Madras High Court
Indian Bank vs The Sub Registrar on 15 September, 2023
WP No.10594 of 2023
IN THE HIGH COURT OF JUDICATURE AT MADRAS
DATED : 15-09-2023
CORAM
THE HONOURABLE MR.JUSTICE S.M.SUBRAMANIAM
WP No.10594 of 2023
And
WMP No.10543 of 2023
Indian Bank,
Chinniampalayam Branch,
1/202, Avinashi Road,
Chinniampalayam,
Coimbatore-641 062. ... Petitioner
Vs.
1.The Sub Registrar,
Singanallur Sub Registrar Office,
14/48, Vellalore,
Coimbatore-641 016.
2.Mr.P.Thirugnanam ... Respondents
Prayer: Writ Petition filed under Article 226 of the Constitution of India
for issuance of a Writ of Certiorarified Mandamus, calling for the records of
the first respondent and quash the Refusal Check Slip bearing
Page 1 of 28
https://www.mhc.tn.gov.in/judis
WP No.10594 of 2023
No.RFL/Singanallur/5/2023 dated 25.02.2023 and consequently direct the
first respondent to register the Certificate of Sale dated 23.02.2023.
For Petitioner : Mr.Jayesh B.Dolia,
Senior Counsel for
M/s.Aiyar and Dolia.
For Respondent-1 : Mr.T.Arunkumar,
Additional Government Pleader.
For Respondent-2 : Mr.K.Suresh
ORDER
The Refusal Check Slip dated 25.02.2023 issued by the first
respondent, is under challenge in the present writ petition.
PETITIONER'S CASE:
2. The petitioner is Indian Bank, questioned the validity of
returning the Sale Certificate presented for registration under the
Registration Act, 1908.
3. The principles already settled by the High Courts and the
https://www.mhc.tn.gov.in/judis
WP No.10594 of 2023
Supreme Court, are not in dispute between the parties to the writ petition on
hand.
4. Admittedly, the first mortgage was created by the borrowers
in the petitioner-Indian Bank on 13.05.2014. The second mortgage by way
of Supplemental Deed was created on 20.11.2014 and the third mortgage
was created on 05.10.2015. The order of attachment was passed by the
Principal District Court, Karur in OS No.104 of 2016 on 20.07.2017 and on
19.01.2021.
5. The account of the borrower was declared as Non-
Performing Assets. Consequently, the demand notice was issued under
Section 13(2) on 20.01.2021. Publication was made on 26.01.2021 and
possession notice was issued under Section 13(4) of the Act, on 13.07.2021.
Auction sale notice was issued on 08.12.2022 and E-Auction was held on
26.12.2022. The conditional order was passed by the Debts Recovery
Tribunal, Coimbatore in S.A.No.1163 of 2022 to pay a sum of
Rs.1,40,00,000/- by an order dated 26.12.2022. After conducting public
auction, the petitioner-Bank issued Sale Certificate to the Auction Purchaser
https://www.mhc.tn.gov.in/judis
WP No.10594 of 2023
on 23.02.2023. Sale Certificate issued was presented for registration under
the provisions of the Registration Act, 1908. The Sub Registrar returned the
Sale Certificate on the ground that the subject property was attached by the
Principal District Court, Karur in OS No.104 of 2016 and therefore, the
documents cannot be registered in view of the bar imposed under Section
22-B of the Registration Act, 1908.
6. The learned Senior Counsel appearing on behalf of the writ
petitioner mainly contended that the petitioner-Bank is the secured creditor
holding first charge over the subject property and empower to deal with the
property to realise the debts. They acted in accordance with the SARFAESI
Act, 2002 and the Rules and accordingly auctioned the property through
public auction and consequently issued Sale Certificate in favour of the
successful Auction Purchaser.
