Point of Law: Section 26(E) of the SARFAESI Act and Section 31B of Act 51 of 1993, there cannot be any doubt that the rights of a secured creditor to realize the debts due and payable by sale of assets over which security interest is created, would have priority over all the debts.

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 2nd Respondent 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 (‘SARFAESI Act’) in respect of the property in dispute, as arbitrary, illegal and violative of principles of natural justice.

2. The averments in the affidavit filed in support of the Writ Petition show that, on 06.02.2015 and 22.08.2017, M/s. Sree Sarada Traders, represented by 5th Respondent availed a loan of Rs.3,75,00,000/-. The 5th Respondent being the owner of the property in Residential Building consisting of Ground, First and Second floors bearing New Door Nos.17/180 and 174/181 (Old D. No. 17/159 and 17/160) situated in Survey No.30/2B/1A1, Ward No. 17, Mundy Bazar, Kadapa, land to an extent of 2730 square feet or 303.33 square yards building constructed thereon to an extent of ground floor 2664.28 square feet, first floor 2664.28 square feet, second floor 317.21 square feet, [‘Property’], created a registered Mortgage on 11.02.2015 in favor of the Petitioner. Thus, the Petitioner herein became a secured creditor as per the provisions of the SARFAESI Act.

3. Having regard to the default committed by the 5th Respondent in payment of loan amount, an E-auction was held on 19.10.2020 after complying with the statutory requirements. The 3rd Respondent is the highest bidder in the auction so conducted. When the Petitioner approached the 2nd Respondent for registration of the property, it was informed that 4th Respondent herein filed a Suit against 5th Respondent for recovery of the money due to him basing on a promissory note and obtained an order of attachment, over the subject property, on 09.11.2020. The 2nd Respondent is said to have shown that, a Circular Memo, dated 10.03.2010, stating that once the Civil Court passed an order of attachment, he cannot register the same. Challenging the said action of the 2nd Respondent in not registering the property, the present Writ Petition came to be filed.

4. Reiterating the averments, 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, he would submit that the 2nd Respondent cannot refuse to register the Sale Certificate. It is further stated that the Respondent No. 4 is not secured creditors and the orders of attachment by the Civil Court came to be passed on 09.11.2020 while the date of hypothecation/mortgage was much prior i.e. on 11.02.2015. Having regard to the above, he pleads that the action of the 2nd respondent is illegal and incorrect.

5. A counter came to be filed by the 4th Respondent disputing the averments made in the affidavit filed in support of the petition, but, however, contends that there is an order of attachment pursuant to the order passed by the Civil Court and, as such, the Petitioner Bank has no right over the property. Having regard to the contents of paragraph no. 10 of the counter, it is urged that the amount due to the Petitioner Bank may be adjusted after adjusting the loan amount. The claim of the 4th Respondent may also be adjusted from the left over amount.

6. Learned Government Pleader for Revenue opposed the same, but however, does not dispute the law laid down in catena of judgments.

7. Before going further, it will be just and proper to refer Section 26(E) of the Act, which reads as under:

Section 26E: Priority to secured creditors-

“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, cesses and other rates payable to the Central Government or State G