Dismissed

K Rahman Khan v. the Joint Registrar of Co-Operative Societies

Karnataka HC6 Nov 2023WP/3490/2016

Case brief

AI extract

What is this about?

The High Court of Karnataka dismissed a writ petition challenging an order attaching properties of respondents in surcharge proceedings under the Karnataka Co-operative Societies Act. The court held that the Order of the Registrar and the Appellate Tribunal confirming the attachment in view of allegations of banking fraud were correct.

What did the court decide?

The writ petition was dismissed as it was deemed devoid of merit.

K Rahman Khan Vs the Joint Registrar of… — Writ and Judicial Review | Karnataka HC (2023)

¶1

1 - NC: 2023:KHC:39991 WP No. 3490 of 2016

¶2

IN THE HIGH COURT OF KARNATAKA AT BENGALURU

¶3

DATED THIS THE 6^TH DAY OF NOVEMBER, 2023

¶4

BEFORE

¶5

THE HON'BLE MR JUSTICE C.M. POONACHA WRIT PETITION NO. 3490 OF 2016 (CS-RES)

¶6

BETWEEN:

¶7

K RAHMAN KHAN S/O LATE KHASIM KHAN AGED ABOUT 76 YEARS NO 200/C 7TH MAIN 3RD BLOCK JAYANAGAR BENGALURU - 560011

¶8

…PETITIONER

¶9

(BY SRI. DWARAKANATH H S, AND SRI B PRAMOD, ADVOCATES)

¶10

AND:

¶11

THE JOINT REGISTRAR OF CO-OPERATIVE SOCIETIES RULE 441 AND ARBITRATOR , AMANATH CO-OPERATIVE BANK LTD , AMANATH HOUSE NO 43, HOSPITAL ROAD Digitally signed by BENGALURU – 560001 BHARATHI S Location: HIGH 2. AMANATH CO-OPERATIVE BANK LTD COURT OF KARNATAKA AMANATH HOUSE,

¶12

AMANATH CO-OPERATIVE BANK LTD AMANATH HOUSE, NO. 43, HOSPITAL ROAD SHIVAJINAGAR BENGALURU - 560001. REPRESENTED BY ITS GENERAL MANAGER

¶13

SRI S S PEERAN S/O LATE S M PEER, MAJOR RESIDING AT NO 22, ALBERT ROAD CROSS, RICHMOND TOWN, BENGALURU – 560025

¶14

2 - NC: 2023:KHC:39991 WP No. 3490 of 2016

¶15

ZIAULL SHERIFF S/O LATE GAFFAR SHERIFF MAJOR RESIDING AT AL BAKRA GOLDEN ENCLAVE AIRPORT ROAD BENGALURU – 560017

¶16

SADATH ALI KHAN S/O B M SANA KHAN MAJOR RESIDING AT SANA NO 2/3 HAYES ROAD BENGALURU – 560015

¶17

AZIZ MOHAMMAED S/O MOHAMMED DADA AGED ABOUT 65 YEARS R/O NO 23 F STREET ROBERTSON ROAD CROSS CLIVELYD TOWN, FRAZER TOWN BENGALURU – 560011

¶18

HYDER ALI JEEVA BAHI S/O JEEVA BHAI MAJOR AGED MAJOR RESIDING AT NO 17/1 CHURCH ROAD BASAVANAGUDI BENGALURU – 560004

¶19

MOHAMMED ATEEQ AHMED S/O LATE ABDUL GAFOOR MAJOR RESIDING AT NO 23 F STREET CLAIVELYD TOWN BENGALURU – 560011

¶20

SMT JAMEELA KHALEEL W/O LATE M R KHALEEL MAJOR RESIDING AT NO 18/3 ANDREE ROAD SANTHI NAGAR BENGALURU – 560027

¶21

MOHAMMED ASADULLA S/O MOHAMMED YOSUFF MAJOR RESIDING AT NO 1022/47 38TH CROSS

¶22

3 - NC: 2023:KHC:39991 WP No. 3490 of 2016

¶23

T BLOCK JAYANAGAR BENGALURU – 560011

¶24

A SHAFLULLA S/O H V ABDUL WAHAB MAJOR RESIDING AT NO. 53 MUNISWAMAPPA ROAD MUNNIREDDY PALYA BENGALURU – 560032

¶25

K HIDAYATHULLA S/O K AHMEDD HUSSAIN MAJOR RESIDING AT NO 346 KHATHIB STREET PERIAPET VANIYAMBADI TAMIL NADU 635754

¶26

SMT KHAIRUNNISA HUSBANDS NAME NOT KNOWN MAJOR RESIDING AT NO.11A, 2^ND MAIN ROAD J C NAGAR BENGALURU 56006.

