Dismissed

Vinjam Srinivasa Rao v. Union of India

Andhra Pradesh HC21 Mar 2023WP/20756/2021

Case brief

AI extract

What is this about?

In a SARFAESI auction dispute, the petitioner alleged the bank cheated him by ignoring court attachments. The court held the bank had superior priority as a secured creditor with prior mortgage rights, was unaware of later suits, and was not estopped from selling despite prior High Court direction for registration.

What did the court decide?

Rejected petitioner's claim of fraud; dismissed writ petition and closed pending interlocutory applications.

Vinjam Srinivasa Rao Vs Union of India — Execution and Attachment | Andhra Pradesh HC (2023)

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HON’BLE SRI JUSTICE U. DURGA PRASAD RAO AND HON’BLE SRI JUSTICE B.V.L.N. CHAKRAVARTHI

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Writ Petition No.20756 of 2021

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ORDER: ( Per Hon’ble Sri Justice U. Durga Prasad Rao)

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The petitioner prays for writ of mandamus declaring the

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action of respondents 2 and 3 in not returning the sale amount paid by the petitioner pursuant to the e-Auction notice dated 28.05.2021 in respect of the residential house in an extent of 319.89 square yards with RCC roof, ground, first and second floors covered by Door No.12-2-5/12, old ward No.4, New Ward No.10, Prakash Nagar, Narasaraopet Municipality (for short, “subject property”) as illegal and contrary to the provisions of the Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (for short, „the SARFAESI Act‟) and consequently direct the respondents 2 and 3 to return the money of Rs.1,25,90,000/- with interest @ 18% p.a. to the petitioner.

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2. The petitioner‟s case is thus:

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(a) Pursuant to the e-auction notice dated 28.05.2021

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published in newspapers dated 28.05.2021 and 01.06.2021 for sale

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of the subject property, the petitioner participated and became the highest bidder. The respondents 2 and 3 suppressed the fact that there were several encumbrances over the subject property and auctioned the same in favour of the petitioner in a deceitful manner. After payment of the entire sale consideration and obtaining Sale Certificate, the petitioner came to know that as against the borrower Sri Aravapalli Seetharamanjaneyulu and another, various suits and execution petitions were filed by various parties seeking to attach the subject property which was sold in e- auction in favour of the petitioner. O.S.Nos.205/2018, 46/2019, 50/2019, 51/2019, 53/2019, 360/2019, 386/2019, 33/2020, 34/2020, 35/2020, 39/2020, 42/2020, 50/2020, 54/2020, 107/2020, 247/2020, 257/2020, 298/2020, 299/2020, 124/2021, 130/2021, 143/2021, 171/2021, 216/2021, 228/2021 are the suits pending against A. Seetharamanjaneyulu on the file of the Principal Junior Civil Judge and II Additional Junior Civil Judge, Narasaraopet. In those suits, attachment was made in respect of the subject property and the Registering authorities were informed of the said fact which is within the knowledge of respondents 2 and 3. Apart from

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the suits, there are execution petitions. i.e., E.P.Nos.7/2020, 18/2020, 19/2020, 9/2021, 41/2021, 64/2021, 65/2021, 66/2021,

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68/2021, 69/2021 and 70/2021, which are pending. Hence the petitioner made a representation dated 05.08.2021 to refund the bid

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amount of Rs.31,50,000/- with interest and cancel the sale certificate and also to cancel the loan granted to him by the 3^rd respondent in respect of remaining bid amount of Rs.1,25,90,000/-. However, the respondents have not taken any action. The respondents 2 and 3 were well aware of the cases pending against the subject property and thereby they were not entitled to sell the property without clearing the encumbrances. However, they sold the property in public auction suppressing all the facts. The petitioner paid the bid amount under the impression that the property was free from encumbrances and the said property is a freehold property. Hence the writ petition.

