High Court of KeralaSingle Judge2020-12-08Writ petition allowed; bank's priority recogniz...

Bank of Baroda & Premier Marine Foods v. Sub Registrar, Kuthiyathode; Tahsildar Cherthala; Village Officer, Aroor; Abdul Nazar; Augustian Antony; P.T. Joy

Case / Petition Number:WP(C).No.23810 of 2020

Case Details & Bench

Court: High Court of Kerala
Hon'ble Judges: Raja Vijayaraghavan V
Judgment Date: 2020-12-08
Court Decision / Holding: This writ petition is allowed. It is declared that the 1st petitioner bank will have priority in the matter of recovery of its dues from the 4th respondent. The respondents 1 to 3 shall accept the application filed by the 2nd petitioner seeking to effect mutation in the Thandaper Register after effacing the attachments reflected in Ext.P11 series encumbrance certificate. After effecting mutation, the respondents shall accept basic tax from the 2nd petitioner in respect of the property covered by Ext.P10 sale certificate.
Final Disposition: Writ petition allowed; bank's priority recognized; mutation directed post removal of encumbrances; basic tax to be paid by the 2nd petitioner.

Parties to the Case

Appellants / Petitioners

Bank of Baroda M.G. Road Ernakulam Branch
Premier Marine Foods

Respondents

Sub Registrar, Kuthiyathode Sub Registrar's Office
Tahsildar, Cherthala Taluk Office
Village Officer, Aroor Village
Abdul Nazar
Augustian Antony
P.T. Joy

Legal Representation & Advocates

Counsels for Petitioners

• Leo George (Advocate)

Counsels for Respondents

• Bimal K. Nath (Senior Government Pleader)

Case Synopsis & Summary

This writ petition challenges the refusal of mutation of title in the Thandaper Register in favour of the auction purchaser (2nd petitioner) following a SARFAESI sale. The 1st petitioner Bank of Baroda, after amalgamation with Vijaya Bank, invoked SARFAESI to recover dues from the 4th respondent, who had mortgaged the property in 2014. The property was sold under SARFAESI (Ext.P10) to the 2nd petitioner on 28.09.2020, after which the Bank submitted Ext.P12 and the 2nd petitioner Ext.P10 for mutation. Encumbrance certificates (Ext.P11 series) show attachments by revenue authorities, which the petitioners contend should not defeat the SARFAESI sale. The respondents contend there are unresolved encumbrances preventing mutation. The court, relying on SARFAESI Section 26E (priority to secured creditors) and Section 31B of RDDB&FI Act, held that the secured creditor’s rights survive attachments and that the attachments do not defeat the sale. It declared priority to the Bank for recovery, and directed mutation after effacing attachments, with basic tax to be paid by the 2nd petitioner on the property under Ext.P10. The judgment cites HDFC v. Sub Registry Officer and Madhan v. Sub Registrar to support the rationale.

Provisions of Law Cited

Securitisation And Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (SARFAESI Act, 2002)Section 26E of SARFAESI ActSection 31B of the Recovery of Debts Due to Banks and Financial Institutions Act, 1993Rule 8 of the Security Interest (Enforcement) Rules, 2002Rule 9 of the Security Interest (Enforcement) Rules, 2002

Legal Doctrines & Maxims

Priority of secured creditors under SARFAESI Act (Section 26E) after registration
Rights conferred by mortgage cannot be defeated by subsequent attachments
Attachments or encumbrances cannot defeat SARFAESI sale

Submissions & Arguments

Contentions of Appellants / Petitioners

The petitioners submit that SARFAESI Section 26E provides priority to secured creditors, ensuring payment before all other debts, taxes, cesses and rates to the Government or local authorities. Following amalgamation of Vijaya Bank with Bank of Baroda and the sale under SARFAESI, Ext.P10, the 2nd petitioner seeks mutation in the Thandaper Register. They contend that the attachments reflected in Ext.P11 series encumbrance certificates do not affect the bank's rights secured by the 2014 mortgage, and that the government authorities cannot override the SARFAESI sale. Reliance is placed on HDFC v. Sub Registry Officer and Madhan v. Sub Registrar to buttress the principle that attachments cannot defeat a SARFAESI sale. They seek mutation and payment of basic tax by the 2nd petitioner after mutation.

