Maruturi Raghavendra Rao vs The State Of Andhra Pradesh,
2022 Latest Caselaw 9173 AP

          *HONOURBLE SRI JUSTICE D.V.S.S. SOMAYAJULU
                        + W.P.No.28307 of 2011



% 29.11.2022


# Maruturi Raghavendra Rao,
S/o Samba Murthy, aged 42 yrs.,
Chirala Mandal,
Prakasam District and another

                                                          ... Petitioners


        Vs.
$ The State of Andhra Pradesh
Rep., by the District Collector & District Magistrate,
Prakasam District at Ongole and 2 others.
                                                         ... Respondents




! Counsel for the petitioner : Sri G.Ramesh

! Counsel for the Respondents : Government Pleader for Revenue


< Gist:


> Head Note:


? Cases referred:
1
    2012 (1) ALD 90 (SC)
1
    (2016) 10 SCC 767
                               2




HON'BLE SRI JUSTICE D.V.S.S.SOMAYAJULU


                   W.P.No.28307 of 2011
O R D E R:

This writ petition is filed questioning the unilateral

execution and registration of two deeds of cancellation dated

05.09.2011 by which a certificate of sale issued by the Debt

Recovery Tribunal was cancelled without notice etc.

This case raises some interesting questions for decision.

Petitioners are the successful bidders in an auction

conducted by the Debt Recovery Tribunal, Visakhapatnam.

The State Bank of India, Chirala filed O.A.No.62 of 2009

against a defaulting borrower for recovery of the money due.

The Tribunal decreed the O.A., and issued a certificate for

recovery of the sum due. The certificate was transmitted to

the Recovery Officer, who exercised the powers conferred on

him by the Recovery of Debts Due to Banks and Financial

Institutions Act, 1993. He brought the property to sale in an

auction held on 18.10.2010. The petitioners were the highest

bidders for items 2 and 3 of the auction held on 18.01.2021.

The sale was confirmed in their favour. An order of

confirmation was also given in favour of the petitioners. The

sale certificates were also registered on 29.01.2011.

Thereafter, the petitioners came to know that unilateral deeds

of cancellation bearing Nos.4127 and 4128 of 2011 were

executed by the District Collector, Ongole and the same were

also registered. Questioning the said registration of the

unilateral deeds on various grounds, the present writ petition

is filed.

For the petitioners Sri G.Ramesh argued the matter at

great length. He put in a lot of effort to explain to the Court

the provisions of the Acts that are applicable and the legal

position. He also gave a compilation of case law.

The sum and substance of the learned counsel‟s

submission is that (1) no notice was issued to the petitioners

before the documents were cancelled (2) Rule 26(1)(k)(i) of the

A.P. Rules under Registration Act, 1908 (for short „the Rules)

on which the State relies is not applicable and the same was

relied upon for cancelling the deeds. (3) Unilateral

cancellation of the sale certificates is not valid under law; (4)

Recovery of Debts and Bankruptcy Act, 1993 (Act 51 of 1993)

and the Securitisation and Reconstruction of Financial Assets

and Enforcement of Security Interest Act, 2002 (Act 54 of

2002) (for short „the SARFAESI Act) are Special Acts enacted

by the Parliament and their provisions will prevail over the

Andhra Pradesh Assigned Lands (Prohibition of Transfers)

Act, 1977 (for short „the POT Act‟) enacted by the State. (5)

Lastly, a three year period is fixed by judicial interpretation of

the Rule before which an assignment can be cancelled and in

this case, the same expired long ago. Learned counsel relies

upon the compilation of judgments to argue that the entire

action is vitiated.

In reply to this, on behalf of the 2nd respondent, very

detailed submissions are made by the Government Pleader for

Revenue. According to him, the lands which are the subject

matter of the certificate of sale are „assigned‟ lands. These

assigned lands were sold in the year 2005-2006 by the

original assignees. It is therefore submitted that the initial

transfer by the assignee to one Karna Nagalingam is opposed

to the POT Act. A show cause notice was also issued and it is

stated that after considering the issues, the possession of the

lands were also taken back. The appeal filed by the said

K.Nagalingam before the Revenue Divisional Officer against

the order of the Tahsildar was also dismissed. K.Nagalingam

also made an application for issuance of No Objection

Certificate for transfer of the land, but the same was also

rejected by the Government. Questioning the same,

WP.No.26391 of 2010 was filed. But in the interim period,

the said K.Nagalingam sold some part of the land and also

mortgaged another part to State Bank of India. Thereafter,

the property was brought to sale by the Recovery Officer of

the Debt Recovery Tribunal and the same was purchased by

the petitioners. The contention of the learned Government

Pleader therefore is that the lands which were mortgaged were

already resumed by the State and despite the information

being submitted to the Debt Recovery Tribunal, the Recovery

Officer proceeded with the sale. Therefore, it is contended

that the entire sale is vitiated.