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3. Respondents 2 and 3 filed counters and opposing the writ petition, inter alia contending thus:

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(a) Firstly it is contended that the writ petition is not maintainable and the petitioner should approach the Debts

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Recovery Tribunal if he is aggrieved. Nextly it is contended that pursuant to the e-Auction notice dated 28.05.2021 the petitioner submitted his application on 16.06.2021 with tender/EMD amount of Rs.12 lakhs and inspected the property and visited the branch and verified the title deeds of the property and also obtained copy of legal scrutiny report dated 01.03.2007 which was issued by the panel advocate of the bank. The said report was issued by the panel advocate at the time of sanction of loan to its borrower-cummortgagor Sri Aravalli Seetaramanjaneyulu. After having satisfied with the title that there were no encumbrances over the property as per EC issued by the Sub Registrar only the petitioner participated in the e-Auction dated 21.06.2021 and became successful bidder on offering Rs.1,25,90,000/- and the said bid was accepted. He paid 25% of EMD amount i.e., Rs.31,50,000/-. So far as balance amount is concerned, since he has no funds the petitioner requested for loan and on the mortgage of the subject property and loan of Rs.1,03,00,000/- was sanctioned to him. The said loan amount was adjusted towards the purchase amount and thereafter to the loan account of A.Seetaramanjaneyulu. Thereafter sale certificate dated

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20.07.2021 was issued to the petitioner along with the physical possession of the property.

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(b) It is further submitted that when the petitioner and bank officials visited the Sub Registrar Office for registration of the sale certificate, the SRO refused to register the same on the ground that the subject property was in prohibited list as certain Court attachment orders were pending against the subject property. In spite of the bank official informing the SRO that the bank being a secured creditor, it will have preference over others U/s 26E of SARFAESI Act, the SRO declined to register the sale certificate. Hence the bank filed W.P.No.21112 of 2021 against the SRO, Narasaraopet and others before this High Court wherein, though the present petitioner was impleaded as Respondent No.4, he never appeared and contested the case. Ultimately the said writ petition was allowed by the High Court on 21.03.2022 and direction was given to the SRO to register the sale certificate. Thereafter the bank vide its letter dated 13.04.2022 informed the petitioner to take steps for registration of the sale certificate at the said SRO office. Instead of taking required steps for registration, the petitioner with

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an ulterior motive sent a letter dated 23.04.2022 and made several demands one of which was, bank has to waive the interest on the housing loan availed by him to purchase the said property. Considering the matter the bank agreed to waive the interest on the said housing loan for period of one year i., from the date of sanction of the loan i.e., 19.07.2021 till 20.07.2022 and rejected the rest of his demands and conveyed its decision through letter dated 06.07.2022. Having received the letter, instead of coming forward to get registration of sale certificate, the petitioner sent e-mail dated 25.08.2022 to the bank informing that he spent Rs.9.6 lakhs available with him to purchase another house at Narasaraopet for his farther and he cannot spend more time to take care of registration and re-furnishing the house.

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(c) Finally it is submitted that there are no other charges or encumbrances registered over the subject property and the bank has not received any notices during the relevant period of time from the Court and it was not a party to the 3^rd party litigations and hence the bank was unaware of the attachments. Despite knowing about the title of the bank over the subject property and also the direction

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of the High Court, the petitioner is wantonly not coming forward

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for registration. Hence the writ petition is liable to be dismissed.

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4. Heard argument of learned counsel for the petitioner Sri N. Subba Rao, and the Deputy Solicitor General of India representing the 1^st respondent, and learned counsel for respondents 2 and 3 Sri K.Harinarayana.

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5. The main plank of argument of petitioner‟s counsel is that the subject property was beset with a number of encumbrances in the form of Court attachments in a huge number of cases. However, the respondent-bank without disclosing the same, auctioned the property as if the subject property was a freehold property without any encumbrances and believing the same the petitioner purchased the said property in the e-auction sale and initially deposited 25% of the sale amount and later by obtaining loan from the 3^rd respondent-bank paid the balance amount and obtained sale certificate. Learned counsel would vehemently argue that it is the legal responsibility of the bank to honestly divulge to the intended purchasers about the existence of all encumbrances.

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However, the bank has deliberately suppressed the fact and cheated the petitioner. Learned counsel would argue that merely because in the auction sale notice it was proclaimed that the sale was on “as is where is” and “as is what is” basis that will not exonerate the bank from its duty to lay bare the encumbrances over the property. Since the petitioner came to know about the tainted nature of the subject property only before the registration of the sale certificate, he requested the bank authorities to cancel the sale and refund his amount and also close his loan account. However, the bank has unduly rejected petitioner‟s legitimate request though fault in the entire episode lies with it. He placed reliance on Mandava Krishna Chaitanya v. UCO Bank, Assset Management Branch¹

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and Haryana Financial Corporation v. Rajesh Gupta² to contend that the bank or a financial corporation which has deliberately suppressed the material facts relating to the encumbrances over the auctioned property cannot seek to sustain the auction sale. Learned counsel would pray to allow the writ petition.

