UCO BANK Vs. STATE OF KERALA

JUDGEMENT

(1.) The petitioner is a Nationalised Bank. Respondents 3 and 4 who were later removed from the party array, availed a loan of Rs.1,30,00,000.00 from the petitioner Bank. Loan was sanctioned as per Ext.P1 dtd. 2/2/2016. An equitable mortgage was created on the same day as evident from Ext.P2 letter of deposit of title deeds. Default was committed in the payment of the loan amount. The account was classified as an NPA on 31/1/2018. The 3rd respondent filed W.P.(C)No.11274 of 2018 before this Court which was disposed of by Ext.P3 judgment directing the petitioner therein to pay the overdue amount in 10 equal monthly instalments, along with the regular instalments and with a further direction to the Bank to regularise the loan account, if the overdue amounts are paid as directed. The directions in the said judgments were also not complied with by the borrowers. The petitioner Bank proceeded with SARFAESI proceedings. Notice dtd. 4/6/2018 under Sec. 13(4) of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (SARFAESI Act for short) was issued to respondents 3 and 4. The petitioner filed M.C. No.440 of 2018 before the Additional Chief Judicial Magistrate Court, Ernakulam for taking possession. The Advocate Commissioner appointed in the said proceedings took physical possession and handed over possession to the Bank, based on which M.C. No.440/2018 was closed on 30/11/2019. The 4th respondent thereupon filed I.A.No.1956/2019 in S.A.No.339/2019 before the Debt Recovery Tribunal, Ernakulam, which was dismissed by Ext.P5 order dtd. 21/11/2019. The property was put in auction. The encumbrance certificate dtd. 21/6/2022 taken prior to the sale is produced as Ext.P6. Ext.P6 shows that the 1st Additional Munsiff Court, Ernakulam had by order dtd. 29/11/2019 in I.A.No.4556 of 2019 in O.S.No.888 of 2019 filed by the 5th respondent ordered attachment of the property.

(2.) The petitioner Bank issued sale notice dtd. 24/5/2022 fixing the date of sale as 27/6/2022. Two bidders submitted tenders and remitted the earnest money deposit. Respondents 6 and 7 purchased the property in the auction and remitted part consideration. The auction purchasers informed that the balance amount will be paid after the entry regarding attachment is effaced. On 28/6/2022, the petitioner addressed the 2nd respondent for effacing the entry which is regarding an attachment effected on 29/11/2019, much after the mortgage dtd. 2/6/2016. Ext.P8 is the letter. Since no action was forthcoming, the petitioner has approached this Court praying for a direction to the 2nd respondent to consider Ext.P8 representation and efface entry No.2 regarding the order of attachment dtd. 29/11/2019 from the Books of Registry maintained at SRO, Tripunithura.

(3.) The 5th respondent has filed a counter affidavit. It is stated that the 5th respondent had initiated O.S.No.888/2019 against the borrowers for recovery of money. It is stated that the property had been put in possession of the 5th respondent as 'nerpanayam' and the 5th respondent was permitted to reside without payment of any rent. It is stated that an amount of Rs.5,50,000.00 was received by the 3rd respondent for the said arrangement without interest. It is submitted that it was while the 5th respondent was residing in the building that he and his family were evicted based on orders of the Chief Judicial Magistrate Court, Ernakulam. It is seen that the order of attachment is immediately after the order Ext.P5 issued by the Debt Recovery Tribunal. A Division Bench of this Court in Secretary, Keechery Service Co-operative Bank Ltd. v. Sajitha Nizar and Ors. [2020 (5) KHC 231] has held that after the creation of the mortgage of the property, subsequent attachment created in respect of the property will be free of encumbrance and it can be mutated in favour of the auction purchaser. In Federal Bank Ltd. State of Kerala and Ors. [2016 (5) KHC 4504], this Court has held that in view of Sec. 13 of the SARFAESI Act, 2002, the saleable interest is lost and any sale deed executed in violation of the statutory mandate is illegal and therefore unenforceable. In Sree Gokulam Chit and Finance Co. Pvt. Ltc. v. Emil and Eric Hospitality Services and Ors. [2021 (6) KHC 411], this Court held that the right of redemption of mortgagor comes to an end on the date of publication of notice to public auction.