- 1 - HC-KAR NC: 2025:KHC:32582-DB WP No. 9000 of 2020 IN THE HIGH COURT OF KARNATAKA AT BENGALURU DATED THIS THE 20TH DAY OF AUGUST, 2025 PRESENT THE HON'BLE MR. JUSTICE D K SINGH AND THE HON'BLE MR. JUSTICE VENKATESH NAIK T WRIT PETITION NO.9000 OF 2020 (GM-KLA) BETWEEN: 1. SHRI K.C. ONKARAPPA SON OF LATE K. CHANNAPPA AGED ABOUT 49 YEARS SALES OFFICER AND DGM DAVANAGERE DISTRICT CENTRAL CO-OPERATIVE BANK LTD. NO.311, D, DAVARAJ URS LAYOUT 'A' BLOCK, P.B.ROAD DAVANAGERE-577 006. 2. SRI M. DAKSHINAMURTHY AGED ABOUT 59 YEARS SON OF LATE C.M. SIDDALIGIAH THE RECOVERY OFFICER UNDER RULE 441 AND ASSISTANT REGISTRAR DAVANAGERE DISTRICT CENTRAL CO-OPERATIVE BANK LTD. NO.311, D, DAVARAJ URS LAYOUT 'A' BLOCK , P.B.ROAD DAVANAGERE-577 006. …PETITIONERS (BY SRI GAUTAM S. BHARADWAJ, ADVOCATE) AND: 1. STATE OF KARNATAKA REPRESENTED BY THE SECRETARY DEPARTMENT OF CO-OPERATION VIDHANA SOUDHA BENGALURU-560 001. Digitally signed by MOUNESHWARAPPA NAGARATHNA Location: High Court of Karnataka - 2 - HC-KAR NC: 2025:KHC:32582-DB WP No. 9000 of 2020 2. THE UPA LOKAYUKTA M.S.BUILDING DR. B.R. AMBEDKAR VEEDHI BENGALURU-560 001. 3. THE REGISTRAR KARNATAKA LOKAYUKTA M.S.BUILDING DR. B.R. AMBEDKAR VEEDHI BENGALURU-560 001. 4. THE STATION HOUSE OFFICER DAVANAGERE EXTENSION POLICE STATION DAVANAGERE-577 004. 5. THE CHIEF EXECUTIVE OFFICER DAVANAGERE DISTRICT CENTRAL CO-OPERATIVE BANK LTD. DAVANAGERE-577 006. 6. SHRI M.G. PARAMESHWARGOUDA SON OF SIDDANAGOUDA AGE MAJOR RESIDING AT HOLE SIRIGERE TALUK HARIHAR DISTRICT: DAVANAGERE-581 123. 7. SHRI K. NARASAPPA SON OF HANAMANTAPPA AGED ABOUT 62 YEARS RESIDING AT YALAVATTI VILLAGE HARIHARA TALUK DISTRICT: DAVANAGERE-577 530. 8. 9. THE DEPUTY REGISTRAR CO-OPERATIVE SOCIETIES DAVANAGERE DISTRICT ZILLA ADALITHA BHAVANA DAVANAGERE-577 001. T.R. DWARAKANATH S/O. LATE RAMCHANDRAPPA AGED ABOUT 72 YEARS RESIDING AT 738/1 10TH MAIN ROAD, PJ EXTENTION - 3 - HC-KAR NC: 2025:KHC:32582-DB WP No. 9000 of 2020 DAVANAGERE-577 002. …RESPONDENTS (BY SMT. PRATHIBHA R.K., AGA FOR R-1, R-4 AND R-8; SRI VENKATESH S. ARABATTI, ADVOCATE FOR R-2 AND R-3; SRI YOGESH V. KOTEMATH, ADVOCATE FOR SRI P.H. VIRUPAKSHAIAH, ADVOCATE FOR R-6 AND R-7; SRI T. BASAVARAJ, FOR R-5; SMT. NIREEKSHA D., ADVOCATE FOR SRI SHOWRI H.R., ADVOCATE FOR R-9) * * * THIS WRIT PETITION IS FILED UNDER ARTICLES 226 AND 227 OF THE CONSTITUTION OF INDIA READ WITH SECTION 482 OF THE CODE OF CRIMINAL PROCEDURE, 1973, PRAYING TO QUASH THE ENQUIRY REPORT DATED 1-3-2018 UNDER SECTION 12(1) OF THE KARNATAKA LOKAYUKTA ACT, 1984 PREPARED BY R-2 ARISING OUT OF COMPLAINT WHICH IS MARKED AS ANNEXURE-P AND QUASH THE ENTIRE PROCEEDINGS PENDING ON THE FILE OF R-2 - UPA LOKAYUKTA IN COMPLAINT INITIATED ON THE COMPLAINT LODGED BY THE R-5 AND 6 RESPECTIVELY AGAINST THE PETITIONERS HEREIN AND ETC. THIS WRIT PETITION, COMING ON FOR FURTHER HEARING, THIS DAY, ORDER WAS MADE THEREIN AS UNDER: CORAM: HON'BLE MR. JUSTICE D K SINGH and HON'BLE MR. JUSTICE VENKATESH NAIK T ORAL ORDER (PER: HON'BLE MR. JUSTICE D K SINGH) Heard Sri. Gautam S. Bharadwaj, learned counsel for the petitioners, Smt. Prathibha R.K., learned AGA for respondent Nos.1, 4 and 8, Sri. Venkatesh S. Arabatti, learned counsel for respondent Nos.2 and 3, Sri. Yogesh V. Kotemath, learned counsel representing Sri. P.H.Virupakshaiah, learned counsel - 4 - HC-KAR NC: 2025:KHC:32582-DB WP No. 9000 of 2020 for respondent Nos.6 and 7, Sri. T.Basavaraj, learned counsel for respondent No.5 and Smt. Nireeksha D., learned counsel representing Sri. Showri H.R., learned counsel for respondent No.9. 