Madras High Court
State Bank Of India vs The Sub Registrar on 9 November, 2023
W.P.(MD)No.18340 of 2021
BEFORE THE MADURAI BENCH OF MADRAS HIGH COURT
DATED : 09.11.2023
CO RAM
THE HONOURABLE MR.JUSTICE N.ANAND VENKATESH
W.P.(MD)No.18340 of 2021
State Bank of India,
Stressed Asset Recovery Branch,
Rep. through its Chief Manager,
LMS Compound, Opposite to Museum West Gate,
Vikas Bhavan Post,
Thiruvananthapuram, Kerala – 695 033. ... Petitioner
-vs-
1.The Sub Registrar,
O/o. Sub-Registrar, Pavoorchathiram,
Kamarajar Street, Pavoorchathiram,
Tenkasi District.
2.M/s. Sree Narayana Modern Rice Mills,
A Partnership Firm,
Rep. by its Partners,
Door No.10/936 D1, Melepavoor Road,
Kulasekharapatti Village,
Pavoorchatram Post, Tenkasi Taluk,
Tenkasi District.
3.N.Muthuselvi
4.S.Navamani
5. N.Karthiga
1/16
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6.N.Revathi
7.Karuppayee
8.Shanmuga Lakshmi @ Priya
9.Shriram Transport Finance Company Ltd.,
No.25, MPM Building, 2nd Floor,
SN High Road, Tirunelveli Junction,
Tirunelveli - 627 001. ... Respondents
PRAYER: Writ Petition filed under Article 226 of the Constitution of India,
to issue a Writ of Mandamus, directing the first respondent to efface/delete
the encumbrances namely the attachment found in Entry No.19, dated
22.07.2019 in Document no.76/2019 and the Entry No.20, dated 11.10.2019,
bearing Document No.90/2019 and the Entry No.21, dated 04.11.2019,
bearing Document No.96/2019 and the Entry No.25, dated 18.10.2019,
bearing Document No.95/2019, reflected in the Encumbrance Certificate,
bearing No.58/2021, dated 24.08.2021, in respect of the schedule of the
properties annexed along with this writ petition, on the basis of the
petitioner's representation dated 04.08.2021, within a time frame as may be
fixed by this Court.
For Petitioner : Mr.M.Ponniah
For R1 : Mr.A.K.Manikkam
Special Government Pleader
For R2, R3, R5 and R6 : Mr.R.Rajesh Kumar
For R4 and R7 : No Appearance
For R8 : Mr.A.Mathan
2/16
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W.P.(MD)No.18340 of 2021
For R9 : Mr.R.Shankar Ganesh
ORDER
This Writ Petition has been filed by the State Bank of India for
issuance of Writ of Mandamus, directing the first respondent to delete the
entries found in the Encumbrance Certificate, by considering the
representation made by the petitioner on 04.08.2021.
2. The specific case of the petitioner is that the respondents 2 to 7 had
availed various loan facilities from the erstwhile State Bank of Travancore
and created mortgage over the properties by virtue of deposit of title deeds on
21.04.2010, 12.09.2013, 13.01.2016 and 28.11.2016. All these mortgages
were registered before the first respondent. The loan amount was not repaid.
The State Bank of Travancore was merged with the State Bank of India by
virtue of the Notification issued by the Government of India, dated
22.02.2017 and it became effective from 01.04.2017.
3. The further case of the petitioner is that the loan amount was not
repaid back and hence, proceedings were initiated by the Bank for recovery
of the loan. It is also brought to the notice of this Court that the property was
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W.P.(MD)No.18340 of 2021
brought for sale towards the recovery of loan and the sale certificate was also
issued in favour of the successful bidder and the sale certificate was also
registered on the file of the first respondent.
4. The grievance of the petitioner is that the respondents 2 to 7 had
colluded with the respondents 8 and 9 and started creating encumbrance over
the properties, which have already been mortgaged to the petitioner Bank and
thereby, the Entry Nos.19, 20, 21 and 25 were made in the Encumbrance
Certificate based on the collusive orders obtained from the Civil Court. The
petitioner wants these entries to be deleted from the Encumbrance Certificate
and a representation was made in this regard. Since the same was not
considered, the present Writ Petition has been filed before this Court.
