- 1 - HC-KAR NC: 2025:KHC:27538 WP No. 6510 of 2025 IN THE HIGH COURT OF KARNATAKA AT BENGALURU DATED THIS THE 22ND DAY OF JULY, 2025 BEFORE THE HON'BLE MR. JUSTICE S SUNIL DUTT YADAV WRIT PETITION NO. 6510 OF 2025 (GM-RES) BETWEEN: 1. AMALOR INTERNATIONAL LIMITED 609, 6TH FLOOR, HONG KONG PLAZA 188 CONNAUGHT ROAD WEST HONG KONG - 999 077 22A, GUANDONG INVESTMENT TOWER 148 CONNAUGHT ROAD, CENTRAL HONG KONG REPRESENTED BY ITS AUTHORIZED SIGNATORY M RAMESH, S/O MUNISWAMY NAIDU … PETITIONER (BY SRI. D.R. RAVISHANKAR, SENIOR ADVOCATE FOR SRI V.R. VINAY KUMAR, ADVOCATE AND SRI SHREERAM T. NAYAK., ADVOCATE) AND: 1. THE BRANCH HEAD CANARA BANK HONG KONG BRANCH NO.904, 9/FL AON CHINA BUILDING 29, QUEENS ROAD CENTRAL, HONG KONG - 999 076 Digitally signed by PRAKASH N Location: HIGH COURT OF KARNATAKA - 2 - HC-KAR NC: 2025:KHC:27538 WP No. 6510 of 2025 2. THE AUTHORIZED OFFICER CANARA BANK ARM-1 BRANCH 2ND FLOOR, NO.86, SPENCER TOWER MG ROAD, BANGALORE - 560 001 3. M/S. MSK SHELTERS PARTNERSHIP FIRM UNDER PARTNERSHIP ACT AT NO.471, 39TH C CROSS ROAD 5TH BLOCK, JAYANAGAR BANGALORE - 560 041 REPRESENTED BY ITS MANAGING PARTNER M SURESH KUMAR … RESPONDENTS (BY SRI. DHYAN CHINNAPPA., SENIOR ADVOCATE FOR SRI VIGNESH SHETTY, ADVOCATE FOR R1 & R2; SRI SHASHWATH S.P., ADVOCATE FOR R3) THIS W.P. IS FILED UNDER ARTICLES 226 AND 227 OF THE CONSTITUTION OF INDIA, PRAYING TO - TO HOLD AND DECLARE THAT THE ENTIRE ACTION INITIATED BY THE RESPONDENT NO.2 UNDER THE PROVISIONS OF THE SARFAESI ACT AS ILLEGAL AND ETC. THIS PETITION HAVING BEEN HEARD AND RESERVED ON 01.07.2025 AND COMING ON FOR PRONOUNCEMENT OF ORDERS THIS DAY, ORDER WAS MADE THEREIN AS UNDER: CORAM: HON'BLE MR. JUSTICE S SUNIL DUTT YADAV - 3 - HC-KAR NC: 2025:KHC:27538 WP No. 6510 of 2025 CAV ORDER At the outset, it must be noticed that the petitioner is the Principal Debtor, while the respondent No.3 is the Guarantor and the property of Guarantor is the subject matter of notice under the Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 [Hereinafter referred to as "SARFAESI Act"]. The Sale Notice at Annexure-'R' dated 21.01.2025 relates to the property of the Guarantor. 2. It is to be noticed that on an earlier occasion, the Guarantor (Respondent No.3) had approached this Court by filing a Writ Petition No.4792/2025 [GM-RES] challenging action under the SARFAESI Act as being void ab initio, illegal and without jurisdiction and on such grounds had challenged the Sale Notice dated 21.01.2025. The said Writ Petition came to be disposed off without any final adjudication after recording an observation that another Guarantor had already approached the Debts - 4 - HC-KAR NC: 2025:KHC:27538 WP No. 6510 of 2025 Recovery Tribunal [Hereinafter referred to as “DRT”]. It is stated that identical legal contentions as raised in the present petition were raised by the respondent No.3 as regards the Sale Notice dated 21.01.2025. 3. It is pertinent to notice that in the present round of litigation, the very same Sale Notice of 21.01.2025 (Annexure-'R') is sought to be challenged. W.P.No.4792/2025 having been disposed off on 24.02.2025, the action of respondent Bank is now challenged in the present writ petition filed on 04.03.2025, i.e., eight days after the disposal of the earlier Writ Petition. There is nothing on record to evidence respondent No.3 having approached the DRT invoking the substantive remedy. The present effort of the Principal Debtor must lead to the same conclusion of being relegated to avail of the substantive remedy. 4. It must be noticed that the loan has been sanctioned by Canara Bank, Hong Kong Branch. In the - 5 - HC-KAR NC: 2025:KHC:27538 WP No. 6510 of 2025 letter of sanction at condition No.(iii)(g) insofar as the charge is concerned, there is a reference to property in India. Such details are forthcoming from loan sanction letter at Annexure-'C' dated 12.03.2018. 5. The Memorandum of Deposit of Title Deeds executed on 22.12.2017 is one between respondent No.3 M/s. M.S.K. Shelters and the Canara Bank having its Head Office at Bengaluru. The mortgage was executed by way of security in the context of credit facilities of Rs.32,50,00,000/- advanced to the petitioner. 