TaxTMI 
TaxTMI 
2025 (5) TMI 2240
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....ces 3 Consistency in precedents vis-à-vis need for law to be socially relevant 4 Can a Single Judge make a reference to a Full Bench? 5 Scope of hearing third parties 6 Scope of the reference 7 Submissions on the precise question referred 8 Evolution of the Securitisation law 9 Extant provisions of law 10 Priority to the claim of secured creditor and overriding effect of SARFAESI Act 11 Effect of the amendment to the SARFAESI Act by Act 44 of 2016 12 Attachment and sale under the Code of Civil Procedure - nuances 13 Attachment is not an encumbrance on the property 14 Once sale takes place the attachment falls on ground 15 Sale by authorised officer and stamp duty 16 Process of registration under the Registration Act and SARFAESI Act -compared 17 Scope of deletion of an entry in Book No.1 18 Sale certificates should be registered dehors attachment 19 Can the High Court issue a writ of mandamus directing the registering officers to register a sale certificate? 20 Can the High Court issue a writ of mandamus or certiorari directing to efface an entry in Book No. 1? 21 ....
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....ments effected subsequent to the mortgage created in favour of the bank have no consequences and such an attachment will have to be effaced from the records. 2. A Division Bench of this Court, in Writ Appeal No.612/2015, followed the decision in S.Madhan's case (supra) and ordered that any such attachment effected after the date of the mortgage is invalid and ordered effacement of such attachment by the Registrar. 3. We may not have much doubt in regard to proposition of law. Any attachment or any other obligation created after the mortgage would not have legal consequences. But the issue is whether this Court is competent to order the effacement of such attachment without the parties approaching the civil court or family court which passed the order of attachment invoking the provisions under the law for lifting that attachment. 4. The learned Counsel for the appellant place reliance on Paragraph 15 of the judgment of the Apex Court in Jagdish Prasad v. Iqbal Kaur [AIR 2015 SC 158] and argued that writ court shall not exercise the power of writ of certiorari to interfere with orders passed on judicial side. We are not agreeing with the proposition of....
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.... be profitable in this context to refer to the law laid down by the Hon'ble Supreme Court in K.C.Ninan v. KSEB and others [2023 SCC Online SC 663]. (3) Can the petitioners' (banks') contention that they have a duty and obligation to transfer "an encumbrance free title" to the auction purchaser be recognized in law, in view of the above referred provisions of The Security Interest (Enforcement) Rules and Appendix IV-A? (4) Is not the dictum laid down in paragraph No.9 of Madhan S. (supra) that the sale of the mortgaged property under the SARFAESI Act is free from all encumbrances liable to be reconsidered, especially when Madhan S. (supra) does not refer at all to the Security Interest (Enforcement) Rules, 2002? (5) Can the petitioners/banks rely on the proposition of law that attachments effected subsequent to creation of equitable mortgage will not affect the title and ownership over such property, in seeking effacement of such attachments, especially when the contingency of the mortgagee/Bank retaining amounts in excess of the mortgage debt pursuant to sale - over which the holder of a subsequent attachment can lay a claim - is taken into consid....
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....Advocate Mohammed Rafiq, the learned Special Government Pleader. Consistency in precedents vis-a-vis need for law to be socially relevant 6. The learned counsel for the 4th respondent in W.P. (C) No.17036 of 2024 submitted at the outset that the learned Single Judges went wrong in making reference to a Full Bench inasmuch as Section 3 of the Kerala High Court Act, 1958 does not envisage such a procedure. It is also contended that the Division Bench ought not to have made the reference since the same has the effect of unsettling a proposition of law in vogue for the last more than 10 years. In the view of the learned counsel, the principle in Madhan S. [2014 (1) KLT 406] attained the status of a stare decisis and having been reiterated by successive Division Benches, no reference should have been made. 7. The necessity to have consistency and the importance of the principles of stare decisis have been underlined by the Apex Court in a catena of decisions. In Keshav Mills Co.Ltd. v. Commissioner of Income Tax, Bombay North, Ahmedabad [1965 1965 SC 1636] the Apex Court held: "23. xxxx In exercising this inherent power, however, this Court would naturally like to impo....
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....n Corpus Juris Secundum:- "Under the stare decisis rule, a principle of law which has become settled by a series of decisions generally is binding on the courts and should be followed in similar cases. This rule is based on expediency and public policy, and, although generally it should be strictly adhered to by the courts, it is not universally applicable." 9. In Mishri Lal (Dead) by LRs. v. Dhirendra Nath (Dead) by LRs. [(1999) 4 SCC 11] the Apex Court held that while it is true that the doctrine of Stare Decisis has no statutory sanction and the same is based on a rule of convenience and expediency and as also on `Public Policy' but the doctrine should and ought always to be strictly adhered to by the courts of law to sub-serve the ends of justice. 10. The Apex Court in Sakshi v. Union of India [(2004) 5 SCC 518] held: "23. Stare decisis is a well-known doctrine in legal jurisprudence. The doctrine of stare decisis, meaning to stand by decided cases, rests upon the principle that law by which men are governed should be fixed, definite and known, and that, when the law is declared by a court of competent jurisdiction authorised to construe it, such dec....
