- 1 - HC-KAR NC: 2025:KHC:38452 WP No. 38111 of 2016 C/W WP No. 32969 of 2013 IN THE HIGH COURT OF KARNATAKA AT BENGALURU DATED THIS THE 24TH DAY OF SEPTEMBER, 2025 BEFORE THE HON'BLE MR. JUSTICE R. NATARAJ WRIT PETITION NO. 38111 OF 2016 (GM-KSFC) C/W WRIT PETITION NO. 32969 OF 2013 (GM-KSFC) IN WP No. 38111/2016: BETWEEN: SRI. MANJUNATHA B.P., S/O. LATE BHATTA PARAMESHWARAYA, AGED ABOUT 70 YEARS, RESIDING AT "SRI DEVI", NH-66, VARAMBALLY VILLAGE, BRAHMAVARA POST, UDUPI TALUK AND DISTRICT-576213. …PETITIONER (BY SRI. NITIN R., ADVOCATE) AND: 1. KARNATAKA STATE FINANCIAL CORPORATION REPRESENTED BY ITS GENERAL MANAGER HAVING OFFICE AT 3RD FLOOR, ANANTA TOWERS, COURT ROAD, UDUPI-576 101. 2. KARNATAKA STATE FINANCIAL CORPORATION KSFC BHAVAN, #1/1, THIMMAIAH ROAD, BENGALURU-560 052 REPRESENTED BY ITS GENERAL MANAGER. 3. MR. NAGARAJA RAO C.H., S/O MR. C.H. RAO, AGED ABOUT 48 YEARS, Digitally signed by SUMA Location: HIGH COURT OF KARNATAKA - 2 - HC-KAR NC: 2025:KHC:38452 WP No. 38111 of 2016 C/W WP No. 32969 of 2013 RESIDING AT NO.1247, 2ND CROSS, KRISHNAMURTHIPURAM MYSORE-570 004. …RESPONDENTS (BY SRI. BIPIN HEGDE, ADVOCATE FOR R1 & R2; SRI. S.K. ACHARYA, ADVOCATE FOR R3) THIS WRIT PETITION IS FILED UNDER ARTICLES 226 AND 227 OF THE CONSTITUTION OF INDIA PRAYING TO QUASH AND SET ASIDE THE AUCTION SALE DATED 26.8.2009 THAT WAS CONFIRMED BY THE R-1 IN FAVOUR OF THE R-3 BY LETTER DATED 16.10.2009 BEARING NO.KSFC/U/BO/1101/2009-10 VIDE ANNEXURE-J AND ETC. IN WP NO. 32969/2013: BETWEEN: NAGARAJA RAO C.H., AGED ABOUT 46 YEARS, CHARTERED ACCOUNTANT, S/O. SRI. C.H. RAO, NO.1247, 2ND CROSS, KRISHNAMURTHY PURAM, MYSORE-570 004. ...PETITIONER (BY SRI. S.K. ACHARYA, ADVOCATE) AND: 1. KARNATAKA STATE FINANCIAL CORPORATION 3RD FLOOR, ANANTA TOWERS, COURT ROAD, UDUPI-576 101 REPRESENTED BY ITS DEPUTY GENERAL MANAGER. 2. ASSISTANT GENERAL MANAGER KARNATAKA STATE FINANCIAL CORPORATION, 3RD FLOOR, ANANTA TOWERS, COURT ROAD, UDUPI-576 101. 3. KARNATAKA STATE FINANCIAL AR DEPARTMENT, - 3 - HC-KAR NC: 2025:KHC:38452 WP No. 38111 of 2016 C/W WP No. 32969 of 2013 NO.1/1, THIMMAIAH ROAD, BENGALURU-560 052 RECOVERY-II, REPRESENTED BY ITS DEPUTY GENERAL MANAGER (R-II). 4. THE DEPUTY COMMISSIONER UDUPI DISTRICT, UDUPI-576 101. 5. THE SUPERINTENDENT OF POLICE UDUPI DISTRICT, UDUPI-576 101. 6. SMT. VIJAYALAKSHMI M. BHAT, W/O MANJUNATHA B.P., AGED ABOUT 61 YEARS R/AT "SRI DEVI", NEAR BRAHMAVARA BUS STAND VARAMBALLI VILLAGE, UDUPI TALUK AND DISTRICT. (R-6 AMENDED CAUSE TITLE VIDE COURT ORDER DATED 04.09.2014) ...RESPONDENTS (BY SRI. BIPIN HEGDE, ADVOCATE FOR R1 TO R3; SRI. SRINIVASA KUMAR M., HCGP FOR R4 & R5; SRI. K.PRASAD HEGDE, ADVOCATE FOR R6) THIS WRIT PETITION IS FILED UNDER ARTICLES 226 AND 227 OF THE CONSTITUTION OF INDIA PRAYING TO DIRECT THE R1 TO R3 TO EXECUTE A REGISTERED SALE DEED IN RESPECT OF THE SCHEDULE PROPERTY IN FAVOUR OF THE PETITIONER IN PURSUANCE TO THE PUBLIC AUCTION PROCEEDINGS DATED 20.8.2009 AND ETC. THESE WRIT PETITIONS, COMING ON FOR ORDERS, THIS DAY, ORDER WAS MADE THEREIN AS UNDER: CORAM: HON'BLE MR. JUSTICE R. NATARAJ - 4 - HC-KAR NC: 2025:KHC:38452 WP No. 38111 of 2016 C/W WP No. 32969 of 2013 ORAL ORDER In WP No.38111/2016, the petitioner has challenged the auction sale dated 26.08.2009, by which the sale was confirmed by respondent No.1 in favour of the respondent No.3, by a letter dated 16.10.2009 bearing No.KSFC/U/BO/1101/2009-10. 2. In WP No.32969/2013, the petitioner being the auction purchaser has sought for a direction to the respondent Nos.1 to 3 to execute a registered sale deed in respect of the property auctioned on 26.08.2009. He has also sought for a writ in the nature of mandamus to direct the respondent Nos.1 to 3 to remove the unlawful/unauthorised occupation of the scheduled property by the borrowers and to evict them through the due process of law and to direct the respondent Nos.1 to 3 to place him in lawful possession and enjoyment of the property. He has also sought for a direction to the respondent Nos.1 to 3 to compensate him for the loss of time in not taking effective measures to execute the sale deed. 3. The petitioner in WP No.38111/2016 claims to be the owner of an immovable property bearing Nos.72 and 73 in - 5 - HC-KAR NC: 2025:KHC:38452 WP No. 38111 of 2016 C/W WP No. 32969 of 2013 survey No.198/1A, measuring 5 cents each in Varamballi Village, Udupi Taluk. The petitioner had developed the said properties in 4.35 cent and had leased remaining 5.65 cent it out to his wife Smt.B.Vijayalakshmi.M.Bhat for a period of 30 years, in terms of a lease deed which was duly registered. As per the said lease deed, Smt.B.Vijayalakshmi.M.Bhat was permitted to construct a building over the property for the purpose of running a business therein. The lease was for a period of 30 years, after which the leased property along with the building had to revert to the petitioner. 