Madras High Court
Indian Overseas Bank vs The Sub Registrar on 18 December, 2018
Author: R.Subbiah
Bench: R.Subbiah, B.Pugalendhi
1
BEFORE THE MADURAI BENCH OF MADRAS HIGH COURT
DATED: 18.12.2018
CORAM:
THE HONOURABLE MR.JUSTICE R.SUBBIAH
AND
THE HONOURABLE MR.JUSTICE B.PUGALENDHI
W.P(MD)No.14618 of 2018
and
W.M.P(MD)Nos.13164, 13165 and 15462 of 2018
Indian Overseas Bank,
Having one of its Branches at
Door No.21, Victoria Road, Tuticorin,
Tuticorin District, Represented by
The Chief Manager/Authorized Officer. ... Petitioner
Vs.
1.The Sub Registrar,
Tuticorin Keelur, Tuticorin District.
2.M/s.Beau Motors Pvt Ltd.,
4/447B, Ettayapuram Road,
Tuticorin - 628 002 & District,
Represented by its Managing Director,
Mr.K.Samuel.
3.K.Samuel
4.Praveen Kumar
5.M/s.Peeyesyem HK Motord LLP,
No.14B, Jagannathan Street,
Nungambakkam, Chennai 600 034,
Represented by its
Chief Executive Officer. ... Respondents
http://www.judis.nic.in
2
PRAYER: Petition filed under Article 226 of the Constitution of
India, praying for issuance of a writ of Certiorarified Mandamus to
call for the records relating to the attachment entry registered on
06.02.2017 in Index II on the file of the first respondent in response
to the order of attachment issued by VII Additional Court, Chennai,
in I.A.No.728 of 2017 in O.S.No.270 of 2017, in favour of the fourth
respondent and issue a consequential direction to the first
respondent to efface/delete the said adverse encumbrance entry
and register the sale certificate, dated 20.03.2018 executed by the
petitioner bank in favour of the fifth respondent in respect of the
subject property upon payment of stamp duty and registration
charges within a time period to be fixed by this Court.
For Petitioner : Mr.N.Dilip Kumar
For Respondent No.1 : Mr.M.Murugan
Government Advocate
For Respondent No.5 : Mr.A.Kapaleeshwaran
For M/s.V.K.Associates
For Respondent Nos.2,3,&4 : No appearance
*****
ORDER
[Order of the Court was made by R.SUBBIAH,J.] Challenge in this Writ Petition is to the attachment entry registered on 06.02.2017 in Index II on the file of the first http://www.judis.nic.in respondent in response to the order of attachment issued by the 3 Seventh Additional Court, Chennai, in I.A.No.728 of 2017 in O.S.No.270 of 2017, in favour of the fourth respondent and issue a consequential direction to the first respondent to efface/delete the said adverse encumbrance entry and register the sale certificate, dated 20.03.2018 executed by the petitioner bank in favour of the fifth respondent in respect of the subject property upon payment of stamp duty and registration charges within a time period to be fixed by this Court.
2. According to the petitioner, the second respondent and the third respondent availed various credit facilities from the petitioner bank and so far, a total sum of Rs.7.82 crores was given by way of cash credit to the second respondent. The borrowers/guarantors executed memorandum of deposit of title deeds in favour of the petitioner bank in respect of their several properties, including the subject property of 75 cents situated in the Registration District of Thoothukudi, Thoothukudi Keelur Sub-Registration District, Thoothukudi Taluk, Pulipanchankulam Village. The said mortgage deeds were registered on the file of the first respondent in Document No.2118/2009, dated 09.07.2009, Document No. 293/2011 and Document No.1655 of 2013, dated 19.04.2013. Thus, the properties are the secured assets of the petitioner bank. While so, due to the default committed by the borrowers/guarantors in http://www.judis.nic.inrepayment of the loan amount, the loan account was classifed as 4 "Non-Performing Asset", on 31.12.2016. A statutory demand notice dated 05.01.2017 was issued to the borrowers/guarantors followed by a possession notice on 21.08.2017. They neither replied to the said notices nor repaid the outstanding loan amounts. Therefore, the petitioner bank proceeded to issue a sale notice on 15.02.2017 seeking to bring the secured asset for auction sale on 09.02.2018. The fifth respondent herein was the successful bidder and the entire sale consideration was paid by the petitioner on 26.02.2018 itself. Accordingly, the petitioner bank issued sale certificate on 20.03.2018 in favour of the fifth respondent and when the same was submitted for registration before the first respondent, he orally refused to register the sale certificate citing impugned adverse encumbrance entry in respect of the subject property. In this regard, the petitioner bank submitted a representation to the first respondent on 23.04.2018, narrating the entire details and requesting him to register the sale certificate. However, the first respondent issued the impugned proceedings refusing to register the sale certificate dated 20.03.2018 on the ground that there were adverse encumbrances/attachments available against the said property.