6. The consideration for the mortgage is the extension of credit facilities to the petitioner and is made out from para-(I) of the Memorandum of Deposit of Title Deeds (Annexure-'D'). Para I reads as follows:- “WHEREAS on the request of M/s Amalor International Limited., having registered office at 1005, South China Building 1, Wyndham Street, Central, Hongkong (hereinafter referred to as the borrower), the bank has sanctioned to it credit facilities upto a limit of Rs. 32,50,00,000.00 (USD - 6 - HC-KAR NC: 2025:KHC:27538 WP No. 6510 of 2025 5 Million is covereted at INR 65.00 which is rate as on date of deposit of title deeds) on condition that repayment of it including principal, interest, bank charges, costs of realization etc., shall be secured by a mortgage of immovable property/ies. ” 7. It was noticed that the petition was pending since 04.03.2025 and in light of insistence of a finding on the point of jurisdiction, matter is adjudicated. 8. Though it is the contention of petitioner that the respondent No.1 Bank could not have enforced security in terms of the provisions of the SARFAESI Act, as loan sanctioned documents point out to the terms of the sanction letter being governed and construed in accordance with the laws of Hong Kong with non-exclusive jurisdiction to the Courts of Hong Kong Special Administrative Region, it is necessary to notice that there is no complete bar as regards enforcement of the credit facilities. This becomes apparent on a plain reading of the stipulation in the loan sanction document dated - 7 - HC-KAR NC: 2025:KHC:27538 WP No. 6510 of 2025 12.03.2018. The relevant Clause for reference reads as follows:- “The sanction letter shall be governed by and construed in accordance with the laws of Hong Kong. The parties hereto agree to submit to the non- exclusive jurisdiction of the courts of Hong Kong Special administrative Region but the facility may be enforceable in any court of competent jurisdiction.” (emphasis supplied) 9. It must be noticed that though it is admitted that the extension of credit facility is by Canara Bank (Hong Kong Branch), it is not in dispute that the security for such loan advanced is the deposit of Title Deeds evidencing the mortgage on 22.12.2017. 10. It is necessary to notice that the Memorandum of Deposit of Title Deeds is entered into with respondent No.3 M/s. M.S.K. Shelters, which is the 'Mortgagor’ and Canara Bank with its Head Office at Bengaluru having Branch Office at Hong Kong which is the 'Mortgagee'. The - 8 - HC-KAR NC: 2025:KHC:27538 WP No. 6510 of 2025 property mortgaged is situated in Kuduvatti Village, Nandi Hobli, Chikkaballapura District and the mortgage is registered before the Office of Sub-Registrar, Chikkaballapura. This mortgage by way of Deposit of Title Deeds would fall within the definition of a Security Agreement under Section 2(zb)1 of the SARFAESI Act. The definition of 'Debt' under Section 2(ha)2 of the SARFAESI Act refers back to definition under Section 2(g)3 of the Recovery of Debts Due to Banks and Financial Institutions Act, 1993. In terms of the said Act, 'Debt' includes liability due from any person by a Bank or a Financial Institution. 12(zb) “security agreement” means an agreement, instrument or any other document or arrangement under which security interest is created in favour of the secured creditor including the creation of mortgage by deposit of title deeds with the secured creditor. 2 2(ha) “debt” shall have the meaning assigned to it in clause (g) of section 2 of the Recovery of Debts Due to Banks and Financial Institutions Act, 1993 (51 of 1993) and includes—(i) unpaid portion of the purchase price of any tangible asset given on hire or financial lease or conditional sale or under any other contract; (ii) any right, title or interest on any intangible asset or licence or assignment of such intangible asset, which secures the obligation to pay any unpaid portion of the purchase price of such intangible asset or an obligation incurred or credit otherwise extended to enable any borrower to acquire the intangible asset or obtain licence of such asset. 