Andhra Pradesh High Court - Amravati
The South Indian Bank Limited vs The State Of Ap on 15 October, 2024
Author: Ninala Jayasurya
Bench: Ninala Jayasurya
APHC010178002024
IN THE HIGH COURT OF ANDHRA PRADESH
AT AMARAVATI [3443]
(Special Original Jurisdiction)
PRESENT
HONOURABLE THE CHIEF JUSTICE DHIRAJ SINGH THAKUR
THE HONOURABLE SRI JUSTICE NINALA JAYASURYA
WRIT PETITION Nos: 9214; 3181 and 13728 of 2024
W.P.No.3181 of 2024:
Between:
The South Indian Bank Limited ...PETITIONER
AND
The State Of Andhra Pradesh and Others ...RESPONDENT(S)
Counsel for the Petitioner: Mr.Ambatipudi Satyanarayana, Senior
Counsel assisted by Mrs.Ch. Laxmi Chaya
Counsel for the 1st & 2nd Respondent: Smt.S.Pranathi, Spl. Govt. Pleader
The Court made the following:
COMMON ORDER
Dt:15.10.2024.
The issue involved in these Writ Petitions is similar and the same
are disposed of by this Common Order.
2) The brief facts as set out in the Writ Petitions, relevant for better
appreciation of the petitioner's case are that the 3rd respondent - a
proprietary concern represented by the 4th respondent availed various
loan facilities to a tune of Rs.4,52,17,985.49 ps., from the petitioner-bank,
executed necessary loan documents and created an equitable mortgage
by depositing title deeds in respect of the following properties:
(a) Land admeasuring 515 Sq.yrds., bearing Plot No.274, Mayuri-II
Jana Chaitanya Plots, Gorantla Village, Amaravathi Road, Guntur,
purchased vide sale deed dated 17.04.2012;
(b) Land admeasuring 200 Sq.yards bearing Plot No.1137, Mayuri-II,
Janachaitanya Plots, Gorantla, Amaravathi Road, Guntur,
purchased vide Registered Sale Deed dated 26.03.2012; and
(c) Land admeasuring 240 Sq.yards, bearing Plot No.261, Arjun-II,
Janachaitanya Plots, Gorantla, Amaravathi Road, Guntur,
purchased vide Registered Sale Deed dated 23.04.2012.
3) The Memorandum of Deposit of Title Deeds in respect of the above
properties were executed initially in the month of November, 2012 and
the same were subsequently re-deposited by executing Memorandum of
Deposit of Title Deeds (Combined Format) for constructive redeposit of
title deeds and fresh deposit of title deeds on 30.01.2019 in favour of the
petitioner-bank. In view of the default in repayment of the loan amount,
Bank sold the above said properties in auction.
4) The grievance of the petitioner-The South Indian Bank Limited, is
that the Registration authorities are not registering the Sale Certificates
issued by the Bank under the provisions of the Securitization and
Reconstruction of Financial Assets and Enforcement of Security Interest
Act, 2002 (for short `the SARFAESI Act') in respect of the subject matter
properties on the premise that they have been included in the list of
prohibited category in view of the order of attachment in respect of the
same, which was made absolute by the learned I Additional Senior Civil
Judge, Guntur in O.S.No.105 of 2020.
5) Heard Mr. Ambatipudi Satyanarayana, learned Senior Counsel
appearing for the petitioner and Smt. S. Pranathi, learned Special
Government Pleader representing the respondents 1 and 2. Despite
service of personal notices, unofficial respondents had not caused
appearance.
6) Learned senior counsel for the petitioner-bank inter alia submits
that as the borrower / guarantor / mortgagor failed to discharge the loan,
the account of the borrower was classified as NPA on 29.08.2021 and by
invoking the provisions of SARFAESI Act, the subject matter properties
were auctioned on 27.10.2023, 20.09.2023 and 15.03.2024 respectively.
He submits that pursuant to the said auctions, the petitioner bank issued
Sale Certificates to the respondent No.7 in the respective Writ Petitions.
