Kerala High Court
K.J.Binu vs The Secretary, Nedumangad ... on 28 May, 2021
Equivalent citations: AIR 2021 KERALA 215, AIRONLINE 2021 KER 567
Author: S. Manikumar
Bench: S.Manikumar, Shaji P.Chaly
IN THE HIGH COURT OF KERALA AT ERNAKULAM
PRESENT
THE HONOURABLE THE CHIEF JUSTICE MR.S.MANIKUMAR
&
THE HONOURABLE MR. JUSTICE SHAJI P.CHALY
FRIDAY, THE 28TH DAY OF MAY 2021 / 7TH JYAISHTA, 1943
RP NO. 974 OF 2020
(AGAINST THE JUDGEMENT DATED 25/09/2020 IN WP(C) NO.19984/2020)
REVIEW PETITIONER/PETITIONER IN W.P.:
K. J. BINU,
COUNSELOR AND FINANCE COMMITTEE MEMBER,
NEDUMANGAD MUNICIPALITY, NEDUMANGAD,
THIRUVANANTHAPURAM.
BY ADVS. DR. S. GOPAKUMARAN NAIR (SR.)
SMT. T. S.MAYA (THIYADIL)
SRI. D. S. SREEKUMARAN
SRI. SOORAJ T. ELENJICKAL
RESPONDENTS/RESPONDENT NOS. 1 TO 8 IN W.P.:
1 THE SECRETARY, NEDUMANGAD MUNICIPALITY,
MUNICIPALITY OFFICE, NEDUMANGAD,
THIRUVANANTHAPURAM-695 541.
2 NEDUMANGAD MUNICIPALITY,
REPRESENTED BY ITS SECRETARY, NEDUMANGAD,
THIRUVANANTHAPURAM-695 541.
3 EXCISE COMMISSIONER,
COMMISSIONERATE OF EXCISE, THIRUVANANTHAPURAM-695 023.
4 ASSISTANT DIRECTOR GENERAL (H & R)
MEMBER SECRETARY (HRACC), MINISTRY OF TOURISM,
GOVT. OF INDIA, C-1, HUTMENTS, DALHOUSIE ROAD,
NEW DELHI 110 011.
5 SHRI ABDUL RASHEED,
S/O. ALIYAR ALIAS HEERA BABU, CITADEL, GOLF LINKS,
KAWDIAR, THIRUVANANTHAPURAM-695 003.
6 HEERA CONSTRUCTION COMPANY PRIVATE LTD.,
(HCCPL), REPRESENTED BY ITS MANAGING DIRECTOR,
C. ABDUL RAHSEED, HEERA PARK, M.P. APPAN ROAD,
VAZHUTHACAUD, THIRUVANANTHAPURAM-695 014.
R.P. 974/2020 2
7 THE AUTHORIZED OFFICER,
INDUSTRIAL FINANCING CORPORATION OF INDIA LTD, (IFCI),
142, M.G. ROAD, NUNGAMBAKKAM, CHENNAI-600 034.
8 THE INDUSTRIAL FINANCING CORPORATION OF INDIA LTD., (IFCI)
REPRESENTED BY ITS MANAGING DIRECTOR, IFCI TOWER,
61 NEHRU PLACE, NEW DELHI 110 019.
BY SRI. SURIN GEORGE IPE, SENIOR GOVERNMENT PLEADER
THIS REVIEW PETITION HAVING COME UP FOR ADMISSION ON 28.05.2021, THE
COURT ON THE SAME DAY DELIVERED THE FOLLOWING:
R.P. 974/2020 3
ORDER
S. Manikumar, CJ Instant review petition is filed seeking to review the judgment of this Court in W.P.(C) No. 19984 of 2020 dated 25/09/2020, by which, having found that there is no merit in the writ petition, the reliefs sought for by the petitioner were rejected and consequently, dismissed the same. Said judgment reads thus:
"43. In the light of the decision in Transcore v. Union of India (cited supra), the secured creditor stands in the position of a receiver and if that be so, it is not open for the bank/secured creditor, who has a charge over the secured asset, to contend that the borrower has lost the status of owner of the property.
44. Giving due consideration to the provisions of the SARFAESI Act, 2002, and the rules framed thereunder, we are of the view that the borrower, who had defaulted to pay the loan amount with interest for which, properties are brought for auction, is still the owner of the property and entitled to seek for enforcement of his rights, under the laws in force. Therefore, the 5th respondent, can seek enforcement of his property rights under Article 300A of the Constitution of India."
2. W.P.(C) No.19984 of 2020 has been filed by the petitioner seeking for the following reliefs:
R.P. 974/2020 4
(a) Issue a writ of certiorari or any other writ, direction or order, quashing Exhibit-P4 ownership certificate dated 21.08.2020 issued by Nedumangad Municipality to the 5th respondent.