4. (i) The petitioner contended that Smt.B.Vijayalakshmi.M.Bhat constructed a building over the property to run Sri.Durga Printers in the ground floor. Thereafter, she constructed four floors over it. The said Smt.B.Vijayalakshmi.M.Bhat raised term loan, additional term loan, bridge loan and additional bridge loan from the respondent No.1 amounting to a sum of Rs.30,62,000/-. She also executed hypothecation deeds dated 15.11.1991, 17.10.1995 and 17.03.1997, hypothecating the plant and machinery as security for the loan and also executed a - 6 - HC-KAR NC: 2025:KHC:38452 WP No. 38111 of 2016 C/W WP No. 32969 of 2013 mortgage deed dated 06.02.1995, mortgaging her leasehold rights over 5.65 cents of land that was leased to her. (ii) The petitioner executed deeds of guarantee dated 15.11.1991, 06.02.1995, 17.10.1995, 17.03.1997 and 24.03.1998 and stood guarantee for the repayment of the loan so raised. In addition to the loan raised by Smt.B.Vijayalakshmi.M.Bhat, she had raised further term loan and additional term loan and executed hypothecation deeds dated 18.03.1995 and 28.03.1996 and the petitioner executed corresponding deeds of guarantee on 18.03.1995 and 28.03.1996 guaranteeing the repayment of the further term loan and additional term loan raised. (iii) The petitioner contended that due to default in repayment of the loan by Smt.B.Vijayalakshmi.M.Bhat, the respondent No.1 seized and took over Sri.Durga Printers. Likewise, in the year 2002, the respondent No.1 locked up the convention hall that was being run in the upper floors of the building under Section 29 of the State Financial Corporations Act, 1951 (henceforth referred to as 'SFC Act' for short). The respondent No.1 held proceedings on 10.07.2002 and took - 7 - HC-KAR NC: 2025:KHC:38452 WP No. 38111 of 2016 C/W WP No. 32969 of 2013 possession of the assets of the firm. It also stated that it would take over possession of 10 cents of the land along with the building constructed thereon for recovery of dues of Rs.98,01,320/-. (iv) The respondent No.1 then filed two cases against the petitioner and Smt.B.Vijayalakshmi.M.Bhat for recovery of the loan amounts. One was Miscellaneous Case No.45/2003 under Sections 31 and 32 of the State Financial Corporations Act, 1951 and the other was Miscellaneous Case No. 24/2004 under Sections 31 and 32 of the SFC Act against the petitioner and Smt.B.Vijayalakshmi.M.Bhat to recover loans that was sanctioned for the expansion of Sri.Durga Printers. (v) During the pendency of the aforementioned proceedings, the respondent No.1 published a tender for putting up the property for auction followed by a newspaper publication proposing to auction the properties on 16.03.2009. A bid was received for a sum of Rs.48,00,000/-. However, the said auction was dropped as there were discrepancies in the schedule of the property mentioned in the tender notice and the actual boundaries of the property. The respondent No.1 - 8 - HC-KAR NC: 2025:KHC:38452 WP No. 38111 of 2016 C/W WP No. 32969 of 2013 thereafter held a meeting of the officials whereat the valuation of the property was determined at Rs.58,10,000/-. Thereafter, on 16.08.2009, the respondent No.1 published another notice putting up the petitioner's property for sale, which included 10 cents of land as well as the plant machinery and building. The respondent No.3 submitted his bid for a sum of Rs.28,50,000/-, which was the highest bid. The respondent No.1 accepted the bid and the property was sold for a sum of Rs.28,50,000/-. The petitioner was asked to sign the bid sheet after completion of the auction and he did so under protest. The letter issued by respondent No.1 