State Bank of India Stressed Asset Recovery Branch v Sub Registrar, Karunagappally, Kollam; Kannan Enterprises; Abdul Majeed Moothotam Veetil Thekkathil; Mohanan Nair; Shambu Prasad; Basheerkutty Ottamavila Puthen Veettil

## **IN THE HIGH COURT OF KERALA AT ERNAKULAM** ## **PRESENT** **THE HONOURABLE MR.JUSTICE MURALI PURUSHOTHAMAN** **FRIDAY, THE 22[ND] DAY OF DECEMBER 2023 / 1ST POUSHA, 1945** **WP(C) NO. 21558 OF 2023** ## **PETITIONER:** **STATE BANK OF INDIA STRESSED ASSET RECOVERY BRANCH, LMS COMPOUND, OPP.MUSEUM WEST GATE, VIKAS BHAVAN P.O, THIRUVANANTHAPURAM REPRESENTED BY ITS CHIEF MANAGER, PIN – 695 033.** ## **BY ADV S.EASWARAN** ## **RESPONDENTS:** - **1 SUB REGISTRAR REGISTRAR OFFICE, KARUNAGAPALLY, KOLLAM, PIN – 690 518.** - **2 S.KANNAN PROPRIETOR OF M/S. KANNAN ENTERPRISES, RESIDING AT SAYABI, TOWN LIMIT, KADAPPAKKADA P. O, KOLLAM – 691 577 PRESENTLY RESIDING AT GEETHIKA BHAVAN, THIRUKKOVILVATTOM, MUKHATHALA P. O, KOLLAM, PIN – 691 577.** - **3 SRI. ABDUL MAJEED MOOTHOTAM VEETIL THEKKATHIL, KULASEKARAPURAM, KOLLAM, PIN – 690 544.** - **4 SRI MOHANAN NAIR S/O. NARAYANAN NAIR CHITHIRA SADANAM 72 A VISHU NAGAR, MULLUVIAL CHERIYAL VADAKKEVILA VILLAGE, KOLLAM, PIN – 691 020.** - **5 SHRI.SHAMBU PRASAD S/O. M G DAMODARAN, MEECHERIL VEEETIL, KALIYAMKAVU, KURUVILANGAD VILLAGE, KOTTAYAM, PIN – 686 642.** - **6 SHRI.BASHEERKUTTY OTTAMAVILA PUTHEN VEETTIL, MAYNAGAPPALLY VILLAGE, KUNATHOOR TALUK, KOLLAM, PIN – 690 540.** **WP(C).No.21558 OF 2023** **2** **BY ADVS. R2 – SMT. NURIYA O. A R3 - SRI. S.SREEKUMAR (KOLLAM) SRI.SIRAJ K. H SRI. MOHAMMED SHAD K.A. DENNY VARGHESE LIJO RAJU REVATHY P. MANOHARAN NABIL KHADER SMT. DEEPA V. - GP** **THIS WRIT PETITION (CIVIL) HAVING COME UP FOR ADMISSION ON 22.12.2023, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING:** **WP(C).No.21558 OF 2023** **3** ## **JUDGMENT** The petitioner, a Nationalised Bank, has filed this writ petition seeking a direction to the 1[st] respondent, the Sub Registrar, to register Ext.P4 sale certificate in favour of its auction purchaser _de hors_ the attachment entered in Ext.P6 Certificate. 2. The 2[nd] respondent (hereinafter referred to as 'borrower') availed credit facilities from the petitioner Bank. By way of security for the said amounts the borrower created equitable mortgage in favour of the petitioner by deposit of title deeds of his property on 24.09.2007. The borrower defaulted payment of installments and the petitioner initiated proceedings against the secured assets under the provisions of the SARFAESI Act. The property was sold to the 3[rd] respondent (hereinafter referred to as the 'auction purchaser') in auction and Ext.P4 is the sale certificate. **WP(C).No.21558 OF 2023** **4** When steps were taken to register the sale certificate, the Sub Registrar refused to register the same and issued Ext.P5 communication stating that there is an order of attachment dated 22.07.2013 in I.A No.980 of 2013 in O.S No.664 of 2012 of the Sub Court, Karunagappally against the property and a writ petition _viz;_ W.P. (C) No.30656 of 2021 is pending before this Court. The said attachment has been entered in Ext.P6 Encumbrance Certificate. 3. The petitioner states that W.P.(C) No.30656 of 2021 was filed by the auction purchaser for issuance of sale certificate and the same was dismissed as withdrawn by judgment dated 20.06.2023. It is stated that the attachment by the Sub Court, Karunagappally is subsequent to the creation of the equitable mortgage by the borrower and the same cannot stand in the way of registering Ext.P4 sale certificate issued pursuant to the sale conducted under the SARFAESI **WP(C).No.21558 OF 2023** **5** Act. The property mortgaged to the petitioner was subsequently sold by the borrower to respondents 4 and 5 on 21.05.2013. The petitioner states that the sale deed executed after the mortgage cannot survive in preference to the equitable mortgage created by the borrower in favour of the petitioner as early as on 24.09.2007. The petitioner further states that Ext. P4 sale certificate has to be registered _de hors_ the sale deed executed in favour of respondents 4 and 5. Accordingly, the petitioner prays for a direction to quash Ext.P5 and for direction to the Sub Registrar to efface the attachment in Ext.P6 Encumbrance certificate and register Ext.P4 sale certificate _de hors_ the encumbrance contained in Ext.P6. 