'Classic Case Of Misuse Of Process Of Law': Karnataka HC Pulls Up Father-Son Duo For Filing Frivolous Petitions Against SARFAESI Proceedings

The Karnataka High Court imposed costs of Rs. 25,000 against a father-son duo for filing frivolous petitions challenging SARFAESI proceedings.

In that context, the Bench of Justice M Nagaprasanna observed that, "it becomes a classic case of repeated abuse of the process of law after having defaulted at every time in the undertakings given to this Court and the subject petition calls in question an order that did not take away any right of the petitioners who have dragged on the proceedings for 7 months now."

 In the same vein, it was further held that, "finding no merit in the petition, the petition stands rejected with costs of `25,000/- to be paid to the 2nd respondent/auction purchaser."

Senior Advocate Aditya Sondhi and Counsel Karan Boraiah appeared for the petitioners. Senior Advocate Puttige R Ramesh, along with others, appeared for the respondents. 

The case centred on a loan of Rs. 1,70,00,000/- secured by the second petitioner through a mortgage of the schedule property. The bank initiated SARFAESI Act proceedings due to the petitioners' failure in timely monthly repayments. Despite multiple attempts, the property didn't sell initially. An interim Court order was granted in W.P.No.50465 of 2019, but the case was disposed of based on the petitioners' claimed payments.

After two years, with no payments received, the bank issued a fresh sale notice on 23-08-2021. The property was eventually sold on 14-09-2021, and the 2nd respondent, the auction purchaser, deposited the entire bid amount of Rs. 2,01,25,000/- by 23-11-2021. Further legal actions ensued, including a writ appeal (withdrawn on 21-10-2022), issuance of the sale certificate on 27-10-2022, and subsequent applications for a time extension.

Despite interim orders in the parallel writ petition, payments were contested, leading to dismissals. The petitioners filed an appeal (S.A.No.114 of 2023) before the Tribunal. In the writ petition, interim orders were issued on 17-03-2023, 04-05-2023, 07-06-2023, and 03-10-2023, allowing deposit extensions based on the petitioners' claims. On 03-10-2023, the Court observed that these deposits wouldn't affect the rights of the auction purchaser, the 2nd respondent.

Highlighting the abuse of the process of law by the petitioners, the Court observed that, "In all the jugglery of dates hereinabove, one fact that would unmistakably emerge is abuse of the process of law by the petitioners. On rotation, the son and the father are filing petitions. This is the 4th petition filed by the petitioners. Every time indulgence is shown by this Court directing payment to be made only to see that the property of the petitioners is not lost, but every time the interim orders are violated."

Relying on the judgment passed by the Apex Court in Celir LLP vs Bafna Motors (Mumbai) Private Limited, the High Court stressed that as per the SARFAESI Act, once the sale notice is issued, the right to redeem the mortgaged property by the borrower is lost and the right of enforcement of security interest by the Bank is absolute. 

Subsequently, it was observed that since the matter is at large before the Tribunal, "it is for the petitioners to pursue the remedy before the Tribunal and not approach this Court time and again by misusing and abusing the process of law and repeatedly violating the undertakings given to this Court."

Cause Title: YB Shamanna & Anr. vs The Authorized Officer, The UCO Bank & Anr.

Click here to read/download the Judgment