2025 (5) TMI 2240 - HC - Indian Laws

Registration of SARFAESI sale certificates: ministerial filing can be compelled, but register entries for judicial attachments cannot be deleted.

A confirmed SARFAESI sale that vests title free of encumbrances known to the secured creditor requires the registering officer to file the sale ... Enforcement of security interest under the SARFAESI Act - priority of secured creditor's claim and overriding effect of SARFAESI Act - registration of sale certificate under Section 13(8) read with Rule 9(6) and filing under Section 89(4) - entry in Book No.1 under Section 89(5) of the Registration Act - effacement or deletion of entries in Book No.1 - writ jurisdiction under Article 226 of the Constitution - alternative remedy principle and limitation on writ relief - attachment not being an encumbrance creating proprietary interest - power and limits of Single Judge to refer to a Full/Larger Bench under the Kerala High Court Act - mandamus to compel performance of a statutory, ministerial duty - HELD THAT:- The registration details of a property contained in the records of the registering authority thus enable people to find out whether a property with which they may be concerned has been made subject to some particular legal obligation. The other purposes are to give solemnity of form and legal importance to certain classes of documents by directing that they shall be registered and also to perpetuate documents which may afterwards be of legal importance. Such records will put on record, what the particulars are and as far as land is concerned what obligations exist with regard to them, which will help to prevent fraud. From the above discussion, it comes out that when a property is sold by an authorised officer on behalf of the secured creditor under Section 13(4) of the SARFAESI Act and issued a sale certificate as provided in Section 13(8), every other claim over that property, which arose after creation of the mortgage in favour of the secured creditor and registration of creation of the security interest in the Central Registry would stand extinguished. If an interest or an encumbrance was created upon the property before creation of the mortgage in favour of the secured creditor, the same undoubtedly would prevail. Leaving that apart, no interest or charge created upon or attachment ordered in respect of a secured asset after creation of the mortgage can be a reason not to register a sale certificate issued by the authorised officer. The registering officer concerned has, therefore, a legal obligation as provided in Section 89(4) of the Registration Act to file the same in his Book No.1. The registering officer, however, has no obligation or rather he is not empowered to delete or efface an entry made in Book No.1 in terms of Section 89(4) or (5) of the Registration Act. Can the High Court issue a writ of mandamus directing the registering officers to register a sale certificate? - HELD THAT:- When a property is sold by an authorised officer on behalf of the secured creditor under Section 13(4) of the SARFAESI Act and issued a sale certificate as provided in Section 13(8), every other claim over that property, which arose after creation of the mortgage in favour of the secured creditor and registration of creation of such a security interest in the Central Registry would stand extinguished. Its corollary is that if an interest or an encumbrance was created upon the property before creation of the mortgage in favour of the secured creditor, the same would prevail. We further held that any interest or charge created upon or attachment ordered in respect of a secured asset after creation of the mortgage in favour of the secured creditor cannot be a reason not to register a sale certificate issued by the authorised officer. The registering officer concerned has, therefore, a legal obligation as provided in Section 89(4) of the Registration Act to file the same in his Book No.1. Thus, this Court can certainly issue a writ of Mandamus commanding to register a sale certificate issued by the authorised officer selling a secured asset dehors an attachment by a civil court/family court/revenue authority after creation of the mortgage in favour of the secured creditor. Can the High Court issue a writ of mandamus or certiorari directing to efface an entry in Book No. 1? - HELD THAT:- The ratio in TATA Engineering and Locomotive Co. Ltd. v. Assistant Commissioner of Commercial Taxes [1967 (2) TMI 67 - SUPREME COURT] that in exceptional cases where action is being taken under an invalid law or arbitrarily without sanction of law, the High Court may interfere to avoid hardship to a party and to provide a quick and efficacious remedy is highlighted to urge that direction to efface entries regarding attachment in the registers in the registrar’s office is apposite and permissible in law. As we had explained in paragraph No.83, what a registering authority can do, when an attachment regarding which there has already been an entry in Book No.1 is withdrawn or extinguished, is to make another entry concerning the same in Book No.1. It is so provided in Section 89(5)(b) of the Registration Act. The manner in which such an entry is to be made is explained