Dismissed

Basappa S/O Tippanna Vagathi v. the Authorised Officer

Karnataka HC3 Sept 2024WP/75191/2013

Case brief

AI extract

What is this about?

A Karnataka High Court dismissed a writ petition seeking to quash sale certificates executed by a financial corporation, holding that the erstwhile purchasers had an efficacious remedy under Section 17 of the SARFAESI Act before the Debts Recovery Tribunal and cannot approach the High Court in writ jurisdiction.

What did the court decide?

Writ petition seeking quashing of Sale Certificates dismissed as no efficacious remedy is available before the High Court.

Basappa S/O Tippanna Vagathi Vs the… — Civil Procedure and Limitation | Karnataka HC (2024)

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1 - NC: 2024:KHC-D:12678 WP No. 75191 of 2013

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IN THE HIGH COURT OF KARNATAKA, DHARWAD BENCH DATED THIS THE 3^RD DAY OF SEPTEMBER, 2024 BEFORE

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THE HON'BLE MR. JUSTICE H.P.SANDESH WRIT PETITION NO. 75191 OF 2013 (GM-KSFC)

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BETWEEN:

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SRI. BASAPPA S/O. TIPPANNA VAGATHI, AGE: 65 YEARS, OCC: AGRICULTURE, R/O. ARISHINAGODI, TQ: NARAGUND-582207, DIST: GADAG.

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SRI. BASAPPA S/O. KALLAPPA SAVADATTI , AGE: 58 YEARS, OCC: AGRICULTURE, R/O. MENSINKAI ONI, TQ: NARAGUND-582207, DIST: GADAG.

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SRI. MAHADEVAPPA S/O. SAHADEVAPPA BEDAGE, AGE: 57 YEARS, OCC: BUSINESS, R/O. GADI ONI, TQ: NARAGUND-582207, DIST: GADAG.

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SRI. DHARMARAJ S/O. FAKKIRAPPA MORE, SINCE DECEASED BY HIS LR’S.

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SAROJA HANGARAKI

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Location: HIGH COURT OF KARANTAKA DHARWAD BENCH

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4(A) SMT. LAXMIBAI W/O. DHARMARAJ MORE AGE: 48 YEARS, OCC: HOUSEHOLD WORK, R/O. SANAPUR ONI, TQ: NARAGUND-582207, DIST: GADAG.

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4(B) SRI. RAVI S/O. DHARMARAJ MORE, AGE: 30 YEARS, OCC: BUSINESS, R/O. SANAPUR ONI, TQ: NARAGUND-582207, DIST: GADAG.

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4(C) SRI. SHRINIVAS S/O. DHARMARAJ MORE, AGE: 28 YEARS, OCC: AGRICULTURE, R/O. SANAPUR ONI, TQ: NARAGUND-582207, DIST: GADAG. …PETITIONERS

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(BY SRI. N.P. VIVEKMEHTA, ADV. FOR P1-P3 & P4(A))

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2 - NC: 2024:KHC-D:12678 WP No. 75191 of 2013

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AND:

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THE AUTHORISED OFFICER, KARNATAKA STATE FINANCIAL CORPORATION, LL BUILDING, FILED MARSHAL K.M. CARIYAPPA CIRCLE, HUBLI ROAD, GADAG-582202.

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THE BRANCH MANAGER, KARNATAKA STATE FINANCIAL CORPORATION, LL BUILDING, FILED MARSHAL K.M. CARIYAPPA CIRCLE, HUBLI ROAD, GADAG-582202.

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SRI. SIDDAPPA S/O. SHANKRAPPA NARGUND, AGE: 49 YEARS, OCC: BUSINESS, R/O. DANDAPUR, TQ: NARAGUND-582207, DIST: GADAG.

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SRI. GANGADHAR S/O. HANAMANTAPPA KAJJARI, AGE: 42 YEARS, OCC: SERVICE, R/O. LIG 12, HUDKO COLONY, DIST: GADAG-582202.

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SMT. BHARATI YALLARIGOUDA PATIL AGE: 40 YEARS, OCC: GOVT. SERVICE, R/O. GOVT. HOSPITAL, NARAGUND-582207, DIST: GADAG.

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SMT. INDIRABAI F/O.DHARMAJI MORE, AGE: MAJOR, (CORRECT AGE NOT KNOWN) OCC: HOUSEWIFE, R/O. NARAGUND-582207, DIST: GADAG.

