Phoenix Arc Private Limited v. Sub Registrar, Feroke and Others

## **`4IN THE HIGH COURT OF KERALA AT ERNAKULAM`** # **`PRESENT`** ## **`THE HONOURABLE MR.JUSTICE MURALI PURUSHOTHAMAN`** ``` THURSDAY, THE 21[ST] DAY OF DECEMBER 2023 / 30TH AGRAHAYANA, ``` ## **`1945`** ## **`WP(C) NO. 36109 OF 2023`** ## **`PETITIONER:`** ``` PHOENIX ARC PRIVATE LIMITED 5TH FLOOR, DANI CORPORATE PARK, 159, CST ROAD, KALINA, SANTACRUZ, EAST MUMBAI REPRESENTED BY ITS AUTHORISED SIGNATORY, HARSH MAGIA, PIN - 400098 BY ADVS. A.KEVIN THOMAS NIDHI SAM JOHNS LIJO JOSEPH (THOPPIL) ``` ## **`RESPONDENTS:`** ``` 1SUB REGISTRAR, FEROKE SUB REGISTRAR OFFICE, FEROKE KOZHIKODE, PIN - 673631 2VILLAGE OFFICER RAMANATTUKARA VILLAGE, KOZHIKODE, PIN - 673633 3MADHAVANUNNI T KALLAMKUTHU HOUSE, NEDIYIRUPPU P.O. MALAPPURAM, PIN - 673638 4MURALEEDHARAN S/O. M. VELAYUDHAN NAIR, KEDARAM HOUSE, MOOZHIKKAL ROAD, MUNDUPARAMB, MALAPPURAM AMSOM, MUNDUPARAMBA P.O., PIN - 676509 5POPULAR STEEL TRADERS REPRESENTED BY ITS MANAGING PARTNER MR. SHIVSHANKARAN T, VP X1/1408 , VENGARA, MALLAPURAM, KERALA, PIN - 676304 BY ADVS. AJMAL V.A A.C.ARFANA(K/273/2014) FATHIMA V.A.(K/001274/2018) SRI. A.V. THOMAS SMT. DEEPA NARAYANAN – GP ``` ## THIS WRIT PETITION (CIVIL) HAVING COME UP FOR ADMISSION ON 21.12.2023, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING: 2 W.P.(c) No. 36109 of 2023 ## **JUDGMENT** The petitioner, an Asset Reconstruction Company, has filed this writ petition for a direction to the 1[st] respondent Sub Registrar to efface the entry regarding the attachment of its secured asset from the SRO Register and to register Ext. P5 Sale Certificate. 2. The 3[rd] respondent availed a loan from the South Indian Bank by creating an equitable mortgage by deposit of title deeds in respect of the property having an extent of 43 cents in old survey No.354/1 of Ramanattukara Kozhikode District on Village, 21.12.2009. The said mortgage was extended to cover renewed credit facilities on 25.10.2013. The 3[rd] respondent defaulted payment of loan amount and 3 W.P.(c) No. 36109 of 2023 the Bank initiated proceedings under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act (for short, SARFAESI Act). 3. The 3[rd] respondent challenged the said proceedings before this Court in W.P(C) No.3692 of 2017 and this Court, by Ext. P3 judgment dated 06.02.2017, permitted the 3[rd] respondent to satisfy the loan account in installments. 4. The South Indian Bank, by an assignment agreement dated 17.03.2017, assigned the debts and underlying securities along with rights, title and interest pertaining to the 3[rd] respondent in favour of the petitioner Company. 4 W.P.(c) No. 36109 of 2023 5. The 3[rd] respondent defaulted payment of installments and the petitioner took physical possession of the secured asset on 23.05.2022 pursuant to the order dated 12.11.2020 passed by the Chief Judicial Magistrate Court, Kozhikode in M.C. No. 220 of 2020. The property was sold in auction to the 5[th] respondent and Ext. P5 is the sale certificate. 6.When the auction purchaser took steps to register the property, the same was refused by the Sub Registrar on the ground that there is an attachment against the property evidenced by Ext. P6 encumbrance certificate. The attachment order dated 15.07.2022 in favour of the 4[th ] respondent was passed by the Munsiff Court, Manjeri in O.S No. 263 of 2022. The petitioner states that the attachment effected by the Munsiff Court, Manjeri and entered in Ext. P6 is 5 W.P.(c) No. 36109 of 2023 subsequent to the equitable mortgage created by the 3[rd] respondent in favour of the petitioner. The petitioner also states that the attachment as above has been effected subsequent to the petitioner taking possession of the secured assets. It is further stated that the said suit itself was decreed by the Court by Ext. P7 judgment dated 29.11.2022 on the basis of admission made by the 3[rd] respondent and agreeing to pay the amount in installments. The petitioner states that subsequent attachments cannot stand in the way of registration and mutation of the secured asset. 7. Heard the learned counsel for the petitioner, the learned counsel for the 3[rd] respondent and the learned Government Pleader. 6 W.P.(c) No. 36109 of 2023 8. Sri. A. Kevin Thomas, the learned counsel for the petitioner relied on the decisions of this Court in **Madhan S.