(b) Issue a declaration that Exhibit-P4 is null and void, as respondents 1 and 2, viz., The Secretary, Nedumangad Municipality, Thiruvananthapuram; and Nedumangad Municipality, represented by its Secretary, have no authority or jurisdiction to issue the same, in view of Exhibits-P2 and P3 notifications dated 26.10.2018 and 23.01.2020 respectively.
(c) Issue a further declaration that all the consequential and further official acts based on and relying on Exhibit-P4 ownership certificate dated 21.08.2020 are null, void and, without any basis.
3. Facts leading to the filing of this review petition are, petitioner, a Councilor of Nedumangad Municipality, has filed the writ petition seeking to quash Exhibit-P4 ownership certificate dated 21.08.2020, issued by the respondent Municipality to the 5th respondent in respect of a property, viz., Indraprastha Building. According to the petitioner, Exhibit-P4 was issued after initiation of recovery proceedings in respect of huge loan arrears against the property by the Industrial Financing Corporation of India Limited, and its authorised officer viz., respondents 7 and 8, for which, certain property was offered as security under the provisions of the SARFAESI Act, 2002.
4. Review petitioner has further stated that since notice regarding auction sale was published and notified in daily newspapers by the secured creditor, the 8th respondent, 5th respondent ceased to be the owner of the R.P. 974/2020 5 property and, therefore, he is not entitled to get an ownership certificate in respect of the said property, after the date of its publication, as contemplated under Section 13(8) of the SARFAESI Act, 2002.
5. Review petitioner has further stated that, Section 13(8) of the Act, 2002, makes it clear that further proceedings in the notified auction sale of the property need to be stayed, only if the borrower/owner of the property has tendered to the secured creditor, the amount due together with all the costs, charges and expenses, incurred by him, at any time before the date of publication of notice for public auction or inviting quotation or tender from public or private treaty for transfer by way of lease, assignment or sale of the secured asset. Since the 5th respondent has not complied with the above provision of the Act, the further proceedings pursuant to auction sale notification are to take place.
6. While dismissing the writ petition, this Court rejected the legal contentions putforth by the petitioner and held that secured creditor stands in the position of a receiver and if that be so, it is not open for the bank/ secured creditor, who has a charge over the secured asset, to contend that the borrower has lost the status of the owner of the property. It was further held that the borrower, who had defaulted to pay the loan amount with interest, for which properties are brought for auction, is still the owner R.P. 974/2020 6 of the property and is entitled to seek enforcement of his right, under law. Finally, this Court held that the 5th respondent can seek for enforcement of his property rights under Article 300A of the Constitution of India.
7. Review petitioner has further contended that the issue raised for adjudication in the writ petition was not as to whether the 5 th respondent can seek enforcement of his property rights for recovery from the secured creditor. On the contrary, it was the specific case of the petitioner that once the borrower had failed to discharge his liability in full, within the period specified in Section 13(2) of the SARFAESI Act, 2002 and after that, when the secured creditor has initiated proceedings under Section 13(8) of the SARFAESI Act, 2002, the borrower ceases to be the owner of the property, so that he is not entitled to obtain an ownership certificate from any authorities concerned.
8. It is the case of the review petitioner that a conjoint reading of the objects and reasons of the SARFAESI Act, 2002, and Section 13 thereof, lead one to the conclusion that though actual sale of the property does not take place in favour of the secured creditor, by virtue of the legal fiction, the secured creditor becomes the owner of the property in the eventuality of happenings under sub-sections (4) and (8) of Section 13 of the Act. It is under this legal fiction of ownership that the bank/financial institution R.P. 974/2020 7 becomes entitled to notify the property for sale, as under law, only the owner has the right to offer for sale his property to another. It is in the above interpretation of law, the Hon'ble Apex Court in M/s. Transcore v. Union of India and another [(2008) 1 SCC 125] held that there is a conceptual distinction between the securities by which, the creditor obtains ownership of or interest in the property concerned (mortgages) and securities where the creditor obtains neither an interest in nor possession of the property but the property is appropriated to the satisfaction of the debt (charges). Basically, the SARFAESI Act, 2002 deals with the former type of securities under which, the secured creditor, viz., the bank/financial institution obtains interest in the property concerned. It is for this reason, the SARFAESI Act, 2002 ousts the intervention of the courts/tribunals.
9. Review petitioner has further contended that this Court lost sight of the above legal interpretation and the finding of the Hon'ble Supreme Court in M/s. Transcore (cited supra), about the ownership of the security by the secured creditor under the SARFAESI Act.
