City Union Bank vs Sub Registrar

N. Nagaresh, J

The City Union Bank is the petitioner. The Bank seeks to declare that it has priority in the matter of recovery of its dues from 3rd to 8th respondents over attachment/encumbrance reflected in Ext.P15 Encumbrance Certificate, being a secured creditor having its security interest registered with the “Central Registry” as provided in Section 26E of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002. The petitioner also seeks to command the 1st respondent-Sub Registrar to register Ext.P12 Sale Certificate ignoring/effacing the encumbrance/attachments in favour of the 10th respondent as reflected in Ext.P15 Encumbrance Certificate.

The petitioner states that the petitioner-Bank granted various credit facilities to respondents 3 to 5 during 2014-2017. As a security, respondents 3 to 8 executed security agreements in favour of the petitioner. Respondents 3 to 5 had mortgaged an extent of 1.583/100 undivided share in an extent of 51.21 Cents in Survey No.36/1, Re-survey No.176/35, Re-survey Block No.5, Kasba Village, Kozhikode Taluk, Kozhikode District along with Flat No.1C in the building complex “Leo Paradise”. The period of equitable mortgage was extended from time to time.

The petitioner states that the equitable mortgage was created as early as on 12.02.2014. The mortgage was registered with the Central Registry. When the borrower failed to remit the amounts due, the loan accounts were declared as NPA on 28.03.2020. Section 13(2) notice was issued under the SARFAESI Act. Later, the petitioner took possession of the secured asset invoking Section 14. A sale notice was published. The property was sold for a sum of ₹45,01,000/- in favour of the 9th respondent, on 02.01.2024.

A Sale Certificate in favour of the 9th respondent has been engrossed in stamp with requisite value. The 1st respondent declined to register the Sale Certificate on the ground that the property has been attached on 16.12.2017. The attachment has been obtained by the 10th respondent on 16.12.2017 in IA No.3067/2017 in OS No.149/2017 of the Additional Subordinate Judges Court, Kozhikode.

The petitioner says that the security interest in respect of the property covered by Ext.P1 deed has been created in favour of the petitioner by the 6th and 7th respondents as early on 26.03.2013. The purported encumbrance as reflected in Ext.P15 Encumbrance Certificate is on 18.12.2017. The continuance of the attachment is therefore opposed to law. The attachment is therefore liable to be effaced from records and respondents 1 and 2 are compellable to register the Sale Certificate issued by the petitioner, contends the petitioner.

The petitioner has a superior right under Section 31B of the Recovery of Debts and Bankruptcy Act. The right of the petitioner is clear from the judgments rendered by this Court in Madhan S. v. Sub Registrar, Kollam and others [2014 (1) KHC 249] and Secretary, Keecheri Service Co-operative Bank Limited v. Sajitha Nizar and others [2020 (5) KHC 231].

The 10th respondent resisted the writ petition filing counter affidavit. The 10th respondent stated that he has filed OS No.149/2017 before the Sub Court, Kozhikode against the 6th respondent praying for recovery of money. The Sub Court has ordered an attachment before judgment. The petitioner filed IA No.2378/2018 on 03.12.2018 to get themselves impleaded in the Original Suit alleging that the property was already mortgaged with the petitioner and that the petitioner is having first charge over the property.

The Sub Judge dismissed the said application as per order dated 04.01.2019. The 6th respondent, who was defendant in the OS, remained ex-parte and an ex-parte Decree was passed on 07.01.2019. The defendant then filed IA No.253/2019 to set aside the ex-parte Decree. The Sub Judge set aside the ex-parte Decree and the Original Suit was included in the list for trial.

The petitioner again approached the Sub Court filing IA No.1586/2019 in IA No.3607/2017 seeking to declare that the petitioner is having first charge over the attachment schedule / claim petition schedule property; and may lift the attachment already effected over the attachment schedule property. By order dated 01.10.2019, the Sub Court partly allowed the application. Even though the learned Sub Judge declared that the petitioner is having first charge over the property in question, the Court disallowed the request to lift the attachment. Subsequently, the Sub Court decreed the Original Suit as per Ext.R10(d) judgment.

The 10th respondent also obtained a decree against 8th respondent in Commercial Suit No.81/2021. Ext.R10(e) is the judgment dated 29.07.2022 in Commercial Suit No.81/2021. The 10th respondent filed EP No.32/2021 to execute the judgment. The petitioner filed EA No.427/2021 in EP No.132/2021 in OS No.149/2017. The petitioner has initiated SARFAESI proceedings after the decree passed by the civil court. The writ petition is therefore liable to be dismissed.

I have heard the learned Standing Counsel for the petitioner, the learned Government Pleader representing respondents 1 and 2, the learned counsel representing respondents 6 and 7 and the learned counsel representing the 10th respondent.

From the pleadings, it is evident that the mortgage was created by 6th and 7th respondents in favour of the petitioner-Bank on 26.03.2013. The mortgage is evidenced by Exts.P2 and P7. The mortgage was registered with the Central Registry during 2013-2014. The sale of the property was effected by the petitioner-Bank on 02.01.2024. The contention of the petitioner is that since the attachment of property by the Sub Court, Kozhikode is only on 18.12.2017, the said attachment has no effect in view of the law laid down by this Court in Madhan S. (supra).

However, it is to be noted that the 10th respondent had instituted OS No.149/2017 before the Sub Court, Kozhikode against the 6th respondent for recovery of money in the year 2017. The Sub Court, Kozhikode had ordered attachment of the property as per Ext.P15 on 18.12.2017. The petitioner-Bank filed IA No.2378/2018 on 03.12.2018 to get impleaded in the original suit. The said application was dismissed by the Sub Court.

The said Suit was decreed ex-parte. Subsequently, the defendant in the Suit filed IA No.253/2019 to set aside the ex-parte Decree. The ex-parte Decree was set aside. The petitioner has filed IA No.1586/2019 in IA No.3067/2017 in OS No.149/2017 seeking to declare that the petitioner is having first charge over the attachment schedule / claim petition schedule property; and may lift the attachment already effected over the attachment schedule property. The Sub court has decreed the Original Suit as per Ext.R10(d) judgment.

The 10th respondent filed Commercial Suit No.81/2021 in the Court of Commercial / Principal Sub Court, Kozhikode. The 10th respondent filed EP No.32/2021 to execute the judgment. The petitioner filed EA No.427/2021 in EP No.132/2021 in OS No.149/2017, making a claim.

When there are serious disputes regarding the liability in respect of the mortgaged property and civil litigations are pending and when the petitioner has already approached the civil court with its claim, it would be highly inappropriate for this Court to pass an order in order to enable the petitioner to efface the attachments over the property to facilitate an auction sale made by the petitioner. As the petitioner has approached the civil court, the petitioner has to avail the civil remedy.

The writ petition is therefore dismissed.