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....ges setting out, the reasons why it could not agree with the earlier judgment. If, then, the Bench of three Learned Judges also comes to the conclusion that the earlier judgment of a Bench of three learned Judges is incorrect, reference to a Bench of five learned Judges is justified. 13. The submission of Advocate Sadchith P. Kurup is that the Division Bench should not have desisted from following the law laid down in Ali Asharaf [2015 (3) KLT OnLine 1117] and Keechery Service Co-operative Bank Ltd. [2020 (5) KHC 231]. The Division Bench should not have even doubted those decisions which also of Division Benches, it is submitted. In the light of the law laid down in Pradip Chandra Parija [(2002) 1 SCC 1] we are unable to accept that contention. It may further be noted that the Apex Court in Dr.Shah Faesal [(2020) 4 SCC 1] took a definite view that although a Bench of co-ordinate strength cannot take a contrary view and cannot overrule a decision of earlier co-ordinate Bench, it can certainly refer the matter to a Larger Bench for reconsideration in case of disagreement with the view of such earlier Bench. Therefore, there can be little doubt that the Division Bench exercised jur....
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....h of two Judges alone and not by a Full Bench or a Larger Bench. 17. A Full Bench of this Court in Peter v. Sara [2006 (4) KLT 219] held: "8. In Kannappan v. R.T.O. Ernakulam (1988 (1) KLT 902), a Division Bench of this Court considered the question as to whether the Single Judge has power to refer a case to the Full Bench. It was held that, "2. There can be no "hesitation" for a single Judge to follow a Division Bench ruling binding on the single Bench for, he is bound in law to follow the Division Bench decision. The fact that the views of the learned Judge did not find acceptance at the hands of the Division Bench does not mean that whenever the identical question is raised before the learned Judge, the matter has to be again referred to a Division Bench till the views of the single Judge are endorsed by a Division or Full Bench. Brought up in the highest traditions of judicial discipline, this court cannot at any time swerve from the path of judicial decorum and propriety....." "4. Under Section 3 of the Kerala High Court Act, a single Judge may adjourn a case for being heard and determined by a Bench of two Judges. But a single Judge has no power ....
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....exercise of the powers under Section 6 of the High Court Act; the reference remains the one made by the learned Single Judges to a Full Bench, which is impermissible in law. The inevitable conclusion is that the orders of the learned Single Judges adjourning W.P.(C) Nos.7115 of 2023, 24723 of 2023, 34928 of 2023, 36701 of 2023, 41544 of 2023, 1761 of 2024, 5522 of 2024, 5675 of 2024, 5740 of 2024, 6301 of 2024, 10737 of 2024, 14018 of 2024, 17036 of 2024, 21285 of 2024, 32200 of 2024 & 34043 of 2024 for being heard by the Full Bench is incorrect. Suffice it to say that when the order of reference is wrong, the only option for the Larger Bench is to send it back to the reference court. We do so. Scope of hearing third parties 20. When we decline to consider the reference in the writ petitions, the immediate question that arises is, can the submissions of the learned Senior Counsel and other counsel on behalf of various banks, financial institutions and other parties on the questions of law involved in the matter be considered? 21. Rule 152 of the Rules of the High Court of Kerala, 1971 reads: "152. Hearing of third parties.-(1) The Court may order notice of the pet....
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....provided in favour of the secured creditor by virtue of the SARFAESI Act is an independent right, which is not adversely affected in any manner by any other law owing to the non-obstante clause in Section 13(1). And that, the right conferred on the secured creditor would not be defeated because of the subsequent attachments ordered by the Civil Courts and as per the sale certificate title to the property stood conveyed to the purchaser. Accordingly, the learned Single Judge directed to register the sale certificate and further declared that the purchaser will be at liberty to enjoy the property with absolute ownership, exclusive possession and clear and marketable title. Right of the purchaser to remit the basic tax and to get possession certificate from the revenue authorities was also declared. 24. However, another learned Single Judge in Madhan S. [2014 (1) KLT 406] considered the law in Housing Development Finance [2011 (3) KLJ 561], but took a different view in a similar set of facts. The sale in Madhan S. [2014 (1) KLT 406] was on the basis of an order passed by the Debt Recovery Tribunal under the provisions of the erstwhile Recovery of Debts due to Banks and Financial In....