2. Petitioner No. 1 was the Sales Officer, and petitioner No. 2 was the Recovery Officer in respect of the sale of the assets of the Bhadra Sahakari Sakkare Karkhane Niyamit (hereinafter referred to as "Co-operative Sugar Factory"). The five Co-operative banks form the consortium to advance loan to the said sugar factory. Details of the principal amount which due from the sugar factory and the interest thereon and the total amount due in respect of each bank as of 30.06.2005 are given as under: Name of Bank Principal Interest Total Davanagere DCC Bank 7,27,35,397 - 7,27,35,397 Karnataka State Co- operative Apex Bank Ltd, Bangalore 9,28,87,000 77,11,293 10,05,98,293 Chitradurga DCC Bank 1,55,74,233 3,52,326 1,59,26,559 Shimoga DCC Bank 3,48,72,545 24,94,309 3,73,66,854 Bellary DCC Bank Ltd, Hospete 2,27,96,405 24,40,842 2,52,37,247 - 5 - HC-KAR NC: 2025:KHC:32582-DB WP No. 9000 of 2020 Total 23,88,65,480 1,29,98,770 25,18,64,250 3. The consortium banks have approached the Court of Deputy Additional Registrar of Co-operative Societies, Bengaluru (CREDIT), by filing Case No. RCS:CRD:KME:8:180/2011-12 for the recovery of the amount due against the Co-operative Society. The Award dated 25.04.2015 came to be passed by the said Authority in favour of the consortium banks. In the award, it was held that the Co- operative sugar factory was in debt for Rs.25,18,64,250/- as on 30.06.2005 to the five consortium banks and the said amount with interest at 16% per annum from the date of the decree till the date of clearing the same was to be paid by the respondent factory to the banks. It was further directed that the said amount was to be recovered by the petitioner banks jointly and severally by selling the movable and immovable properties attached before the Judgment on 23.09.2006, belonging to the respondent factory. The said award came to be challenged by the Co-operative sugar factory before the Karnataka Appellate Tribunal (KAT) at Bengaluru. However, challenge to the said award was unsuccessful and the appeal was dismissed by the Karnataka Appellate Tribunal by the Order dated 04.04.2017. - 6 - HC-KAR NC: 2025:KHC:32582-DB WP No. 9000 of 2020 4. Petitioner No.1 was appointed as the Sales Officer by petitioner No.2 to conduct the sale of the movable and immovable properties of the Co-operative Societies to satisfy the award passed by the Court of Deputy/Additional Registrar of Co-operative Societies, Bengaluru (CREDIT), dated 25.04.2015. 5. The State Government had fixed the value of the property of the Co-operative Society at Rs.150 Crores. However, the petitioner was of the opinion that the value of the property of the Co-operative Society was around Rs.76,22,50,000/- and the liabilities of the Bhadra Co-operative Sugar Factory as on 31.03.2016 were Rs.101,80,87,830.81/-. It appears that no one came forward even upto the minimum price fixed by the Government at Rs.150 Crores. One Sri. B.Karibasappa, representing the Davanagere Sugarcane Grower's Society (R), which was registered just 15 days before the date of auction, quoted a sum of Rs.54 Crores for the properties of the sugar factory which were put in auction. The petitioner brought to the notice - 7 - HC-KAR NC: 2025:KHC:32582-DB WP No. 9000 of 2020 of the banks the aforesaid facts and asked the banks either to accept the bid of Sri B. Karibasappa or reject the same. 6. This auction proceedings have been challenged by the Co-operative Society by filing a revision under Section 108 of the Karnataka Co-operative Society Act, 1959, before the Revisional Authority being, Revision No. CO/05/CAP/2017, which is still pending for final disposal. 