shows that the auctioned property included the six shops on the ground floor in the front portion of the building and the machineries of both the units. (vi) The petitioner contended that he got the property value by a licensed surveyor and valuator, who valued the property at a sum of Rs.1,52,50,000/-. He also contended that respondent No.1 took possession of all the movables and machineries of Sri.Durga printing press and sold them on 25.03.2010 and recovered a paltry sum of Rs.1,30,000/-. He contended that a portion of the property leased to Smt.B.Vijayalakshmi.M.Bhat was acquired for the purpose of - 9 - HC-KAR NC: 2025:KHC:38452 WP No. 38111 of 2016 C/W WP No. 32969 of 2013 widening the highway in the year 2007. In October 2013, the petitioner received a notice from the Court of the Principal Senior Civil Judge, Udupi, stating that he was entitled to receive a sum of Rs.60,87,727/- in respect of 994 square meters of land. He claims that the said case is still pending in L.A.C. No.87/2013. 5. (i) The petitioner being aggrieved by the auction of the property belonging to him, filed an interlocutory application in Miscellaneous case Nos.45/2003 and 24/2024 challenging the auction sale held by respondent No.1 in favour of respondent No.3. The said applications were rejected on the ground that the auction purchaser was not a party in the said petitions. Thereafter, the petitioner filed appeals in MFA Nos.3893/2010 and 3894/2010 which came to be disposed off vide common order dated 30.08.2012 directing the petitioner to cure the defects in the applications filed by him. (ii) On 03.10.2012 the petitioner filed an application to implead the auction purchaser in the recovery proceeding initiated by respondent No.1. He also filed applications challenging the auction sale. However, the application for - 10 - HC-KAR NC: 2025:KHC:38452 WP No. 38111 of 2016 C/W WP No. 32969 of 2013 impleading respondent No.3 was dismissed on 28.04.2016, on the ground that the auction sale cannot be challenged in a proceeding initiated by the respondent No.1 under Section 31 of the SFC Act and that the remedy available to the petitioner was to file a writ petition before this Court. Accordingly, the petitioner has filed this writ petition challenging the auction sale in favour of respondent No.3. 6. (i) The learned counsel for the petitioner submitted that respondent No.1 could not have proceeded against the property of the guarantor, which was mortgaged under Section 29 of the SFC Act. In this regard, he referred to Section 29 of the SFC Act and submitted that the respondent No.1 can seize and sell the plant and machinery and property of an industrial establishment. He contended that there is no provision under Section 29 of the SFC Act, for the respondent No.1 to take steps against the guarantor. He referred to Section 31(1)(a) of the SFC Act and submitted that the respondent No.1 is entitled to proceed not only against the borrower but also against the guarantor. He contended that in the case of Karnataka State Financial Corporation v. N.Narasimhaiah - (2008) 5 SCC 176 the Hon'ble Supreme Court held that the respondent Nos.1 - 11 - HC-KAR NC: 2025:KHC:38452 WP No. 38111 of 2016 C/W WP No. 32969 of 2013 and 2 have no authority in law to proceed against a guarantor under Section 29 of the SFC Act. (ii) He further contended that Smt.B.Vijayalakshmi.M.Bhat had only mortgaged the leasehold rights over an extent of 5.65 cents of land and the mortgage deed specifically provided that in case of default of payment of loan, the respondent No.1 may take over possession of the property and receive the rents, income etc. Therefore, he contended that respondent No.1 had no authority in law to sell the property at an auction. (iii) He also contended that what was mortgaged to the respondent No.1 was not freehold but leasehold rights. He contended that respondent No.1 could have encumbered the leasehold rights but not sell the property in favour of respondent No.3. He also referred to the guidelines framed by the Hon'ble Supreme Court in the case of Mahesh Chandra v. UP State Financial corporation - AIR 1993 SC 935. He therefore submits that the impugned proceedings under Section 29 of the SFC Act against the petitioner was not only illegal but also an attempt to usurp his property. Thus, he contended that - 12 - HC-KAR NC: 2025:KHC:38452 WP No. 38111 of 2016 C/W WP No. 32969 of 2013 the impugned auction sale in favour of respondent No.3 is liable to be set at nought. 