MUHAMMAD RAFEEQ Vs. BANK OF BARODA

JUDGEMENT

(1.) Whether the petitioner, 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 Section 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 SRFAESI 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 Sections 13(1) and 13(2) of the SRFAESI Act, read with the overriding provision under Section 35, and Section 56, Sections 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: