Union Bank of India Vs Sub Registrar (Kerala High Court)
The Kerala High Court considered a writ petition filed by Union Bank of India seeking directions to the Sub Registrar to remove an attachment over a property covered by a sale certificate issued under the SARFAESI Act, register the sale certificate on payment of requisite stamp duty, and direct the revenue authorities to effect mutation of the property in the purchaser’s name.
The Bank stated that borrowers had jointly availed a housing loan of ₹7,00,000 by creating an equitable mortgage over the property on 01.12.2015. Upon default in repayment, the Bank initiated proceedings under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002, sold the mortgaged property, and issued a sale certificate dated 11.08.2023 in favour of the auction purchaser.
When the sale certificate was presented for registration, the Sub Registrar found an attachment entered in the encumbrance certificate pursuant to an order of the Family Court dated 06.04.2018. The Bank contended that since the equitable mortgage had been created before the attachment, the subsequent attachment had no effect on the Bank’s rights and should be removed from the encumbrance register.
The Court noted that the equitable mortgage was created on 01.12.2015, whereas the Family Court attachment was effected on 06.04.2018. The Bank relied on the decisions in Madhan S. v. Sub Registrar, Kollam and Others, Secretary, Keechery Service Co-operative Bank Ltd. v. Sajitha Nizar alias Sajitha P.M. and others, and Ali Asharaf M.M. and Another v. Sub Registrar, Thrissur. The Court also referred to Phoenic ARC Pvt. Ltd. v. Sub Registrar, Feroke, which considered Section 89(5) of the Registration Act, 1908.
Referring to the earlier decisions, the High Court observed that an attachment effected after the creation of an equitable mortgage does not affect a sale conducted under the SARFAESI Act and that such attachment loses its efficacy upon confirmation of the sale. It further noted that the subsequent attachment should be removed from the encumbrance register, as otherwise it would continue to adversely affect the property’s marketability and title despite having no legal effect.
Finding that the attachment in the present case had been created after the equitable mortgage, the Court held that it did not affect the Bank’s sale under the SARFAESI Act.
Accordingly, the High Court directed the first respondent to remove the attachment relating to the property covered by the sale certificate and register the sale certificate on presentation, if otherwise in order. It also directed the third respondent to effect mutation of the property upon such registration, provided there was no other impediment. The writ petition was disposed of with these directions.
Cases Discussed
- Phoenic ARC Pvt. Ltd. v. Sub Registrar, Feroke, 2023 KHC Online 9452
- Secretary, Keechery Service Co-operative Bank Ltd. v. Sajitha Nizar alias Sajitha P.M. and others, 2020 (5) KHC 231
- Ali Asharaf M.M. and Another v. Sub Registrar, Thrissur, Judgment dated 24.7.2015 in W.A. No.612/2015
- Madhan S. v. Sub Registrar, Kollam and Others, 2014 (1) KHC 249
FULL TEXT OF THE JUDGMENT/ORDER OF KERALA HIGH COURT
The petitioner has approached this Court seeking a direction to the first respondent to efface the attachment effected over the property covered by Ext.P5 and register the same on presentation of the same on payment of requisite stamp duty and for a consequential direction to respondents 2 and 3 to effect transfer of registry of property in the name of the fifth respondent as and when Ext.P5 is registered with the first respondent.
2. Petitioner is a nationalised Bank. As per the averments in the Writ Petition, one Mohandas P.T. and his wife, the fourth respondent, jointly availed a housing loan of Rs.7,00,000/- from the Bank by mortgaging the property having an extent of 2.83 Ares in survey No.89/9 of Thrikkariyoor Village obtained as per Ext.P1 sale deed. Later, on account of the default committed by the parties in repaying the loan amount, the Bank enforced the mortgage and brought the property for sale by initiating proceedings under the ‘Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002. (hereinafter referred to as the ‘SARFAESI Act’) and the same was sold in favour of the fifth respondent and Ext.P5 sale certificate dated 11.08.2023 was issued. However, the sale certificate when presented for registration, it was found that there is an entry of attachment at the instance of the fourth respondent dated 06.04.2018 by the Family Court, Muvattupuzha in I.A.No.383 of 2018 in O.S.No.215 of 2018 as is evident from Ext.P6 encumbrance certificate. Petitioner submits that on account of the mortgage created prior to the attachment of the property and on account of the subsequent sale of the mortgaged property as per Ext.P5, the attachment reflected in Ext.P6 falls to ground and to be effaced. However, the first respondent is refusing to register the sale certificate, consequent mutation of the property and acceptance of tax and it is in the said circumstance, the petitioner has approached this Court.
3. Petitioner submits that since the mortgage was prior to the date of attachment, necessarily the respondents have to register the sale certificate and to efface the order of attachment in Ext.P6 encumbrance certificate.
4. The attachment effected by the Family Court, Muvattupuzha, in I.A.No.383 of 2018 in O.S.No.215 of 2018 is on 06.04.2018 and the equitable mortgage in favour of the petitioner is created on 01.12.2015.
5. Heard the learned counsel for the petitioner and the learned Government Pleader.
6. The learned counsel for the petitioner relied on the decision of this Court in Madhan S. v. Sub Registrar, Kollam and Others [2014 (1) KHC 249] and the decision of a Division Bench of this Court in Secretary, Keechery Service Co-operative Bank Ltd. v. Sajitha Nizar alias Sajitha P.M. and others, [2020 (5) KHC 231] 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.
7. 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 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 Madhan’s case. In Keechery Service Cooperative Bank case (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. In the light of the aforesaid declaration of law by this Court the order of dismissal of the petition filed for lifting the attachment ordered under Ext R7 (a) viz., Ext.R7(b) by the Federal Bank would pale into insignificance. 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 efface all encumbrance over the property effected after 27/06/2014, the date on which the property in question was mortgaged with Federal Bank”.
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 Bank under the SARFAESI Act and has to be effaced from the encumbrance register. It is evident from the documents produced in the Writ Petition that the attachment obtained by the fourth respondent is subsequent to the creation of equitable mortgage by the borrowers in favour of the petitioner.
9. This Court in Phoenic ARC Pvt. Ltd. v. Sub Registrar, Feroke [2023 KHC Online 9452] while considering an identical issue referring to Section 89(5) of the Registration Act, 1908 has held that since the attachment subsequent to creation of equitable mortgage has lost its efficacy and has to be obliterated from the records, the same can be done by the Sub Registrar by filing the certified copy of the order/judgment of this Court in Book No.1 maintained by the Sub Registrar.
10. Accordingly, there will be a direction to the first respondent to efface the attachment effected over the property covered by Ext.P5 sale certificate and register Ext.P5 on presentation, if the same is otherwise in order. There will also be a direction to the third respondent to effect mutation of the property on such registration, if there is no other impediment.
Writ Petition is disposed of with the above directions.