7. He further contended that a Division Bench of this Court in M.Narayana and Others vs. The Karnataka State Financial Corporation and Others - 2021: KHC : 428-DB, WA No.620/2009, had considered a case where a guarantee was offered by the husband in favour of the wife and held that even in that circumstance too, the KSFC cannot proceed against the guarantor under Section 29 of the SFC Act. He therefore contended that the impugned proceedings is liable to be set at nought. 8. (i) The petition is opposed by respondent No.3, who has filed a statement of objections inter alia contending that the writ petition is filed in the year 2016 after nearly 7 years from the date of confirmation of the sale. He therefore contended that the writ petition lacks merit and is not maintainable either in law or on the merits of the case. He has also alleged that the petitioner has misled this Court and has suppressed material facts. - 13 - HC-KAR NC: 2025:KHC:38452 WP No. 38111 of 2016 C/W WP No. 32969 of 2013 (ii) He contended that the petitioner has not disputed the loan transaction between Smt.B.Vijayalakshmi.M.Bhat and respondent No.1. He contended that the said Smt.B.Vijayalakshmi.M.Bhat is none other than the wife of the petitioner, who had executed a hypothecation deed as well as mortgage deed towards security for the repayment of the loan. He contended that the petitioner has not disputed that he stood guarantee for the loan transaction and also executed a deed of guarantee for the repayment of the loan. He also admitted that there was a default in repayment of the loan by Smt.B.Vijayalakshmi.M.Bhat, resulting in respondent No.1 taking action under Section 29 of the SFC Act and seized the assets and properties of Sri.Durga Printers. He contended that respondent No.1 took possession of 10 cents of land for the recovery of the loan amount. (iii) He also contended that the auction sale proceedings was initiated by the respondent No.1 by a sale notice dated 06.03.2009. Later, again respondent No.1 issued another auction notice to bring the property for sale and he participated in the bid and submitted the highest bid of Rs.28,50,000/-, which was accepted by respondent No.1. He claimed that the - 14 - HC-KAR NC: 2025:KHC:38452 WP No. 38111 of 2016 C/W WP No. 32969 of 2013 petitioner was also one of the participants in the said auction and therefore he must not have protested against the acceptance of the bid. He claims that though the petitioner knew about the auction sale, he has not explained the reason for the delay in challenging the auction held in the year 2016. Therefore, he contended that petitioner cannot take advantage of his own mistake and hence cannot challenge the auction proceedings and cannot compel the respondent No.1 not to execute a sale deed in his favour. It claimed that the petitioner has not shown any bona fides to settle the huge loan payable to the respondent No.1 and therefore no sympathy or lenience can be shown to them. 9. (i) He also disputed the valuation submitted by the petitioner on the ground that the same is not supported by any documents. He admitted that a portion of the property was acquired and the payment of compensation is in consideration in LAC No.87/2013. He however denied that the petitioner and his wife are still in possession of the auctioned property. He contended that all actions taken by respondent No.1 under Sections 31 and 32 of the SFC Act, 1951, have attained finality. - 15 - HC-KAR NC: 2025:KHC:38452 WP No. 38111 of 2016 C/W WP No. 32969 of 2013 (ii) He contended that he paid a sum of Rs.28,50,000/- by raising loan from other banks and has been paying interest and therefore the impugned auction cannot be set at nought at the instance of a defaulting petitioner. He also contended that the petitioner has abused the judicial process is referred to the judgment of the Hon'ble Apex Court in the case of Priyanka Srivastava and Another v. State of Uttar Pradesh and Others - (2015) 6 SCC 287, where the Hon'ble Supreme Court expressed concern over the manner in which unscrupulous litigants abuse the process to harass and pressurize financial institutions through dubious methods. Therefore, he contended that this Court should refrain from exercising jurisdiction under Article 226 of the Constitution of India. 