Court dismisses writ petition, upholds attachment on secured property. Bank's actions faulty. Clear dues to remove attachment.

The Court dismissed the writ petition, ruling in favor of the 1st respondent's attachment on the secured property. The Bank's premature actions and failure to comply with statutory procedures led to the non-registrable sale certificate with known encumbrances. The Court emphasized that the Bank and auction purchaser must clear the dues before removing the attachment, ensuring other statutory creditors' rights to realize their dues are not compromised.

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Issues Involved:
1. Removal of attachment on secured property.
2. Priority of secured creditor over unsecured creditor.
3. Compliance with statutory procedures under SARFAESI Act and Security Interest (Enforcement) Rules.
4. Validity of sale certificate with known encumbrances.

Summary:

Issue 1: Removal of Attachment on Secured Property
The petitioner, a Bank, sought a direction to remove the attachment effected by the 1st respondent on the secured property to enable the registration of the sale certificate in favor of auction purchasers. The attachment by the 1st respondent was preventing the Bank from auctioning the property and realizing its dues.

Issue 2: Priority of Secured Creditor Over Unsecured Creditor
The Court confirmed that the petitioner-Bank, as a secured creditor, holds the first charge over the property under Section 26-E of the SARFAESI Act and Section 31-B of the Recovery of Debts and Bankruptcy Act, 1993. The 1st respondent, being an unsecured creditor, does not have precedence over the secured creditor.

Issue 3: Compliance with Statutory Procedures Under SARFAESI Act and Security Interest (Enforcement) Rules
The Court emphasized the importance of following the procedures under Rule 9 of the Security Interest (Enforcement) Rules, 2002. The Bank must ensure that the sale of the secured property is free from encumbrances. The Bank failed to provide proof that the sale certificate was properly sent to the 3rd respondent for making entries as required under Section 89(4) of the Registration Act.

Issue 4: Validity of Sale Certificate with Known Encumbrances
The sale certificate issued by the Bank indicated known encumbrances, including dues to the Commercial Tax Department, Central Excise and Service Tax Department, and Tamil Nadu Electricity Board. The Court ruled that a sale certificate with known encumbrances cannot be registered under the Registration Act. The auction purchaser, aware of these encumbrances, must discharge them to convert the sale into one free from encumbrances.

Conclusion:
The Court dismissed the writ petition, stating that the Bank's actions were premature and non-compliant with statutory procedures. The sale certificate issued with encumbrances is non-registrable, and the attachment cannot be removed without clearing the dues. The Bank and the auction purchaser cannot deprive other statutory creditors of their rights to realize their dues.

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