- 1 - HC-KAR NC: 2026:KHC:29408 WP No. 7311 of 2022 IN THE HIGH COURT OF KARNATAKA AT BENGALURU DATED THIS THE 16TH DAY OF JUNE, 2026 BEFORE THE HON'BLE MR. JUSTICE M.G.S. KAMAL WRIT PETITION NO. 7311 OF 2022 (GM-KSFC) BETWEEN: M/s.MAHARAJA RESIDENCY REPRESENTED BY ITS PROPRIETOR SRI C V RAJU S/O C V VENKATAPPA AGED ABOUT 59 YEARS SY NO 17/9 AND 17/10 NEAR TALUK OFFICE DABBEGHATTA BIDAR SRIRANGAPATNA HIGHWAY CHIKKANAYAKANAHALLI TOWN TUMKURU DISTRICT - 572 214. …PETITIONER (BY SRI. N SURESHA, ADVOCATE) AND: 1. THE BRANCH MANAGER KARNATAKA STATE FINANCIAL CORPORATION (KSFC) SPECIAL PLOT NO 2 INDUSTRIAL ESTATE B H ROAD, TUMAKURU - 572 103 2. SMT SUJATHA W/O SRI C V RAJU AGED ABOUT 50 YEARS SY NO 17/9 AND 17/10 NEAR TALUK OFFICE, C N HALLI TOWN TUMAKURU DISTRICT - 572 103. Digitally signed by SUMA B N Location: HIGH COURT OF KARNATAKA - 2 - HC-KAR NC: 2026:KHC:29408 WP No. 7311 of 2022 3. SRI SUDHAMA B S/O SRI BALAKRISHNA AGED ABOUT 35 YEARS PROPRIETOR OF BALAJI SERVICE STATION NO.153 CHOWDESHWARI TEMPLE ROAD NEAR HALEPALYA CIRCLE HALEPALYA POST, TIPTUR TALUK TUMKUR DISTRICT - 572 202. …RESPONDENTS (BY SRI. SOMASHEKAR. T., ADVOCATE FOR C/R1; SRI. GANAPATHI BHAT VAJRALLI,ADVOCATE FOR R3; SRI. H. VASANTH KUMAR., ADVOCATE FOR R2) THIS WRIT PETITION IS FILED UNDER ARTICLES 226 AND 227 OF THE CONSTITUTION OF INDIA, PRAYING TO QUASH THE SALE NOTICE DATED 11.12.2020 VIDE ANNEXURE-E BY KSFC TUMKUR AND QUASH THE SALE DEED DATED 18.02.2021 VIDE ANENXURE-L SALE DEED BETWEEN R- 1 AND R3. THIS PETITION, COMING ON FOR PRELIMINARY HEARING IN 'B' GROUP, THIS DAY, ORDER WAS MADE THEREIN AS UNDER: CORAM: HON'BLE MR. JUSTICE M.G.S. KAMAL ORAL ORDER Petitioner, a Proprietorship Concern represented by its proprietor Sri.C.V.Raju is before this Court being aggrieved by the sale notice dated 11.12.2020 published in Vijaya Karnataka Daily newspaper dated 12.12.2020 and to quash the sale deed dated 18.02.2021, as per Annexure-L executed by respondent No.1 in favour of respondent No.3. - 3 - HC-KAR NC: 2026:KHC:29408 WP No. 7311 of 2022 2. Brief facts of the case are: (a) That petitioner had availed financial assistance to the tune of Rs.140 lakhs from respondent No.1 during the year 2012 for the purpose of starting a business in the name of "Hotel Maharaja Residency". Petitioner had obtained required license and approvals from various departments of the State. (b) Petitioner though had submitted a project proposal for loan to an extent of 140 lakhs, he was released only Rs.60 lakhs. Petitioner had to mobilize funds from his relatives, friends and private financiers to meet the project cost of Rs.140 lakhs. Since respondent did not release the remaining Rs.80 lakhs within time, petitioner was required to pay high rate of interest to the private financiers and other persons. Incidentally petitioner also suffered heavy loss of business due to demonetization and other factors. Respondent No.1 without releasing the amount as sanctioned, proceeded to take coercive steps to recover the loan amount. Petitioner had approached the respondent No.1 offering one time settlement by restructuring the loan which also did not materialize. (c) Things stood thus respondent No.1 had issued paper publication intending to auction the property in "Vijaya Karnataka" and "Deccan Herald" daily newspapers on 27.08.2020, fixing the e-auction of the petition schedule - 4 - HC-KAR NC: 2026:KHC:29408 WP No. 7311 of 2022 property on 28.09.2020 at 10.00 a.m. and 08.10.2020 at 11 a.m. respectively. That since the sale did not take place respondent No.1 had published the sale notice on 11.12.2020 in "Vijayavani" daily newspaper. (d) Petitioner had earlier approached this Court by filing Writ petition in W.P.No.8211/2021 aggrieved by the sale notice dated 27.08.2020. The said writ petition came to be withdrawn as the sale did not take place. (e) That the market value of the subject land is about Rs.10.5 crores. Respondent No.1 had fixed the reserve price of the property at Rs.150 lakhs as per the value of the sub-Registrar valued at Rs.3,030/- per square foot. (f) Petitioner has always been ready and willing to settle the matter under one time settlement scheme. Petitioner had also deposited Rs.30 lakhs in the month of December 2021 and had approached respondent No.1 for settlement of the matter without following the procedures, respondent No.1 has even proceeded to execute the deed of sale in favour of respondent No.3. The sale transaction between respondent No.1 and respondent No.3 is collusive depriving the legitimate right of the petitioner to have the property, auctioned at a prevailing market rate. Hence the petition. 