Allowed

Bank of Baroda v. State of Kerala

Kerala HC24 Sept 2020WP(C)/16997/2020

Case brief

AI extract

What is this about?

The Court allowed a writ petition filed by Bank of Baroda. It held that attachments created after the mortgage in favor of the secured creditor have no impact on the sale conducted under the SARFAESI Act. The respondent authorities were directed to efface attachments and register the sale certificate.

What did the court decide?

Respondents directed to efface all attachments made on the properties covered by the sale certificate and issue revenue certificates; Sub Registrar directed to register the sale certificate.

Bank of Baroda Vs State of Kerala — Banking and Recovery | Kerala HC (2020)

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IN THE HIGH COURT OF KERALA AT ERNAKULAM

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PRESENT

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THE HONOURABLE MR. JUSTICE RAJA VIJAYARAGHAVAN V

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THURSDAY, THE 24TH DAY OF SEPTEMBER 2020 / 2ND ASWINA, 1942

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WP(C).No.16997 OF 2020(Y)

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PETITIONER/S:

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BANK OF BARODA, ROSABRB,ERNAKULAM,PALLIMUKKU,M.G.ROAD, ERNAKULAM,REPRESENTED BY ITS CHIEF MANAGER,RATHISH VIJAYENDRAN,S/O P.K.VIJAYENDRAN, AGE 47.

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BY ADV. SRI.LEO GEORGE

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RESPONDENT/S:

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1 STATE OF KERALA, REPRESENTED BY ITS SECRETARY TO GOVERNMENT, DEPARTMENT OF TAXES, SECRETARIAT, THIRUVANANTHAPURAM-695001.

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2 THE SUB REGISTRAR CHERTHALA, SUB REGISTRAR'S OFFICE,POLICE STATION ROAD, KODATHIKAVALA, CHERTHALA, KERALA-688524.

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3 THE TAHSILDAR CHERTHALA, TALUK OFFICE,CHERTHALA, ALAPPUZHA DISTRICT, PIN-688532.

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4 THE VILLAGE OFFICER, VAYALAR EAST VILLAGE, ALAPPUZHA DISTRICT, PIN-688531.

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*** 5 M/S.ORMA TIMBERS, VII/157A, A PARTNERSHIP FIRM HAVING OFFICE OPP FEDERAL BANK, THANKY JUNCTION, CHERTHALA, ALAPPUZHA, KERALA-688524,REPRESENTED BY ITS MANAGING PARTNER LAJI JOSEPH. (DELETED)**

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6 M/S.LYNX PROPERTIES AND DEVELOPERS, A PARTNERSHIP FIRM HAVING OFFICE AT DOOR NO.1 SKYLINE SPRING FIELD, PADIVATTOM, EDAPPALLY P.O., ERNAKULAM KERALA PIN - 682 024, REPRESENTED BY ITS MANAGING PARTNER LAJI JOSEPH.(DELETED)

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WP(C).No.16997 OF 2020

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7 M/S.AGP CITY GAS PRIVATE LIMITED, HAVING CORPORATE OFFICE AT NO.23, RAJIV GANDHI SALAI (OMR), 1ST FLOOR, BUILDING NO.CORE-2, PACIFIC TECH PARK, NAVALUR, CHENNAI, PIN - 600 130.

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8 M/S.BHARATH SANCHAR NIGAM LIMITED, CULLEN RD, EREZHA, MULLAKKAL, ALAPPUZHA, KERALA - 688 011.

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*** RESPONDENT NOS.5 AND 6 ARE DELETED FROM THE PARTY ARRAY AS PER ORDER DATED 24.09.2020 IN I.A.NO.1 OF 2020.**

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R7 BY ADVS. SRI.LINDONS C.DAVIS SMT.E.U.DHANYA SRI.RAJITH DAVIS R8 BY ADV. SRI.MATHEWS K.PHILIP

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R1 TO R4 BY SRI K.P HARISH SR GP

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THIS WRIT PETITION (CIVIL) HAVING COME UP FOR ADMISSION ON 24.09.2020, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING:

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WP(C).No.16997 OF 2020

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JUDGMENT

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The petitioner is a Nationalised Bank. M/s. Orma Timbers, Cherthala, availed financial assistance from the petitioner and towards collateral security for the repayment of the credit facility, created security interest in respect of certain items of properties owned by M/s. Lynx Properties and Developers, Ernakulam. Ext. P1 and P2 are the original deed of various items of properties owned by M/s. Lynx Properties and situated at Vayalar East Village. Exhibit P3 is the copy of the Declaration in the matter of Mortgage by deposit of Title Deeds executed by M/s. Lynx Properties on 18.06.2010. Default was committed by M/s. Orma Timbers and the account was categorised as a Non Performing Asset on 16.4.2014. Proceedings were initiated under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002. (‘SARFAESI’ Act for short) and after taking physical possession of the property, the same was sold in auction on 6.9.2019 to the 7th respondent in compliance with the provisions of the Act and Rules. Exhibit P6 is the sale certificate issued in favor of the 7th respondent by the petitioner herein.