3 2(g) debt means any liability (inclusive of interest) which is claimed as due from any person by a bank or a financial institution or by a consortium of banks or financial institutions during the course of any business activity undertaken by the bank or the financial institution or the consortium under any law for the time being in force, in cash or otherwise, whether secured or unsecured, or assigned, or whether payable under a decree or order of any civil Court or any arbitration award or otherwise or under a mortgage and subsisting on, and legally recoverable on, the date of the application [and includes any liability towards debt securities which remains unpaid in full or part after notice of ninety days served upon the borrower by the debenture trustee or any other authority in whose favour security interest is created for the benefit of holders of debt securities or. - 9 - HC-KAR NC: 2025:KHC:27538 WP No. 6510 of 2025 11. The Mortgage Deed created with respect to an Indian asset by way of a registered document in favour of Canara Bank by M/s. M.S.K. Shelters to secure the interest of the petitioner would come within the applicability of SARFAESI Act. 12. The action by the respondent Bank for enforcement of security in terms of the Mortgage Deed for default by the petitioner is by resort to Sale Notice and the provisions of the SARFAESI Act and the Security Interest (Enforcement) Rules, 2002. 13. The contention that the loan agreement which stipulates the construction of the sanction letter must be in accordance with laws of Hong Kong with exclusive jurisdiction of Courts of Hong Kong Special Administrative Region would exclude the jurisdiction of proceedings under the SARFAESI Act in India, requires to be rejected. 14. Once the mortgage can be construed to be a security and fulfils all requirements so as to make it - 10 - HC-KAR NC: 2025:KHC:27538 WP No. 6510 of 2025 enforceable under provisions of the SARFAESI Act, it can be stated that recourse to provisions of SARFAESI Act being a statutory remedy available to the Bank would be permissible, notwithstanding any Clause in the loan sanction letter. Such construction would be on the basis of the principle that there cannot be contracting out of statutory scheme designed to protect public policy.4 This position was strengthened in Booz Allen and Hamilton Inc. v. SBI Home Finance Limited & Ors.5 Para-35 of the said decision is extracted hereinbelow:- “35. The Arbitral Tribunals are private fora chosen voluntarily by the parties to the dispute, to adjudicate their disputes in place of courts and tribunals which are public fora constituted under the laws of the country. Every civil or commercial dispute, either contractual or non-contractual, which can be decided by a court, is in principle capable of being adjudicated and resolved by arbitration unless the jurisdiction of the Arbitral Tribunals is excluded either expressly or by necessary implication. Adjudication of certain 4 See, Waman Shriniwas v. Ratilal (1959) OnLine SCC 120 and Lachoo Mal v. Radhey Shyam (1971) 1 SCC 619. 5 (2011) 5 SCC 532. - 11 - HC-KAR NC: 2025:KHC:27538 WP No. 6510 of 2025 categories of proceedings are reserved by the legislature exclusively for public fora as a matter of public policy. Certain other categories of cases, though not expressly reserved for adjudication by public fora (courts and tribunals), may by necessary implication stand excluded from the purview of private fora. Consequently, where the cause/dispute is inarbitrable, the court where a suit is pending, will refuse to refer the parties to arbitration, under Section 8 of the Act, even if the parties might have agreed upon arbitration as the forum for settlement of such disputes. 48. The provisions of the Transfer of Property Act read with Order 34 of the Code, relating to the procedure prescribed for adjudication of the mortgage suits, the rights of mortgagees and mortgagors, the parties to a mortgage suit, and the powers of a court adjudicating a mortgage suit, make it clear that such suits are intended to be decided by public fora (courts) and therefore, impliedly barred from being referred to or decided by private fora (Arbitral Tribunals). We may briefly refer to some of the provisions which lead us to such a conclusion. 