Andhra Pradesh High Court - Amravati
Maruturi Raghavendra Rao vs The State Of Andhra Pradesh, on 29 November, 2022
*HONOURBLE SRI JUSTICE D.V.S.S. SOMAYAJULU
+ W.P.No.28307 of 2011
% 29.11.2022
# Maruturi Raghavendra Rao,
S/o Samba Murthy, aged 42 yrs.,
Chirala Mandal,
Prakasam District and another
... Petitioners
Vs.
$ The State of Andhra Pradesh
Rep., by the District Collector & District Magistrate,
Prakasam District at Ongole and 2 others.
... Respondents
! Counsel for the petitioner : Sri G.Ramesh
! Counsel for the Respondents : Government Pleader for Revenue
< Gist:
> Head Note:
? Cases referred:
1
2012 (1) ALD 90 (SC)
1
(2016) 10 SCC 767
2
HON'BLE SRI JUSTICE D.V.S.S.SOMAYAJULU
W.P.No.28307 of 2011
O R D E R:
This writ petition is filed questioning the unilateral execution and registration of two deeds of cancellation dated 05.09.2011 by which a certificate of sale issued by the Debt Recovery Tribunal was cancelled without notice etc. This case raises some interesting questions for decision. Petitioners are the successful bidders in an auction conducted by the Debt Recovery Tribunal, Visakhapatnam. The State Bank of India, Chirala filed O.A.No.62 of 2009 against a defaulting borrower for recovery of the money due. The Tribunal decreed the O.A., and issued a certificate for recovery of the sum due. The certificate was transmitted to the Recovery Officer, who exercised the powers conferred on him by the Recovery of Debts Due to Banks and Financial Institutions Act, 1993. He brought the property to sale in an auction held on 18.10.2010. The petitioners were the highest bidders for items 2 and 3 of the auction held on 18.01.2021. The sale was confirmed in their favour. An order of 3 confirmation was also given in favour of the petitioners. The sale certificates were also registered on 29.01.2011. Thereafter, the petitioners came to know that unilateral deeds of cancellation bearing Nos.4127 and 4128 of 2011 were executed by the District Collector, Ongole and the same were also registered. Questioning the said registration of the unilateral deeds on various grounds, the present writ petition is filed.
For the petitioners Sri G.Ramesh argued the matter at great length. He put in a lot of effort to explain to the Court the provisions of the Acts that are applicable and the legal position. He also gave a compilation of case law.
The sum and substance of the learned counsel‟s submission is that (1) no notice was issued to the petitioners before the documents were cancelled (2) Rule 26(1)(k)(i) of the A.P. Rules under Registration Act, 1908 (for short „the Rules) on which the State relies is not applicable and the same was relied upon for cancelling the deeds. (3) Unilateral cancellation of the sale certificates is not valid under law; (4) Recovery of Debts and Bankruptcy Act, 1993 (Act 51 of 1993) and the Securitisation and Reconstruction of Financial Assets 4 and Enforcement of Security Interest Act, 2002 (Act 54 of 2002) (for short „the SARFAESI Act) are Special Acts enacted by the Parliament and their provisions will prevail over the Andhra Pradesh Assigned Lands (Prohibition of Transfers) Act, 1977 (for short „the POT Act‟) enacted by the State. (5) Lastly, a three year period is fixed by judicial interpretation of the Rule before which an assignment can be cancelled and in this case, the same expired long ago. Learned counsel relies upon the compilation of judgments to argue that the entire action is vitiated.
In reply to this, on behalf of the 2nd respondent, very detailed submissions are made by the Government Pleader for Revenue. According to him, the lands which are the subject matter of the certificate of sale are „assigned‟ lands. These assigned lands were sold in the year 2005-2006 by the original assignees. It is therefore submitted that the initial transfer by the assignee to one Karna Nagalingam is opposed to the POT Act. A show cause notice was also issued and it is stated that after considering the issues, the possession of the lands were also taken back. The appeal filed by the said K.Nagalingam before the Revenue Divisional Officer against 5 the order of the Tahsildar was also dismissed. K.Nagalingam also made an application for issuance of No Objection Certificate for transfer of the land, but the same was also rejected by the Government. Questioning the same, WP.No.26391 of 2010 was filed. But in the interim period, the said K.Nagalingam sold some part of the land and also mortgaged another part to State Bank of India. Thereafter, the property was brought to sale by the Recovery Officer of the Debt Recovery Tribunal and the same was purchased by the petitioners. The contention of the learned Government Pleader therefore is that the lands which were mortgaged were already resumed by the State and despite the information being submitted to the Debt Recovery Tribunal, the Recovery Officer proceeded with the sale. Therefore, it is contended that the entire sale is vitiated.