5. The issue that is involved in the present Writ Petition is squarely
covered by the earlier orders passed by this Court. For proper appreciation,
the order passed by this Court in W.P.(MD)No.17254 of 2020, dated
24.03.2021 [State Bank of India vs. The Joint - II Sub – Registrar, Karur and
others] can be relied upon and the relevant portions are extracted hereunder:-
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''10.The learned Counsel cited a number of decisions in
support of his legal contention that the secured creditor is having
precedence over other claims as against the property. The legal
position has been repeatedly clarified and the issue is no longer res
intergra. Among the citations, the learned Counsel would rely upon a
Full Bench decision of this Court in UTI Bank Vs Deputy
Commissioner, reported in (2007) 1 MLJ 1 and he would draw the
attention of this Court to paragraph Nos.24, 25 and 26 thereof,
which are as hereunder:
''24.All the decisions relied on by Mr.V.T.Gopalan, clearly
show that the Government is entitled to claim its dues/taxes/duties in
preference to other ordinary debts. In all those cases there is no
provision as found in SARFAESI Act or a specific provision claiming
to have ''first charge.''
... ... ... In Dena Bank case (cited supra) it is held that the
Crown's preferential right to recover all debts over other creditors is
confined to ordinary and unsecured creditors.
25.In the case on hand, the petitioner Bank which took
possession of the property under Section 13 of the SARFAESI Act,
being a special enactment, undoubtedly is a secured creditor.
26. In the light of the above discussion, we conclude,
''(i) Generally, the dues to Government, i.e.,tax, duties, etc.
(Crown's debts) get priority over ordinary debts.
(ii) Only when there is a specific provision in the statute
claiming ''first charge'' over the property, the Crown's debt is entitled
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W.P.(MD)No.18340 of 2021
to have priority over the claim of others.''
11.The learned Counsel would also rely upon yet another Full
Bench judgment in The Assistant Commissioner Vs. The Indian
Overseas Bank, reported in 2016 (6) CTC 769 and the relevant
paragraphs are extracted hereunder:
''2.We are of the view that if there was at all any doubt, the
same stands resolved by view of the Enforcement of Security Interest
and Recovery of Debts Laws and Miscellaneous Provisions
(Amendment) Act, 2016, Section 41 of the same seeking to introduce
Section 31B in the Principal Act, which reads as under:-
''31B. Notwithstanding anything contained in any other law
for the time being in force, the rights of secured creditors to realise
secured debts due and payable to them by sale of assets over which
security interest is created, shall have priority and shall be paid in
priority over all other debts and Government dues including
revenues, taxes, cesses and rates due to the Central Government,
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, 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.''
3.There is, thus, no doubt that the rights of a secured creditor
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W.P.(MD)No.18340 of 2021
to realise secured debts due and payable by sale of assets over which
security interest is created, would have priority over all debts and
Government dues including revenues, taxes, cesses and rates due to
the Central Government, State Government or Local Authority. This
section introduced in the Central Act is with ''notwithstanding''
clause and has come into force from 01.09.2016.
6.In so far as question (b) is concerned, the same is stated to
relate only to auction sales, which may be carried out in pursuance
to the rights exercised by the secured creditor having a mortgage of
the property. This aspect is also covered by the introduction of
Section 31B, as it includes ''secured debts due and payable to them
by sale of assets over which security interest is created''.
12.The learned Counsel would also draw the attention of this
Court to the decision in the case of Ansari Vs Commercial Tax
Officer, reported in 2016 SCC Online Madras 18565, wherein the
learned Judge of this Court in paragraph Nos.4,5 and 6 has held as
hereunder;
''4.At this stage, it would be worthwhile to refer to the decision
of the Hon'ble Division Bench of this Court in the case in 1.D.Senthil
Kumar, 2.C.P.Senthil, 3.C.P.Sakthivel vs. 1. The Commercial Tax
Officer, Brough Road, Erode 2.The Sub-Registrar, No.1,
Karungalpalayam, Erode (2006-3-L.W.627), wherein in an identical
set of facts, the order of attachment was set aside. Paragraph No.12
of the judgment is usefully extracted hereunder:
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''12. In the instant case, the property was sold by public auction
on 10.03.2003. The sale was conducted in execution of the Recovery
Certificates issued by the Debts Recovery Tribunal for recovery of
dues to the City Union Bank. The appellants had paid the entire
amount due on 25.3.2003 and the sale was confirmed in their favour
on 23.4.2003. There is no indication of any sales tax arrears in the
advertisement for auction sale and there was no application from
any statutory or public authority seeking to set aside the sale. For
the first time, by letter dated 25.6.2004, the Commercial Officer
required the second respondent to create an encumbrance with
regard to the property and consequently an entry was made in the
register in respect of encumbrance of the first respondent. Thus, it is
evident that the appellants had no actual notice of the charge prior
to the transfer. There is also no material to show that the appellants
had constructive notice of the charge and no submissions were made
by the learned Special Government Pleader on this issue. In the
circumstances, we are of the view that the appellants were the
purchasers for value without notice for the sales tax arrears of the
defaulting company or the consequent charge on the property. Thus,
the property in the hands of the appellants was free of the charge and
it is not open to the first respondent to enforce the liabilities of the
defaulting company in this manner against the appellants.''
