Disposed

M/S Embee Agro Food Industries v. Canara Bank

Karnataka HC15 Feb 2024WP/7301/2023

Case brief

AI extract

What is this about?

A company's representative paid the entire one-time settlement amount plus interest and legal expenses after the borrower's death; the Bank refused to return original title deeds on the ground that the petitioner was not the original borrower. The Court directed return of documents within a week and awarded Rs.2 lakhs as costs against the Bank.

What did the court decide?

Direction to Bank to return original title documents within one week; costs of Rs.2 lakhs payable by the Bank along with the documents.

M/S Embee Agro Food Industries Vs Canara… — Contract and Commercial Disputes | Karnataka HC (2024)

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NC: 2024:KHC:6407 WP No. 7301 of 2023

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IN THE HIGH COURT OF KARNATAKA AT BENGALURU DATED THIS THE 15^TH DAY OF FEBRUARY, 2024

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BEFORE

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THE HON'BLE MR JUSTICE M.NAGAPRASANNA WRIT PETITION NO. 7301 OF 2023 (GM-RES)

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BETWEEN:

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M/S EMBEE AGRO FOOD INDUSTRIES PLOT NO.44A AND B, 45B, HANAGAWADI INDUSTRIAL AREA, HARIHAR TALUK, DAVANAGERE REP. BY SRI M B SOMASHEKAR GOWDA AGED ABOUT 85 YEARS (SENIOR CITIZEN) DIRECTOR REGISTERED UNDER COMPANIES ACT, 1956

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…PETITIONER

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(BY SRI. B PRASANNA KUMAR, ADVOCATE)

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AND:

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CANARA BANK ARM BRANCH MANIPAL HEAD OFFICE ANNEXE (MANIPAL) UDUPI-576 104 REP. BY ITS CHIEF MANAGER.

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Digitally signed by NAGAVENI Location: HIGH COURT OF KARNATAKA

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…RESPONDENT (BY SRI. VIGNESH SHETTY, ADV.) THIS WP IS FILED UNDER ARTICLE 226 OF THE CONSTITUTION OF INDIA PRAYING TO DIRECT THE RESPONDENT BANK TO RELEASE HOUSE PROPERTY AS MENTIONED IN THE OTS LETTER DATED 29.09.2022 ANNEXURE-A BY RECEIVING RS.180 LAKHS ON RECEIPT OF THE SAID AMOUNT FROM THE PETITIONER AND DIRECT THE RESPONDENT BANK TO CONSIDER THE EXTENSION OF THE PERIOD AS PER THE OTS ACCEPTED VIDE ANNEXURE-A BY A MAXIMUM PERIOD UPTO 30.07.2023 BY IMPOSING THE BANK RATE OF INTEREST AND SET ASIDE THE ISSUANCE OF POSSESSION NOTICES DATED 23.03.2023, ISSUED BY THE RESPONDENT BANK VIDE ANNEXURE-E, F, G AND H.

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THIS PETITION, COMING ON FOR PRELIMINARY HEARING - 'B' GROUP, THIS DAY, THE COURT MADE THE FOLLOWING:

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NC: 2024:KHC:6407 WP No. 7301 of 2023

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ORDER

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The petitioner is before this court seeking the following prayer:

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"(i) To release house property as mentioned in the OTS letter dated 29/9/2022 Annexure A by receiving Rs.180 lakhs on receipt of the said amount from the Petitioner, and

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(ii) Directing the Respondent Bank to consider the extension of the period as per the OTS accepted vide Annexure-A by a maximum period upto 30.7.2023, by imposing the bank rate of interest and

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(iii) Set aside the issuance of Possession Notices dated 23/3/2023, issued by the Respondent bank vide Annexure-E, F, G & H.”

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Heard the learned counsel Sri.B.Prasanna Kumar, appearing for the petitioner and the learned counsel Sri.Vignesh Shetty, appearing for the respondent.

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The original borrower was one Animesh Gowda M.S., the Managing Director of M/S. Embee Agro Food Industries, the present petitioner. The original borrower had borrowed certain amount from the respondent - Canara Bank.

