Madras High Court
M/S.Rainbow Foundations Ltd vs The Authorized Officer on 23 March, 2016
Author: R.Subbiah
Bench: R.Subbiah
IN THE HIGH COURT OF JUDICATURE AT MADRAS
12.04.2016
CORAM
THE HONOURABLE MR.JUSTICE R.SUBBIAH
W.P.No.11989 of 2016
and
W.M.P.No.10358 of 2016
M/s.Rainbow Foundations Ltd.,
Rep.by it's Joint Managing Director Mr.Gajraj Jain,
4, Thanikachalam Road,
T.Nagar, Chennai-600 017. ... Petitioner
Vs.
1.The Authorized Officer,
State Bank of India,
Stressed Assets Management Branch,
No.32, Montieth Road,
Red Cross Building,
Egmore, Chennai-600 008.
2.The Sub-Registrar,
Purasawalkam,
Chennai-600 007. ... Respondents
Writ Petition filed under Article 226 of the Constitution of India, praying for issuance of a Writ of Mandamus, directing the 2nd respondent to register and return the Sale Certificate issued by the 1st respondent dated 23.03.2016.
For Petitioner : Mr.K.Rajasekaran
For respondents : Mr.E.Om Prakash
for M/s.Ramalingam Associates (For R1)
Mr.V.Jayaprakash Narayanan, Spl. GP
(For R2)
ORDER
This writ petition has been filed by the petitioner, praying for issuance of a Writ of Mandamus, to direct the 2nd respondent to register and return the Sale Certificate issued by the 1st respondent-Bank dated 23.03.2016.
2.In the affidavit filed in support of the writ petition, it has been averred by the petitioner, inter alia, as follows:-
2-1.The petitioner-Company is a Public Limited Company duly registered under the Companies Act, 1956. The State Bank of India, the 1st respondent herein, had issued E-Auction Sale Notice dated 13.01.2016 for sale of the property being vacant land situated at Old Door No.58, then Nos.74 & 75, Present Door Nos.177 and 179, Purasawalkam High Road, Chennai, in R.S.No.121/1 of Block No.5, Purasawalkam Division, Puraswawalkam, Perambur Taluk, measuring to an extent of 3 grounds 231 sq.ft., or thereabouts, situated within the registration District of Chennai North and Sub-District of Purasawalkam, to be held on 22.02.2016.
2-2.The said property originally belonged to one S.Krishnakumar, owner of M/s.Rathna Stores. The said property was secured by the 1st respondent-Bank towards the financial facility offered by the 1st respondent-Bank to M/s.Rathna Stores. When M/s.Rathna Stores failed to repay the loan amount as agreed upon and on their default in payment of the agreed amount, their account became non-performing asset. The 1st respondent-Bank issued Notice under Section 13(2) of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (in short SARFAESI Act), by giving 60 days time; but, the M/s.Ratha Stores failed to pay the amount. Therefore, the 1st respondent-Bank, after complying with the provision of Section 13(4) of the SARFAESI Act and Rule 8(1) & (2) of SARFAESI Rules, filed a petition in Crl.M.P.No.46 of 2016 for taking possession of the said property, before the Chief Metropolitan Magistrate, Allikulam, Chennai on 06.02.2016. The Chief Metropolitan Magistrate, Allikulam, Chennai, by issuing warrant on 06.02.2016 in the said Crl.M.P.No.46 of 2016, appointed an Advocate Commissioner for taking possession of the subject property and handed over the secured asset to the 1st respondent-Bank, so as to proceed to recover the amount due to them.
2-3.Thereafter, the petitioner-company gave a letter dated 16.02.2016 to the 1st respondent-Bank informing their willingness to participate in the E-auction with a condition that if the petitioner-company is declared as a successful bidder, they would pay 10% EMD and the balance 15% on the date of auction and the remaining 75% only on handing over the vacant possession of the property (15 days from the date of auction) or otherwise, the 1st respondent-Bank should return 25% amount paid by them immediately. The 1st respondent-Bank also accepted the said conditions on 18.02.2016. Accordingly, the petitioner-company paid 10% EMD for the subject property and also participated in the E-Auction held on 22.02.2016 and subsequently, the petitioner-company was declared as the successful bidder for the above mentioned schedule property. The 1st respondent-Bank also confirmed the sale of the subject property to the petitioner by issuing Confirmation of Sale letter dated 22.02.2016 and requested them to make the balance amount of sale price of Rs.10,93,50,000/- within 15 days from the date of auction sale and informed further that on payment of the balance amount of sale price, the Sale Certificate will be issued.