10. (i) The learned counsel for the respondent No.3 while reiterating the submissions made in the statement of objections, submitted that the petitioner had executed a deed of guarantee on 18.03.1995, which contained several clauses authorising the respondent No.1 to proceed against the property owned by him to recover the dues of Sri.Durga Printers. He referred to clauses 1, 2, 5, 6, 11, 12, 13, 19 and - 16 - HC-KAR NC: 2025:KHC:38452 WP No. 38111 of 2016 C/W WP No. 32969 of 2013 24 and submitted that by these covenants the petitioner had authorized the respondent No.1 to proceed against the property which included exercise of power under Section 29 of the SFC Act, 1951. (ii) He therefore contended that the petitioner is now estopped in law from contending that the respondent No.1 was not authorized in law to exercise power against petitioner under Section 29 of the SFC Act, 1951. He also contended that the petitioner has approached this Court after nearly 7 years from the date of the auction and therefore, the petition is liable to be rejected. In support of this claim, he has referred to the judgment of this Court in M/s Ratna Industries vs. Karnataka State Financial Corporation and Others passed in WP No.13956/2012(GM-KSFC). He tried to distinguish the judgment of the Apex Court in the case of Karnataka State Financial Corporation vs. N. Narasimhaiah - (2008) 5 SCC 176 by contending that in that case the guarantor's property was put to auction, though there was no demand for clearance of the loan amount. He contended that it was in that circumstance that the Hon'ble Apex Court held that a Financial Corporation cannot proceed under Section 29 of the SFC Act - 17 - HC-KAR NC: 2025:KHC:38452 WP No. 38111 of 2016 C/W WP No. 32969 of 2013 against a guarantor. He contended that the judgment of the Hon'ble Apex Court is therefore distinguishable on facts. (iii) He also contended that the petitioner and his wife have defaulted to respondent No.1 and have not taken any steps whatsoever from the day the property was brought to sale till date and therefore no sympathy or leniency should be shown to the petitioner by setting at nought the auction held. He contended that the respondent No.3 has raised huge sums of money for the purpose of submitting his bid to purchase the property in question at the public auction held on 16.08.2009. (iv) He contended that if the auction is set aside at this point in time, the respondent no.3 would suffer irreparable loss and injury and therefore submits that in case if this Court would come to the conclusion that the auction has to be set at nought, then suitable orders will be passed directing the respondent No.1 to compensate the petitioner. 11. In support of his writ petition filed in WP No.32969/2013, he contended that though the auction sale was confirmed in favour of respondent No.3 way back in the year 2009, the respondents have not taken any steps for conclusion - 18 - HC-KAR NC: 2025:KHC:38452 WP No. 38111 of 2016 C/W WP No. 32969 of 2013 of the transaction by executing the deed of absolute sale and placing him in possession of the property. He contended that the Financial Corporation is therefore liable to be directed to execute a deed of sale and also evict the persons in possession of the secured asset and hand over possession to the auction purchaser/petitioner. 12. The learned counsel for the petitioner replied to the above and submitted that the petitioner was bona fide in prosecuting the proceedings before the District Court where the respondent No.1 had initiated proceedings under Sections 31 and 32 of the SFC Act, 1951, by trying to implead the auction purchaser and questioning the auction sale. He contended that the said applications were finally determined in the year 2016, whereby the petitioner was advised to file a writ petition before this Court challenging the auction sale. He therefore contended that the petitioner filed the petition in the year 2016. He further submits that as the petitioner was pursuing the proceedings before a wrong forum, the petitioner cannot be thrown out on the ground of delay and laches. - 19 - HC-KAR NC: 2025:KHC:38452 WP No. 38111 of 2016 C/W WP No. 32969 of 2013 13. I have considered the submission of the learned counsel for the petitioner and the learned counsel for the respondent No.3. I have also perused the relief sought for in both the writ petitions as well as the voluminous papers placed on record. 