Borrowers of the Kaizen Group challenged auction/sale notices issued by Canara Bank under SARFAESI and sought mandamus to sanction a one-time settlement. The court held OTS cannot be demanded as a right and sale/auction challenges should go through alternative remedies, dismissing all petitions with liberty.
This page shows the compact analysis of this judgement. The full analysis — procedural history, issue-by-issue holdings with ratio and obiter, advocates, and paragraph-level evidence for every claim — is being added to the record in batches and will appear here when this judgement has been through it.
NC: 2024:KHC-D:17085 WP No. 105777 of 2024 C/W WP No. 105820 of 2024 WP No. 105821 of 2024 AND 2 OTHERS
IN THE HIGH COURT OF KARNATAKA, DHARWAD BENCH DATED THIS THE 22ND DAY OF NOVEMBER, 2024
BEFORE
THE HON'BLE MR. JUSTICE PRADEEP SINGH YERUR
WRIT PETITION NO. 105777 OF 2024 (GM-RES) C/W
WRIT PETITION NO. 105820 OF 2024 GM-RES), WRIT PETITION NO. 105821 OF 2024 GM-RES), WRIT PETITION NO. 105822 OF 2024 GM-RES), WRIT PETITION NO. 106046 OF 2024 GM-RES),
IN WP NO.105777/2024
BETWEEN:
Digitally signed by GAVRIBIDANUR SUBRAMANYA GUPTA SREENATH Location: HIGH COURT OF KARNATAKA
…PETITIONERS
(BY SRI. SANTOSH P. PUJARI, ADVOCATE)
AND:
THE AUTHORISED OFFICER, ”CANARA BANK”, ASSET RECOVERY MANAGEMENT BRANCH, CIRCLE OFFICE BUILDING,
FIRST FLOOR, BALMATTA ROAD MANGALURU-575 001.
…RESPONDENT
(BY SRI. S.C. HIREMATH, ADVOCATE)
THIS WRIT PETITION IS FILED UNDER ARTICLES 226 AND 227 OF THE CONSTITUTION OF INDIA PRAYING TO ISSUE A WRIT IN THE NATURE OF CERTIORARI OR ANY OTHER WRIT OR DIRECTIONS, QUASHING THE IMPUGNED AUCTION NOTICE DATED 20/09/2024 BEARING NO. REF.ARM/MNG/F169/554/2024-25 VIDE ANNEXURE-D ISSUED BY THE RESPONDENT UNDER SECTION 13(4) OF THE SARFAESI ACT, TO THE PETITIONERS ETC.
IN WP NO.105820/2024
BETWEEN:
NC: 2024:KHC-D:17085 WP No. 105777 of 2024 C/W WP No. 105820 of 2024 WP No. 105821 of 2024 AND 2 OTHERS
MAHANTESH NAGAR BELAGAVI-590 016. 3. KAIZEN ACCUMULATORS, REPRESENTED BY ITS PROPRIETOR, SMT.MINHAJ W/O.NADEEM LATIF, AGED ABOUT 40 YEARS OCC: BUSINESS, R/AT.H.NO.2651, SECTOR NO.XII, OPP KHADI KUTIR KIDS PARADISE LANE MAHANTESH NAGAR BELAGAVI-590 016.
NC: 2024:KHC-D:17085 WP No. 105777 of 2024 C/W WP No. 105820 of 2024 WP No. 105821 of 2024 AND 2 OTHERS
…PETITIONERS
(BY SRI.SANTOSH P. PUJARI, ADVOCATE)
AND:
… RESPONDENTS
(BY SRI. S.C. HIREMATH, ADVOCATE FOR R1 & R2)
THIS WRIT PETITION IS FILED UNDER ARTICLES 226 AND 227 OF THE CONSTITUTION OF INDIA PRAYING TO ISSUE A WRIT IN THE NATURE OF MANDAMUS OR ANY OTHER WRIT OR ORDER DIRECTING THE RESPONDENTS TO SANCTION ONE TIME SETTLEMENT TO THE PETITIONERS AS PER THE ORDER OF THIS HON'BLE COURT IN W.P. NO.102474/2022 DATED 19/07/2022 VIDE ANNEXURE-A AND ORDER OF THIS HON’BLE COURT IN W.P. NO. 102483/2024 DATED 06/06/2024 VIDE ANNEXURE-B.