** _**v**_ **. Sub Registrar, Kollam and Others [2014 (1) KHC 249: 2014 (1) KLT 406: ILR 2014 (1) Ker.586: 2014 (1) KLJ 483: AIR 2014 Ker.54], Secretary, Keechery Service Co-** _**v**_ **operative Bank Ltd. . Sajitha Nizar alias Sajitha P.M. and Others [2020 (5) KHC 231: ILR 2020 (4) Ker.249: 2020(6) KLT 68: 2020(4) KLJ 970]** and **HDFC Bank v. Sub Registrar Office [2011 (3) KLJ 561: 2011 KHC 851]** and contends that the attachment effected subsequent to the creation of equitable mortgage will not affect the right of the Bank to sell the mortgaged property and the attachment has to be effaced from the encumbrance register. The learned counsel further contends that 7 W.P.(c) No. 36109 of 2023 the remedy of the 3[rd] respondent to redeem the mortgage has been extinguished in view of the provisions contained in Section 13 (8) of the SARFAESI Act. 9. Smt. Deepa Narayanan, the learned Government Pleader submits that, when an order of attachment of immovable property or release of any immovable property from attachment has been made by any Court and communicated to the Sub Registrar as per Section 89(5)(b) of the Registration Act, 1908, the Sub Registrar shall file the copy of the order in Book No.1 maintained under Section 51 and shall be indexed as per Section 54 of the said Act. Smt. Deepa then refers to Rule 171 of the Registration Rules (Kerala) and submits that a certificate of encumbrance shall contain list of all acts and 8 W.P.(c) No. 36109 of 2023 encumbrances effecting the property in question. Therefore, the Registering officer has no power to efface any entries and the only option is to have the attachment lifted by the competent Court. 10. In **Madhan** 's case (supra), this Court held in paragraph 9 as follows:- _“9. The preponderance of judicial opinion leads to the irresistible conclusion that the sale of the mortgaged property in favour of the petitioner under Ext.P5 sale certificate under the Act is free of all encumbrances. The attachments effected subsequent to the mortgage created in favour of the bank do not affect the title and ownership of the petitioner over the subject property. Such attachments have no impact on the sale conducted under the Act and the same ceases to have any effect or fall to the_ 9 W.P.(c) No. 36109 of 2023 _ground the moment the sale is confirmed in favour of the petitioner. The declaration so sought by the petitioner is therefore granted and I further direct the Sub-Registrar and the Village Officer to efface the attachments effected subsequent to the mortgage from the relevant records. Otherwise those attachments would remain as a permanent taboo prejudicially affecting the marketability and title to the property even though they ceased to have any legal efficacy. The needful in relation to the property bought by the petitioner shall be done within a period of two months from the date of receipt of a copy of this judgment.”_ 8. A Division Bench of this Court in **Ali Asharaf** **M.M. and Another** _**v**_ **. Sub Registrar, Thrissur (Judgment dated 24.7.2015 in W.A. No.612/2015)** has affirmed the law laid down in 10 W.P.(c) No. 36109 of 2023 **Madhan** 's case (supra). In **Keechery Service Cooperative Bank Ltd** (supra), another Division Bench of this Court also affirmed the law laid down in **Madhan** 's case (supra) and held in paragraph 7 as under:- _“7. …. We do not find any reason to disagree with the declaration of law in Madhan's case (supra) which was virtually affirmed by the Division Bench in Ali Asharaf's case (supra). In the said circumstances and taking note of the fact that the orders of attachment of the property in question were after the creation of equitable mortgage of the same with Federal Bank we do not find any reason to interfere with the impugned judgment passed by the learned Single Judge following the dictum in Madhan's case (supra), carrying the directions to effect mutation of the property as also to_ 11 W.P.(c) No. 36109 of 2023 _efface all encumbrance over the property effected after 27/06/2014, the date on which the property in question was mortgaged with Federal Bank”._ In **HDFC Bank** (supra), this Court held as follows: “7.....This Court finds that the rights and liberties conferred on the creditor / Bank by virtue of mortgage created in the year 2001 and the right to proceed under the relevant provisions of the SARFAESI Act cannot be defeated because of the subsequent attachments ordered by the Civil Courts in 2007-09. As such, the sale conducted on 24.11.2010, leading to issuance of Ext.P4 sale certificate, is complete in all respects and the title stands conveyed to the second petitioner.” Thus it is trite law that attachment effected subsequent to the creation of equitable mortgage does not have any effect on the sale conducted by the 12 W.P.