7. When the case stood, thus, the 6th and 7th respondents have approached the Karnataka Lokayuktha by filing the complaint making the allegation primarily of undervaluing the assets of the Co-operative Society at the hands of the petitioners. The Lokayuktha has conducted the investigation and submitted the report under Section 12 (1)* of the Karnataka Lokayuktha Act on 01.03.2018, directing the Competent Authority to initiate disciplinary action against the officials who were involved in conducting the auction proceedings of the assets of the Co-operative society. 8. Mr. Gautam Bharathwaj, learned counsel for the petitioners, has submitted that the petitioners were not given any opportunity to present their case before the Lokayuktha * Corrected Vide Court Order dated 25/09/2025. - 8 - HC-KAR NC: 2025:KHC:32582-DB WP No. 9000 of 2020 because no notice was issued to them and the entire enquiry had been conducted behind their back. He has also submitted that the complaint before the Lokayuktha was not maintainable in view of Section 8 (1)(b) of the Karnataka Lokayuktha Act as there is an alternate remedy available of filing the revision impugning the auction proceedings and in fact the revision is pending against the auction proceedings before the Revisional Authority. 9. Mr. Venkatesh S. Arabatti, the learned counsel representing Lokayuktha, submits that he does not dispute the fact that the petitioners were not put to notice by the Lokayuktha and they did not have the opportunity to present their case before the Lokayuktha. He further submits that there is no force in the submission of the learned counsel for the petitioners that the complaint before the Lokayuktha was not maintainable. The complaint before the Lokayuktha is regarding the malicious action of the petitioners in fixing the sale price below the minimum sale price fixed by the Government itself, which is Rs.150 Crores. He has also submitted that the Lokyuktha has enquired about the - 9 - HC-KAR NC: 2025:KHC:32582-DB WP No. 9000 of 2020 allegations, and therefore, the report of the Lokayuktha in respect of misconduct committed by the petitioners is neither illegal nor barred under Section 8(1)(b) of the Karnataka Lokayuktha Act. Section 8(1)(b) has not applicable to the facts of the present case. The complaint before the Lokayuktha is about the misconduct of the petitioner and not in respect of the auction proceedings against where the revision is pending. 10. We have considered the submissions. It is appropriate for this Court not to give finding regarding maintainability of the complaint, and it would be open to the petitioners to contend the same before the Lokayuktha. However, since the petitioners were not served with notice and they did not have any opportunity to participate in the proceedings, and the report has been submitted under Section 12(1)* of the Karnataka Lokayuktha Act against them, though they are not named, but the fact remains that the petitioners are the only officials, who were involved in conducting the auction proceedings of the assets of the respondent - sugar factory. As there has been a violation of the principles of natural justice, we set aside the report and remand back the * Corrected Vide Court Order dated 25/09/2025. - 10 - HC-KAR NC: 2025:KHC:32582-DB WP No. 9000 of 2020 matter to the Lokayuktha to conduct a fresh enquiry by issuing notice to the petitioners. The relevant incriminating materials against the petitioners should be provided to them for their response, to the show-cause notices. 11. With the aforesaid observation, the writ petition is disposed of. The report dated 01.03.2018 (Annexure-P) is set aside and the matter is remanded back to the Lokayuktha to conduct fresh enquiry as directed above. All consequential *actions taken in pursuance to the report dated 01.03.2018 (Annexure-P) of the Lokayuktha are also set aside. Sd/- (D K SINGH) JUDGE Sd/- (VENKATESH NAIK T) JUDGE AM List No.: 1 Sl No.: 45 * Corrected Vide Court Order dated 25/09/2025.