Madras High Court
The Federal Bank Limited vs The Sub-Registrar on 5 November, 2024
Author: G.K.Ilanthiraiyan
Bench: G.K.Ilanthiraiyan
W.P(MD)No.11686 of 2024
BEFORE THE MADURAI BENCH OF MADRAS HIGH COURT
DATED: 05.11.2024
CORAM
THE HONOURABLE MR.JUSTICE G.K.ILANTHIRAIYAN
W.P(MD)No.11686 of 2024
and
W.M.P(MD)Nos.10432 & 10433 of 2024
The Federal Bank Limited,
Represented by its Associate Vice President,
Venkatesan C. ... Petitioner
Vs
1.The Sub-Registrar,
Office of the Sub-Registrar,
Keezhsathanur,
Trichy District.
2.S.Karthikeyan
3.CR.Selvaraju
4.Kandasamy Varappagoundar
5.Natarajan Kandasamy
6.Madeswari K
7.Rajeswari Raghupathy
8.Vijaya Samundeeswari Selvaraju
9.Kalanithi Natarajan
10.Thirunavukkarasu,
S/o.Karuppaiah,
Proprietor, M/s.Best Blue Metals,
No.60, Lakshmipuram, karudaiyampalayam Post,
Nedungur Village,
Aravakkurichi Taluk,
Karur District.
11.M/s.Pon Vinayaga Blue Metals,
Represented by its Partner,
S.Ponnusamy,
S/o.Subbaryan,
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W.P(MD)No.11686 of 2024
Office at S.F.No.435/4, Karudaiyam,
Palayam Village & Post,
Aravakurichi Taluk,
Karur District.
12.K.Sabarinathan ... Respondents
PRAYER: Writ Petition filed under Article 226 of Constitution of
India, to issue a Writ of Certiorarified Mandamus, calling for the
records relating to the impugned Refusal Check Slip passed by the
first respondent in RFL/Keezhsathanur/15/2023 dated 19.06.2023
and quash the same and consequently direct the first respondent
Sub-Registrar to efface/delete the attachment entry dated
09.04.2022 and 22.07.2022 made in Documents Nos.8 and 18 of
2022 and the first respondent to register the sale certificate dated
18.06.2023 issued by the petitioner Bank in favor of the 12 th
respondent Auction purchaser in respect of the schedule mentioned
property.
For Petitioner : Mr.N.Dilipkumar
For R – 1 : Mr.Veera Kathiravan
Additional Advocate General
Assisted by
Mr.S.P.Maharajan
Special Government Pleader
For RR 2 to 4
& 6 to 8 : No appearance
For RR 5 & 9 : Unserved
For RR 10 & 11 : Mr.B.Brijesh Kishore
For R – 12 : Mr.B.Rajasekar
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W.P(MD)No.11686 of 2024
ORDER
This Writ Petition has been filed challenging the order
passed by the first respondent, dated 19.06.2023 whereby refused
to register the sale certificate and issued refusal check slip.
2.Originally one Ponnusamy borrowed a loan from the
petitioner by depositing the title deeds in respect of the subject
property. In order to close the said loan, the respondents 2 to 5 had
purchased the subject property by mortgaging the very same
property in favour of the petitioner by depositing the title deed on
06.07.2020. They had borrowed loan to the tune of
Rs.3,00,00,000/- and executed all required documents on
06.07.2020. The respondents 2 to 5 are the principal borrowers and
respondents 6 to 9 are co-borrowers (in short hereinafter referred
to as 'the borrowers'). The borrowers failed to repay the loan
amount and committed default. As such, the loan accounts were
declared as Non-Performing Assets and the petitioner proceeded
under SARFAESI Act as against the borrowers. Finally, the petitioner
caused an auction sale notice and brought the subject property for
auction sale. On 31.03.2023, 12th respondent herein was being the
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successful bidder had purchased the subject property for total
consideration of Rs.3,11,00,000/-. Accordingly, he was issued a sale
confirmation letter and subsequently, issued a sale certificate dated
18.06.2023. When the petitioner presented the sale certificate for
registration before the first respondent, the first respondent refused
to register the same and issued a refusal check slip dated
19.06.2023.
3.The learned counsel appearing for the petitioner would
submit that the first respondent ought not to have refused to
register the sale certificate, since the sale certificate was issued in
favour of 12th respondent under SARFAESI Act. Further, as per the
circular issued by the Inspector General of Registration, dated
10.07.2021, the first respondent shall have to register the sale
certificate issued under the SARFAESI Act. It was refused on the
ground of an attachment order passed by the civil Court. The
subject property was mortgaged with the petitioner by the
respondents 2 to 5 on 06.07.2020, whereas the civil Court passed
an order of attachment only on 26.08.2022 though the suits were
filed by the respondents 10 & 11 on 13.01.2020 & 22.01.2020 ie.,
after deposit of title deed on 06.07.2020. In support of his
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contention, the learned counsel appearing for the petitioner relied
upon the judgment of the Division Bench of this Court in W.A.No.
3037 of 2023, dated 03.07.2024 (Indian Bank Vs. The Sub
Registrar and another).
