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2010 DIGILAW 165 (KER)

Muhammad Rafeeq v. Bank Of Baroda

2010-02-23

P.R.RAMACHANDRA MENON

body2010
Judgment : 1. Whether the petitioners, who are strangers to the loan given by the first respondent Bank to the borrower, from whom the petitioners purchased one of the items of the properties over which security interest was created, is eligible to have the said property spared, placing reliance on Sec. 56 of the Transfer of property Act, is the point mooted in this Writ Petition. 2. The petitioners purchased the property covered by Ext. P1 sale deed from one Mustaffa, who had borrowed some amount from the first respondent, creating security interest over two items of properties. When the borrower turned to be a defaulter, the Bank declared the Account as 'NPA' and proceeded with further steps invoking the machinery under the SARFAESI Act, which led to issuance of Ext.P3 sale proclamation. The learned Counsel for the petitioners submits that, since the defaulter/borrower has already conveyed the first item of the properties, though after creating security interest over both the items of the properties, the rights and liberties of the petitioners, being the subsequent purchasers, so as to have the item 'marshalled' as contemplated under Section 56 of the Transfer of Property Act, cannot be watered down and that appropriate direction might be issued to confine the sale in respect of the 'second item' of the properties and only on failure to realise the due amount, to proceed against the 'first item' of property covered by Ext.P1 sale deed executed by the borrower. 3. Mr. B. Krishnan, the learned Counsel for the petitioners argued the matter at length, referring to the statutory provisions, particularly Section 13 (1) and (2) of the SARFAESI Act, read with the overriding provision under Section 35, and Sec. 56, Sec. 69 and 69A of the Transfer of Property Act, in relation to the rights and interests of the petitioners. It is worthwhile to refer to the relevant provisions, which are extracted below. It is worthwhile to refer to the relevant provisions, which are extracted below. Section 13(2) of the SARFAESI Act: "(2) Where any borrower , who is under a liability to a secured creditor under a security agreement, makes any default in repayment of secured debt or any instalment thereof, and his account in respect of such debt is classified by the secured creditor as non-performing asset, then, the secured creditor may require the borrower by notice in writing to discharge in full his liabilities to the secured creditor within sixty days from the date of notice failing which the secured creditor shall be entitled to exercise all or any of the rights under sub- section (4). Section 56 of the T.P. Act: "56. Marshalling by subsequent purchaser: If the owner of two or more properties mortgages them to one person and then sells one or more of the properties to another person, the buyer is, in the absence of a contract to the contrary, entitled to have the mortgaged-debt satisfied out of the property or properties not sold to him, so far as the same will extend, but not so as to prejudice the rights of the mortgagee or persons claiming under him or of any other person who has for consideration acquired an interest in any of the properties" 4. As obvious from the above provision(Sec. 56 of the T.P. Act), it takes care of the situation whereby proper regard is given to the better rights and interest of the 'mortgagee', making it clear that the buyer is entitled to have the mortgaged debt satisfied out of the property or properties not sold to him, so far as the same will extend, but not so as to prejudice the rights of the mortgagee or persons claiming under him or any other person who has for consideration acquired an interest in any of the properties. 5. Referring to the other provisions under the SARFAESI Act, particularly as to the overriding provision of Section 35, the learned Counsel for the petitioners submits that the said provision has to be read and understood in the light of Section 13 (1) of the Act, which reads as follows: "13. 5. Referring to the other provisions under the SARFAESI Act, particularly as to the overriding provision of Section 35, the learned Counsel for the petitioners submits that the said provision has to be read and understood in the light of Section 13 (1) of the Act, which reads as follows: "13. Enforcement of security interest:(1) Notwithstanding anything contained in Section 69 or Section 69A of the Transfer of Property Act, 1882 (4 of 1882) any security interest created in favour of any secured creditor may be enforced, without the intervention of the Court or Tribunal, by such creditor in accordance with the provisions of this Act." Since reference in Sec. 13(1) is only to Sec.69 or 69A of the Transfer of Property Act, the learned Counsel submits that the rights and interests conferred on the petitioners under Section 56 of the T.P. Act are to be honoured and they cannot be taken away by virtue of the overriding provision under Section 35 of the SARFAESI Act . 6. Heard the learned Counsel appearing for the other side as well. 7. The circumstance under which reference is made to Section 69 and 69A of the T.P. Act in Section 13(1) of the SARFAESI Act has to be looked into, with the help of a magnifying glass. Under Sec.13(1) of the SARFAESI Act, the intervention of the Court or Tribunal is totally given a 'go bye' and the secured creditor is given the liberty to proceed against the security interest directly. Under the T.P. Act, if the specified circumstances as mentioned under Section 69 are satisfied, a mortgagee can proceed against the property concerned and to have it sold without the intervention of the Court (in the given set of circumstances as contemplated therein). Contrary to this, Sec.13(1) of the the SARFAESI Act, gives an unbridled power to the secured creditor to proceed against the property, over which security interest is created without intervention of the Court or Tribunal, i.e., even without satisfying the conditions mentioned in the concerned provisions of the T.P. Act. 8. Coming to Section 35 of the SARFAESI Act, the provision is crystal-clear , which is extracted below: Section 35 of the SARFAESI Act: "35. 8. Coming to Section 35 of the SARFAESI Act, the provision is crystal-clear , which is extracted below: Section 35 of the SARFAESI Act: "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" The above provision contains a 'non-obstante' clause, whereby it is clearly stated that the provisions of the SARFAESI 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. There is absolutely no ambiguity with regard to meaning/interpretation to be given. The said provision clearly overrides all other provisions in any other law including Section 56 of the T.P. Act and no better right or interest could be conferred upon any other person. The sanctity of Sec. 35 of the SARFAESI Act has already been subjected to detailed analysis by this Court on many an occasion giving effect to the scope, object and purpose of the legislation. The overriding effect of the statute being of paramount importance, absolutely no interference is called for. The idea and understanding of the petitioners to the contrary is quite wrong and misconceived. 9. The learned Counsel appearing for the Bank submits that, though the Writ Petition is devoid of any merit, there is no objection for the first respondent to proceed initially with the sale of the 'second item' and to ascertain whether the amount derived therefrom will satisfy the liability towards the Bank. Once the liability is cleared in toto, there may not be any necessity to proceed against the 'first item' of the properties, i.e., the property covered by Ext.P1, stated as purchased by the petitioners. The said submission is recorded. The first respondent is at liberty to proceed with further steps, honouring the submission as above. The Writ Petition is disposed of