IN WP NO.105821/2024
BETWEEN:
SMT. MINHAJ W/O.NADEEM LATIF, PROPRIETOR KAIZEN ACCUMULATORS, AGED ABOUT 40 YEARS
NC: 2024:KHC-D:17085 WP No. 105777 of 2024 C/W WP No. 105820 of 2024 WP No. 105821 of 2024 AND 2 OTHERS
OCC: BUSINESS R/AT R.SY.NO.222/A, VPC NO.1315, P.B. ROAD MANGUTTI VILLAGE, HUKKERI BELAGAVI-591 254.
…PETITIONER
(BY SRI. SANTOSH P.PUJARI, ADVOCATE)
AND:
THE AUTHORISED OFFICER, ”CANARA BANK”, ASSET RECOVERY MANAGEMENT BRANCH, CIRCLE OFFICE BUILDING FIRST FLOOR BALMATTA ROAD MANGALURU-575 001.
…RESPONDENT
(BY SRI. S.C. HIREMATH, ADVOCATE FOR C/R)
THIS WRIT PETITION IS FILED UNDER ARTICLES 226 AND 227 OF THE CONSTITUTION OF INDIA PRAYING TO ISSUE A WRIT IN THE NATURE OF CERTIORARI OR ANY OTHER WRIT OR DIRECTIONS, QUASHING THE IMPUGNED SALE NOTICE DATED 20/09/2024 BEARING NO. REF/ARM/MNG/F168/558/2024- 25 VIDE ANNEXURE-C ISSUED BY THE RESPONDENT UNDER THE SARFAESI ACT, TO THE PETITIONER.
IN WP NO.105822/2024
BETWEEN:
SMT. MINHAJ W/O.NADEEM LATIF, PROPRIETOR: KAIZEN ACCUMULATORS, AGED ABOUT 40 YEARS OCC: BUSINESS, R/o R.SY.NO.222/A, VPC NO.1315 P.B. ROAD, MANGUTTI VILLAGE
NC: 2024:KHC-D:17085 WP No. 105777 of 2024 C/W WP No. 105820 of 2024 WP No. 105821 of 2024 AND 2 OTHERS
HUKKERI BELAGAVI-591 254. (BY SRI. SANTOSH P. PUJARI, ADVOCATE)
…PETITIONER
AND:
THE AUTHORISED OFFICER, ”CANARA BANK”, ASSET RECOVERY MANAGEMENT BRANCH, CIRCLE OFFICE BUILDING FIRST FLOOR, BALMATTA ROAD MANGALURU-575001.
…RESPONDENT
(BY SRI.S.C.HIREMATH, ADVOCATE FOR C/R)
THIS WRIT PETITION IS FILED UNDER ARTICLES 226 AND 227 OF THE CONSTITUTION OF INDIA PRAYING TO ISSUE A WRIT IN THE NATURE OF CERTIORARI OR ANY OTHER WRIT OR DIRECTIONS, QUASHING THE IMPUGNED SALE NOTICE DATED 20/09/2024 BEARING NO. REF: ARM/MNG/171, 172/F557/350/2024-25 VIDE ANNEXURE-C ISSUED BY THE RESPONDENT UNDER SECTION 13(4) OF THE SARFAESI ACT, TO THE PETITIONER.
IN WP NO.106046/2024
BETWEEN:
SHRI GULZAR S/O. ABDUL LATIF MOMEN, AGED ABOUT 40 YEARS OCCU: BUSINESS, R/AT. CTS NO.3200 BHENDI BAZAR, NEAR KHADE BAZAR BELAGAVI-590 001.
