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Judgment
The present writ petition is filed seeking to issue a writ of Mandamus declaring the action of the respondents in not registering the Sale Certificate dated 01.10.2019 in respect of the property i.e. House bearing No.15-2810/1 situated at Bharat Nagar, 1st cross(Ambedkar Nagar Seg-2), Chittoor town, pursuant to the auction conducted on 06.07.2019 and including the same in the prohibitory list as illegal, arbitrary and contrary to Law and for a consequential direction to the respondents to register the Sale Certificate dated 01.10.2019 by deleting the said property from the prohibitory list and to pass such other orders.
Heard learned counsel for the petitioner, the learned Assistant Government Pleader for Stamps and Registration and Sri Suresh Kumar Reddy Kaluva for respondent No.4.
The brief facts as per the affidavit filed in support of the writ petition are as follows:
The petitioner is a nationalized bank. It extended various credit facilities to one Mr.M.Nagarajaiah and his wife Smt.V.L.N.Manjula by way of financial assistance against various assets creating security interest in favour of the bank. As the said creditors failed to repay the outstanding amount, the accounts were declared as Non-Performing Assets(N.P.A.). Notices under Section 13(2) of Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act( for short 'SARFAESI Act') were issued on 20.10.2018 calling upon them to pay the total outstanding liabilities of the Bank. As they failed to pay the outstanding amounts, the bank issued a possession notice under Section 13(4) of the SARFAESI Act r/w Rule 8 of the Rules framed under the said Act in respect of the property in question. Later the possession of the same was taken over pursuant to the orders passed in an application filed under Section 14 of the SARFAESI Act. Subsequently, an auction was conducted in respect of the said property on 30.05.2019 and one Mr.A.Vamsi Krishna became the successful bidder in respect of the above property bearing D.No.15-2810/1 situated at Bharath Nagar, Chittore Town. The sale was confirmed in his favour on the same day as he paid 25% of the offer price i.e., Rs.17,12,750/- and the balance amount Rs.51,38,250/- was subsequently paid and a Sale Certificate was issued in his favour on 01.10.2019. When the third respondent was approached by the bank- authorities to register the sale certificate dated 01.10.2019 in favour of the above said auction purchaser, the third respondent refused to register the Sale Certificate on the ground that the 4th respondent obtained orders of attachment dated 21.08.2018 in O.S.No.70 of 2018 on the file of XI Additional District Judge, Chittore, against the above said property and therefore the property was included in prohibitory list. Aggrieved by the said action, the present writ petition is preferred.
The learned counsel for the petitioner submits that the principal borrower mortgaged the said property to the petitioner-bank by deposit of title deeds vide document No.78/2006, much prior to the order of attachment dated 21.08.2018 in I.A.No.152 of 2018 in O.S.No.70 of 2018. He contends that the Sale Certificate issued under the provisions of SARFAESI Act stands altogether on different footing in Law and the order of attachment before or after the judgment, will not have any bearing on proceedings initiated in terms of SARFAESI Act. While contending that the sale of the mortgaged property in favour of the auction purchaser and the consequential sale certificate issued in terms of SARFAESI Act is free from all encumbrances, he submits that the attachment affected subsequent to the mortgage created in favour of the petitioner-bank would not affect the rights of the secured creditor/bank over the property. The learned counsel while placing reliance on the judgment of Hon'ble Division Bench of the erstwhile common High Court in City Union Bank Limited, Karim nagar branch v. Sub-Registrar, Pedda Palli ALD 2018 Vol.6 Pg.16 = ALT 2018 Vol.5 Pg.279 submits that the action of the 3rd respondent in refusing to register the sale certificate on the ground that there is an order of attachment, is illegal, arbitrary and that if the property in question is not deleted from the prohibited list of properties and not registered, the petitioner-bank as well as the auction purchaser will be subjected to serious prejudice and irreparable loss.
The learned counsel for respondent No.4 submits that in view of the order of attachment and decree in favour of respondent No.4, rights of the decree holder prevails over the rights of the auction purchaser. The learned Assistant Government Pleader supported the action of the respondent No.3 in refusing to register the property in question as the same was attached by virtue of the orders passed by a competent Civil Court.
