IN THE HIGH COURT OF KARNATAKA AT BENGALURU DATED THIS THE 7TH DAY OF JANUARY, 2019 BEFORE THE HON’BLE MR. JUSTICE H.T. NARENDRA PRASAD WRIT PETITION No.13491/2013 (GM-KSFC) BETWEEN M/S VCM POLYURETHANES PVT. LTD.
A COMPANY INCORPORATED UNDER THE COMPANIES ACT, 1956 HAVING REGISTERED OFFICE AT 503 JHULELAL CHS, 16TH ROAD, KHAR (W) MUMBAI - 400 052 REPRESENTED BY ITS AUTHORIZED SIGNATORY SRI VENKATESH K. CHHABRIA ... PETITIONER (BY SRI S.V. BHAT, ADVOCATE FOR SRI C.G. GOPALASWAMY, ADVOCATE) AND THE KARNATAKA STATE FINANCIAL CORPORATION A BODY CORPORATE CONSTITUTED UNDER THE STATE FINANCIAL CORPORATIONS ACT, 1951 HAVING HEAD OFFICE AT NO.1/1 THIMMAIAH ROAD BANGALORE-560 052. REPRESENTED BY ITS MANAGING DIRECTOR ... RESPONDENT (BY SRI P.S. MALIPATIL, ADVOCATE) THIS WRIT PETITION IS FILED UNDER ARTICLE 226 OF THE CONSTITUTION OF INDIA, PRAYING TO DIRECT THE RESPONDENT TO CANCEL THE MORTGAGE OF THE PROPERTY BEARING NO. 10-B, KIADB INDUSTRIAL AREA, KASABA HOBLI, BANGALORE RURAL DISTRICT AT THE COST OF THE RESPONDENT AND RETURN THE ORIGINAL DOCUMENTS OF TITLE PERTAINING TO SAID PROPERTY TO THE PETITIONER AND ETC.
THIS PETITION COMING ON FOR PRELIMINARY HEARING IN ‘B’ GROUP THIS DAY, THE COURT MADE THE FOLLOWING:
O R D E R This writ petition is filed by the petitioner seeking direction to the respondent to cancel the mortgage of the property bearing No.10-B, KIADB Industrial Area, Kasaba Hobli, Bangalore Rural District at the cost of the respondent and to return the original documents of title pertaining to the said property.
2. The brief facts of the case:
The petitioner is engaged in the business of manufacturing polyurethane products and elastomer systems in Maharashtra State and in order to serve its customers in the southern states of India, it was on the look out for a suitable place in either Karnataka or Tamil Nadu for establishing another manufacturing facility. Having learnt that the KIADB was selling the property bearing No.10-B at KIADB Industrial Area, Kasaba Hobli, Bangalore Rural District that it had taken over from a defaulter company in exercise of the powers conferred on the respondent under Section 29 of the State Financial Corporation Act, 1951 and considering the situation of the subject property in an industrial area with all infrastructure in place, the petitioner participated in the auction held by the respondent on 03.09.2004 and the petitioner was the successful bidder for Rs.9,10,000/-. Immediately after that, the petitioner paid the said sum and completed the formalities associated with the auction. The respondent-the Karnataka State Financial Corporation has confirmed the auction sale by its letter dated 14.10.2004, the lease hold rights of the subject property and delivered the vacant physical possession to the petitioner. The petitioner paid the sums of the defaulter company owed to the KIADB and got the subject property re-allotted from it on lease-cum-sale basis. On 11.2.2005, the KIADB executed lease-cum-sale agreement in respect of the subject property in favour of the petitioner.
b) Petitioner took up the project of establishing its industry in the subject property and applied to the respondent for grant of term loan in terms of the application submitted on 07.11.2005 along with the project report and other documents as stipulated by the respondent and has paid loan processing fee of Rs.1,13,219-48 to the respondent and also provided the letter of Citi Bank NA sanctioning working capital of the project.
c) Pursuant to the petitioner’s application, the respondent by letter dated 12.01.2006 intimated the petitioner that the term loan sought by the petitioner to the tune of Rs.93,40,000/- has been sanctioned subject to the condition that the petitioner has to mortgage the lease hold rights of the subject property after obtaining permission from the KIADB. Pursuant to that, the petitioner has mortgaged the property by depositing the title deeds with the respondent. Inspite of sanctioning the loan, the respondent has not released the amount. On enquiry, it has been informed to the petitioner by letter dated 05.09.2009 that in view of the pendency of the case before the Hon’ble High Court of Karnataka, the respondent has cancelled the term loan. Immediately, on 23.03.2010, the petitioner issued a notice to the respondent vide Annexure-F seeking for cancellation of the mortgage of the subject property and return the original documents and also sought for payment of process fee amount of Rs.1,13,219-48 and also to pay the damages caused to the petitioner. As per Annexure-G dated 16.11.2010, the respondent-Corporation has given reply to the petitioner and denied the claim of the petitioner. Hence, the petitioner filed a complaint before the National Consumer Disputes Redressal Commission, New Delhi in Consumer Complaint No.201/2011. The Commission vide order dated 22.2.2012 (Annexure-H) disposed of the said complaint filed by the petitioner and held that the application filed by the petitioner is not maintainable since the petitioner was not a consumer as defined under the Act.
d) The Company Application No.108/2010 which is pending before this Court was disposed of on 04.01.2012 and at Paragraph Nos.7 and 8 of the said judgment, it has been held as under:
“7. On a careful reading of the aforesaid decisions and also the chronology of the events that have occurred in this case, I am of the opinion that the action taken by the first respondent in transferring the assets of the Company is fully protected in view of Section 29 of the SFC Act and therefore, Section 537 of the Companies Act cannot be invoked by the Official Liquidator.