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The original borrower had defaulted in payment. Not being able to pay the mounting of debts, commits suicide, comes into

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NC: 2024:KHC:6407 WP No. 7301 of 2023

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the picture the representative of the petitioner-Company, the father of the original borrower. The Bank owing to and knowing about the death of the original borrower, the son of one M.B.Somashekar Gowda, the present petitioner who is representing the Company is offered a one time settlement of Rs.19.75 crores plus legal expenses. The correspondences between the two results in the Bank accepting the one time settlement and passing an order on 29.09.2022 which reads as follows:

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"संदभ� Ref: ARM/7280/SL/164/2022-23 �दनांक /Date:29.09.2022

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Embee Agro Food Industries Private Limited Plot No.44A & B, 458 Hanagawadi Industrial Area Harihara Taluk Davanagere District - 577601

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Sub: Your request for One Time Settlement (OTS) of your NPA loan accounts Ref: Your letter Ref. No. Nil dated 19.07.2022, 20.09.2022 and other request letters

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We are pleased to inform you that the Sanctioning Authority has permitted OTS of your accounts as under:

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a. To pay Rs.1975.00 Lakh + legal expenses of Rs.1.32 Lakh in full and final settlement, payable as under:

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b. Rs.201.32 Lakh received along with proposal kept in OTS Suspense GL to be adjusted on communication of OTS sanction.

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NC: 2024:KHC:6407 WP No. 7301 of 2023

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c. Rs.300.00 Lakh to be paid on or before 29.09.2022. (Total amount payable Rs.501.32 Lakhs till 29.09.2022)

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d. Rs.1475.00 Lakh to be paid within 90 days from the date of communication of OTS sanction i.e. on or before 28.12.2022.

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e. Out of total OTS offer amount of Rs. 1976.32 Lakh, on receipt of Rs1151.32 Lakhs and subject to submission of absolute sale deed/Lease Deed from the KIADB extending the lease period for at least 5-7 years which is already lapsed in respect of the prime security industrial unit/ land, i.e. land and building situated in Plot No.44-A, 44-B & 45-B measuring 07 Acres located at Sy. No. 92 & 93 Hangawadi Industrial Area, Harihar Taluk, Davanagere, by the borrower, the following House property to be released

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Details of Security to be released: Land and Building located at site No. 36, 37, 38 and 39 with Door Nos. 979/36, 980/37, 980/38, and 982/39 TaralabaluBadavane, Davanagere in the name of Mr.SumashekharGowda and Mrs. M S Girijamma.

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f. The documents/title deeds of securities charged to the bank other than mentioned above in point (e) will be released only on receipt of the entire compromise amount and treat the account as closed duly ensuring that the party/Directors/guarantors has no direct /indirect/contingent liability with our bank.

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g. Please note that this one time settlement stands automatically cancelled without further notice in case if there is any failure to comply with terms and conditions of this OTS sanction including payment of the compromise amount as per schedule of payment as stated in the sanction. Further the bank reserves its right to proceed legally for recovery of entire dues.

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NC: 2024:KHC:6407 WP No. 7301 of 2023

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h. Borrower shall withdraw all cases/ appeal/complaints, if any, filed against the Bank before DRT, DRAT, CDRF/HC etc. immediately.

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i. The concession extended as above stands automatically withdrawn in case borrower fails to remit the compromise amount within the stipulated time and Bank reserves the right to proceed legally for recovery of entire dues in case the party does not comply with the above.

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j. NO further exposure to the borrower/guarantors.

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k. OTS details will appear with CICS.

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l. Submit post dated cheques for the payable offer amount along with a copy of this sanction letter duly acknowledged by the borrower.

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Other Conditions.

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A. Borrower to withdraw suit/case filed against the Bank, if any.

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B. Bank reserve the right for withdrawal of the OTS sanctioned at any point of time even during the period permitted for payment of the OTS without assigning any reasons for withdrawal of OTS.

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C. In the event of Bank finding party's misrepresentation of facts, bank reserves the right to withdraw the OTS permitted and proceed legally for recovery of entire dues.

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D. In the event of non-compliance with any of the terms of the sanction by the party, including payment of the OTS amount as per the stipulated schedule, the OTS sanction stands automatically withdrawn without assigning any reason for the same and the bank reserves the right to proceed as it deems fit including proceeding legally for recovery of the entire dues

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E. Upon payment of the entire OTS amount as per the terms of sanction, the accounts will appear in

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NC: 2024:KHC:6407 WP No. 7301 of 2023

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the records of the CICS, for a minimum period of seven years with remark "settled" as per CIC Regulation Act, 2005."