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....he High court is not expected to entertain the writ petition and order effacement of the attachment. It is also submitted that the entries in Book No.1 are effected pursuant to communication of the order of attachment as contemplated in Section 89(5) of the Registration Act and such an entry cannot be ordered to be deleted or effaced by this Court. For, firstly, that there is alternative effective remedy, secondly, that an order of attachment issued by a civil court is not amenable to the writ jurisdiction of the High Court and thirdly, that effacement of entry in the records of the registering office is a process unknown to law. 28. The learned counsel for the appellant Sri.Mohammed Iqbal places reliance on Chanan Singh & Sons v. Collector Central Excise [(1999) 9 SCC 17], Anandwardhan v. Pandurang [(2005) 11 SCC 195] and Radhey Shyam v. Chhabi Nath [(2015) 5 SCC 423] to fortify his contention. In Chanan Singh [(1999) 9 SCC 17], a writ petition was filed before the High Court despite there having a statutory remedy to challenge the order of the Tribunal. The High Court dismissed the writ petition and when challenged that judgment, the Apex Court held that the High Court was rig....
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....on [(1998) 8 SCC 1], the Apex Court delineated the circumstances in which a High Court can entertain a writ petition even in a case where alternative remedy is available. It was held that (i) where the writ petition seeks enforcement of any of the fundamental rights; (ii) where there is a violation of principles of natural justice; (iii) where the order of the proceedings are wholly without jurisdiction; or (iv) where the vires of an act is challenged, the High Court can entertain a writ petition. It was explained that the controversy is purely a legal one involving only questions of law, the High Court should entertain the writ petition. The aforementioned principle was reiterated by the Apex Court in Rajasthan State Electricity Board [(2008) 5 SCC 632]. 33. Besides the aforesaid precise contentions, more detailed questions touching to the objective of enacting the Recovery of Debts and Bankruptcy Act, 1993 (RDB Act), SARFAESI Act, and Credit Information Companies (Regulation) Act, 2005 were raised by the learned Senior Counsel and other Counsel appearing for the banks and financial institutions. Need to have a mechanism for speedy recovery of loans, which become non-performing....
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....ntral database of security interests created on property rights and to have effective mechanism for recovery of debts due to banks and financial institutions. 36. In Transcore v. Union of India [(2008) 1 SCC 125] the Apex Court considered in detail the evolution of the SARFAESI Act and objects and reasons. It was observed that the SARFAESI Act was primarily enacted to reduce the non performing assets by adopting measures not only for recovery but also for reconstruction. Therefore, the Act provides for setting up of asset reconstruction companies, special purpose vehicles, asset management companies etc. which are empowered to take possession of secured assets of the borrower including the right to transfer by way of lease, assignment or sale. It also provides for taking over of the management of the borrower companies as well as realisation of the secured assets. Another reason for enacting SARFAESI Act pointed out is that when the civil courts failed to expeditiously decide suits filed by the banks and financial institutions, Parliament enacted the Debt Recovery Tribunals Act, 1993 (DRT Act). However, the Debt Recovery Tribunal did not provide for assignment of debts to securi....
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.... recovery was very cumbersome and suggested that special tribunals be set up for recovery of the dues of banks and financial institutions by following a summary procedure. The Tiwari Committee also prepared a draft of the proposed legislation which contained a provision for disposal of cases in three months and conferment of power upon the Recovery Officer for expeditious execution of orders made by adjudicating bodies. 3. The issue was further examined by the Committee on the Financial System headed by Shri M. Narasimham. In its First Report, the Narasimham Committee also suggested setting up of special tribunals with special powers for adjudication of cases involving the dues of banks and financial institutions. 4. After considering the reports of the two Committees and taking cognizance of the fact that as on 30-9-1990 more than 15 lakh cases filed by public sector banks and 304 cases filed by financial institutions were pending in various Courts for recovery of debts, etc. amounting to Rs. 6000 crores, the Parliament enacted the Recovery of Debts Due to Banks and Financial Institutions Act, 1993 (for short, 'the DRT Act'). The new legislation facilitat....
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....as in 2001, a sum of more than Rs. 1,20,000/- crores was due to the banks and financial institutions and this was adversely affecting the economy of the country. Therefore, the Government of India asked the Narasimham Committee to suggest measures for expediting the recovery of debts due to banks and financial institutions. 9. In its Second Report, the Narasimham Committee noted that the non - performing assets of most of the public sector banks were abnormally high and the existing mechanism for recovery of the same was wholly insufficient. In Chapter VIII of the Report, the Committee noted that the evaluation of legal framework has not kept pace with the changing commercial practice and financial sector reforms and as a result of that the economy could not reap full benefits of the reform process. The Committee made various suggestions for bringing about radical changes in the existing adjudicatory mechanism. By way of illustration, the Committee referred to the scheme of mortgage under the Transfer of Property Act and suggested that the existing laws should be changed not only for facilitating speedy recovery of the dues of banks, etc. but also for quick resolution of d....
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.... in section 69 or section 69A of the Transfer of Property Act, 1882 (4 of 1882), any security interest created in favour of any secured creditor may be enforced, without the intervention of the court or tribunal, by such creditor in accordance with the provisions of this Act. (2) Where any borrower, who is under a liability to a secured creditor under a security agreement, makes any default in repayment of secured debt or any instalment thereof, and his account in respect of such debt is classified by the secured creditor as non-performing asset, then, the secured creditor may require the borrower by notice in writing to discharge in full his liabilities to the secured creditor within sixty days from the date of notice failing which the secured creditor shall be entitled to exercise all or any of the rights under sub-section (4): Provided that- (i) the requirement of classification of secured debt as non-performing asset under this sub-section shall not apply to a borrower who has raised funds through issue of debt securities; and (ii) in the event of default, the debenture trustee shall be entitled to enforce security interest in the same manner....
