Karnataka High Court Grants Relief to Senior Citizen in Loan Guarantee Case

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On 3rd August 2020, Justice G. Narendar heard the case of Smt Lakshmamma & Anr V. Pheonix Arc Pvt Ltd, via video-conferencing. The Court granted relief to the petitioners as the loan amount was paid by Respondent No .2 company by selling off the commercial property. Hence, the residential property of the Petitioner No. 1 was saved from getting disposed of due to non-payment of the loan.

Facts of the Case 

The petitioner and respondents belong to the same family. The relationship between the petitioner and the respondent can be stated as follows:

  1. Petitioner No. 1 is a widow and a senior citizen.
  2. Petitioner No. 2 is the daughter in law of Petitioner No.1.
  3. Respondent 3 is the son in law of petitioner No. 1
  4. Respondent No. 4 is the daughter of petitioner No.1 and wife of Respondent No. 3.

Petitioner No. 1 is a guarantor to the loan advanced to Respondent No. 2. Respondent No. 3 has defaulted in repayment of the loan. Respondent No. 3 and 4 are partners of Respondent No. 2. They have defaulted in repayment of the loan. The residential property of petitioner No. 1 was kept as security for the loan advanced.

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Respondent No. 1 initiated action and took physical possession of the property. That possession covers 10% of the outstanding loan amount. The Respondent No.1 proceeds to sell the property of the Petitioner No.1.

Petitioner No.1 gave a representation to Respondent No.1 to proceed against the borrower property first. The borrower’s property is commercial property. The commercial property is enough to fetch the loan amount. Petitioner No. 1 also filed a writ of mandamus seeking the directions to respondent No. 1.

As per the court’s compliance, Respondent No.1 issued notice to Respondent No. 2 to deposit a sum of 10% of the reserve price. The writ of mandamus stated that petitioner’s submission is in favour of the petitioner as well as the company. 

Arguments of the Petitioners

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The learned counsel for the Petitioner argues that Petitioner No. 2 is ready to deposit the balance amount. But petitioner No. 2 is unable to do so in view of the interim order.

Arguments of the Respondents

The learned counsel for the Respondent argues that Petitioner No. 2 is willing to deposit the balance amount on the present day. The sale of the property is confirmed in favour of Petitioner No. 2. Respondent No.1 should be permitted to refund the amount received from the highest bidder of the property. 

Court’s Analysis

The writ petition disposes of by placing a record of the learned counsel of Petitioner.

Court’s Decision

The court directed Respondent No. 1 to receive a balance of amount ₹1,12,76,000. Respondent No. 1 receives the amount if it is deposited by Petitioner No. 2. The company confirms sale in favour of Petitioner No. 2. 

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The company is also permitted to refund the amount to the highest bidder of the property. The possession of the property should be handed over within one week from the date of receipt of the balance amount.

The petition stands ordered an disposed of accordingly.


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