He submits that when the said Sale Certificates were sought to be
registered, the 2nd respondent refused to register the same and the
petitioner-bank on enquiries learnt that the respondent No.6 herein filed
O.S.No.105 of 2020 on the file of the 1st Additional Senior Civil Judge
Court, Guntur and obtained an order of attachment of the subject matter
properties vide Orders dated 16.12.2020 in I.A.No.229 of 2020 and the
same was made absolute on 06.10.2021. By reason of the said orders,
he submits that the subject matter properties were included in the list of
prohibited properties as per the provisions of the Registration Act and on
that premise the Registration of the Sale Certificates were not
entertained.
7) Learned Senior Counsel submits that the subject matter properties
were mortgaged in favour of the petitioner-bank by deposit of title deeds
prior to the order of attachment dated 16.12.2020, passed by the learned
I Additional Senior Civil Judge, Guntur, therefore the same is not binding
on the bank. He submits that the bank has every reason to believe that
the suit is collusive in nature, got filed by the mortgagor of the bank
through the 6th respondent to defeat the lawful proceedings initiated by
the Bank under the provisions of the SARFAESI Act. He submits that the
petitioner-Bank is not a party to the suit and as the 4th respondent, who is
the owner of the property had created a valid mortgage of the subject
matter properties in favour of the bank on 31.10.2019, being the secured
creditor, the bank has every right to proceed against the subject matter
properties, including the sale of the same by invoking the provisions of
the SARFAESI Act and its rights will not be affected by virtue of the
orders passed by the learned Civil Court. Referring to Section 26E and
other provisions of the said Act, he contends that the debts due to any
secured creditor shall be paid in priority over all other debts etc.
8) Relying on the decisions in City Union Bank Ltd., v Sub-
Registrar, Peddapalli1, Bank of India v The State of Andhra Pradesh2,
W.P.No.44014 of 2018, dated 19.12.2018 and the decision of the
Hon'ble Supreme Court of India in Celir LLP v Bafna Motors (Mumbai)
Private Ltd., and Ors.,3 learned Senior Counsel contends that in the light
of the statutory and legal position, the petitioner-bank is entitled for
Mandamus and directions to the 2nd respondent to Register the Sale
Certificates in respect of the properties referred to above.
9) The learned counsel had also drawn the attention of this Court to a
Memo dated 13.05.2022 issued by the Commissioner and Inspector
General of Registration and Stamps, Andhra Pradesh, Vijayawada,
wherein instructions were issued to the Registration Officers with regard
to the registration of the documents under the provisions of SARFAESI
Act vis-a-vis the attachment orders passed by the competent Court /
Registrar of Chits etc.
10) On the other hand, learned Special Government Pleader made
submissions with reference to the counter affidavit filed by the 2nd
respondent and supported the action of the Registration authorities in not
registering the Sale Certificates in respect of the subject matter
properties. Placing reliance on the decision of a Division Bench of this
2018 SCC OnLine Hyd 370 = WP No.1084 & 2585 of 2017 (06.08.2018)
W.P.No.3892 of 2022 APHC (22.04.2022)
(2024) 2 SCC 1
Court dated 18.04.2023 passed in W.P.No.2247 and 2259 of 2023, she
contends that by virtue of the order of attachment passed by the
competent Civil Court, the Sale Certificates cannot be registered and if at
all the interest of the bank is effected by virtue of the attachment orders,
the petitioner bank has to take necessary action to get the order of the
attachment raised. She contends that so long as the order of the
attachment continues, the properties which are listed in the prohibited
category cannot be registered. Making the said submissions she seeks
dismissal of the Writ Petitions.
11) This Court has considered the submissions made and perused the
material on record.
12) On an appreciation of the rival contentions, the point that falls for
consideration is as to whether the petitioner bank is entitled for
registration of the sale certificates in respect of the above mentioned
properties, in the facts and circumstances of the case.
13) At the outset, it may be pertinent to note that the execution of
Memorandum of Deposit of Title Deeds, dated 30.01.2019, in respect of
the subject matter properties and registration of the same by the Revenue
authorities is not in dispute. Further, it is also not in dispute that the
attachment orders dated 16.12.2020, referred to above passed by the
Civil Court in O.S.No.105 of 2020 are subsequent to the creation of the
equitable mortgage by deposit of title deeds in favour of the petitioner-
bank. Be that as it may.