5. Further, in the decision in the case of Senthil Kumar vs.
Assistant Commissioner, Chennai and Others, in W.P.No.9928 of
2009, dated 22.12.2010, the Hon'ble Division Bench, in somewhat
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identical circumstances, has held as follows:
''17. However in this case, the property was sold under the
provision of SARFAESI Act for non-payment of dues to the Bank, the
Third Respondent which brought the property for auction through
tender-cum-auction sale on 19.5.2008; The Sale Certificate was also
issued on 19.5.2008 and possession and also stated to be given to the
petitioners. The rights already got accrued to the petitioners in view
of the sale under the SARFAESI Act. The First respondent-s
communication dated 24.12.2008 to the Third Respondent-Bank
reads as follows:
''The Sub-Registrar, Virugambakkam has issued an
Encumbrance Certificate on 24.12.2008 with the Commercial Tax
Officer as one of the purchaser cannot claim the right on the said
property.''
The aforesaid communication would show that the
Encumbrance (tax arrears) Certificate was only reflected on
24.12.2008. Whereas the Encumbrance Certificate dated 15.5.2008
issued by the Sub-Registrar Office, Virugambakkam did not reflect
any encumbrance except the Sale Deed dated 9.6.1998 and no claim
of the First Respondent was reflected. The sale was conducted on
19.5.3008 and subsequent only the encumbrance of the First
Respondent was made on 24.12.2008. It is clear from Sale Notice
dated 20.09.2008 by the First Respondent, the sales tax arrears were
due from 1991-92 to 1996-97. However, the petitioners had no notice
of charge over the property in question, in spite of their due
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W.P.(MD)No.18340 of 2021
verification of Encumbrance Certificate dated 15.5.2008. Hence, it
has to be held that the petitioners are bona fide purchasers without
notice of charge under Section 24(2) of the TNGST Act and the rights
accrued to them cannot be interfered with. For the reasons stated
above, the respondents 1 and 2 belatedly could not proceed against
the petitioner's property for the arrears of sales tax due of the
Company which availed the loan from the Third Respondent-Bank.''
6. In the light of the above, the writ petition is allowed and the
impugned attachment is quashed and the second respondent is
directed to delete the said entry and make appropriate entries stating
that the said attachment has been lifted. The above direction shall be
complied with by the second respondent within a period of four
weeks from the date on which the petitioner approaches the second
respondent by way of representation, accompanied by a copy of this
order. No cost. Connected miscellaneous petition is closed.''
13.The petitioner has also cited the latest judgment of this
Court in the case of Tamil Nadu Merchantile Bank Limited Vs the
Joint-I Sub Registrar Office, Madurai and others [W.P(MD)Nos.
6976 and 1101 of 2021 dated 29.01.2021] and referred to Paragraph
Nos.8,9 and 13, which read as follows:
''8. Considering the similar issue, a Division Bench of this
Court, in which one of us [Hon'ble Mr.Justice M.M.SUNDRESH] is a
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party, in a batch of writ petitions in W.P.(MD)Nos.8546 of 2020,
etc., batch, by order dated 09.09.2020, was pleased to hold that the
proceedings under the SARFAESI Act would have primacy, especially
in a case where the mortgage in favour of the Bank was earlier. The
aforesaid decision was rendered after taking note of the judgment
rendered by the Division Bench of the Gujarat High Court in Bank
of India v. State of Gujarat [Manu/GJ/0130/2020] and a Full Bench
judgment of this Court in Assistant Commissioner (CT), Annasalai
III Assessment Circle v. Indian Overseas Bank [(2016) 6 CTC 769].
9. Reliance has been made on the order passed by the learned
Single Judge in Govindhji Jewat & Co., v. Rukmani Mills Ltd.,
reported in 2020 (6) CTC 313, wherein, the aforesaid principle has
been reiterated. In the said case, the learned Single Judge has held
that the mortgage being earlier, it creates a right in favour of the
mortgagee and therefore, even the order of attachment passed by the
Civil Court will have to yield. In the said judgment also, the learned
Single Judge made reliance upon the judgment of the Division Bench
in S.Senthamarai Kannan v. Chief Manager, Canara Bank, Palani
Branch, Dindigul District [CDJ 2020 MHC 2555].
