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HIGH COURT OF KERALA
C.J.CHACKO, CJ
UCO BANK – Appellant
Versus
THE STATE OF KERALA – Respondent
WP(C)/29341/2021
Banking - Securitisation - SARFAESI Act - Sections Summary - The case addressed the interaction between mortgage rights under the SARFAESI Act and the implications of subsequent attachments, concluding that earlier mortgages take precedence, allowing the sale to proceed despite contesting attachments.
Fact of the Case:
The petitioner Bank sought to register a sale certificate from a property sold under the SARFAESI Act after its mortgagors defaulted on a financial facility. The Sub Registrar refused registration due to subsequent attachments on the property.
Finding of the Court:
The court found that the equitable mortgage was prior to the attachments in question, and therefore, the Bank had the right to register the sale certificate and efface the subsequent attachments.
Issues: Whether the petitioner Bank could register the Sale Certificate despite existing attachments due to prior equitable mortgage rights.
Ratio Decidendi: The court held that prior mortgages prevail over subsequent attachments, and registration of the Sale Certificate must be allowed if no interdictory orders are in place.
Final Decision: The writ petition was allowed, directing the Sub Registrar to register the Sale Certificate and efface subsequent attachments.
J U D G M E N T
The UCO Bank, which is a public sector Bank, constituted under the provisions of the Banking Companies (Acquisition and Transfer of Undertakings) Act, 1970, is the petitioner in this case.
2. The petitioner says that, they had obtained an equitable mortgage over the property involved in this case from respondents 3 and 4, who are its owners, while availing of a financial facility from them; but that since the said respondents did not service the said facility satisfactorily, they were constrained to bring it to sale under the provisions of the Securitisation and Reconstruction of Financial Assets and Enforcement of Securities Interest Act (hereinafter referred to as the 'SARFAESI Act' for short). They say that the sale has been confirmed in favour of the auction purchaser, but that when they attempted to register the Sale Certificate, by presenting it before the 2nd respondent – Sub Registrar, said Authority has refused to accede to it saying that there are certain attachments reflected on the property in question.
3. The petitioner asserts that all the attachments reflected on the property, as are evident from Ext.P5 Encumbrance Certificate, were all much after the date of mortgage - which was 10.09.2014, and therefore, that, going by the various judgments of this Court, including inSecretary, Keechery Service Co-operative Bank Ltd v. Sajitha Nizar Alias Sajitha P.M [ 2020 (6) KLT 68 ], they cannot be impeded from proceeding against it or in bringing it to sale, which they have done validly as per the provisions of the SARFAESI Act. They therefore, pray that the Sub Registrar be directed to efface the attachments and to register the Sale Certificate without any further delay.
4. In response, the learned Government Pleader –
Smt.M.Anima, submitted that Sub Registrar has been incapacitated from effacing the attachments or from registering the Sale Certificate because he has noticed the orders over the property brought on it by the contesting respondents from a competent Court. She submitted that, however, if this Court is so inclined, the Sub Registrar can register the Sale Certificate and then efface the entries of attachments from the Encumbrance Certificate, provided all other statutory conditions and requirements are satisfied and met by the parties.
5. In response to the afore submissions made by Sri.G.G.Manoj, on behalf of the petitioner, Sri.Abraham Mathew, learned counsel for respondent No.6 and Sri.T.Madhu, learned counsel appearing for respondent No.5 argued that the sale conducted by the Bank is in flagrant violation of the provisions of the SARFAESI Act and that this writ petition suffers from suppression of material facts, including the value of the same.
6. Sri.Abraham Mathew Vettoor, in fact, argued that the owners of the property, namely respondents 3 and 4, had earlier approached the petitioner Bank for One Time Settlement, but that disregarding the same, the property has been brought to sale for a lower amount than what was offered; and therefore, that the entire exercise is vitiated and thus liable to be set aside by this Court. He then supplemented it by saying that, to his information, the owners of the property, namely respondents 3 and 4, have already approached the competent Forum for having the sale set aside and thus prayed that this writ petition be not allowed at this time, when such proceedings are pending.
7. Sri.Peer Mohammed Khan, learned counsel appearing for the owners of the property, namely respondents 3 and 4, affirmed the afore submissions of Sri.Abraham Mathew Vettoor, saying that a Securitisation Application has already been filed before the Debts Recovery Tribunal (DRT), Ernakulam, assailing the sale and that same is still pending. He predicated that his clients are confident of the sale being set aside because it was done in flagrant violation of the mandatory provision that a sale could have been conducted only 15 days after the notice had been served on his clients. He als
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