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This was not completely paid by the present petitioner.

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The extension of time was sought for making good the OTS in terms of a communication dated 13.03.2023, which reads as

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follows:

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Date: 13^th March 2023

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The Chief Manager, Canara Bank ARM Branch Head Officer Annexe (Manipal) UDUPI - 576104

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Dear Sir,

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Sub: Extension of OTS settlement period. Ref: your letter No.ARM/7280/SL/164/2022-23, dated 29^th September 2022

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We hereby request you to extend us the time for the above said One Time Settlement payment. We are very confident to clear off the second part of the payment as our KIADB Land Sale Deed is getting obtained very soon. This will help us to outsource the finance to settle the above said OTS.

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It is to inform you that we have already paid Rs. 9.35 crores against the total amount of Rs. 19.7 crores. We hereby entreat you to extend six months time (from the date of this letter) to settle the balance amount of Rs. 10.40 crores (approx)

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Thanking you, Yours faithfully

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NC: 2024:KHC:6407 WP No. 7301 of 2023

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Sd/MANAGING DIRECTOR EMBEE AGRO FOOD INDUSTRIES PVT. LTD.

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Copy to:The President, KASSIA, Vijayanagar, Bangalore - 560040."

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This was not acceded to by the Bank and further proceedings were taken up against the petitioner. A possession notice was issued under Section 13(4) of Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002. On 23.03.2023, in furtherance of the aforequoted communication, possession of the property was sought to be taken by the Bank. The petitioner rushes to this Court in the subject petition.

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This Court, on 06.04.2023, had passed the

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following order:

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" Heard Sri D.R.Ravishankar, learned senior counsel for the petitioner and Sri Vignesh Shetty, learned counsel for the respondent.

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The petitioner is before this Court holding an affidavit of undertaking that he would clear the entire loan amount on or before 30.07.2023.

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It is admitted that the petitioner has paid Rs.9.71/- crores upto 05.04.2023 and is still in due of Rs.1.80/- crores. He would submit that Rs.1.80/- crores would be deposited within three weeks from today and would clear the entire amount on or before 30.07.2023.

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Since the representative of the petitioner is aged 85 years and that he has demonstrated the bonafides by depositing aforesaid amount, the undertaking merits acceptance. I deem it appropriate to direct the bank not to take any precipitative action qua the property, till the next date of hearing, subject to the petitioner adhering to the terms of the affidavit of undertaking.

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In the event, the petitioner would deposit Rs.1.8/- crores, the bank shall consider release of the property from the ambit of the proceedings under the SARFAESI Act."

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(Emphasis supplied)

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Again on 12.04.2023, the following order:

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"Learned counsel for petitioner has moved this matter owing to certain typographical error crept in the order dated 06.04.2023.

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The order passed by this Court on 06.04.2023, reads as follows:

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“Heard Sri D.R.Ravishankar, learned senior counsel for the petitioner and Sri Vignesh Shetty, learned counsel for the respondent.

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The petitioner is before this Court holding an affidavit of undertaking that he would clear the entire loan amount on or before 30.07.2023.

NC: 2024:KHC:6407 WP No. 7301 of 2023

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In the event, the petitioner would deposit Rs.1.8/- crores, the bank shall consider release of the property from the ambit of the proceedings under the SARFAESI Act.”

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Learned counsel for the petitioner clarifies by submitting that the balance OTS amount would be cleared on or before 30.07.2023 and that is what is indicated in the affidavit even. Therefore, the indication in the order dated 06.04.2023, that ‘he would clear the entire loan amount on or before 30.07.2023’, appears to be a typographical error.

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Therefore, the unnumbered paragraph of the order dated 06.04.2023, shall be corrected and read as follows:

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“The petitioner is before this Court holding an affidavit of undertaking that he would clear the balance OTS amount on or before 30.07.2023’.

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This order shall be treated as part and parcel of the order dated 06.04.2023.

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Office to issue a fresh certified copy of the order."

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(Emphasis supplied)

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and on 04.08.2023, the following order:

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" The challenge is to the coercive proceedings of loan recovery instituted under the provisions of Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002. The Coordinate Bench of this court vide ad interim order dated 12.4.2023 had said as under:

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“ Learned counsel for petitioner has moved this matter owing to certain typographical error crept in the order dated 06.04.2023.

