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BankingLatestLegalNovember 2023

Mortgage of the Bank and sale certificate of mortgaged property in auction shall prevail over order of attachment of the Civil Court

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Judgment of November, 2023 in W.P.Nos.6488, 7087 and 478 of 2022 – State Bank of India Vs. The State of Andhra Pradesh and others

The properties in question were mortgaged on 25.2.2012, 2.2.20215 and 3.9.2014, respectively, with the petitioners – Nationalized Banks.

The said properties were sold in auction and the Banks issued the sale certificates under Rule 9(6) of the Security Interest (Enforcement) Rules, 2002 to the respective auction purchasers.  The Banks approached the registration authority to register sale certificates.   However, the registration was refused on the ground that there was an order of attachment on the said property passed by the Civil Court.

Orders dated 6.3.2017 and 20.11.2018 of attachment passed by the Additional Senior Civil Judge.   The property mortgaged to the petitioner Bank in W.P.No.478 of 2022 on 3.9.2014 was placed in the prohibited category list on 4.2.2016.

The petitioners Banks were not parties to the civil suits between two private parties.   Section 35 of SARFAESI Act has over-riding effect and the Banks have priority on the dues recoverable from the mortgaged properties.

HELD that the attachment does not affect the rights of the secured creditor in the mortgage of the Bank and also sale of the same.   The attachment ceases to have any effect the moment the same is confirmed in favour of the secured creditor Bank and the auction purchaser.

 

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