3. Learned counsel for the petitioner reiterating the aforesaid facts submits: - 5 - HC-KAR NC: 2026:KHC:29408 WP No. 7311 of 2022 (a) That as per notice dated 20.01.2021 issued by the respondent-KSFC, petitioner was due and liable to pay a sum of Rs.1,33,05,676.60 as on 10.01.2021. He also refers to another communication dated 19.11.2018 issued by the respondent-KSFC, wherein it is stated that the valuation of the property brought for sale was arrived at 284.15 lakhs. (b) Referring to Annexure-G information which was provided by the Sub-Registrar of Chikkanayakanahalli, he submits that the value of the property per square foot as on 14.09.2020 was Rs.30,300/-. (c) That the due as on 10.11.2018 was only 94.53 lakhs. Thus he submits that respondent authorities have proceeded to auction the property, undervaluing the same contrary to their own valuation causing financial loss and burden on the petitioner. (d) That respondent authorities have not shown that they have taken due care in valuing and auctioning the property and offering the same in a transparent manner. Hence seeks for allowing of the petition. 4. In response, learned counsel appearing for respondent No.1-authority referring to statement of objections submits: - 6 - HC-KAR NC: 2026:KHC:29408 WP No. 7311 of 2022 (a) That the loan account of the petitioner was classified as Non Performing Asset as on 31.07.2015, a show cause notice had been sent on 05.05.2015 under Section 29 of the State Financial Corporations Act, 1951, followed by several letters, reminders and notices apart from personal visits made to the petitioner to clear the loan and other over-dues. The part payment made by the petitioner were adjusted to the loan account, since there was no progress, the respondent authority had taken over the possession of the unit under Section 29 on 14.09.2015. A loan recall notice was thereafter sent on 03.11.2015. (b) The property was put to auction as many as on six occasions. However, there was no bid received from the intended purchasers. The seventh sale notification was published in the Vijay Karnataka and Deccan Herald newspapers pursuant to which, two bidders had expressed their interest in the e-auction. The entire process of re-auction was transparent at all time with due intimation to the petitioner, providing him an option to bring better offer with the prospective purchasers. (c) That in the seventh sale notification, the highest bid that was received was Rs.151 lakhs against the reserve price of Rs.150 lakhs. The e-auction purchaser, namely respondent No.3-Sudhama he being the successful bidder had paid the full sale amount. Consequently, respondent - 7 - HC-KAR NC: 2026:KHC:29408 WP No. 7311 of 2022 No.1 executed deed of sale on 18.02.2020 and possession of the property was delivered on 22.02.2021. (d) As a result of sale of the primary assets, loan account was closed and the balance sale amount available was sent to the petitioner by way of a cheque dated 06.03.2021, bearing No.011356 for Rs.14,37,808/- through Registered Post Acknowledgement Due (RPAD). The loan account was closed on 06.03.2021. A closure report was also sent to the petitioner from the respondent No.1- corporation. Petitioner though received the said cheque, did not encash but returned the same to the Corporation. (e) The allegation of respondent No.1 not accepting the one time proposal of the petitioner is untenable inasmuch as the respondent No.1 had by letter dated 20.01.2021 called upon the petitioner to remit 25% of the total amount outstanding for