Contentions of Respondents

The respondents contend that there are outstanding attachments over the property (Ext.P11 series) and that mutation cannot be effected while encumbrances subsist. They argue for respecting the encumbrances and pending revenue actions, suggesting mutation should wait until encumbrances are cleared or satisfied.

Cited Precedents (2)

Case Name	Citation	Treatment	Explanation
HDFC v. Sub Registry Officer	2011 KHC 851	Positive	Supports the proposition that attachments do not defeat SARFAESI sale; cited to justify the bank's priority notwithstanding post-sale encumbrances.
Madhan v. Sub Registrar	2014 (1) KLT 406	Positive	Affirms that attachments cannot defeat SARFAESI proceedings; used to reinforce priority of secured creditors post-sale.

Diagnostic Tool

Beta

Does this judgment govern your specific facts?

Don't risk relying on a distinguishable precedent. Enter your facts or proposition below. We will test it against Bank of Baroda & Premier Marine Foods v. Sub Registrar, Kuthiyathode; Tahsildar Cherthala; Village Officer, Aroor; Abdul Nazar; Augustian Antony; P.T. Joy and instantly map out authorities that support, challenge, or govern your position.

Extracted Judgment Text

Exact text extracted from official judgment records.

## **IN THE HIGH COURT OF KERALA AT ERNAKULAM** ## **PRESENT** ## **THE HONOURABLE MR. JUSTICE RAJA VIJAYARAGHAVAN V** **TUESDAY, THE 08TH DAY OF DECEMBER 2020 / 17TH AGRAHAYANA, 1942** ## **WP(C).No.23810 OF 2020(A)** ## **PETITIONERS:** - **1 BANK OF BARODA M.G.ROAD ERNAKULAM BRANCH, PALLIMUKKU, M.G.ROAD, ERNAKULAM, REPRESENTED BY ITS ASST GENERAL MANAGER AND AUTHORISED OFFICER SETHU RAM.V.K, S/O LATE.KARTHIKEYAN NAIR,AGED 53 YEARS.** - **2 PREMIER MARINE FOODS, CHANDIROOR DESOM,CHANDIROOR.P.O, AROOR VILLAGE, CHERTHALA, ALAPPUZHA-688537, A PARTNERSHIP FIRM REPRESENTED BY ITS MANAGING PARTNER, NIHAS MUSTAFA, S/O.ABDULREHAMAN MUSTHAFA, AGED 40 YEARS.** - **BY ADV. SRI.LEO GEORGE** ## **RESPONDENTS:** - **1 THE SUB REGISTRAR KUTHIYATHODE SUB REGISTRAR'S OFFICE, KUTHIYATHODE, ALAPPUZHA-688533.** - **2 THE TAHSILDAR CHERTHALA, TALUK OFFICE,CHERTHALA, ALAPPUZHA DISTRICT, PIN-688532.** - **3 THE VILLAGE OFFICER, AROOR VILLAGE, ALAPPUZHA DISTRICT, PIN 688532.** - **4 ABDUL NAZAR, AGED 58 YEARS S/O KUTTY MOOSA, PROPRIETOR, M/S.SONIA-EXPORTS, PEARL GARDENS, CHANDIROOR, ALAPPUZHA-688547.** - **5 AUGUSTIAN ANTONY, S/O.ANTONY, VICTOR HOUSE, KAVANAD.P.O, SAKTHIKULANGARA VILLAGE, KOLLAM-691581.** - **6 P.T.JOY, S/O THOMMANKUTTY, PADAVATTUMMEL HOUSE, CHETTIKKATTUMURI, MOOTHAKUNNAM, NORTH PARAVUR - 683 516** **WP(C).No.23810 OF 2020** **2** ## **SRI BIMAL K NATH SR GP** **THIS WRIT PETITION (CIVIL) HAVING COME UP FOR ADMISSION ON 08.12.2020, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING:** **WP(C).No.23810 OF 2020** **3** ## **JUDGMENT** The 1st petitioner herein is a Public Sector Bank. The 2nd petitioner is the auction purchaser of a secured asset which was sold by the Bank invoking the provisions of the Securitisation And Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (‘SARFAESI’ Act for short) read with Rule 8 and 9 of the Security Interest (Enforcement) Rules, 2002. The petitioners are before this Court being aggrieved by the refusal on the part of the respondents 1 to 3 in permitting the 2nd petitioner to effect mutation of the property in his name after effacing the attachments. 