M/S. Innofive Quality Products Pvt. Ltd. v. the Reserve Bank of India

Karnataka HC18 Sept 2025WP/6994/2025

Case brief

AI extract

What is this about?

SARFAESI Act Section 17; sale notice by secured creditor; borrower's repeated assurances and false statements; non-compliance with interim order conditions; Rs.1 Crore payment condition; undertaking before DRT to discharge entire amount; MSME borrower versus Union Bank of India Manipal Branch; RBI circular dated 17.03.2016 No. RBI/2015-16/338; sale not held for want of bidders; Karnataka High Court 2025; writ petition disposed of.

What did the court decide?

The petitioner cannot resort to repeated assurances and defeat the rights available to a secured creditor under the SARFAESI Act; its earlier challenge was disposed of on an undertaking to discharge the entire amount, and it has not complied even with the first condition of the interim order. ¶¶41

M/S. Innofive Quality Products Pvt. Ltd. Vs the… — Company and Corporate | Karnataka HC (2025)

What the court decided

AI extract

Outcome

Disposed

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Issue for consideration

Whether the writ petition challenging the sale notice should be dismissed on the ground that the petitioner abused the Court's indulgence by making false statements not once but twice over and failed to comply with the conditions of the interim order.

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Court's answer

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Key takeaways

If there is another auction by the secured creditor and yet another challenge by the petitioner, that conduct must be considered.obiter¶¶41

Detailed headnote1 paragraphs

Karnataka HC (Bengaluru), single Bench of B M Shyam Prasad J, disposed of W.P. No. 6994 of 2025 (GM-RES) filed by M/s Innofive Quality Products Pvt Ltd (MSME borrower) against the Reserve Bank of India and Union Bank of India, Manipal Branch, challenging a sale notice (Annexure-A) and seeking regularisation of the loan account per RBI circular RBI/2015-16/338 dated 17.03.2016. The borrower's earlier challenge to a prior auction sale under Section 17 of the SARFAESI Act stood disposed of on its undertaking (recorded before the DRT) to discharge the entire amount; on 10.03.2025 this Court granted interim protection against issuance of the Sale Certificate subject to payment of the entire amount within eight weeks, including Rs.1 Crore within four weeks. Counsel for the bank pointed out, and counsel for the petitioner did not dispute, that not even the first condition was complied with, and that the petitioner had made false statements twice over; the sale had in any event not been held for want of bidders. Holding that a borrower cannot resort to repeated assurances to defeat the rights of a secured creditor under the SARFAESI Act, the Court disposed of the petition, observing that any further auction followed by yet another challenge would be considered as relevant conduct.

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NC: 2025:KHC:37373 WP No. 6994 of 2025

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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 18^TH DAY OF SEPTEMBER, 2025

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BEFORE

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THE HON'BLE MR. JUSTICE B M SHYAM PRASAD

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WRIT PETITION NO. 6994 OF 2025 (GM-RES)

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BETWEEN:

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M/S. INNOFIVE QUALITY PRODUCTS PVT LTD NO.II-95(9), M/S MAMA AGRO INDUSTRY NEAR GANGAVISHVESHWARA SABHA BHAVAN, NEELAVARA, UDUPI-576 213 REGISTERED UNDER COMPANIES ACT, 2013 (MSME)

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Digitally signed by VANAMALA N Location: HIGH COURT OF KARNATAKA

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REPRESENTED BY ITS MANAGING DIRECTOR, SMT. SINDHU SANJAY SHENOY, W/O. SANJAY SHENOY, G-01, B WING, SHAMBHAVI SOVEREIGN, PERAMPALLI ROAD, MANIPAL, UDUPI-576 104.

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…PETITIONER (BY SRI. MAHESH KIRAN SHETTY.,ADVOCATE)

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NC: 2025:KHC:37373 WP No. 6994 of 2025

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HC-KAR

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AND:

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THE RESERVE BANK OF INDIA CENTRAL OFFICE, 10^TH FLOOR, CENTRAL OFFICE BUILDING, SHAHID BHAGAT SINGH MARG, POST BOX NO. 10014, MUMBAI-400 001, REPRESENTED BY ITS AUTHORIZED OFFICER.