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....reditor; (d) require at any time by notice in writing, any person who has acquired any of the secured assets from the borrower and from whom any money is due or may become due to the borrower, to pay the secured creditor, so much of the money as is sufficient to pay the secured debt. (5) xxxx (5A) xxxx (5B) xxxx (5C) xxxx (6) Any transfer of secured asset after taking possession thereof or take over of management under sub-section (4), by the secured creditor or by the manager on behalf of the secured creditor shall vest in the transferee all rights in, or in relation to, the secured asset transferred as if the transfer had been made by the owner of such secured asset. (7) Where any action has been taken against a borrower under the provisions of sub-section (4), all costs, charges and expenses which, in the opinion of the secured creditor, have been properly incurred by him or any expenses incidental thereto, shall be recoverable from the borrower and the money which is received by the secured creditor shall, in the absence of any contract to the contrary, be held by him in trust, to be applied, firstly, in payment of ....
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....uotations from the persons dealing with similar secured assets or otherwise interested in buying the such assets; or (b) by inviting tenders from the public; (c) by holding public auction including through e-auction mode; or (d) by private treaty. Provided that in case of sale of immovable property in the State of Jammu and Kashmir, the provisions of Jammu and Kashmir Transfer of Property Act, 1977 shall apply to the person who acquires such property in the State. (6) the authorised officer shall serve to the borrower a notice of thirty days for sale of the immovable secured assets, under sub-rule (5): Provided that if the sale of such secured asset is being effected by either inviting tenders from the public or by holding public auction, the secured creditor shall cause a public notice in the Form given in Appendix IV-A to be published in two leading newspapers including one in vernacular language having wide circulation in the locality. (7) every notice of sale shall be affixed on the conspicuous part of the immovable property and the authorised officer shall upload the detailed terms and conditions of the sale, on the website....
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.... sale issued under sub-rule (6) shall specifically mention that whether the purchaser has purchased the immovable secured asset free from any encumbrances known to the secured creditor or not. 43. It is also relevant to look at the proforma prescribed for giving notice concerning sale of the security interest, which is an immovable property as well as the sale certificate, which are in respectively Appendix IV-A and V to the Enforcement Rules. The said forms are extracted below: "APPENDIX - IV-A [Refer proviso to rule 8 (6)] SALE NOTICE FOR SALE OF IMMOVABLE PROPERTIES E-Auction Sale Notice for Sale of Immovable Assets under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 read with proviso to Rule 8 (6) of the Security Interest (Enforcement) Rules, 2002. Notice is hereby given to the public in general and in particular to the Borrower (s) and Guarantor(s) that the below described immovable property mortgaged/charged to the Secured Creditor, the constructive/physical ---------------(whichever is applicable) possession of which has been taken by the Authorised Officer of ----------------------- Secured Creditor, ....
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....d; On the North by On the South by On the East by On the West by List of encumbrances 1. 2. Sd/- Authorized Officer (Name of the Institution) Date: Place:" 44. The aforementioned provisions in Rules 8 and 9 insist on authorised officer who is conducting sale of a secured asset to follow the procedure akin to the procedure being followed by a Civil Court in a sale of a mortgaged property in the matters of valuation of the property, fixing the reserve price, deciding how much part of the property is to be sold to clear the debt, dealing with the excess part of the sale price, etc. The authorised officer is obligated to ensure clearance of all known encumbrances over the secured asset before the sale, under Rule 9(7) of the Enforcement Rules. It is corresponding to that obligation of the authorised officer is the right of the auction purchaser to get encumbrance free title in terms of the provisions under sub-rule (10) of Rule 9 of the Enforcement Rules. The wording of sub-rule (10) that the certificate of sale issued under Sub-rule (6) shall specifically mention that whether the purchaser has purchased the immovable secured asset free from....
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.... of secured assets by the secured creditor with the Central Registry. Thus, any debt recoverable under any statutory provisions or under any contract will be subject to priority rights of the secured creditor, unless priority to any other claim over the claim of the secured creditor is given by way of statutory exception. 46. A Full Bench of the High Court of Judicature at Bombay in Jalgaon Janta Sahakari Bank Limited v. Joint Commissioner of Sales [2022 KHC 5615] considered the effect of using the word 'priority' in Section 26E of the SARFAESI Act. It was held, to which we agree, that the rights accorded to 'first charge' holders by Central as well as State legislation having been known to the Parliament, in such a situation, what the Parliament intended by exercising its legislative power by introducing amendments explicitly in the SARFAESI Act, more particularly by incorporating Section 26E, was to make the valuable right of the 'first charge' holder subordinate to the dues of a second creditor. The rights of such of the first charge holders accorded by several legislations enacted by the State, having regard to the language in which Section 26E is cou....
