Kerala High Court
Phoenix Arc Private Limited vs The Sub Registrar on 2 August, 2021
Author: P.V.Kunhikrishnan
Bench: P.V.Kunhikrishnan
WP(C) NO. 7633 OF 2020
1
IN THE HIGH COURT OF KERALA AT ERNAKULAM
PRESENT
THE HONOURABLE MR. JUSTICE P.V.KUNHIKRISHNAN
MONDAY, THE 2ND DAY OF AUGUST 2021 / 11TH SRAVANA, 1943
WP(C) NO. 7633 OF 2020
PETITIONER/S:
PHOENIX ARC PRIVATE LIMITED
TRUSTEE OF PHOENIX TRUST FY 18-1 SCHEME B HAVING
ITS REGISTERED OFFICE AT 5TH FLOOR, DANI CORPORATE
PARK, 158, C.S.T. ROAD, KALINA, SANTACRUZ, (E)
MUMBAI 400098, REPRESENTED BY THE AUTHORIZED
OFFICER MR. SAILESH IYENGAR, HAVING OFIFCE AT 5TH
FLOOR, DANI CORPORATE PARK, 158, C.S.T. ROAD,
KALINA, SANTACRUZ (E) MUMBAI, 400098.
BY ADVS.
PRAKASH P.GEORGE
SRI.SADER E.REAZ
RESPONDENT/S:
1 THE SUB REGISTRAR
OFFICE OF THE SUB REGISTRAR, ERNAKULAM, 2ND FLOOR,
PERUMPILLY BUILDING, OPPOSITE TO MAHARAJAS COLLEGE
GROUND M.G. ROAD, ERNAKULAM, COCHIN 682 011.
2 MANAPPURAM FINANCE LTD,
MANAPPURAM GENERAL FINANCE AND LEASING LTD)., A
COMPANY INCORPORATED UNDER THE COMPANIES ACT
HAVING REGISTERED OFFICE AT DOOR NO. 638 A,
MANAPPURAM HOSUE, VALAPPAD P.O. TRISSUR DISTRICT,
680 567, REPRESENTED BY ITS MANGING DIRECTOR.
3 ADDL.R3.V.GOUTHAMAN
S/O.S.VELAYUDHAN AND MRS.S.REKHA, W/O.V.GOUTHAMAN,
AYILYAM, HOUSE NO.12/262, KUTTY SAHIB ROAD, SOUTH
CHITTOR P.O, ERNAKULAM DISTRICT, PIN 682 027
4 ADDL.R4.S.REKHA
WP(C) NO. 7633 OF 2020
2
W/O.V.GOUTHAMAN, AYILYAM, HOUSE NO.12/262, KUTTY
SAHIB ROAD, SOUTH CHITTOOR PO, ERNAKULAM DISTRICT
PIN 682027
ADDL.R3 AND R4 ARE IMPLEADED IN WPC NO.7633/2020
AS PER ORDER DATED 31.3.2021 IN IA NO.1/21 IN THE
WPC.
BY ADVS.
SRI.BIJO FRANCIS
SRI.K.SANEESH KUMAR
SRI.JOSE KURIAKOSE (VILANGATTIL)
OTHER PRESENT:
SMT.SHEEJA.C.S., SR.GP
THIS WRIT PETITION (CIVIL) HAVING COME UP FOR ADMISSION
ON 02.08.2021, THE COURT ON THE SAME DAY DELIVERED THE
FOLLOWING:
WP(C) NO. 7633 OF 2020
3
P.V.KUNHIKRISHNAN, J
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W.P.(C)No.7633 of 2020
--------------------------------
Dated this the 02nd day of August 2021
JUDGMENT
The petitioner is a company incorporated under the Companies Act, 1956 and registered as an Asset Reconstruction Company under Section 3 of the SARFAESI Act, 2002. According to the petitioner, it is acting as a trustee of Phoenix Trust FY 18-1 Scheme B, for the benefit of the holders of Security Receipts issued by the trustee therein. Ext.P1 is the resolution, authorising the authorised officer, to represent the petitioner in this proceedings. It is stated in the Writ Petition that a loan was availed by a proprietary concern, M/s.Sandra Company from Bajaj Finance Ltd. It was a home loan for an amount of Rs.1,18,65,000/- (Rupees One Crore Eighteen Lakhs Sixty Five Thousand only). Towards security of the loan amount, Mrs.Sandra Thomas WP(C) NO. 7633 OF 2020 4 created equitable mortgage of 2.98 Ares of property comprised in Sy.No.963/1 and 964/1 of Cherannallur Village, Kanayannur Taluk, Ernakulam District together with a two storied residential building bearing Cochin Corporation door No.46/362 situated in the property by depositing the original sale deed bearing registration No.3315/2015 of the Sub Registrar's Office, Ernakulam. Ext.P2 is the sale deed.
