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IN THE HIGH COURT OF ANDHRA PRADESH AT AMARAVATI
C.PRAVEEN KUMAR, V.SUJATHA, JJ.
STATE BANK OF INDIA - Petitioner
Vs.
The State of Andhra Pradesh - Respondent
WRIT PETITION No.27281 OF 2021
Decided On : 23-03-2022
Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 - Section 2(zd), 13(2), 14 , 26E , 31B, 34 - Secured Creditor - Priority to secured creditors - Civil court not to have jurisdiction - Writ Petition came to be filed seeking issuance of a writ of Mandamus to declare inaction on part of respondents 2 and 3 in not receiving and not registering sale certificate issued by petitioner-Bank - Whether Writ Petitioner who is secured creditor would have priority of charge over mortgaged property in question with regard to loans due to Bank - Whether a direction can be issued to 3rd respondent to register subject property in favour of Petitioner Bank.
Finding of the Court:
conjoint reading of Section 26(E) of SARFAESI Act and Section 31B of Act 51 of 1993, there cannot be any doubt that rights of a secured creditor to realize debts due and payable by sale of assets over which security interest is created, would have priority over all debts - In instant case, property offered as security for loan taken by 5th respondent was in month of May 2016 - Order of attachment, as stated earlier, came to be made long after property was mortgaged to secured creditor - Hence, rights of Writ Petitioner Bank/secured creditor to realize secured debts due and payable to it by sale of assets over which security interest is created shall have priority and, hence, point is answered in favor of Writ Petitioner and, accordingly, court hold that Writ Petitioner would have priority over mortgaged property in question with regard to loan due to bank.
Result: Writ Petition is allowed.
ORDER :
C.Praveen Kumar, J.
1. The present Writ Petition came to be filed seeking issuance of a writ of Mandamus to declare the inaction on the part of the respondents 2 and 3 in not receiving and not registering the sale certificate issued by the petitioner-Bank under the provisions of the Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (hereinafter referred to as the SARFAESI Act') in respect of the property in dispute, as arbitrary, illegal and violative of principles of natural justice.
2. Heard Mr.S.Satyanarayana Moorthy, learned counsel for the petitioner and also Government Pleader for Revenue on behalf of Respondent Nos. 1 to 3. There is no representation on behalf of the unofficial respondents.
3. The circumstances, which lead to filing of the present writ petition are as under:
4. As the 5th respondent committed default in payment of dues, in accordance with the agreed terms, the account of the 5th respondent was classified as NPA and accordingly, the procedure under SARFAESI Act was invoked for recovery of the amount. A demand notice dated 14.09.2016, Section 13(2) possession notice and also a sale notice fixing the date of auction on 17.11.2016 was issued and the bid was knocked down at Rs.85,96,000/- in favour of one Sri B.Rama Narayana (4th respondent). The auction purchaser is said to have deposited the entire sale proceeds.
5. Thereafter, the petitioner Bank filed Crl.MP No.382 of 2014 under Section 14 of the SARFAESI Act, for taking physical possession of the secured asset. By an order dated 05.12.2017, an advocate commissioner was appointed for taking physical possession of the property. A sale certificate was issued in favour of the successful bidder and the said successful bidder approached the 3rd respondent for ascertaining the stamp duty and the registration charges payable basing on the certificate of sale etc. It was informed to the auction purchaser that the property cannot be registered as an order came to be passed by a civil Court in I.A.No.1667 of 2017 in O.S.No.185 of 2017, attaching the properties in dispute.
6. The averments in the affidavit show that the petitioner herein addressed a letter to the 3rd respondent informing that the petitioner is a secured creditor under the SARFAESI Act and the property came to be sold in an auction held under the provisions of the SARFAESI Act and as such, the 3rd respondent cannot deny registration of the property.
7. Reply came to be issued by the 3rd respondent reiterating the stand taken earlier.
8. Challenging the inaction on the part of the 3 rd respondent, the present writ petition came to be filed.
9. Sri S.Satyanarayana Moorthy, learned counsel for the petitioner would submit that the issue is no more resintegra and is covered by the orders passed by this Court. Referring Sections 26(E) and 34 of the SARFAESI Act, she would submit that the 3rd respondent cannot refuse to register the sale certificate. It is further stated that the respondents 4 to 6 are not the secured creditors and the orders of attachment by the Civil Court came to be passed later while the date of hypothecation/mortgage was much prior to that date. Having regard to the above, he pleads that the action of the 3rd respondent is illegal and incorrect.
10. Learned Government Pleader for Revenue opposed the same, but however, does not dispute the law laid down in catena of judgments.
11. Before going further, it will be just and proper to refer Section 26(E) of the Act, which reads as under:
“26E. Notwithstanding anything contained in any other law for the time being in force, after the registration of security interest, the debts due to any secured creditor shall be paid in priority over all other debts and all revenues, taxes, cesse
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