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2024 DIGILAW 1451 (AP)

Union Bank Of India v. State Of Andhra Pradesh

2024-10-15

DHIRAJ SINGH THAKUR, RAVI CHEEMALAPATI

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ORDER : (Per Sri Justice Ravi Cheemalapati) Action of the Registering Authorities in refusing to remove the subject properties from prohibited property list and not registering sale certificates issued by the petitioner Bank in favour of auction purchasers under Securitisation And Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (Hereinafter, referred to as ‘SARFAESI Act’) and Rules framed thereunder, is questioned in this Writ Petition being illegal, arbitrary and violative of the provisions of SARFAESI Act 2. The case of the petitioner Bank, in brief, is that respondent no.6, availed credit facilities from erstwhile Andhra Bank and offered the subject properties i.e. items 1 to 3 as security for due discharge of the credit facilities availed or may be availed from time to time and by depositing original title deeds and by execution of Memorandum of Deposit of Title deeds initially on 07.11.2008, 30.01.2010 and 30.01.2010 in respect of item nos.1 to 3 respectively created equitable mortgage over the said properties, which was extended from time to time by execution of Memoranda on 10.12.2013, 20.10.2017 and Registered Memorandum of Deposit of title deed on 18.04.2019 and consequent to amalgamation of Andhra Bank with the petitioner bank with effect from 01.04.2020, the petitioner bank became the lender entitled to recover the debts due to the erstwhile Andhra Bank and enforce securities. It is its further case that as respondent no.6 committed default in repayment of the credit facilities availed by him, his account was classified as Non Performing Asset (NPA) and demand notice dated 30.07.2021 was issued followed by Possession notice dated 29.03.2022 and E-auction notice dated 19.06.2023 fixing the date of auction as 13.07.2023 and item nos. 1 and 3 of the subject property were sold in the said E-auction and when the bank authorities and the successful bidders visited the Registering Authorities to ascertain the stamp duty and registration fee payable on the certificate of sale, they were informed by respondent nos. 4 & 5-concerned sub Registrars, that in view of the restraint orders passed by civil Courts at Guntur, they cannot register sale certificates in relation to the subject property. 4 & 5-concerned sub Registrars, that in view of the restraint orders passed by civil Courts at Guntur, they cannot register sale certificates in relation to the subject property. It is its further case that it is learnt that respondent nos.7 to 9 filed O.S.No.860 of 2023 & O.S.No.1661 of 2022 on the file of II Additional Junior Civil Judge, Guntur and O.S.No.225 of 2022 on the file of Principal Senior Civil Judge, Guntur respectively against respondent no.6 for specific performance of agreements of sale dated 01.04.2014, 02.07.2012 and 02.06.2012 in respect of item nos.1 to 3 of the subject property respectively and obtained interim orders of injunction on 7.7.2023, 20.01.2023 and 30.01.2023 respectively and those suits filed by respondent nos.8 & 9 were decreed exparte. It is the further case of the petitioner that injunction orders were passed against respondent no.6 but not against the Bank and the factum that the suits were decreed exparte shows the collusiveness between parties to the suits making it clear that the agreements were introduced to defraud and defeat the rights of the Bank. It is the further case of the petitioner that the Bank being the secured creditor and the original title deeds were deposited with the bank from 07.11.2008 evidenced by execution of memorandum of deposit of title deeds, the bank is entitled to sell the properties under Section 26(E) of SARFAESI Act and the orders passed by Courts will always be subject to mortgage/charge already created over the property and therefore, the action of the Registering Authorities in not removing the subject property from prohibited list and in not registering the sale certificates is illegal. 3. The respondent nos.4 & 5- Sub Registrars, filed separate counters contending that in view of the orders passed by Civil Courts, the subject property was entered into prohibited list of CCA and the registering authority has no power to remove and register the sale certificates without receiving orders from the Court and therefore, there is no illegality either in refusing to remove the property from prohibited list or in not registering the sale certificates. The writ petition being devoid of merits is liable to be dismissed. 4. The writ petition being devoid of merits is liable to be dismissed. 4. The respondent nos.7 to 9 filed separate counters with identical averments denying material averments of the writ affidavit and further contending that they entered into sale agreements with respondent no.6 for purchase of respective items of the subject property and consequent to failure of respondent no.6 in performing his part of the contract, they filed suits for specific performance and obtained orders of injunction directing respondent no.6 not to alienate the property; that the respondents had no knowledge about mortgage of the subject property, however, the same being subsequent to agreement of sale, does not bind the respondents. There are no merits in the writ petition and the same is liable to be dismissed. 5. Heard Smt. V.Dyumani, learned counsel for petitioner-Bank, learned Government Pleader for Stamps & Registration, and Sri Chilukuri Narendra Babu, learned counsel for respondent nos.7 to 9. Despite service, the respondent no.6 remained unrepresented. 