7. It is mainly contended that the attachment issued by the
Principal District Court is not binding on the petitioner-Bank in view of
Order XXXVIII, Rule 10 of the Code of Civil Procedure and Section 26-E
of the SARFAESI Act. Order XXXVIII, Rule 10 of the Code of Civil
https://www.mhc.tn.gov.in/judis
WP No.10594 of 2023
Procedure speaks about “attachment before judgment not to affect the rights
of strangers, nor bar decree-holder from applying for sale”. Section 26-E of
the SARFAESI Act, provided “priority to secured creditors”. Accordingly,
the petitioner-Bank holds first charge over the property and more-so the
mortgage was created prior to the attachment of the property by the
Principal District Court, Karur.
8. In support of the above contentions, the learned Senior
Counsel for the petitioner relied on the judgment of the Hon'ble Division
Bench of Madurai Bench dated 31.08.2023 passed in WP (MD) No.674 of
2023. The Hon'ble Division Bench considered the judgments of the Apex
Court of India on the principles relating to secured creditors holding first
charge over the mortgaged property under Section 26-E of SARFAESI Act.
The Hon'ble Division Bench further considered that the subsequent
attachments are not binding on the secured creditors in view of Order
XXXVIII, Rule 10 of Code of Civil Procedure. Section 64 of Code of Civil
Procedure bars 'private transfer'.
9. The transfer in the present case is an involuntary transfer. It
https://www.mhc.tn.gov.in/judis
WP No.10594 of 2023
is the secured creditor, who has exercised his right under the Special Act, is
the SARFAESI Act, 2002. The Hon'ble Division Bench of Madurai Bench
of this Court considered the scope of Section 26-E of the SARFAESI Act,
2002, which starts with a non obstante clause. However, neither the
Government Pleader nor the counsel for the appellant, brought to the notice
of the Hon'ble Division Bench about T.N.Amendment Act 41/22 dated
16.08.2022. Thus there was no discussion about Rule 9 of Security Interest
(Enforcement) Rules 2022.
REPLY BY RESPONDENTS:
10. The learned Additional Government Pleader, appearing on
behalf of the first respondent, raised an objection by stating that there is no
discussion about the mandatory requirements contemplated under the
provisions of Registration Act, 1908. Further, it is not placed before the
Hon'ble Division Bench of Madurai Bench of this Court regarding the
mandatory Rules to be followed by the secured creditors-Banks as
contemplated under the Security Interest (Enforcement) Rules, 2002. The
mandatory provisions of the Rules as well as the provisions of the
Registration Act, 1908 and the Registration Rules, which is required in such
https://www.mhc.tn.gov.in/judis
WP No.10594 of 2023
cases, where the Sale Certificates are presented for registration have not
been discussed nor be considered by the Hon'ble Division Bench of
Madurai Bench of this Court and therefore, the said judgment is of no avail
in support of the facts and circumstances of the present case on hand.
11. Pertinently neither the learned Government Pleader nor the
learned counsel appearing on behalf of the appellant brought to the notice of
the Hon'ble Division Bench about the Tamil Nadu Amendment Act 41/22
dated 16.08.2022.
12. The learned Additional Government Pleader, appearing on
behalf of the first respondent, made a submission that twin options are
available for the holders of the Sale Certificate issued by the secured
creditors for registration under the Registration Act, 1908. The Auction
Purchaser may present the Sale certificate for registration under Section 17
of the Registration Act, for registration. In such cases, the Registering
Authority is empowered to register the same by following the procedures
and by recovering the prescribed stamp duty. In cases, where the Authorised
Officer of the Bank communicates the Sale Certificate to the Registering
https://www.mhc.tn.gov.in/judis
WP No.10594 of 2023
Authority/Sub Registrar under Section 89(4) of the Registration Act, 1908,
then the Registering Authority is bound to follow the procedures as
contemplated under Section 89(4) of the Registration Act, 1908, and make
entries in Book No.I, which will have the effect of registration in view of
the principles laid down by the Apex Court in the case of The Inspector
General of Registration vs. G.Madhurambal [2022 LiveLaw (SC) 969].
13. It is not in dispute that the principles are settled by the
Apex Court regarding the rights of the secured creditors as first charge
holder and to sell the mortgaged property through public auction. The
secured creditors are holding first charge over the property in view of
Section 26-E of the SARFAESI Act, 2002. They are empowered to auction
the property, realise the amount due to them and if any balance amount
remains, then they can discharge other encumbrances by following the
procedures.