in Rule 138 of the Registration Rules (Kerala). In the light of the above position of the law, which is specific; and having the principle been succinctly explained by this Court and also the Apex Court, which we have referred to hereinbefore, the contention on behalf of the banks and other financial institutions that the entries concerning attachments in Book No.1 is liable to be effaced is without any merit and not supported by law. What shall be the appropriate relief? - HELD THAT:- It is true that once sale as contemplated in Section 13(4) of the SARFAESI Act is concluded, all encumbrances created and attachments ordered in respect of the property subsequent to creation of mortgage which matured into sale stood extinguished. But when the entry regarding such an attachment is made in Book No.1 in the Sub Registry based on order of attachment of the civil court or a family court, that is a situation where an effective statutory remedy is available. One can invoke the provisions of Rule 8 of Order XXXVIII of the Code if the claim is that the attachment was untenable in law. If the suit in which such an attachment has been ordered was later dismissed or where the defendant therein furnished security, that is a case for removal of attachment coming under Rule 9 of Order XXXVIII of the Code. That is a situation where the attachment stood withdrawn and what remains is to communicate the matter as provided in Rule 185 of the Civil Rules of Practice and Section 89(5) of the Registration Act. The provisions of Rule 10 of Order XXXVIII makes it clear that an attachment before judgment should not affect the right, existing prior to the attachment, of persons not parties to the suit. Most of the present cases come within this category. If a mortgage was created before the order of attachment either before judgment or after the decree, and such a property was sold under the SARFAESI Act, the attachment does not affect the right obtained by the purchaser, unless such an attachment is in recognition of a pre-existing right in the nature of an interest or charge created on the property. What is required in such a case is to bring to the notice of the court which ordered attachment and that will inevitably result in withdrawal of the attachment. One cannot contend that such a remedy provided under the Code, which is to be exercised by the courts of law, is not effective or efficient. In a petition filed under Rule 8 of Order XXXVIII of the Code, the civil court has to follow the procedure provided in Rule 58 of Order XXI, which is applicable to a petition raising a claim to, or objection to attachment of property in execution of a decree. The procedure contemplated in Rule 58 is akin to the procedure in a suit. An appeal is also provided. Such a procedure need to be resorted to only in rare cases where the attachment was before creation of the mortgage in favour of the secured creditor or the attachment is in recognition of some pre-existing right or interest already created in the property. In all other cases, there would not involve any detailed enquiry. The enquiry invariably would be limited to whether the attachment was before or after creation of the mortgage. In the circumstances, the apprehension of the banks and financial institutions that the procedure before the civil court for getting the attachment removed is cumbersome and the High Court, therefore, has to step in to alleviate the inconvenience that may be caused to the banks, financial institutions and the auction purchasers cannot be countenanced. The jurisdiction under Article 226 of the Constitution of India cannot be exercised in order to circumvent the procedure established by law and in such a way as to cause embarrassment to the process before a civil court. The words “and for any other purpose” in Article 226 of the Constitution of India cannot be interpreted, in the above position of law, to mean that the High Court can order effacement of entries about attachment in Book No.1. As stated above, at least in a few situations a direction to the registering officer to make entry in Book No.1 that the attachment by a civil court is removed or extinguished would invite another round of litigation. That also is a reason to take the view that Article 226 of the Constitution of India cannot be resorted to get such a remedy. High Court can issue a writ of mandamus to compel a registering officer to file/register a SARFAESI sale certificate under Section 89(4) notwithstanding an attachment entry in Book No.1 where the attachment arose after creation of the mortgage, but the Court cannot order deletion/effacement of Book No.1 entries recording attachments Issues: (i) Whether the High Court can, under Article 226, issue a writ of mandamus directing the registering officer to register a sale certificate issued under Section 13(8) of the SARFAESI Act despite an entry in Book No.1 recording an attachment by a civil or family court; (ii) Whether the High Court can, under Article 226, issue a writ of mandamus or certiorari directing deletion or effacement of an entry in Book No.1 relating to such attachment; (iii) Whether earlier decisions permitting effacement under Article 226 should be maintained.Issue (i): Whether