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1 MANU/AP/0087/2018 = 2018 (3) ALD 266

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2 (2010) 1 SCC 655 = MANU/SC/1892/2009

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6. Per contra, learned counsel for respondents argued that the bank has not at all suppressed any material facts and on the other hand pursuant to auction notice the petitioner submitted his application on 16.06.2021 and physically inspected the property and visited the branch and verified the title deeds relating to the property and also obtained copy of legal scrutiny report dated 01.03.2007 issued by the bank panel advocate whereunder, the subject property was not eclipsed by any encumbrances. Thus, after having fully satisfied the petitioner participated in the auction and purchased the subject property and paid 25% of the EMD amount. In order to enable him to pay the balance amount, on his application, loan was granted by the bank. Learned counsel would emphasize that in the entire process there was no suppression of any material fact as alleged.

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(a) Regarding the allegation of encumbrances, learned counsel argued that the original owner of the subject property Sri Aravapalli Seetaramanjaneyulu obtained loan from Syndicate Bank, Narasaraopet Branch (later merged with Canara Bank) by mortgaging his property in the year 2007 vide MOD. Document

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No.3936/2007. ON the date of mortgage, as per the encumbrance certificates and legal opinion issued by the bank panel advocate, there were no encumbrances over the subject property. Hence the bank extended loan to the mortgagor and when he failed to discharge the loan, his loan account was declared as NPA and proceedings were initiated under SARFAESI Act, 2002 and property was ultimately put to auction sale wherein the petitioner participated and purchased. It was only when the Sub Registrar, Narasaraopet refused to register the sale certificate on the ground that the subject property was enlisted in the prohibitory list in view of court attachments in a number of suits, that the Bank for the first time came to know about the suits filed by the 3^rd parties against the original mortgagor and others and about the attachments made in those suits. However, the respondent-bank is not a party in those suits and it has not received any Court notices. Therefore the bank has no occasion to know about those suits and it is preposterous for the petitioner to contend that the bank has suppressed the material facts. Since all the Court proceedings and attachments are long after the mortgage loan advanced by the bank,

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the bank will have priority over the debts and attachments covered by those suits. Further, in terms of Section 26E of the SARFAESI Act, the Bank will have priority over all other debts including statutory taxes, cesses payable to the Government. Since the bank has followed the provisions of the SARFAESI Act and brought subject property to auction sale, its priority under Section 26E is unquestionable.

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(b) Learned counsel would further argue that when the Sub Registrar, Narasaraopet refused to register the sale certificate on an untenable ground, the respondent-bank filed W.P. No.21112/2021 before this Court impleading the said Sub Registrar as well as present writ petitioner and others as party-respondents and prayed for writ of mandamus directing the Sub-Registrar to register the sale certificate executed in favour of the present writ petitioner. Referring to the order dated 21.03.2022 in W.P.No.21112/2021, a copy of which is filed along with counter, learned counsel would submit that though the present writ petitioner was a respondent in the said matter, he did not oppose the writ petition and ultimately this Court allowed the writ petition and directed the Sub-Registrar

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to register the subject property in favour of the present petitioner.

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In that view, the present writ petition is barred by principle of res

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judicata . He would contend that with the issuance of sale certificate the sale and all other proceedings under the SARFAESI Act shall be deemed concluded and the matter cannot be reopened at the instance of the party. He prayed to dismiss the writ petition.

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7. The points for consideration are:

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(i) Whether the respondent-Bank fraudulently sold the

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subject property in auction in favour of petitioner deliberately concealing that the property was tainted with encumbrances by Court attachments?

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(ii) If the above point is held affirmatively, whether the sale

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is liable to be set aside and the petitioner shall be restored to the pre-sale status?

