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2024 Supreme(Mad) 2643
IN THE HIGH COURT OF JUDICATURE AT MADRAS
D. KRISHNAKUMAR, P.B. BALAJI, JJ.
M/s. Tamil Nadu Mercantile Bank Ltd. – Appellant
Versus
The Sub Registrar, Chennai – Respondent
W.P. No. 15451 of 2024
Decided On : 19-10-2024
Important Points
Subject
Property Law - Securitization
Act Referred
Headnote
(B) Priority of Secured Creditors - The SARFAESI Act prioritizes secured creditors for repayments over state dues - This priority extends regardless of subsequent attachments by government authorities. (Paras 8, 15)
Facts of the case:
The petitioner bank, having a secured mortgage from M/s. Friends Telecom, sought registration of a Sale Certificate post-auction sale after the mortgage turned into a non-performing asset. The auction led to a surplus, which was sent to the tax authority, yet registration was denied by the sub-registrar citing an existing attachment.
Findings of Court:
The Court found in favor of the petitioner, affirming the bank's priority as secured creditor over the state tax claim and ordering registration of the Sale Certificate.
Issues: The primary issues were regarding the registry of the Sale Certificate given the existing tax attachment and the interpretation of priority under the SARFAESI Act.
Ratio Decidendi: The court emphasized that under Section 26E, the rights of the secured creditor take precedence over debts owed to governmental authorities, confirming the auction purchaser’s rights.
Result: Writ petition allowed; the Sub-Registrar directed to register the Sale Certificate and cancel prior attachment.
For the Appellant : V. Chandrasekaran
For the Respondents: M. Habeeb Rahman, Haja Naziruddin, G. Nanmaran
| Table of Content |
|---|
| 1. petitioner bank's rights regarding property. (Para 1 , 3 , 4 , 5 , 6 , 7) |
| 2. sarfaesi act prioritizes banks' dues. (Para 8 , 9 , 10) |
| 3. arguments regarding attachment and 'as is where is'. (Para 11 , 12 , 13) |
| 4. judicial reasoning on priority and attachments. (Para 14 , 15 , 16 , 17 , 18 , 19 , 20) |
| 5. order for registration and cancellation of attachment. (Para 21 , 22) |
ORDER :
1. The Petitioner Bank has sought issuance of a Writ of Mandamus, directing the Sub-Registrar, Sembakkam, to delete the property mentioned in the schedule to the Writ Petition from the Certificate of Encumbrance and to direct the 1st respondent to register the Sale Certificate dated 04.10.2023 issued by the petitioner Bank.
2. We have heard Mr. V. Chandrasekaran, learned counsel for the writ Petitioner and Mr. Haja Naziruddin, learned Additional Advocate General, assisted by Mr.G.Nanmaran, learned Special Government Pleader for the 2nd respondent and Mr.M.Habeeb Rahman, learned Government Advocate for the 1st Respondent.
3. According to the learned counsel for the Petitioner Bank, the property which is set out by way of a separate schedule to the Writ Petition was mortgaged by one A.Seyathu, partner of M/s. Friends Telecom in favor of the Petitioner Bank on 12.11.2015, by an agreement of deposit of title deeds. This mortgage was created in respect of credit facilities availed by the partnership firm, M/s. Friends Telecom. The memorandum of deposit of title deeds was duly registered as Document No.12332 of 2015 on the file of Sub Registrar Office, Selayur as well. The property was also registered under Section 26D of Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act (SARFAESI), 2002, on 21.11.2015.
4. It is the case of the Petitioner Bank that the said loan availed by M/s. Friends Telecom became a non-performing asset on 31.03.2021 and consequently the Petitioner Bank invoked the provisions of the SARFAESI Act, 2002, and issued notice under Section 13(2) on 16.09.2021, calling upon the borrower to pay a sum of Rs.17,51,657.85, together with future interest at 11% with monthly rests and also penal interest at the rate of 2% per annum.
5. The specific case of the writ Petitioner Bank is that the subject property of the said mortgage was sold in public auction on 31.08.2023 in favor of Mrs. Kala Ramu, resident of Tambaram for a sum of Rs. 28,60,000/- and that the said auction purchaser had fully complied with the terms and conditions of the auction sale by remitting the entire consideration on 27.09.2023. On receipt of the said amount, the loan account was closed on the very same day i.e., 27.09.2023 and subsequently, a Sale Certificate was issued to the auction purchaser, Mrs. Kala Ramu on 04.10.2023.
6. It is also the case of the Petitioner Bank that after adjusting the sale proceeds towards the loan account, there was a surplus of Rs.1,66,093.31/- and by way of a demand draft bearing No.776296, the same was issued in favour of the 2nd respondent, the Assistant Commissioner, Commercial Taxes Department, Tambaram Assessment Circle.
7. The grievance of the Petitioner Bank is that the 1st respondent Sub Registrar has refused to register the sale certificate citing the priority of charge in favour of the 2nd respondent, the Assistant Commissioner, Commercial Taxes Department, Tambaram Assessment Circle.
8. According to Mr.V.Chandrasekaran, the SARFAESI Act, 2002, gives priority to banks in respect of its dues over all other debts including revenue, taxes, cesses or other rates which may be due and payable to either the State Government, Local Authority or the Central Government.
9. The learned counsel would invite our attention to Section 26E of the SARFAESI Act, 2002, the same is extracted hereunder:
“Section 26E : Priority to secured creditors.
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 shal
