IS IN THE HIGH COURT OF KARNATAKA AT BANGALORE DATED THIS THE 3RD DAY OF KPRIL 1998 BEFORE : THE HON’BLE iLJUSTICE TIRATH S.THAICUR WRIT PETITION No.7570/1g97. BETW&J :- 1. Sri,A.Sriramaiah, S/o Sri ,Venkataramaiah, Major, No.61/2, Viviyani Road, Richards Town, Bangalore—360 005. 2. Sri.A.Sundar Raju, 3/0 Sri,A,Sriramaiah, Major, No.73, B.3.A .Road, Frazer Town. BANGAALORE—560 005, . .. Pet itione ra. ( ByM/s.Tarakaram, Adv,, ) A ND: 1, Karnataka State Finance Corporation, Represented by its Secretary, No.25, Mahatma Gandhi,Road, BINGALORE—560 001. 2. he Deputy Manager(Recovery) Karnataka State Finance, Corporation, Kolar Branch, KcAR. 3, The Special Tahaildar (Recovery) Karnaka State finance Corporation, Banga lore aural Area, No.48, hurch Street, Bangaiore—560 001, ‘‘.9 U. -2— 4. EJaghavendra, Managing Partner of M/e.Keerth i Enterorises, No.5, Pathi Building, Lppaj irao lane, BANGALORE2. .flesoondents. ( By Sri.B.audragowda,Ldv., ) a a — This writ petition filed praying to quash Annexureal dated 4e3—1997, aid direct the resoondents not to make any claim on the petitioners property nentioned in the Schedule on the basis of or for the recovery of any amount which may be due and tayable to the K—I by vir’ tue of petitioners being former prtriere of M/e.Sri Harniman £nterprises; etc., 1 ’his writ petition coming on for hearing, the same having been heard and reserved for pronouncement of order, the Court made the following order : In this tetition for a certiorari the petitioners call in question the valIdity of si auction notice issued by the Special Tah.ildar of the respondent—Ccrpor’tion proposing to auction the inzio,able property mortgaged wtt tue Corporition by way of a collateral security for the repayment of a loan advanced by the latter to Ws.!anaman Enterprises. The facts leading to the present controversy have been set out in the decision of this . . .3 - — ) — Court dated 27—6_1996 in W.P.Nos.222123/199O filed by Sri.Parasmal and others against the Corooration, I do not therefore Dropose to recount the same at length. A reference to the said order shciild in my opinion suffice, All that is for the present material is that the petitioners stood as guarantor for the repaiment of two loans one for a sum of Rs.5,25,000/— ind the other for a sum of Rs,2,00,000/— and furnished by way of collateral security the immovable property owned by them described in the loan agreement dated 28—6—1979. he industrial unit set up by M/s.Hanuman Eliterprisee was in due course taken over by the Corporation under Sec.29 of the Act and sold for the recovery of a part of the amount actually outetending against the said borrower. Proceedings were then initiated against the petitioners for recovery of the balanc outstanding lading to the issue of the auction notice mentioned above. Aggrieved by the said proceedings, the peti tioners have as indicad earlier filed the present writ petition in which Mr Tarakaram, Counsel RoDearing on their behalf raised several contentions to show that the proceedings were illegal a that the oeti— tioners were in no y liable to oay ary part of the outstanding amount. Since this writ petition must 89.4 9 1 V —4— succeed on a short ground, I do not prooose to deal with the other contentions that were strenously urged at the bar, The challenge to the auction notice must inn, opinion succeed on the ground of violation of principles of natural justice. The proceedings in question are accord ing to Mr.Rudragowda, learned Counsel for the respondents based on a certificate issued by a Managing Director of the respondent—Corporation in accordance with Section 3 of the Karnataka Public Monies Recovery of Dues Act 1979. Mr.Gowda has not however produced the certificate issued by the Managing Director even when he was dircted to do so together with the relevant record. That direction s issued keeping in view the contention urged by Mr Tarakaram that the certificate had been issued without notice to the petitioners and that the determination of the peti tioners liability was violative of the principles of natural justice. That Sec.3 of the Act aforementioned empowers the Managing Director to issue a certificte for recovery of the outstanding ount due from ary person referred to in Section 3 cannot be disputed. what is however inportant is t hat such a certificste which has the effect of determining the liability of , , .5 —5— the person concerned can be issued only after he is put on notice and afforded an opportunity of being heard in the matter. No such notice was apparently issued at any stage by the Managing Director to the petitioner. The issue of such. a notice assumes all the more importance in view of the specific case set up by the petitioner that they are not lile to be proceeded ainst nor can their preDerty be sold for recovery of the balance amount outstanding against M/s,Haan ‘nterprises. Whether or not Sec. of the Act was applicable to enforce the liability of a guarantor as also the question whether or not the peti tioners stood absolved from their liability on account of reconstitution of the oartnersF’ip concern are cues— tion that may haveraised by the petitioners had a notice been issued to them before issuing the certi ficate. Suffice it to say that non issue of any notice and the denial of opportunity of an hearing to the peti tioners bcfore the matter was entrusted to the revenue agency for mcing recoveries was bound to cause pre judice to them and visit them with seriis civil conse— quencee rendering the certificate and the follow up \ proceedings illegal. —6— 2. In the ‘iit, this writ petition succeeds and is hereby altowed. Ihe Impugned recovery proceedings initiated against the petitioners are hereby quashed, Liberty is however ix kxx reserved to the Managing Director of the respondent—Corporation to issue a fresh certificate in accordance with law after affording to the petitiorrs an oooortunity of being heard in the matter. Since the matter has already been rlayed, I direct that the petitioners shall apnear before t Menaging Director of the respondent—orporat ion on 30—4—1998 to receive the notices which he may serve upon them nd to which the petitioners shall be at librtv to file objections within such time as may be specified for the nuroose. Upon consIderation of obec— tions if any filed, the Managing Director shall pass fresh orders on the subject in accordance with law. In the circstances, however, the parties are left to bear tieir own costs, L IiO( Jan7 cf)