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The order passed by this Court on 06.04.2023, reads as follows:

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NC: 2024:KHC:6407 WP No. 7301 of 2023

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“Heard Sri D.R.Ravishankar, learned senior counsel for the petitioner and Sri Vignesh Shetty, learned counsel for the respondent.

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The petitioner is before this Court holding an affidavit of undertaking that he would clear the entire loan amount on or before 30.07.2023.

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In the event, the petitioner would deposit Rs.1.8/- crores, the bank shall consider release of the property from the ambit of the proceedings under the SARFAESI Act.”

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Therefore, the unnumbered paragraph of the order dated 06.04.2023, shall be corrected and read as follows:

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“The petitioner is before this Court holding an affidavit of undertaking that he would clear the balance OTS amount on or before 30.07.2023’.

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This order shall be treated as part and parcel of the order dated 06.04.2023.

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Office to issue a fresh certified copy of the order.”

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Learned Sr. Advocate appearing for the petitioner submits that the OTS was settled for a sum of

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NC: 2024:KHC:6407 WP No. 7301 of 2023

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Rs.19,75,00,000/- (Rupees Nineteen Crore & Seventy Five Lakh) only, of which a sum of Rs.11,51,32,000/(Rupees Eleven Crore Fifty One Lakh Thirty Two Thousand) only, has been already paid, although with some delay because of an untoward incident in the family i.e., suicide of his son (i.e., the original borrower, petitioner being his father). Petitioner this day has handed a Bank Draft for a sum of Rs.8,25,00,000/(Rupees Eight Crore & Twenty Five Lakh) only which counsel for the respondent-bank on instruction of the court has accepted reserving contentions in the Writ Petition and the outcome of bank’s pending W.A.No.620/2023.

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The counsel for the petitioner on record has filed a Memo offering to pay all the interest that would accrue due for the delayed period and also the penalty, if any, that may be levied by the Bank or this Court. The Memo reads as under:

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“That the petitioner above named respectfully submits that the petitioner is ready to pay the addition charge or interest to the default OTS amount, as ordered by this Hon’ble Court.”

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Counsel for the bank submits that already the request for One Time Settlement having been rejected twice, the arrangement of the present kind may not be forced on her client especially when Writ Appeal pends. There is some logic in this. The payment today made shall not be construed as prejudicing the contentions of the bank either in this petition or in the Writ Appeal.

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In view of the above, call this matter for further consideration in the first week of September, 2023, awaiting some orders at the hands of Hon’ble Division Bench of this court in the subject Writ Appeal."

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(Emphasis supplied)

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The first order that was passed by this Court on

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06.04.2023 is challenged by the Bank before the Division Bench

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NC: 2024:KHC:6407 WP No. 7301 of 2023

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in W.A.No.620/2023. The Division Bench disposes the writ

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appeal by the following order:

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"1. This writ appeal is directed against an interim order dated 06.04.2023 passed by the learned Single Judge in the pending W.P.No.7301/2023.

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2. Upon the unfortunate death of the borrower, who was the Managing Director of the respondent –Company, his father took over the responsibility of repayment of loan amount. Pursuant to our order dated 11.10.2023, the respondent has filed an affidavit dated 25.10.2023. It is stated in paragraph 5 of the affidavit that the respondent had paid the entire OTS amount ofRs.19,76,32,000/(Rupees nineteen crores seventy six lakhs thirty two thousand only) to the appellant –Bank albeit with some delay. It is further stated in paragraph 6 of the affidavit that as per his calculation, the amount of interest at the rate of18% p.a. for the delayed period comes to Rs.98,46,492/-(Rupees ninety eight lakhs forty six thousand four hundred and ninety two only)

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3. The learned Senior Counsel appearing for the respondent submits that to show his bona fide, the respondent has handed over to the learned counsel for the appellant –Bank a Banker’s Cheque dated 09.11.2023 for Rs.40,00,000/(Rupees forty lakhs only) and Cheque dated 26.12.2023 for Rs.58,46,492/-(Rupees fifty eight lakhs forty six thousand four hundred and ninety two only) both drawn on Canara Bank, ARM Branch. The appellant –Bank is directed to accept the instruments. We make it clear that this arrangement is made due to peculiar circumstances of the case referred to above and the same shall not be treated as a precedent, since no law is intended to be laid down.