13. Therefore, looking from any perspective, we are of the view
that the petitioner Bank cannot be denied the relief as sought for. In
such view of the matter, both the writ petitions stand allowed. The
first respondent in both the writ petitions are directed to register the
sale certificates issued by the petitioner Bank in favour of the
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respondents 7 & 8 in W.P.(MD)No.6976 of 2020 and the 7th
respondent in W.P.(MD)No.1101 of 2021. Consequently, the
encumbrance / attachment entry made on the file of the first
respondent with respect to the properties, which are subject matter of
the two mortgage deeds and the subject matter of these writ
petitions, are directed to be deleted by the first respondent.''
14.The learned Counsel would thus submit that the issue has
been settled in favour of the petitioner bank, giving no room for any
adjudication in this writ petition, anymore.
15.Mr.K.Sathiya Singh, learned Additional Government
Pleader appearing for the 1st respondent would submit that as far as
the legal position is concerned he has nothing to add, as the Courts
have consistently been holding that the secured creditor will have
precedence over the other attachments. He would therefore, submit
that any direction issued by this Court, the 1st respondent would
comply with the same.
16.Mr.S.Ponsenthilkumaran, learned Counsel appearing for
the 4th respondent has made his factual submission in regard to the
attachments made at the instance of his client. For respondent Nos.2
and 3, there is no representation despite notice being served and the
names have been printed in the cause list for the today's hearing.
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17.In any case, when the legal principle has been well settled
in favour of the petitioner claim, the presence and absence of the
private respondents would not be material at all in disposing of this
writ petition.
18.In consideration of the above narrative, this court is of the
view that as contended by the learned Counsel for the petitioner, the
claim of the petitioner has to be necessarily allowed. The facts would
disclose that the charge has been created by the bank as early as on
04.07.2011 itself, that is much prior to the attachments made on the
schedule property at the instance of the respondents 2 to 4 herein.
19.In view of the catena of decisions and a few of which,
referred to for the sake of brevity, this Court being bound by the
decisions has to mandatorily follow the legal precedents on the
subject matter. Moreover, there appears to be no dispute in regard to
the factual narrative as mentioned above and therefore, this Court
has to allow this writ petition without any hesitation.
20.In the above said circumstances, a writ of Mandamus is
issued to the 1st respondent to delete the encumbrances, namely the
attachment entries as stated by the petitioner in the prayer of the writ
petition, in respect of the schedule property, made at the instance of
the respondents 2 to 4 herein. The 1st respondent is directed to
implement this direction within a period of four weeks from the date
of receipt of a copy of this order. The bank is also directed to make
available a copy of the affidavit filed in support of the writ petition
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for the 1st respondent to act in pursuance of the above direction of
this Court.''
6. When the above order was passed, this Court took into consideration
all the earlier orders and came to a conclusion that the subsequent
encumbrances that were made, will not bind the Bank and accordingly,
directed deletion of the encumbrances. The above order will squarely apply
to the facts of the present case, since the encumbrance was already created in
favour of the petitioner Bank and thereafter, in the year 2019, subsequent
encumbrance was created. The same will not bind the petitioner Bank.
7. In view of the above, there shall be a direction to the first respondent
to delete the encumbrances namely, the attachment found in Entry No.19,
dated 22.07.2019 in Document no.76/2019 and the Entry No.20, dated
11.10.2019, bearing Document No.90/2019 and the Entry No.21, dated
04.11.2019, bearing Document No.96/2019 and the Entry No.25, dated
18.10.2019, bearing Document No.95/2019, reflected in the Encumbrance
Certificate, bearing No.58/2021, dated 24.08.2021. This process shall be
completed by the first respondent within a period of four weeks from the date
of receipt of a copy of this order. The petitioner is directed to make a fresh
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representation to the first respondent along with all the relevant documents
and also a copy of this order.
8. This Writ Petition is disposed of with the above directions. No
costs.
NCC : Yes/No 09.11.2023
Index : Yes/No
smn2
To
The Sub Registrar,
O/o. Sub-Registrar, Pavoorchathiram,
Kamarajar Street, Pavoorchathiram,
Tenkasi District.
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W.P.(MD)No.18340 of 2021
N.ANAND VENKATESH, J.
smn2
W.P.(MD)No.18340 of 2021
09.11.2023
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