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The Karnataka High Court recently ruled that a shareholder who prefers the sale of a property under Section 2 of the Partition Act cannot purchase the shares of other shareholders. In the judgment by Justice Sreenivas Harish Kumar, the court dismissed a petition filed by Mukunda Ra and Venkatesh Rao. The court highlighted that the petitioners, who expressed a preference for a sale, are prevented from exercising their rights under Section 3 of the Act when the respondents are willing to buy their shares at the court-determined valuation.
The case involved a property in Bhadravathi town, Shivamogga district, which was sold at an auction in April 2006. Ramachandra Rao, the original judgment debtor, emerged as the highest bidder with a bid of Rs 12,05,000. Subsequently, in court proceedings, a person named Mujeeb offered Rs 12.1 lakh and made the payment. Ramachandra Rao's legal representatives challenged this sale, leading the high court to direct the trial court to proceed according to the provisions of the Partition Act.
Following this, Ramachandra Rao's legal representatives sought permission from the trial court to deposit 2/3rd of Rs. 12.1 lakh and filed an application under Section 4 of the Partition Act, requesting the exercise of the right of pre-emption. The petitioners, Mukunda Ra and Venkatesh Rao, also asked the trial court to release their 2/3rd share.
On October 25, 2021, the trial court partially granted the application of Ramachandra Rao's legal representatives, directing them to deposit Rs. 16,57,058, which represented 2/3rd of the shares of Mukunda Rao and Venkatesh Rao. The court permitted the applicants to purchase the shares of the petitioners. Challenging this decision, the petitioners argued that as shareholders, they were entitled to buy the shares of the respondents, the legal representatives of Ramachandra Rao. They believed that by filing an application under Section 2 of the Partition Act, they obtained the right to purchase the shares of other shareholders.
Contrarily, the legal representatives of Ramachandra Rao contended that the petitioners had forfeited their right by filing an application under Section 2, indicating their desire for the sale proceeds of the property. After considering the arguments presented, Justice Sreenivas Harish Kumar clarified that when Sections 2 and 3 of the Act are read together, the court must first determine that division according to the decree is not feasible due to the reasons mentioned in Section 2.
The judge further noted that once the court orders a sale, parties or shareholders other than the applicant under Section 2 gain the right to purchase the shares. Consequently, the judge upheld the trial court's decision in Bhadravathi.
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