Dismissed

M/S Rathna Industries v. Karnataka State Finance Corporation

Karnataka HC10 Oct 2023WP/13956/2012

Case brief

AI extract

What is this about?

Petitioner sought nullification of an asset auction by Karnataka State Finance Corporation and a fresh auction. The High Court dismissed the writ petition, holding it barred by significant delay, failure to utilize prior settlement opportunities, and the issue having been previously considered and decided in a related writ petition prior to the confirmation of the sale. The Court also noted the pe

What did the court decide?

Petition to declare the auction sale null and void and direct a fresh auction was dismissed. Petitioner is not granted any relief.

M/S Rathna Industries Vs Karnataka State Finance… — Banking and Recovery | Karnataka HC (2023)

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1 - NC: 2023:KHC:36802 WP No. 13956 of 2012

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IN THE HIGH COURT OF KARNATAKA AT BENGALURU

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DATED THIS THE 10^TH DAY OF OCTOBER, 2023

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BEFORE

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THE HON'BLE MR JUSTICE R. NATARAJ WRIT PETITION NO. 13956 OF 2012 (GM-KSFC)

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BETWEEN:

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M/S RATHNA INDUSTRIES, REPRESENTED BY ITS PROPRIETOR, SRI. K.R. VENUGOPAL, S/O LATE.K.R. RAJAGOPAL, AGED ABOUT 48 YEARS, NO.756, 5^TH MAIN ROAD, RAGHAVENDRA BLOCK, SRINAGAR, BANGALORE - 560 050.

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…PETITIONER

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(BY SRI. SHARATH KUMAR SHETTY, ADVOCATE)

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AND:

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Digitally signed by SUMA Location: HIGH COURT OF KARNATAKA

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KARNATAKA STATE FINANCE CORPORATION, NO.197, I^ST FLOOR, 2^ND STAGE, WEST OF CHORD ROAD, BANGALORE - 560 086. REPRESENTED BY ITS ASSISTANT GENERAL MANAGER.

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KSSIDC, HEAD OFFICE, RAJAJINAGAR, INDUSTRIAL ESTATE, BANGALORE - 560 010. REPRESENTED BY ITS GENERAL MANAGER/DEPUTY

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GENERAL MANAGER.

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M/S. SINGHAL GRANITES PVT LTD., NO.809, BARTON CENTRE, NO.94, M.G. ROAD, BANGALORE - 560 001. REPRESENTED BY ITS PROPRIETOR.

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…RESPONDENTS

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(BY SRI. BIPIN HEGDE, ADVOCATE FOR R1; SMT. MANJULA N TEJASWI, ADVOCATE FOR R2; SMT. UDITA RAMESH, ADVOCATE FOR R3)

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THIS WRIT PETITION IS FILED UNDER ARTICLES 226 AND 227 OF THE CONSTITUTION OF INDIA PRAYING TO DIRECT THE R1 CONDUCTED AUCTION SALE IN FAVOUR OF R3 IS NULL & VOID AD FRESH AUCTION TO BE CONDUCTED BY THE R1 WITH DUE NOTICE TO PETITIONER AND ETC.,

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

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ORDER

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The petitioner has sought for following reliefs:-

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i. Issue a writ of mandamus or any appropriate writ, order or directing that the 1st respondent conducted auction sale in favour of 3rd respondent is null and void and fresh auction to be conducted by the 1st respondent with due notice to petitioner.

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ii. Issue a writ of Mandamus or any other appropriate writ, order or directions, directing the respondents to

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3 - NC: 2023:KHC:36802 WP No. 13956 of 2012

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give opportunity to the petitioner to participate in the sale proceedings of the property for bringing a purchaser."

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The writ petition discloses that the petitioner was the owner of an industrial shed bearing No.C-35, Industrial estate, Hoskote, where he had established a business of printing and manufacture of note books. Petitioner had availed a term loan from the Karnataka State Financial Corporation (henceforth referred as 'Corporation'). Since the petitioner defaulted in the payment of installments to the KFSC, proceedings under Section 29 of the State Financial Corporation Act, 1951 was initiated and the machineries worth Rs.7,00,000/- was seized and sold. The State Financial Corporation attempted to sell the land and building on nine occasions and every time, the petitioner raised some concern and the sale was postponed. The petitioner continued his efforts to save the land and building by offering a one time settlement which also did not fructify. The Corporation therefore was compelled to initiate proceedings for sale of the land and

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building by a sale notice dated 17.09.2006 which was published in Deccan Herald. In response to the sale notice, the Corporation received two bids, the highest of which was a sum of Rs.14,25,000/-. The petitioner was given an opportunity to secure a better offer following which, communications ensued between the petitioner and

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the Corporation, which ultimately reached this Court in W.P.No.11243/2007. This Court in an attempt to help the petitioner save his unit, in terms of the order dated 03.08.2007 granted a final opportunity to the petitioner to pay a sum of Rs.17,50,000/- by or before 30.09.2007.