4. A counter affidavit has been filed on behalf of the borrower wherein it is stated that the petitioner Bank has approached him for working out a settlement and he is willing to settle the matter with the Bank. **WP(C).No.21558 OF 2023** **6** 5. Respondents 4 and 5 have filed a counter affidavit wherein it is stated that they have purchased the property by virtue of Ext.R5(A) sale deed dated 12.05.2013 and mutation has been effected and they are paying land tax in respect of the property and are _bona fide_ purchasers having purchased the property with good consideration. It is contended that they obtained non-encumbrance certificate in respect of the property during the relevant period and there is clear collusion between the Bank and the auction purchaser. Accordingly, they pray to dismiss the writ petition. 6. Heard Sri.S.Easwaran, the learned counsel for the petitioner, Smt.O.A Nuriya, the learned counsel for the 2[nd] respondent, Sri.S.Sreekumar (Kollam), the learned counsel for the 3[rd] respondent and Sri.Siraj Karoly, the learned counsel for respondents 4 and 5. Though notice was served, there is no appearance for the 6[th] respondent. **WP(C).No.21558 OF 2023** **7** 7. Sri.Easwaran, the learned counsel for the petitioner submits that the right of the borrower to redeem the mortgage has been extinguished under Section 13(8) of the SARFAESI Act. The attachments effected by the Sub Court, Karunagappally at the instance of the 6[th] respondent is subsequent to the creation of the equitable mortgage by the borrower in favour of the petitioner and the same cannot affect the right of the petitioner to sell the property under the provisions of the SARFAESI Act. So also, it is contended that the sale conducted by the borrower in favour of respondents 4 and 5 on 12.05.2013 cannot survive in preference to the mortgage created by the borrower as early as on 24.09.2007. The learned counsel relied on the decision of this Court in **Kerala State Financial Enterprises Ltd. v. Meenachil Cooperative Agricultural and Rural Development Bank Ltd.** [2004 (3) KLT 369] to contend that a **WP(C).No.21558 OF 2023** **8** mortgagor is disabled from further encumbering the properties in any case without the junction of the mortgagee and that a liability is automatically attached to the property and it is a burden imposed upon the land and the interest in the land, by the owner of the land. The learned counsel also relied on the decision 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] and contends that the attachment effected subsequent to the creation of equitable mortgage will not affect the right of the petitioner to sell the mortgaged property and the attachments have to be effaced from the encumbrance register. 8. Sri.Siraj Karoly, the learned counsel for respondents 4 and 5 would contend that the said respondents are _bona fide_ purchasers of the property and that the mortgage in favour of the petitioner Bank **WP(C).No.21558 OF 2023** **9** was not reflected in Ext.R5(C) Encumbrance Certificate and that the property was registered in their favour and mutation was effected and they are also paying land tax in respect of the property. Being _bona fide_ purchasers, the right of the auction purchaser, if any, is subject to the right of respondents 4 and 5. 9. 