¶27

SMT NASEEMA BEGUM HUSBANDS NAME NOT KNOWN MAJOR RESIDING AT NO 100/2 1ST FLOOR ROBERTSON ROAD FRAZER TOWN BENGALURU – 560005

¶28

SRI M A RAJ FATHERS NAME NOT KNOWN MAJOR RESIDING AT NO 512 4TH CROSS, 5TH BLOCK K H B COLONY KORAMANGALA BENGALURU - 560095

¶29

SMT SADIQA BEGUM HUSBANDS NAME NOT KNOWN MAJOR RESIDING AT NO 64/12 8TH MAIN ROAD

¶30

4 - NC: 2023:KHC:39991 WP No. 3490 of 2016

¶31

1ST CROSS K E B LAYOUT B T M 1ST STAGE

¶32

BENGALURU - 560029

¶33

SMT NOOR JAHAN BEGUM HUSBANDS NAME NOT KNOWN MAJOR RESIDING AT NO. 11, SIDDARAMAPPA LAYOUT LINGARAJAPURAM BENGALURU - 560084

¶34

…RESPONDENTS

¶35

(BY SRI SIDDHARTH BABURAO, AGA FOR R1 SRI ABHINAV V, ADVOCATE FOR R2)

¶36

THIS WP IS FILED UNDER ARTICLES 226 & 227 OF THE CONSTITUTION OF INDIA PRAYING TO QUASH THE ORDER DATED 18.12.2015 PASSED IN APPEAL NO.76/2008 BY THE HON'BLE KARNATAKA APPELLATE TRIBUNAL, BANGALORE AT ANNEX-A AND ALLOW THE APPEAL AND ETC.

¶37

THIS PETITION, COMING ON FOR PRELIMINARY HEARING IN ‘B’ GROUP, THIS DAY, THE COURT MADE THE FOLLOWING:

¶38

ORDER

¶39

The present writ petition is filed challenging the order dated 18.12.2015 passed in Appeal No.76/2018 by the Karnataka Appellate Tribunal, Bangalore (hereinafter referred to as ‘the Tribunal’) as well as the order dated 14.01.2018 passed in JRD/ACB/Surcharge/01/2007-08 by Respondent No.1 on the application filed by the Petitioner.

¶40

The relevant facts necessary for consideration of the present petition are that Respondent No.2 – Bank instituted proceedings against various persons including the Petitioner

¶41

5 - NC: 2023:KHC:39991 WP No. 3490 of 2016

¶42

under Section 69 of the Karnataka Co-Operative Societies Act, 1959 (for short ‘the Act’) for recovery of a sum of `10,203.48 lakhs together with interest @ 18% per annum from the Respondents in the said petition jointly and severally. In the said proceedings, the Respondent No.2- Bank filed an application under Section 103 of the Act to pass an order of attachment before the award/orders of the properties of the Respondents mentioned in the said application.

¶43

It is forthcoming from the record that Respondent No.1 had passed a provisional order of attachment dated 20.11.2007 and thereafter upon failure of furnishing of adequate security, order dated 14.1.2008 was passed confirming the order of attachment.

¶44

The Petitioner being aggrieved by the order dated 14.1.2008, preferred an Appeal No.76/2008 before the Tribunal. Respondent No.2 – Bank entered appearance before the Tribunal and contested the said proceedings. The Tribunal by its judgment dated 18.12.2015, dismissed the Appeal filed by the Petitioner and confirmed the order dated 14.01.2008

¶45

¶46

NC: 2023:KHC:39991 WP No. 3490 of 2016

¶47

passed by the Respondent No.1. Being aggrieved, the present writ petition is field.

¶48

Sri H.S.Dwarakanath, learned counsel for the Petitioner vehemently contends:

¶49

i) That the application filed by the Respondent No.2- Bank under Section 103 of the Act does not contain the requisite averments as required under Section 103(1) of the Act. In the absence of the necessary averments being made, which tantamounts a jurisdictional fact, the Respondent No.1 ought not to have passed the order of attachment;

¶50

ii) That Respondent No.1 in its order has recorded a finding that the properties of the Petitioner have been enjoyed as joint family properties and concept of joint family being alien to Muslim Law, the order of attachment could not have been passed.

