@JUDGMENTTAG-ORDER
Anand Byrareddy, J.@mdashHeard the learned counsel for the petitioners and the respondents.
2. The petitioners had intended to establish an industry, and therefore, had established an Unit called "Kaveri Free Cost Industry, Malavalli," at Karwar taluk. It was intended to be a brick industry, and therefore, they had applied for a term loan with the respondent-Karnataka State Financial Corporation (hereinafter referred to as ''K.S.F.C.'' for brevity) in the year 2003. A loan was sanctioned for a sum of Rs. 14,30,000/- as a term loan and Rs. 5,50,000/- as an NEF loan. A sum of Rs. 4,60,000/- as a term loan and Rs. 1,90,000/- as the N.E.F. loan were disbursed to the petitioner. There were two persons, who had offered security and stood as guarantors for due repayment of the loan, namely, Om Prakash G. Pujar and Halappa Katagi. Respondent No. 1 had accepted the security furnished by way of land bearing Survey No. 191/1, plot Nos. 11 and 12, each measuring 40 x 60 feet of Pujar and Survey No. 38/5 measuring 1 acre 15 guntas of Naligatti village of Shirahatti taluk belonging to Katagi. In addition to that, the petitioner had mortgaged a property bearing Survey No. 71 measuring 1 acre of Malavalli village of Mundagod taluk, Karwar district. It is thereafter that the loan was released. The Branch Manager of K.S.F.C., Karwar had assured that the remaining amount would be released from time to time. The petitioners had thereafter established their brick industry and did service the loans. However, the petitioners claim to have run into difficulties. In that, the respondent No. 2, according to the petitioners, did not release the working capital in time and since there was drought continuously for three years, the market for the product of the petitioners also suffered. In this manner the loan which was sanctioned was not released in entirety.
3. However, on the other hand, the respondent No. 2 insisted on the repayment of the loan and legal action was contemplated under Section 29 of the State Financial Corporations Act, 1951 (hereinafter referred to as ''the S.F.C. Act'', for brevity). The brick factory was taken over, as also mortgaged property as on 10.01.2008. The plea on the part of the petitioners for more time to repay the amounts was negated. The respondents claimed an outstanding balance of Rs. 5,62,453/- and eight days time was granted to make payment as per letter dated 21.01.2008. However, the petitioners not having repaid the amount, it had increased to Rs. 7,76,997/- by November 2011. In any event the property mortgaged was brought to sale and inspite of several attempts on the part of the respondents to find a willing purchaser, there were no offers. However, it transpires that by letter dated 22.01.2013 the petitioners were informed that the Unit of the petitioners was sold to one Babulal of Malavalli village for Rs. 4,00,000/- and it was adjusted towards the outstanding loan amount. According to the petitioners, the said sale was contrary to the guidelines issued by K.S.F.C. The valuation as per the guidance value fixed by the Sub-Registrar, Mundagod was not taken into account. The guidance value was in excess of Rs. 12,00,000/-, whereas the value fixed was much less. The petitioners are said to have made representations bringing it to the attention of the respondents that the guidance value of the property, which was seized was Rs. 21,000/- per gunta, whereas, the value adopted by the respondent No. 2 was Rs. 7,500/- per gunta and that the property which was sold to Babulal for Rs. 4,00,000/- was worth more than Rs. 13,00,000/-. The bone of contention in this background is as regards the property bearing Survey No. 71 measuring 1 acre of Mulavalli village, Mundagod taluk, which has been sold to respondent No. 3 for a sum of Rs. 4,00,000/-.
4. The learned counsel for the petitioners would contend that the sale was confirmed and sale deed was executed in favour of the respondent No. 3 by K.S.F.C. on 18.01.2013 and according to the learned counsel for the petitioners the manner in which the sale was completed is as follows--
The Authorised Officer has taken possession of the property along with the building on 11.01.2008. The respondent No. 1-Corporation had issued a circular No. 921 fixing guidelines for fixing of the reserve price in respect of the properties on 15.10.2010 and the notice was issued fixing the e-auction on 19.08.2011 and the respondent No. 1 had fixed the sale through e-auction for a sum of Rs. 4,00,000/- on 22.10.2012 and the sale deed was executed on 18.01.2013 for a sum of Rs. 4,00,000/- in respect of the said property. As on the date of sale, the guidance value in respect of the properties in the vicinity of the said property for the year 2011-12 was Rs. 11,600/- per gunta, whereas the value at which the sale deed has been executed in respect of the property at Rs. 4,500/- per gunta. It is this which is the primary ground of challenge. As per the circular issued by the Chairman and Managing Director of K.S.F.C. providing guidelines for K.S.F.C. in bringing properties to sale that in respect of assets brought for sale more than three times and upto five times through e-auction, as in the present case on hand, the guidance value which is curiously shown as "S.R. value" [or Sub-Registrar value (sic)] or the highest offer received earlier, whichever is higher which would indicate that the higher value as between the guidance value and the highest offer received ought to have been the reserve price. Whereas, the reserve price that is adopted is Rs. 4,500/- per gunta as against Rs. 11,600/- per gunta, which is not at all in line with the guidance prescribed by the K.S.F.C. itself. Hence, he would submit that this has resulted in the sale transaction being irregular and to the prejudice of the petitioners and ought to be set aside. Therefore, he would submit that in all fairness, since the petitioners were never in a position to salvage the property by repaying the loan at the appropriate time and notwithstanding that it is after several attempts in bringing the property to sale that it was finally sold to respondent No. 3, he would make an offer to reimburse to respondent No. 3 of the sale price that has been paid for the property along with the interest at 9% per annum from the date of sale till the date of payment as well as the cost incurred by the respondent insofar as the sale transaction is concerned. Therefore, seeking to salvage, the property, as there is likelihood of the properties fetching a far greater return on the same being brought to sale in accordance with law.