14. Question arises, when the issue relating to registration of
Sale Certificate raised, then the Registering Authority, who is bound by the
provisions of the Registration Act, has to ensure that the mandatory
https://www.mhc.tn.gov.in/judis
WP No.10594 of 2023
requirements under the Act, are complied with.
15. Section 22-A of the Registration Act, 1908 was inserted by
Tamil Nadu Act 28 of 2012 with effect form 20.10.2016. Section 22-B was
inserted by Tamil Nadu Act 41 of 2022 with effect from 16.08.2022.
16. In view of the Tamil Nadu Amendments and insertion of
Sections 22-A, 22-B, the Registering Authority in the State of Tamil Nadu
is empowered to refuse registration based on any one of the grounds
stipulated under Sections 22-A (or) 22-B of Registration Act, 1908.
17. The learned Additional Government Pleader, appearing on
behalf of the first respondent, brought to the notice of this Court that
Sections 22-A and 22-B of the Registration Act, 1908 and Rule 55-A of the
Registration Rules, are inserted in compliance of the judgment of the
Hon'ble Division Bench of this Court in the case of Ammasi Kutty relating
to fraudulent registration (WA No.1989 of 2019 dated 30.04.2021). The
Tamil Nadu Amendment has got a specific object, since large scale
fraudulent registrations were made by suppressing material facts.
https://www.mhc.tn.gov.in/judis
WP No.10594 of 2023
18. It is not in dispute between the parties that there is an
express bar under Section 22-B of the Registration Act, 1908, if the
documents presented are relating to transfer of immovable property by way
of sale, gift, lease or otherwise, which is attached permanently or
provisionally by a Competent Authority under any Central Act or State Act,
for the time being in force or any Court or Tribunal. Therefore, there is no
ambiguity in respect of the action taken by the Registering Authority in
refusing to register the Sale Certificate presented by the Auction Purchaser.
19. Irrespective of the procedures contemplated under Rule 55-
A of the Registration Rules, the secured creditor-Bank has an option to lift
the attachment or discharge the encumbrances and present the Sale
Certificate for registration. Even in the absence of Rule-55A, the option is
left open either to the secured creditor or to the Auction Purchaser to
discharge the encumbrances and thereafter register the Sale Certificate free
from all encumbrances.
20. The issue of public importance is that, whether the Sale
https://www.mhc.tn.gov.in/judis
WP No.10594 of 2023
Certificate issued with encumbrances cause prejudice to the public interest
at large or not. Every Auction Purchaser must be made known about the
factual details regarding the secured assets proposed to be auctioned by the
secured creditor. Any suppression in this regard will vitiate the auction
itself. Thus compliance of the mandatory procedures contemplated under
the SARFAESI Act and the SARFAESI Rules become necessary in the
interest of public and to protect the bona fide Auction Purchasers of the
secured assets.
21. The Legislations consider these aspects loudly and framed
procedures for issuance of notice and sale Certificates, etc.
PROCEDURES CONTEMPLATED:
22. Section 26 E of the SARFAESI Act stipulates that
“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.” Therefore the petitioner Bank holds first
https://www.mhc.tn.gov.in/judis
WP No.10594 of 2023
charge and they are entitled to auction the property of realise the loan dues
by priority. Debts due to any secured creditor shall have precedence over all
other debts.
23. The Security Interest (Enforcement) Rules 2002,
contemplates procedures.
● Rule 9 stipulates “Time of sale, issue of sale certificate and
delivery of possession, etc.”
● Sub Rule (6) to Rule 9 states that “ On confirmation of sale by
the secured creditor and if the terms of payment have been
complied with, the authorised officer exercising the power of
sale shall issue a certificate of sale of the immovable property
in favour of the purchaser in the Form given in Appendix V to
these rules.”