2. It is submitted that the borrowers were not able to repay the loan amount and the loan account became a non-performing asset. Accordingly, SARFAESI proceedings were initiated by the Bajaj Finance Ltd. Ext.P3 is the Section 13(2) notice issued by the Bajaj Finance Ltd. The symbolic possession of the property was taken as per Ext.P4 on 26.04.2017 by the Bajaj Finance Ltd. Thereafter an application under Section 14 of the SARFAESI Act was filed before the Chief Judicial Magistrate Court, Ernakulam and the learned Magistrate, WP(C) NO. 7633 OF 2020 5 Ernakulam appointed an Advocate Commissioner. The Advocate Commissioner took possession of the property. Ext.P5 is the report of the Advocate Commissioner.
3. It is submitted that as per assignment agreement dated 29.12.2017, Bajaj Finance Ltd. has assigned the security interest in relation to the aforesaid home loan to the petitioner company. After that Bajaj Finance Ltd. sent a letter dated 23.02.2018 to the borrower, informing the aspect of assignment of security interest over the secured assets to the petitioner herein. Ext.P6 is the letter dated 23.2.2018. Based on the assignment agreement, Bajaj Finance Ltd. handed over the possession of the secured asset to the petitioner and since then the secured assets are under the lock and key of the petitioner and the petitioner is in absolute physical possession of the said secured assets. The petitioner also sent a letter dated 17.10.2018 to the borrower informing about the WP(C) NO. 7633 OF 2020 6 aspect of assignment of the security interest in the said property and the building in favour of the petitioner by the Bajaj Finance Ltd. as evidenced by Ext.P7.
4. It is stated in the Writ Petition that towards realisation of the amount due towards the petitioner, petitioner initiated steps for effecting sale of the secured asset by issuing and publishing the sale notice strictly conforming to the provisions of the SARFASI Act. Ext.P8 is the sale notice. For the purpose of the sale, when the encumbrance certificate of the property was obtained for the period from 01.01.2000 to 30.12.2019, it could be seen that a prohibitory order passed by the Arbitrator Mr.K.V.Mohanakrishnan, Advocate against Mrs.Sandra Thomas in an arbitration proceeding initiated by Manappuram Finance Ltd, the 2nd respondent herein, is reflected therein as entry bearing No.F-158/2017 dated 08.08.2017 in volume 2865 at pages 333 to 342. Ext.P9 is the encumbrance WP(C) NO. 7633 OF 2020 7 certificate. Ext.P10 is the prohibitory order issued by the Arbitrator, Mr.K.V. Mohanakrishnan.
5. According to the petitioner, since there is an endorsement in the encumbrance certificate, it creates problem for selling the property. Subsequently it is stated that the property was sold and the same was purchased by respondents 3 and 4. The petitioner approached the 1st respondent for registering Ext.P16 sale certificate. But the 1st respondent refused to register the sale certificate stating that there is an endorsement in the encumbrance certificate based on Ext.P10 prohibitory order. Hence this Writ Petition is filed with the following reliefs:
i. Issue a writ of mandamus or any other appropriate, writ, direction or order directing the 1st respondent to efface/remove the entry bearing number F-158/2017 dated 08.08.2017 in volume 2865 at pages 333 to 342 in relation to 2.98 Ares of property together with the residential building comprised in Sy.No.963/1 and 964/1 of Cheranallur Village from the records maintained in the office of the 1st respondent, within a time frame fixed by this Hon'ble Court.
