Madras High Court
Tamil Selvan vs The Sub Registrar on 6 March, 2025
W.P.(MD)No.3705 of 2025
BEFORE THE MADURAI BENCH OF MADRAS HIGH COURT
DATED: 06.03.2025
CORAM:
THE HONOURABLE MR.JUSTICE V.LAKSHMINARAYANAN
Writ Petition(MD)No.3705 of 2025
Tamil Selvan : Petitioner
Vs.
1. The Sub Registrar,
Office of the Sub Registrar,
Rajapalayam.
2. The Authorised Officer,
Assistant General Manager and Clo-1,
State Bank of India,
Stressed Assets Management Branch,
1112, Raja St, Avinashi Road,
Coimbatore 641 037.
3. The Recovery Officer,
Employees Provident Fund Organization,
District Office,
AKM Complex,
Old Virudhunagar Road,
Sivakasi 626 189,
Virudhunagar District. : Respondents
1/12
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W.P.(MD)No.3705 of 2025
PRAYER: Writ Petitions filed under Article 226 of the Constitution of
India for issuance of Writ of Mandamus, by directing the first respondent
to raise the attachment made in the encumbrance register as arbitrary and
against the principles of natural justice over the petitioner property to an
extent of 7.21 Acres as per document and 6.615 acres land actual with
building in SF. No. 667/1B, 3A, 3B, 3C, 697/1, 2, 700/1A, 6, 1B at D.No.
5/361 and 5/362, Muthukudi to Ramco Nagar - Samusigapuram Main
road, Samusigapuram Village, Rajapalayam Taluk, Virudhunagar District,
within the time stipulated by this Hon'ble Court.
For Petitioner : Mr.Saravanan for Mr.A.Sivaji
For Respondents : Mr.R.Suresh Kumar
Additional Government Pleader
for R1
Mr.Jagadeesan
for Mr.N.Dilip Kumar for R2
Mr.R.Ravikumar for R3
ORDER
The writ petitioner is a SARFAESI auction purchaser. He
seeks for a writ of mandamus to raise the attachment over the property
situated at S.F.Nos.667/1B, 3A, 3B, 3C, 697/1, 697/2, 700/1A, 6, 700/1B,
to an extent of 7.21 acres of Samusigapuram Village, Rajapalayam Taluk,
Virudhunagar District.
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2. The properties had been mortgaged by the previous owner
with the State Bank of India. The mortgagor defaulted in payments of
amounts. This constrained the second respondent to invoke the
provisions of the Securitisation and Reconstruction of Financial Assets
and Enforcement of Security Interest Act, 2002 (hereinafter referred to as
“SARFAESI Act”) and the Rules made thereunder. The property was
brought for sale by e-auction on 24.08.2022. The writ petitioner
participated and he was successful. The second respondent Bank also
issued a sale certificate to that effect. The petitioner presented the sale
certificate for registration with the first respondent. The first respondent
demanded the payment of 7% as stamp duty and 4% as registration
charges. Aggrieved by the same, the petitioner filed W.P(MD) No.1033
of 2023. The said writ petition was allowed. It is pleaded by the
petitioner that against the order dated 20.04.2023, an appeal has been
preferred by the first respondent in W.A.SR (MD) No.34328 of 2024.
3. In the meantime, when he approached the first respondent
for registration, he was informed that on 09.01.2023, an endorsement was
made that the property has been attached by the third respondent. The
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third respondent claimed that the defaulter/borrower had left dues to an
extent of Rs.8,25,752/- (Rupees Eight Lakhs Twenty Five Thousand
Seven Hundred and Fifty Two) with the EPFO and hence, they attached
the property as a prelude for recovery. Aggrieved by the same, the
petitioner has filed this writ of mandamus to raise the attachment.
4. When the matter came up for admission, Mr.R.Suresh
Kumar, took notice for the first respondent and Mr.N.Dilip Kumar, for
the second respondent. I ordered private notice to the third respondent.
Mr.R.Ravikumar, has entered appearance for the third respondent. He
requested time to go on the record by way of a counter. The counter
having been filed, I have taken up the writ petition for final disposal.
5. Mr.Saravanan, appearing for Mr.A.Sivaji, urges that as the
petitioner has purchased the property pursuant to a SARFAESI
notification sale, he is entitled to the benefit of Section 26(E) of the
SARFAESI Act. According to him, all debts and other dues in the form of
taxes, cesses and other rates payable to the Central Government or the
State Government or a local authority, are subject to the security interest,
created in favour of the mortgagee. He relies upon a judgment of a
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Division Bench of this Court in Tamilnadu Mercantile Bank Ltd., Vs.
The Sub Registrar, Rajakilpakkam and another, [2024-5-L.W.502], to
press home this point.
6. Mr.Suresh Kumar, states that being a registering authority,
the first respondent is duty bound to register any encumbrance that is
brought to their notice by a statutory authority. In the present case, all
that the first respondent has done is to bring on record the attachment
that has been effected by the third respondent.
7. Mr.Jegadeesan, appearing for Mr.N.Dilip Kumar, states
that the writ petitioner is a purchaser in a SARFAESI auction sale held by
the second respondent. He supports the plea of the writ petitioner that
security interest created in favour of a mortgagee will have a priority, by
virtue of Section 26(E) over the claims of the third respondent.
8. The only villain in the game is Mr.Ravikumar, who
strongly opposes the writ petition. Relying upon his counter-affidavit, he
states that the property was attached invoking Section 11(2) of the
Employees' Provident Funds and Miscellaneous Provisions Act of 1952.