2-4.Thereafter, the petitioner-company sent a letter dated 04.03.2016 to the 1st respondent stating that the balance sale price is available with them and that they are in a position to make the payment anytime, on hearing from them regarding their readiness to handover the vacant possession to the petitioner.
2-5.While such being so, the 1st respondent-Bank with the help of the Advocate Commissioner took possession of the subject property on 11.03.2016. In the meantime, the petitioner-company informed the 1st respondent vide their letter dated 15.03.2016 that they came to understand that the said property was attached by the Income Tax Authorities even prior to the 1st respondent's notification and e-auction notice dated 13.01.2016 and as a genuine buyer, the said fact was not informed by them and inspite of the same, they were ready and willing to pay the balance sale consideration, only after getting the assurance with regard to the vacant possession and nil encumbrance in respect of the subject property, so as to enable the petitioner to register the sale Certificate in their favour.
2-6.The 1st respondent-Bank replied the petitioner vide letter dated 15.03.2016 stating that the 1st respondent-Bank has first prior charge over the properties brought for e-auction sale on 22.02.2016 and hence, the Income Tax Attachment for Rs.10.42 crore as on the properties brought for sale ranks subservient to their Bank's charge and the purchasers of the properties in the said auction would not be liable for the said Income Tax dues of M/s.Rathna Stores and the auction purchasers' interest and title over the properties would not be affected by the said attachment by the Income Tax Department. Further, upon receipt of remaining 75% of the sale price from the petitioner, necessary arrangements would be made for lifting the Income Tax Attachment and they had discussion with the officials of the Income Tax Department in this regard. The 1st respondent further informed that the subject property's physical possession had already been taken by them and reiterated that the petitioner should arrange to deposit the balance 75% of the sale consideration immediately, failing which the amount already deposited by the petitioner- company would be forfeited without any notice.
2-7.Believing the 1st respondent's assurance and on their direction, subsequently, the petitioner-company remitted the balance sale consideration on 23.03.2016. On receipt of the complete sale consideration, the 1st respondent issued a Sale Certificate in favour of the petitioner-Company under Rule 9(6) of SARFAESI Act on 23.03.2016 and possession was handed over to the petitioner on the same day vide Possession Certificate dated 23.03.2016. Subsequently, on the same day, when the petitioner approached the 2nd respondent for registration of Sale Certificate, the petitioner was asked to pay 5% of the sale price as stamp duty, 1% registration Fee. The petitioner also made ready the stamp duty of Rs.72,90,000/- and Rs.14,58,100/-, altogether Rs.87,48,100/- vide two D.D.Nos.003010 and 003009, respectively, both dated 23.03.2016 and presented the Sale Certificate for registration on the very same day. But, the petitioner's dismay, the 2nd respondent refused to register the said Sale Certificate, indicating that the said property had been attached by the Income Tax Authorities and that he came to understand the same on verification of Encumbrance Certificate of the said property. Even though, all the facts were explained to the 2nd respondent by producing all the relevant documents stating very clearly that the 1st respondent-Bank has prior right over the Income Tax Department, the 2nd respondent declined to register the Sale Certificate.
2-8.It is further stated by the petitioner that the Sale Certificate issued under SARFAESI proceedings would have the stamp duty payable under Article 18 read with Article 23 of Stamp Act, on the sale price fixed in the Sale Certificate. As per the said Act, the petitioner-company has already taken Demand Drafts for the stamp duty and Registration Fees, as stated supra, but, by declining to register the Sale Certificate, the 2nd respondent herein is denying the petitioner's right, interest and title over the subject property. Though the Courts in many decision held that the Registering Authorities are not concerned with the consequences of a particular transaction while registering the documents which is apparent from Rule 55 framed under Section 59 of the Registration Act, the 2nd respondent is very adament for the reasons best know to him. Hence, the petitioner has come forward with the present writ petition seeking for the relief as stated supra.