WP(C) NO. 7633 OF 2020 8 ii. Declare that the equitable mortgage created in the year 2018 over the 2.98 Ares of property together with the residential building comprised in Sy.No.963/1 and 964/1 of Cheranallur Village by deposit of title deeds has over riding effect over the prohibitory order passed by the Arbitrator on 15.07.2017 and that the said prohibitory order will not bind on the petitioner and the subsequent purchasers of the said property from the petitioner under SARFAESI Act.
iii. To grant such other relief as this Honourable Court deems fit and proper in the facts and circumstances of the case.
iv. Issue a writ of mandamus or other appropriate writ, direction or order commanding the 1 st respondent to register the Ext.P16 sale certificate in the name of the auction purchaser within a time frame fixed by this Hon'ble Court.
6. Heard the learned counsel for the petitioner, learned Government Pleader appearing for the 1st respondent and the learned counsel for respondents 3 and 4.
7. Learned counsel for the petitioner submitted that admittedly, the property was mortgaged to the Bajaj Finance Ltd. on 22.07.2015. As evidenced by Ext.P10, the attachment order is passed by the Arbitrator only on 04.08.2017. Therefore, the WP(C) NO. 7633 OF 2020 9 learned counsel submitted that in the light of several decisions of this Court, endorsement in the encumbrance certificate about subsequent attachment is to be removed. Learned counsel relied on the judgment of this Court in Madhan S. vs. Sub Registrar, Kollam :2014 (1) KHC 249, The Secretary, Keecheri Service Co-operative Bank Ltd. Vs. Sajitha Nisar alias Sajitha P.M. and others : 2020 (5) KHC 231, the decision in the unreported judgment dated 24.07.2016 in W.A.No.612 of 2015, decision of this Court in Pradeep K.N. vs. Station House Officer, Perumbavoor and another : 2016 (2) KHC 714 and the unreported judgment dated 25.06.2021 in W.P.No. 13282/2021 & W.M.P.No.14097/2021 of the Madras High Court. The learned counsel submitted that in the light of the above judgments, the entry in the encumbrance certificate about the prohibitory order based on Ext.P10 is unsustainable. The learned counsel submitted that the 1st respondent is bound to register the sale certificate. WP(C) NO. 7633 OF 2020 10
8. The learned counsel for the 2nd respondent submitted that the original owner of the property is not impleaded in this Writ Petition. The learned counsel submitted that he is a necessary party. The learned counsel for respondents 3 and 4 supported the contentions of the petitioner.
9. The short point to be decided in this case is whether the 1st respondent is bound to register Ext.P16 sale certificate ignoring the entry in Ext.P9 encumbrance certificate. This point is considered by this Court in detail in several decisions. In Madhan S. vs. Sub Registrar, Kollam's case (supra) this Court observed like this in paragraph 9:
9. The preponderance of judicial opinion leads to the irresistible conclusion that the sale of the mortgaged property in favour of the petitioner under Ext.P5 sale certificate under the Act is free of all encumbrances. The attachments effected subsequent to the mortgage created in favour of the bank do not affect the title and ownership of the petitioner over the subject property. Such attachments have no impact on the WP(C) NO. 7633 OF 2020 11 sale conducted under the Act and the same ceases to have any effect or fall to the ground the moment the sale is confirmed in favour of the petitioner. The declaration so sought by the petitioner is therefore granted and I further direct the Sub-Registrar and the Village Officer to efface the attachments effected subsequent to the mortgage from the relevant records. Otherwise those attachments would remain as a permanent taboo prejudicially affecting the marketability and title to the property even though they ceased to have any legal efficacy. The needful in relation to the property bought by the petitioner shall be done within a period of two months from the date of receipt of a copy of this judgment.
10. Similarly the Division Bench of this Court in the Secretary, Keecheri Service Co-operative Bank Ltd. Vs. Sajitha Nisar alias Sajitha P.M. and others' case (supra) observed like this in paragraph 7:
"7. In the light of the aforesaid declaration of law by this Court the order of dismissal of the petition filed for lifting the attachment ordered under Ext.R7(a) viz., Ext.R7(b) by the Federal Bank would pale into insignificance, We do not find any reason to disagree with the declaration of law in Madhan's case (supra) which was virtually affirmed by the Division bench in Ali WP(C) NO. 7633 OF 2020 12 Asharaf's case (supra). In the said circumstances and taking note of the fact that the orders of attachment of the property in question were after the creation of equitable mortgage of the same with Federal bank we do not find any reason to interfere with the impugned judgment passed by the learned Single Judge following the dictum in Madhan's case (supra), carrying the directions to effect mutation of the property as also to efface all encumbrance over the property effected after 27.06.2014, the date on which the property in question was mortgaged with Federal Bank".
