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2025 Supreme(Online)(Mad) 58142
IN THE HIGH COURT OF JUDICATURE AT MADRAS
J. Nisha Banu, S. Srimathy, JJ
City Union Bank Limited – Appellant
Versus
Sub-Registrar – Respondent
W.P.(MD)No.3291 of 2024
For the Appellants/Petitioners: N.Dilip Kumar
For the Respondents: Veera Kathiravan, P.T.Thiraviyam
Section 26E of the SARFAESI Act grants secured creditors a priority charge over mortgaged assets, overriding subsequent attachments by statutory authorities, and the registering authority is obligated to register sale certificates and make contra-entries to reflect this priority.
Headnote:(A) SARFAESI Act, 2002 - Sections 13(2), 13(4), 26E and 35 - Registration Act, 1908 - Section 22-B - Priority of secured creditor - Attachment by statutory authorities vs. Mortgage by bank - Challenge to refusal of registration of sale certificate - Respondent refused to register sale certificate citing prior attachment by tax department - Held, Section 26E of SARFAESI Act grants priority to secured creditors over all other debts including taxes due to State Government - Statutory attachment under Section 22-B does not curtail the primacy of the secured creditor’s rights established under Section 26E - Registrar directed to make contra-entry to reflect priority of the petitioner bank.
Facts of the case:
The petitioner bank, having a registered mortgage from 2007, brought the secured asset to auction sale after the borrower defaulted. The 7th respondent was the successful bidder. The 1st respondent (Sub-Registrar) refused to register the sale certificate due to an attachment entry made by the tax authority (6th respondent) in 2019. The bank sought a writ of mandamus to quash the refusal slip and delete the attachment entry.
Findings of Court:
The court observed that the bank’s mortgage preceded the tax authority’s attachment. While the Registration Act prohibits registering documents under attachment, Section 26E of the SARFAESI Act overrides other laws. The court directed the Registrar to record a contra-entry acknowledging the bank’s priority over the attachment.
Issues: Whether the Sub-Registrar can refuse to register a sale certificate issued by a secured creditor due to a subsequent attachment by statutory authorities, and the procedure to deal with such entries.
Ratio Decidendi: Secured creditors have a first charge over the mortgaged property by virtue of Section 26E of the SARFAESI Act, which overrides other laws. The registering authority must recognize this priority by recording a contra-entry rather than refusing registration.
Result: Writ petition allowed.
| Table of Content |
|---|
| 1. factual background involving loan default, sarfaesi proceedings, and refusal to register sale certificate. (Para 1 , 2) |
| 2. contentions regarding the conflict between section 26e of sarfaesi act and section 22-b of the registration act. (Para 3 , 4 , 5 , 6 , 7) |
| 3. court's directive to prioritize secured creditors by recording contra-entries regarding attachment. (Para 8 , 9 , 10 , 11 , 12 , 13 , 14 , 15 , 16 , 17 , 18 , 19) |
PRAYER : Writ Petition filed under Article 226 of the Constitution of India, praying this Court to issue a Writ of Certiorarified Mandamus, to call for the records related to the impugned Refusal Check Slip passed by the 1st respondent in RFL/Vadamadurai/No.307/2023, dated 20.12.2023 and to quash the same and consequently, to direct the 1st respondent, Sub-Registrar, Vada Madurai, Dindigul District, to efface/delete the attachment entry, dated 02.02.2019 and 07.02.2019, made in Document Nos.12 and 13 of 2019, and to register the sale certificate executed by the petitioner bank in favour of the 7th respondent in respect of the schedule mentioned property.
For Petitioner : Mr.N.Dilip Kumar
For R1 and R6 : Mr.Veera Kathiravan
Additional Advocate General
assisted by Mr.P.T.Thiraviyam
Government Advocate
***
ORDER
(Order of the Court was delivered by S.SRIMATHY, J.)
The present writ petition is filed for Writ of Certiorarified Mandamus, to quash the impugned Refusal Check Slip passed by the 1st respondent in RFL/Vadamadurai/No.307/2023, dated 20.12.2023 and to direct the 1st respondent, Sub-Registrar, Vada Madurai, Dindigul District, to efface/delete the attachment entry, dated 02.02.2019 and 07.02.2019, made in Document Nos.12 and 13 of 2019, and to register the sale certificate executed by the petitioner bank in favour of the 7th respondent in respect of the schedule mentioned property.
2.The brief facts are that the 2nd respondent availed a credit facility of Rs.10 Crores/- (Rupees Ten Crores only) from the petitioner bank and had loan documents and registered mortgage by deposit of title deeds on 20.07.2007 in Document No. 2479 of 2007 on the file of the 1st respondent. All these documents have been registered on the file of the first respondent. The 2nd respondent M/s. DSRM Steels Private Limited chad availed a Term Loan of Rs.25,00,00,000/- (Rupees Twenty Five Crores only) from the petitioner Bank and had executed the Memorandum of Deposit of Title Deeds on 20.09.2011, vide Document No.4637 of 2011. The 2nd respondent further approached the petitioner bank on 26.09.2016 seeking enhancement from Rs.35,00,00,000/-(Rupees Thirty Five Crores only) to Rs. 40,00,00,00/- (Rupees Forty Crores only) and it was sanctioned and had executed the Memorandum of Deposit of Title Deed, vide Document No. 2157 of 2017, dated 01.08.2017. The respondents 3 and 5 had executed the Modification of Memorandum of Deposit of Title Deed, vide Document No. 2157 of 2017, dated 01.08.2017. The borrowers failed to repay the loans and committed default. Therefore, the loan accounts were classified as Non-Performing Assets with effect from 06.10.2016.The petitioner bank issued statutory Demand Notice under Section 13(2) of the SARFAESI Act, dated 19.10.2017, demanding re-payment of loan amount for Rs.48,71,93,783/- (Rupees Forty Eight Crores Seventy One Lakhs Ninety Three Thousand and Seven Hundred and Eighty Three only). The petitioner bank issued a Possession Notice under Section 13 (4) of the SARFAESI Act, 2002 and Rule 8 of Security Interest (Enforcement) Rules, 2002 to the borrower and guarantors on 03.01.2018. The petitioner bank had also served the possession notice by affixing the same in the secured asset premise on 03.01.2018. The bank published the possession notice in two newspapers namely, 'DAILY THANTHI' and 'INDIAN EXPRESS' on 03.01.2018, as required under the SARFAESI Act. The borrowers did not respond to the said notices and failed to repay the outstanding loan amount as required. The bank therefore proceeded