● Sub Rule (7) to Rule 9 states that “ Where the immovable
property sold is subject to any encumbrances, the authorised
officer may, if the thinks fit, allow the purchaser to deposit
with him the money required to discharge the encumbrances
and any interest due thereon together with such additional
https://www.mhc.tn.gov.in/judis
WP No.10594 of 2023
amount that may be sufficient to meet the contingencies or
further cost, expenses and interest as may be determined by
him.”
● Sub Rule (8) to Rule 9 states that “On such deposit of money
for discharge of the encumbrances, the authorised officer may
issue or cause the purchaser to issue notices to the persons
interested in or entitled to the money deposited with him and
take steps to make the payment accordingly.”
● Sub Rule (9) to Rule 9 denotes that “The authorised officer
shall deliver the property to the purchaser free from
encumbrances known to the secured creditor on deposit of
money as specified in sub-rule (7) above.”
● Sub Rule (10) to Rule 9 indicates that “The certificate of sale
issued under sub-rule (6) shall specifically mention that
whether the purchaser has purchased the immovable secured
asset free from any encumbrances known to the secured
creditor or not.”
24. On compliance of Sub Rule (7) and (8) after issuing the
https://www.mhc.tn.gov.in/judis
WP No.10594 of 2023
sale certificate, the authorised officer shall deliver the property to the
purchaser, free from encumbrances known to the secured creditor on deposit
of money as specified under Sub Rule (7).
25. The procedures contemplated under Rule 9 of the Security
Interest (Enforcement) Rules 2002, unambiguously stipulates that the
secured creditors / Bank has got responsibility and accountability to
consider the statutory creditors and other debts, while dealing with the
secured assets. Unilateral actions, by neglecting other debts, are
impermissible, since the procedures contemplated under the rules indicate
about the protections provided to unsecured creditors, statutory creditors
etc. The spirit of the Rules amplifies that the sale must be made free from all
encumbrances to the third party Auction Purchaser, who is not expected to
suffer unnecessarily on account of the procedural violations, if any
committed by the secured creditors/ Banks.
26. On issuance of sale certificate under Sub Rule (6) to Rule
9, the purchaser may be allowed to deposit the money required to discharge
the other encumbrances. On such deposit of money, the encumbrances may
https://www.mhc.tn.gov.in/judis
WP No.10594 of 2023
be cleared by the authorised officer. After clearing all the encumbrances, the
authorised officer shall deliver the property to the purchaser free from any
encumbrances. Sub Rule (10) to Rule 9 denotes that “The certificate of sale
issued under Sub-rule (6) shall specifically mention that whether the
purchaser has purchased the immovable secured asset free from any
encumbrances known to the secured creditor or not.”
27. Therefore, the secured creditors are empowered to make
two kinds of auction sales. Firstly they can auction the secured assets and
issue sale certificate under the form given in Appendix-V of the Rules by
listing the other encumbrances. While indicating the other encumbrances,
steps have to be taken by the secured creditors to clear the other
encumbrances. Thereafter, under Sub Rule (9) to Rule 9, the authorised
officer shall deliver the property to the Auction Purchaser, free from
encumbrances. Sub Rules (7) to (10), to Rule 9, indicate the subsequent
procedures to be followed by the authorised officer to protect the other
encumbrances / non-secured statutory or other debts. It is not as if the
secured creditors/ Banks can auction the secured assets, issue sale certificate
and wash off their hands. They have duty towards the other non-secured
https://www.mhc.tn.gov.in/judis
WP No.10594 of 2023
statutory creditors under the provisions of the Security Interest
(Enforcement) Rules 2002. In the event of non-compliance of the statutory
rules issued under the SARFAESI Act, the Bank is not entitled for any relief
from the hands of the Constitutional Courts. Unilateral actions of the
secured creditors, at no circumstances be appreciated. They, being a public
sector, is duty bound to protect the interest of the other statutory creditors
including Crown's debt. The power conferred under the SARFAESI Act
cannot be exercised, so as to deprive the other statutory creditors from
realising their dues. This exactly is the reason why the legislature thought fit
and contemplated the procedures so as to protect the interest of the Crown's
debt and the interest of other non-secured creditors. Thus, mandatory
procedures contemplated under the Rules, if violated or not complied with,
then the secured creditor/ Bank is not entitled for the relief waiver of other
debts.
