Borrower's property was attached for recovery of dues as arrears of land revenue after the Corporation had already recovered the full demand through auction sale and executed a discharge deed. The court found Section 32(g) invocation unjustified since the account balance was nil and quashed the attachment order.
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NC: 2024:KHC:1074 WP No. 35607 of 2010
IN THE HIGH COURT OF KARNATAKA AT BENGALURU
DATED THIS THE 9TH DAY OF JANUARY, 2024
BEFORE
THE HON'BLE MR JUSTICE M.NAGAPRASANNA WRIT PETITION NO. 35607 OF 2010 (GM-KSFC)
BETWEEN:
SRI. SYED MOINUDDIN QUADRI SINCE DEAD REPRESENTED BY LRS
Digitally signed by PADMAVATHI B K Location: HIGH COURT OF KARNATAKA
BOTH ARE RESIDING AT NO.272/3D, VIJAYANAGAR 2ND STAGE, MYSORE – 570 019.
(BY SRI. MEGHACHANDRA D. N., ADVOCATE)
…PETITIONERS
AND:
REPRESENTED BY ITS SECRETARY
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SRI HARSHA ROAD, LASHKAR MOHALLA MYSORE – 570 001.
REP. BY THE ASST. GEN. MANAGER
NOTE: CAUSE TITLE AMENDED VIDE COURT ORDER DATED 17.01.2020
…RESPONDENTS
(BY SRI. SPOORTHY HEGDE, HCGP FOR R1, R3 AND R5; SRI. GURURAJ JOSHI, ADVOCATE FOR R2 AND R4)
THIS WRIT PETITION IS FILED UNDER ARTICLES 226 AND 227 OF THE CONSTITUTION OF INDIA PRAYING TO QUASH ORDER OF ATTACHMENT DATED 15/16.09.2009 ISSUED BY RESPONDENT NO.4 AT ANNEXURE P TO THE WRIT PETITION AND ETC.,
THIS WRIT PETITION, COMING ON FOR FURTHER HEARING, THIS DAY, THE COURT MADE THE FOLLOWING:
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ORDER
The petitioners are before this Court calling in question an order of attachment dated 15/16-09-2009 issued by the 4th respondent – Special Tahsildar seeking to attach the property of the petitioners.
The petitioner – Syed Moinuddin Quadri, now deceased, is the original borrower of money from the hands of Karnataka State Financial Corporation (‘Corporation’ for short). A mortgage deed is executed by the petitioner as a security of loan amount of Rs.15 lakhs advanced by the Corporation on 17-02-1984. The petitioner defaults in payment to the Corporation which leads the Corporation to issue a notice on
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23-11-1995. The petitioner prefers P.Mis.No.400 of 1996 which later came to be registered as O.S.No.4463 of 2002 to recover the losses that he has suffered qua other entities. On 11-02-1997 yet another demand notice is issued against the petitioner. The demand notice depicted Rs.10,33,525/- to be the total amount in due in the loan accounts of the petitioner. The petitioner fails to pay. Under Section 29 of the State Financial Corporations Act, 1951 (‘Act’ for short), the Corporation put the property for sale and the property was sold in favour of one Sri. Mohammed Vaseem and the Corporation recovered Rs.10,55,000/-. On such amount being recovered from the hands of Sri. Mohammed Vaseem, the successful auction purchaser, a release/discharge deed was executed by the Corporation in favour of the petitioner. The Discharge Deed recorded that Rs.10,55,000/- has been recovered. Therefore, the loan stood completely discharged.
notice to the petitioner on 15-03-2001 depicting that the amount of Rs.10,31,655/- is still in due from the petitioner. Long thereafter, on 02-06-2009 contending that there is a due
of Rs.33,97,110/- which is not fulfilled by the petitioner, Section 32(g) proceedings were instituted by the Corporation by order dated 25-02-2009 directing recovery of the amount in due as arrears of land revenue. The proceedings having taken further, the 4th respondent issues a notice on 15-09-2010 to recover the amount of Rs.33,97,110/- as the amount in due and to be recovered as arrears of land revenue. It is at that juncture, the petitioner has knocked at the doors of this Court in the subject petition.
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grown to mountainous proportions. He would submit that the action of the Corporation is, on the face of it, arbitrary.
The application seeking finance from the hands of the Corporation was submitted in two loan accounts, one term
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loan account in which Rs.15 lakhs had been sanctioned on 26-10-1983, but no amount was disbursed in the said loan account, this is an admitted fact. In the other term loan, an amount of Rs.11,59,000/- was disbursed to the petitioner on 27-03-1991 out of the term loan sanctioned of Rs.12,89,000/-.