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The petitioner was also given an option to bring a better offer than a sum of Rs.17,50,000/-. Since the petitioner failed to do so, the respondent - Corporation accepted the highest offer received pursuant to the paper publication dated 17.09.2006, consequent to which, the purchaser deposited the entire auction amount on 07.11.2007. Later, the petitioner is stated to have submitted a representation dated 14.11.2007 getting a better bid at a sum of Rs.18,00,000/-. The petitioner renewed his

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request by his letter dated 11.06.2008 and thereafter, followed it up by getting a notice issued through his counsel on 10.08.2011 which was suitably replied by the Corporation on 02.09.2011. The Corporation also addressed a letter to the learned counsel for the petitioner by a reply dated 07.12.2011 setting out the events that had transpired in the case. Being aggrieved by the non consideration of the request of the petitioner, the petitioner has filed this writ petition for an appropriate writ to direct the respondent No.1 to declare that the auction sale in favour of the respondent No.3 is null and void and to conduct a fresh auction and also sought for a writ in the nature of mandamus to direct the respondents to provide an opportunity to participate in the sale proceedings that may be held.

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The learned counsel for the petitioner reiterated the contentions urged in the writ petition and claimed that the unit of the petitioner was burnt down in an accidental fire and petitioner suffered huge loss. He submits that

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apart from the investment infused into the business by the petitioner, he also lost the plant and machinery as well as land and building by virtue of the respondent No.1 - Corporation exercising power under Section 29 of the Act. He therefore prays that action of the respondents in auctioning the property without following the rules of auction may be set aside. He contends that the auction notice is extremely bald and it did not disclose what the base price was. He further contends that except two bidders, there were no bids received by the respondent No.1 - Corporation and therefore, the auction was not competitive but was a mere charade.

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Per contra, learned counsel for the respondent No.1 - Corporation submits that the order dated 03.08.2007 passed by this Court in W.P.No.11243/2007 is self explanatory. He contended that the attempt to auction the asset on nine occasions was spurned by the petitioner. Though a long leash was given to the petitioner to bring a better offer, the petitioner did not use

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the opportunity and therefore, the respondent No.1 was perforced to accept the highest bid received pursuant to the auction notice dated 17.09.2006. He submits that the auction purchaser had deposited the amount on 07.11.2007, consequent to which, the auction was confirmed in his favor. He submits that though the petitioner had submitted the representation on 14.11.2007 quoting a better offer, it was actually submitted before the respondent No.1 on 26.11.2007 i.e., much after the sale was confirmed in favour of the purchaser. He therefore, submits that the petitioner is not honest and bonafide in filing this writ petition. He also submits that the writ petition is filed nearly after five years from the date of confirmation of the auction. He also submits that the petitioner cannot contend that the sale dated 29.09.2006 was not in accordance with law since that ground was already exhausted when he filed W.P.No.11243/2007 and thus, the validity of the sale cannot be examined in this writ petition.

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The learned counsel for the respondent No.3 supported the contention of the learned counsel for the respondent No.1 and submitted that the entire auction price was paid to the respondent No.1 and now the respondent No.3 is in physical possession and enjoyment of the auctioned asset.

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I have considered the submissions of the learned counsel for the petitioner as well as the learned counsel for the respondents.

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It is seen from the order passed by this Court in W.P.No.11243/2007 that this Court, after noticing that the industrial unit in question was brought for sale and the highest bid of Rs.14,25,000/- was received, granted an opportunity to the petitioner to deposit a sum of Rs.17,50,000/- which included a sum of Rs.14,25,000/(being the highest auction price) and a sum of Rs.3,25,000/- being the interest. The petitioner was granted time to deposit the said money by 30.09.2007 and liberty was reserved to the petitioner to secure a better

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offer. The petitioner admittedly did not deposit a sum of Rs.17,50,000/- before 30.09.2007 and also did not secure a better offer. In the meanwhile, since the time granted by this Court had elapsed, the Respondent - Corporation took further steps to accept the highest bid received pursuant to the sale notice dated 17.09.2006 and accepted the bid of the respondent No.3. The respondent No.3 is stated to have deposited the entire amount on 07.11.2007, consequent to which, the possession of the unit was delivered to the respondent No.3. The petitioner nearly after five years from the date of acceptance of the highest bid has filed this writ petition challenging the auction sale and has also sought for a re-auction of the unit. The reliefs sought for by the petitioner cannot be granted for more than one reason namely, (i) that the writ petition is hit by delay and latches in as much as, the petitioner has slept over his rights for nearly five years from the date of confirmation of the auction, ii) the opportunity given by the respondent No.1 to the petitioner for a one time settlement of the dues was not utilized,

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iii) the petitioner failed to take advantage of the opportunity granted by this Court to pay the outstanding by 30.09.2007 or to serve a better offer, (iv) the petitioner cannot assail the correctness of the auction sale since he did not raise those contentions in W.P.No.11243/2007.

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In that view of the matter, this petition lacks merits and is dismissed .

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Sd/JUDGE

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MH/List No.: 1 Sl No.: 5 CT:SNN

M/S Rathna Industries v. Karnataka State Finance Corporation

Case brief

What is this about?

What did the court decide?

M/S Rathna Industries v. Karnataka State Finance Corporation

Case brief

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What did the court decide?

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