D Meena, Guntur Dist vs K Lakshmi Narayana, Guntur Dist 1 ...
2022 Latest Caselaw 5486 AP

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           HON'BLE SRI JUSTICE SUBBA REDDY SATTI



        CIVIL MISCELLANEOUS APPEAL NO. 744 of 2016


JUDGMENT:

The above Civil Miscellaneous Appeal is filed against the order

and decree dated 22.06.2016 passed in E.A. No.184 of 2011 in EP

number 209 of 2010 in OS number 571 of 2009 on the file of IV

Additional Senior Civil Judge Guntur, whereby the claim petition

filed by the appellant under Order XXI Ruels 97, 99 and 101 of the

Code of Civil Procedure (for short 'CPC') was dismissed.

2. For the sake of convenience, parties shall be referred to as they

are arrayed in claim petition.

3. The case of the claim petitioner in brief is that claim petition

schedule property admeasuring 138.41 square yards of site along

with industrial building, near Golden Engineering Enterprises, 2nd

line, phase I and II, Auto Nagar, Guntur was purchased by the claim

petitioner from State bank of Hyderabad, Chandramouli Nagar

branch in the auction conducted by the bank. Claim petitioner

became the highest bidder for Rs. 8,20,000. Sale was confirmed on

26.05.2011. After payment of the amount and sale certificate was

issued in favour of the claim petitioner on 06.07.2011, on which date

possession of the property was handed over to the claim petitioner.

The sale certificate was registered on 07.07.2011 and the claim

petitioner has been in possession and enjoyment of the claim

petition schedule property since the date of its handing over

possession.

4. While so, on 30.07.2011, Court Amin came to the claim

petition schedule property in the absence of claim petitioner, to

deliver possession of claim petition schedule property to the 1 st

respondent. However, the said delivery was resisted on behalf of the

claim petitioner and Amin having noted the resistance went away

informing that the 1st respondent obtained decree in O.S.No.571 of

2009 against the 2nd respondent, wherein suit was filed for recovery

of money basing on promissory note executed by 2nd respondent. It

was informed about the attachment of the property before

judgement, passing of decree in favour of the 1st respondent, filing of

execution petition by decree holder; bringing the property to the

auction and participation of the decree holder in the auction with the

leave of the court in E.P.No.209 of 2010 in O.S.No.571 of 2009.

Subsequent to confirmation of sale and issuance of sale certificate,

auction purchaser filed E.A.No.153 of 2011 and hence the Executing

Court passed delivery order on 26.07.2011.

5. Claim petitioner having come to know about the proceedings,

consulted the advocate. The advocate, in turn, informed the claim

petitioner that 1st respondent herein filed O.S.No.571 of 2009

against 2nd respondent basing on promissory note dated 06.02.2007

executed by 2nd respondent for a sum of Rs.5,00,000/- and

decreeing of the suit by the court below on 25.02.2010 for a sum of

Rs.8,07,000/- with subsequent interest and costs. The claim

petitioner was also intimated that 1st respondent herein filed

I.A.No.864 of 2009 in OS number 571 of 2009 under Order 38 Rule

5 seeking attachment of the property before judgment in respect of

the claim petition schedule property.

6. In the claim petition it was averred that 2nd respondent

borrowed amount from State Bank of Hyderabad, Chandramouli

Branch, Guntur on 05.08.2006 and at the time of obtaining loan, 2nd

respondent deposited his title deeds and created equitable mortgage

with the bank. Subsequently, as 2nd respondent failed to discharge

the loan amount, the authorised officer of State Bank of Hyderabad,

Guntur initiated proceedings under section 13(2) of Securitisation

and Reconstruction of Financial Assets and Enforcement of Security

Interest Act 2002 (for short 'SARFAESI Act'). Possession notice was

issued and the same was published on 03.02.2011. The Bank

officials filed Crl.M.P.No.39 of 2011 on the file of learned Chief

Judicial Magistrate-cum-Prl.Assistant Sessions Judge, Guntur and

as per the order, dated 17.02.2011 passed by the said Court wherein

an Advocate Commissioner was appointed to take possession of the

schedule property. Advocate Commissioner took possession of the

property. Subsequent to handing over the possession of the claim

petition property to the authorized officer, auction was conducted

wherein claim petitioner emerged as highest bidder for Rs.

8,20,000/-. On 06.07.2011 Sale certificate was issued in favour of

the claim petitioners and possession of property was handed over to

her.

