Dismissed¶78

Krishna Valley Vineyard Private Limited v. Bank of India

Karnataka HC12 Aug 2025WP/27060/2019

Case brief

AI extract

What is this about?

Territorial jurisdiction under Article 226(2) Constitution; extra-territorial writ challenge to proceedings before Metropolitan Magistrate, South Delhi; Section 138 Negotiable Instruments Act cheque dishonour; cheque No.364525; OTS settlement Rs.1,60,00,000/-; SFAC venture capital assistance Rs.25,43,000/-; Bank of India undertaking; Kusum Ingots cause-of-action test; writ dismissed as not maintainable; High Court of Karnataka GM-RES; no opinion on merits; liberty to defend before Delhi court.

What did the court decide?

No relief to the petitioners; the writ petition was dismissed as not maintainable, with liberty to raise appropriate defence before the Court in New Delhi. ¶78

Krishna Valley Vineyard Private Limited Vs Bank of India — Arbitration | Karnataka HC (2025)

What the court decided

AI extract

Outcome

No relief to the petitioners; the writ petition was dismissed as not maintainable, with liberty to raise appropriate defence before the Court in New Delhi.

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Issue for consideration

Maintainability of the writ petition before the High Court of Karnataka: whether this Court has jurisdiction under Article 226(2) of the Constitution to entertain a writ petition challenging proceedings before the Court of the Metropolitan Magistrate, South Delhi, no cause of action having arisen within the State of Karnataka. +1 more

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Court's answer

The agreement entered into between the petitioners and respondent No.2 was entered into at New Delhi, with any dispute concerning the agreement referable to adjudication by the Indian Council of Arbitration, Federation House, Tansen Marg, New Delhi, under the Arbitration and Conciliation Act, 1996, the venue of arbitration being New Delhi.

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Ratio / Principle

No part of the cause of action arose in the State of Karnataka; therefore the petitioners cannot invoke Article 226 of the Constitution of India to file a writ petition challenging the proceedings initiated by respondent No.2 before the Court in New Delhi.

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Key takeaways

In view of the judgment of the Apex Court in M/s. Kusum Ingots and Alloys Ltd. v. Union of India, (2004) 6 SCC 254, the writ petition is not maintainable before this Court and consequently is dismissed as not maintainable.ratio¶78
This Court has not expressed any opinion on the merits of the case; it is open to the petitioners to raise appropriate defence before the Court in New Delhi.obiter¶78

Detailed headnote1 paragraphs

Writ petition under Articles 226 and 227 of the Constitution by a borrower company, its directors and guarantors, seeking certiorari to quash proceedings under Section 138 of the Negotiable Instruments Act pending before the Court of the Metropolitan Magistrate, South Delhi in Case Reg.No.8468/2018 (summons dated 25.03.2019) for dishonour of cheque bearing No.364525 dated 31.01.2018 for Rs.25,43,000/- drawn in favour of respondent No.2 (Small Farmers Agri-Business Consortium), along with a direction to respondent No.1 (Bank of India) to repay the SFAC venture-capital loan out of the one-time-settlement amount. The petitioners contended that the cheque was in fact honoured on 01.02.2018 pursuant to an OTS with respondent No.1 at Rs.1,60,00,000/- allegedly inclusive of the SFAC loan. Held: the financing agreement with respondent No.2 was entered into at New Delhi with the venue of arbitration at New Delhi; no part of the cause of action arose in Karnataka; applying M/s. Kusum Ingots and Alloys Ltd. v. Union of India, (2004) 6 SCC 254, the High Court of Karnataka lacks jurisdiction under Article 226(2) to entertain the petition; the writ petition was dismissed as not maintainable, the Court expressly refraining from expressing any opinion on the merits and leaving the petitioners free to raise their defence before the Court in New Delhi.

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NC: 2025:KHC:31168 WP No. 27060 of 2019

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HC-KAR

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IN THE HIGH COURT OF KARNATAKA AT BENGALURU

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DATED THIS THE 12^TH DAY OF AUGUST, 2025

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BEFORE

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THE HON'BLE MR. JUSTICE R. NATARAJ WRIT PETITION NO.27060 OF 2019 (GM-RES)

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BETWEEN:

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KRISHNA VALLEY VINEYARD PRIVATE LIMITED NO.3538, DR. RAJKUMAR ROAD RAJAJINAGAR 4^TH BLOCK, BANGALORE-560010 REPRESENTED BY ITS MANAGING DIRECTOR, RAJASHEKHAR MALLANAGOUDA RUDRAGOUDAR.