In addition, it is pointed out that Rule 26(1)(k)(i) of the

Rules is squarely applicable to the facts and circumstances

and the District Collector himself has executed the deeds of

cancellation which were duly registered by the Sub-Registrar.

Learned Government Pleader also points out that a reading of

the cancellation documents, which are impugned, clearly

show that the property was sold despite intimation to the

Debt Recovery Tribunal. Therefore, learned Government

Pleader justifies the action of the State.

COURT: This Court has given anxious considerations to the

issues raised. It is clear that the vires of Rule 26(k) is not

challenged in this case. The law on the aspect is clear and

well settled. Cancellation of previously registered deed can

only be done if a Court of competent jurisdiction cancels the

same or if the procedure under Rule 26 (1) (k)(i) is followed.

As this branch of law is well settled, this is not been adverted

to once again.

(a) The first point that has to be decided is whether the

petitioners are entitled to any notice before the deeds of sale

are cancelled. Rule 26(1)(k)(i) of the Rules on which both the

petitioners and the respondents rely upon is as follows:

26(1)(k)(i) The registering officer shall ensure at the time of presentation for registration of cancellation deeds of previously registered deed of conveyances on sale before him, that such cancellation deeds are executed by all the executant and claimant parties to the previously registered conveyance on sale and that such cancellation deed is accompanied by a declaration showing mutual consent or orders of a competent Civil or High Court or

State or Central Government annulling the transaction contained in the previously registered deed of conveyance on sale;

Provided that the registering officer shall dispense with the execution of cancellation deeds by executant and claimant parties to the previously registered deeds of conveyance on sale before him if the cancellation deed is executed by a Civil Judge or a Government Officer competent to execute Government orders declaring the properties contained in the previously registered conveyance on sale to be Government or Assigned or Endowment lands or properties not registerable by any provision of law.

A plain reading of this Rule does not indicate that before

the deed of cancellation is executed, the affected party is

entitled for a notice. However, the case law relied upon by the

learned counsel includes the judgment in Kaitha Narasimha

v. the State of A.P. (W.P.NO.3744 of 2007), wherein a

Division Bench held that Rule 26(1)(k)(i) of the Rules

incorporates one of the facets of the rules of natural justice in

the procedure laid down for registration of a cancellation

deed. The Rule, according to the Division Bench, is intended

to ensure that a duly registered sale deed is not cancelled

without the executant and the claimant getting an

opportunity to contest the registration of the cancellation

deed. In the case of Thota Ganga Laxmi and another v.

Government of Andhra Pradesh and others 1, the Hon‟ble

Supreme Court also considered Rule 26(1)(k)(i)). In the

concluding paragraph, the Hon‟ble Supreme Court held that

only when a sale deed is cancelled by a competent Court that

the cancellation deed can be registered and that too after

notice to the concerned parties. In that case, the Hon‟ble

Supreme Court noticed that there was no declaration by a

competent Court nor was there any notice to the parties.

In Satya Pal Anand v. State of Madhya Pradesh and

others2, the position of law in the case of Thota Ganga

Laxmi (1 supra) was also considered and the passage

mentioned above was cited, but no distinction was drawn by

the Hon‟ble Supreme Court.

A Division Bench of the combined High Court while

deciding W.P.No.20683 of 2012 and W.P.No.2192 of 2013

clearly held in a para 29 as follows:

"29. Thus, having regard to the law laid down by the Supreme Court and provisions of the Act, in our

2012 (1) ALD 90 (SC)

(2016) 10 SCC 767

opinion, whenever registered documents such as Development Agreement-cum-GPA, is sought to be cancelled, execution and registration of such a document/deed must be at the instance of both the parties i.e., bilaterally and not unilaterally. If a deed of cancellation is allowed to be registered without the knowledge and consent of other party to the deed/document, sought to be cancelled, such registration would cause violation to the principles of natural justice and lead to unnecessary litigation, emanating therefrom. In any case, as stated earlier, in the absence of any provision specifically empowering the Registrar to entertain a document of cancellation for registration without the signatures of both the parties to the document, the deed cannot be entertained. Moreover, if the Registrars are allowed to entertain a deed of cancellation for registration without signatures of both the parties to the document sought to be cancelled, such power would tantamount to conferring the power to decide disputed questions between the parties. No party to the document would ever approach for cancellation of registered document unilaterally unless there is a dispute with the other party in respect of the subject matter of the document.

