The rights of a bona fide purchaser under the SARFAESI Act prevail over subsequent encumbrances like Lok Adalat awards, necessitating proper legal consideration in execution proceedings.

This appeal is directed against the order dated 17.01.2018 of the Sub Court, Mavelikakra in E.A.No.154 of 2014 in Execution Petition No.70 of 2012 in O.S.No.150 of 2006, dismissing the application filed by the appellant for lifting the attachment over 2.23

Ares of land and a residential building situated therein, over which the appellant claimed absolute title and possession.

2. The appellant is a third party to the abovesaid execution proceedings pending before the Sub Court, Mavelikkara. He claims to have obtained the above property in a sale conducted by the authorized officer of the Punjab National Bank, Circle Office, Ernakulam under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (for short ‘SARFAESI Act’). Pursuant to the above sale, a sale certificate dated 07.09.2012 was issued under Rule 9(6) of the Security Interest (Enforcement) Rules, 2002. The appellant claims to have mutated the above property in his name and is said to be in possession and enjoyment of the said property. According to the appellant, no encumbrance on the property was brought to the notice of the Secured Creditor at the time of sale, though the borrowers were witnesses in the Purchase Certificate. While so, the property was attached as per order dated 26.11.2013 in E.A.No.22 of 2013 in E.P.No.70 of 2012 of the Sub Court, Mavelikkara by the 1st respondent, who was the decree holder in that execution proceedings. The above execution proceedings were initiated towards enforcement of the award dated 08.10.2010 in O.S.No.150 of 2006 of the Lok Adalat, towards realization of an amount of Rs.2,86,166/-. The above award of the Lok Adalat was in respect of the settlement of O.S.No.150 of 2006, a suit instituted by the 1st respondent against the 2nd respondent for realization of money. In the above award dated 08.10.2010 of the Lok Adalat, it was made clear that in the event of the 2nd respondent failing to make payment of the amount mentioned thereunder, the 1st respondent will be entitled to get the said amount realized from the plaint schedule property in the said suit, i.e., O.S.No.150 of 2006 of the Sub Court, Mavelikkara. It is towards execution of the above award dated 08.10.2010 of the Lok Adalat, that the 1st respondent filed E.P.No.70 of 2012 against the 2nd respondent before the Sub Court, Mavelikkara. Upon getting knowledge about the above attachment, the appellant filed E.A.No.154 of 2014 before the Sub Court, Mavelikkara, for lifting the above attachment on the basis of a contention that he is having absolute title and possession over the property in question, as per the above Sale Certificate dated 07.09.2012 issued by the authorized officer under the SARFAESI Act. It was further contended by the appellant that at the time when the above attachment was made, the 2nd respondent was having no title over the said property. The appellant further contended that he is a bona fide purchaser for value without notice of the charge created on the said property as per the award of the Lok Adalat, and hence the attachment over the said property is liable to be lifted.

Respondents 1 and 2 who are the decree holder and the judgment debtor respectively in the aforesaid execution petition did not file any objection to E.A.No.154 of 2014 filed by the appellant. In the enquiry before the Executing Court, the appellant tendered evidence as PW1 and produced the Sale Certificate in his favour, which is marked as Ext.A1. The certified copy of the award dated 08.10.2010 of the Lok Adalat in O.S.No.150 of 2006 was marked as Ext.C1.

3. After an evaluation of the evidence, the learned Sub Judge held that Ext.A1 Sale Certificate would clearly suggest that the transfer was effected in favour of the appellant, subject to the encumbrances on the property and hence, he is not entitled to claim that the attachment ordered over the said property is liable to be lifted. Aggrieved by the aforesaid order of d