8. In that view of the matter, the petition fails and accordingly, the same is dismissed. However, if there is any claim made by the workmen of the Company before the Official Liquidator, the first respondent shall be liable to satisfy the said claims in accordance with law.”
e) After disposal of the Company Application, the petitioner has given notice to the respondent on 20.12.2012 for cancellation of the mortgage of the subject property and to return the original documents of the property and also requested for return of process fee which is paid by the petitioner and also damages caused to him. Since, no reply has been received from the respondent-Corporation, the petitioner has filed this writ petition seeking for the following relief:
“(a) issue a writ, order or direction in the nature of mandamus directing the respondent to cancel the mortgage of the property bearing No. 10-B, KIADB Industrial Area, Kasaba Hobli, Bangalore Rural District, at the cost of the respondent and return the original documents of title pertaining to said property to the petitioner, (b) issue a writ, order or direction in the nature of mandamus directing the respondent to file appropriate forms with the Registrar of Companies in Karnataka relating to cessation of charge on the property bearing No.10-B, KIADB Industrial Area, Kasaba Hobli, Bangalore Rural District, belonging to the petitioner, (c) issue a writ, order or direction in the nature of mandamus directing the respondent to pay the petitioner the sum of Rs.50,00,000.00 as compensation for the mental agony and anguish that the respondent has caused to the shareholders and directors of the petitioner by failing to provide to it the term loan that the respondent promised and committed, (d) issue a writ, order or direction in the nature of mandamus directing the respondent to pay to the petitioner the sum of Rs.1,50,00,000.00 as compensation for the losses suffered by it on account of the delay in implementation of the project caused by the negligence, carelessness, recklessness and inefficiency on the part of the respondent, (e) issue a writ, order or direction in the nature of mandamus directing the respondent to refund the sum of Rs.1,13,219.48 being the processing fee paid by the petitioner to the respondent, and (f) grant such relief or relief(s) as this Hon’ble Court may deem fit, in the circumstances of the case.”
5. The learned counsel for the petitioner submits that the petitioner had applied with the respondent for grant of term loan and had paid loan processing fee of Rs.1,13,219-48/- to the respondent. The respondent on 12.1.2006 had intimated the petitioner that it had sanctioned the term loan to the tune of Rs.93,40,000/-. Subsequently, the petitioner had mortgaged the property by depositing the title deeds with the respondent. Later, the respondent vide letter dated 05.09.2009 has cancelled the sanction of term loan on the ground that there is a case pending before the High Court of Karnataka in respect of the property in dispute. He further contended that even the company application pending before this Court is held in his favour. After disposal of the company application, he has issued notice dated 20.12.2012 as per Annexure-K requesting for cancellation of mortgage deed, to return the original documents and to pay back the process fee which is collected by the respondent and to pay the damages caused to him. He further contended that cancellation of the loan is contrary to the provisions of law and it is not due to the fault of the petitioner and therefore, he is entitled to damages caused to him.
6. Per contra, the learned counsel for the respondent-Corporation submits that in respect of notice dated 20.12.2012 issued by the petitioner vide Annexure-K is concerned, the respondent-Corporation will consider the same and take appropriate decision for loss and damages is concerned, and this Court cannot consider the same in this writ petition.
7. Heard the learned counsel for the parties and perused the records.
8. It is not in dispute that the petitioner has purchased the lease hold rights of the default company by way of auction for a sum of Rs.9,10,000/- Subsequent to that, KIADB has handed over the possession of the property and has executed lease- cum sale deed in favour of the petitioner in respect of the auction property. The petitioner has applied for term loan with the respondent-Corporation and on his request the respondent has sanctioned the term loan and issued the sanction letter. Pursuant to that the petitioner has mortgaged the property by depositing the title deeds before the respondent. Inspite of that respondent has not released the amount on the ground that the case is pending before the High Court of Karnataka in Company Application No.108/2010 in Company Petition No.38/2003. The said application was disposed of by this Court on 4.1.2012. Immediately after disposal of the company application, he has given notice dated 20.12.2012 to the respondent as per Annexure-K stating that cancellation of the loan is not due to the fault of the petitioner and requested to cancel the mortgage of the subject property and to return the original documents of title and to return the process fee paid by the petitioner. Even as on the date of sanction of the term loan, company application was pending before this Court and respondent was aware of the same. The respondent Corporation without any proper reason unilaterally cancelled the loan. Since it is not due to the fault of the petitioner, he has no other alternative. Hence he sought for cancellation of the mortgage and to return the process fee Rs.1,13,219/- and also for return of the original title deeds of the property. Inspite of the notice dated 12.12.2012, the respondent has not taken any decision on the demand notice issued by the petitioner. Since the loan granted to the petitioner is cancelled the respondent Corporation is required to return the documents which is submitted by the petitioner.
9. At this stage, the learned counsel for the respondent-Corporation on instructions submits that notice dated 20.12.2012 issued by the petitioner as per Annexure-K will be considered in accordance with law and they will pass orders within two weeks. Further, he submits that if the petitioner appears before the respondent on 23.1.2019, the respondent shall return the original documents of the title deeds which is deposited by the petitioner.
10. The submission of the learned counsel for the respondent-Corporation is placed on record. The respondent-Corporation is directed to consider the notice dated 20.12.2018 issued by the petitioner as per Annexure-K in accordance with law and pass an order within two weeks from the date of receipt of the copy of this order.
11. In respect of the damages is concerned, this Court under writ proceeding cannot determine the same. Therefore, it is for the petitioner to work out his remedy before the appropriate legal forum.
12. With the above observation, the writ petition is disposed of.
Sd/- JUDGE SBS/DM