In view of this position of law, it is clear that as valuable

rights of parties are involved and the decision to cancel an

earlier registered document has civil consequences, this Rule

of natural justice has been read into Rule 26(1)(k)(i) of the

Rules, by the Division Bench of the combined High Court and

also the Hon‟ble Supreme Court. Therefore, this Court has no

hesitation to hold that even if that before action under

26(1)(k)(i) of the Rules is taken, parties to a document are

entitled to a notice and a hearing before the final action is

taken on the cancellation deed.

(b) RULE 26(k)(i):

If the Rule 26(1)(k)(i) is examined, the following would be

visible:

(1) the Registering Officer should ensure that all the

parties to the previously registered deed which is now sought

to be cancelled should execute the deed of cancellation and

(2) the cancellation deed must be accompanied by a

declaration showing mutual consent; which clearly implies

that apart from the execution of the deed of cancellation, a

document showing mutual consent is required and (3) the

deed of cancellation or mutual consent document is not

required, if the cancellation is by virtue of an order of

competent Civil Court, High Court or State or Central

Government annulling the transaction in the previous deed.

The proviso which carves out the exception states that; if the

deed of cancellation is executed by a Civil Judge or a

Government Officer competent to execute the Government

orders declaring the property contained in the previous

document of sale to be Government or assigned or

endowment land or a property that is not capable of

registration, the bilateral deed of execution is not necessary.

This is the sum and substance of the Rule in question.

If it is broken down into its component parts, the following

are discernible:

(i) Cancellation deed should be executed by all the parties

concerned.

(ii) There should be a declaration showing mutual consent

which should be presented along with the deed of cancellation

or there should be an order of a competent Civil Court or High

Court or the State or the Central Government „annulling‟ the

transaction.

(iii) If the deed is executed by a Government Officer, it should

reflect the fact that: that the properties contained in the

previously registered conveyance are government properties,

assigned lands or endowment lands or properties are not

registerable by any provision of law,

(iv) the Officer executing this deed of cancellation should also

be „competent to execute the document‟.

Unfortunately, the Rules do not define who is a

„Competent Officer‟. The Rules do not specify or name a

particular Officer as the Competent Officer. The varieties of

lands as mentioned are „assigned lands‟; endowment lands or

lands that are „not registerable‟ by any provision of law.

These are clearly different types of lands and different

enactments/laws govern them. Under the applicable law, the

Officer must be authorized. Thereafter, the Officer who is

executing the deed on behalf of the State should be

„competent‟ to execute the cancellation deed pursuant to the

Government order by which the property is declared to be

Government/assigned/endowment land etc.

The importance of this Rule and its provisions is also

highlighted by sub-rule 26(ii) itself which is as follows:

26(k)(ii) Save in the manner provided for above no cancellation deed of a previously registered deed of conveyance on sale before him shall be accepted for presentation for registration.

(v) Annulment of a transaction is also an order having

serious consequences. There should therefore be a clear

recital of the annulment of the transaction by the State or the

Central Government as defined in Rule 26(1)(k)(i) of the Rules.

This order of annulment must naturally precede the deed of

cancellation. (vi) Unless all these conditions are all fulfilled in

conjunction, a deed of cancellation cannot be registered

under Rule 26(1) (k) (i) of the Rules. It is reiterated that as

different enactments apply to assigned lands/endowment

lands etc., the „competency‟ of the Officer must be defined and

established.

Needless to say a notice/compliance with rules of

natural justice is also necessary as mentioned in the previous

paragraphs.

If the deeds of cancellation filed in this case are

examined vis-à-vis, the literal interpretation of Rule

26(1)(k)(i)), it is clear that there is no Government order

"annulling" the transaction. It is also clear that there is no

Government order „declaring‟ that the properties contained in

the certificate of sale are assigned lands and Government

lands. It is also clear that the competency of the District

Collector to execute the deed of cancellation is also not

established. It is also not clear from the counter and the

documents filed that the procedure under Section 4 of the

POT Act has been followed.

Therefore, this Court also holds that on these grounds

also the petitioners are entitled to succeed.

(c) Unilateral cancellation of deeds is no longer valid. The

case law is very well settled and is not being repeated here

once again.

(d) SARFAESI ACT/RDDB ACT:- The last submission made

by the learned counsel for the petitioners is that Act 54 of

2002 and the SARFAESI Act are Special Acts passed by the

Parliament to permit the sale of properties in which security

interest has been created without the intervention of the

Court. Section 13 of the SARFAESI Act and in particular

section 13(4) of the SARFAESI Act are clear. As per section

13(6) of the SARFAESI Act, the transferee shall secure all the

rights that are existing in the property and the transfer shall

be deemed to have been made by the original owner himself.