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....ed creditor. After considering almost all decisions on the point in relation to the right of a tenant in possession of the secured asset, it was held that if a valid tenancy under law is in existence even prior to the creation of the mortgage, such tenant's possession cannot be disturbed by the secured creditor by taking possession of the property. If a tenancy under law comes into existence after the creation of a mortgage but prior to issuance of a notice under Section 13(2) of the SARFAESI Act, it has to satisfy the conditions of Section 65A of the Transfer of Property Act. If a tenant claims that he is entitled to possession of a secured asset for a term of more than a year, it has to be supported by the execution of a registered instrument. It was clarified that in the absence of a registered instrument, if the tenant only relies upon an unregistered instrument or an oral agreement accompanied by delivery of possession, the tenant is not entitled to possession of the secured asset for more than the period prescribed under the provisions of the Transfer of Property Act. It was held thus: "24.1. If a valid tenancy under law is in existence even prior to the creation of ....
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....very of possession of the secured asset. However, the amended provisions of Section 13(8) of the SARFAESI Act, makes it clear that the right of the borrower to redeem the secured asset stands extinguished thereunder on the very date of publication of the notice for public auction under Rule 9(1) of the Enforcement Rules. In effect, the right of redemption available to the borrower under the present statutory regime is drastically curtailed and would be available only till the date of publication of the notice under Rule 9(1) of the Enforcement Rules and not till the completion of the sale or transfer of the secured asset in favour of the auction purchaser. 51. A Division Bench of this Court in Thrissur District Co-operative Bank Ltd. v. Mustaffa T.A. [2022 (4) KLT 830] dealt with the question, whether the Lok Ayukta has jurisdiction to entertain a complaint against the action taken by an authorised officer. Complaints were filed before the Lok Ayukta seeking to quash notices and to direct the respondent therein, to stop the proceedings initiated for taking over possession, eviction and auction proceedings by the authorised officer of the Bank under the SARFAESI Act. This Court h....
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....ank till such time the encumbrances are cleared as per the provisions of the said enactments and Rules thereto. In other words, it was held that if the mortgage was created after the amounts have fallen due as per the provisions of the KGST Act and the KVAT Act, it can be termed that the mortgage is subject to the statutory charge. 53. The law thus declared is that a secured creditor has every right to bring the secured assets for sale irrespective of other debts due from a secured debtor to any person, including the Government or any other encumbrance created thereon after the mortgage in favour of the secured creditor. The secured creditor gets priority to its debts, however, subject to the statutory charges and other encumbrances created prior to the mortgage in favour of the secured creditor. Effect of the amendment to the SARFAESI Act vide Act 44 of 2016 by which Chapter IV-A was inserted, particularly, provisions concerning the Central Registry also requires a look. Effect of the amendment to the SARFAESI Act by Act 44 of 2016 54. Section 26B, which was added by Act 44 of 2016 insists on the secured creditor as also all other creditors to register their claims in the....
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....ossession of secured assets, take over the management of the business of the borrower, appoint a manager, etc. Once the possession is taken over, the secured creditor may initiate steps for realisation of debt by having recourse to lease, assignment or sale of the secured asset. The mortgagor-debtor still has the right to pay the entire debt and get the secured assets released from the liability any time before the date of publication of notice for public auction under Section 13(8) of the SARFAESI Act. If the secured creditor after taking over possession of the property as provided in Section 13(4) of the Act, and sells it after complying with the conditions thereof, the purchaser gets title to the property free of all encumbrances as if it has been transferred by its owner, by virtue of the provisions of Section 13(6) of the SARFAESI Act." (Underline supplied) Attachment and sale under the Code of Civil Procedure - nuances 56. The sale by an authorised officer may be juxtaposed with a sale by a civil court. Section 64 of the Code prohibits private alienation of a property attached by a court. A bird's eye view of the related provisions in the Code as well as the Registra....
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....ld that the requirement to notify people by beat of drum is an anachronism which appears to be inappropriate in the present day and age. But, the other procedure insisted are mandatory. Rule 185 of the Civil Rules of Practice, Kerala says that on attachment of an immovable property, the matter shall be intimated to the registering officer concerned. Section 89(5) of the Registration Act, 1908 contemplates that every court passing an order of attachment of immovable property or for the release of the immovable property from attachment shall send a copy of such order together with a memorandum describing the property, as far as may be practicable in the manner required by Section 21, to the registering officer within the local limits of whose jurisdiction the whole or any part of the immovable property comprised in such order is situated. On sending such an order, the registering officer shall file the copy and memorandum in Book No.1 maintained in the registering office. 59. Section 51 of the Registration Act insists on maintaining, inter alia, Book No.1, which is named as "register of non-testamentary documents relating to immovable property". Section 53 provides for the procedu....