14. The fact that the petitioner was a guarantor for the loan raised by his wife is not in dispute. It is also not in dispute that a mortgage deed was executed by the borrower mortgaging the leasehold rights that she had in the property in question and the petitioner was party to the said mortgage deed. The deed of partnership of Sri.Durga Printers, which is placed on record by the learned counsel for the respondent No.1 (KSFC) shows that the petitioner in WP No.38111/2016 was not a partner of the said firm. The learned counsel for the respondent No.1 did not dispute that the petitioner in WP No.38111/2016 was a guarantor for the loan raised by Smt.B.Vijayalakshmi.M.Bhat for establishing a business under the name and style Sri.Durga Printers. In the light of the above, if we consider the proceedings initiated to bring the property for sale, it is more than evident that what was sought to be sold was the property of a guarantor and not the lease - 20 - HC-KAR NC: 2025:KHC:38452 WP No. 38111 of 2016 C/W WP No. 32969 of 2013 hold rights that the borrower had in the property. In order to decipher the authority of respondent No.1 to proceed under Section 29 of the SFC Act against a guarantor or his property, it is appropriate to refer to Section 29 of the SFC Act, 1951, which reads as follows: "29. Rights of Financial Corporation in case of default.-(1) Where any industrial concern, which is under a liability to the Financial Corporation under an agreement, makes any default in repayment of any loan or advance or any instalment thereof [or in meeting its obligations in relation to any guarantee given by the Corporation or otherwise fails to comply with the terms of its agreement with the Financial Corporation, the Financial Corporation shall have the [right to take over the management or possession or both of the industrial concerns], as well as the [right to transfer by way of lease or sale] and realise the property pledged, mortgaged, hypothecated or assigned to the Financial Corporation. (2) Any transfer of property made by the Financial Corporation, in exercise of its powers 2[***] under sub- section (1), shall vest in the transferee all rights in or to the property transferred [as if the transfer] had been made by the owner of the property. (3) The Financial Corporation shall have the same rights and powers with respect to goods manufactured or produced wholly or partly from goods forming part of the - 21 - HC-KAR NC: 2025:KHC:38452 WP No. 38111 of 2016 C/W WP No. 32969 of 2013 security held by it as it had with respect to the original goods. (4) Where any action has been taken against an industrial concern under the provisions of sub-section (1), all costs, charges and expenses which in the opinion of the Financial Corporation have been properly incurred] by it "[as incidental thereto shall be recoverable from the industrial concern and the money which is received by it *[***] shall, in the absence of any contract to the contrary, be held by it in trust to be applied firstly, in payment of such costs, charges and expenses and, secondly, in discharge of the debt due to the Financial Corporation, and the residue of the money so received shall be paid to the person entitled thereto. (5) Where the Financial Corporation has taken any action against an industrial concern] under the provisions of sub-section (1), the Financial Corporation shall be deemed to be the owner of such concern, for the purposes of suits by or against the concern, and shall sue and be sued in the name of[the concern." 