(c) No. 36109 of 2023 Bank under the SARFAESI Act and has to be effaced from the encumbrance register. 9. Smt. Deepa is right in her submission that when an order of attachment of immovable property or release of any immovable property from attachment has been made by any Court and communicated to the Sub Registrar as per Section 89(5)(b) of the Registration Act, 1908, the Sub Registrar shall file the copy of the order and memorandum in Book No.1 and shall be indexed as per Section 54 of the said Act. According to Smt. Deepa, the Registering officer has no power to efface such entries. In **Madhan** 's case (supra), this Court directed the Sub-Registrar and the Village Officer to efface the attachments effected subsequent to the mortgage from the relevant records for the reason 13 W.P.(c) No. 36109 of 2023 that those attachments would remain as a permanent taboo prejudicially affecting the marketability and title to the property, even though they ceased to have any legal efficacy. It is evident from the documents produced by the petitioner that the attachment effected by the Munsiff Court, Manjeri is subsequent to the creation of the equitable mortgage and therefore, in the light of the decisions cited supra, the attachment order lost its efficacy, and, therefore, needs to be obliterated from the records. This can be done in the same manner as provided under Section 89(5)(b) of the Registration Act, 1908. Section 89(5) of the Registration Act, 1908 reads as follows: " **89. Copies of certain orders, certificates and instruments to be sent to registering officers and filed. -** x x x 14 W.P.(c) No. 36109 of 2023 ## (5) Every Court passing - (a) any decree or order creating, declaring, transferring, limiting or extinguishing any right, title or interest to or in immovable property in favour of or of any person, or (b) an order for the attachment of immovable property or for the release of any immovable property from attachment, shall send a copy of such decree or order together with a memorandum describing the property, as far as may be practicable in the manner required by S.21, to the Registering Officer within the local limits of whose jurisdiction the whole or any part of the immovable property comprised in such decree or order is situate, and such officer shall file the copy and memorandum in his Book No.1." ( _underlining supplied_ ) Since the attachment subsequent to the creation of equitable mortgage has lost its efficacy and has to be obliterated from records, the same can be done by the Sub Registrar by filing the certified copy of the order/judgment of this Court in his Book No.1. 15 W.P.(c) No. 36109 of 2023 Accordingly, there will be a direction to the 1[st] respondent to efface the attachment effected by the Munsiff Court, Manjeri in O.S No. 263 of 2022 from Book No.1 by filing the certified copy of this judgment in the said Book and register Ext. P5 sale certificate as and when presented, on payment of the required stamp duty and registration fee and if the same is otherwise in order. After registration of the property as above, the 2[nd] respondent shall effect transfer of registry, if there are no other legal impediments. The writ petition is disposed of. **Sd/-** bnu **MURALI PURUSHOTHAMAN JUDGE** 16 W.P.(c) No. 36109 of 2023 ## **`APPENDIX`** ## `PETITIONER’S EXHIBITS` ``` Exhibit P1TRUE COPY OF THE LETTER DATED 26/10/2013 GIVEN BY THE 3RD RESPONDENT TO SOUTH INDIAN BANK LTD CONFIRMING DEPOSIT OF TITLE DEED Exhibit P2TRUE COPY OF DOCUMENT NO.1834/1994 OF FEROKE SRO Exhibit P3TRUE COPY OF THE JUDGMENT DATED 06/02/2017 OF HON'BLE HIGH COURT OF KERALA IN W.P(C) NO.3692 OF 2017 Exhibit P4TRUE COPY OF THE SALE NOTICE DATED 05/08/2023 ISSUED BY THE PETITIONER Exhibit P5TRUE COPY OF THE SALE CERTIFICATE DATED 27.09.2023 ISSUED BY THE PETITIONER TO THE 5TH RESPONDENT Exhibit P6TRUE COPY OF THE ENCUMBRANCE CERTIFICATE NO. 8962/23 DATED 09/10/2023 IN RESPECT OF THE SUBJECT MATTER PROPERTY ISSUED BY THE 1ST RESPONDENT Exhibit 7TRUE COPY OF THE JUDGMENT DATED 29/11/2022 OF THE MUNSIFF COURT, MANJERI IN O.S. NO.263 OF 2022 Exhibit P8TRUE COPY OF THE CASE STATUS OF O.S. NO. 263 OF 2022 BEFORE THE MUNSIFF COURT, MANJERI Exhibit P9TRUE COPY OF THE JUDGMENT DATED 30/03/2023 IN W.P(C) NO.9875 OF 2023 OF HON'BLE COURT OF KERALA Exhibit P10TRUE COPY OF THE ORDER DATED 05/06/2023 IN SLP NO.11292 OF 2023 OF THE HON'BLE SUPREME COURT OF INDIA ```