A mortgage created in favor of a secured creditor takes precedence over subsequent attachment orders passed by a civil court; such attachments cannot impede the registration of a sale certificate issued under the SARFAESI Act.

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LISA GILL, J.

1. Petitioner is aggrieved of non-registration of sale certificate dated 30th of May 2025 issued by petitioner company in favour of respondents No.9 in proceedings under the Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (for short, “SARFAESI Act”), on the pretext that respondent No.8 obtained an order of attachment on 28th of September 2022 in O.S.No.121 of 2022 from learned Additional District and Session Judge, Vijayawada against respondents No.3 to 6 and that property has been included in list of prohibited properties.

2. Learned counsel for petitioner submitted that respondent No.3 i.e. Andhra Pradesh State Government Employees Mutually Aided Co-operative House Building Society Limited, through its Secretary, respondent No.4 and co-borrowers respondents No.5 to 7 availed of business loan facilities in form of financial assistance to a tune of Rs.8.50 Crores from petitioner. Necessary loan documents were executed in favour of petitioner company and mortgage registered relating to land in question as is detailed in Para 5 of writ petition. Valid security interest was created in respect to property in question in favour of petitioner’s company as early as on 22nd of April 2021 and 20th of November 2020.

3. On account of financial indiscipline of borrower, account was classified NPA and provisions under SARFAESI Act were invoked with demand notice being issued on 13th of March 2023, ultimately leading to issuance of sale notice dated 21st of April 2025. Subsequently respondent No.3, borrower came forward and made a private treaty with petitioner company under Memorandum of Understanding dated 27th of May 2025 for facilitating sale of mortgaged secured asset. With consent of both borrower and petitioner, mortgage property in plot 765 was sold to respondent No.9 in total compliance of procedures contemplated under the Act as well as Security Interest (Enforcement) Rules 2002. No objection whatsoever was ever raised by borrower/mortgager or anyone else.

4. Respondent No.9 deposited entire sale consideration amount as per terms and conditions of auction and sale certificate was issued in his favour on 30th of May 2025. When registration of sale certificate was sought, it was refused by respondent No.2-Sub Registrar on the premise that there is an order of attachment dated 1st of July 2022 passed by learned Additional District and Session Judge, Vijayawada in O.S.No.121 of 2022 and that subject property is in prohibited list.

5. Learned counsel for petitioner submitted that upon making inquiries it came to notice of petitioner that civil suit O.S.No.121 of 22 which appears to be a collusive suit was filed through respondent No.8 at the behest of borrower respondent No.3 in March 2022, that is much after mortgage of this property with petitioner by respondent No.3. Mortgage of property in question with petitioner is duly detailed in the said civil suit, but despite being aware of mortgage in favour of petitioner, it was not arrayed as party to civil suit. Learned counsel for petitioner submits that in given factual matrix, refusal of respondent No.2 to register the sale certificate is absolutely unjustified and is in fact illegal. As per Section 26E of SARFAESI Act, it is specifically provided that debts due to any se