This again is not in dispute. The petitioner defaulted in repayment of the loan. This led the Corporation in issuing a demand notice on the petitioner on 11-02-1997. The demand notice reads as follows:
¤ªÀÄä SÁvÉ ¸ÀASÉå 65024401 ªÀÄvÀÄÛ 65024470gÀ°è ¢£ÁAPÀ 15.01.97PÉÌ gÀÆ.10,33,525UÀ¼ÀÄ (ºÀvÀÄÛ ®PÀëzÀ ªÀÄƪÀvÀÛªÀÄÆgÀÄ ¸Á«gÀzÀ LzÀÄ £ÀÆgÀÄ E¥ÀàvÉÛöÊzÀÄ gÀÆ¥Á¬ÄUÀ¼ÀÄ ªÀiÁvÀæ) ¨ÁQ EzÀÄÝ CzÀgÀ ¸ÀA§AzsÀªÁV ¤ªÀÄUÉ FUÁUÀ¯Éà C£ÉÃPÀ ¥ÀvÀæUÀ¼À£ÀÄß CzÀ®èzÉ ¢£ÁAPÀ 27.11.96gÀAzÀÄ WÀlPÀªÀ£ÀÄß ¸Áé¢üãÀ ¥Àr¹PÉƼÀÄîªÀ £ÉÆÃnøÀ£ÀÄß PÀ¼ÀÄ»¹zÀÝgÀÆ ¸ÀºÀ vÁªÀÅUÀ¼ÀÄ ªÀÄgÀÄ¥ÁªÀw ªÀiÁqÀ®Ä ªÀÄÄAzÉ §A¢®èªÉAzÀÄ w½¸À®Ä «µÁ¢¸ÀÄvÉÛãÉ. ¤ªÀÄä SÁvÉAiÀÄ°è F PɼÀV£ÀAvÉ ¨ÁQ¬ÄgÀÄvÀÛzÉ.
¸Á®zÀ ²®ÄÌ 7,94,000 C¸À®Ä PÀAvÀÄUÀ¼ÀÄ 7,94,640 §rØ PÀAvÀÄUÀ¼ÀÄ 2,78,746 EvÀgÉ RZÀÄð 5,139 _________ MlÄÖ 10,33,525
£ÀªÀÄä ¥ÀvÀæzÀ ¢£ÁAPÀ 27.11.96gÀ ¥ÀæPÁgÀ ¤ªÀÄUÉ w½¹zÀAvÉ £ÀªÀÄä C¢üPÁjUÀ½AzÀ ¤ªÀÄä WÀlPÀªÀ£ÀÄß ¤ÃªÀÅ ¸À» ªÀiÁrPÉÆnÖgÀĪÀ CqÀªÀiÁ£À ¥ÀvÀæzÀ µÀgÀvÀÄÛUÀ¼À ¤AiÀĪÀÄ 8 ªÀÄvÀÄÛ 10gÀ ¥ÀæPÁgÀ ¸Áé¢üãÀ¥Àr¹PÉƼÀî¯ÁVzÉ.
F ¥ÀvÀæ vÀ®Ä¦zÀ 7 ¢ªÀ¸ÀUÀ¼ÉƼÀUÁV ¨ÁQ ºÀt ¥ÁªÀwªÀiÁqÀ®Ä ¤ÃªÀÅ ªÀÄÄAzÉ §gÀ¢zÀÝ°è ¤ªÀÄä WÀlPÀªÀ£ÀÄß §»gÀAUÀªÁV ºÀgÁdÄ ªÀiÁqÀ®Ä wêÀiÁð¤¸À¯ÁUÀĪÀÅzÀÄ.
NC: 2024:KHC:1074 WP No. 35607 of 2010
EzÀPÉÌ ¸ÀA§A¢ü¹zÀAvÉ, AiÀiÁªÀÅzÉà RZÀÄð ªÀÄvÀÄÛ ¥ÀjuÁªÀÄUÀ½UÉ ¤ÃªÉà dªÁ¨ÁÝgÀgÁUÀ¨ÉÃPÁUÀÄvÀÛzÉ. ¤ÃªÀÅ EzÀPÉÌ CªÀPÁ±À ¤ÃqÀĪÀÅ¢®èªÉAzÀÄ £Á£ÀÄ £ÀA©gÀÄvÉÛãÉ.”