3.When the matter is taken up for consideration, the learned counsel for the petitioner, by relying upon the judgment passed by this Court in W.P.No.36076 of 2015, dated 04.03.2016 (S.Praveen Bohra Vs. Joint-I Sub-Registrar (In the cadre of District Registrar), submitted that in the said case, this Court by relying on the judgment of the Hon'ble Supreme Court in reported in (1985) 2 SCC 167, Balkrishan Gupta and others vs. Swadeshi Polytex Limited and another, held that the sale of the subject property pending the order of attachment is void only as against the claims enforceable under the order of the said attachment and not in respect of other claims; thus, the order of attachment cannot be a bar to register the document.
4.By relying upon the above said decision, the learned counsel for the petitioner submitted that following the said decision, the present writ petition could be allowed.
5. I have also heard the learned counsel for the 1st respondent as well as the learned Special Government Pleader appearing for the 2nd respondent and perused the materials available on record.
6.It is relevant to make a reference in the unreported judgment of the Madurai Bench of Madras High Court in W.P.(MD) No.2635 of 2012, dated 13.03.2013, in the case of M/s.K.D.P.Properties Private Limited vs. The Sub-Registrar and other, relied on by the learned counsel for the petitioner, wherein, in paragraph No.18, a reference was made to the decision of the Hon'ble Apex Court reported in (1985) 2 SCC 167, Balkrishan Gupta and others vs. Swadeshi Polytex Limited and another, and it was held as follows:-
18.In (1985) 2 SCC 167 (supra), the Hon'ble Supreme Court has held as under:
30.The consequence of attachment of certain shares of a company held by a shareholder for purposes of sale in a proceeding under section 149 of the Land Revenue Act is more or less the same. The effect of an order of attachment is what Section 149 of the Land Revenue Act itself says. Such attachment is made according to the law in force for the time being for the attachment and sale of movable property under the decree of a civil court. Section 60 of the Code of Civil Procedure, 1908 says that except those items of property mentioned in its proviso, lands, houses or other buildings, goods, money, bank-notes, cheques, bills of exchange, hundis, promissory notes, Government securities, bonds or other securities of money, debts, shares in a corporation and all other saleable property, moveable or immovable, belonging to a judgment-debtor, or over which, or the profits of which, he has a disposing power which he may exercise for his own benefit, whether the same be held in the name of the judgment-debtor, or by another person in trust for him or on his behalf, is liable for attachment and sale in execution of a decree against him. Section 64 of the Code of Civil Procedure, 1908, states that where an attachment of a property is made, any private transfer or delivery of the property attached or of any interest therein and any payment to the judgment debtor of any debt, dividend or other monies contrary to such attachment, shall be void as against all claims endorceable under the attachment. What is forbidden under Section 64 of the Code of Civil Procedure is a private transfer by the judgment-debtor of the property attached contrary to the attachment, that is, contrary to the claims of the decree holder under the decree for realisation for which the attachment is effected. A private transfer under Section 64 of the Code of Civil Procedure is not absolutely void, that is, not void as against all the world but void only as against the claims enforceable under the attachment. Until the property is actually sold the judgment debtor retains title in the property attached. Under Rule 76 of Order 21 of the Code of Civil Procedure, 1908, the shares in a corporation which are attached may be sold through a broker. In the alternative such shares may be sold in public auction under Rule 77 thereof. On such sale either under Rule 76 or under Rule 77, the purchaser acquires title. Until such sale is effected, all other rights of the judgment debtor remain unaffected even if the shares may have been seized by the officer of the court under Rule 43 of Order 21 of the Code of Civil Procedure, 1908 for the purpose of effecting the attachment, or through a Receiver or though an order in terms of Rule 46 of Order 21 of the Code of Civil Procedure may have been served on the judgment debtor or on the company concerned.
