Madras High Court
M/S.Siva Automotive Trading ... vs The Sub Registrar on 2 August, 2023
W.P.(MD) No.28500 of 2022
BEFORE THE MADURAI BENCH OF MADRAS HIGH COURT
DATED : 02.08.2023
CORAM:
THE HONOURABLE MR.JUSTICE S.S.SUNDAR
and
THE HONOURABLE MR.JUSTICE D.BHARATHA CHAKRAVARTHY
W.P.(MD) No.28500 of 2022
and
W.M.P.(MD)No.22505 of 2022
M/s.Siva Automotive Trading Private Limited,
No.2C, Gate Lock Road, New Ramnad Road,
Madurai-625 009.
Rep. by its Authorized Signatory,
Mr.Veeramani Arumugam,
S/o.Arumugam ... Petitioner
-vs-
1.The Sub Registrar,
Othakadai Sub Registrar Office,
No.869, Melur Main Road,
Othakadai, Madurai-625 107.
2.M/s.Pro Visual Audio Private Limited,
No.4, Pushpa Nagar, 1st Main Road,
Iyyapanthangal, Chennai-600 056.
3.M/s.Sukrith Motor Cars Private Limited,
Rep. by its Directors,
Mrs.N.Maheswari & Natarajan Purushothaman,
B-73, 3rd Street, Kalai Nagar,
Madurai-625 104.
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W.P.(MD) No.28500 of 2022
4.R.P.Balamurugan
5.M/s.Kotak Mahindra Bank Limited,
Rep. by its Authorised Officer,
Samson Towers, 4th floor, No.402, 403,
Pantheon Road, Egmore,
Chennai-600 008.
6.Commissioner of CGST & Central Excise,
Office of the Commissioner of CGST & Central Excise,
Central Revenue Buildings,
Bibikulam, Madurai-625 002.
7.M/s.Mahindra & Mahindra Financial Services Limited,
Rep. by its Authorised Officer,
Dr.G.M.Bhosalre Marg, P.K.Kurne Chowk,
Worli, Mumbai-400 018. ... Respondents
PRAYER: Petition filed under Article 226 of the Constitution of India, to
issue a writ of certiorarified mandamus, to call for the records of the
encumbrance attachment entries in vide Document Nos:8/2019, dated
11.04.2019, Document No.9/2019, dated 12.04.2019, Document Nos:
19/2019 and 20/2019, dated 26.08.2019 on the file the first
respondent/Sub Registrar, Othakadai Sub Registrar Office, Madurai
and quash the same and consequently, direct the first respondent to
register the Sale Certificate dated 22.11.2022 issued by the fifth
respondent bank to and in favour of the petitioner/Auction purchaser
M/s.Siva Automotive Trading Private Limited, within a time frame.
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W.P.(MD) No.28500 of 2022
For Petitioner : Mr.R.Murali
for Mr.T.N.Karthikeyan
For Respondents : Mr.J.K.Jeyaseelan
Government Advocate for R1
: No Appearance for R2 to R4
: Mrs.Ananda Gomathy for R5
: Mr.N.Dilipkumar for R6
: Mr.A.P.Athithan for R7
ORDER
[Order of the Court was made by D.BHARATHA CHAKRAVARTHY, J.]
The petitioner company is an auction purchaser of the property in
the nature of plots in Uthangudi village, Madurai North Taluk, Madurai
North Registration District in R.S.Nos.149/4A1, 149/4A3, 149/4A and
148/2. The property was sold under SARFAESI Act, by the fifth
respondent bank, being the secured creditor. A sale certificate was duly
issued in favour of the petitioner on 22.02.2022. Upon producing the
same for registration before the first respondent namely the Sub-
Registrar, Othakadai, Madurai, the same was declined orally on the
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W.P.(MD) No.28500 of 2022
ground that in respect of the property purchased, there are orders of
attachment passed by the Commissioner of CGST and Central Excise
Madurai, the sixth respondent herein, vide Document No.8 of 2019
dated 11.04.2019 and Document No.9 of 2019 dated 12.04.2019. This
apart the eighth respondent being the sole arbitrator, at the behest of
seventh respondent, namely M/s.Mahindra and Mahindra Financial
Services Limited had also passed attachment orders dated 26.8.2019
which are registered as Document Nos.19 of 2019 and 20 of 2019.
2. It is the case of the petitioner that the fifth respondent alone is
the secured creditor and by virtue of the provisions of the SARFAESI
Act, the claim of the secured creditor is paramount and has precedence
over others and therefore, the registration of the above attachment
orders have to be deleted and the petitioner’s sale certificate is to be
registered.
3. Heard Mr. R.Murali, learned counsel appearing on behalf of the
petitioner, Mr.J.K.Jayaseelan, learned Government Advocate appearing
on behalf of the respondents 1 to 4, Mrs. Ananda Gomathy, learned
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W.P.(MD) No.28500 of 2022
counsel appearing on behalf of the fifth respondent, Mr.N.Dileep Kumar,
learned counsel appearing on behalf of the sixth respondent and Mr.A.P.