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....he fees payable in that behalf, the Books Nos. 1 and 2 and the Indexes relating to Book No. 1 shall be at all times open to inspection by any person applying to inspect the same; and, subject to the provisions of section 62, copies of entries in such books shall be given to all persons applying for such copies. (2) Subject to the same provisions, copies of entries in Book No. 3 and in the Index relating thereto shall be given to persons executing the documents to which such entries relate, or to their agents, and after the death of the executants (but not before) to any person applying for such copies. (3) Subject to the same provisions, copies of entries in Book No. 4 and in the Index relating thereto shall be given to any person executing or claiming under the documents to which such entries respectively refer, or to his agent or representative. (4) The requisite search under this section for entries in Book Nos. 3 and 4 shall be made only by the registering officer. (5) All copies given under this section shall be signed and sealed by the registering officer, and shall be admissible for the purpose of proving the contents of the original docum....
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....#39;s Law lexicon, explained the term "encumbrance" as a claim, lien or liability, attached to property. This is the sense in which the term is ordinarily used. An encumbrance, in this sense, has to be a liability "attached to property"; it must be a burden or liability that runs with the land. In State of H.P. v. Tarsem Singh [(2001) 8 SCC 104] the Apex Court held that the word "encumbrance" means a burden or charge upon property or a claim or lien upon an estate or on the land and that the word "encumber" means burden of legal liability on property. In that view, a charge created in terms of Section 100 of the Transfer of Property Act was held to be an encumbrance. 65. Can in that perspective an attachment by a court an encumbrance on the property? The purport of Section 64 of the Code embodies the interdiction to the rights of a property owner by reason of an attachment by a civil court. It says that where an attachment has been made, any private transfer or delivery of the property attached, etc. shall be void as against all claims enforceable under the attachment. That is the limited restriction created against the owner of a property when it is attached. The Apex Court dil....
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.... attached property of the judgment-debtor and there is no reason for holding that it continued to affect the attached property in any way when the attached property no longer continues to be the property of the judgment-debtor. The auction purchaser takes the property free from attachment. The consequence no doubt to an earlier attaching creditor is very serious, but his rights are sufficiently safeguarded in such a situation by entitling him a ratable distribution of the proceeds of the sale. This is the only way left to a money-decree-holder when other like decree-holders proceed against the same property in execution. If this were not so, complications will arise between an earlier attaching creditor and a subsequent attaching creditor. If the sale was under a private alienation with the earlier sale there is nothing left with the transferor to transfer subsequently to another. In the same manner the prior sale in pursuance of an attachment will prevail over a subsequent sale even if the latter sale was in pursuance of an earlier attachment. In other words with the court sale all attachment subsisting on the property will fall to the ground." 68. The aforesaid view was reiter....
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....y a court, would stand extinguished. Sale by authorised officer and stamp duty 72. Section 17 of the Registration Act requires that every transfer of an immovable property worth above Rs. 100/- to be registered. In the case of a sale under Section 13(4) of the SARFAESI Act also, is such a registration mandatory or not is a mooted question. When the learned Senior Counsel and other counsel appearing for the bank and financial institutions submitted that the law on the point is no more res integra, the learned Government Pleader would submit that the levy of stamp duty being a matter coming within List-II of Schedule-VII to the Constitution of India, the right of the State to levy stamp duty is undeniable. 73. The learned Government Pleader would submit that as distinguished from a court sale or even a revenue sale, the sale by a secured creditor involves transfer of title between private parties without involvement of a court or tribunal. A sale by a court or tribunal precedes an adjudication of the dispute and payment of court fees. When that is not involved in a sale by an authorised officer, the State has every authority to levy stamp duty. It is true that a Central Regi....
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....ured creditor is not compulsorily registrable. It is required only that the sale certificate is filed before the registering authority as provided in Section 89(4) of the Registration Act. No stamp duty is leviable on such a sale certificate. Once a sale certificate is so submitted, the registering authority is required to enter the same in Book No.1 maintained under Section 51 of the Registration Act. Process of registration under the Registration Act and SARFAESI Act - compared 77. As we indicated hereinbefore, Section 20(4) of the SARFAESI Act enforces the provisions pertaining to the Central Registry only in addition to and not in derogation of the provisions contained in the Registration Act. Which among those statutes will prevail has also been a question mooted. Learned Counsel Sri. Sunil Sankar submitted that Banking being an entry (item 45) in List I in the VII schedule to the Constitution of India, and Registration of deeds and documents is an entry (item 6) in List III, priority shall be to the provisions concerning transfer of title in terms of the provisions in the SARFAESI Act, which is a Central Law. It is more so since Section 89(5) is a State amendment. True,....
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....n shall send a copy of the same to the registering officer concerned and such officer shall file the copy in Book No.1. It was by virtue of the said provision, a sale certificate issued on behalf of the secured creditor is also forwarded to the Sub Registrar concerned, who in turn is entering the same in Book No.1. The procedure for making such entries is provided in Sections 53, 54 and 55 of the Registration Act, which we extracted hereinbefore. 81. The grievance of the banks and financial institutions is that the registering officers are not obliging the demands for registering the sale certificates issued by the authorised officers if there is an entry in Book No.1 regarding an attachment over the property by a court or other revenue authorities. The further grievance is that the request for deleting such entries in Book No.1, which ceased to exist in view of the sale by the secured creditor, is not being obliged by the registering authorities. Before addressing the said questions, we may explain the process for making various entries in Book No.1 and also the effect of such entries. 82. A learned Single Judge of the Karnataka High Court in M.Ramakrishna Reddy v. Sub Regis....