11. In the light of the above two judgments, the stand of the 1st respondent in not registering the sale certificate because of the entry in Ext.P9 encumbrance certificate will not stand. Admittedly, the property is mortgaged to Bajaj Finance Ltd. on 22.07.2015 and as evidenced by Ext.P10 prohibitory order, it was only on 04.08.2017. Therefore, that prohibitory order need not be considered by the 1st respondent and is to be effaced from the encumbrance certificate. Therefore, this Writ Petition is allowed in the following manner:
WP(C) NO. 7633 OF 2020 13
1. The 1st respondent is directed to efface/remove the entry bearing No.F-158/2017 dated 08.08.2017 in volume 2865 at pages 333 to 342 in relation to 2.98 Ares of property together with residential building comprised in Sy.No.963/1 and 964/1 of Cheranallur Village from the records maintained in the office of the 1 st respondent within one month from the date of receipt of a copy of this judgment.
2. The 1st respondent is directed to register Ext.P16 sale certificate, if it is otherwise in order.
Sd/-
P.V.KUNHIKRISHNAN JUDGE rkc WP(C) NO. 7633 OF 2020 14 APPENDIX OF WP(C) 7633/2020 PETITIONER'S EXHIBITS EXHIBIT P1 TRUE COPY OF THE BOARD RESOLUTION DATED 31.01.2020.
EXHIBIT P2 TRUE COPY OF THE SALE DATED NO.
3315/2015 OF THE SRO ERNAKULAM.
EXHIBIT P3 TRUE COPY OF THE 13(2) NOTICE DATED 9.02.2017 ISSUED BY BAJAJ FINANCE LTD. EXHIBIT P4 TRUE COPY OF THE POSSESSION NOTICE DATED 26.4.2017.
EXHIBIT P5 TRUE COPY OF THE REPORT SUBMITTED BY THE ADVOCATE COMMISSIONER.
EXHIBIT P6 A TRUE COPY OF THE LETTER DATED 23.02.2018 ISSUED BY BAJAJ FINANCE LTD TO THE BORROWER.
EXHIBIT P7 TRUE COPY OF THE LETTER DATED 17.10.2018 SENT BY THE PETITIONER TO THE BORROWER. EXHIBIT P8 TRUE COPY OF THE SALE NOTICE PUBLISHED BY THE PETITIONER.
EXHIBIT P9 TRUE COPY OF THE ENCUMBRANCE CERTIFICATE OF THE SECURED ASSET FOR THE PERIOD FROM 1.1.2000 TO 30.12.2019.
EXHIBIT P10 TRUE COPY OF THE PROHIBITORY ORDER PASSED BY THE ARBITRATOR AGAINST THE BORROWER.
EXHIBIT P11 THE TRUE COPY OF THE REPRESENTATION SENT TO THE 1ST RESPONDENT.
EXHIBIT P12 TRUE COPY OF THE POSTAL RECEIPT EVIDENCING THE DESPACH OF EXT. P11. WP(C) NO. 7633 OF 2020 15 EXHIBIT P13 TRUE COPY OF THE DELIVERY TRACK REPORT DOWN LOADED FROM THE SITE OF INDIA POST. EXHIBIT P14 TRUE COPY OF THE REPLY DATED 13/3/2020, WHICH WAS DISPATCHED ON 29/9/2020 FROM THE OFFICE OF THE 1ST RESPONDENT EXHIBIT P15 TRUE COPY OF THE LETTER DATED 17/12/2020 SENT BY THE AUTHORIZED OFFICER OF THE PETITIONER COMPANY EXHIBIT P16 TRUE COPY OF THE SALE CERTIFICATE DATED LETTER 3/2/2021 ISSUED BY THE AUTHORIZED OFFICER OF THE PETITIONER COMPANY RESPONDENTS' EXHIBITS EXT.R3A TRUE COPY OF THE SALE CERTIFICATE DT.3.2.12 ISSUED BY AUTHORISED OFFICER OF THE PETITIONER COMPANY TO THE IMPLEADING PETITIONERS.