Federal Bank Limited v. P.S. Kesavan Nair

## **IN THE HIGH COURT OF KERALA AT ERNAKULAM** ## **PRESENT** ## **THE HONOURABLE MRS. JUSTICE C.S. SUDHA** **FRIDAY, THE 26[TH] DAY OF NOVEMBER 2021 / 5TH AGRAHAYANA, 1943** ## **OP(C) NO. 1460 OF 2017** **AGAINST THE ORDER DATED 20.6.2015 IN EA 1011/2011 IN EP 461/2007 IN OS 632/2006 OF ADDITIONAL MUNSIFFS COURT-III, THIRUVANANTHAPURAM** ## **PETITIONER/PETITIONER/DECREE HOLDER:** **THE FEDERAL BANK LIMITED HEAD OFFICE AT ALUVA, BRANCH AT PONGUMMOODU, REPRESENTED BY ITS AUTHORIZED OFFICER & CHIEF MANAGER, ASSET RECOVERY BRANCH, THIRUVANANTHAPURAM, ANJANA I.** **BY ADVS.SRI.A.ANTONY SRI.M.V.JACOB MANICKANAMPARAMPIL SMT.LEELAMMA ANTONY** ## **RESPONDENT/COUNTER PETITIONER/2ND JUDGMENT DEBTOR:** ## **P.S.KESAVAN NAIR** **S/O.PARAMESWARAN NAIR, RESIDING AT KARTHIKA, RISHIMANGALAM, VANCHIYOOR, THIRUVANANTHAPURAM-695035.** **THIS OP (CIVIL) HAVING COME UP FOR ADMISSION ON 19.11.2021, THE COURT** **ON 26.11.2021 DELIVERED THE FOLLOWING:** 2 **O.P.(C)No.1460 of 2017** Dated this the 26[th] day of November, 2021 ## J U D G M E N T This petition filed under Article 227 of the Constitution of India is against Exts.P7 and P8 order and communication respectively of the Additional Munsiff-III, Thiruvananthapuram in E.A.1011/2011 in E.P.461/2007 in O.S.No.632/2006. 2. The petitioner Bank on 2.9.2005 had sanctioned an overdraft cash credit facility of Rs.35 lakhs to one Jayakumar, Proprietor- M/s.Solar Opticals for running his business in Thiruvananthapuram. Relating to the loan transaction, two properties were offered by the said person in relation to which equitable mortgage was created on 7.10.2005. The borrower committed default, pursuant to which, the petitioner Bank proceeded under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 ('the SARFAESI Act'), for realisation of an amount of Rs.38,20,839/-. The properties were sold in auction and an amount of Rs.29,33,100/- was realised. As on the date of sale, an amount of Rs.42,78,527/- was due to the petitioner Bank. The petitioner Bank also filed 3 ## **O.P.(C)No.1460 of 2017** O.A.No.254/2008 before the DRT, for realisation of the balance amount of Rs.46,30,295/- along with interest. The said OA was decreed and recovery certificate was also issued by the Bank on 23.9.2009. However, since the petitioner Bank was unable to find out other assets of the borrower, further proceedings was kept in abeyance. From the SARFAESI sale proceedings, Bank has recovered only an amount of Rs.30,11,680.95/-. 3. While so, the respondent herein filed O.S.No.632/2006 and obtained a decree against the aforesaid Jayakumar. The respondent then filed E.P.No.461/2007 for execution of the decree and thereafter filed E.A.No.1011/2011 to direct the petitioner Bank to deposit before the court the whole of the auction amount received in the SARFAESI sale proceedings. According to the petitioner Bank, though they filed objections to the said E.A., the court below without considering any of their contentions, passed Ext.P7 order directing the petitioner bank to deposit the whole auction sale amount obtained by the sale of the properties before the said court. Pursuant to Ext.P7, the court sent Ext.P8 communication dated 17.3.2016 to the petitioner Bank directing compliance of Ext.P7 order. Aggrieved, the petitioner Bank has filed the present petition. 4 ## **O.P.(C)No.1460 of 2017** 4. As early as on 4.7.2017, service has been completed against the respondent herein. However, the respondent has not appeared. Hence, Adv.A.Antony, learned counsel for the petitioner was heard and the records were perused. 5. According to the learned counsel for the petitioner, Ext.P7 order and Ext.P8 communication are illegal and passed without any jurisdiction. They have been passed in violation of the specific provisions contained in the SARFAESI Act and the Transfer of Property Act. Error is apparent on the face of the record; the orders are perverse and arbitrary and therefore liable to be set aside. The learned counsel drew the attention of this Court to Sections 26(e), 34 and 35 of the SARFAESI Act as well as Section 31(b) of the Recovery of Debts and Bankruptcy Act, 1993. Reference was also made to the dictum laid down in Madhan S. vs. Sub Registar, Kollam (2014(1) KHC 249) and Secretary, Keechery Service Cooperative Bank Ltd. vs. Sajitha Nizar alias Sajitha (2020(5) KHC 231) in support of the arguments advanced. In these decisions, it has been held that attachment effected subsequent to creation of equitable mortgage would stand effaced. 5 ## **O.P.