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2023 Supreme(Kar) 1207

IN THE HIGH COURT OF KARNATAKA
H.P.Sandesh, J.
Ashwini Shetty – Appellant
Versus
Manohar Shetty – Respondent
Writ Petition No. 15801/2020 (GM-CPC)
Decided On : 24-08-2023

Advocates appeared:
Shreyas Jayasimha, Advocate, Hemant R.Rao, Advocate, Jayakumar S.Patil, Advocate, Ajay Rao, Advocate, C.K.Nandakumar, Advocate, H.S.Rukkoji Rao, Advocate, H.R.Katti, Advocate

Headnote:(A) Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 - Section 34 - Civil Court jurisdiction - A suit for partition concerning joint family properties cannot be maintained when properties have been mortgaged and recovery proceedings initiated under SARFAESI Act - The order rejecting the plaintiff's application for temporary injunction during the pendency of the suit was upheld as no prima facie case was established and jurisdiction barred. (Paras 11, 35, 51)

(B) Joint Hindu Family (HUF) - Understanding the nature of HUF properties - Loans acquired from financial institutions using mortgaged HUF properties do not confer absolute rights upon individual members and cannot be challenged in civil court if recovery proceedings are ongoing. (Paras 37, 46)

Facts of the case:
The plaintiff filed a suit for partition of HUF properties, claiming rights over properties allegedly mortgaged by parents during minors' age. The financial institutions initiated recovery proceedings under the SARFAESI Act, alleging collusion among family members. (Paras 1-9)

Findings of Court:
The Trial Court correctly ruled that the civil court could not interfere with SARFAESI proceedings, and the plaintiff's claims for partition were ineffective against the loan agreements made by her parents. (Paras 11, 43, 51)

Issues: The main questions included whether the Trial Court erred in rejecting the application for injunction and if the winding case against the defendants should proceed considering the existing recovery proceedings. (Paras 51, 52)

Ratio Decidendi: The plaintiff's claims were rejected on the basis that existing recovery mechanisms under the SARFAESI Act barred civil court jurisdiction concerning properties secured under a loan. The court emphasized that claims against mortgage arrangements cannot impede financial institutions' rights under existing statutory frameworks. (Paras 34, 37, 48)

Result: The appeals and writ petition were dismissed.

Table of Content
1. background on hindu undivided family constituted and properties. (Para 2 , 3 , 4 , 5 , 6)
2. details on loan agreements and potential impacts on properties. (Para 7 , 8 , 19)
3. arguments against the maintainability of the suit. (Para 9 , 10 , 16)
4. decision rationale and dismissal of the case. (Para 11 , 26 , 51)
5. court's jurisdiction and the effect of the sarfaesi act. (Para 12 , 17 , 40 , 49)

JUDGMENT

1. The writ petition and appeal are filed against the order passed by the Trial Court on memo and also on the application filed under Order XXXIX Rules 1 and 2 of CPC.

2. The factual matrix of the case of the plaintiff before the Trial Court in O.S.No.8584/2012 is that the plaintiff is one of the daughter of defendant Nos.1 and 2 and defendant No.3 is her sister and all of them have constituted a Hindu undivided family (HUF) and said Hindu Joint Family was in possession of several properties being in the nature of sites in the city of Bengaluru and coffee estates located at several places in and around Chikmagaluru. The said HUF is hereinafter referred to as 'Manohar Shetty HUF'.

3. It is further contended that the plaintiff along with defendant Nos.2 and 3 also constituted a HUF for which defendant No.2 declared herself to be 'kartha' and the said HUF herein after referred to as 'Harini Shetty HUF' and said HUF was also in possession of several properties such as coffee estates in Chikkamagaluru. Income arising out of the properties of 'Harini Shetty HUF' is shared and utilized by the members of HUF being the plaintiff, defendant Nos.2 and 3 and respective documents are also produced before the Court. It is contended that the plaintiff along with the defendants are in joint possession of the properties, which belong to both 'Manohar Shetty HUF' and 'Harini Shetty HUF' and the proceeds arising from these two properties are being deposited along with the nucleus of the respective HUF and the same is being utilized by the members of the respective HUF. It is also contended that the grandfather of the plaintiff i.e., late C. Narayana Shetty was married to Smt.Akkayya Shedthi in the year 1952 and the grandfather had two sons namely, Sitaram Shetty and Manohar Shetty who is defendant No.1 in the suit and three daughters namely Sumitra Shetty, Hemalatha Shetty and Sakunthala Shetty. It is contended that all the sons and daughters of Narayana Shetty constituted the Joint Hindu Family. The grandfather of the plaintiff i.e., Narayana Shetty along with his brothers i.e., Nagayya Shetty and Sanjeeva Shetty by utilizing the funds of their joint family along with another, who is their relative i.e., Raghu Shetty formed a partnership firm in the year 1981 under the name and style "Sri Shankaranarayana Construction Company" for the purpose of conducting business in the areas of construction work, manufacturing and sale of tiles and acquiring and developing of coffee estates.

4. In the course of its business had amassed wealth that was in the nature of joint family income, since the funds of joint family was utilized by the grandfather of the plaintiff along with his brothers as initial capital for establishing partnership business. The said partnership firm was dissolved in the year 1986 as per the Resolution Deed dtd. 10/7/1986. Part of the assets relating to Woddaegoode estate and all the movable and immovable assets of the firm that were not allotted to any other partner, which was in the nature of office building, furniture, bank deposits, office equipment, deposits, vehicles etc., was allotted to the share of the grandfather of the plaintiff. The original copy of the Resolution Deed is in possession of defendant No.1 and photo copy is produced. It is also contended that defendant No.1 along with other family members of Narayana Shetty were inducted into the partnership firm and by utilizing the funds of the erstwhile joint family, the firm continued the business as was carried on by the previous partners, which was still

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