6. Smt. V.Dyumani, learned counsel for Bank, while reiterating the contents of the writ affidavit, would further contend that the provisions of the SARFAESI Act have an overriding effect and the debts due to the Bank shall be paid in priority over all other debts after registration of the security interest and therefore, the Registering authorities cannot refuse to register sale certificates issued by the bank after selling the property by invoking the provisions of the SARFAESI Act. The learned counsel would further contend that the orders passed by the civil Courts would only restrain respondent no.6 from alienating the property but not the Bank, which is not party to the proceedings before civil Courts, and further the said restraint orders came to be passed in suits filed basing on collusive agreements of sale entered into by respondent no.6 in favour of respondent nos.7 to 9 much subsequent to creation of mortgage in favour of the bank only with a view to defraud, delay and defeat the legitimate right of the bank to realize unpaid credit facilities availed by respondent no.6 and therefore, the restraint orders would not in any way bind the petitioner bank from selling the property mortgaged to the bank and therefore the action of the Registering Authorities in including the properties in prohibited properties list and refusing to register the sale certificates pursuant to restraint orders, is arbitrary, unconstitutional and illegal. The learned counsel would further contend that since creation of mortgage over the subject property is much prior to the agreements of sale said to have been executed by respondent no.6, the rights, if any, accrued to purchasers of the said property under the agreements, even if they are presumed to be true, would be subject to the mortgage created in favour of the bank. Accordingly, prayed to allow the writ petition and direct the Registering authorities to remove the subject property from prohibited properties list and register the sale certificates issued by the bank in favour of the successful bidders of the subject property. In support of her above contentions, the learned counsel places reliance on City Union Bank Limited, Karimnagar Branch, Rep. by its Chief Manager and Authorised Officer v. The Sub Registrar, Peddapalli, Karimnagar District & others, 2018 SCC OnLine Hyd 370, decision of division bench of High Court of Judicature at Hyderabad for the State of Telangana and the State of Andhra Pradesh in Andhra Bank, Munagala Branch, rep. by its Authorized Officer v. The Commissioner and Inspector General of Registration and Stamps, Hyderabad and others, Orders dated 19.12.2018 passed in W.P.No.44014, decision of the learned single judge of High Court of Judicature at Hyderabad for the State of Telangana and the State of Andhra Pradesh in State Bank of India, RASMEC and SARC, rep. by its authorized officer v. State of Andhra Pradesh and others, Orders dated 06.02.2019 passed in W.P.No.29922 of 2018. 7. On the other hand, learned Government Pleader, would contend that pursuant to the communication received from civil Courts regarding restraint orders passed in relation to the subject property, the concerned sub Registrars within whose jurisdiction the subject property situate, entered the property into prohibited list of CCA and refused to register the sale certificates in due compliance of Standing Order 219 issued by the Revenue Department and therefore, the action of the Registering authority is justified and the same by no means can be termed either illegal or arbitrary as sought to be contended by the learned counsel for the petitioner. The writ petition being meritless deserves dismissal. 8. The writ petition being meritless deserves dismissal. 8. In reply, the learned counsel for the petitioner would contend that the Standing Order 219 issued by Revenue Department pertains only to alienation pendente lite made by the private parties and by no stretch of imagination it would include institutional sales carried out under SARFAESI Act and therefore, the rejection by the registering authorities taking aid of the said Standing Order is misconceived and misdirected. 9. Whereas, Sri Chilukuri Narendra Babu, learned counsel for respondent nos.7 to 9, would contend that the agreements of sale entered into by respondent nos.7 to 9 with respondent no.6 being prior to creation of mortgage, the claim of the bank cannot take precedence over the agreements of sale and the bank cannot have any preferential right of realization and since the owner of the property had executed agreements of sale prior to mortgaging the subject property, the right of the bank to realize shall be subject to the rights of respondent nos.7 to 9 created over the subject property by virtue of agreements of sale. Accordingly, prayed to dismiss the writ petition. 10. Perused the material available on record and considered the submissions made by learned counsel. 11. Copies of plaints in the suits filed by respondent nos.7 to 9 vide O.S.Nos.860 of 2023, 1661 & 225 of 2022 would indicate that the plaintiffs (respondent nos.7 to 9) claim to have entered into agreements of sale with respondent no.6 for purchase of respective items of subject property on 01.04.2014, 02.06.2012 and 02.07.2012. Whereas the petitioner-bank claims that respondent no.6 had created mortgage over the schedule property i.e. item nos. 1 to 3 initially on 7.11.2008, 30.01.2010 and 30.01.2010 respectively by deposit of original title deeds evidenced by execution of memorandum of deposit of title deeds and the same is being extended from time to time by way of execution of Memorandum of deposit of Title deed on 10.12.2013, 20.10.2017 and 18.04.2019. The respondent no.6 did not deny by making his appearance and filing counter either deposit of title deeds or execution of memorandum as pleaded by the petitioner-bank. 12. Therefore, it is evident that the equitable mortgage created by respondent no.6 in favour of the petitioner-bank is much prior to the agreements of sale said to have been executed by him in favour of respondent nos.7 to 9. 13. 12. Therefore, it is evident that the equitable mortgage created by respondent no.6 in favour of the petitioner-bank is much prior to the agreements of sale said to have been executed by him in favour of respondent nos.7 to 9. 