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RAJASHEKHAR MALLANAGOUDA RUDRAGOUDAR AGED ABOUT 44 YEARS.

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MALLANAGOUDA S RUDRAGOUDAR AGED ABOUT 46 YEARS.

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Digitally signed by SUMA Location: HIGH COURT OF KARNATAKA

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MAHESH M RUDRAGOUDAR AGED ABOUT 47 YEARS.

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PARVATHY M RUDRAGOUDAR AGED ABOUT 49 YEARS.

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SAHEBGOUDA M RUDRAGOUDAR AGED ABOUT 43 YEARS.

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ALL ARE RESIDING AT NO.28, MAHALGABARAT, NEAR OLD MUGALKHOD MATH SOLARPUR ROAD, BIJAPUR-586 103.

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&PETITIONERS

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(BY SRI. TULSI KUMAR B.N., ADVOCATE)

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HC-KAR

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AND:

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BANK OF INDIA BENGALURU MAIN BRANCH NO.11, KEMPEGOWDA ROAD BENGALURU-560 009.

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REP. BY ITS CHIEF MANAGER

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SMALL FARMERS AGRI-BUSINESS CONSORTIUM NCUI AUDIOTORIUM BUILDING, 5^TH FLOOR, SIRI FORT INSTITUTIONAL AREA, AUGUST KRANTI MARG, HAUZ KHAS NEW DELHI-110 016.

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REP. BY ITS DIRECTOR

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&RESPONDENTS

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(BY SRI. M MOHAMED IBRAHIM, ADVOCATE FOR R-1; SRI. SHRINIVAS.B.S, ADVOCATE FOR R-2)

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THIS W.P. IS FILED UNDER ARTICLES 226 AND 227 OF THE CONSTITUTION OF INDIA PRAYING TO QUASH / SET ASIDE THE PROCEEDINGS INITIATED BEFORE THE COURT OF THE METROPOLITAN MAGISTRATE, SOUTH DELHI IN CASE REG.NO.8468/2018 SUMMONS DATED 25.03.2019 ANENXURE-P AND ETC.

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

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CORAM: HON'BLE MR. JUSTICE R. NATARAJ

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ORAL ORDER

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The petitioners have sought for writ in the nature of certiorari to quash the proceedings before the Court of the Metropolitan Magistrate, South Delhi, in Case

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3 - NC: 2025:KHC:31168 WP No. 27060 of 2019

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HC-KAR

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No.8468/2018 and Summons dated 25.03.2019. They have also sought for a direction to the respondent No.1 to repay the loan due to the respondent No.2 out of the one time settlement amount.

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The petitioner No.1, petitioner No.2 as the borrowers and petitioner Nos.3 to 6 as the guarantors approached the respondent No.1 in the year 2011 for financial assistance for setting up a winery. Accordingly, certain Agriculture Term Loan, Agriculture Cash Credit, Agriculture Demand Loan, Small Scale Industry Demand Loan were sanctioned. The petitioner No.1 thereafter approached the respondent No.2 seeking assistance by way of venture capital. The respondent No.2 sanctioned a sum of Rs.25,43,000/- towards venture capital assistance for setting up an agribusiness project. The sanction was released to the account of the petitioner No.1. It is claimed that as per the Agreement between the petitioner No.1 and the respondent No.2 dated 13.06.2012, the petitioner No.1 was required to issue a post-dated cheque

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HC-KAR

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and authorise respondent No.1 to debit its account from time to time and petitioner No.1 undertook not to withdraw the securities from the respondent No.1 3 bank until and unless the venture capital amount was repaid to the respondent No.2.

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In accordance with the above, the petitioner No.1 issued a Cheque bearing No.364525 dated 31.01.2018 for Rs.25,43,000/- drawn in favour of the respondent No.2 and handed it over to the respondent No.2. Petitioners contend that the respondent No.1 vide its letter dated 16.06.2012 addressed to respondent No.2 confirmed that the petitioner No.1 had a loan account with it and that the venture capital amount would be refunded from the account of the petitioner No.1. It also undertook not to release the securities charged for the term loan until the refund of venture capital to the respondent No.2. In addition, the respondent No.1 addressed a letter dated 14.05.2012 undertaking not to release the primary and collateral as well as the promoter9s security before the

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HC-KAR

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Venture Capital Advance is fully repaid by the petitioner No.1.