51. If the three issues referred by the appellant are the only disputes, it may be possible - 12 - HC-KAR NC: 2025:KHC:27538 WP No. 6510 of 2025 to refer them to arbitration. But a mortgage suit is not only about determination of the existence of the mortgage or determination of the amount due. It is about enforcement of the mortgage with reference to an immovable property and adjudicating upon the rights and obligations of several classes of persons (referred to in para 48.2 above), who have the right to participate in the proceedings relating to the enforcement of the mortgage, vis-à-vis the mortgagor and mortgagee. Even if some of the issues or questions in a mortgage suit (as pointed out by the appellant) are arbitrable or could be decided by a private forum, the issues in a mortgage suit cannot be divided.” 15. This position of law was further reiterated in Mardia Chemicals Ltd. & Others. v. Union of India & Others.6 The Apex Court while upholding the constitutional validity of the SARFAESI Act has observed as follows:- “66. On behalf of the petitioners one of the contentions which has been forcefully raised is that existing rights of private parties under a contract cannot be interfered with, more particularly putting one party in an advantageous position over the other. For 6 (2004) 4 SCC 311. - 13 - HC-KAR NC: 2025:KHC:27538 WP No. 6510 of 2025 example, in the present case, in a matter of private contract between the borrower and the financing bank or institution through impugned legislation rights of the borrowers have been curtailed and enforcement of secured assets has been provided for without intervention of the court and above all depriving them of the remedy available under the law by approaching the civil court. Such a law, it is submitted, is not envisaged in any civilized society governed by rule of law. As discussed earlier as well, it may be observed that though the transaction may have the character of a private contract yet the question of great importance behind such transactions as a whole having far-reaching effect on the economy of the country cannot be ignored, purely restricting it to individual transactions, more particularly when financing is through banks and financial institutions utilizing the money of the people in general, namely, the depositors in the banks and public money at the disposal of the financial institutions….. 67. It is well known that in different States rent control legislations were enacted providing safeguards to the sitting tenants as against the existing rights of the landlords, which before coming into force of such law were governed by contract between the private parties. Therefore, it is clear that it has always been held to be lawful, whenever it was necessary in the public interest to legislate irrespective of the fact that it - 14 - HC-KAR NC: 2025:KHC:27538 WP No. 6510 of 2025 may affect some individuals enjoying certain rights. In the present case we find that the unrealized dues of banking companies and financial institutions utilizing public money for advances were mounting and it was considered imperative in view of recommendations of Expert Committees to have such law which may provide speedier remedy before any major fiscal setback occurs and for improvement of general financial flow of money necessary for the economy of the country that the impugned Act was enacted. Undoubtedly, such a legislation would be in the public interest and the individual interest shall be subservient to it. Even if a few borrowers are affected here and there, that would not impinge upon the validity of the Act which otherwise serves the larger interest. 