(Emphasis added)
The demand notice was unequivocal. It demanded
Rs.10,33,525/- on all the accounts in which the loan had been disbursed in favour of the petitioner. The disbursal is only in one account at Rs.11,59,000/-. The petitioner did not pay the amount. The Corporation then puts up the property of the petitioner for auction. The auction purchaser is one Sri. Mohammed Vaseem. The auction purchaser pays the amount of Rs.10,55,000/-, the rate at which the auction was conducted. After the payment was received from the hands of Sri. Mohammed Vaseem, a Discharge Deed is executed by the Corporation. The Discharge Deed assumes significance as it records the entire payment being received from the hands of the auction purchaser as was demanded by the hands by the petitioner. Some clauses of the Discharge Deed reads as follows:
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M/s Banu Steel Industires, a proprietor ship concern having its place of business at Plot No.139 (A). Belagola Industrial Area. Metagalli. Mysore-2 and office at No.1157. HAL II Stage. Indiranagara. Bangalore and represented by its proprietor Sri S. M. Quadri S/o S T Quadri, aged about 44 years. residing at No.139(A). Belagola Industrial Area. Mysore has availed loan of Rs.15.00 lakhs for establishment of above said industry.
WHEREAS, the property/title deeds described in the schedule hereunder was mortgaged by M/s. Bhanu Steel Industries. Represented by its proprietor Sri Quadri S M under Mortgage Deed. Dated 17th February 1984. Registered as No.1452/83-84, Book-I. Volume-698, Pages 1-22 dated 2nd day of March 1984 in the Office of the Sub-Registrar. Mysore Taluk, Mysore as security for the loan of Rs. 15.00 lakhs advanced by the Corporation.
WHEREAS, M/s. Bhanu Steel Industries became a defaulter in repayment of the loan due to the corporation. The corporation has taken over the unit u/s. 29 of SFCs ACT and sold to Sri Mohammed Vaseem of M/s. Kothari Finance and properties Private limited. Now it has been changed to M/s. Karishma Enterprises Pvt. Ltd., for a sale consideration of Rs.10.55 lakhs. The purchaser has paid the sale proceeds and requested the corporation to reconvey/release the schedule property described hereunder from the charge created under the said mortgage deed.”
(Emphasis added)
The Discharge deed records that the property was put up for sale consideration of Rs.10,55,000/- and the purchaser has paid the sale proceed and requested the Corporation to release the property in his favour by clearing the charge created under the mortgage deed.
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“[32G.Recovery of amounts due to the Financial Corporation as an arrear of land revenue .Where any amount is due to the Financial Corporation in respect of any accommodation granted by it to any industrial concern, The Financial Corporation or any person authorized by it in writing in this behalf, may, without prejudice to any other mode of recovery, make an application to the State Government for the recovery of
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the amount due to it, and if the State Government or such authority, as that Government may specify in this behalf, is satisfied, after following such procedure as may be prescribed, that any amount is so due, it may issue a certificate for that amount to the Collector, and the Collector shall proceed to recover that amount in the same manner as an arrear of land revenue.]”
Section 32(g) permits recovery of the amount due to the Corporation as arrears of land revenue. The Corporation projects an imaginary due from the hands of the petitioner and communicates to the Tahsildar to recover Rs.33,97,110/- as arrears of land revenue.
a project review report by way of a memo before this Court. The project review report depicts that the balance in the
NC: 2024:KHC:1074 WP No. 35607 of 2010
account is nil. If the balance in the account is nil, where from the interest spring is a mystery. Learned counsel for Corporation seeks to decipher the mystery, but makes a futile effort, as there is no explanation that can be projected, as the balance that is shown is zero, and the interest shown is as Rs.1,36,68,329/-. It is this action of the Corporation that shocks the conscience of the Court. Therefore, the petition deserves to be allowed.
ORDER
Sd/JUDGE
BKP List No.: 2 Sl No.: 51/CT:SS
2 issues framed by the court
Whether recovery of Rs.33,97,110/- under Section 32(g) of the SFC Act could be pursued after the Corporation had recovered the full dues from auction sale and executed a discharge deed.
Whether the attachment order dated 15/16-09-2009 issued by the Special Tahsildar was arbitrary and liable to be quashed.
3 provisions across 2 enactments
Sri Syed Moinuddin Quadri (since dead) represented by LRs - Shahnaz Begum @ Shameem and Syeda Mehnaz
The State of Karnataka, Department of Revenue
Karnataka State Financial Corporation
The Village Accountant, Koppal
The Special Tahasildar (Bangalore Urban Zone), Karnataka State Financial Corporation
Deputy Commissioner, Bengaluru District
M.Nagaprasanna
As recorded by the court registry
Judgements on the same questions, provisions and authorities, from every court