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8. Points No.1 & 2 : We gave our anxious consideration to the

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facts and law submitted by both parties. The poignant argument on behalf of the petitioner is that the respondent-bank has suppressed material facts relating to the encumbrances over the subject

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property and conducted e-auction sale. The petitioner honestly believing that the property is a free-hold and unencumbered, purchased same for a huge amount and thus he was cheated by the bank. There is no demur about the law laid to the effect that an action initiated by fraud causing injury is liable to be set aside at the option of the injured who deserve restoration of his status by a court order. Ergo, in the instant case also, if the respondent-bank fraudulently sold the subject property by suppressing the material facts concerning to its encumbrances and thus caused monetary

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loss and mental agony to the petitioner, the sale will be liable to be set aside. However, the crucial question is whether the respondentbank is guilty of such suppression of material facts.

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9. On a careful scrutiny of facts and law, it must be asserted,

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we found no such guilty conduct on the part of the respondentBank as alleged. Our reasons are thus:

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(a) The allegation of petitioner regarding cheating is not supported by facts and law. Admittedly, for purchasing the subject property the petitioner obtained loan from the 3^rd respondent / bank. In that context, on the security of subject property, loan was

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extended by the bank. In respect of its clear, valid and marketable title, Sri E.Mallikarjuna Rao, the Standing Counsel of the respondent-bank issued a legal scrutiny report dated 29.06.2021, a copy of which is filed in the Court by the respondent. In the said report, learned Standing Counsel has clearly mentioned that the subject property originally stood in the name of Aravapallli Seetharamanjaneyulu under registered Sale Deed vide document No.7895/2006 dated 17.07.2006 issued by the Registrar‟s Office, Narasaraopet and Sale Deed was found to be a genuine one. Learned counsel further mentioned that subsequently said A.Seetharamanjaneyulu mortgaged the subject property in favour of Syndicate Bank, Narasaraopet Branch (now Canara Bank) under document No.3936/2007 dated 21.03.2007 by way of Memorandum of deposit of title deeds. Later, on default committed by A.Seetharamanjaneyulu, the Syndicate Bank, Narasaraopet Branch (now Canara Bank) by exercising its powers under the SARFAESI Act, 2002, conducted e-auction and the present writ petitioner being the highest bidder for Rs.1,25,90,000/became the successful purchaser. He paid 25% of the bid amount

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and the authorized officer, Canara Bank issued confirmation letter in favour of the petitioner on 23.06.2021. On payment of balance

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amount, the sale certificate can be issued in favour of the purchaser.

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(b) Learned Standing Counsel further mentioned that he obtained Encumbrance Certificate dated 25.06.2021 under statement No.61128636/2021 issued by SRO, Narasaraopet for a period of 38 years from 01.01.1983 to 24.06.2021 disclosing that the schedule mentioned property was mortgaged to Syndicate Bank, Narasaraopet Branch (now Canara Bank) under the Memorandum of deposit of title deeds vide document No.3936/2007 dated 21.03.2007 and thereby, the said Bank has got charge over the property. Finally learned Standing Counsel issued certificate basing on the documents prepared by him, wherein, inter alia , he mentioned that there are no mortgages, charges whatsoever as could be seen from the Encumbrance Certificate for the period from 01.01.1983 to 24.06.2021 in respect of the subject property. Thus, he opined that the Bank can obtain balance 75% of the bid amount and can execute Sale Certificate in favour of the writ

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petitioner and thereafter, he can create equitable mortgage by depositing the certificate of sale in favour of Canara Bank.

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10. Thus, the above legal scrutiny report which was obtained by the petitioner and submitted to the Bank at the time of securing loan for payment of 75% of the balance bid amount would pellucidly show that over a period of 38 years from 01.01.1983 to 24.06.2021, except the sale transaction vide document No.7895/2006 dated 17.07.2006 which is the title deed of A.Seetharamanjaneyulu and document No.3936/2007 dated 21.03.2007 which is the document of mortgage by Memorandum of deposit of title deeds executed by the said A.Seetharamanjaneyulu in favour of the then Syndicate Bank, there were no other encumbrances over the subject property. This fact is not disputed by either party, most importantly the writ petitioner. While so, as per the e-auction notice dated 28.05.2021, the respondent-bank sold the subject property in public auction on 21.06.2021. Thus, it is needless to emphasize, there were no recorded encumbrances over the subject property as on the date of auction sale.