28. If the above procedures are not complied with and the sale
certificate has not been issued free from any encumbrances, then the sale
certificate issued would fall under the second category, i.e., with
encumbrance.
https://www.mhc.tn.gov.in/judis
WP No.10594 of 2023
29. The second category of sale certificate, in the form given
in Appendix-V of the Rules, indicates that the list of encumbrances must be
furnished in the sale certificate. In the present case, such list of
encumbrances are not furnished by the authorised officer including the
attachment, made by the District Court in respect of the secured assets. In
the event of mentioning the list of encumbrances in the sale certificate, then
it is to be construed that the sale certificate was not issued free from
encumbrances. When the sale certificate was issued with encumbrances then
such sale certificate cannot be registered under the Registration Act nor
encumbrances made can be removed without lifting the attachments.
30. Once the Bank auctioned the property and issued a sale
certificate under Sub Rule (6) to Rule 9 of Security Enforcement Rule 2002
by mentioning the list of other encumbrances, then such sale certificate
cannot be registered by the registering authority. Thus, only on lifting the
attachment, necessary entries can be made in the encumbrance certificate or
to remove the encumbrances under the provisions of the Registration Act,
1908.
https://www.mhc.tn.gov.in/judis
WP No.10594 of 2023
31. The legislative intention of the SARFAESI Act and
Security Interest (Enforcement) Rules, 2002, are not restricted by providing
priority to the secured creditors / Banks, but extends its protection to the
non-secured and statutory creditors. Therefore, the secured creditors /
financial institutions, while invoking the provisions of the SARFAESI Act,
and the Rules framed thereunder are mandated to follow the procedures
scrupulously so as to ensure that other non-secured creditors are not
deprived of their rights to realise their statutory or other dues.
32. Under the provisions of the SARFAESI Act and the
Security Interest (Enforcement) Rules 2002, the Auction Sale by the secured
creditors, completes on delivery of the secured assets to the Auction
Purchasers, free from all encumbrances. Violation of procedures, if any
committed by the secured creditors, if resulted in denial of the rights of
other non-secured creditors and statutory dues, then the secured creditors
are not entitled for a direction from the High Court to remove the
encumbrances notified. Thus, compliance of the procedures contemplated in
the Rules are not only mandatory, but the non-compliance would result in
https://www.mhc.tn.gov.in/judis
WP No.10594 of 2023
denial of an opportunity to the non-secured creditors to recover their dues.
33. The Auction Purchasers are to be made aware of the known
encumbrances by the secured creditors. The secured creditors, to cover up
their misdeeds, cannot file a writ petition and seek a direction against the
Registering Authority to remove the encumbrances, which would deprive
the other non-secured creditors from realising their dues. Importantly, such
directions, if issued to remove the encumbrances, the public in general
would be misled on account of such entries made in the public records and
there is a possibility of fraud, misrepresentation or otherwise during further
alienation of properties. That apart, the non-secured creditors and the
statutory creditors would loose their opportunity to recover their dues
permanently.
34. If the auction sale has been completed in all respects in
compliance with the provisions of the SARFAESI Act and Rules, then alone
the sale certificate issued by the authorised officer can be construed as free
from all encumbrances as stipulated under Rule 9 of the Security Interest
Enforcement Rules. In the event of notifying any other encumbrances in the
https://www.mhc.tn.gov.in/judis
WP No.10594 of 2023
sale certificate, then it is to be construed as sale certificate with
encumbrances. In respect of the sale certificate issued with known
encumbrances, then the Registering Authority under the Registration Act is
not empowered to remove encumbrances. Such refusal is made in order to
protect the interest of the non-secured statutory creditors and to protect the
interest of the public at large, and therefore refusal by the Registering
Authority is in consonance with law.