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The petitioner No.1 claims that it suffered loss

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and thereafter, it submitted a One Time Settlement (OTS) proposal offering to pay Rs.1,20,00,000/- in full and final settlement of all the loans including the SFAC loan payable to the respondent No.2. Petitioners contend that respondent No.1 stated that the offer was too low and requested the petitioner No.1 to improve the offer and come forward for a meaningful discussion. Thereafter, petitioner No.1 increased the offer from Rs.1,20,00,000/to Rs.1,45,00,000/- and finally settled at Rs.1,60,00,000/Petitioner No.1 contends that the settlement was inclusive of SFAC loan payable to the respondent No.2. It contends that after payment of part of the OTS amount, the respondent No.1 released one of the securities, which it had mortgaged. Thereafter, petitioners paid the entire OTS amount along with interest and the respondent No.1 issued a No Due Certificate to the petitioner No.1.

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HC-KAR

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Petitioners contend that respondent No.1 ought to have closed all the loan accounts as settled under the OTS. It contends that respondent No.1 was bound to honour its undertaking to repay the SFAC loan to the respondent No.2. Petitioner contends that the cheque drawn in favour of the respondent No.2 referred to supra was presented for payment by respondent No.2 and the same was duly honored by the respondent No.1 on 01.02.2018 as evidenced by the statement of accounts. Petitioner contends that the payment of cheque was also confirmed through a message sent by the respondent No.1 to the mobile of the petitioner No.2.

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The petitioners claim that they were surprised and shocked to receive summons from the Court of the Metropolitan Magistrate, South Delhi in Case No.8468/2018 requiring their appearance either in person or by a pleader to answer to a charge under Section 138 of the Negotiable Instruments Act, for dishonor of cheque bearing No.364525. The petitioners are therefore before

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NC: 2025:KHC:31168 WP No. 27060 of 2019

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HC-KAR

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this Court challenging the proceedings initiated by respondent No.2 before the Court at Delhi.

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Learned counsel for the petitioners contended that the petitioners have already paid the cheque that was drawn in favour of the respondent No.2 and the same is evident from the account extract. Learned counsel took the Court to the account extract which indicates that a sum of Rs.25,43,000/- was debited to the account of the petitioner No.1. He contends that strangely a sum of Rs.25,43,000/- was shown as credit by September 2018. He therefore contends that the respondent No.1 which was bound to pay SFAC loan to the respondent No.2 had initially processed the cheque submitted by respondent No.2 and later retracted and claimed that it was not liable to repay the SFAC loan.

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Per contra, the respondent No.2 contends that the writ petition is not maintainable before this Court as petitioners are challenging the proceedings initiated before the Court of the Metropolitan Magistrate, South Delhi in

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HC-KAR

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Case No.8468/2018. It is contended that this Court does

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not have extra-territorial jurisdiction over the Court in New Delhi under Article 226(2) of the Constitution of India as no cause of action arose within the State of Karnataka and therefore, the writ petition is not maintainable. It is also contended interalia that there was no settlement between the petitioner No.1 and the respondent No.2 regarding payment of SFAC loan. It is contended that even if settlement is entered into between the petitioners and respondent No.1, the same is not binding upon the respondent No.2 as it had not consented to the arrangement between the petitioners and the respondent No.1 that the loan shall be repaid by the respondent No.1.

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Learned counsel for the respondent No.2 reiterated the above contentions and claimed that the petitioners are bound to repay the SFAC loan of Rs.25,43,000/- to the respondent No.2 and they cannot shovel it on respondent No.1. He also contends that there is no mention in the OTS agreement that the one time

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NC: 2025:KHC:31168 WP No. 27060 of 2019

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HC-KAR

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settlement amount of Rs.1,60,00,000/- includes the amount payable to respondent No.2.

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The respondent No.1 has also filed the

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statement of objections interalia contending that the respondent No.1 has nothing to do with the liability of the petitioners with respondent No.2 and the cheque issued by the petitioners to respondent No.2 is the sole liability of the petitioners. It contended that it had settled the dues payable by petitioners to it at Rs.1,70,00,000/- and after payment, it issued a no due certificate and closed the loan account on 13.05.2020. It contends that since respondent No.2 presented the cheque on 01.02.2018 and the limit granted to petitioners was assessable, the cheque was cleared and the amount of Rs.25,43,000/- was debited to the account of petitioners and later reversed. Learned counsel for respondent No.1 reiterated the above and submitted that respondent No.1 had no obligation to clear the loan payable by the petitioners to respondent No.2.

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10 - NC: 2025:KHC:31168 WP No. 27060 of 2019

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HC-KAR

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I have considered the submissions of learned

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counsel for the petitioners and learned counsel for the respondent Nos.1 and 2.