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The petitioner contends that immediately thereafter the petitioner

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and the 7th respondent approached the 2nd respondent seeking registration of the sale certificate. The 2nd respondent insisted for production of the basic tax certificate for which the petitioner and the 7th respondent approached the 3rd

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WP(C).No.16997 OF 2020

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respondent. The said respondent, however, refused to issue the Tax receipt contending that there are subsisting attachments over the property effected by the Sales Tax Authorities and the BSNL, the 8th respondent herein. According to the petitioner, the attachment over the property was effected much after the execution of the mortgage by M/s. Lynx Properties in favor of the petitioner. Later, as directed by this Court in Exhibit P8 judgment, the petitioner approached the 4th respondent and made a formal request for issuance of Non-Attachment Certificate, RoR, and to receive basic tax after effacing the attachment, if any, over the same. The 4th respondent, however, refused the request of the petitioner by Exhibit P9 communication stating that the RR proceedings were initiated prior to the petitioner taking possession of the property under the SARFAESI Act. Being aggrieved, the petitioner has approached this Court seeking a direction to the respondents 3 and 4 to efface all attachments made on the properties covered by Exhibit P6 sale certificate and to issue non-attachment certificate, RoR, BTR and location sketch and for a further direction to the 2nd respondent to register the sale certificate issued in favor of the 7th respondent.

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The 8th respondent has filed a statement wherein it is stated that towards arrears of telephone bill amounting to Rs.3,161/- due to the BSNL which was pending from 2014, revenue recovery proceedings were initiated on 9.12.2019 as is evident from Exhibit R8 (a).

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I have heard Sri. Leo George, the learned counsel appearing for the petitioner, Sri.Mathews K. Philip, the learned standing counsel appearing for

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WP(C).No.16997 OF 2020

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the 8th respondent and the learned Government Pleader.

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I have considered the submissions advanced and have perused the records. Section 26E of the SARFAESI Act grants priority to secured creditors after the registration of the security interest and 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. The rights and liberties conferred on the creditor/bank by virtue of mortgage created and the right to proceed under the relevant provisions of the SARFAESI Act cannot be defeated because of the subsequent attachments (see HDFC v. Sub Registry Officer [2011 KHC 851] and Madhan v. Sub Registrar [2014 (1) KLT 406]). In TDB v Deputy Examiner, Local Fund Audit and Others , [2020 (3) KHC 129] a Division Bench of this Court had occasion to observe that the sale carried out either under the SARFAESI Act or under the RDB Act takes precedence even over the statutory charges due to the Government created under KVAT Act or under other State Enactments after the Amendment Act of 2016. A secured creditor in whose favour a security interest has been created thus has priority in sale and payment over all other statutory charge holders.

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In the case on hand, the mortgage was created on 18.6.2010 as is evident from Exhibits P3 and P4. The attachment towards sales tax arrears was effected after issuing notice under the Revenue Recovery Act on 25.10.2013 as is evident from Exhibit P9 reply issued by the 3rd respondent. In other words, the attachments were effected much after the execution of the

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WP(C).No.16997 OF 2020

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mortgage and creation of the security interest by M/s. Lynx Properties. In that view of the matter, the attachment so effected will have no impact on the sale conducted under the provisions of the SARFAESI Act.

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Resultantly, this writ petition will stand allowed. The respondents 3 and 4 shall efface all the attachments made on the properties covered by Exhibit P6 sale certificate and shall issue the revenue certificates sought for by the landholder on his filing appropriate application and remitting the requisite

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fees. The 2nd respondent shall register the sale certificate if the same is otherwise in order and in strict compliance with the procedure.

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SD/-

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RAJA VIJAYARAGHAVAN V

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JUDGE

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sru

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WP(C).No.16997 OF 2020

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APPENDIX

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PETITIONER'S/S EXHIBITS:

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EXHIBIT P1	A TRUE COPY OF SALE DEED NO.1092/2008 BOTH OF CHERTHALA SRO DT 5.4.2008
EXHIBIT P2	A TRUE COPY OF THE SALE DEED NO.1091/2008 BOTH OF CHERTHALA SRO.05.4.2008
EXHIBIT P3	A TRUE COPY OF THE DECLARATION IN THE MATTER OF MORTGAGE BY DEPOSIT OF TITTLE DEEDS EXECUTED BY THE SIXTH RESPONDENT IN FAVOUR OF THE BANK DT.19.6.2010
EXHIBIT P4	A TRUE COPY OF CONFIRMATION OF MORTGAGE EXECUTED BY THE SIXTH RESPONDENT IN FAVOUR OF THE BANK DT.19.06.2010
EXHIBIT P5	A TRUE COPY OF THE FINAL ORDER PASSED BY THE DRT-1 OA NO.430/2014 DT.4.7.2016.
EXHIBIT P6	A TRUE COPY OF THE SALE CERTIFICATE DATED 28.02.2020.
EXHIBIT P7	A TRUE COPY ENCUMBRANCE CERTIFICATE ISSUED BY THE SECOND RESPONDENT FOR THE PERIOD COVERING FORM O1.01.1990 TO 07.12.2019 DT.9.12.2019
EXHIBIT P8	A TRUE COPY OF THE JUDGMENT IN WP(C)NO.11997/2020 DATED 18.06.2020
EXHIBIT P9	A TRUE COPY OF THE COMMUNICATION ISSUED BY THE THIRD RESPONDENT TO THE PETITIONER DATED 13.07.2020.
RESPONDENT'S/S EX	HIBITS:
EXHIBIT R8(A)	A TRUE COPY OF THE REQUISITION IN FORM-24.

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//TRUE COPY// P.A.TO JUDGE

Bank of Baroda v. State of Kerala

Case brief

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Bank of Baroda v. State of Kerala

Case brief

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