19.The dictum laid down in the above judgment (1985) 2 SCC 167 (supra), gives a fitting answer to the issue raised in this writ petition. So far as the order of attachment passed by the DRT is concerned, the transfer is not void generally but it is void only as against the claims enforceable under the said attachment. Therefore, I am of the opinion that the sale of the property attached cannot be construed as illegal sale. However, if the 2nd respondent bank exercises its right as against the property, the petitioner cannot raise any objection because the sale of the vendor in favour of the petitioner is void in respect of the order of attachment obtained by the 2nd respondent bank. So, even if the property is sold in favour of the petitioner, the 2nd respondent bank can always exercise its right as against the said property.
20. In view of the above finding, I am of the opinion that the sale of the subject property pending the order of attachment is void only as against the claims enforceable under the order of said attachment and not in respect of other claims. Therefore, the sale of the property, which is under attachment, cannot be said as illegal.
In the light of what is stated above, the writ petition is allowed and the 1st respondent, Sub- Registrar, Kochiadai, Madurai, is directed to release the registered document in favour of the petitioner within a period of one week from the date of receipt of a copy of this order. No costs.
7. It is also worthwhile to refer to the unreported judgment of Madurai Bench of Madras High Court in W.P.(MD) No.14388 of 2014, dated 01.09.2014, in the case of M.Chitra vs. The Sub-Registrar, relied on by the learned counsel for the petitioner, wherein, in paragraph No.5, it was held as follows:-
5. In such circumstances, merely because there is an order of attachment passed by a Civil Court, the same cannot be a ground to refuse to register the Memorandum of Deposit of Title Deeds. If any deposit of title deeds is created in respect of the said property pursuant to the right acquired by the petitioner, vide settlement deed, dated 04.07.2011, it is always subject to further orders to be passed by the Civil Court. The petitioner's case is that she acquired title by way of settlement deed dated 04.07.2011, much prior to the order of attachment. Further, the learned counsel appearing for the petitioner placed reliance on Order 38, Rule 10 C.P.C. stating that attachment before judgment shall not affect the rights, existing prior to the attachment, of persons not parties to the suit, nor bar any person holding a decree against the defendant from applying for the sale of the property under attachment in execution of such decree. The lending bank namely, Canara Bank, Vadamadurai if satisfies with the title of the petitioner over the property, can request the Registrar to register the document. In such circumstances, merely because an order has been passed by the Civil Court effecting attachment, cannot be a bar for entertaining a document for registration. Hence, the reasons assigned by the respondent refusing to register, vide his memo, dated 25.07.2014, is not in accordance with law beyond the scope of Section 71 of the Act.
8. Thus, it is crystal clear that it is well settled principle of law that the order of attachment cannot be a bar to register the document. It is clear that the sale of any property, pending the order of attachment, is void only as against the claims enforceable under the order of said attachment and not in respect of other claims. Hence, if a document is presented for registration in compliance with the provisions under the Registration Act, the Sub Registrar cannot deny the registration of the same unless there is interim order from the competent Court restraining him from registering the document and he is empowered to deny the registration of the document within the frame of provisions of the Registration Act and Rules framed thereunder, particularly, on the grounds enunciated under Rule 55, viz., if the document is forged, impersonation by the parties, if the executing party is a minor or a lunatice, etc. Therefore, in the absence of any interim order from the competent Court nor any of the grounds available under Rule 55, the Sub Registrar cannot deny the registration.
9. In the light of the decisions cited supra, the Writ Petition is allowed and the 2nd respondent viz., Sub-Registrar, Purasawalkam, Chennai, is directed to register the Sale Certificate dated 23.03.2016 issued by the 1st respondent in faovur of the petitioner and to release the registered document in favour of the petitioner, within a period of two weeks from the date of receipt of a copy of this order. Consequently, connected Miscellaneous Petition is closed. No costs.
12.04.2016 Index : Yes/No Internet : Yes/No ssv R.SUBBIAH, J. ssv To 1.The Authorized Officer, State Bank of India, Stressed Assets Management Branch, No.32, Montieth Road, Red Cross Building, Egmore, Chennai-600 008. 2.The Sub-Registrar, Purasawalkam, Chennai-600 007. W.P.No.11989 of 2016 and W.M.P.No.10358 of 2016 12.04.2016