15. The question whether the respondent No.1 can proceed against the guarantor, in exercise of the powers under Section 29 of the SFC Act is no longer res intergra in view of the judgment of the Hon'ble Apex Court in the case of Karnataka State Financial Corporation v. N.Narasimhaiah - (2008) 5 SCC 176. This position of law was later reiterated - 22 - HC-KAR NC: 2025:KHC:38452 WP No. 38111 of 2016 C/W WP No. 32969 of 2013 in the case of Ormi Textiles and Another v. State of Uttar Pradesh and others- (2008) 5 SCC 194. A Division Bench of this Court in W.A.No.620/2009 also followed the aforesaid judgments and held that under the Indian Partnership Act, 1932, a partnership firm is not a separate legal entity distinct from its partners. A partner's property becomes partnership property only when contributed to the common stock. Although partners are jointly and severally liable for the firm's acts under Section 25 of the Indian Partnership Act, 1932, they are not considered ''industrial concerns" under Section 29 of the SFC Act, 1951. Therefore, the property of the partner in respect of which an equitable mortgage was created by deposit of title deeds in favour of partnership for security of the loan sanctioned to the partnership firm cannot be sold in exercise of the powers under Section 29 of the SFC Act, 1951. The Division Bench of this Court while referring to the judgment of the Hon’ble Apex Court in Satya Pal Anand v. State of Madhya Pradesh - (2016) 10 SCC 767 held that the Court exercising power under Article 226 of the Constitution of India can also set at nought a sale deed, which is executed in contravention of the law. Therefore, it needs no reiteration that - 23 - HC-KAR NC: 2025:KHC:38452 WP No. 38111 of 2016 C/W WP No. 32969 of 2013 the respondent No.1 is devoid of any authority to proceed against the guarantor under Section 29 of the SFC Act, 1951. Now that the respondent No.1 has taken out proceedings against the petitioner as well as the borrowers under Section 31 of the Act, 1951, the interest of respondent No.1 is sufficiently taken care of. 16. Be that as it may, since the property of the petitioner is brought for sale by respondent No.1 in proceedings under Section 29 of the SFC Act, 1951. The same cannot stand. Consequently, the writ petition filed by the guarantor/petitioner in WP No.38111/2116 deserves to be allowed. In view of the above no relief can be granted in WP No.32969/2013 and accordingly deserves to be dismissed. 17. Accordingly, the following orders passed: ORDER i. WP No.38111/2016 is allowed. ii. The impugned auction sale of the petitioner's property bearing No.KSFC/U/BO/1101/2009-10 dated 26.08.2009 is set aside. - 24 - HC-KAR NC: 2025:KHC:38452 WP No. 38111 of 2016 C/W WP No. 32969 of 2013 iii. Consequently, WP No.32969/2013 filed by the petitioner seeking for a direction to the Financial Corporation to execute a sale deed and place him in possession fails and is accordingly dismissed. iv. The respondent No.1 - Karnataka State Financial Corporation, Udupi is directed to refund the money received from respondent No.3 in WP No.38111/2016 (Mr.Nagraj Rao C.H.) along with interest at the rate of 10% per annum from the date of deposit till the date of refund. This shall be complied within a period of three months from the date of receipt of a certified copy of this order. v. It is open for respondent No.3 in WP No.38111/2016 (Mr.Nagraj Rao C.H.) to file appropriate proceedings against the respondent No.1 - KSFC, Udupi for damages for the loss of opportunity, loss of time, money and energy, as well as the unwanted criminal prosecution launched against him by the petitioner, in WP - 25 - HC-KAR NC: 2025:KHC:38452 WP No. 38111 of 2016 C/W WP No. 32969 of 2013 No.38111/2016 which was quashed by this Court in Criminal Petition No.3922-8922/2017. vi. It is needless to mention that this order or any observations made herein shall not come in the way of the KSFC proceeding against the petitioner in WP No.38111/2016 under Sections 31 and 32 of the SFC Act, 1951. vii. Despite the authoritative pronouncement of the Hon’ble Supreme Court, in the case of KSFC v. N.Narasimhaiah, the KSFC continues to proceed against the properties of the guarantors under Section 29 of the SFC Act. This has to stop. It is made clear that in case this Court comes across any such acts, the managing director of the KSFC shall be personally held responsible for all the costs and consequences. Sd/- (R. NATARAJ) JUDGE BKN/List No.: 1 Sl No.: 7