In addition, it is pointed out that Rule 26(1)(k)(i) of the Rules is squarely applicable to the facts and circumstances and the District Collector himself has executed the deeds of cancellation which were duly registered by the Sub-Registrar. Learned Government Pleader also points out that a reading of the cancellation documents, which are impugned, clearly 6 show that the property was sold despite intimation to the Debt Recovery Tribunal. Therefore, learned Government Pleader justifies the action of the State.
COURT: This Court has given anxious considerations to the issues raised. It is clear that the vires of Rule 26(k) is not challenged in this case. The law on the aspect is clear and well settled. Cancellation of previously registered deed can only be done if a Court of competent jurisdiction cancels the same or if the procedure under Rule 26 (1) (k)(i) is followed. As this branch of law is well settled, this is not been adverted to once again.
(a) The first point that has to be decided is whether the petitioners are entitled to any notice before the deeds of sale are cancelled. Rule 26(1)(k)(i) of the Rules on which both the petitioners and the respondents rely upon is as follows:
26(1)(k)(i) The registering officer shall ensure at the time of presentation for registration of cancellation deeds of previously registered deed of conveyances on sale before him, that such cancellation deeds are executed by all the executant and claimant parties to the previously registered conveyance on sale and that such cancellation deed is accompanied by a declaration showing mutual consent or orders of a competent Civil or High Court or 7 State or Central Government annulling the transaction contained in the previously registered deed of conveyance on sale;
Provided that the registering officer shall dispense with the execution of cancellation deeds by executant and claimant parties to the previously registered deeds of conveyance on sale before him if the cancellation deed is executed by a Civil Judge or a Government Officer competent to execute Government orders declaring the properties contained in the previously registered conveyance on sale to be Government or Assigned or Endowment lands or properties not registerable by any provision of law.
A plain reading of this Rule does not indicate that before the deed of cancellation is executed, the affected party is entitled for a notice. However, the case law relied upon by the learned counsel includes the judgment in Kaitha Narasimha v. the State of A.P. (W.P.NO.3744 of 2007), wherein a Division Bench held that Rule 26(1)(k)(i) of the Rules incorporates one of the facets of the rules of natural justice in the procedure laid down for registration of a cancellation deed. The Rule, according to the Division Bench, is intended to ensure that a duly registered sale deed is not cancelled without the executant and the claimant getting an opportunity to contest the registration of the cancellation 8 deed. In the case of Thota Ganga Laxmi and another v. Government of Andhra Pradesh and others 1, the Hon‟ble Supreme Court also considered Rule 26(1)(k)(i)). In the concluding paragraph, the Hon‟ble Supreme Court held that only when a sale deed is cancelled by a competent Court that the cancellation deed can be registered and that too after notice to the concerned parties. In that case, the Hon‟ble Supreme Court noticed that there was no declaration by a competent Court nor was there any notice to the parties.
In Satya Pal Anand v. State of Madhya Pradesh and others2, the position of law in the case of Thota Ganga Laxmi (1 supra) was also considered and the passage mentioned above was cited, but no distinction was drawn by the Hon‟ble Supreme Court.
A Division Bench of the combined High Court while deciding W.P.No.20683 of 2012 and W.P.No.2192 of 2013 clearly held in a para 29 as follows:
"29. Thus, having regard to the law laid down by the Supreme Court and provisions of the Act, in our 1 2012 (1) ALD 90 (SC) 2 (2016) 10 SCC 767 9 opinion, whenever registered documents such as Development Agreement-cum-GPA, is sought to be cancelled, execution and registration of such a document/deed must be at the instance of both the parties i.e., bilaterally and not unilaterally. If a deed of cancellation is allowed to be registered without the knowledge and consent of other party to the deed/document, sought to be cancelled, such registration would cause violation to the principles of natural justice and lead to unnecessary litigation, emanating therefrom.
In any case, as stated earlier, in the absence of any provision specifically empowering the Registrar to entertain a document of cancellation for registration without the signatures of both the parties to the document, the deed cannot be entertained. Moreover, if the Registrars are allowed to entertain a deed of cancellation for registration without signatures of both the parties to the document sought to be cancelled, such power would tantamount to conferring the power to decide disputed questions between the parties. No party to the document would ever approach for cancellation of registered document unilaterally unless there is a dispute with the other party in respect of the subject matter of the document.