…PETITIONER
(BY SRI. SANTOSH P. PUJARI, ADVOCATE)
NC: 2024:KHC-D:17085 WP No. 105777 of 2024 C/W WP No. 105820 of 2024 WP No. 105821 of 2024 AND 2 OTHERS
AND:
…RESPONDENTS
(BY SRI. S.C. HIREMATH, ADVOCATE FOR R1 & R2)
THIS WRIT PETITION IS FILED UNDER ARTICLES 226 AND 227 OF THE CONSTITUTION OF INDIA PRAYING TO ISSUE A WRIT IN THE NATURE OF MANDAMUS OR ANY OTHER WRIT OR ORDER OR DIRECTIONS DIRECTING THE RESPONDENT BANK TO CONSIDER THE ONE TIME SETTLEMENT PROPOSAL OF THE PETITIONER DATED 07/10/2024 VIDE ANNEXURE-B IN ACCORDANCE WITH THE ORDER PASSED BY THIS HON’BLE COURT IN W.P. NO.102483/2024 DATED 06/06/2024 VIDE ANNEXURE-C.
THESE PETITIONS ARE COMING ON FOR PRELIMINARY HEARING THIS DAY, THE COURT MADE THE FOLLOWING:
ORAL ORDER
(PER: THE HON'BLE MR. JUSTICE PRADEEP SINGH YERUR)
Since common question is involved, with the consent of learned counsels for the parties, these matters are taken up together for disposal.
NC: 2024:KHC-D:17085 WP No. 105777 of 2024 C/W WP No. 105820 of 2024 WP No. 105821 of 2024 AND 2 OTHERS
has sanctioned a loan to the petitioners and to one Nazir Ahmed Latif (husband of Petitioner No.2/Smt. Hamedabanu in W.P. No.105777/24) and there is a outstanding due amount to the bank as on 31.8.2024 amounting to Rs.3,61,07,886-13. Learned counsel for the petitioners contends that out of the several firms, one of the sister concerns of 'Kaizen Alloys' i.e,
NC: 2024:KHC-D:17085 WP No. 105777 of 2024 C/W WP No. 105820 of 2024 WP No. 105821 of 2024 AND 2 OTHERS
'Kaizen Refiners' was destroyed unfortunately by a fire accident. Therefore, the proprietor of the said Kaizen Refiners sought help to restart the factory and thereafter, the loan account of Hamedabanu (petitioner no.2 in W.P. No.105777/24) was classified as Non-Performing-Asset (hereinafter referred to as 'NPA' ) and accordingly proceedings were initiated against Smt. Hamedabanu and her family members.
NC: 2024:KHC-D:17085 WP No. 105777 of 2024 C/W WP No. 105820 of 2024 WP No. 105821 of 2024 AND 2 OTHERS
interconnected. The respondent/bank initiated action against Smt. Hameda Banu and her family members for recovery of the loan amount and the outstanding due amount under the provisions of Securitization & Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (hereinafter referred to as 'SARFAESI Act' ). It is further contended by the learned counsel that the petitioners and the concerned proprietors intimated to the respondent/bank about their difficulty and the financial crisis due to the fire incident having destroyed the raw materials. Hence, sought time for payment and also for a direction to the respondent/bank to consider the OTS proposal of the petitioners. In this context, petitioners filed several writ petitions before this Court, out of which W.P. No.102481/2024 c/w W.P. No.102483/2024 came to be allowed, wherein the respondent/bank agreed to consider the prayer for OTS in terms of 2024-25 scheme and accordingly, the petitions were disposed of with directions to the bank.