2. It is the case of the petitioners that the 4th respondent secured credit facilities from the erstwhile Vijaya Bank in the year 2014. Towards collateral security, for the credit facilities, the 4th respondent is stated to have created equitable mortgage in favour of the Bank on 16.04.2014. When default was committed by the 4th respondent, the secured asset was classified as a Non-Performing Asset. While proceedings were pending as aforesaid, the Vijaya Bank amalgamated with the 1st petitioner bank under a scheme of Amalgamation and the 1st petitioner became entitled to continue with the proceedings initiated under the SARFAESI Act. The immovable property was brought to sale and the 2nd petitioner was the successful bidder. The assets **WP(C).No.23810 OF 2020** **4** were sold to the 2nd petitioner by way of Ext.P10 registered sale certificate which is dated 28.9.2020. After effecting sale as aforesaid, the 1st petitioner approached the 1st respondent and submitted Ext.P12 representation requesting to mutate the property in favour of the 2nd petitioner after effecting transfer of registry. Identical representation was submitted by the 2nd petitioner as well. The grievance of the petitioners is that no steps were taken by the respondents 1 to 3 for the reason that there are some attachments over the property covered under Ext.P10 sale certificate. It is in the afore circumstances, that the petitioners have approached this Court seeking for a direction to the respondents 1 to 3 to effect mutation in the Thandaper register of the village in favour of the 2nd petitioner after effacing the attachments reflected in Ext.P11 series encumbrance certificate and also to receive basic tax from the 2nd petitioner in respect of the property covered under Ext.P10 sale certificate. 3. I have heard Sri. Leo George, the learned counsel appearing for the petitioners, and Sri. Bimal K.Nath, the learned Senior Government Pleader. 4. Sri. Leo George, the learned counsel submitted that Section 26E of the SARFAESI Act grants priority to secured creditors and it states that the dues to any secured creditor shall be paid in priority over all other debts and all revenues, taxes, Cesses and Rates due to the Central Government, State Government or Local Authority. Section 31B of the Recovery of Debts Due to Banks and Financial Institutions Act, 1993 also declares the position in the **WP(C).No.23810 OF 2020** **5** same lines. 5. I have considered the submissions made by the learned Government pleader as well. 6. Section 26E of the SARFAESI Act grants priority to secured creditors after the registration of the security interest and 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. In the instant case, the property was mortgaged on 16.4.2014 whereas the attachment was effected much later as is evident from Ext.P11 series encumbrance certificate. The rights and liberties conferred on the creditor/bank by virtue of mortgage created in the year 2014 and the right to proceed under the relevant provisions of the SARFAESI Act cannot be defeated because of the subsequent attachments ordered by the revenue authorities or by the Civil Court (see **HDFC v. Sub Registry Officer** [2011 KHC 851] and **Madhan v. Sub Registrar** [2014 (1) KLT 406]). In that view of the matter, the attachment so effected shall have no impact on the sale conducted under the provisions of the SARFAESI Act. Resultantly, this writ petition will stand allowed. It is declared that the 1st petitioner bank will