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(a) Be that as it may, according to the writ petitioner, some third-parties said to have filed suits and execution petitions probably against the mortgager A.Seetharamanjaneyulu and others and got attached the subject property through Court. The particulars of those Court matters as narrated in para 3 of the writ petition are O.S.Nos.205/2018, 46/2019, 50/2019, 51/2019, 53/2019, 360/2019, 386/2019, 33/2020, 34/2020, 35/2020, 39/2020, 42/2020, 50/2020, 54/2020, 107/2020, 247/2020, 257/2020, 298/2020, 299/2020, 124/2021, 130/2021, 143/2021, 171/2021, 216/2021, 228/2021 on the file of the Principal Junior Civil Judge and II Additional Junior Civil Judge, Narasaraopet, and E.P.Nos.7/2020, 18/2020, 19/2020, 9/2021, 41/2021, 64/2021, 65/2021, 66/2021, 68/2021, 69/2021 and 70/2021. It should be noted that except mentioning the above suits and EPs, the petitioner has not filed certified copies of the pleadings and the Court attachment orders. The petitioner has also not impleaded the parties in those matters as the respondents in the present writ petition. So, the writ pleadings are silent as to the particulars of the parties in the aforesaid matters and nature of the claims made by

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them. Even assuming that the plaintiffs / petitioners in those matters filed the suits and EPs against A.Seetharamanjaneyulu claiming that they are his creditors and got attached the present subject property in their proceedings, still it is not known whether the loans advanced by them to A.Seetharamanjaneyulu were secured by the mortgage of the present subject property and whether such secured interest was prior to the mortgage by deposit of title deeds executed by A.Seetharamanjaneyulu in favour of the Syndicate Bank, Narasaraopet Branch (now Canara Bank). In the absence of such crucial facts, merely because some third-parties filed suits from 2018 onwards and obtained attachment of the subject property, this Court cannot jump into conclusion that the plaintiffs / petitioners in those matters have any priority over the respondent-Bank, particularly in the light of the facts that the mortgage in favour of the bank was way back on 21.03.2007 and the Encumbrance Certificate obtained by the bank Standing Counsel showed that there were no other encumbrances except the mortgage in favour of the respondent bank in between 01.01.1983 and 24.06.2021. It must be noted that we are not oblivious of the

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fact that the plaintiffs / petitioners in the aforesaid suits and EPs are not before us in this writ petition and we don‟t have the advantage of hearing their claim. However, as already stated supra, since there were no encumbrances over the subject property from 01.01.1983 till 24.06.2021 except the mortgage in favour of the bank, we can safely hold that except the court attachments, no other secured interest was created in favour of third parties during the relevant period. From these facts, the irresistible conclusion one can arrive is that the respondent-bank being a secured creditor over the subject property and stood prior in point of time over the court attachments, its mortgage loan gets primacy over others under general law without referring to the special law i.e., the SARFAESI Act.

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11. The general law is concerned, whether an attachment before judgment enforced under Order XXXVIII Rule 5 CPC will have an overriding affect over the prior encumbrances created in respect of the same property is no more res integra . In this context, Order XXXVIII Rule 10 CPC lays down as follows:

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“10. Attachment before judgment not to affect rights

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of strangers nor bar decree-holder from applying for sale :Attachment before judgment shall not affect the rights, existing prior to the attachment, of persons not parties to the suit, nor bar any person holding a decree against the defendant from applying for the sale of the property under attachment in execution of such decree. ”

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(a) Thus, the above provision is clear to the effect that the attachment will not affect the prior rights created under valid contracts or decrees. Reiterating the same principle, the Madras High Court in S.U.S. Davey Sons v. P.M.Narayana Swamy³ , held thus:

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“ 5. When an attachment is effected the person against whom the order is made is prohibited and restrained from transferring or charging the property. The order of attachment is issued against the judgment-debtor and in respect of all his interest in the immovable property. In this case, the actual order of attachment made is not produced. But, it is presumed that it is in the same form as contained in Form 24 of Appendix E to the Civil Procedure Code. That only is directed against the defendant or the judgment debtor and the word 'defendant' or 'judgment debtor' would not include a mortgagee with power of sale. We are specifically referring to this because, we have already stated in the earlier part of the judgment that no notice of attachment was specifically issued to the

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3 MANU/TN/0385/1983 = AIR 1983 Mad 217