69. On behalf of respondents time and again stress has been given on the contention that in a contractual matter between the two private parties they are supposed to act in terms of the contract and no question of compliance with the principles of natural justice arises nor the question of judicial review of such actions needs to be provided for. However, at the very outset, it may be pointed that the contract between the parties as in the present cases, is no more as private as sought to be asserted on behalf of the respondents. If that was so in that event parties would be at liberty to seek redressal of their grievances on account of - 15 - HC-KAR NC: 2025:KHC:27538 WP No. 6510 of 2025 breach of contract or otherwise taking recourse to the normal process of law as available, by approaching the ordinary civil courts. But we find that a contract which has been entered into between the two private parties, in some respects has been superseded by the statutory provisions or it may be said that such contracts are now governed by the statutory provisions relating to recovery of debts and bar of jurisdiction of the civil court to entertain any dispute in respect of such matters…..” (emphasis supplied) Hence, it is settled legal position that provisions of statute and statutory rights cannot exclude or contract away provisions of an enactment conferring rights safeguarding Public Financial Institutions.7 16. It needs to be noticed that the mortgage by way of deposit of Title Deeds by itself would be construed to be a standalone document. The Mortgage Deed which is a registered document executed before the office of the Sub-Registrar at Chikkaballapura relates to a property in 7Statement of Objects and Reasons under the Enforcement of Security Interest and Recovery of Debts Laws and Miscellaneous Provisions (Amendment) Act, 2016. - 16 - HC-KAR NC: 2025:KHC:27538 WP No. 6510 of 2025 India and the consideration for creation of such security is the extension of credit facility by Canara Bank through its Branch. Default in payment of loan dues could result in enforcement of the security under the SARFAESI Act. 17. Even if it is construed that the credit facility is extended by Branch of Canara Bank at Hong Kong, still it would be consideration enough for creation of a security in favour of Canara Bank with its Head Office at Bengaluru. If that were to be so, the Mortgage Deed could be enforceable as a security under provisions of the SARFAESI Act and contentions regarding lack of jurisdiction by reliance on Clause in a contract cannot be accepted in light of the discussion made above. 18. Insofar as recourse to parallel remedies are concerned, viz., pre-existing proceedings in the form of execution proceedings before the Civil Court in Execution Case No.35/2022 instituted pursuant to Arbitral Award passed by the High Court of the Hong Kong Special - 17 - HC-KAR NC: 2025:KHC:27538 WP No. 6510 of 2025 Administrative Region, Court of First Instance, Action No. 78 of 2021 vis-à-vis proceedings under the SARFAESI Act, it must be noticed that the right to institute proceedings under the SARFAESI Act is an additional remedy and not ‘in derogation of’ other laws as may be applicable in terms of Section 37 of the Act. 19. As stated in Transcore v. The Union of India and Another8, the Apex Court while determining the validity of parallel proceedings under the DRT and SARFAESI Act has held at para-64 as hereunder:- "64. … In the present case, as stated above, the NPA Act is an additional remedy to the DRT Act. Together they constitute one remedy and, therefore, the doctrine of election does not apply. Even according to Snell's Principles of Equity (31st Edn., p.119), the doctrine of election of remedies is applicable only when there are two or more co- existent remedies available to the litigants at the time of election which are repugnant and inconsistent. In any event, there is no repugnancy nor inconsistency between the two remedies, 8 (2008) 1 SCC 125. - 18 - HC-KAR NC: 2025:KHC:27538 WP No. 6510 of 2025 therefore, the doctrine of election has no application.” As there is no inconsistency between the two remedies, execution of the Arbitral award granted by the Court of First Instance of Hong Kong before the Civil Court can proceed simultaneously with SARFAESI proceedings. 