IN THE HIGH COURT OF KARNATAKA

DHARWAD BENCH

DATED THIS THE 16^TH DAY OF DECEMBER 2021

BEFORE

THE HON’BLE MR.JUSTICE N.S.SANJAY GOWDA

W.P.No.66993/2009 (GM-RES)

BETWEEN

SARASWATH CO-OP. BANK (SCHEDULE BANK),

SAMADEVI GALLI, BELGAUM,

KARNATAKA BY ITS MANAGER.

...PETITIONER

(BY SRI.SANGRAM S KULKARNI, ADV.)

AND

1 .

EMPLOYEES STATE INSURANCE CORPN.

SUB REGIONAL OFFICE, HUBLI

BY ITS RECOVERY OFFICER,

SARVODAYA CIRCLE, KESAVAPURA,

HUBLI.

2 .

RESERVE BANK OF INDIA

NRUPATHUNGA ROAD, BANGALORE-560 002

BY ITS ASST. GENERAL MANAGER.

….RESPONDENTS

(BY SRI.VINAY S KOUJALAGI, ADV. FOR

SRI.V M SHEELVANT, ADV. FOR R1;

NOTICE TO R2-SERVED)

THIS WRIT PETITION IS FILED UNDER ARTICLES 226 &

227 OF THE CONSTITUTION OF INDIA PRAYING TO QUASH

THE NOTICE DTD. 3/12/2009 ISSUED BY RESERVE BANK OF

INDIA VIDE ANNEXURE-C. 2. QUASH THE IMPUGNED ORDER

PASSED BY THE RECOVERY OFFICER OF ESI CORPORATION

DTD. 30/1/2007 VIDE ANNEXURE-A.

: 2 :

THIS PETITION COMING ON FOR HEARING, THIS DAY,

THE COURT MADE THE FOLLOWING:

ORDER

1.

M/s. BEMCO Jacks & Allied Products Ltd., Belgaum had

obtained a loan from the petitioner-Bank. However, M/s.

BEMCO Jacks & Allied Products Ltd., defaulted on the loan

payments and this led to initiation of proceedings under the

provisions of the Securitization and Reconstruction of Financial

Assets and Enforcement of Security Interest Act, 2002 (for

short ‘SARFAESI Act’). Ultimately, on culmination of those

proceedings, the petitioner-Bank sold assets of M/s. BEMCO

Jacks & Allied Products Ltd., and recovered a sum of

Rs.81,00,000/- as against the outstanding sum of Rs.1.07

crores.

2.

The ESI Corporation claiming that there was certain

dues from M/s. BEMCO Jacks & Allied Products Ltd.,

proceeded to issue a notice of attachment. The ESI

Corporation proceeded to hold that the petitioner was a

deemed defaulter and was liable for recovery as provided

under Section 45C to 45-I of the Employees’ State Insurance

Act, 1948 (for short ‘the ESI Act’). Vide Annexure-A, the ESI

: 3 :

Corporation ordered that a sum of Rs.2,63,041/- was be paid

into the account of Corporation by the petitioner, who was

considered as a deemed defaulter within 15 days.

3.

Pursuant to the said order, a notice under Section 45G

to the Reserve Bank of India calling upon the RBI to pay a

sum of Rs.2,63,041/- that was being held by the RBI on

account of the petitioner-Bank.

4.

The RBI has in turn informed the petitioner that unless

the attachment order passed by the Corporation was

withdrawn or revoked or quashed, it would be constrained to

comply with the notices and debit the petitioner-Bank

accounts with the amount claimed by the Corporation.

5.

Being aggrieved by the order passed under Section 45G

and the notice of the RBI, the petitioner is before this Court.

6.

It is the specific case of the learned counsel for the

petitioner that the petitioner was holding absolutely no

amounts on account of employer/establishment and therefore

the question of calling upon the petitioner-Bank to clear the

dues would not arise. He submitted that on the assets

mortgaged to the Bank being sold by the Bank, the money so

: 4 :

realized became the amount of the petitioner-Bank and

nobody including the ESI Corporation could lay a claim on it.

He submitted that provisions of Section 45G would be

applicable

only

if

money

of

the

establishment

i.e.,

M/s. BEMCO Jacks was in deposit of the petitioner-Bank could

it be said the Bank was holding the money of the

establishment. He submitted that since the entire money

recovered from sale proceeds was essentially the money of

the Bank, the entire proceedings was one without jurisdiction.

7.

Learned counsel for the ESI Corporation on the other

hand contended that the petitioner-Bank was in possession of

the assets of the employer and therefore the money held by

the Bank was essentially the money of the establishm