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4. At this stage, the learned counsel for the appellant -Bank submits that the respondent owes some amount towards legal and other miscellaneous expenses which may approximately comes to Rs.5,00,000/- (Rupees five lakhs only). The learned Senior Counsel appearing for the respondent submits that the respondent is ready and willing to pay even the said amount ofRs.5,00,000/- (Rupees five lakhs only) so as to put an end to the litigation once for all. Accordingly, the respondent is directed to pay a sum of Rs.5,00,000/- (Rupees five lakhs only) to the appellant –Bank by way of Demand Draft on or before 31.12.2023 towards legal and other miscellaneous expenses.

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With the above observations and directions, the writ appeal is disposed off.

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In view of disposal of the writ appeal, the pending interlocutory applications do not survive for consideration and are accordingly disposed off.”

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(Emphasis supplied)

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The appellant-Bank before the Division Bench

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submits that the present petitioners owes some amount towards legal expenses and miscellaneous expenses apart from what was quoted at paragraph 3 supra. Today, it is an admitted fact that the present petitioner has cleared the entire amount observed by the Division Bench at paragraphs 3 and 4 to its last pie. Bank has received the entire amount. The Division Bench had directed the petitioner to pay on or before

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NC: 2024:KHC:6407 WP No. 7301 of 2023

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31.12.2023, which the petitioner complies. The compliance is not in dispute.

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After receiving the entire amount from the hands of the petitioner, begins the dodging of the Bank to return the original title deeds. It is therefore, this Court had passed the order on 12.02.2024 supra directing the Bank to return the documents, failing which, it would be constrained to impose the cost that Bank had recovered from the borrower at Rs.5 lakhs – being the legal fees and other expenses. The matter was directed to be listed on 15.02.2024 i.e., today. The petitioner alleges that the Bank has not returned the documents. Having receiving the entire amount under the OTS that they had offered, along with Rs.5 lakhs of legal expenses, the Bank is dodging the petitioner who is now 85 years old, to return the original documents, which at all times has to be returned to the petitioner.

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The counsel for the respondent-Bank is projecting a new bogey that the petitioner is not the original borrower. He is the father of the original borrower, therefore, documents

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cannot be returned to him. The original borrower, the son of the present petitioner is no more. He dies by committing suicide. The Bank is aware of it. The Bank offers OTS to the present petitioner which is on account of the death of the son and is now wanting to return the documents to the original borrower, who is no more. It is this action of the Bank that shocks the conscience of the Court. It is a State under Article 12 of the Constitution of India. This attitude of the Bank which is akin to the attitude of a cantankerous private lender cannot be countenanced by this Court, that too after receiving the entire amount to its last pie, and knowing full well that the original borrower, the son is no more, is wanting to return the original documents to the original borrower. It is beyond comprehension and rather strange that the Bank comes up with such pleas which can only be termed as preposterous.

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An 85 year old man is being dodged by the Bank after

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him having paid the entire amount under OTS including the legal fees of Rs.5 lakhs and other expenses. He is only wanting the return of original documents. The learned counsel for the Bank submits that if a direction is issued, they would return the

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NC: 2024:KHC:6407 WP No. 7301 of 2023

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documents. Therefore, a direction is to be issued to return the documents, but it cannot be a direction simpliciter. It is a fit case where this Court should mulct the Bank for having behaved in a manner that would not behove its status of being a State under Article 12 of the Constitution of India.

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For the aforesaid reasons, the following:

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ORDER

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(i) The Writ Petition is disposed.

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(ii) A direction is issued to the Bank to return the original documents to the borrower, within one week from the date of receipt of the copy of the order.

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(iii) The web-hosted copy of the order be treated as

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the certified copy of the order and the documents be returned, within one week from the date of the web-hosted copy.

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(iv) In view of the observations in the course of the order, the petitioner becomes entitled to a cost

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NC: 2024:KHC:6407 WP No. 7301 of 2023

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of Rs.2 lakhs to be paid by the Bank to the present petitioner, at the time when the original documents are returned, i.e., within the same

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one week.

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Sd/JUDGE

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KG List No.: 1 Sl No.: 4

M/S Embee Agro Food Industries v. Canara Bank

Case brief

What is this about?

What did the court decide?

M/S Embee Agro Food Industries v. Canara Bank

Case brief

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