(C)No.1460 of 2017** 6. Going by the case of the petitioner herein as stated in the objections to the E.A. filed, 0.81 acres of property in re-survey No.1923/3 belonging to the debtor over which equitable mortgage was created, has been sold in auction on 30.12.2008, pursuant to which, sale deed was executed in favour of the auction purchaser. So the Bank has neither possession nor title over the property in question. The title deed was deposited with the Bank as early as on 7.10.2005, pursuant to which, the equitable mortgage had been created whereas the attachment was effected only in the year 2006. That being the position, as held in the aforesaid decisions, attachments effected subsequent to the mortgage created in favour of the petitioner Bank will not affect the proceedings initiated under the SARFAESI Act. The subsequent attachment in the suit would not affect the title or ownership of the auction purchaser over the property. The said attachment will have no effect or it will fall to ground the moment the sale is confirmed. That being the position, Ext.P7 order could not have been passed by the court below. 7. Further, E.A.No.1011/2011 is seen to have been moved under Section 73 of CPC which deals with rateable distribution. The learned 6 ## **O.P.(C)No.1460 of 2017** Munsiff relying on the dictum in Govindan Master v. Janaki V. (2011(3) KHC 581) has allowed the application. However, the learned Munsiff failed to notice that this Court in the said decision has held that the mandatory requirements under Section 73 will have to be satisfied by a party claiming ratable distribution. One of the conditions to be satisfied is that the application for execution should have been filed to the court which holds the assets before the assets came into the custody of the court. The learned single Judge in the said case has also referred to a Division Bench decision of this Court, namely, Boban vs. Sajith Kumar (2003 KHC 1428) wherein it has been held that no rateable distribution can be claimed unless all the conditions contemplated under Section 73 are fulfilled. To enable the decree holder to participate in the assets of a judgment debtor, the following conditions are to be satisfied by the decree holder; namely, (i) decree holder claiming share in the rateable distribution should have applied for execution of his decree to the appropriate Court, (ii) such application should have been made prior to the receipt of the assets by the Court, (iii) the assets of which a rateable distribution is claimed must be assets held by the Court, (iv) the attaching creditor as well as the decree holder claiming to participate in the 7 ## **O.P.(C)No.1460 of 2017** assets should be holders of decrees for the payment of money, and (v) such decrees should have been obtained against the same judgment debtor. Therefore, no rateable distribution can be claimed unless all the aforesaid conditions are fulfilled. 8. In this case, all the aforesaid conditions have not been satisfied and so the learned Munsiff could not have passed Exts.P7 order on that ground also. Even otherwise, the attachment which has been affected after the mortgage has been created in respect of the property, will have no effect and hence on the said ground alone, the order is liable to be set aside. In the light of the aforesaid discussion, the original petition is allowed and Ext.P7 order is set aside. All pending interlocutory applications are closed. **==> picture [24 x 11] intentionally omitted <==** C.S.SUDHA JUDGE ami/ 8 **O.P.(C)No.1460 of 2017** 9 ## **O.P.(C)No.1460 of 2017** ## **APPENDIX OF OP(C) 1460/2017** ## **PETITIONER'S EXHIBITS** ## **EXHIBIT P1** **TRUE COPY OF THE REQUEST OF JAYKUMAR DTD 8/10/2005 FOR ACCEPTING THE TITLE DEED OF THE PROPERTY AS EQUITABLE MORTGAGE AS ENVISAGED UNDER SECTION 58 (F) OF THE TRANSFER OF PROPERTY ACT IN RESPECT OF 10 CENTS OF PROPERTY.** - **EXHIBIT P2 TRUE COPY OF THE REQUEST OF JAYAKUMAR DTD 8/10/2005 FOR ACCEPTING THE TITLE DEED OF THE PROPERTY AS EQUITABLE MORTGAGE AS ENVISAGED UNDER SECTION 58(F) OF THE TRANSFER OF PROPERTY ACT IN RESPECT OF 2 CENTS OF PROPERTY** - **EXHIBIT P3 TRUE COPY OF THE SALE NOTICE DTD 20/4/2007 ISSUED BY THE PETITIONER BANK.** - **EXHIBIT P4 TRUE COPY OF THE SALE NOTICE DTD 28/11/2008 ISSUED BY THE PETITIONER BANK** - **EXHIBIT P5 TRUE COPY OF THE SAID ORDER DTD 18/3/2013 IN EA 940/2007 OF THE MUNSIFFS COURT, THIRUVANANTHAPURAM.** - **EXHIBIT P6 TRUE COPY OF THE OBJECTION DTD 3/10/2011 FILED BY THE BANK IN EA 1011/2011 OF THE MUNSIFFS COURT, THIRUVANANTHAPURAM.** - **EXHIBIT P7 TRUE COPY OF THE ORDER DTD 20/6/2015 IN EA 1011/2011 OF THE MUNSIFFS COURT.** - **EXHIBIT P8 TRUE COPY OF THE COMMUNICATION DTD 17/3/2016 OF THE PRESIDING OFFICER OF THE MUNSIFFS COURT, THIRUVANANTHAPURAM.**