4.The first respondent filed a counter-affidavit and
Mr.Veera Kathiravan, learned Additional Advocate General appearing
for the first respondent would submit that 12th respondent is none
other than the son of the second respondent. The 10th respondent
instituted a suit in Commercial O.S.No.01 of 2020 and obtained an
order of attachment in I.A.No.02 of 2020 in Commercial O.S.No.01
of 2020 by order dated 17.08.2020 and 11th respondent instituted a
suit in Commercial O.S.No.03 of 2020 and obtained an order of
attachment in I.A.No.01 of 2020 in Commercial O.S.No.03 of 2020
by order dated 21.04.2021. The suit in C.O.S.No.01 of 2020 was
decreed in favour of 10th respondent on 26.08.2022. Therefore, in
order to cheat the persons, who initiated proceedings as against the
property ie., respondents 10 & 11, the sale certificate was issued in
favour of 12th respondent. When there is an order of attachment
passed by the Court, the first respondent cannot register the sale
certificate issued by the petitioner. There is a clear bar under
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Section 22-B of the Registration Act, 1908. Therefore, the request
made by the petitioner was rightly rejected by the first respondent
and directed to raise the attachment before the Court of law to
register the sale certificate.
5.In support of his contention, the learned Additional
Advocate General appearing for the first respondent relied upon the
order of this Court passed in W.P(MD)No.4553 of 2024, dated
18.03.2024 (Tamil Nadu Mercantile Bank Limited Vs. The Sub
Registrar and others). The Inspector General of Registration had
issued a circular dated 10.07.2021, much prior to the insertion of
Section 22-B in the Registration Act. Therefore, the first respondent
had rightly refused to register the sale certificate, without raising
the Court attachments, as per the provisions of Section 22-B(3) of
the Act. He further submitted that the respondents 10 & 11
instituted the suits even before the deposit of the title deed and
obtained an order of attachment of the subject property. Only
thereafter, in order to defeat the claims of the respondents 10 & 11,
the original borrower namely Ponnusamy while pending litigation in
respect of the subject property had executed a sale deed in favour
of the respondents 2 to 5. In turn, they borrowed a loan from the
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petitioner by mortgaging the said property. During the auction, 12 th
respondent, who is being the son of the second respondent, had
purchased the subject property. It shows the collusion between the
petitioner and the respondents 2 to 9 & 12. Therefore, the
contention of the petitioner that the mortgage is prior to the order
of attachment of the property has no force.
6.Heard the learned counsel appearing on either side
and perused the materials placed before this Court.
7.The subject property was mortgaged with the
petitioner by name Ponnusamy and availed loan. In order to settle
the loan amount, the respondents 2 to 5 had paid the entire loan
amount and purchased the subject property by registered sale
deed, dated 06.07.2020. On the same day, they had mortgaged the
said property and availed loan by depositing the title deeds.
Thereafter, they committed a default in payment of the loan and the
loan account was declared as a Non-Performing Asset.
Subsequently, the petitioner initiated proceedings under the
SARFAESI Act and brought the subject property for auction sale.
The 12th respondent, who was being the successful bidder,
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purchased the subject property and he was issued a sale certificate
after sale confirmation. The sale certificate was presented for
registration. It was refused on the ground that the subject property
was already attached in the suit proceedings initiated by the
respondents 10 & 11 who are the lenders of the loan in favour of
the original borrower namely Ponnusamy.
8.It seems that the said Ponnusamy borrowed a loan
from the respondents 10 and 11 and committed a default.
Therefore, they filed a suit for recovery of money in O.S.Nos.1 and
3 of 2020 before the Principal District Court, Karur on 13.01.2020 &
22.01.2020. They also filed applications in I.A.No.02 of 2020 in
Commercial O.S.No.01 of 2020 and I.A.No.01 of 2020 in
Commercial O.S.No.03 of 2020 on the file of the District Court,
Karur for attachment of the subject property. Both the petitions
were ordered by order dated 17.08.2020 and 21.04.2021 whereby
attached the subject property. Admittedly, both attachment orders
were passed after the mortgage of the subject property with the
first respondent on 06.07.2020. Further, the subject property was
brought for auction sale under the SARFAESI Act. The 12th
respondent purchased the same and he was issued a sale certificate
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under the SARFAESI Act. As per the Circular, dated 10.07.2021
issued by the Inspector General of Registration, the registration of
the sale certificate could not be denied even when the exists entry
as per the civil Court order.
9.It is also relevant to extract the provision under
Section 22-B of the Registration Act, 1908:
'Section 22-B. Refusal to register
forged documents and other documents prohibited
by law:- Notwithstanding anything contained in this
Act, the registering officer shall refused to register
the following documents namely:-
(1) forged document;
(2) document relating to transaction, which is
prohibited by any Central Act or State Act for the
time being in force;
(3) document 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;
(4) any other document as the State
Government may by notification, specify.'
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10.It cannot be invoked in respect of an involuntary
transfer namely the sale under SARFAESI Act. This issue has been
dealt with by the Hon'ble Division Bench of this Court in W.A.No.