In view of this position of law, it is clear that as valuable rights of parties are involved and the decision to cancel an earlier registered document has civil consequences, this Rule of natural justice has been read into Rule 26(1)(k)(i) of the 10 Rules, by the Division Bench of the combined High Court and also the Hon‟ble Supreme Court. Therefore, this Court has no hesitation to hold that even if that before action under 26(1)(k)(i) of the Rules is taken, parties to a document are entitled to a notice and a hearing before the final action is taken on the cancellation deed.
(b) RULE 26(k)(i):
If the Rule 26(1)(k)(i) is examined, the following would be visible:
(1) the Registering Officer should ensure that all the parties to the previously registered deed which is now sought to be cancelled should execute the deed of cancellation and (2) the cancellation deed must be accompanied by a declaration showing mutual consent; which clearly implies that apart from the execution of the deed of cancellation, a document showing mutual consent is required and (3) the deed of cancellation or mutual consent document is not required, if the cancellation is by virtue of an order of competent Civil Court, High Court or State or Central Government annulling the transaction in the previous deed.
The proviso which carves out the exception states that; if the 11 deed of cancellation is executed by a Civil Judge or a Government Officer competent to execute the Government orders declaring the property contained in the previous document of sale to be Government or assigned or endowment land or a property that is not capable of registration, the bilateral deed of execution is not necessary.
This is the sum and substance of the Rule in question. If it is broken down into its component parts, the following are discernible:
(i) Cancellation deed should be executed by all the parties concerned.
(ii) There should be a declaration showing mutual consent which should be presented along with the deed of cancellation or there should be an order of a competent Civil Court or High Court or the State or the Central Government „annulling‟ the transaction.
(iii) If the deed is executed by a Government Officer, it should reflect the fact that: that the properties contained in the previously registered conveyance are government properties, 12 assigned lands or endowment lands or properties are not registerable by any provision of law,
(iv) the Officer executing this deed of cancellation should also be „competent to execute the document‟.
Unfortunately, the Rules do not define who is a „Competent Officer‟. The Rules do not specify or name a particular Officer as the Competent Officer. The varieties of lands as mentioned are „assigned lands‟; endowment lands or lands that are „not registerable‟ by any provision of law. These are clearly different types of lands and different enactments/laws govern them. Under the applicable law, the Officer must be authorized. Thereafter, the Officer who is executing the deed on behalf of the State should be „competent‟ to execute the cancellation deed pursuant to the Government order by which the property is declared to be Government/assigned/endowment land etc. The importance of this Rule and its provisions is also highlighted by sub-rule 26(ii) itself which is as follows:
26(k)(ii) Save in the manner provided for above no cancellation deed of a previously registered deed of conveyance on sale before him shall be accepted for presentation for registration.13
(v) Annulment of a transaction is also an order having serious consequences. There should therefore be a clear recital of the annulment of the transaction by the State or the Central Government as defined in Rule 26(1)(k)(i) of the Rules.
This order of annulment must naturally precede the deed of cancellation. (vi) Unless all these conditions are all fulfilled in conjunction, a deed of cancellation cannot be registered under Rule 26(1) (k) (i) of the Rules. It is reiterated that as different enactments apply to assigned lands/endowment lands etc., the „competency‟ of the Officer must be defined and established.
Needless to say a notice/compliance with rules of natural justice is also necessary as mentioned in the previous paragraphs.
If the deeds of cancellation filed in this case are examined vis-à-vis, the literal interpretation of Rule 26(1)(k)(i)), it is clear that there is no Government order "annulling" the transaction. It is also clear that there is no Government order „declaring‟ that the properties contained in the certificate of sale are assigned lands and Government lands. It is also clear that the competency of the District 14 Collector to execute the deed of cancellation is also not established. It is also not clear from the counter and the documents filed that the procedure under Section 4 of the POT Act has been followed.
Therefore, this Court also holds that on these grounds also the petitioners are entitled to succeed.
(c) Unilateral cancellation of deeds is no longer valid. The case law is very well settled and is not being repeated here once again.