5. While the learned counsel for the respondent - K.S.F.C. would seek to justify the sale transaction and would point out that admittedly it was after repeated times at bringing the property to sale that it was finally sold in favour of the respondent No. 3 and the fact that it has been done in accordance with law cannot be faulted. Notwithstanding the guidelines that have been issued as per the petitioners, though it is not clear as to what was the guidance value since the petitioners themselves have produced documents, which would indicate that the guidance value was otherwise than at Rs. 11,600/- per gunta as is evident from Annexure-T and hence he would submit that the purchaser being a bonafide purchaser for value cannot be deprived of the sale transaction, which apparently cannot be set at naught as the third party interest has intervened and even if it could be held that the respondent - K.S.F.C. has acted illegally in effecting the sale transaction for a lesser value than the guidance value, it would not affect the vested right of the respondent No. 3 by virtue of the sale transaction having been completed and hence seeks that the petitions be dismissed.
6. The learned counsel for respondent No. 3 would also canvass that the sale transaction having been completed it would not be possible to cancel such a sale deed by recourse to these petitions. Even if it could be shown that the property has been sold for a lesser value, the respondent would offer to pay the difference of amount to bring the sale transaction in line with the guidance value prescribed at the relevant point of time, and therefore, would plead that it would result in a travesty of justice if the sale transaction which was otherwise valid being set at naught at the instance of the petitioners, who have not been diligent in seeking to protect their property, if that were their intention. Hence the Court coming in aid to the petitioners, who have been indolent is not contemplated and seeks dismissal of the petitions.
7. While by way of a reply the learned counsel for the petitioners would point out that the so called inconsistency in the guidance value sought to be highlighted by the learned counsel for the respondents with reference to Annexure-T is misleading as the petitions were accompanied by the said Annexure, which pertains to the year 2010-11, whereas the sale transaction was of the year 2012 and what would be relevant is the Annexure produced along with the memo as an additional document dated 05.03.2014, which is the appropriate value to be taken into account and would reiterate that there is no injustice caused to the respondents. For the petitioners are ready to bear the burden of interest that the monies paid by the respondent No. 3 would have accrued over time and the endeavour is only to ensure that the petitioners or the guarantors receive the proper value for their properties.
8. In the light of the aforesaid circumstances and having due regard to the rival contentions, it is not much in dispute that the property has been sold for a value of Rs. 4,500/- per gunta, whereas the guidance value at the relevant point of time was Rs. 11,600/- per gunta. It cannot be said that the sale transaction was in accordance with the guidelines and certainly prejudices the petitioners in the property having been sold for a value less than the half the actual guidance value. And in relation to the real market value, the value of the property would have been much higher than even the guidance value. Therefore, there is injustice caused, which would have to be set right. The contention that there has been a completed transaction in the property having been conveyed in favour of the respondent No. 3 and that he has a vested right in the same, which cannot be reversed in writ jurisdiction is not a contention that can be sustained. This Court in the exercise of writ jurisdiction would certainly be empowered to set at naught a transaction which shocks the conscience of the Court and would certainly be characterised as being unconscionable as the sale price is less than half of even the guidance value whereas the real market value would be much higher than the guidance value itself. Therefore, this is one ground on which the sale transaction could be set aside. The further justification of the same is that petitioners are ready and willing to reimburse the respondent No. 3 of the sale price paid along with the interest at 9% per annum from the date of sale till the date of payment. This would ensure that there is no injustice caused to the respondent No. 3 even if he was a bonafide purchaser for value, who was parted with good money and since the amount is reimbursed with the interest, the interest of the respondent No. 3 is protected and the property is again available as security for the K.S.F.C. to recover its outstanding loan amount albeit at the proper price, which should be in the interest of all. Accordingly, the writ petitions are allowed.
9. The sale transaction in favour of the respondent No. 3 is set at naught, subject to the condition that the petitioners shall reimburse the respondent No. 3 of the sale price with the appropriate stamp duty and registration charges and with interest at 9% per annum on the total amount including stamp duty and registration charges from the date of sale till date of payment, which amount shall be paid within a period of four weeks from today, subject to which the petition is allowed in terms as above.
10. As a matter of form, it would be necessary for the sale deed to be formally cancelled by another registered document, as no registered document can be set at naught except by a further registered document and in terms of the order of this Court the sale deed shall be cancelled by a cancellation deed.
11. In view of disposal of petitions, the interim application does not survive for consideration.