FINDINGS:
35. In the present case, the facts reveal that the petitioner is the
secured creditor and by exercising their powers under the SARFAESI Act,
issued Sale Notice, auctioned the subject mortgaged properties and issued
Sale Certificates. Pertinently, the Sale Notice for sale of immovable
properties issued by the petitioner-Bank reveals that in the Annexure-A, the
petitioner has specifically stated that the subject property is free from
encumbrances. Paragraph-1 of the Sale Notice in Annexure-A reads as
“Notice is hereby given to the public in general and in particular to the
Borrower (s) and Guarantor (s) that the below described immovable
property mortgaged/changed to the Secured Creditor, the physical /
https://www.mhc.tn.gov.in/judis
WP No.10594 of 2023
constructive / Symbolic (whichever is applicable) possession of which
has been taken by the Authorised Officer of Indian Bank,
Chinniampalayam Branch, Coimbatore, Secured Creditor, will be sold
on “As is where is”, “As is what is”, and “Whatever there is” on
26.12.2022, between 11.00 A.M. and 03.30 P.M., for recovery of
Rs.2,81,59,276/- (Rupees Two Crores Eighty One Lakhs Fifty Nine
Thousand Two Hundred and Seventy Six only) (as on 08.12.2022 due to
the Indian Bank, Chinniampalayam Branch, Secured Creditor”.
36. In the Annexure A to the Sale Notice, the following
informations are provided to the public at large:-
“Encumbrances on property if any – Nil”.
37. The sale Notice was not issued in compliance to Rule 9 of
the Security Interest (Enforcement) Rules. Compliance of Rule 9 of the
Secured Interest (Enforcement) Rules, is mandatory for the purpose of
issuance of Sale Certificate in order to protect the “public interest” and the
interest of the bona fide Auction Purchasers. Any violations of the
procedures contemplated under Rule 9 of the Security Interest
https://www.mhc.tn.gov.in/judis
WP No.10594 of 2023
(Enforcement) Rules, would cause infringement of the right of bona fide
Auction Purchasers of the secured assets auctioned by the secured creditors.
True disclosure of the facts and the status of the secured assets are of
paramount importance in order to protect the interest of the Auction
Purchasers. Any violations in this regard would cause prejudice to the
interest of Auction Purchasers.
38. This Court has witnessed in many cases that Financial
Institutions/Secured Creditors/Banks are not following the procedures as
contemplated under Rule 9 of the Security Interest (Enforcement) Rules,
which is creating lot of dispute in the matter of registration of Sale
Certificate for the benefit of the bona fide Auction Purchasers. Lapses and
derelictions committed by the secured creditors in dealing with the secured
assets is resulting in denial of right to the bona fide Auction Purchasers and
in such circumstances, the Banks/Financial Institutions are attempting to
step into the shoes of the purchasers and filing writ petitions before the
High Court only to cover up their misdeeds and suppression of facts made
by them. The secured creditors are taking undue advantage of Section 26-E
of the SARFAESI Act and states that they hold first charge and therefore,
https://www.mhc.tn.gov.in/judis
WP No.10594 of 2023
they are not bound by other encumbrances and attachments made by the
Courts. No doubt, the other attachments are not binding on the secured
creditors as they hold first charge under Section 26-E of the SARFAESI
Act. However, the secured creditors cannot wash off their hands in totality
depriving the rights of other creditors as well as the attachments made by
the Competent Court of Law or the Tribunals. The Legislatures thought fit
and prescribed comprehensive procedures under the Security Interest
(Enforcement) Rules in order to protect both i.e., interest of the secured
creditors and to protect the interest of the non secured creditors and other
creditors and the attachments.
39. The Auction Purchaser is at liberty to purchase the
property through Public Auction either with encumbrances or free from
encumbrances. Unless the facts are made clear by the secured creditors, the
Auction Purchaser may not know about the other encumbrances created in
respect of the properties proposed to be auctioned through Public Auction.