(d) SARFAESI ACT/RDDB ACT:- The last submission made by the learned counsel for the petitioners is that Act 54 of 2002 and the SARFAESI Act are Special Acts passed by the Parliament to permit the sale of properties in which security interest has been created without the intervention of the Court. Section 13 of the SARFAESI Act and in particular section 13(4) of the SARFAESI Act are clear. As per section 13(6) of the SARFAESI Act, the transferee shall secure all the rights that are existing in the property and the transfer shall be deemed to have been made by the original owner himself. It is further clear that under section 17 of the SARFAESI Act, any person aggrieved by the sale of the property shall have to 15 make an application before the Debt Recovery Tribunal within 45 days. So this provides a remedy to a person affected by the Bank's action.
Section 35 of the SARFAESI Act, is also as follows:
35. The provisions of this Act to override other laws: The provisions of this Act shall have effect, notwithstanding anything inconsistent therewith contained in any other law for the time being in force or any instrument having effect by virtue of any such law.
Therefore, it is clear that this Central law will override the provisions of all other laws including the POT Act which is a State Act. The learned counsel also drew the attention of this Court that the period of limitation provided under section 17 of the SARFAESI Act, which is 45 days from the date on which the measures were taken. Learned counsel submits rightly that the respondents have spelt out in their counter that they were aware of the proceedings before the Recovery Officer. Yet they did not take action within the stipulated 45 days.
This Court also notices section 36 of the SARFAESI Act, which is as follows:
16
36. Limitation: No secured creditor shall be entitled to take all or any of the measures under sub-
section (4) of section1 3, unless his claim in respect of the financial asset is made within the period of limitation prescribed under the Limitation Act, 1963 (36 of 1963). In the light of this, it is clear that the respondent-State should have approached the Debt Recovery Tribunal; filed an appropriate application and thereafter sought a declaration that they are the rightful owners of the property and instead of doing so, they unilaterally executed the deeds of cancellation. The respondents cannot by themselves decide that the property was wrongly transferred or that the execution of the certificate of sale is also not correct. They acted as a judge in their own case. In this court‟s opinion this is a matter eminently within the jurisdiction of the Courts/Tribunals under the relevant Acts. Once the statute prescribes the manner in which the action is to be taken it should be done in that method or not at all.
The two Acts RDDB Act and SARFAESI Act are special central enactments. In particular, the SARFAESI Act was enacted with the avowed objective of speeding up recovery of bank dues and without Courts intervention also. At the same 17 time, a person affected is given the option of approaching the Debt Recovery Tribunal and seeking redressal (section 17). These are special enactments/ central enactments and as such they will prevail over the POT Act made by the State of Andhra Pradesh. On this ground also, this Court holds that in the circumstances of this case, the action of the respondent-State is wrong.
(e) The last issue raised is about the limitation. According to the learned counsel for the petitioners and the case law relied upon by him, by a process of judicial interpretation, the Courts have held that for violation of conditions of allotment, a period of three years from the date of allotment is fixed for the action. Therefore, he submits that the cancellation in 2011 is incorrect.
In the opinion of this Court, while the proposition of law is correct, its applicability to the facts of the case is in doubt, since what the State has done appears to be done/concluded in 2007. Therefore, this issue is decided against the petitioners.
Legal Conclusions : In conclusion, this Court holds as follows; (A) Before a deed of cancellation is registered 18 cancelling the previously registered document, the parties to the documents should be put on notice and given an opportunity of representing their case. As a consequence and as a natural corollary, the aggrieved parties‟ objection should be disposed by a speaking order and on merits.
(B) As per Rule 26 (1) (k)(i), the cancellation deed should be executed by all the parties to the document and is to be accompanied by a declaration showing mutual consent or the orders of a civil Court or a High Court or of the State or Central Government „annulling the transaction‟, (C) the Officer executing the deed of cancellation (if it is not executed by a Judge/Court ) should rely upon a prior/earlier order of the Government annulling/declaring the property contained in the previous document to be Government land/assigned land etc., and (D) the said officer should also be „authorized/competent‟ to execute the deeds. This competency should be by virtue of a law/regulation having the force of law and cannot be a self conferred competency. (E) All these conditions must exist/be complied with fully before the previously registered deed is cancelled.
19
In case of conflict between the Central Act namely the SARFAESI Act, r/w Act 51 of 1993 vis-à-vis, POT Act, like in the present case, the Central Acts alone shall prevail. The respondents can only take recourse to the provisions of law by moving an appropriate application before the designated Court within the period of limitation for a declaration of their rights. They cannot unilaterally decide the issues involved. The writ petition is therefore allowed. No order as to costs. As a sequel, the miscellaneous petitions if any shall stand dismissed.
________________________ D.V.S.S.SOMAYAJULU,J Date: 29.11.2022 Note L.R. Copy be marked.
KLP