7. It was further averred in the claim petition that 1st and 2nd

respondents colluded together and hence 1st respondent filed suit

O.S.No.571 of 2009. 2nd respondent did not contest the suit. Decree

holder, after obtaining permission from the Court participated in the

auction and emerged as highest bidder for Rs. 12,15,000/- against

the EP amount of 8,93,147/-. When the Amin came to the property

to deliver the property the same was objected and hence the claim

petition was filed.

8. 1st respondent (decree holder) filed counter and opposed the

application. In the counter it was contended inter alia that the claim

petitioner is aware that sale of the claim schedule property was held

subsequent to the attachment of the property in suit O.S.No.571 of

2009, passing of decree, dated 25.02.2010 in favour of 1 st

respondent; that sale was conducted in execution of the decree in

which 1st respondent became the highest bidder; that sale certificate,

dated 06.06.2011 was issued by the Executing Court. It was further

averred by the 1st respondent that the sale certificate, dated

07.07.2011 obtained by the claim petitioner is invalid and doesn't

bind the 1st respondent. Pending enquiry in E.A.No.184 of 2011,

claim petitioner demolished the building and started construction of

new building and eventually prayed the court to dismiss the petition.

9. During the course of enquiry claim petitioner examined herself

as PW1 and got examined PW2. Exs.A1 to A 10 were marked. On

behalf of the respondents, the 1st respondent examined himself as

RW1 and Exs.R1 and R2 were marked. Executing Court by order

dated 22.06.2016 dismissed the claim petition. Aggrieved by the

same the above civil miscellaneous appeal is filed.

10. Heard Sri K. Rama Koteswara Rao learned counsel appearing

for the appellant and Smt. Kalla Tulasi Durgamba learned counsel

representing 1st respondent. No representation on behalf of the 2nd

respondent and in fact 2nd respondent remained exparte in claim

petition.

11. Along with the CMA, CMAMP No.1515 2016 was filed under

section 151 CPC to stay all further proceedings in EP No.209 of 2011

in O.S.No.571 of 2009 on the file of learned IV Additional Senior Civil

Judge, Guntur pending disposal of the appeal. This court by order

dated 27.09.2016 granted interim order and the same is extended

from time to time. The interim order is in existence as on today.

CMAMP No.1478 of 2017 was filed by the 1st respondent to vacate

the interim order dated 27.09.2016. With the consent of the both the

counsel, this Civil Miscellaneous Appeal itself was heard.

12. I.A. 1 of 2019 is filed under order XLI rule 27 CPC to receive

Additional Documents viz. (1) original sale certificate dated

06.07.2011, (2) certified copy of the registered sale certificate vide

No.3329/2011, dated 07.07.2011 and (3) original property tax dated

16.07.2018. No counter was filed by the 1st respondent.

13. Learned counsel for the claim petitioner would contend that

the claim schedule property was mortgaged with the bank when

respondent No.2 availed a loan of Rs.3,50,000/- on 05.08.2006 and

thereby created equitable mortgage. He submits that going by the

averments in the plaint, O.S.No.571 of 2009, 2nd respondent

borrowed an amount of Rs.5,00,000/- from the 1st respondent by

executing promissory note, dated 06.07.2007 for the said amount

and since he failed to discharge the amount, respondent No.1 filed

suit. He submits that according to the 1st respondent, in the suit 1st

respondent filed I.A.No.826 of 2009 under Order XXXVIII Rule 5 of

C.P.C. seeking attachment of the property and the same was ordered

and eventually suit was decreed on 25.02.2010. Thus, he submits

that execution of promissory note, filing of the suit, attachment

order and passing of judgment and decree are subsequent to

creation of equitable mortgage and hence, the suit claim is subject to

mortgage.

14. Learned counsel contends that the executing Court dismissed

the claim on a wrong presumption that judgment debtor transferred

the property in favour of the claim petitioner after filing of the suit.

He contends that executing Court went wrong in invoking Order XXI

Rule 102 of CPC, which has no application to the facts of this case.

He further contends that the executing Court did not consider

Section 58 of the Transfer of Property Act (T.P. Act). Learned counsel

also prayed the Court to receive the documents filed as additional

evidence. He also would contend that certified copies could not be

filed along with claim petition, though it was pleaded in the petition.

Thus, prays to allow the I.A. as well as appeal.

