the present regular second appeal.

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NC: 2023:KHC-D:9059 RSA No. 5356 of 2008

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6. This Court while admitting the appeal on 17.02.2009

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had framed the following substantial questions of law:

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i. Whether the Lower Appellate Court has erred in construing the document at Ex.P.16 as a valid discharge said to have been given by the appellant herein in the light of the contention of the appellant herein before the Lower Appellate Court that despite the said letter the document at Ex.D1 viz., mortgage deed would still bind the plaintiff?

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ii. Whether the Lower Appellate Court has erred in its ultimate decision despite the contention of the appellant that the property was mortgaged by the plaintiff in his individual capacity as a guarantor to the transaction by way of collateral security?

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The learned counsel for the appellant/dependentKSFC submitted that plaintiff No.1 has offered his individual property as a collateral security for the loan availed from the defendant-KSFC in respect of the firm namely Karnataka Dying Mill, Mudhol, in which, plaintiff No.1 is also one of the partner. Therefore, the property of plaintiff No.1 was mortgaged with the defendant-KSFC as a collateral security. Even after dissolution of partnership firm, the said mortgage is still subsisting for recovery of

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loan. Therefore, the defendant-KSFC has proceeded with the mortgaged property offered by plaintiff No.1. Therefore, submitted that this is not correctly appreciated by the First Appellate Court resulting into erroneously reversing the judgment and decree passed by the trial Court. Therefore, prays to allow the defendant-KSFC for exercising the right on the mortgaged property of plaintiff No.1 by setting aside the judgment and decree passed by the First Appellate Court.

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On the other hand, learned counsel appearing for the respondent-plaintiff submitted that as per Ex.P16certificate issued by KSFC, Bagalkot, has issued discharge certificate, discharging the plaintiff from all liabilities by recognizing the deed of dissolution of partnership firm and also recognized the one of the partner namely A.B.Patel alone is liable for all liabilities of KSFC. Thus, Ex.P1 creates estoppel on the part of the defendant-KSFC. Hence, the first appellate court is correct in it’s reasoning decreeing the suit which need not be interfered with. Therefore,

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prays for dismissing the appeal by confirming the judgment and decree of the first appellate court.

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It is true that, the plaintiff No.1 and A.B.Patel were partners of firm namely Karnataka Dying Mill, Mudhol. As per Ex.P.13-deed of dissolution of the firm, the plaintiff No.1 has come out from the firm and the said A.B.Patel continued to be a sole proprietor of the said firm. In the said Ex.P.13-deed of dissolution, it was agreed and contained that the said A.B.Patel alone is responsible for all the loans of KSFC including the other minor loans. It is also agreed in the said Ex.P13-deed of dissolution that the said A.B.Patel is alone responsible for all the dues and the liabilities which will be created in future as a result of income assessment proceedings are in other garment dues for the previous period.

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Ex.P.14 is the compromise between the said A.B.Patel and plaintiff No.1 affirming the said deed of dissolution and as per this deed of dissolution, A.B.Patel alone is responsible for all the liabilities of the KSFC. This

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dissolution of partnership firm was forwarded to the defendant-KSFC and the defendant-KSFC has recognized the dissolution of partnership firm and thereby relieved the plaintiff No.1 from all the liabilities with the KSFC and noted the other partner namely A.B.Patel is solely liable for the liabilities of the unit as per Ex.P16.

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Ex.P.16 is the discharge certificate issued by the KSFC to the plaintiff No.1 thereby stating that the dissolution of partnership firm has been recognized by the KSFC and relieved the plaintiff No.1 from all the liabilities with the KSFC and noted another partner namely A.B.Patel is solely liable for the liabilities of the unit and is empowered to put the assets into the use just standing in the name of the firm. When this being the Ex.P.16-discharge certificate issued in favour of plaintiff No.1, relieve/discharge of all the liabilities of appellant No.1 which creates an estoppel under Section 115 of the Indian Evidence Act, on the part of the defendant-KSFC. This is what is appreciated by the First Appellate Court. After discharge of plaintiff No.1 from

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all liabilities of KSFC, the properties given by the plaintiff No.1 as collateral security might not have been acquired by the plaintiff No.1 by redeeming mortgage and may be with the KSFC but the KSFC cannot take disadvantage of utilizing the said mortgaged property depriving the rights of plaintiff No.1, when the defendant-KSFC has recognized the dissolution of firm and further recognized A.B.Patel is liable for all the liabilities, then once again proceeding against the mortgaged property of plaintiff No.1 by putting auction into it is illegal.

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Ex.P16 creates estoppels against the KSFC. This is what is appreciated by the First Appellate Court. Therefore, the First Appellate Court is correct in decreeing the suit which needs no interference. Therefore, the substantial question of law is answered that the First Appellate Court is justified in holding that the discharge certificate-Ex.P16 creates estoppel. Just because even after dissolution of firm and recognizing the A.B.Patel alone is liable for all liabilities of the partnership firm by

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relieving plaintiff No.1, proceedings against the mortgaged property as per Ex.D1 by creating charge over it, is not correct. Therefore, the substantial question of law is answered in favour of the plaintiff that the First Appellate Court is justified in construing Ex.P.16 as a valid discharge certificate and proceedings initiated by KSFC as per Ex.D1

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is not correct. Therefore, there is no merit found in the appeal filed by the KSFC and the same is liable to be dismissed. Accordingly, I pass the following:

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ORDER

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i. Appeal is dismissed.

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ii. Judgment and decree passed by the Addl. Civil Judge (Senior Division) Jamkhandi, sitting at Mudhol in RA No.135/2005 dated 25.09.2008 in reversing

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the judgment and decree passed in OS No.197/2001 by Prl. Civil Judge(Jr. Dn.), Mudhol is confirmed.

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iii. Costs made easy.

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iv. Draw decree accordingly.

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SD/JUDGE

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PB: Para 1 to 6 HMB: Para 7 to end. List No.:5 Sl No.: 6

Spl Tahasildar v. Shambulingappa

Case brief

What is this about?

What did the court decide?

Spl Tahasildar v. Shambulingappa

Case brief

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