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UNION BANK OF INDIA A BODY CORPORATE CONSTITUTED UNDER THE BANKING COMPANIES (ACQUISITION AND TRANSFER OF UNDERTAKINGS) ACT, 1970 AND HAVING ITS HEAD OFFICE AT 239, VIDHANA BHAVAN MARG, NARIMAN POINT, MUMBAI-400 021.

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BRANCH OFFICE AT MANIPAL BRANCH SH, 33 EXTN, WARD NO. 16, MANIPAL (SHIVALLI), UDUPI-576 104, IFSC CODE UBIN0901288 REPRESENTED BY ITS AUTHORIZED OFFICER, MARUTHESH S. A., BRANCH MANAGER,

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NC: 2025:KHC:37373 WP No. 6994 of 2025

HC-KAR

MANIPAL BRANCH.

…RESPONDENTS

(BY SMT.DIVYA PURANDAR., ADVOCATE FOR C/R2)

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THIS W.P. IS FILED UNDER ARTICLES 226 AND 227 OF THE CONSTITUTION OF INDIA PRAYING TO QUASH THE SALE NOTICE DATED 21.02.2025 BEARING NO.

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RD/UDUPI/CRLD/MAR/2024-25 ISSUED BY R-2 VIDE ANNX-A; DIRECT THE R-2 TO REGULARIZE THE LOAN ACCOUNT OF THE PETITIONER WITH IMMEDIATE EFFECT AND PROVIDE THE FACILITIES THAT ARE PROVIDED TO THE MSME AS PER THE GUIDELINES OF THE R-2 AS PER THE CIRCULAR IN THIS REGARD ISSUED BY THE R-1 RESERVED BANK OF INDIA DATED 17.03.2016 BEARING NO. RBI/2015-16/338 VIDE ANNEXUREC.

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THIS PETITION, COMING ON FOR ORDERS,

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THIS DAY, ORDER WAS MADE THEREIN AS UNDER:

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CORAM: HON'BLE MR. JUSTICE B M SHYAM PRASAD

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NC: 2025:KHC:37373 WP No. 6994 of 2025

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HC-KAR

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ORAL ORDER

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The petitioner [ a borrower] is aggrieved by the Sale Notice dated 21.01.2025 [Annexure-A] issued by the second respondent [ the secured creditor ]. This Court on 10.03.2025 has granted interim order directing the second respondent not to issue Sale Certificate to the auction purchaser provided the petitioner pays the entire amount [as undertaken before the DRT in the earlier proceedings] within eight [8] weeks putting the petitioner on condition to pay a sum of Rs.1 Crore within four [4] weeks from the date of this order.

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Mr.Mahesh Kiran Shetty, the learned counsel for the petitioner, does not dispute that the petitioner has not even complied with the first condition, and with this admission, Ms.Divya Purandar, the learned counsel for the secured creditor, submits that this

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5 - NC: 2025:KHC:37373 WP No. 6994 of 2025

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HC-KAR

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Court must dismiss the petition on the sole ground that the petitioner has abused the indulgence in making a false statement not just once but twice over. When queried, Ms. Divya Purandar supports that sale is not held because of want of bidders.

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These submissions are considered as also the undisputed fact that the petitioner's earlier challenge to a prior auction sale under Section 17 of the Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 [for short, 'the SARFAESI Act' ] is disposed of in view of the undertaking to discharge the entire amount which forms the basis for this Court's order. This Court is of the opinion that the petitioner cannot resort to repeated assurances and defeat the rights available to a secured creditor under the SARFAESI Act. As such, the petition stands disposed of observing that if there is another auction by the secured creditor and

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NC: 2025:KHC:37373 WP No. 6994 of 2025

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HC-KAR

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yet another challenge by the petitioner, this conduct

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must be considered.

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SD/(B M SHYAM PRASAD) JUDGE

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