3. We have heard the submissions of the learned counsel for the parties and perused the materials available on record. http://www.judis.nic.in 5
4. Similar issue came up for consideration before this Court in W.P.(MD).No.10724 of 2018, dated 06.12.2018, Central Bank of India Vs the Joint Sub-Registrar No.1, wherein this Court has held as follows:-
7. In Assistant Commercial Tax Officer (CT) v. Indian Overseas Bank reported in 2016 (6) CTC 769, the Full Bench of this Court has held as under:
“... 2. We are of the view that if there was at all any doubt, the same stands resolved by view of the Enforcement of Security Interest and Recovery of Debts Laws and Miscellaneous Provisions (Amendment) Act, 2016, Section 41 of the same seeking to introduce Section 31B in the Principal Act, which reads as under:-
“31B. Notwithstanding anything contained in any other law for the time being in force, the rights of secured creditors to realise secured debts due and payable to them by sale of assets over which security interest is created, shall have priority and shall be paid in priority over all other debts and Government dues including revenues, taxes, cesses and rates due to the Central Government, State Government or local authority.
Explanation - For the purpose of http://www.judis.nic.in this section, it is hereby clarified that on 6 or after the commencement of the Insolvency and Bankruptcy Code, 2016, in cases where insolvency or bankruptcy proceedings are pending in respect of secured assets of the borrower, priority to secured creditors in payment of debt shall be subject to the provisions of that Code.”
3. There is, thus, no doubt that the rights of a secured creditor to realise debts due and payable by sale of assets over which security interest is created, would have priority over all debts and Government dues including revenues, taxes, cesses and rates due to the Central Government, State Government or Local Authority. This section introduced in the Central Act is with “notwithstanding” clause and has come into force from 01.09.2016.
4. The law having now come into force, naturally it would govern the rights of the parties in respect of even a lis pending.
5. The aforesaid would, thus, answer question (1) in favour of the financial institution, which is a secured creditor having the benefit of the mortgaged property.
6. In so far as question (b) is concerned, the same is stated to relate only to auction sales, which may be carried out in pursuance to the rights exercised by the secured creditor having a mortgage of the property. This aspect is also covered by the introduction of Section 31B, as it includes #secured debts due and payable to them by sale of assets over http://www.judis.nic.in which security interest is created”.7
7. We, thus, answer the aforesaid reference accordingly.”
8. For the sake of convenience, Section 26-E of the SARFAESI Act, is extracted hereunder:
“26E. Notwithstanding anything contained in any other law for the time being in force, after the registration of security interest, the debts due to any secured creditor shall be paid in priority over all other debts and all revenues, taxes, cesses and other rates payable to the Central Government or State Government or local authority.
Explanation.- For the purposes of this section, it is hereby clarified that on or after the commencement of the Insolvency and Bankruptcy Code, 2016, in cases where insolvency or bankruptcy proceedings are pending in respect of secured assets of the borrower, priority to secured creditors in payment of debt shall be subject to the provisions of that Code.”
5. In the light of the judgment of the Full Bench of this Court reported in 2016 (6) CTC 769 (cited supra) and on a conjoint reading of Section 26-E of the SARFAESI Act and Section 31-B of the Recovery of Debts Due to Banks and Financial Institutions Act, 1993, there cannot be any doubt that the rights of a secured creditor to realise the debts due and payable by sale of assets over which security interest is created, would have priority over all http://www.judis.nic.in debts and Government dues including revenues, taxes, cesses and 8 rates due to the Central Government, State Government or Local Authority, inasmuch as Section 31-B of the Recovery of Debts Due to Banks and Financial Institutions Act, 1993, was introduced with a “notwithstanding” clause and it has also come into force from 01.09.2016.
6. In such view of the matter, we are of the opinion that the order of attachment before judgment cannot be a bar for the first respondent to register the sale certificate in respect of the property in question and hence, there cannot be any impediment for the first respondent to register the sale certificate dated 20.03.2018 issued in favour of the fifth respondent.
7. Accordingly, this writ petition is allowed and the impugned order passed by the first respondent is quashed and consequently, the first respondent is directed to register the sale certificate dated 20.03.2018 issued by the petitioner bank in favour of the fifth respondent, within a period of two weeks from the date of receipt of a copy of this order. No costs. Consequently, connected Writ Miscellaneous Petitions are closed.
Index :Yes/No (R.P.S.,J.) (B.P.,J.)
Internet :Yes/No 18.12.2018
NB
http://www.judis.nic.in
9
To
The Sub Registrar,
Tuticorin Keelur, Tuticorin District.
http://www.judis.nic.in 10 R.SUBBIAH,J.
AND B.PUGALENDHI,J.
NB W.P(MD)No.14618 of 2018 18.12.2018 http://www.judis.nic.in