Adhithan, learned appearing on behalf of the seventh respondent.
4. On perusal of the material records of the case more specifically
the encumbrance certificate it is clear that there is a mortgage executed
in favour of the fifth respondent bank. Therefore, the fifth respondent
being the secured creditor under the SARFAESI Act and the security
interest being duly registered, by virtue of Section 26E of SARFAESI Act,
2002, it is only the claim of the fifth respondent bank which has
priority. Section 26E of SARFAESI Act, 2002, is extracted hereunder for
ready reference:
“Section 26E: Priority to secured creditors. 26E.
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. Explanation.—For the purposes of this
section, it is hereby clarified that on or after the
commencement of the Insolvency and Bankruptcy Code, 2016
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W.P.(MD) No.28500 of 2022
(31 of 2016), in cases where insolvency or bankruptcy
proceedings are pending in respect of secured assets of the
borrower, priority to secured creditors in payment of debt
shall be subject to the provisions of that Code.”
5. On account of the above amendment to the SARFAESI Act,
2002, the attachment of the commissioner of CGST and Central Excise
as well as the attachment under the arbitration award will stand valid if
only any money which is left over after the satisfaction of the entire loan
due to the fifth respondent bank.
6. Therefore, once the fifth respondent bank exercises its power of
selling the property through the Authorized Officer, the attachments
made by the other respondents were rendered otiose. Thereafter, the
only right of the sixth and seventh respondents was to claim their dues
if any surplus money is left with the Authorized Officer under the
SARFAESI Act. This position is no longer res integra and is recently
reiterated by the Hon’ble Supreme Court of India in Kotak Mahindra
Bank Ltd vs. Girnar Corrugators Private Limited and Others [2023
(3)SCC 210] and it is useful to extract paragraph No.32 which reads as
hereunder:
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W.P.(MD) No.28500 of 2022
“....32. At this stage, the object and purpose of the
enactment of the SARFAESI Act is required to be considered.
The SARFAESI Act has been enacted to regulate securitization and
reconstruction of financial assets and enforcement of security
interest and to provide for a Central database of security interest
created on property rights, and for matters connected therewith or
incidental thereto. Therefore, the SARFAESI Act has been enacted
providing specific mechanism/provision for the financial assets
and security interest. It is a special legislation for enforcement of
security interest which is created in favour of the secured creditor
— financial institution. Therefore, in absence of any specific
provision for priority of the dues under the MSMED Act, if the
submission on behalf of Respondent 1 for the dues under the
MSMED Act would prevail over the SARFAESI Act, then in that
case, not only the object and purpose of special
enactment/the SARFAESI Act would be frustrated, even the later
enactment by way of insertion of Section 26-E of the SARFAESI
Act would be frustrated. If the submission on behalf of
Respondent 1 is accepted, then in that case, Section 26-E of
the SARFAESI Act would become nugatory and would become
otiose and/or redundant. Any other contrary view would be
defeating the provision of Section 26-E of the SARFAESI Act and
also the object and purpose of the SARFAESI Act.”
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W.P.(MD) No.28500 of 2022
7. The learned counsels appearing on behalf of the sixth and
seventh respondents cannot dispute the above legal position. In this
case admittedly there is no money which is left over after satisfying the
loan amount of the fifth respondent bank and thus the attachments
made by the sixth and seventh respondents have become completely
nugatory and otiose and such are liable to be deleted as otherwise the
same would create unnecessary cloud over the title of the petitioner.
Useful reference in this regard can be made to the judgment of this
court in Tamil Nadu Mercantile Bank Ltd., Vs. The Joint I Sub
Registrar and Others [2021 (2)LW 622] whereunder in paragraph No.
13, these entries were ordered to be deleted by the Sub Registrar. The
learned counsel on either side would not dispute the said legal position
that similar reliefs has been granted in several other decisions also.
8. In view thereof, this writ petition is allowed on the following
terms:
(i) The writ petitioner shall once again present the sale
certificate dated 22.11.2022 before the first respondent for
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W.P.(MD) No.28500 of 2022
registration within a period of two weeks from the date of
receipt of a copy of this order. Upon such production, the first
respondent shall register the same in accordance with law
more specifically without reference to any of the attachment
orders or encumbrances that may reflect in the records;
(ii)The first respondent shall also show the entries of
attachments vide Document Nos.8 of 2019, 9 of 2019, 19 of
2019 and 20 of 2019 as deleted;
(iii) There shall be no orders as to costs. Consequently,
connected miscellaneous petition is closed.
[S.S.S.R., J.] [D.B.C., J.]
02.08.2023
NCC : Yes / No
Index : Yes / No
Internet : Yes / No
sji
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W.P.(MD) No.28500 of 2022
S.S.SUNDAR, J.
and
D.BHARATHA CHAKRAVARTHY, J.
sji
To:
The Sub Registrar,
Othakadai Sub Registrar Office,
No.869, Melur Main Road,
Othakadai, Madurai-625 107.
W.P.(MD) No.28500 of 2022
02.08.2023
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