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2021 Supreme(Online)(KER) 7853
HIGH COURT OF KERALA
S.MANIKUMAR, CJ, SHAJI P.CHALY, J
K.J.BINU – Appellant
Versus
THE SECRETARY, NEDUMANGAD MUNICIPALITY – Respondent
RP 974 2020
DR. S. GOPAKUMARAN NAIR (SR.), SMT. T. S.MAYA (THIYADIL), SRI. D. S. SREEKUMARAN, SRI. SOORAJ T. ELENJICKAL, SRI. SURIN GEORGE IPE, SENIOR GOVERNMENT PLEADER
A borrower maintains ownership rights until the completion of auction proceedings under the SARFAESI Act, despite defaulting on loan obligations.
Headnote:
SARFAESI - Ownership Rights - SARFAESI Act, 2002 - Sections 13(2), 13(4)(a), 13(8) - Court interprets that under SARFAESI provisions, a borrower retains ownership until formal completion of auction proceedings; the creditor is akin to a receiver, supporting the borrower's rights under Article 300A.
Fact of the Case:
A review petition was filed regarding a writ petition that unsuccessfully sought to quash an ownership certificate issued to a party amidst recovery proceedings under the SARFAESI Act against the property, sparking a dispute over property ownership post-notification of auction.
Finding of the Court:
The court reaffirmed its prior judgment, clarifying that a secured creditor's position does not equate to the loss of ownership for the borrower until all auction proceedings are completed, emphasizing the borrower's entitlement to assert property rights.
Issues: Whether the borrower ceases to be the owner of the property upon auction notice publication under the SARFAESI Act, thus affecting the issuance of an ownership certificate by a municipality.
Ratio Decidendi: Ownership remains vested with the borrower until the formal auction process completes; the secured creditor acts in a capacity similar to a receiver, which preserves borrower's rights despite default.
Final Decision: The review petition is dismissed.
O R D E R
S. Manikumar, CJ Instant review petition is filed seeking to review the judgment of this Court in W.P.(C) No. 19984 of 2020 dated 25/09/2020, by which, having found that there is no merit in the writ petition, the reliefs sought for by the petitioner were rejected and consequently, dismissed the same. Said judgment reads thus:
“43. In the light of the decision in Transcore v. Union of India (cited supra), the secured creditor stands in the position of a receiver and if that be so, it is not open for the bank/secured creditor, who has a charge over the secured asset, to contend that the borrower has lost the status of owner of the property.
44. Giving due consideration to the provisions of the SARFAESI Act, 2002 , and the rules framed thereunder, we are of the view that the borrower, who had defaulted to pay the loan amount with interest for which, properties are brought for auction, is still the owner of the property and entitled to seek for enforcement of his rights, under the laws in force. Therefore, the 5th respondent, can seek enforcement of his property rights under Article 300A of the Constitution of India.”
2. W.P.(C) No.19984 of 2020 has been filed by the petitioner seeking for the following reliefs:
(a) Issue a writ of certiorari or any other writ, direction or order, quashing Exhibit-P4 ownership certificate dated 21.08.2020 issued by Nedumangad Municipality to the 5th respondent.
(b) Issue a declaration that Exhibit-P4 is null and void, as respondents 1 and 2, viz., The Secretary, Nedumangad Municipality, Thiruvananthapuram; and Nedumangad Municipality, represented by its Secretary, have no authority or jurisdiction to issue the same, in view of Exhibits-P2 and P3 notifications dated 26.10.2018 and 23.01.2020 respectively.
(c) Issue a further declaration that all the consequential and further official acts based on and relying on Exhibit-P4 ownership certificate dated 21.08.2020 are null, void and, without any basis.
3. Facts leading to the filing of this review petition are, petitioner, a Councilor of Nedumangad Municipality, has filed the writ petition seeking to quash Exhibit-P4 ownership certificate dated 21.08.2020, issued by the respondent Municipality to the 5th respondent in respect of a property, viz., Indraprastha Building. According to the petitioner, Exhibit-P4 was issued after initiation of recovery proceedings in respect of huge loan arrears against the property by the Industrial Financing Corporation of India Limited, and its authorised officer viz., respondents 7 and 8, for which, certain property was offered as security under the provisions of the SARFAESI Act, 2002 .
4. Review petitioner has further stated that since notice regarding auction sale was published and notified in daily newspapers by the secured creditor, the 8th respondent, 5th respondent ceased to be the owner of the property and, therefore, he is not entitled to get an ownership certificate in respect of the said property, after the date of its publication, as contemplated under Section 13(8) of the SARFAESI Act, 2002 .
5. Review petitioner has further stated that, Section 13(8) of the Act, 2002, makes it clear that further proceedings in the notified auction sale of the property need to be stayed, only if the borrower/owner of the property has tendered to the secured creditor, the amount due together with all the costs, charges and expenses, incurred by him, at any time before the date of publication of notice for public auction or inviting quotation or tender from public or private treaty for transfer by way of lease, assignment or sale of the secured asset. Since the 5th respondent has not complied with the above provision of the Act, the further proceedings pursuant to auction sale notification are to take place.
6. While dismissing the writ petition, this Court rejected the legal contentions putforth by the petitioner and held that secured creditor stands in the position of a receiver and if that be so, it is not open for the
