MS.CANFIN HOMES LTD Vs. SUB REGISTRAR PUTHENCRUZ

JUDGEMENT

(1.) The petitioner, a Housing Finance company, has filed this writ petition for a direction to the Sub Registrar, to efface the entry of Ext. P5 Sale deed effected subsequent to Ext.P1 mortgage from the encumbrance certificate.

(2.) The 2nd respondent and her husband Mr. Justin Paul Rajan (now deceased), availed credit facilities from the petitioner bank by mortgaging the property covered by Ext.P1 sale deed admeasuring 1.82 Ares in ReSurvey No.14312232 of Kizhakkambalam Village along with building bearing No. II345C. The equitable mortgage by deposit of title deed was created by the borrowers on 12/11/2011. Since the borrowers defaulted payment of installments, the petitioner initiated proceedings under the SARFAESI Act. Symbolic possession of the secured asset was taken on 31/12/2013 and when the petitioner approached the Chief Judicial Magistrate Court, Ernakulam seeking physical possession of the secured asset, the borrowers cleared the overdue and the account became performing. However, the borrowers further defaulted payments in the loan account and the petitioner again initiated proceedings under the SARFAESI Act and physical possession of the property was taken as per the orders of the Chief Judicial Magistrate Court, Ernakulam in CMP No.7002019. Though the secured asset was put to sale, there were no bidders.

(3.) When the petitioner obtained Ext. P6 Encumbrance Certificate for the property, it was noticed that the property had been sold on 24/7/2014 by Mr. Justin Paul Rajan to respondents 3 and 4 as per Ext. P5 sale deed. The sale was conducted behind the petitioner's back, suppressing the fact that the property was mortgaged to the petitioner. According to the petitioner, in view of the priority of mortgagee rights the petitioner holds over the property, without discharging the mortgage debt due to the petitioner, respondents 3 and 4 cannot claim ownership over the property. It is contended that the execution of Ext. P5 Sale Deed is not binding upon the petitioner. However, since the execution of Ext. P5 Sale Deed is reflected in Ext. P6 encumbrance certificate, the prospective buyers are hesitant to purchase the property. It is therefore contended that, unless and until the said entry is effaced, the petitioner won't be able to effectively sell the property through e-auction invoking the provisions under the SARFAESI Act. Accordingly, a declaration is sought that the execution of Ext. P5 sale deed is not binding upon the petitioner in view of the priority of mortgagee rights the petitioner holds over the secured asset and will not operate against the SARFAESI proceedings initiated by the petitioner against the secured asset, and for direction to the 1st respondent to efface the entry of Ext. P5 sale deed effected subsequent to Ext. P1 mortgage, from Ext. P6 encumbrance certificate.