3037 of 2023, by order dated 03.07.2024 (Indian Bank Vs.
The Sub-Registrar and another). The Hon'ble Division Bench of
this Court referred the Judgment of the Division Bench of this Court
in W.P(MD)No.674 of 2023 in the case of
M/s.Cholamandalam Investment and Finance Company
Limited Vs. the District Registrar and others, in which, the
Hon'ble Division Bench concluded that the refusal of registration of a
sale certificate on the ground of an attachment order is in force, is
not justified. The relevant paragraph of the Judgment is extracted
hereunder:
'11. Section 64 of C.P.C. bars private
transfer. The transfer in the present case is an
involuntary transfer. It is the secured-creditor,
who has exercised its right under the Special Act
viz., the Act 2002.
12. Section 26-E of the Act, 2002 starts with
a non obstante clause. Section 26-E of the Act,
2002 provides that notwithstanding anything
contained in any other law for the time being in
force, after the registration of the security
interest, the debts due to any secured-creditor
shall be paid in priority over all other debts and all
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revenues, taxes, cesses and other rates payable to
the Central Government or State Government or
local authority.
13. Section 26-E of the Act, 2002 expressly
and unambiguously provides for a priority right to
a secured creditor over all other claims.
14. The debt of the fourth respondent was
an unsecured debt. The mortgage of the property
in favour of the present petitioner or the
judgment-debtor under the award was prior to the
attachment of the property.
15. The rights of the secured-creditor have a
priority charge. The Apex Court, in the case of
Kotak Mahindra Bank Limited vs. Girnar
Corrugators Private Limited and others, reported
in (2023) 3 SCC 210, has held that the legislature
has expressly and unambiguously provided for a
legal framework exclusively on the issue of
'priority' of payment of debt by including Section
26-E in the Act, 2002. In the said case, it was held
that the recovery under the Act, 2002 with respect
to the secured asset would prevail over the
recovery of the award amount under the Micro,
Small and Medium Enterprises Development Act,
2006.'
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11.Thus, it is clear that Section 26-E of the SARFAESI
Act, 2002 expressly and unambiguously provides for a priority right
to a secured creditor over all other claims. The debt of the
respondents 10 and 11 was an unsecured debt whereas the
mortgage of the subject property by depositing title deeds in favour
of the petitioner was prior to the attachment of the subject
property. Therefore, the first respondent ought not to have refused
to register the sale certificate issued under the SARFAESI
proceedings. Though the learned Single Judge of this Court held in
W.P(MD)No.4553 of 2024, dated 18.03.2024 (Tamil Nadu
Mercantile Bank Limited Vs. The Sub Registrar and others)
that the petitioner or the buyer succeeds in raising the attachment,
the registering authority cannot be called upon to register the sale
certificate. No writ Court can issue Mandamus contrary to law.
Section 22-B(3) of the Registration Act cannot be lost sight of.
12.In view of the Judgment passed by the Hon'ble
Division Bench of this Court in W.A.No.3037 of 2023, by order
dated 03.07.2024 (Indian Bank Vs. The Sub-Registrar and
another), the order passed by the learned Single Judge of this
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Court is not applicable to the case on hand. That apart, the original
borrower was one Ponnusamy. In order to settle the loan amount,
he sold out the subject property in favour of the respondents 2 to 5
on 06.07.2020. In turn, the respondents 2 to 5 availed loan by
mortgaging the very same property once again and settled the
entire loan amount borrowed by the said Ponnusamy. Therefore, on
the date of attachment of the subject property, no property stands
in the name of the said Ponnusamy. Even then, the civil Court
passed an attachment order in respect of the subject property as if
stands in the name of the said Ponnusamy. The registration of the
sale deed and the mortgage by deposit of title deed were clearly
entered into the Encumbrance Certificate. Without even verifying
the same, the civil Court attached the subject property which was
not in the name of the said Ponnusamy.
13.Therefore, the petitioner gets priority over all other
charges and any order of attachment passed by the civil Court
subsequently, will never bind the petitioner to which the mortgage
has already been created by the debtor. In fact, the attachment
order was passed not as against the respondents 2 to 5. It was
passed as against the original borrower Ponnusamy. Therefore, the
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order of attachment obtained by the respondents 10 & 11 cannot be
put against the petitioner and it will not bind the first respondent.
14.In view of the above, the order passed by the first
respondent, dated 19.06.2023 is liable to be quashed and the same
is quashed.
15.Accordingly, the Writ Petition is allowed. The
petitioner is directed to represent the sale certificate for registration
in favour of 12th respondent before the first respondent and on
receipt of the same, the first respondent shall register and release
the document forthwith. There shall be no order as to costs.
Consequently, connected Miscellaneous Petitions are closed.
05.11.2024
NCC : Yes / No
Index : Yes / No
Internet : Yes
ps
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To
The Sub-Registrar,
Office of the Sub-Registrar,
Keezhsathanur,
Trichy District.
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G.K.ILANTHIRAIYAN, J.
ps
Order made in
05.11.2024
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