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A perusal of the agreement entered into

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between the petitioners and the respondent No.2 shows that the said agreement was entered into at New Delhi. The same is evident from the clause mentioned therein that in the case of any dispute concerning the agreement, it shall be referred for adjudication to Indian Council of Arbitration, Federation House, Tansen Marg, New Delhi and the provisions of the Arbitration and Conciliation Act, 1996 will apply. It is also agreed that the venue of such arbitration will be New Delhi.

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The respondent No.2 is situated in New Delhi and operates its business in New Delhi. No part of the cause of action arose in the State of Karnataka for the petitioners to invoke provisions of Article 226 of the Constitution of India to file a writ petition challenging the proceedings initiated by the respondent No.2 before the

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NC: 2025:KHC:31168 WP No. 27060 of 2019

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11 -

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HC-KAR

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Court in New Delhi. In that view of the matter and in view

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of the judgment of Apex Court in M/s. Kusum Ingots and Alloys Ltd., Vs. Union of India and another 3 2004(6) SCC 254, the writ petition is not maintainable before this Court and consequently, this writ petition is dismissed as not maintainable. It is made clear that this Court has not expressed any opinion on the merits of the case and it is open for the petitioners to raise appropriate defence before the Court in New Delhi. Writ petition is disposed of on the above terms.

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Sd/(R. NATARAJ) JUDGE

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List No.: 1 Sl No.: 10

Procedural history

How this case reached the court

AI extract

Order under challenge
Summons dated 25.03.2019 (Annexure-P) issued in Case Reg.No.8468/2018 by the Court of the Metropolitan Magistrate, South Delhi, initiating proceedings under Section 138 of the Negotiable Instruments Act for dishonour of cheque bearing No.364525, which the petitioners sought to quash/set aside.¶28
Court of the Metropolitan Magistrate, South Delhi · 25.03.2019
Prior proceeding
In 2011, petitioner Nos.1 and 2 as borrowers and petitioner Nos.3 to 6 as guarantors approached respondent No.1 for financial assistance for setting up a winery; certain Agriculture Term Loan, Agriculture Cash Credit, Agriculture Demand Loan and Small Scale Industry Demand Loan were sanctioned.¶36
Prior proceeding
Respondent No.2 sanctioned venture capital assistance of Rs.25,43,000/- to petitioner No.1 for setting up an agribusiness project; as per the agreement dated 13.06.2012, petitioner No.1 was required to issue a post-dated cheque and authorise respondent No.1 to debit its account.¶36
Prior proceeding
Petitioner No.1 issued cheque bearing No.364525 dated 31.01.2018 for Rs.25,43,000/- drawn in favour of respondent No.2 and handed it over to respondent No.2; respondent No.1 had by letters dated 16.06.2012 and 14.05.2012 undertaken to refund the venture capital amount and not to release securities until repayment.¶40
Prior proceeding
Petitioner No.1 submitted an OTS proposal to respondent No.1, raising the offer from Rs.1,20,00,000/- to Rs.1,45,00,000/- and finally settling at Rs.1,60,00,000/-, contended to be inclusive of the SFAC loan payable to respondent No.2; after paying the entire OTS amount with interest, petitioner No.1 obtained a No Due Certificate from respondent No.1.¶45
Prior proceeding
As contended by the petitioners, respondent No.2 presented the cheque and respondent No.1 duly honoured it on 01.02.2018, as evidenced by the statement of accounts and a confirmation message sent to the mobile of petitioner No.2.¶48
Prior proceeding
Petitioners received summons from the Court of the Metropolitan Magistrate, South Delhi in Case No.8468/2018 requiring their appearance to answer a charge under Section 138 of the Negotiable Instruments Act for dishonour of cheque bearing No.364525.¶49
Prior proceeding
Respondent No.1, in its statement of objections, contended that it had settled the dues payable by the petitioners to it at Rs.1,70,00,000/-, issued a no due certificate and closed the loan account on 13.05.2020; it stated that the cheque presented on 01.02.2018 was cleared, the amount of Rs.25,43,000/- was debited to the petitioners' account and later reversed.¶66

Krishna Valley Vineyard Private Limited v. Bank of India

Case brief

What is this about?

What did the court decide?

Krishna Valley Vineyard Private Limited v. Bank of India

Case brief

What is this about?

What did the court decide?

Why is it important?

What the court decided

Issues for consideration

Cases cited

Statutes considered

Procedural history

Parties & counsel

Coram

Case details

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