20. Insofar as the contention that the contracts entered into by way of Mortgage by Deposit of Title Deeds being in violation of Foreign Exchange Management Act, 1999 [Hereinafter referred to as “FEMA”], it must be noticed that both the petitioner and respondent No.3 having obtained benefits from the very loan transaction and having offered security by way of mortgage, cannot be permitted to approbate and reprobate. 21. Furthermore, in any event, Foreign Exchange Management (Borrowing and Lending) in Foreign Exchange Regulations 2000, Regulation No.49 states that 9 4.(1) An authorised dealer in India or his branch outside India may lend in foreign currency in the circumstances and subject to the conditions mentioned below, namely: i) A branch outside - 19 - HC-KAR NC: 2025:KHC:27538 WP No. 6510 of 2025 Authorized dealer in India, or Branch outside India, may lend in foreign currency loans in the normal course of banking business outside India. If that were to be so, the contention of the petitioner regarding violations of provisions of FEMA do not stand. 22. Insofar as other contentions relating to unreasonable indecisiveness in regards to the One Time Settlement proposals, it is settled position that scope of interference is minimal. As regards other procedural violations, if any, in connection with measure under the provisions of the SARFAESI Act are concerned, it is a settled position that the petitioner is required to take recourse through the substantive remedy of challenging Section 13 measure under Section 17 of the SARFAESI Act. India of an authorised dealer being a bank incorporated or constituted in India, may extend foreign currency loans in the normal course of its banking business outside India. - 20 - HC-KAR NC: 2025:KHC:27538 WP No. 6510 of 2025 23. Accordingly, the Writ Petition stands rejected in light of the discussions as above. Insofar as the substantive contentions relating to the actions under the SARFAESI Act as regards to the impugned proceedings, the petitioner is at liberty to approach DRT for appropriate remedy under Section 17 of the SARFAESI Act. 24. Needless to state that the time spent in the present proceedings may be taken note of appropriately, if an objection regarding limitation is raised, in the event petitioner were to approach the DRT. 25. All contentions are kept open, while it is clarified that contentions, including and regarding jurisdiction raised and other contentions as adverted to and decided herein are not open for re-adjudication. 26. It is observed that the petitioner had insisted on the recording of finding which according to them is a jurisdictional issue and by virtue of which, the proceedings before the DRT was one without jurisdiction and - 21 - HC-KAR NC: 2025:KHC:27538 WP No. 6510 of 2025 accordingly has been decided by this Court in the Writ proceedings itself. Sd/- (S SUNIL DUTT YADAV) JUDGE VGR - 22 - HC-KAR NC: 2025:KHC:27538 WP No. 6510 of 2025 IN THE HIGH COURT OF KARNATAKA AT BENGALURU [AMALOR INTERNATIONAL LIMITED VS. THE BRANCH HEAD AND OTHERS] 22.07.2025 (VIDEO CONFERENCING / PHYSICAL HEARING) CORAM: HON'BLE MR. JUSTICE S SUNIL DUTT YADAV ORAL ORDER After pronouncement of order today, learned counsel for the petitioner files a memo and requests that time may be granted to avail of the alternative remedy and some protection may be granted to the petitioner in the interregnum. In light of the memo filed and submission made, petitioner is granted three weeks' time to take appropriate steps to approach the Debts Recovery Tribunal. Until such time, the respondent Bank not to take any precipitative steps. It is made clear that this protection is granted only in light of relegation of petitioner to avail of the substantive - 23 - HC-KAR NC: 2025:KHC:27538 WP No. 6510 of 2025 remedy and must not be construed to be an order passed considering the contentions on merits. Needless to state that, upon lapse of such time, the limited protection granted to the petitioner would cease to operate. This order is to be read in conjunction with the final order dated 22.07.2025 pronounced today. Sd/- (S SUNIL DUTT YADAV) JUDGE VGR List No.: 1 Sl No.: 161