13. Admittedly, in all the three suits filed by respondent nos.7 to 9 for specific performance, the civil Courts granted injunction restraining respondent no.6 herein from alienating the petition schedule property. 14. The Registering authorities claim that, as per Standing Order-219 issued by the Revenue Department, whenever an order passed by a Civil Court restraining a person from alienating a property is either brought to the notice or served on the Registering Officer, he is estopped from going ahead with the registration. Accordingly, pursuant to receipt of injunction orders passed in the suit filed by respondent nos.7 to 9 restraining respondent no.6 from alienating the subject property, they included the subject property to the list of Prohibited properties of CCA and thereby declined to register the sale certificates issued by the bank. 15. However, since the subject property was mortgaged to the petitioner-bank much prior to the alleged date of execution of agreements of sale, the rights, if any, of respondent nos.7 to 9 are circumscribed by the right of the secured creditor for realization of the debt advanced on the foot of creation of equitable mortgage. Therefore, the orders passed by civil Court restraining respondent no.6 from alienating the property do not bind the petitioner-bank for the reasons that property was not only mortgaged prior in point of time but also the petitioner-bank is not made a party to those proceedings and moreover the orders only restrain the respondent no.6 from alienating the property. 16. Standing Order-219 issued by the Revenue Department pertaining to registration relied on by the Registering authorities to justify their action reads as follows: “S.O.219:- An order restraining a person from alienating certain property does not operate as a prohibition to the registering officer against the registration of a document executed by such person affecting such property. (b) If the Andhra Pradesh high court or any Civil Court restrains a person from alienating a property and if such orders are brought to the notice of the Registering officers or served on the Registering Officer, the Registering officer is estopped from going ahead with the registration.” 17. (b) If the Andhra Pradesh high court or any Civil Court restrains a person from alienating a property and if such orders are brought to the notice of the Registering officers or served on the Registering Officer, the Registering officer is estopped from going ahead with the registration.” 17. In the decisions relied on by the learned counsel for the petitioner in City Union Bank Limited (supra 1), division bench of High Court of Judicature at Hyderabad for the State of Telangana and the State of Andhra Pradesh, has analyzed the ambit of Standing Order 219 in light of Section 64 of Code of Civil Procedure in the following terms: “11. Upon fair reading of S.O.219 in the light Section 64 of CPC, this Court is of the view that it only pertains to a civil dispute between the private parties and it does not include an institutional sale under a statute. Though Section 64 comes into play only after the alienation of the property under attachment amongst the private persons, the said legal position does not create an embargo upon the Registrar to proceed with the registration of sale certificates under the SARFAESI Act as the bank is not a party to the suit and the sale is not being effected by a party to the attachment order.” 18. In State Bank of India, RASMEC and SARC (supra 3), learned single Judge of this Court by placing reliance on City Union Bank Limited (supra 1), has set aside the letter refusing to register the document/sale certificate presented by bank and directed the registering authority to receive and process the subject document. 19. In Andhra Bank, Munagala Branch (supra 2), a division bench of High Court of Judicature at Hyderabad for the State of Telangana and the State of Andhra Pradesh observed that since the order of attachment is obviously subsequent in point of time to the mortgage, the claim of the respondent cannot take precedence over the mortgage in favour of the bank and the only thing that the respondent can seek is the payment of any surplus, after adjustment of all the dues by the bank. 20. 20. In the instant case, as observed supra, not only the restraint orders but also the agreements of sale are subsequent to creation of mortgage by respondent no.6 in favour of petitioner-bank and therefore, the claim of respondent nos.7 to 9 cannot take precedence over the mortgage in favour of the bank. Further, since the sale held by the petitioner-bank being an institutional sale under a statue, the same does not fall within the ambit of Standing Order-219 issued by the Revenue Department pertaining to registration and therefore, the sale certificates issued by the petitioner-bank stand on a different pedestal from the conveyance deeds executed by private parties that are sought to be averted by the said Standing Order. 21. In view of the above, in the considered opinion of this Court, the action of the Registering authorities either in including the subject property to list of prohibited properties of CCA or in refusing to register the sale certificates issued by petitioner-bank to the successful bidders in the auction held under the provisions of SARFAESI Act, is not in accordance with the true spirit of the Standing Order-219. 22. Having regard to the above, this writ petition is disposed of, directing respondent nos. 4 and 5 to remove the subject properties from prohibited property list of CCA and register the sale certificates issued by the petitioner bank to successful bidders of the subject property provided they are in compliance of the provisions of Stamp Act, Registration Act and Rules made thereunder. There shall be no order as to costs. Pending miscellaneous applications, if any, shall stand closed.