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 ground the moment the sale is petitioner. The confirmed in favour of 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 **WP(C).No.21558 OF 2023** **10** from the relevant records. Otherwise those attachments would remain as a permanent taboo prejudicial 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.” 10. 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 Madhan's case (supra). In **Secretary, Keechery Service Co-operative Bank Ltd. v.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], 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 **WP(C).No.21558 OF 2023** **11** 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 efface all encumbrance over the property effected after 27/06/2014, the date on which the property in question was mortgaged with Federal Bank”. 11. From the documents produced before this Court, it is evident that the attachment effected in favour of the 6[th] respondent by the Sub Court, Karunagappally and the sale conducted by the 2[nd] respondent in favour of respondents 4 and 5 in respect of the mortgaged property are subsequent to the creation of equitable mortgage by the 2[nd] respondent in favour of the petitioner. Accordingly, in the light of the dictum laid down by this Court in the above decisions, entries of attachment in the Encumbrance **WP(C).No.21558 OF 2023** **12** Register are liable to be effaced and the 1[st] respondent has to register Ext.P4 sale certificate not withstanding the entries therein. 12. It is trite law that the mortgagor is disabled from further encumbering the properties without the junction of the mortgagee. It is the duty of the seller to disclose the encumbrance created by him before the sale. If the seller has failed to do so, the remedy of the purchaser is against the seller. Merely because respondents 4 and 5 are _bona fide_ purchasers, unaware of the mortgage, it does not follow that the charge is effaced from the property. The right of the purchasers will always be subject to the charge created under the mortgage. 13. Accordingly, Ext.P5 is set aside. There will be a direction to the 1[st] respondent to register Ext.P4 sale certificate as and when presented on the 3[rd] respondent paying the requisite stamp **WP(C).No.21558 OF 2023** **13** duty/registration fee and if the same is otherwise in order, _de hors_ the encumbrance in Ext.P6. 14. It is submitted by the learned counsel for the 3[rd] respondent that the stamp papers purchased by the 3[rd] respondent for execution of Ext.P4 sale certificate have become obsolete. It will be open to the 3[rd] respondent to make necessary application before the 1[st] respondent for validation of the stamp papers in the light of this judgment. 15. It is made clear that, this judgment will not impede any other remedies as may be available to respondents 4 to 6 in law. The writ petition is disposed of. ## **Sd/-** **MURALI PURUSHOTHAMAN JUDGE** SPR **WP(C).No.21558 OF 2023** **14** ## **APPENDIX** ## **PETITIONER’S EXHIBITS:-** |**EXHIBIT P1**|**COPY OF LETTER DATED 10.06.2008 CONFIRMING**| |---|---| ||**THE CREATION OF EQUITABLE MORTGAGE.**| |**EXHIBIT P2**|**COPY OF DEMAND NOTICE DATED 09.02.2013**| ||**ISSUED UNDER SECTION 13(2) OF THE**| ||**SECURITISATION ACT.**| |**EXHIBIT P3**|**COPY OF SALE NOTICE DATED 06.03.2021.**| |**EXHIBIT P4**|**COPY OF CERTIFICATE OF SALE DATED**| ||**21.02.2022.**| |**EXHIBIT P5**|**COPY OF LETTER NO NIL DATED NIL ISSUED BY**| ||**THE IST RESPONDENT.**| |**EXHIBIT P6**|**COPY OF ENCUMBRANCE CERTIFICATE DATED**| ||**06.04.2022.**| ## **RESPONDENTS EXHIBITS:** |**EXHIBIT R2A**|**TRUE COPY OF NOTICE ISSUED BY PETITIONER**| |---|---| ||**DATED 07.10.2023.**| |**EXHIBIT R5A**|**TRUE COPY OF THE SALE DEED DATED**| ||**21.05.2013.**| |**EXHIBIT R5B**|**TRUE COPY OF THE TAX RECEIPT DATED**| ||**27.05.2013.**| |**EXHIBIT R5C**|**TRUE COPY OF NON- ENCUMBRANCE CERTIFICATE**| ||**DATED 25.06.2013.**| |**EXHIBIT R5Ca**|**TRUE COPY OF NON- ENCUMBRANCE CERTIFICATE**| ||**DATED 25.06.2013.**|