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....removed/released. The law laid down by the Apex Court in the following decisions fortifies the said view. 84. In Lachhman Dass v. Ram Lal [(1989) 3 SCC 99], the Apex Court held that the real purpose of registration is to secure that every person dealing with the property, where such document requires registration, may rely with confidence upon statements contained in the register as a full and complete account of all transactions by which title may be affected. What the Apex Court explained in that regard in Satya Pal Anand v. State of Madhya Pradesh [(2016) 10 SCC 767] is that the function of the Registering Officer is purely administrative and not quasi-judicial. Once he registered a document, it is not open to him, under the Registration Act to cancel the registration. Sale certificates should be registered dehors attachment 85. The above takes us to the question, should the High Court direct to register a sale certificate even if there is an attachment of the property by a civil court or a revenue authority. It is contended that an attachment is not an encumbrance on the property nor it creates an interest on it and as such the registering authority cannot refuse regis....
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....tate Bank of India v. State of Kerala[2019(5) KHC 330] 4. Secretary, Keechery Service Co-operative Bank Ltd. [2020 (5) KHC 231] 5. District Registrar (General), Ernakulam v. Farzana Khatoon alias Farzana Parvez [2022 KHC 2181] 6. Phoenix Arc Private Limited v. Sub Registrar, Feroke [2023 KHC 9452] Other High Courts 1. Dinesh Kumar Maneklal Patel v. Bank of Baroda [2023 KHC 3716] 2. Premakumar Damodaran Pillai v. Sub Registrar, Thiruvananthapuram [Judgment dated 21.01.2021 in W.P.(C) No.27827 of 2020] 3. M/s Cholamandalam Investment and Finance Company Ltd., Madurai v. District Registrar, Registration Department, Madurai [2024 KHC 2156] 89. One thing very relevant is that despite referring to the decision in Housing Development Finance Corporation [2011 (3) KLJ 561], where no direction to efface the entries concerning civil court attachment had been granted, the learned Single Judge, after referring to that decision, in Madhan S. [2014 (1) KHC 249] proceeded to issue such a direction. No reason for such a deviation has, however, been assigned in Madhan S. [2014 (1) KHC 249]. Having that proposition been affirmed by th....
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....ing or extinguishing any right, title or interest in an immovable property that do not come within the ambit of the SARFAESI Act can be dealt with only as per the provisions of the Registration Act and not the SARFAESI Act. Had the legislature an intention to exclude application of the Registration Act in the matters of transfer of title to a property sold by an authorised officer, such a provision should have been included in the SARFAESI Act itself. 93. Be noticed that not only the secured creditors but also other creditors including Central Government, State Government and local authorities are obliged to file particulars of transactions of creation, modification or satisfaction of secured interest over the properties with the Central Registry in terms of sub-section (2) of Section 26B of the SARFAESI Act. As per sub-section (5), any person having any claim against a borrower obtains an order of attachment of the secured asset from a court or other authority competent to issue attachment order, such person may also file particulars of such attachment with the Central Registry. Of course, he has to pay the prescribed fees for the same. As provided in Section 3 of the Transfer ....
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.... be able to get any priority over a claim of the secured creditor, unless the attachment has been registered with the Central Registry, the reason being an attachment is not an encumbrance on the property or it creates an interest on it. 95. There can be several situations where charge is created on the immovable property by operation of statutory provisions. For example, right of a person to receive maintenance from the profits of an immovable property is enforceable against that property even against a transferee, who has notice of such right as per Section 39 of the Transfer of Property Act. A buyer under an agreement for sale, who paid a part of the purchase money, is entitled to have a charge on the property for the amount so paid, unless he has improperly declined to accept delivery of the property as per Section 55(6)(b) of the Transfer of Property Act, and so on and so forth. When a civil court or a family court orders attachment of an immovable property in consideration of any of such rights and duly entered in Book No.1 in terms of Section 89(5) of the Registration Act, that may be a case where the attaching creditor can have better claim than that of the secured....
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....fects of which a buyer has actual or constructive notice in terms of Section 3 of the Transfer of Property Act. However, in terms of Section 55(1)(a), in the absence of a contract to the contrary, the seller is under an obligation to disclose material defects in the property or in the seller's title thereto of which he is aware and which a buyer could not with ordinary care discover for himself. 99. If we consider the definition "a person is said to have notice" contained in Section 3 of the Transfer of Property Act and sub-rules (7) to (10) of Rule 9 of the Enforcement Rules, which we have extracted hereinbefore, in the light of the law laid down in K.C. Ninan [(2023) 14 SCC 431] it has to be said that the aforementioned principle is applicable in cases of attachment of a secured asset, which has been sold by the authorised officer. We take such a view also for the reason that notice to be published in Appendix IV-A concerning sale carries disclaimers such as, "as-is-where-is", "as is what is" and "whatever there is". Viewed so, the authorised officer is not under an obligation to get the attachment of the secured asset ordered by the civil court, if any, removed or lifte....
