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2022 Supreme(Mad) 2634
IN THE HIGH COURT OF JUDICATURE AT MADRAS
S. SOUNTHAR, J.
The Manager, The Karur Vysya Bank ltd., Coimbatore - Appellant
Versus
The Secretary, Government of Tamil Nadu, Department of Handlooms, Handicrafts, Textiles & Khadi, Secretariat, Chennai & Others - Respondent
W.P.No. 31122 of 2014
Decided On : 24-08-2022
For the Petitioner:A.V. Radhakrishnan, Advocate. For the Respondents:R1 to R3 & R6, M/s. P. Sanjai Gandhi, R4, M/s. S. Pradeepan, R5, M/s. V. Maharahan, Advocates.
The rights of the secured creditor under SARFAESI Act have priority over Crown's debts, and in the absence of any provision in the Tamil Nadu Co-operative Societies Act giving first charge to the amount due to the Cooperative Societies, the secured creditor is entitled to priority over the claim of the society.
Headnote:
Attachment - Tamil Nadu Co-operative Society Act - Section 167 - [Section 167 of Tamil Nadu Co-operative Societies Act] - The court quashed the attachment order passed by the 2nd respondent under Section 167 of the Tamil Nadu Co-operative Societies Act, 1988, as the property under attachment was not shown to be the property of the 4th respondent, and the 2nd respondent was not justified in passing an order of attachment against the property in question which admittedly stands in the name of the 5th respondent. The court also held that the petitioner, as a secured creditor, is entitled to have priority over the claim of the 3rd respondent society.
Fact of the Case:
The petitioner bank challenged the order passed by the 2nd respondent attaching property of the 5th respondent under Section 167 of Tamil Nadu Co-operative Societies Act. The petitioner claimed that the property was mortgaged to them and the attachment hindered their recovery proceedings.
Finding of the Court:
The court found that the property under attachment was not shown to be the property of the 4th respondent, and the 2nd respondent was not justified in passing an order of attachment against the property in question which admittedly stands in the name of the 5th respondent. The court also held that the petitioner, as a secured creditor, is entitled to have priority over the claim of the 3rd respondent society.
Issues: The main issue was the validity of the attachment order passed by the 2nd respondent under Section 167 of the Tamil Nadu Co-operative Societies Act, and the priority of the petitioner as a secured creditor over the claim of the 3rd respondent society.
Ratio Decidendi: The court held that the property under attachment was not shown to be the property of the 4th respondent, and the 2nd respondent was not justified in passing an order of attachment against the property in question which admittedly stands in the name of the 5th respondent. The court also established the priority of the petitioner, as a secured creditor, over the claim of the 3rd respondent society.
Final Decision: The court quashed the attachment order passed by the 2nd respondent under Section 167 of the Tamil Nadu Co-operative Societies Act and directed the 6th respondent to incorporate necessary changes in its file, recording the quashment of the attachment order. The writ petition was allowed with no order as to costs.
JUDGMENT
(Prayer: This Writ petition has been filed under Article 226 of the Constitution of India to issue a writ of certiorarified mandamus calling for the records under the proceedings of the attachment order dated 29.07.2011 of the 2nd respondent under Section 167 of the Tamil Nadu Co-operative Society Act, 1988 and quash the same and direct the 6th respondent to raise the attachment registered as Document No.10 of 2011 in the office of Sub-Registrar of Sulur, Coimbatore with regard to the property, morefully described in Schedule I of the said order dated 29.07.2011.)
The petitioner bank has filed this writ petition challenging the order passed by the 2nd respondent attaching property of the 5th respondent under Section 167 of Tamil Nadu Co-operative Societies Act, and also for consequential direction to 6th respondent to raise the attachment registered as document No.10 of 2011 on the file of the Sub Registrar of Sulur, Coimbatore.
2. According to the petitioner that 4th and 5th respondents who are husband and wife approached the petitioner bank for housing loan for construction of house after demolition of old structure in the site belongs to 5th respondent situated in S.F.Nos.171/1, 171/2 and 178/3 in Karumathampatti Village, Palladam Taluk, Tiruppur District morefully described in the annexure to the impugned order itself. A sum of Rs.19.00 Lakhs was sanctioned to them as a housing loan. As a security purpose for proper payment of the loan amount, 5th respondent created equitable mortgage by deposit of title deeds over the above said lands. The 5th respondent executed a confirmation deed by deposit of title deeds on 29.03.2010 in favour of petitioner bank and created equitable mortgage. The Memorandum of Deposit of title deed was registered on 30.03.2010 as Document No.2844 of 2010 on the file of the Sub Registrar, Sulur, Coimbatore. The 4th and 5th respondents defaulted in repayment of the loan amount and as a consequence, their loan account was classified as Non-Performing Asset on 28.12.2012. When the petitioner bank initiated recovery proceedings against the immovable property mortgaged by 5th respondent, it came to their knowledge that subsequent to registration of the Memorandum of Deposit of title deeds, the 2nd respondent passed impugned order of attachment dated 29.07.2011 attaching the very same property for the amount due to the 3rd respondent society from the 4th respondent. The petitioner claimed that it issued notice under Section 13 (2) of SARFAESI Act, 2002 dated 09.05.2013 calling upon the 4th and 5th respondents to repay a sum of Rs.18,73,317.63/- and there was no response from them. Thereafter, a Possession Notice was issued in respect of the mortgaged property on 18.07.2013. The petitioner claimed that when they proceeded against mortgaged property by bringing it for auction sale, they were not able to get bidders because of the order of attachment reflected in encumbrance certificate issued to the property. The order of the attachment passed by the 2nd respondent was challenged on the ground that for the amount due from 4th respondent, the 2nd respondent is not legally entitled to attach the properties of the 5th respondent.
3. The 3rd respondent filed a counter and opposed the writ petition. In its counter it was submitted by the 3rd respondent that the 4th respondent by his actions and omissions caused loss to the 3rd respondent society to the tune of Rs.58,97,453/-. In order to recover the said amount, the property in question was attached under Section 167 of Tamil Nadu Co-operative Societies Act, 1983, on 29.07.2011. It was claimed in the counter of the 3rd respondent that 5th respondent is the wife of the 4th respondent and the property in question though stands in the name of the 5th respondent, it was purchased by the 4th respondent, nominally in the name of the 5th respondent and she was only a name lender, having no separate source of income. Therefore, 3rd respondent contended in his counte