the purpose of consideration of one time settlement as per the OTS policy of the Corporation. As against the OTS proposal of Rs.15.59 lakhs, petitioner had remitted only Rs.5 lakhs on 20.01.2021 failed to make payment of balance amount. Petitioner did not show any interest to settle the loan account or to avail OTS benefit despite respondent No.1 providing sufficient opportunity in this regard. - 8 - HC-KAR NC: 2026:KHC:29408 WP No. 7311 of 2022 (f) Admittedly, property was valued at Rs.184.86 lakhs. Though the property was put to auction on six occasions, there were no bidders. Respondent No.1-Corporation was therefore constrained to fix the reserve price at Rs.150 lakhs which is more than 75% of the valuation as per Circular No.921 dated 15.10.2010 which provides for revising the fixed price by the competent authority which shall not be less than 75% of valuation. Thus it is submitted respondent No.1-corporation had apart from providing sufficient opportunity to the petitioner had followed and complied with the norms of public auction with bonafide intention of fetching the highest possible price which is within the knowledge of the petitioner. 5. Learned counsel for respondent No.3/auction purchaser supporting the case of respondent No.1 submits: (a) that the petitioner in collusion with his son had made all possible attempts to derail the auction process. One of which was filing a suit in O.S.No.31/2021 before the Senior Civil Judge and JMFC, Chikkanayakanahalli for partition of the suit property, plaint in which contained the averments regarding e-action having been conducted and respondent No.3 being the highest bidder. (b) That respondent No.3 is a bonafide purchaser for value having been declared as successful bidder cannot be now unsettled at the instance of petitioner who has - 9 - HC-KAR NC: 2026:KHC:29408 WP No. 7311 of 2022 not cared to repay the loan or to ensure the public auction fetching highest price. (c) He also relies upon the judgment of the Apex Court in the case of Golden Food Products, India Vs State of Uttar Pradesh and others reported in 2026 INSC 22. Referring to paragraph 21 of the said judgment submits that auction which was otherwise valid cannot be cancelled by the Court in the absence of there being fraud, collusion or suppression. (d) That fact of issuance of publication as many as on six occasions, finally auctioning the same on the 7th occasion indicate that everything was fair, proper and transparent and no fraud, collusion or coercion has been exerted in auctioning the property, warranting interference at the hands of this Court. Hence, seeks for dismissal of the petition. 6. Heard and perused the records. 7. The only grievance of the petitioner in this matter is that the respondent-corporation at once had valued the property at Rs.284 lakhs yet has proceeded to auction the same at Rs.150 lakhs causing loss to the petitioner. Averments made in the statement of objections filed by the respondent - 10 - HC-KAR NC: 2026:KHC:29408 WP No. 7311 of 2022 No.1-corporation indicate that the auction sought to be conducted on six occasions showing the base price as under: first auction on 15.11.2016 base price Rs.276.86 lakhs Second auction on 21.01.2017 base price Rs.276.86 lakhs Third auction on 18.11.2017 base price Rs.284.15 lakhs Fourth auction on 25.02.2020 base price Rs.265.73 lakhs Fifth auction on 27.08.2020 base price Rs.265.73 lakhs Sixth auction on 12.12.2020 base price Rs.184.86 lakhs 8. Since no bidders had shown inclination to participate in the e-auction, respondent No.1 in its seventh auction resorted to reduce the base price to Rs.150 lakhs as per Circular No.921 dated 15.10.2020 issued by the Chairman and Managing Director. 9. Perusal of said Circular indicate if an asset is brought for sale for more than five times through e-auction, reserve price shall be highest offer received on earlier occasion, if the highest offer received is more than 75% of SR value which shall be approved by Executive Directors. However CMD may approve the guidance value lesser than the above value on case to case basis on merits. 