Only Charge Is Created By Attachment Order; It Does Not Transfer A Property: Karnataka HC
The Karnataka High Court observed by an attachment order, a charge is created over a property but that does not transfer a property.
It only creates a right of payment out of the specified property, the court said.
The Court also held that such an order cannot be sustained when a notice under Rule 38(2) of the Karnataka Co-operative Societies Rules, 1960 (‘Rules’) was not sent to the predecessors-in-title and owners.
The Bench of Justice R Devdas held, “...by an order of attachment, a charge is created over a property but that does not either transfer a property or any interest in the property is transferred, but it only creates a right of payment out of the specified property. Admittedly, the fourth respondent-Jawahar Society had not mortgaged the property in question to the third respondent-BDCC Bank. It would have been a different issue if the previous owners had consented for mortgage of the properties at the hands of Jawahar Society. But that is not so in the present case."
Senior Advocate Jayakumar S Patil appeared for the Petitioner whereas HCGP Seshu V appeared for the Respondents.
A writ petition was filed under Articles 226 and 227 of the Constitution seeking to quash an attachment order and award passed by the Joint Registrar of the Co-Operative Societies, Bangalore Region (‘JRCS’), who was Respondent No. 2. The writ also challenged the orders passed by the KAT.
The brief facts of the case were that properties were purchased by the Petitioner. The Jawahar House Building Co-operative Society Limited (‘Jawahar Society’) had borrowed a loan from Bangalore District And Bangalore Rural District Co Operative Central Bank (‘BDCC Bank’). The BDCC Bank commenced recovery proceedings against Jawahar Society by issuing a notice. A dispute under Section 70 of the Karnataka Co-operative Societies Act, 1959 (‘Act’) was raised before the JRCS.
During the pendency of the dispute, an application was filed by BDCC Bank before the JRCS seeking attachment of the lands in question along with several other lands for which agreements of sale were entered into by Jawahar Society. An order of attachment was passed by the JRCS in 1994. Thereafter, an award was also passed in 1997.
However, it was contended that BDCC Bank did not take any further action for recovery, for more than ten years. The petitioner purchased the lands in question in 2007 and 2008, not being aware of the orders of attachment. When the petitioner came to know of the orders of attachment, the petitioner filed an appeal before the KAT.
The Petitioner submitted that he was not a borrower nor a guarantor or in any way connected with the Jawahar Society.
The Court also considered whether the KAT was right in dismissing the appeals filed by the petitioner on the grounds of delay and laches.
The Court said that Order XXI Rule 58 of the Code of Civil Procedure, 1908, mandates that if objection is raised to the attachment of any property attached in execution of a decree on the ground that such property is not liable to be attached, the Court shall proceed to adjudicate upon the claim or objection in accordance with the provisions contained therein.
The Court placed its reliance on Suraj Lamps, Mayadevi v. Lalta Prasad (2015 SC) which observed that a duty is cast on the Executing Court to comprehensively consider all questions raised by the objector on merits in Execution proceedings, particularly when the title of judgment debtor to attach property is being questioned and objector is claiming the same.
The Court observed, “The proviso to sub-rule (1) of Rule 58 of CPC, exempts the Executing Court from entertaining such objection only if the claim is preferred or objection is made after the property attached has already been sold or where the Court considers that the claim or objection was designedly or unnecessarily delayed. Having regard to such express provisions, this Court is of the considered opinion that the KAT could not have dismissed the appeals filed by the petitioner on the ground of delay and laches.”
The Court also observed that when the predecessors-in-title had no notice of the application for attachment and since the said owners were not heard before the orders of attachment were passed nor did the sale officer serve or caused to be served a copy of the demand notice in terms of sub-rule (2) of Rule 38 of the Rules, the order of attachment cannot be sustained.
Accordingly, the Court partly allowed the writ and quashed the impugned order of attachment.
Cause Title: BR Pradeep Kumar v. State of Karnataka and Ors.
Appearances:
Petitioner: Senior Advocate Jayakumar S Patil and Advocate Chandrakanth R Patel
Respondents: HCGP Seshu V, Advocates Somashekhar and R Vijayakumar
