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ANIL K. NARENDRAN, P. G. AJITHKUMAR
Axis Bank, Retail Asset Centre, Represented By Its Legal Manager - Anoop Jose, S/o. Jose – Appellant
Versus
Hilal Ahmed Bhat S/o. Nazeer Ahammed Bhat – Respondent
What is the effect of a civil court attachment on a secured asset after a notice under Section 13(2) of the SARFAESI Act has been issued? What are the rights of a secured creditor when a civil court attaches a property that has been mortgaged to them? What is the extent of the bar to create liens or charges on property after a notice under Section 13(2) of the SARFAESI Act?
Key Points: - The appeal is filed under Section 104(1) read with Order XLIII, Rule 1(j) of the Code of Civil Procedure, 1908 (!) . - The appellant sought to lift the attachment over a property, contending they are a secured creditor (!) . - The 2nd respondent created an equitable mortgage in favor of the appellant by depositing title deeds for a cash credit facility (!) . - The loan amount became a non-performing asset, and the appellant initiated proceedings under the SARFAESI Act (!) . - The Execution Court dismissed the application to lift the attachment, stating the mortgagor's right of redemption can be sold in execution (!) . - The court acknowledged the secured creditor's first charge over the property to realize mortgage money (!) . - The appellant argued that Section 26E of the SARFAESI Act grants them priority over all other debts, including government debts (!) . - The court affirmed that the secured creditor has priority over other debts, including government taxes (!) (!) . - The bar to create any lien, charge, or liability on property after a notice under Section 13(2) of the SARFAESI Act is only against the debtor, not applicable to a civil court (!) (!) . - Despite civil court attachment, the secured creditor's right to recourse to Section 13(4) of the SARFAESI Act is not affected (!) (!) . - Once a sale is confirmed under Section 13(8) of the SARFAESI Act, the effect of civil court attachment extinguishes (!) (!) . - The equity of redemption available to the mortgagor-debtor can be attached and sold by a civil court as long as the right to pay under Section 13(8) subsists (!) . - The court below rightly rejected the appellant's claim, and the appeal was dismissed (!) .
JUDGMENT :
Ajithkumar, J.
This is an appeal under Section 104(1) read with Order XLIII, Rule 1(j) of the Code of Civil Procedure, 1908.
2. The appellant filed E.A.No.118 of 2018 in E.P.No.30 of 2017 in O.S.No.32 of 2016 before the Sub Court, Ottapalam, seeking to lift the attachment over the petition scheduled property. The E.A. was filled invoking the provision of Order XXI, Rule 58 and Section 151 of the Code, contending that the order of attachment obtained by the 1st respondent in respect of the said property on the ground that he was entitled to realise from the said property the debt due to him from the 2nd respondent in O.S.No.32 of 2016 is not sustainable in law, since the appellant is a secured creditor. The 2nd respondent while availing a cash credit facility of Rs.45,00,000/-, he created an equitable mortgage in favour of the appellant by deposit of title deed. The said loan amount has become a non-performing asset, and therefore, the appellant initiated proceedings against the secured asset as per the provisions of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (SARFAESI Act). It is contended that in that circumstan
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