have priority in the matter of recovery of its dues from the 4th respondent. The respondents 1 to 3 shall accept the application filed by the 2nd petitioner seeking to effect mutation in the Thandaper Register after **WP(C).No.23810 OF 2020** **6** effacing the attachments reflected in Ext.P11 series encumbrance certificate. After effecting mutation, the respondents shall accept basic tax from the 2nd petitioner in respect of the property covered by Ext.P10 sales certificate. **Sd/-** **RAJA VIJAYARAGHAVAN V** **JUDGE** ps **WP(C).No.23810 OF 2020** **7** ## **APPENDIX** ## **PETITIONER'S EXHIBITS:** **EXHIBIT P1 A TRUE COPY OF SALE DEED NO.535/1990 OF KUTHIYATHODE SRO DT.22.02.1990** **EXHIBIT P2 A TRUE COPY OF THE SALE DEED NO.2643/1989 OF KUTHIYATHODE SRO.DTD.19.10.1989** **EXHIBIT P3 A TRUE COPY OF THE SALE DEED NO.350/1991 OF KUTHIYATHODE SRO DT.13.02.1991** **EXHIBIT P4 A TRUE COPY OF SALE DEED NO.368/1991 OF KUTHIYATHODE SRO.DT.14.02.1991** **EXHIBIT P5 A TRUE COPY OF MEMORANDUM EVIDENCING DEPOSIT OF TITLE DEEDS EXECUTED BY THE FOURTH RESPONDENT IN FAVOUR OF ESTWHILE VIJAYA BANK WITH RESPECT TO THE PROPERTY COVERED BY SALE DEED NO.535/1990 OF KUTHIYATHODE SRO.DATED 16.04.2014.** - **EXHIBIT P6 A TRUE COPY OF THE MEMORANDUM EVIDENCING DEPOSIT OF TITLE DEEDS EXECUTED BY THE FOURTH RESPONDENT IN FAVOUR OF ERSTWHILE VIJAYA BANK WITH RESPECT OF THE PROPERTY COVERED BY SALE DEED NO.2643/1989 OF KUTHIYATHODE SRO DATED 16.04.2014.** **EXHIBIT P7 A TRUE COPY OF THE MEMORANDUM EVIDENCING DEPOSIT OF TITLE DEEDS EXECUTED BY THE FOURTH RESPONDENT IN FAVOUR OF ERSTWHILE VIJAYA BANK WITH RESPECT OF THE PROPERTY COVERED BY SALE DEED NO.350/1991 OF KUTHIYATHODE SRO DATED 16.04.2014.** - **EXHIBIT P8 A TRUE COPY OF THE MEMORANDUM EVIDENCING DEPOSIT OF TITLE DEEDS EXECUTED BY THE FOURTH RESPONDENT IN FAVOUR OF ERSTWHILE VIJAYA BANK WITH RESPECT OF THE PROPERTY COVERED BY SALE DEED NO.368/1991 OF KUTHIYATHODE SRO DATED 16.04.2014.** **EXHIBIT P9 A TRUE COPY OF THE DEMAND NOTICE CAUSED BY THE AUTHORISED OFFICER OF THE ERSTWHILE VIJAYA BANK DATED 01.08.2015** **WP(C).No.23810 OF 2020** **8** - **EXHIBIT P10 A TRUE COPY OF THE REGISTERED SALE CERTIFICATE BEARING NO.1149/1/2020 OF KUTHIYATHODE SRO DATED 28.09.2020 ISSUED BY THE AUTHORISED OFFICER TO THE FIRST PETITIONER IN FAVOUR OF THE SECOND PETITIONER** - **EXHIBIT P11 A TRUE COPY OF THE ENCUMBRANCE CERTIFICATE ISSUED BY REGISTRATION DEPARTMENT WITH RESPECT TO PROPERTY COVERED BY EXHIBIT P1 FOR A PERIOD COVERING FROM 01.01.1990 TILL 22.05.2020.** - **EXHIBIT P11(A) A TRUE COPY OF THE ENCUMBRANCE CERTIFICATE ISSUED BY REGISTRATION DEPARTMENT WITH RESPECT TO PROPERTY COVERED BY EXHIBIT P2 FOR A PERIOD COVERING FROM 01.01.1990 TILL 22.05.2020.** - **EXHIBIT P11(B) A TRUE COPY OF THE ENCUMBRANCE CERTIFICATE ISSUED BY REGISTRATION DEPARTMENT WITH RESPECT TO PROPERTY COVERED BY EXHIBIT P3 FOR A PERIOD COVERING FROM 01.01.1990 TILL 22.05.2020.** - **EXHIBIT P11(C) A TRUE COPY OF THE ENCUMBRANCE CERTIFICATE ISSUED BY REGISTRATION DEPARTMENT WITH RESPECT TO PROPERTY COVERED BY EXHIBIT P4 FOR A PERIOD COVERING FROM 01.01.1990 TILL 22.05.2020.** - **EXHIBIT P12 A TRUE COPY OF THE REPRESENTATION SUBMITTED BY THE SECOND PETITIONER BEFORE THE FIRST RESPONDENT DATED 28.10.2020** - **EXHIBIT P13 A TRUE COPY OF THE REPRESENTATION SUBMITTED BY THE SECOND PETITIONER BEFORE THE SECOND RESPONDENT DATED 28.10.2020.** **RESPONDENTS EXHIBITS:NIL** **//TRUE COPY//** **P.A TO JUDGE**