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He states it is an Act to provide for benefits like provident fund, pension
and insurance benefits for employees at the lower realms and by virtue of
Section 11(2) of the EPF Act of 1952, EPF dues get priority over the
security interest created in favour of the second respondent Bank.
Therefore, he pleads that the attachment that had been effected on
09.01.2023 is valid. He states this “First Charge” in favour of the
establishment should be given priority even though the security interest
had been created in the year 2015. For this submission, he relies upon the
judgment of the learned Single Judge in UCO Bank, Asset Recovery
Management Branch Vs. The Recovery Officer, Puducherry and
Others, [(2020) 4 MLJ 256] and that of Justice R.Subbiah, in State Bank
of India, SAM Branch Vs. Tax Recovery Officer and Others, [W.P.No.
6685 of 2016, dated 12.04.2016].
9. I have carefully considered the submissions of all sides
and gone through the records.
10. It is not in dispute that the original owner, as a debtor,
had created a mortgage over the property on 16.07.2015. The said
mortgage has been evidenced by its registration in Document No.2777 of
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2015 on the file of the first respondent. It is also not in dispute that in
exercise of powers under the SARFAESI Act, the second respondent
Bank brought the property for e-auction. In the said e-auction, the
petitioner was successful. A sale certificate was also issued to him on
21.11.2022. On the payment of the entire auction amount, when a sale
certificate is issued, it has a twin effect of merging the mortgage with the
sale and transferring the title from the debtor in favour of the auction
purchaser.
11. It is not in dispute that the third respondent EPFO did
not intimate the bank at any point of time from 2015 till 21.11.2022
about any dues from the debtor to EPFO or about any attachment. The
first step that was taken by the EPFO was on 09.01.2023. By that time,
the debtor had lost his title and the writ petitioner had become the owner
of the property.
12. When there is a transfer of title from the debtor to the
auction purchaser, had the attachment by the EPFO preceded the court
auction sale, most certainly, the auction purchaser can be held liable for
payment of the amount. Unfortunately, for Mr.Ravikumar, that is not the
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situation in the present case. The attachment came into force nearly three
months after the sale. Therefore, I cannot call upon the auction purchaser,
to make good the amount due to the third respondent, at the instance of
the debtor.
13. Moving to the next and interesting point that has been
raised by Mr.Ravikumar, that by virtue of Section 11(2) of the EPF Act,
he argues EPFO gets priority over the security interest created in favour
of the second respondent Bank. As rightly contended by Mr.Saravanan,
this specific issue had been dealt with by the Division Bench in
Tamilnadu Mercantile Bank Vs. Sub Registrar case.
14. In paragraph No.15 of the said judgment, the Division
Bench following the Supreme Court in Kotak Mahindra Bank Ltd., Vs.
Girnar Corrugators and Others, [2023 3 SCC 2010], held that in view
of the mandate under Section 26(E) of the SARFAESI Act of 2002, the
asset secured in favour of the Bank would have a priority and prevail
over any other dues and recovery proceedings. The Division Bench
further held it was in exercise of the priority charge that the property had
been brought for public auction and the auction purchaser had paid the
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entire sale consideration. Thus, they concluded the right, title and interest
in respect of the subject matter of the property rightfully vested with the
purchaser on and from the date of auction.
15. Insofar as the judgment relied upon by Mr.Ravikumar, in
State Bank of India Vs. Tax Recovery Officer, [W.P.No.6685 of 2016,
dated 12.04.2016] is concerned, I should point out that in the facts of
that case, the attachment preceded the sale and the auction purchaser had
taken the property subject to the attachment. Following the settled
position of law, the Court held that a sale pending the attachment was not
void for all practical purposes, but it is void insofar as the claims
enforceable under the order of attachment. This judgment does not help
Mr.Ravikumar, for the simple reason the sale was held on 21.11.2022 and
the attachment was on 09.01.2023.
16. With respect to the judgment of the UCO Bank's case,
the discussion was with respect to Section 11(2) of the EPF Act, viz-a-
viz, Section 31(B) of Recovery of Debts Due to Banks and Financial
Institutions Act of 1993. The texture of Section 31(B) and Section 26(E)
are fundamentally different. Hence, this judgment too does not help
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Mr.Ravikumar.
17. In the light of the above discussion, I am left with no
other option than to give the direction as sought for. The writ petition is
ordered. There shall be a direction to the first respondent to delete the
entry of attachment made with respect to property situated in S.F.Nos.
667/1B, 3A, 3B, 3C, 697/1, 697/2, 700/1A, 6, 700/1B, Muthukudi to
Ramco Nagar – Samusigapuram Main road, Samusigapuram Village,
Rajapalayam Taluk, Virudhunagar District, within a period of three (3)
weeks from the date of receipt of a copy of this order. There shall be no
order as to costs.
06.03.2025
Index : Yes / No
Internet : Yes / No
PKN
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To
1. The Sub Registrar,
Office of the Sub Registrar,
Rajapalayam.
2. The Authorised Officer,
Assistant General Manager and Clo-1,
State Bank of India,
Stressed Assets Management Branch,
1112, Raja St, Avinashi Road,
Coimbatore 641 037.
3. The Recovery Officer,
Employees Provident Fund Organization,
District Office,
AKM Complex,
Old Virudhunagar Road,
Sivakasi 626 189,
Virudhunagar District.
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V.LAKSHMINARAYANAN, J.
PKN
06.03.2025
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