15. Learned counsel for respondent No.1 supported the order

impugned and contended that bank conducted auction subsequent

to the attachment order passed under Order XXXVIII Rule 5 of CPC

in the suit. In fact in the said suit, the auction was conducted on

16.03.2010 and 1st respondent being the decree holder, after

permission of the Court, participated in the auction and emerged as

the highest bidder for Rs.12,15,000/-. Thus, learned counsel for 1st

respondent contends that the order of the Court below need not be

interfered with.

16. The following points arise for consideration:

1. Whether the appellant being auction purchaser of property

pursuant to the mortgage had right of precedence over the

schedule property than the decree holder-1st respondent being

auction purchaser pursuant to a decree in civil suit filed

basing on promissory note?.

2. Whether the order under appeal is liable to be set aside?

3. To what relief?

17. 2nd Respondent herein is borrower of State Bank of

Hyderabad, Chandramouli Branch, Guntur. He borrowed an

amount of Rs.3,50,000/- 05.08.2006 from the said bank and

deposited title deeds whereby he created equitable mortgage with

the bank. After creating equitable mortgage, 2nd respondent

borrowed an amount of Rs.5,00,000/- from 1st respondent herein

on 06.02.2007 by executing promissory note in favour of 1st

respondent herein for the said amount.

18. Since 2nd respondent failed to discharge the amount, 1st

respondent filed O.S.No.571 of 2009 on the file of learned IV

Additional Senior Civil Judge, Guntur and also filed I.A.No.826 of

2009 under Order XXXVIII Rule 5 seeking attachment of the

property before judgment. 2nd respondent remained ex parte in

the suit and the suit was decreed on 25.02.2010. Subsequently,

E.P.No.209 of 2010 was filed and the property was brought to

sale. Auction was conducted on 16.03.2011 and the decree

holder/1st respondent, after obtaining permission of the Court

participated in the auction. 1st respondent became the highest

bidder for Rs.12,15,000/-. Sale certificate was issued on

06.06.2011 and according to the 1st respondent possession was

delivered to him on 26.07.2011.

19. 2nd respondent failed to discharge the loan amount, the

authorized officer of State Bank of Hyderabad initiated

proceedings under the SARFAESI Act. The authorized officer

followed the procedure as contemplated under Sections 13(2) and

13(4) of the SARFAESI Act.

20. Crl.M.P.No.39 of 2011 was filed by the authorized officer

before learned Chief Judicial Magistrate -cum- Prl. Assistant

Sessions Judge and Advocate Commissioner was appointed by

order, dated 17.02.2011 to take possession of the property.

Accordingly, bank has taken possession of the property through

the Advocate Commissioner on 01.03.2011 and thereafter bank

sold the property on 26.04.2011 by way of auction. The claim

petitioner participated in the auction and emerged as the highest

bidder for Rs.8,20,000/-. The possession of property was

delivered to the petitioner on 06.07.2011.

21. A perusal of order and documents clearly discloses about

creation of mortgage and subsequent procedure followed by the

bank officials under the SARFAESI Act. Though the claim

petitioner filed all the relevant documents along with the claim

petition, registered sale certificate was not marked as exhibit. The

document mentioned at serial No.26 of list of documents, is copy

of registered sale certificate, dated 07.07.2011.

22. Along with this appeal I.A.No.1 of 2019 is filed to receive

(1) original sale deed, dated 06.07.2011, (2) certified copy of

registered sale certificate, dated 07.07.2011 and (3) original

property tax, dated 16.07.2018. At para 9 of the affidavit, it was

contended that registered sale certificate was misplaced and

hence, the same could not be filed and that non-filing of original

registered sale certificate is neither intentional nor wilful. It was

further averred in the affidavit that when miscellaneous appeal

was listed before, this Court directed the claim petitioner to file

original documents.

23. A perusal of the order passed by lower Court would

indicate that the claim petitioner did not file registered sale

certificate dated 07.07.2011, which according to the trial Court is

crucial document. The lower Court did not consider the crucial

and relevant aspect whether mortgage is prior to the execution of

promissory note and the attachment order in the suit.

24. The point arose in the claim petition which could have

been addressed by Executing Court is whether the mortgage is

prior in point of time or execution of promissory note and

attachment before judgment is at prior point of time? However,

that point was not answered by the executing Court. Since all the

material is before the Court the finding of the executing Court

that claim petitioner did not produce original sale certificate is

unwarranted. Dismissing the claim petition placing reliance on

Order XXI Rule 102 of CPC is also beyond the scope of petition.