NC: 2024:KHC-D:17085 WP No. 105777 of 2024 C/W WP No. 105820 of 2024 WP No. 105821 of 2024 AND 2 OTHERS
scheme to the petitioners in accordance with law. In this context, it is contended that several communications are sent to the respondent/bank, but the same have not been considered despite the orders passed by this Court and that the OTS proposal given by the petitioners is not agreed to and not considered by the bank and hence the petitioners being left with no other alternative, have approached this Court by way of these writ petitions. The reliefs sought in each of these petitions are as under:
Prayer in WP No.105777/2024:
Issue a writ in the nature of certiorari or any other writ or directions, quashing the impugned auction notice dated 20.09.2024 bearing no. ref ARM/MNG/F169/554/2024-25 vide Annexure - D issued by the respondent under section 13(4) of the SARFAESI Act, to the Petitioners.
Prayer in W.P. No.105820/2024:
� Issue a writ in the nature of mandamus or any other writ or order directing, the Respondents to sanction One Time Settlement to the Petitioners as per the order of this Hon'ble Court in W.P.No.102474/2022 dated 19/7/2022 vide
NC: 2024:KHC-D:17085 WP No. 105777 of 2024 C/W WP No. 105820 of 2024 WP No. 105821 of 2024 AND 2 OTHERS
Annexure-A and order of this Hon'ble Court in W.P.No. 102483/2024 dated 06/06/2024 vide Annexure-B.
Prayer in WP No.105821/2024:
Prayer in WP.No.105822/2024:
NC: 2024:KHC-D:17085 WP No. 105777 of 2024 C/W WP No. 105820 of 2024 WP No. 105821 of 2024 AND 2 OTHERS
issued by the Respondent under section 13(4) of the SARFAESI Act, to the Petitioner.
Prayer in WP No.106046/2024:
undertaking given before this Court in the writ petitions mentioned herein above i.e., W.P. No.102481/2024 c/w W.P. No.102483/2024 and not bothered to adhere to the orders passed by this Court.
8.1 Learned counsel vehemently contends that the respondent/bank cannot use the process of OTS scheme to its advantage by not adhering to the orders passed by this Court and the undertaking given by them before this Court to consider the OTS Scheme proposal to resolve the issue. Therefore, learned counsel contends that the OTS scheme having not been considered in accordance with the statutory provisions and the process, the initiation of proceedings for issuance of sale notice and impugned auction notice on the outstanding loan amount is illegal, arbitrary and defeats the very purpose of the OTS scheme incorporated by the bank which has sanction of the RBI. It is further contended that the respondent/bank has violated the RBI guidelines and the order passed by this Court with regard to resolving the issue of the borrower and the lender through OTS process which is fundamental in the banking process/regulation.
8.2 Under these circumstances, it is the vehement
contention of learned counsel for the petitioners that the respondent/bank having not followed the due process of law before issuing the sale notice/auction notice and having not provided a proper valuation report of the schedule property, it amounts to illegal act and omission of the respondent/bank, which is against the very principle of One time Settlement Scheme and hence the impugned orders passed are liable to be set aside. It is incumbent on the respondent/bank to grant OTS scheme to the petitioners considering the previous facts and circumstances stated hereinabove. Learned counsel further contends that despite the petitioners making several attempts to settle the loan amount outstanding to the bank by way of OTS proposal, the respondent has not come forward to agree to the same, which is contrary to its own undertaking and the orders passed by this Court and the judgment rendered
in the case of Sardar Associates and others -vs- Punjab &
Sind bank and others reported in (2009) 8 SCC 257 and in
the case of Bijnor Urban Cooperative Bank Limited, Bijnor -vs- Meenal Agarwal reported in 2021 O Supreme (SC) 820 : (2023)2 SCC 805.
8.3 It is also the grievance of the petitioners that the
respondent/bank has not considered the OTS proposal of the petitioners in the proper perspective and hence sought a writ of mandamus for consideration of the same.