¶51

iii) That the Tribunal has considered the relevant position of law with regard to the attachment before judgment as laid down in Order 38 Rule 5 of CPC and despite noticing the fact that the said position of law is applicable, has recorded a finding that

¶52

7 - NC: 2023:KHC:39991 WP No. 3490 of 2016

¶53

the same would not enure to the benefit of the Petitioner and has erred in dismissing the appeal.

¶54

iv) That the Bank has failed in demonstrating that the properties of the Petitioner are required to be attached and that the order of attachment that has been made by the Respondent No.1 and affirmed by the Tribunal is erroneous and required to be interfered with by this Court in the present writ petition.

¶55

Learned counsel Sri Abhinav Ramanand, appearing

¶56

for Respondent No.2 – Bank in justification of the orders passed by Respondent No.1 and the Tribunal contends that;

¶57

i) That consequent to an inquiry conducted under Section 64 of the Act, proceedings under Section 69 of the Act have been initiated on the basis of report. The enquiry conducted under Section 64 of the Act was proceeded by a report of the Reserve Bank of India. That the report of Reserve Bank of India as well as the one made under Section 64 of the Act demonstrates a large scale fraud in the functioning of the Respondent No.2 and the

¶58

8 - NC: 2023:KHC:39991 WP No. 3490 of 2016

¶59

said aspects have been averred in detail in the application made under Section 69 of the Act by the Bank.

¶60

ii) That in the application made under Section 103 of the Act, specific averments have been made satisfying the ingredients as required under Section 103 (1) of the Act and in view of the averments made in the petition under Section 69 of the Act, Respondent No.2 – Bank has satisfied the requisite criteria as contemplated under Section 103 of the Act and the attachment has been rightly ordered by Respondent No.1 which has been affirmed by the Tribunal;

¶61

iii) That Respondent No.1 as well as the Tribunal having adequately considered the relevant aspect of the matter and having affirmed the attachment, the said orders are not required to be interfered with by this Court in exercise of the jurisdiction contained under Article 227 of the Constitution of India.

¶62

Learned AGA also justifies the order passed by Respondent No.1 as well as the Tribunal.

¶63

¶64

NC: 2023:KHC:39991 WP No. 3490 of 2016

¶65

Submissions made by learned counsel for the Petitioner, learned counsel for Respondent No.2- Bank and learned AGA have been considered and records have been perused. The question that arises for consideration is, ‘whether the attachment made by Respondent No.1 vide its order dated 14.01.2008 and upholding of the same by the Tribunal vide its order dated 18.12.2015 are erroneous and liable to be interfered with ?’

¶66

It is relevant to note that with regard to the functioning of the Respondent No.2 – Bank, the Reserve Bank of India had inspected books of accounts and submitted a report that there have been a series of loans sanctioned which

¶67

are fictitious in nature which is opposed to the Bye-laws, Banking Loan Policies, Reserve Bank of India Norms and guidelines as well as the provisions of the Co-Operative Societies Act and Rules. Based on the said report and noticing several irregularities, the Registrar of Co-operative Societies initiated an inquiry under Section 64 of the Act and an Inquiry Officer was appointed and submitted his report on 30.06.2007 wherein it was forthcoming that there is misappropriation of the Banking funds/accounts to the extent of 10,203.48 lakhs and

¶68

10 - NC: 2023:KHC:39991 WP No. 3490 of 2016

¶69

the same is required to be recovered from the President, Board of Director and two other officers of the Bank as being responsible for the act and misappropriation. Based on the same, proceedings under Section 69 of the Act have been initiated by Respondent No.2 – Bank.

¶70

In the petition filed under Section 69 of the Act, the Respondent No.2 – Bank has setout in detail, the relevant facts, on the basis of which, the said proceedings have been initiated as also have averred with regard to the key features and observations of enquiry report as a result of which the recovery of a sum of `10,203.48 lakhs has been initiated against the Respondents in the said proceedings. In the said proceedings, an application was filed under Section 103 of the Act for attachment, pending adjudication of the said proceedings.

¶71

It is forthcoming from the averments made in the petition under Section 69 of the Act that, the relevant pleadings with regard to the irregularities on the basis of which the said proceedings have been initiated has been made. It is also forthcoming from the application made under Section 103 of the Act, that it has been specifically averred that Respondents

¶72

11 -

¶73

NC: 2023:KHC:39991 WP No. 3490 of 2016

¶74

have made unlawful gain by mismanaging the assets and funds of the Bank during their tenure and have acquired several properties in and around the Bangalore and that Respondents have made frantic attempts to alienate the properties. It is further averred in the said application that some properties have been mortgaged, while others are held in benami in the names of their relatives and that the Bank will be put to great loss and unable to recover the dues if the properties are alienated.

