The actions of the state in attaching property already mortgaged to a secured creditor are illegal and violate the prioritization established under the SARFAESI Act.

JUDGMENT :

BHARGAV D. KARIA, J.

Heard learned advocate Mr.P.M.Dave for the petitioner and learned Assistant Government Pleader Ms.Shrunjal Shah for the respondent No.1.

1. Rule, returnable forthwith. Learned Assistant Government Pleader Ms.Shrunjal Shah waives service of notice of rule for and on behalf of the respondent No.1.

2. By this petition under Article 226 of the Constitution of India, the petitioner has prayed for the following reliefs :

“(A) YOUR LORDSHIPS may be pleased to quashed and set aside the action of respondent no.2 in registering charge of attachment on the subject property being Block/Survey No. 182 paiki, N.H. No. 8, area admeasuring 0-30-16 i.e. 3016 sq. mtr at Kanjari, Tal. Nadiad, Dist. Kheda and Revenue Surey No. 39/A paiki, western area admeasuring 3120 sq.mtrs, Mouje: Poicha (Raina) as being illegal, unjust, arbitrary, and unreasonable and contrary to the Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 as also violative of statutory rights of the petitioner bank and cancel the charge of the respondent no.2 authority, in the interest of justice and equity;

(B) YOUR LORDSHIPS may be pleased to direct the respondent no.7 authority to record the name of the respondent no.6 - in the property card of the subject property forthwith, being an auction purchaser of the subject property, pending admission, hearing and final hearing of the present petition in the interest of justice.”

3. Brief facts of the case are as under :

3.1. In the year 2013, as the respondent nos.3 to 5 were in need of finance for their business, the petitioner advanced cash credit facility worth Rs.3.60 Crore by creating equitable mortgage with regards to the properties mentioned in the mortgage deed. As there was consistent default on the part of the respondent no.3 to 5 in making payment of the financial assistance, petitioner-Bank initiated proceedings under the provisions of Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest, 2002 (for short ‘the SARFAESI Act’).

3.2. Thereafter, the petitioner-Bank issued notice under Section 13 (2) of the SARFAESI Act on 18.07.2018 calling upon the respondent no.3 to 5 to make payment, failing which, proceedings under Section 13 (4) of the SARFAESI Act shall be initiated. It is the case of the petitioner that since the borrower did not repay the dues to the petitioner, the petitioner issued a possession notice dated 05.11.2018 under Section 13 (4) of the SARFAESI Act.

3.3. Subsequently, the petitioner preferred an application under Section 14 of the SARFAESI Act before the Collector & District Magistrate, Anand (Rural). The District Magistrate passed an order dated 13.05.2019 for taking physical possession of the secured assets and the Mamlatdar issued notice on 15.06.2019 intimating the respondent No.3 to 5 for taking over the possession of the properties (in question).

3.4. On 03.09.2021, a notice was issued to the respondent Nos.3 to 5 intimating them for sale of secured assets and on 04.09.2021 as per Rule 8(2) of the SARFAESI Act, the auction notice was published in newspaper, wherein, the auction was scheduled on 28.09.2021. After successful auction process, when the Bank Official initiated process for mutation of name of the respondent No.6 pursuant to the auction sale, it came to the knowledge of the petitioner that vide order dated 18.02.2021, properties (in question) were attached and charge was created by Revenue Entry No. 19356 dated 06.04.2021. Therefore, the petitioner issued a notice dated 11.10.2022 through the Advocate for removal of attachment order dated 18.02.2021 by citing the judgment of this Court in which it was held that such charge cannot be created as against the secured creditor in view of Section 26E of