10. On the above pleadings, this review petition is filed raising the following grounds:
A. The issue raised in the writ petition is whether, the 5 th respondent is entitled to get ownership certificate of the R.P. 974/2020 8 property in question and whether respondents 1 and 2 are competent and authorized to issue the same once the 5 th respondent has ceased to be the owner of the property concerned after the 8th respondent secured creditor has initiated recovery proceedings under Section 13 of the SARFAESI Act, 2002 and after the auction sale notice of the property has been published under Section 13(8) of the Act. This issue has unfortunately not been dealt with in the judgment sought to be reviewed.
B. It is further contended that the basic issue that faced with Exhibits P2 and P3 notifications the 5 th respondent has ceased to be the owner or occupier of Indraprastha building and is not entitled to get Exhibit P4 ownership certificate in respect of the same and also that, by virtue of Exhibits P2 and P3 statutory proceedings under the SARFAESI Act, the 1st respondent has become incompetent, without jurisdiction and unauthorized to issue Exhibit P4 ownership certificate. The legal implications of the above grounds had not been dealt with in the judgment sought to be reviewed.
C. Writ petitioner has not challenged redemption of the disputed property from the secured creditor or any attempt thereof in the writ petition. Therefore, the consideration and findings in the judgment under review, as to whether the borrower could redeem the property after Section 13(8) auction sale notice has been issued by the secured creditor, has been misdirected.
D. Instead of appreciating the contentions and grounds raised in the writ petition, in the light of the legislative R.P. 974/2020 9 scheme of the SARFAESI Act, and the nature of ownership rights acquired by the secured creditor under the Act, the consideration in the judgment and the analysis of legal position has been swayed away to the right of the borrower, to redeem his property from the secured creditor. The right to redeem the property by depositing the entire dues to the creditor would still be available for the borrower/former owner of the property even after initiation of the SARFAESI proceedings, until the sale letter is issued to the auction purchaser, and for exercising that right, he need not be the present owner of the property. But, this court proceeded to conclude that it is because the borrower has the right to redeem the property even after Section 13(8) proceedings have been issued, he continues to be the owner of the property.
E. The legal fiction of the secured creditor becoming the intermediary owner of the property under Section 13(4)(a) of the SARFAESI Act, 2002, once the borrower fails to comply with Section 13(2) notice has been omitted to be considered by this Court. This right to ownership of the property has been confirmed by the Hon'ble Apex Court in paragraph 50 of the judgment in M/s. Transcore v. Union of India and Another [2008 (1) SCC 125]. It could only be by virtue of the above right of ownership that the secured creditor can sell the property to the auction purchaser, as a mortgagee is not entitled to sell the property to a third party.
F. It is further contended that instead of appreciating the legal contentions in the writ petition, and the reliefs sought R.P. 974/2020 10 for, in proper perspectives of the legislative intention of the SARFAESI Act and its provisions, this Court has unfortunately misdirected its approach to the principles and provisions of the law as regards transfer of property and the civil law concept of mortgage and the constitutional principle of right to property, which has resulted in denial of justice to the petitioner, who only challenged the validity of Exhibit P4 ownership certificate in the writ petition and any attempt of the respondent to redeem his property.
11. Based on the above grounds, learned counsel for the review petitioner made submissions.
12. Heard learned counsel for the parties and perused the material on record.
13. Discussion of facts made above would make it clear that the issues raised by the petitioner in this review petition were considered by this Court in the writ petition and clearly held that ownership does not pass by way of mortgage, but only by way of sale, and further that, although auction notice is published, in terms of Section 13(8) of the SARFAESI Act, 2002, the same has to take place as per the procedure contemplated under law, and the auction purchaser has to deposit the entire amount paid, within the time specified under the Act and the rules made thereunder. Only after completion of the entire proceedings, it could be said that title to the property under the mortgage is transferred to the auction purchaser, R.P. 974/2020 11 which thus means, till the entire procedure is completed, the property remains as a mortgaged property with the secured creditor and the title and ownership of the property still vest with the owner of the property. These are all aspects considered elaborately by this Court in the writ petition, taking also into account the principles of law laid down by the Hon'ble Apex Court in M/s. Transcore (cited supra).
14. To put it otherwise, the grounds raised by the petitioner would show that he is attributing illegality in the findings rendered in the judgment under review, which can only be seen as grounds for preferring appeal, and those grounds can never be treated as grounds for review of the judgment at all.
15. Considering all the above aspects, we are of the considered opinion that the review petitioner has failed to make out any case of error apparent on the face of record or other legal infirmities, justifying review of the judgment of this Court in W.P.(C) No.19984 of 2020 dated 25/09/2020.
Review petition therefore fails and accordingly, it is dismissed.
Sd/-
S. MANIKUMAR CHIEF JUSTICE Sd/-
SHAJI P. CHALY
JUDGE
krj //TRUE COPY// P.A. TO C.J.