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mortgagee nor does the order of attachment as such include a mortgagee with a power of sale, under Section 69 of the Transfer of Property Act. In the light of these provisions therefore, we are of the view that the word 'private transfer' occurring in Section 64, Civil Procedure Code, would only mean a transfer by the person against whom the attachment was made or prohibitory order was issued in respect of the immovable property or whose interest (including his legal representative) is attached but would not include a sale or transfer made by a mortgagee with a power of sale. In fact, Order 38, Rule 10, Civil Procedure Code, also slates that attachment before judgment shall not affect the rights of persons not parties to the suit nor bar any person holding a decree against the defendant from applying for the sale of the property under attachment in execution of such decree . (emphasis supplied)”

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In the instant case also, the respondent-bank by exercising its power of sale conferred under the SARFAESI Act, affected the sale and is thus not bound by attachment.

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(b) In the same lines, the High Court of Gujarat in Syndicate

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Bank v. National Wire Products⁴ , held thus:

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“ 9. The trial Court has committed serious error in holding that the provisions of Rule 10 of Order 38 are not applicable. On the contrary, it is the relevant provision which says that the attachment before judgment under

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4 MANU/GJ/0120/1994 = AIR 1994 GUJ 2

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Order 38, Rule 5 shall not affect the rights existing prior to the date of attachment. In fact, the order passed under Order 38, Rule 5 for attachment of property before judgment does not confer any title, charge, lean or priority in the property in favour of the person attaching it. On the contrary, it is crystal clear from the provisions of Order 38, Rule 10 that, an attachment before judgment does not, in any way, affect the rights of the persons, in respect of the disputed property, who are not parties to the suit. The appellant-bank is a stranger or a third party who claimed charge and interest in the disputed property, which was not disputed by the plaintiff in view of the affidavit, Ex. 6. (emphasis supplied). Therefore, it was incumbent upon the trial Court to have mentioned in the impugned order that the attachment of the machineries to the tune of Rs.1,50,000/under Order 38, Rule 5 of the CPC was subject to the first charge of the appellant-bank. Having not done so, the trial Court committed serious error of law, which requires to be corrected in this appeal. ”

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(c) Relying upon the above two decisions, in another judgment in My. Forex Services (P) Ltd. v. City Men Forex and Travels Ltd.⁵ , the High Court of Madras has observed thus:

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“ 10. In the case on hand the suit was filed by the plaintiff only against the defendant 1 to 3 and the fourth defendant was not a party to the suit at the time when the attachment before judgment order was passed by this Court on

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5 MANU/TN/7556/2007 = AIR 2008 MAD 42

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4-10-2003. Therefore the Attachment. Before judgment order passed by this Court does not in any way affect the right of the bank in respect of the disputed property. It is also not disputed by the plaintiff that the properties were mortgaged with the 4^th respondent bank on 15-12-2003 itself. Under such circumstances the attachment before judgment order will not affect the rights of the bank which existed much prior to the date of the order of attachment. Further, an order passed under Order 38, Rule 5 does not confer any title nor any priorities in the property in favour of the plaintiff (emphasis supplied). Therefore, the prayer sought for in Appln. Nos.3827 and 3828 of 2006 cannot be granted. xxxx ”

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12. It is also apposite to mention here that Section 64 CPC says

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that where an attachment has been made, any private transfer or delivery of the property attached or of any interest therein and any payment to the judgment debtor of any debt, dividend or other moneys contrary to such attachment shall be void as against all claims enforceable under attachment. It is no doubt, Section 64 CPC protects the interest of the party who obtained attachment before judgment. However, this provision only prohibits any private transfer or delivery of property made after attachment was affected. However, when Section 64 is studied in conjunction with Order XXXVIII Rule 10 CPC, the attachment will not have any

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affect over the rights created under valid contracts or decrees prior

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to the attachment.

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13. Coming to special law, Section 26E of the SARFAESI Act gives priority to the secured creditors over other debts. It reads thus:

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26E. Priority to secured creditors: 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,

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Explanation – For the purposes of this section, it is hereby clarified that on or after the commencement of the Insolvency and Bankruptcy Code, 2016 (31 of 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 the Code.”