Therefore, disclosure of true and necessary particulars in the Sale Notice is
mandatory and even while issuing the Sale Certificate under Rule 9(6) of
Security Interest (Enforcement) Rules, such Sale Certificate should contain
https://www.mhc.tn.gov.in/judis
WP No.10594 of 2023
the list of encumbrances, enabling the Authorities and the purchaser to
know about other encumbrances. If the list is published, then the Auction
Purchaser may come forward to discharge other encumbrances and convert
the assets free from encumbrances or the purchaser may take the risk of
purchasing the encumbered property. However, the Bank cannot suppress
the facts by not publishing the list of encumbrances, which is in violation of
the procedures contemplated under Rule 9 of the Security Interest
(Enforcement) Rules, 2002.
40. The Registering Authority under the Registration Act,
1908, is bound by the provisions of the Act. On account of the lapses or
derelictions on the part of the secured creditors, the Registering Authority
cannot be compelled to register the Sale Certificate in violation of Section
22-A or Section 22-B of the Registration Act, 1908. The mandatory
provisions under the Act, is to be scrupulously followed, while registering
the documents and in the event of issuing directions by the High Court to
register the document with encumbrances and Court attachments, the same
will lead to an anomalous situation, where the general public is absolutely
misled. The encumbrances published by the Registration Department is a
https://www.mhc.tn.gov.in/judis
WP No.10594 of 2023
public document and the same will be verified for purchase of property by
any person. Therefore, any such misguidance at the instance of the secured
creditors towards the encumbrance records maintained under the
Registration Act, cannot be permitted and the public interest plays a pivotal
role in such circumstances and any erroneous or false or untruthful
statements are found in the encumbrance certificate, it will infringe the
rights of the public at large. The purpose and object of the encumbrance
records under the Registration Act will be defeated.
41. The entire object of the Registration Act, 1908, is to
provide public notice that a particular property is transferred or stands in the
name of the particular person. If such particulars are found to be false or
erroneous, then the public in general will be misled and intending
purchasers will get affected. Any compromise in this regard would lead to
an anomalous situation, where the public in general will be misled.
42. Thus non adherence or violation of the procedures
contemplated under SARFAESI Rules will dis-entitle the Bank from
registering Sale Certificate under Section 17 or Section 89(4) of the
https://www.mhc.tn.gov.in/judis
WP No.10594 of 2023
Registration Act, 1908. The secured creditors have an option either to issue
Sale Certificate with encumbrance or free from encumbrances, as the case
may be and the bona fide Auction Purchaser has an option either to
purchase the property free from encumbrances or with encumbrances and
thereafter, they are at liberty to take a decision to discharge the
encumbrances and register Sale Certificate under Registration Act or not to
register the Sale Certificate, which is not compulsorily registrable. There is
no concept of automatic waiver or discharge of encumbrances, Court
attachments etc.
43. In the present writ petition, the Sale Notice did not disclose
the attachment made by the Principal District Court, Karur. Even in the Sale
Certificate issued by the Bank, there is no indication about the list of
encumbrances. The fact regarding the attachment of property by the
principal District Court, Karur has been suppressed by the Bank right from
their initial stage of auction notice under the provisions of the SARFAESI
Act.
44. Therefore, the petitioner is not entitled for the relief as such
https://www.mhc.tn.gov.in/judis
WP No.10594 of 2023
sought for in the present writ petition. However, the petitioner-Bank or the
Auction Purchaser is at liberty to lift the attachment or discharge the
encumbrances and present the Sale Certificate for registration and in such
circumstances, the Registering Authority is bound to consider the Sale
Certificate for registration by following the procedures as contemplated
under the Registration Act.
45. With the above observations, the present writ petition
stands dismissed. However, there shall be no order as to costs.
Consequently, the connected miscellaneous petition is also dismissed.
15-09-2023
Index : Yes/No
Internet: Yes/No
Speaking order/Non-Speaking order
Neutral Citation : Yes/No
Svn
To
The Sub Registrar,
Singanallur Sub Registrar Office,
14/48, Vellalore,
Coimbatore-641 016.
https://www.mhc.tn.gov.in/judis
WP No.10594 of 2023
S.M.SUBRAMANIAM, J.
Svn
WP 10594 of 2023
15-09-2023
https://www.mhc.tn.gov.in/judis