10. The office notings maintained by the respondent No.1-corporation produced at Annexure-W indicate that - 11 - HC-KAR NC: 2026:KHC:29408 WP No. 7311 of 2022 Executive Director No.1 who is the competent authority has accorded approval to bring the secured asset for sale for lesser value i.e., 75% of the reserve price through e-auction advertisement, taking into consideration of failure of earlier e- auction to fetch the highest bidder. Petitioner, was also at liberty to procure the purchasers to fetch the highest price which the petitioner has not done. 11. Relevant also to refer to the office notings 213, 214 and 215 which read as under: "213. In view of the above facts it is placed for kind perusal and approval for bringing the assets for sale for lesser value i.e. 75% reserve price through e-auction advertisement. pl Sd/- 05.08.2020 "214 - Pre para 210 onwards for kind perusal. The secured property under Sec.29 was brought for sale on five occasions and there has been no offers. Branch office is contemplating to issue the 6th E-Auction Sale advertisement reducing the reserve price to 75% of SR value of Rs.184.86 Lakhs which works out to Rs.138.65 lakhs. For kind approval to bring for sale the property fixing the reserve price at 138.65 Lakhs. For kind perusal and approval of ED pl Sd/- 10.08.2020 [S.Udayshankar] GENERAL MANAGER (CIRCLE-1) "215 - ED1 GM we try for sale @ RP of Rs.150.00 lakhs? Lets try this time. Sd/- 17.08.2020 - 12 - HC-KAR NC: 2026:KHC:29408 WP No. 7311 of 2022 12. Office noting at 215 indicate that approval was accorded to auction the property at base price of Rs.150 lakhs which is much higher than 75% of the SR value. It is in this seventh auction respondent No.3 is stated to have been the successful bidder and has paid the entire amount. Petitioner who was also at liberty to have the property sold fetching highest price has taken no steps. It is not that petitioner was not aware of respondent No.1-corporation taking steps to auction the property as many as on six occasions prior to the public auction conducted on seventh occasion. Petitioner thus cannot now complain of his property having been sold by the respondent No.1 in public auction arbitrarily causing loss to him. The said contention cannot be countenanced. 13. The Apex Court in the case of Golden Food Products India Vs State of Uttar Pradesh and others at paragraph 28 has observed as under: "28. In our view there cannot be any imprimatur of the Court to such arbitrary cancellation of auction by an instrumentality or agency of the State in the absence of there being any fraud, collusion, suppression etc. Merely because the smaller plots measuring 123 to 132 square metres were auctioned and sold at a higher price as compared to the subject plot measuring 3150 square metres which is a large sized plot, could not have been the basis for cancelling the auction insofar as the subject plot is concerned. The demand for smaller plots being higher was sold - 13 - HC-KAR NC: 2026:KHC:29408 WP No. 7311 of 2022 at a higher price per square metre than the subject plot, where there was no demand for the subject plot as only two bidders participated in the auction. The bid of the appellant was above the reserve price. There was no other reason to cancel the auction sale of the subject plot. Therefore, GDA-respondent No.2 was under an obligation in law having accepted the bid offered by the appellant to issue the allotment letter instead of cancelling the auction on the basis of irrelevant considerations that too behind the back of the appellant. Expectation of a higher bid in a subsequent auction cannot be a reason to cancel an auction held in accordance with law." 14. Under the circumstances, this Court is inclined to accept the stand taken by the respondent No.1-corporation particularly in the absence of petitioner making out any prima facie case of fraud or malafides in the process of conducting the auction by respondent No.1. Petition therefore lacks merit and stands dismissed. SD/- (M.G.S. KAMAL) JUDGE SBN List No.: 1 Sl No.: 34