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…RESPONDENTS

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(BY SRI. MAHANTESH R. PATIL, ADV. FOR R1 & R2; SRI. S.R. HEGDE, ADV. FOR R5; SRI. SIDDAPPA S. SAJJAN, ADV. FOR R6; R3-HELD SUFFICIENT; R4-SERVED)

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THIS WRIT PETITION IS FILED UNDER ARTICLES 226 AND 227 OF THE CONSTITUTION OF INDIA PRAYING TO CANCEL SALE CERTIFICATE DATED: 08/04/2011 OF THE SCHEDULE PROPERTIES EXECUTED BY 1^ST RESPONDENT IN FAVOUR OF 4^TH RESPONDENT VIDE ANNEXURE-H, SALE CERTIFICATE DATED: 08/04/2011 OF THE SCHEDULE PROPERTIES EXECUTED BY 1^ST RESPONDENT IN FAVOUR OF 5^TH RESPONDENT VIDE ANNEXURE-J, IN THE PETITION.

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THIS PETITION, COMING ON FOR FINAL HEARING THIS DAY, ORDER WAS MADE THEREIN AS UNDER:

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3 - NC: 2024:KHC-D:12678 WP No. 75191 of 2013

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ORAL ORDER

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(PER: THE HON'BLE MR. JUSTICE H.P.SANDESH)

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Heard the learned counsel for the petitioners and learned counsel for the respondents.

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In this writ petition the prayer is sought to quash Annexure-H that is Sale Certificate dated 08.04.2011 of the scheduled properties executed by 1st respondent in favour of 5th respondent vide Annexure-J in the petition and so also pass any other order or direction as the Court deems fit in the circumstances of the case and also amended the petition seeking relief to cancel the Sale Certificate dated 08.04.2011 of the schedule properties executed by 1st respondent in favor of 4th respondent vide Annexure-M.

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The main contention of the petitioners while seeking these reliefs is that the petitioners have purchased the said properties and the 3rd respondent obtained loan of Rs.1,50,000/- on 18.08.1993 from 2^nd respondent for the purpose of purchasing vehicle and 3rd respondent stood as surety for a loan on 05.02.1994 for Rs.1,76,000/- borrowed by Prabhugouda S/o Naganagouda Mallanagoudar. The 3rd

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respondent has executed the document by mortgaging the said properties in favor of 2nd respondent. After sanction of the loan, the charge was not created in the relevant documents/properties and Encumbrance Certificate has also produced as Annexure-A, which does not disclose any mortgage. It is contended that the petitioners purchased the properties on 06.05.1996 from 3rd respondent and copy of the Sale Deed is also produced as Annexure-B. It is also contended that the 2nd respondent had initiated proceedings under Section 31(1) (a) and (a)(a) and Section 32(1) of the State Financial Corporations’ Act, 1951 (hereinafter to as the “SFC Act”) for recovery of the amount of Rs.8,56,654/- before the Court of District and Session Judge Court at Gadag and the copy of the petition is also produced as Annexure-C. The 1st respondent obtained the order of temporary injunction restraining the petitioners from alienating the properties on 17.11.2003.

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It is also contended that during the pendency of the above petition, the 1st respondent issued a notice on 25.08.2010 and 13/14.09.2010 under Section 13(2) of the Securitization and Reconstruction of Financial Assets and

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Enforcement of Security Interest Act, 2002 (hereinafter referred to as the “SARFAESI Act”), directing the 2^nd respondent to discharge the liability within 60 days. On 04.12.2010, the possession notice was issued and copy of the said notice is produced as per Annexure-D.

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The 1^st respondent also issued a notice on 13.12.2010 under Section 13(4) of the SARFAESI Act, by saying that, possession of the properties are taken and directed the 3rd respondent to discharge the amount due within 30 days in terms of Annexure-E and F. The 1st respondent without obtaining the permission in Miscellaneous Case No.24/2003, auctioned the properties in question, vide notification dated 19.01.2011 and the copy is produced as Annexure-G. The 1st respondent illegally and without bringing to the notice of petitioners has executed Sale Certificate on 08.04 .2011 in favour of 4^th and 5^th respondent as per Annexure-H and J.

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The learned counsel would contend that Miscellaneous Case No.24/2003 was posted on 09.06.2011 and the said matter was adjourned to 08.07.2011, but without bringing the notice of the petitioners and 3rd respondent and without serving the copy of advancement application, the 2nd

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respondent advanced the case on 05.07.2011 and filed a memo for withdrawal of the said petition and the matter was dismissed as settled on the ground that amount was repaid in O.T.S. scheme and produced Annexure-K and L. Hence, it is contended that the 1st respondent acted in a fraudulent manner and executed the Sales Certificate in favor of 4^th and 5th respondent and the petitioners have no other alternative remedy, except to approach the Court.