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....uthority under the Registration Act to cancel the registration. The power conferred on the registrar by virtue of Section 68 of the Registration Act cannot be invoked to cancel the registration of documents already registered. 103. 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....
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....oted with approval the following passage from Halsbury about the efficacy of Mandamus: "..is to remedy defects of justice; and accordingly it will issue, to the end that justice may be done, in all cases where there is a specific legal right and no specific legal remedy for enforcing that right; and it may issue in cases where, although there is an alternative legal remedy, yet that mode of redress is less convenient, beneficial and effectual." 107. The view expressed by the Apex Court in J.R. Raghupathy v. State of Andhra Pradesh [(1988) 4 SCC 364] is that the jurisdiction of the High Court to grant an appropriate writ, direction or order under Article 226 of the Constitution of India is not subject to the archaic constraints on which prerogative writs were issued in England. In a subsequent judgment, Andi Mukta Sadguru Shree Muktajee Vandas Swami Suvarna Jayanti Mahotsav Smarak Trust v. V.R. Rudani [(1989) 2 SCC 691] the Apex Court examined the development of the law of Mandamus and held as under: "22. ..........mandamus cannot be denied on the ground that the duty to be enforced is not imposed by the statute. Commenting on the development of this law, Profes....
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....pector of Police, CBI, Vishakapatnam [(2011) 10 SCC 259] the Apex Court reiterated that, generally, no Court has competence to issue a direction contrary to law nor can the Court direct an authority to act in contravention of the statutory provisions. The Courts are meant to enforce the rule of law and not to pass the orders or directions which are contrary to what has been intended by law. 111. The principles which emerge from the above are:- (i) A writ of mandamus can be issued to enforce a plain, positive, specific and ministerial duty imposed by law upon officers and others who refuse or neglect to perform such duty, and when there is no other adequate and specific legal remedy, (ii) No mandamus can be issued to direct the Government to refrain from enforcing the provisions of law or to do something which is contrary to law, and (iii) No Court has the competence to issue a direction contrary to law nor can the Court direct an authority to act in contravention of the statutory provisions. 112. The Apex Court considered a situation where the registering authority refuses to register an instrument and to the extent of the jurisdiction of the High C....
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....ions, 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? 114. We held hereinbefore that a registering officer has no obligation or rather no empowerment to delete or efface an entry made in Book No.1 in terms of Section 89(4) or (5) of the Registration Act. But the question is, should the secured creditor and the auction purchaser be driven to the court which ordered attachment of the property to get such an entry removed. We have discussed hereinbefore about the objective and rationale behind creation of the mechanism under the SARFAESI Act for speedy recovery of debts without approaching the Courts or Tribunals. Those aspects are highlighted by the learned Senior Counsel and the other counsel appearing for the banks and financial institutions to contend that for meeting that objective of the statute, this Court is obliged to issue directio....
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....s apposite and permissible in law. 118. The learned Senior Counsel and also the other counsel would submit that the jurisdiction under Article 226 can be exercised for enforcement of any legal right conferred by a Statute or even by custom, contract, etc. as held in State of West Bengal v. Committee for Protection of Democratic Rights, West Bengal [(2010) 3 SCC 571]. The Apex Court explained there that the High Court should step in wherever legal right of a person is violated, and it is a case where a writ in the nature of habeas corpus, mandamus, prohibition, quo-warranto and certiorari could not be granted, to mould the relief to meet the extraordinary circumstances of the case. It is submitted that driving banks and financial institutions, and auction purchasers to the civil courts in cases where there has been attachment from a civil court in respect of the secured asset would create an extraordinary situation where the provisions of the SARFAESI Act would become redundant. They would argue vehemently that if such persons have to go through the ordeal of cumbersome procedure before the civil court for getting the attachment released, that will make the speedy remedy of re....
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....tes to the rectification of any particular entry in index I, II, III or IV a note of rectification shall also be entered in the respective index against the particular item rectified." (Underline added) 120. 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? 121. The question next arises is whether the High Court can direct a registering authority to enter a footnote concerning the lifting of attachment ordered by a civil court or a family court, as provided in Rule 138 of the Registration Rules. It is submitted in this regard that the entry made by the registering authority under Section 89(5) of the Registration Act is only in exercise of an administrative act and deletion of that entry does not affect the validity of the attachment ordered by the civil court or family court pursuant to which such....
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....icle 226 of the Constitution of India. Observing that if the registering authority is performing only an administrative act in the given situation, it was held that the High Court was empowered to see whether he performed his duties statutorily ordained upon him and in the manner prescribed by law. 124. 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 remain....
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....ided 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 a....