¶75

Respondent No.1 while considering the order of attachment has noticed the relevant averments made by the Bank as well as contentions purforth by Respondent in the said proceedings to raise the attachment and having considered that the properties were held by family members also has passed the order dated 14.01.2008.

¶76

The Tribunal in the Appeal filed by Petitioner while considering the relevant facts has noticed the relevant provisions for attachment as contemplated under Order 38 Rule 5 of the CPC as also the following judgments which were cited:

¶77

12 - NC: 2023:KHC:39991 WP No. 3490 of 2016

¶78

i ) Palghar Rolling Mills Pvt. Ltd., Vss. Visveshvaraya Iron and Steel Ltd and Another¹

¶79

ii) L.V. Bhujanga Rao Vs. Ch. Venkateswara Rao²

¶80

iii)Renox Commercials Ltd Vs. Inventa Technologies Pvt. Ltd.,³

¶81

iv) Smt. Kamala Panda Vs. Krishna Cloth Stores and Another⁴

¶82

v) Premraj Mundra Vs. Md. Maneck Gazi⁵

¶83

The Tribunal has recorded a finding that the

¶84

principles as laid down in the case of Premraj⁵ have been covered in the other judgments. However, while noticing the position of law as laid down in the other judgments, has not followed the same and has recorded the following finding:

¶85

“27. But the larger question that looms in our mind is "whether the law laid down in the cited judgments of the Hon'ble High Courts is applicable to the present case. It is to be noted that one thing that is common to all the decisions cited by the counsel for the appellant is that the original suit filed by the plaintiff was for recovery of sums which were claimed in respect of legitimate commercial and contractual transactions between the parties. The original transactions were not illegal and forbidden under law. Where as in the present case the money sought to be recovered from the appellant pertained to a massive banking fraud alleged to have

¶86

1 ILR 1985 Kar 3989

¶87

2 AIR 1993 Madras 246

¶88

3 AIR 2000 Madras 213

¶89

4 AIR 1989 Orissa 229

¶90

5 AIR 1951 Calcutta 156

¶91

13 - NC: 2023:KHC:39991 WP No. 3490 of 2016

¶92

been committed by the then management of the R-2 bank and that too in a surcharge proceeding u/s 69 of the KCS Act 1959. The said surcharge proceeding is said to be on the basis of a statutory enquiry conducted u/s 64 of the KCS Act which was ordered at the behest of the Reserve Bank of India. The alleged banking fraud is also said to have been noticed in the inspection conducted by the Reserve Bank of India. Therefore the original proceedings before R-1 is not a pure and simple suit where the plaintiff sought to recover the money owed by the defendant, but the money alleged to have been misappropriated by the management of R-2 bank during the tenure of the appellant who is the then President of R-2 bank.”

¶93

Although learned counsel for the petitioner has pointed out various errors in the reasoning of the Respondent No.1 especially with regard to the finding that the properties are enjoyed as the joint family properties of the petitioners and the fact that the Tribunal having noticed the position of law as laid down in the judgments relied upon by the Petitioner before the Tribunal and having recorded a finding that the said position of law is applicable to the contention of the counsel for the Petitioner, that the position of law has not been made applicable to the facts of the present case and hence, the order of Respondent No.1 and the judgment of the Tribunal are erroneous, the said contention of the Petitioner for setting aside of the order of Respondent No.1 and the judgment of the Tribunal are not required to be accepted in view of the fact that

¶94

14 -

¶95

NC: 2023:KHC:39991 WP No. 3490 of 2016

¶96

in the present case, the Respondent No.2 – Bank has in its proceedings initiated under Section 69 of the Act has clearly set out the basis on which the recoveries are sought to be made from the respondents in the said proceedings which are consequent to the report of the Reserve Bank of India as also the report of the statutory enquiry conducted under Section 64 of the Act. It is on the basis of the said report that the proceedings under Section 69 of the Act have been initiated. Detailed averments have been made by Respondent No.2 – Bank in its petition under Section 69 of the Act as to the basis of its claim and the said aspects are required to be adjudicated in the course of the enquiry as to the extent of the liability of each of the respondents in the said proceedings. In the application filed by the Petitioner under Section 103 of the Act there is a specific averment made that respondents have made unlawful gain by mismanaging the assets and funds of the Bank and attempts are being made to alienate the properties.

