JUDGMENT

Dated this the 30^th day of June, 2023

The petitioner is a banking company as defined under Section 5(c) of the Banking Regulation Act, 1949 and one among the scheduled banks listed under the 2nd schedule to the Reserve Bank of India Act, 1934. The 4^th respondent availed a housing loan of Rs.35,00,000/- from the petitioner on 11.02.2011, for purchasing a residential apartment under construction together with undivided share in the land on which the apartment building is being constructed. As security for the loan, the fourth respondent mortgaged, by deposit of his title deeds, the apartment and the undivided share. The mortgage was created on 04.02.2011 and the original title deeds were deposited on 02.01.2012.

The mortgage was registered in the portal of the Central Registry of Securitisation, Asset Reconstruction and Security Interest of India (CERSAI) on 29.09.2012. The fourth respondent having defaulted repayment, the petitioner was contemplating recovery measures. While so, the first respondent, Securities and Exchange Board of India (SEBI), received a reference from the National Housing Board, alleging that a Company by name Kerala Housing Finance Limited (KHFL) had raised share capital and accepted subscription amount in violation of the statutory provisions and the prescribed procedure. Based on the complaint, SEBI conducted an enquiry into the money mobilisation activities of KHFL. The enquiry revealed various violations and the explanation offered by KHFL and its Directors not being satisfactory, SEBI passed a final order on 10.08.2017, calling upon the Company and its directors to jointly and severally refund the monies collected, with 15% interest, within 180 days. The fourth respondent was one among the directors of KHFL thus called upon to refund the money. The appeal filed by the Company and its directors before the Securities Appellate Tribunal having been dismissed, the SEBI issued demand notices for recovery of rupees 261.35 Crores. Thereafter attachment orders dated 26.06.2019 were issued, followed by prohibitory order dated 02.08.2019.

2. As proceedings under the Insolvency and Bankruptcy Code, 2016 (IBC) had been initiated against company and a moratorium order passed by National Company Law Tribunal, recovery proceedings against the company was kept in abeyance and proceedings against the directors/promoters, continued. During the course of such proceedings, the Recovery Officer of SEBI attached the property of the fourth respondent given as security for the loan availed from the bank and put up that property for sale as per Ext.P3 notice. On coming to know about the proposal to sell the mortgaged property, the Bank issued Ext.P4 communication to the SEBI, requesting to stop the proceedings. In its reply, the SEBI took the stand that the amounts due to SEBI has precedence over any claim, including the bank's claim and hence, the sale will be conducted, considering the paramount interest of the investors. This writ petition was filed thereupon, seeking the following reliefs;

“1. Call for the records of the case up to and including Exhibits 3 and P3 A and to quash Exhibits P 3 and P3 A.

2. Issue a writ of mandamus or such other appropriate writ, order or direction commanding the 1" and 2nd Respondents to specify the encumbrance on the property in favour of the Petitioner for the amount due to the Petitioner, before any further steps are taken to enforce sale of the property.

3. To declare that the prior charge mortgage rights on the property in favour of the Petitioner have priority over any right of sale vested in the 1" and 2nd Respondents under SEBI Act, 1992.

Alternately, 4. To direct the 1 and 2nd Respondents to deposit the amount due to the Bank in the Bank, from out of the sale proceeds received by the said Respondents from any sale of the subject property prior to appropriating any portion of the said proceeds.

5. Stay all further action pursuant to Exhibit P 3 and P 3 A, pending adjudication of the