14) In view of the default in payment of the loan amount, the petitioner-
bank invoked the provisions of the SARFAESI Act, and as contended by
the learned Senior Counsel, after registration of the security, the debts
due to the secured creditor (petitioner bank) shall be paid on priority over
all other debts in terms of Section 26E of the SARFAESI Act, which reads
as follows:
―26E. Priority to secured creditors.--Notwithstanding anything
contained in any other law for the time being in force, after the
registration of security interest, 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.‖
15) By virtue of the rights created in favour of the petitioner-bank
through the deposit of title deeds, it is entitled to realize the secured debts
by bringing the subject matter properties for sale. Following the
procedure contemplated under Law, the petitioner-bank invoked the
provisions of the SARFAESI Act and got auctioned the properties in
question for realization of the loan amount.
16) In City Union Bank Ltd., case referred to above a Division Bench
of the erstwhile High Court of Andhra Pradesh examined an identical
issue as to whether the Sale Certificates issued by the bank in favour of
the auction purchasers can be refused for registration by the Registrar
under the Registration Act on the pretext of an order of attachment
passed by the Civil Court. While referring to the provisions of the Civil
Procedure Code, the Transfer of Property Act and the Registration Act, as
also the decisions of the Hon'ble Supreme Court of India, the Division
Bench inter alia held as follows:
―...the equitable mortgage which was duly created and registered in
favour of the secured creditor is much prior to the order of attachment
before judgment and 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.‖
17) The Division Bench had also referred to decision of the Kerala High
Court in South Indian Bank Ltd., v The Sub-Registrar4, wherein it was
held that the secured creditor is entitled to proceed with the registration
and the Registration authority cannot stall the process of registration
under the guise of an order of attachment passed by the Civil Court. The
Division Bench in categorical terms held that ―the attachment 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‖.
WP© No.3875 of 2017 dt.24.11.2016
18) In a subsequent decision, another Division Bench in Bank of India
case referred to above following the judgment in City Union Bank Ltd.,
case and referring to the provisions of SARFAESI Act i.e., Section 26E,
Section 34 etc., issued directions to the Registrar to register the Sale
Certificate, inter alia, observing that the attachment orders came to be
passed long after the property was mortgaged to the secured creditor. In
the light of the said legal position, the contentions advanced by the
learned Senior Counsel merits acceptance.
19) In so far as the decision on which reliance was placed by the
learned Special Government Pleader, the fact situation is different. It
appears that there is a specific direction from a Court of competent
jurisdiction restraining the Sub-Registrar from registering the sale deed
and in those circumstances, certain observations were made by the
Court, while dismissing the Writ Petitions. But in the case on hand, by
virtue of registration of the securities in favour of the Bank prior to the
order of attachment, being the security creditor, the debts due to the Bank
shall be paid in priority over all other debts, revenues, taxes etc., as
contemplated under Section 26E of the SARFAESI Act. Since the Bank
in the attending facts and circumstances conducted auction for recovery
of loan amounts, the Registration of the Sale Certificates in respect of the
subject properties have to be carried out without any demur. The
attachment orders referred to above and the listing of the subject matter
properties in the prohibited category pursuant to the attachment orders
are of no consequence, cannot be an impediment for registration of the
Sale Certificates validly issued under the provisions of SARFAESI Act.
The point is accordingly answered in favour of the petitioner-bank.
20) In the result, the Writ Petitions are allowed. There shall be a
direction to the 2nd respondent to register the Sale Certificates in respect
of the subject matter properties as and when the same are presented
without reference to the list of prohibited category of properties, if the
same are otherwise in compliance with the provisions of the Registration
Act and the Stamp Act. No costs.
18) Consequently, the Miscellaneous Applications pending, if any, shall
stand closed.
DHIRAJ SINGH THAKUR,J
NINALA JAYASURYA,J
Ssv