¶97

It is forthcoming that under Section 103 of the Act, attachment of the properties could be sought. It is relevant to notice Section 103 (1) of the Act which reads as follows:

¶98

15 - NC: 2023:KHC:39991 WP No. 3490 of 2016

¶99

103. Attachment of property before award or order . –

¶100

(1) If the Registrar is satisfied on an application, report, enquiry or otherwise, that any person with intent to delay or obstruct the enforcement of any order, decision or award that may be made against him under the provisions of this Act,

¶101

-(a) is about to dispose of the whole or any part of his property, or

¶102

(b) is about to remove the whole or any part of his property from the jurisdiction of the Registrar, the Arbitrator or Liquidator, as the case may be,

¶103

He may, unless adequate security is furnished, direct the attachment of the said property; and such attachment shall have the same effect as if made by a Competent Civil Court.

¶104

(emphasis supplied)

¶105

Having regard to the averments made by the Petitioner-Bank in the petition under Section 69 of the Act as to the manner and the basis of which the recovery is sought to be made from the respondents in the said proceedings and in view of the specific averments made by Bank in the application under Section 103 of the Act that by virtue of the unlawful gain made by mismanaging the assets and funds of the Bank during their tenure, the Respondents have acquired several properties in and around the Bengaluru and have made attempts to alienate the properties, it cannot be said that the attachment made by Respondent No.1 which is affirmed by the Tribunal is

¶106

16 - NC: 2023:KHC:39991 WP No. 3490 of 2016

¶107

in any manner erroneous. Respondent No.1, on the application filed under Section 103 of the Act, notified the Respondents in the said application regarding furnishing of adequate security and upon failure to do so, passed an order for attachment.

¶108

The Respondent No.1 in its order has noticed the relevant facts and the apprehension of the Bank that various properties which have been acquired may be alienated. Although there is a finding by Respondent No.1 that the properties are held by family members, it is pertinent to note that the present challenge is not by the said family members. The relevant facts have also been re-appreciated by the Tribunal.

¶109

No doubt, the reasoning of Respondent No.1 with regard to the properties being enjoyed as a joint family as also the reasoning of the Tribunal in attempting to draw distinction that in the judgments referred by the Petitioner that the proceedings in the said cases are for recovery of sum in respect of legitimate, commercial and contractual transactions, whereas the present proceedings are for recovery of amounts pursuant to massive banking fraud alleged to have been committed may

¶110

17 - NC: 2023:KHC:39991 WP No. 3490 of 2016

¶111

not be relevant and appropriate in the facts of the present case.

¶112

However, having regard to the fact that the proceedings have been initiated by the Respondent No.2-Bank under Section 69 of the Act, which is consequent to the report of the Reserve Bank of India as also the statutory enquiry conducted under Section 64 of the Act and in the Petition filed under Section 69 of the Act, the Bank having averred in detail as to the manner in which the misappropriation is alleged to have been committed and having regard to the specific averments made in the application under Section 103 of the Act that the properties have been acquired as a consequence to misuse of the banking funds and an apprehension also having been averred in the said application with regard to the alienation of properties, it cannot be said that the order of Respondent No.1 in granting the attachment as sought for by the Bank which has been affirmed by the Tribunal are in any manner erroneous and liable to be interfered with by this Court in exercise of its equitable, discretionary jurisdiction contained under Article 227 of the Constitution of India. Hence, the question framed for consideration is answered in the negative.

¶113

18 -

¶114

NC: 2023:KHC:39991 WP No. 3490 of 2016

¶115

In view of the aforementioned, no case is made out by the Petitioner to warrant interference in the order passed by Respondent No.1 as also the Tribunal and the above petition is dismissed as being devoid of merit.

¶116

Sd/JUDGE

¶117

BS - List No.: 1 Sl No.: 31

K Rahman Khan v. the Joint Registrar of Co-Operative Societies

Case brief

What is this about?

What did the court decide?

K Rahman Khan v. the Joint Registrar of Co-Operative Societies

Case brief

What is this about?

What did the court decide?

What the court decided

A compact analysis

Issues for consideration

Cases cited

Statutes considered

Parties & counsel

Coram

Case details

Similar cases

Mr P Aboobakkar Vs M/S Vitla Grameena Sahakari Bank Limited

Sri U Rathnakar Bayaru Vs Assistant Registrar of Co-Operative Societies

Usman Vs the State of Karnataka

G.M. Neelakantaiah Vs the State of Karnataka

Smt. Abusa Vs the State of Karnataka

Smt. Sharada Sapaliga Vs State of Karnataka