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It is contended that the 1st respondent without obtaining permission from the District and Sessions Court in Miscellaneous No.24/2003, has executed the Sale Certificates behind the back of petitioners and 3rd respondent. The petitioners have invested huge amount for purchasing the said plots/properties in question and hence, the Sale Certificates required to be quashed. The counsel also submits that when the petition was filed under Section 31 (1) (a) and (a)(a) of the SFC Act, ought not to have invoked the SARFAESI Act in conducting E-auction and selling the properties and the very approach is erroneous. Hence, it requires interference.

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Per contra, the learned counsel appearing for the

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respondents would also submit that under Section 36 of

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SARFAESI Act, the claim is also barred by limitation and also submits that in miscellaneous petition, the said issue is also raised and without looking into the same, the properties are sold. The learned counsel for the respondents would submit that the petition filed under Section 31(1) (a) and (a)(a) of the SFC Act and when the new enhancement brought into the force i.e., SARFAESI Act, 2002, the proceedings have been initiated under the under Section 13 of the SARFAESI Act, the notice was given, E-auction was also issued in terms of Annexure-G, the properties are sold and the petitioners cannot invoke the writ jurisdiction, if any grievances, he has to approach the Debts Recovery Tribunal (hereinafter referred to as the ‘DRT’) and no such application is filed before the DRT. This Court cannot exercise the writ jurisdiction in quashing up either the Sale Certificate or cancellation of the Sale Certificate. If any grievances against invoking of Section 13 of the SARFAESI Act, remedy is under Section 17 of the SARFAESI Act and hence, this writ petition cannot be maintained.

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Learned counsel appearing for the purchaser

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contend that he has been in possession subsequent to the purchase made by the same from the respondent Nos.1 and 2.

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Having heard the learned counsel for the petitioners and learned counsel for the respondents, the learned counsel for the petitioners not disputes the fact that his vendor stood as guarantor when the loan was taken from the Karnataka State Financial Corporation (hereinafter referred to as the ‘KSFC’). The main contention of the learned counsel is that, when he has purchased the properties, he has verified the Encumbrance Certificate as per Annexure-A and the same does not disclose anything about the mortgage created in favour of the KSFC and he is a bonofide purchaser and also it is the contention that when the petition was filed before the District Court invoking Section 31 ought not to have invoked the SARFAESI Act. It is not in dispute that the transaction was taken place in the year 1993 and according to the petitioners, he has purchased the property in the year 1996 and the SARFAESI Act came into force in 2002. The learned counsel for respondents would also contend that the proceedings has been initiated in the SARFAESI Act and the same cannot be challenged before this Court. It is also not in dispute that the Sale Notice was issued and also the properties was brought for sale and E-auction was conducted by giving notice and documents which has been

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produced before the Court clearly discloses that SARFAESI Act has been invoked under Section 13 of the SARFAESI Act. When such being the case, if any grievances ought to have been challenged the same before the DRT under Section 17 of the SARFAESI Act and also Section 17 is very clear that any person (including borrower), aggrieved by any of the measures referred to in Sub-Section (4) of Section 13 taken by the secured creditor or his authorized officer under this Chapter,(may make an application along with such fee, as may be prescribed,) to the Debts Recovery Tribunal having jurisdiction in the matter within 45 days from the date on which such measures had been taken. In the case on hand, no such application is filed before the DRT instead of approached this Court invoking writ jurisdiction. Hence, this Court cannot decide the same when there is an efficacious remedy available to the petitioner under Section 17 of the SARFAESI Act.

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Hence, I do not find any merit in the petition and whatever the ground which the petitioners are urged, it would have urged the same before the DRT under Section 17 of the SARFAESI Act. Hence, no ground is made out to grant relief as

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10 -

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NC: 2024:KHC-D:12678 WP No. 75191 of 2013

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sought in quashing of Annexure-H and M. In view of the

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discussions made above I pass the following:

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ORDER

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a) The Writ Petition is dismissed.

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Sd/(H.P.SANDESH) JUDGE

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PMP CT-MCK List No.: 1 Sl No.: 37

Basappa S/O Tippanna Vagathi v. the Authorised Officer

Case brief

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Basappa S/O Tippanna Vagathi v. the Authorised Officer

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