NC: 2024:KHC-D:17085 WP No. 105777 of 2024 C/W WP No. 105820 of 2024 WP No. 105821 of 2024 AND 2 OTHERS
voluntarily gave an undertaking to consider the OTS proposal in terms of the scheme of 2024-25. But however, the petitioners never came forward to make any payment muchless the outstanding amount and in view of non-payment of the amount and disagreement of the respondent/bank to the terms and conditions putforth by the petitioners, the OTS proposal did not fructify. It is further contended that the petitioners are trying to compel the bank to agree for the OTS proposal as per their unilateral terms and conditions rather than making good the outstanding amount due to the bank.
9.1 Learned counsel for the respondent/bank has filed a memo alongwith the reply dated 23.10.2024 of the respondent/bank stating that the proposal of the petitioners is not acceptable. In the reply dated 23.10.2024, the Asset Recovery & Management Branch of the Canara Bank has stated that since the offer of the petitioners for Rs.2,30,00,000/- is too low compared to the outstanding liability and value of securities, the bank cannot accept the said offer and requested the petitioners to submit OTS offer with substantial improvement from offer of Rs.2,30,00,000/-.
Therefore, learned counsel for the respondent/bank contends that the bank has complied the orders passed by this Court in W.P. No.102481/2024 c/w 102483/2024 dated 6th June 2024 by considering OTS offer/proposal, but since it was much below the expectation of the bank, it was not acceptable to the bank and hence the same was rejected. On these grounds, learned counsel for the respondent/bank contends that these petitions are not maintainable, both on facts and law and the same deserve to be dismissed with exemplary costs. It is also contended that the question of granting an order by way of writ of mandamus to positively consider OTS proposal at the instance of the petitioners is not maintainable, in view of the judgment of the Hon'ble Supeme court in the case of the
Bijnor Urban Co-operative Bank Limited, Bijnor & others
-vs- Meenal Agarwal & others reported in 2021 0 Supreme (SC) 820 : (2023) 2 SCC 805.
the learned counsel for the respondent/bank at length and the judgments relied upon by them and so also perused the records.
having perused the records, the points that would arise for consideration in these writ petitions are:
NC: 2024:KHC-D:17085 WP No. 105777 of 2024 C/W WP No. 105820 of 2024 WP No. 105821 of 2024 AND 2 OTHERS
of mandamus for a direction to the respondent/bank to consider their case for OTS, which was allowed by this Court and accordingly the respondent/bank considered the OTS proposal/offer of the petitioners, but since the offer was too low compared to the outstanding liability and value of securities, it was not acceptable by the bank and the same was communicated to the petitioners with liberty to submit improvised offer/proposal, despite which no such improvement was made. On the contrary petitioners persisted for considering the very same offer time and again and also made it clear that they would continue with several other cases filed against the bank. Under the circumstances, the OTS proposal putforth was rejected by the bank and the same was communicated to the petitioners.
NC: 2024:KHC-D:17085 WP No. 105777 of 2024 C/W WP No. 105820 of 2024 WP No. 105821 of 2024 AND 2 OTHERS
-vs- Meenal Agarwal & others reported in 2021 0 Supreme (SC) 820 : (2023) 2 SCC 805, wherein it is held at paragraphs 8,9 and 11 as under:
NC: 2024:KHC-D:17085 WP No. 105777 of 2024 C/W WP No. 105820 of 2024 WP No. 105821 of 2024 AND 2 OTHERS
entire loan amount, instead of granting the benefit under the OTS Scheme and to recover a lesser amount. It is ultimately for the Bank to take a conscious decision in its own interest and to secure/recover the outstanding debt. No bank can be compelled to accept a lesser amount under the OTS Scheme despite the fact that the Bank is able to recover the entire loan amount by auctioning the secured property/mortgaged property. When the loan is disbursed by the bank and the outstanding amount is due and payable to the bank, it will always take a conscious decision in the interest of the bank and in its commercial wisdom.