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The above section commencing with a non-obstante clause gives priority to the secured creditor, who got registration of security interest, in the matter of payment of the dues over all other debts and revenues, taxes, cesses and other rates payable to the Central

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and State Government or local authority. In that view, even

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assuming that the debts covered by the court proceedings mentioned supra are secured debts, still the mortgage debt of the respondent-bank will get priority over them in the matter of payment of its dues since the respondent-bank has proceeded as per the provisions of the SARFAESI Act. Thus, under law, it can be said that the respondent-bank has rightly proceeded with the auction sale.

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14. In addition to above, in W.P. No.21112/2021, filed by the respondent-bank for a direction to the Sub-Registrar, Narasaraopet to register the Sale Certificate issued by the bank, a Division Bench of this High Court allowed the writ petition with the following observation:

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“10. The issue is no more res integra in view of the orders passed by this Court in W.P.No.10432 of 2020, dated 19.8.2020. Having regard to the above and in the absence of any right or claim by any third party other than those in the writ petition over the subject property, the present Writ Petition is allowed directing respondent No.2 to register the subject property in favour of the auction purchaser, who is respondent No.4 herein. ”

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Thus, in the earlier proceedings this Court has already gave a

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direction to the Sub-Registrar, Narasaraopet to register the Sale Certificate issued by the respondent-bank. Admittedly, the present writ petitioner is a party-respondent therein and he did not raise

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any objection in that matter.

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15. Above all, the contention of the respondent-bank is that it was not a party to any of the suits and EPs filed by the third-parties and said fact is not disputed. In that view, we find force in the contention of the Bank that it had no occasion to know about the filing of suits and EPs by the third-parties.

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Therefore, in the light of facts and law, the petitioner cannot clamour that the respondent-bank has suppressed the material facts relating to the encumbrances over the subject property and sold the same in the auction by cheating the petitioner. We find no reason

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either on facts or in law to set aside the sale.

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16. The decisions relied upon by the petitioner can be distinguished on facts.

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(a) In Mandava Krishna Chaitanya ‟s case (1 supra), the

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facts are altogether different. In that case, it was observed by the Division Bench of the common High Court that the respondentbank has misrepresented several facts relating to the encumbrances

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over the subject property and sold in auction in favour of the petitioner therein, inasmuch as, the subject land was declared as ceiling surplus land under the Urban Land (Ceiling & Regulation) Act, 1976 and notified under Section 10(6) of the said Act. Further, the communication from the Municipal authorities as well as the State Irrigation Department showed that the regularization of the construction in the subject property was not provided and that the land fell within the full tank level of the lake Durgam Cheruvu. The bank cannot deliver the possession of the property to the petitioner as the sale was held without taking physical possession of the property by the bank. In those circumstances, the Division Bench held that the respondent-bank cannot rely upon the outdated principle of caveat emptor which is replaced by the principle of caveat venditor . Accordingly, the writ petition was allowed. However, that is not the situation in the instant case.

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(b) The decision in Haryana Financial Corporation ‟s case

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(2 supra) also can be distinguished on facts. In that case, the Financial Corporation gave advertisement for sale of various units including the land of M/s.Unique Oxygen Private Limited which was a defaulting unit. The respondent made a bid for purchase of the land of M/s. Unique Oxygen Private Limited by depositing an earnest amount of Rs.2.50 lakhs. The respondent addressed letter that on his visit, they noticed that the premises did not have an independent appropriate passage from the road and requested clarification from the appellant. A series of correspondence took place between the parties. Without properly showing the passage, the appellant addressed letter dated 18.05.1998 to the respondent to deposit balance amount of the bid, failing which the EMD would be forfeited. Aggrieved, the respondent filed writ petition before Punjab and Haryana High Court and a Division Bench set aside the forfeiture order and directed the appellant to refund the amount along with interest @ 12%. The appellant went before the Hon‟ble Apex Court. The Apex Court having agreed with the Division Bench order, observed that the appellant has failed to provide a

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proper passage and failed to disclose the material defect about the non-existence of independent passage to the property and therefore, it acted in breach of Section 55(1)(a) & (b) of the Transfer of Property Act. Accordingly, the appeal was dismissed. Such is not the case here.

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The points are accordingly answered against the petitioner

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and in favour of the respondent-bank.

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17. Thus, on a conspectus of facts and law, we see no merits in the petitioner‟s case and accordingly, the Writ Petition is dismissed. No costs.

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As a sequel, interlocutory applications pending, if any, shall

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stand closed.

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__________________________ U. DURGA PRASAD RAO, J