The submissions made by the learned counsel are considered in the light of the judgment referred to supra, wherein the Hon'ble Division Bench dealt with identical facts and circumstances. In the said case, loan was granted by the petitioner i.e., the City Union Bank Limited. The Managing Partner of the 4th respondent-firm therein created an equitable mortgage in favour of the secured creditor/bank by depositing title deeds of his immovable property. As he failed to pay the loan amounts, the secured creditor/bank invoked provisions of SARFAESI Act by treating the loan account as Non-Performing Assets(NPA). Accordingly, the bank issued demand notice and also possession notice under the provisions of SARFAESI Act. Later, the property was brought to auction on 25.02.2016 and respondent No.5 therein stood as highest bidder in the auction and the secured creditor/bank issued Sale Certificate dated 19.08.2016. Thereafter, the secured creditor/bank and the 5th respondent-auction purchaser approached the Registration Authorities, but they refused to register the property on the ground that the same is sub-judice before the Court of Senior Civil Judge, Karimnagar in I.A.No.290 of 2015 in O.S.No.901 of 2015 where in on 25.06.2015, an order of attachment before judgment under Order 38 Rule 5 of the Civil Procedure Code has been passed. Under the said circumstances, the secured creditor/bank filed a writ petition challenging the action of the Sub-Registrar in not registering the Sale Certificate.
The Hon'ble Division Bench formulated the point for consideration in the following terms:
"Whether the Sale Certificate executed by the bank in favour of the auction-purchaser can be refused registration by the Registrar under the Registration Act, 1908 on the pretext of an order of attachment before judgment by a Civil Court?"
The Hon'ble Division Bench while referring to the provisions of Order 38 Rule 5 and Rule 10 as also Section 64 of the Civil Procedure Code dealing with the provisions of attachment before judgment visa-a-vis Sections 53 and 54 of the Transfer of Property Act and Sections 22-A, 47 of the Registration Act, 1908, allowed the writ petition by directing the Sub- Registrar to register the Sale Certificate in accordance with the Registration Act. The Hon'ble Division Bench in the light of the judgments of the Hon'ble Supreme Court in Kerala State Financial Enterprises Ltd., v. Official Liquidator, High Court of Kerala AIR (2007) Supreme Court 63, Sardar Govindrao Mahadik v. Devi Sahai (1982) 1 SCC 237 and Hamda Ammal v. Avadiappapathur (1999) 1 SCC 715, expressed the view that the equitable mortgage which was duly created and registered in favour of the secured creditor/bank is much prior to the order of attachment before judgment and the Sale Certificate issued under the provisions of SARFAESI Act stands altogether on a different footing and the order of attachment before judgment will not have any bearing on the SARFAESI proceedings.
The Hon'ble Division Bench while examining the argument of the learned Government Pleader for Revenue with reference to Section 22-A of the Registration Act and Standing Order 219 issued by the Revenue Department pertaining to the registration expressed its considered view "that it only pertains to a civil dispute between the private parties and does not include an institutional sale under a statute. Though Section 64 comes into play only after the alienation of the property under attachment amongst the private persons, the said legal position does not create an embargo upon the Registrar to proceed with the registration of sale certificates under the SARFAESI Act as the bank is not a party to the suit and the sale is not being effected by a party to the attachment order."
The Hon'ble Division Bench while referring to Rule 10 of Order 38 of Civil Procedure Code which provides that "Attachment before Judgment shall not affect the rights, existing prior to the attachment, of persons not parties to the suit, nor bar any person holding a decree against the defendant from applying for the sale of the property under attachment in execution of such decree" opined that in view of the said provision, the attachment before judgment shall not affect the rights, existing prior to the attachment, of person not parties to the suit. Ultimately, the Hon'ble Division Bench held thus:
"The preponderance of judicial opinion leads to the irresistible conclusion that the sale of the mortgaged property in favour of the auction purchaser and the sale certificate under the SARFAESI Act in such circumstances is free of all encumbrances. The attachments effected subsequent to the mortgage created in favour of the bank do not affect the rights of the secured creditor over the subject property. Such attachments have no impact on the sale conducted under the Act and the same ceases to have any effect or fall to the ground the moment the same is confirmed in favour of the secured creditor Bank and auction purchaser. Otherwise, those attachments would remain as a permanent taboo prejudicially affecting the marketability and title to the property even though they ceased to have any legal efficacy and thereby it becomes necessary to register the sale certificate."
A similar view was expressed by another Division Bench in its order dated 19.12.2018 in Writ Petition No.44014 of 2018.
In view of the above legal position, the contentions of the learned counsel for the petitioner merits acceptance and the contentions contra of the respondents deserves to be rejected.
Accordingly, the writ petition is allowed. The action of the respondent No.3 in not registering the Sale Certificate dated 01.10.2019 is declared as illegal, respondents are directed to delete the property in question from the prohibitory list and the respondent No.3 is directed to register the said Sale Certificate in accordance with law. It is needless to observe that this order would not preclude the 4th respondent to work out his remedies available in law against the defendants/judgment debtors in O.S.No.70 of 2018 on the file of XI Additional District Judge, Chittore. There shall be no order as to costs.
As a sequel, all the pending miscellaneous applications, if any, shall stand closed.