NC: 2024:KHC-D:17085 WP No. 105777 of 2024 C/W WP No. 105820 of 2024 WP No. 105821 of 2024 AND 2 OTHERS
the entire loan amount which can be realised by selling the mortgaged/secured properties. If it is held that the borrower can still, as a matter of right, pray for benefit under the OTS Scheme, in that case, it would be giving a premium to a dishonest borrower, who, despite the fact that he is able to make the payment and the fact that the bank is able to recover the entire loan amount even by selling the mortgaged/secured properties, either from the borrower and/or guarantor. This is because under the OTS Scheme a debtor has to pay a lesser amount than the actual amount due and payable under the loan account. Such cannot be the intention of the bank while offering OTS Scheme and that cannot be purpose of the Scheme which may encourage such a dishonesty.
NC: 2024:KHC-D:17085 WP No. 105777 of 2024 C/W WP No. 105820 of 2024 WP No. 105821 of 2024 AND 2 OTHERS
the payment and/or that the bank/financial institution is able to recover the entire loan amount even by auctioning the mortgaged property/secured property, either from the loanee and/or guarantor, the bank would be justified in refusing to grant the benefit under the OTS Scheme. Ultimately, such a decision should be left to the commercial wisdom of the bank whose amount is involved and it is always to be presumed that the financial institution/bank shall take a prudent decision whether to grant the benefit or not under the OTS Scheme, having regard to the public interest involved and having regard to the factors which are narrated hereinabove."
when the matter was argued before this Court, an opportunity was given to the petitioners to approach the bank and pay substantial amount to show the bonafides . But instead of making the payment of substantial amount to the satisfaction of the bank by improving their earlier offer, the petitioners continued to persist the bank to accept their OTS proposal as was given earlier. Learned counsel for the respondent/bank submitted that there is no good satisfactory improvised
NC: 2024:KHC-D:17085 WP No. 105777 of 2024 C/W WP No. 105820 of 2024 WP No. 105821 of 2024 AND 2 OTHERS
proposal than what was given earlier and no further payment has been made. Under the circumstances, it is apparent on the face of the record that the petitioners have not come forward with better improvised higher proposal than what was given earlier to the bank.
NC: 2024:KHC-D:17085 WP No. 105777 of 2024 C/W WP No. 105820 of 2024 WP No. 105821 of 2024 AND 2 OTHERS
aspects feasible and agreeable to the bank. Ultimately, the bank may either accept or reject the proposal given by the petitioners. No bank can be compelled to accept a lesser amount under the OTS Scheme despite the fact that the Bank is able to recover the entire loan amount.
NC: 2024:KHC-D:17085 WP No. 105777 of 2024 C/W WP No. 105820 of 2024 WP No. 105821 of 2024 AND 2 OTHERS
efficacious remedy, this Court should refrain itself from exercising its extraordinary jurisdiction under Article 226 of the Constitution of India, especially in financial matters.
O R D E R
Sd/(PRADEEP SINGH YERUR) JUDGE
GSS
List No.: 1 Sl No.: 10
2 issues framed by the court
Whether a writ of mandamus could issue directing the bank to consider an OTS proposal already considered and rejected?
Whether the writ petitions challenging the sale/auction notices were maintainable given the availability of alternative remedies under the SARFAESI framework?
Colour shows how this judgement treated each authority
Sardar Associates and others -vs- Punjab & Sind Bank and othersReferred
(2009) 8 SCC 257 · Who else cites this
Bijnor Urban Co-operative Bank Limited, Bijnor -vs- Meenal AgarwalRelied on¶14
2021 O Supreme (SC) 820 : (2023)2 SCC 805 · Who else cites this
3 provisions across 2 enactments
Shri Gulzar s/o Abdul Latif Momen
Smt. Hamedabanu w/o Nazirahmed Latif
Kaizen Refiners
Kaizen Motocop
Kaizen Accumulators
Kaizen Alloys
Pradeep Singh Yerur
As recorded by the court registry
Judgements on the same questions, provisions and authorities, from every court