the High Court can direct registering officers to register sale certificates issued under Section 13(8) SARFAESI Act despite entries of attachment in Book No.1.Analysis: Section 13 of the SARFAESI Act together with Rule 9(6) and sub-rule (10) of the Enforcement Rules confer on a purchaser, on confirmation of sale and compliance with payment terms, title to the secured asset free of encumbrances known to the secured creditor. Chapter IV-A (Sections 26B-26E) and Section 35 of the SARFAESI Act create priority consequences and an overriding effect in favour of secured creditors for interests created and registered as prescribed. Section 89(4) of the Registration Act requires the authorised officer to forward a copy of the sale certificate to the registering officer for filing in Book No.1. Jurisprudence (including Asset Reconstruction Company (India) Ltd. v. S.P. Velayutham) recognises the High Court's power under Article 226 to compel statutory officers to perform their ministerial registration duties. Where an attachment arises after creation and registration of the security interest and the SARFAESI sale has vested title free of such subsequent encumbrances, the registering officer is obliged to file the sale certificate as mandated by Section 89(4).Conclusion: The High Court can issue a writ of mandamus directing a registering authority to register/file a sale certificate issued under Section 13(8) of the SARFAESI Act read with Rule 9(6) of the Enforcement Rules despite an existing entry in Book No.1 recording an attachment, provided the attachment arose after creation/registration of the secured interest.Issue (ii): Whether the High Court can direct deletion/effacement of an entry in Book No.1 recording an attachment by a civil/family court.Analysis: Book No.1 and the statutory indexes under the Registration Act are maintained as a public record; entries made under Section 89(5) follow judicial orders and the registering officer's function is administrative, not judicial. The Registration Act and Rules (including Rule 138 in Kerala Rules) envisage making consequential footnotes or subsequent entries recording revocation or cessation of encumbrances rather than erasing earlier entries; the registering officer has no power to delete or cancel entries on the basis of an enquiry into the validity of the underlying judicial order. Where the attachment reflects a judicial order, relief affecting that order (including deletion of the corresponding register entry) ordinarily lies with the court which made the attachment or through the statutory procedures in the Code of Civil Procedure (Order XXXVIII / Order XXI as applicable). Interfering to efface Register entries would amount to substantive interference with judicial orders and run counter to Radhey Shyam and allied precedents.Conclusion: The High Court cannot, under Article 226, grant a writ of mandamus or certiorari directing deletion or effacement of an entry in Book No.1 made pursuant to a court's order of attachment; parties seeking annotation that an attachment has been extinguished must approach the court which issued the attachment so that the registrar may make appropriate consequent entries (footnotes) in accordance with the Registration Act and Rules.Issue (iii): Whether prior decisions holding that effacement of Book No.1 entries can be ordered under Article 226 remain good law.Analysis: The statutory scheme of the SARFAESI Act, the Registration Act and the Code of Civil Procedure, together with principles limiting writ interference with judicial orders, require that deletion of register entries made pursuant to judicial attachment be effected by the court which passed the attachment or by following the statutory procedures; therefore, earlier decisions that permitted effacement under Article 226 conflict with these statutory and procedural constraints.Conclusion: Decisions to the extent they held that a High Court may direct effacement or deletion of entries in Book No.1 concerning attachments under Article 226 are overruled.Final Conclusion: The references are answered: Single Judge references to Full/Larger Benches under Section 3 were incorrect and are sent back as directed; the High Court may issue mandamus to register sale certificates under Section 89(4) of the Registration Act where SARFAESI sales have vested title free of subsequent attachments, but it may not direct deletion/effacement of register entries reflecting judicial attachments; parties seeking annotation that an attachment has been extinguished must approach the court which issued the attachment to enable the registrar to make the appropriate subsequent entry or footnote as provided by law.Ratio Decidendi: Where a SARFAESI sale is validly confirmed and vested title free of encumbrances known to the secured creditor, the registering authority must file the sale certificate in Book No.1 under Section 89(4) of the Registration Act and the High Court may compel such ministerial registration by writ; however the power to delete or efface register entries made pursuant to judicial attachment lies with the court which issued the attachment or through the statutory procedures and cannot be supplanted by Article 226 to erase prior judicial entries.