25. When a mortgage is created in terms of the provisions of

the Transfer of Property Act, it amounts to an encumbrance. An

order of attachment before judgment creates no charge. The

quality of the mortgage as an encumbrance does not get watered

down to be subservient to by an order of attachment by the civil

court under Code of Civil Procedure. That order of attachment

does not override or deserves to be preferred over the rights of a

mortgagee or the effect of the mortgage as an encumbrance

26. In Housing Development Finance Corporation v. Sub

Registry Officer1 wherein the issue arose under the

Securitisation and Reconstruction of Financial Assets and

Enforcement of Security Interest Act, 2002 Kerala High Court

held as under:

"This court finds that the rights and liberties conferred on the creditor/bank by virtue of mortgage created in the year 2001 and the right to proceed under the relevant provisions of the SARFAESI Act cannot be defeated because of the subsequent attachments ordered by the civil courts in 2007-2009. As such, the sale conducted on

[2011 (3) KLJ 561]

24.11.2010, leading to issuance of Ext.P4 sale certificate, is complete in all respects and the title stands conveyed to the second petitioner".

27. In City Union Bank Limited v. Sub-Registrar,

Peddapalli & Ors.2 a Division Bench of the High Court for the

State of Telangana and the State of Andhra Pradesh, held that

equitable mortgage, which was duly created and registered in

favour of the secured creditor being much prior to the order of

attachment before judgment, the sale certificate issued under the

provisions of the SARFAESI Act stands altogether on a different

footing under law and the order of attachment before judgment

will not have any bearing on the SARFAESI proceedings. It was

further held that Section 26E of the SARFAESI Act makes it clear

that notwithstanding anything contained in any other law for the

time being in force, after registration of the security, the debts

due to any secured creditor shall be paid in priority over all other

debts and all revenues, taxes, cesses and other rates payable to

the Central Government or State Government or local authority.

28. As noted supra, the crucial point to be decided was not

addressed by Executing Court. On that ground alone the order

under appeal is liable to be set aside. Apart from the same,

original documents (1) sale deed, dated 06.07.2011, (2) certified

copy of registered sale certificate, dated 07.07.2011 and (3)

2 Manu/HY/0183/2018

property tax, dated 16.07.2018 were filed along with the appeal

by way of interlocutory application under Order XI Rule 27 CPC.

No counter was filed opposing the same. Proper and valid reasons

were assigned to receive those documents. In fact, those

documents are also very much necessary in adjudicating the

disputes. The failure of the appellant in not filing the originals

before executing court is neither wilful nor wanton. For proper

adjudication, those documents are necessary.

29. In view of the narration supra, this Court is of the

opinion that the order under appeal is unsustainable and hence it

is hereby set aside. Claim Petition is remanded to the Executing

Court to decide afresh after receiving and marking the documents

three in number referred to supra as exhibits.

30. The Executing Court shall consider as to if Mortgage is prior

in point of time, and if so, the consequences of execution of

promissory note and attachment before judgment of the

mortgaged property keeping in view Sec 58 of Transfer of Property

Act and Order XXXVIII CPC. The Executing Court also if

necessary permit the parties to lead evidence. The Executing

Court shall frame point referred to supra which is relevant in the

facts of this case.

31. Accordingly, this Civil Miscellaneous Appeal is allowed by

setting aside the order dated 22.06.2016 passed in E.A. No.184 of

2011 in EP number 209 of 2010 in OS number 571 of 2009 on

the file of IV Additional Senior Civil Judge, Guntur. The matter is

remanded to learned IV Senior Civil Judge, Guntur for fresh

consideration with a direction to receive the documents i.e. (1)

original sale certificate, dated 06.07.2011, (2) certified copy

registered sale certificate bearing No.313 of 2011, dated

07.07.2011 (3) and original property tax receipt, dated

16.11.2018. If the parties intend to lead any evidence apart from

the evidence, which is already on record, the trial Court is at

liberty to permit them to lead evidence. The trial Court shall

dispose of the claim petition as expeditiously as possible within a

period of six months from the date of the order.

Registry is directed to send the originals filed along with I.A.1

of 2019 to the Lower Court without fail. No order as to costs.

As a sequel, pending miscellaneous petitions, if any, shall

stand closed.

________________________________ JUSTICE SUBBA REDDY SATTI Date : 23.08.2022 ikn

HON'BLE SRI JUSTICE SUBBA REDDY SATTI

CIVIL MISCELLANEOUS APPEAL NO. 744 of 2016

Date : 23.08.2022

ikn