It is further clear that under section 17 of the SARFAESI Act,

any person aggrieved by the sale of the property shall have to

make an application before the Debt Recovery Tribunal within

45 days. So this provides a remedy to a person affected by

the Bank's action.

Section 35 of the SARFAESI Act, is also as follows:

35. The provisions of this Act to override other laws: The provisions of this Act shall have effect, notwithstanding anything inconsistent therewith contained in any other law for the time being in force or any instrument having effect by virtue of any such law.

Therefore, it is clear that this Central law will override

the provisions of all other laws including the POT Act which is

a State Act. The learned counsel also drew the attention of

this Court that the period of limitation provided under section

17 of the SARFAESI Act, which is 45 days from the date on

which the measures were taken. Learned counsel submits

rightly that the respondents have spelt out in their counter

that they were aware of the proceedings before the Recovery

Officer. Yet they did not take action within the stipulated 45

days.

This Court also notices section 36 of the SARFAESI Act,

which is as follows:

36. Limitation: No secured creditor shall be entitled to take all or any of the measures under sub- section (4) of section1 3, unless his claim in respect of the financial asset is made within the period of limitation prescribed under the Limitation Act, 1963 (36 of 1963).

In the light of this, it is clear that the respondent-State

should have approached the Debt Recovery Tribunal; filed an

appropriate application and thereafter sought a declaration

that they are the rightful owners of the property and instead

of doing so, they unilaterally executed the deeds of

cancellation. The respondents cannot by themselves decide

that the property was wrongly transferred or that the

execution of the certificate of sale is also not correct. They

acted as a judge in their own case. In this court‟s opinion

this is a matter eminently within the jurisdiction of the

Courts/Tribunals under the relevant Acts. Once the statute

prescribes the manner in which the action is to be taken it

should be done in that method or not at all.

The two Acts RDDB Act and SARFAESI Act are special

central enactments. In particular, the SARFAESI Act was

enacted with the avowed objective of speeding up recovery of

bank dues and without Courts intervention also. At the same

time, a person affected is given the option of approaching the

Debt Recovery Tribunal and seeking redressal (section 17).

These are special enactments/ central enactments and as

such they will prevail over the POT Act made by the State of

Andhra Pradesh. On this ground also, this Court holds that

in the circumstances of this case, the action of the

respondent-State is wrong.

(e) The last issue raised is about the limitation. According

to the learned counsel for the petitioners and the case law

relied upon by him, by a process of judicial interpretation, the

Courts have held that for violation of conditions of allotment,

a period of three years from the date of allotment is fixed for

the action. Therefore, he submits that the cancellation in

2011 is incorrect.

In the opinion of this Court, while the proposition of law

is correct, its applicability to the facts of the case is in doubt,

since what the State has done appears to be done/concluded

in 2007. Therefore, this issue is decided against the

petitioners.

Legal Conclusions : In conclusion, this Court holds as

follows; (A) Before a deed of cancellation is registered

cancelling the previously registered document, the parties to

the documents should be put on notice and given an

opportunity of representing their case. As a consequence and

as a natural corollary, the aggrieved parties‟ objection should

be disposed by a speaking order and on merits.

(B) As per Rule 26 (1) (k)(i), the cancellation deed

should be executed by all the parties to the document and is

to be accompanied by a declaration showing mutual consent

or the orders of a civil Court or a High Court or of the State or

Central Government „annulling the transaction‟, (C) the

Officer executing the deed of cancellation (if it is not executed

by a Judge/Court ) should rely upon a prior/earlier order of

the Government annulling/declaring the property contained

in the previous document to be Government land/assigned

land etc., and (D) the said officer should also be

„authorized/competent‟ to execute the deeds. This competency

should be by virtue of a law/regulation having the force of law

and cannot be a self conferred competency. (E) All these

conditions must exist/be complied with fully before the

previously registered deed is cancelled.

In case of conflict between the Central Act namely the

SARFAESI Act, r/w Act 51 of 1993 vis-à-vis, POT Act, like in

the present case, the Central Acts alone shall prevail. The

respondents can only take recourse to the provisions of law

by moving an appropriate application before the designated

Court within the period of limitation for a declaration of their

rights. They cannot unilaterally decide the issues involved.

The writ petition is therefore allowed. No order as to costs.

As a sequel, the miscellaneous petitions if any shall stand

dismissed.

________________________ D.V.S.S.SOMAYAJULU,J

Date: 29.11.2022 Note L.R. Copy be marked.

KLP