IN THE HIGH COURT OF KARNATAKA AT BENGALURU DATED THIS THE 29TH DAY OF JUNE 2017 PRESENT THE HON’BLE MR. JUSTICE H.G.RAMESH AND THE HON’BLE MRS. JUSTICE K.S.MUDAGAL MISCELLANEOUS FIRST APPEAL NO. 425/2016 (SFC) BETWEEN :
1. SRI D.R.SRIKANTAIAH AGED ABOUT 84 YEARS NO.301/A, 9TH MAIN ROAD 4TH BLOCK, JAYANAGARA BANGALORE-560 011 2. SRI R.K.SHETTY AGED ABOUT 65 YEARS NO.7, NOORIE ROAD 4TH BLOCK, JAYANAGARA BANGALORE-560 011 ...APPELLANTS (BY SMT. LAKSHMI S.HOLLA, ADVOCATE) AND :
1. KARNATAKA STATE FINANCIAL CORPORATION HAVING ITS HEAD OFFICE AT 1/1, THIMMAIAH ROAD BANGALORE-560 052 REP; BY ITS AGM (MB 7 FS) 2. THE DEBENTURE TRUSTEE KARNATAKA STATE FINANCIAL CORPORATION 1/1, THIMMAIAH ROAD BANGALORE-560 052 3. M/S ANCO COMMUNICATIONS LIMITED B-41/42, INDUSTRIAL ESTATE MAHADEVAPURA, BANGALORE-560 048 BY ITS OFFICIAL LIQUIDATOR, COMPANY IN LIQUIDATION HIGH COURT OF KARNATAKA BANGALORE-1 4. SRI B.S.SUBHAS NO.117, NAGARAJU LAYOUT BULL TEMPLE ROAD CROSS BANGALORE-560 019 ...RESPONDENTS THIS MFA IS FILED UNDER SECTION 32(9) OF THE STATE FINANCIAL CORPORATION ACT, AGAISNT THE ORDER DT:25.11.2015 PASSED IN MISC.NO.484/2002 ON THE FILE OF THE XXXVII ADDITIONAL CITY CIVIL JUDGE, BANGALORE, ALLOWING THE PETITION FILED U/S 31(A) (aa) 32 (1) & 32 OF STATE FINANCIAL ACT.
THIS MFA COMING ON FOR ADMISSION THIS DAY, K.S.MUDAGAL, J., DELIVERED THE FOLLOWING:
JUDGMENT K.S.MUDAGAL J.:
This appeal arises out of the order dated 25.11.2015 passed by the XXXVII Addl. City Civil & Sessions Judge (CCH-38), Bangalore City in Misc.No.484/2002. By the impugned order, the trial Court has allowed the petition of the present respondent nos.1 and 2 under Sections 31(aa) and 32 of The State Financial Corporation Act, 1951 (Hereinafter referred to as ‘The Act’ for short) for recovery of Rs.2,53,25,253/- with interest @ 24% P.A. compoundable half yearly.
2. The appellants are respondents 2 and 3 before the trial Court. Respondent nos.3 and 4 are respondent nos.1 and 4 respectively. Respondent nos.1 and 2 are petitioner nos.1 and 2 before the trial Court. For the purpose of convenience, parties will be referred to hereafter with their ranks before the trial Court.
3. Respondent nos.2 to 4 are the directors of respondent no.1 – company. In 1996, respondent no.1 – Company availed loan of Rs.125 lakhs from the petitioner to acquire non-convertible debentures of the face value of Rs.100 lakhs executing necessary documents. Respondent nos.2 to 4 are the guarantors to the loan and are also liable as directors of the Company. Petitioners filed the petition contending that having availed such loan, the respondents have committed default in repayment of the loan and their liability as on the date of the petition is Rs.2,53,25,253/-. The petitioner sought to enforce the recovery of the said loan from the respondents.
4. The respondents in their defence admitted the availment and terms of the loan, but contended that they have discharged the loan in one time settlement scheme under letter dated 16.10.2008. In support of their claim, petitioners got examined PW1 and got marked Ex.P.1 to P.18. Respondents got examined one Madanmohan as RW1 and did not adduce any documentary evidence.
5. The trial Court after hearing the parties, by the impugned order allowed the petition holding that the respondents have failed to prove their defence of discharge of debt.
6. Smt.Lakshmi S Holla, learned counsel appearing for the appellants seeks to assail the order of the trial Court on the following grounds:
(i) The trial Court has failed to appreciate the admission of the petitioners regarding the discharge of loan under Ex.P.9;
(ii) The petition is bad for non-joinder of necessary parties viz., the sureties to the loan who furnished collateral security;
(iii) The petitioner’s discharged the guarantor of the mortgaged property without the knowledge of the appellants and without legal justification or reason;
(iv) The trial Court failed to take into account the payments made.
7. Learned counsel appearing for the respondents seeks to justify the order of the trial Court on the ground that having admitted the liability, the respondents failed to prove their defence of discharge of loan.
8. Having regard to the aforesaid rival contentions, the question that falls for consideration of this Court is:
“Whether the findings of the trial Court that the respondents have failed to prove their defence of discharge of debt or liability is sustainable?”
9. Section 32(6) of the Act states that on the borrower/respondent showing any cause against the enforcement of the liability, the District Judge has to conduct an investigation into the matter applying the provisions of the Code of Civil Procedure. After making such investigation, the District Judge can pass an order under Section 32(7) for enforcement of the order or absolve the borrowers from the liability.
10. Since the respondents admitted availment of the loan and liability and set-up the specific plea of discharge of liability and the petitioners denied the same, the burden was on the respondents to prove their defence. They have not produced any material like loan discharge letter, acknowledgement/receipt for having paid the money. Ex.P.9 is only a communication for one time settlement of the liability and not a receipt or discharge letter. Except the self-serving testimony of RW1, who is not even a party to the petition, the respondents failed to adduce any proof of discharge of the debt. Therefore, the trial Court is fully justified in allowing the petition. No ground made out to admit the appeal. Therefore dismissed.
Sd/- JUDGE Brn Sd/- JUDGE