LI Network
Published on: November 19, 2023 at 15:52 IST
The Andhra Pradesh High Court has reaffirmed that attachments made subsequent to a mortgage in favor of a bank do not impact the sale conducted under the SARFAESI Act.
The court’s decision came in response to a petition filed by the State Bank of India (SBI) against the State, challenging the non-entertainment and registration of the Sale Certificate executed by the bank in an auction concerning a property.
Justice Ninala Jayasurya, presiding over a Single Bench, emphasized that the inclusion of a property mortgaged to the bank in the prohibited category, due to non-application of mind, renders the registration ineffective and holds no legal consequence.
The subject properties were mortgaged in loan transactions, and due to non-payment of loan amounts, the petitioner banks, as secured creditors, initiated proceedings under the SARFAESI Act. Public auction notices were issued for the sale of the properties through e-auction, and successful bidders were declared.
Following the payment of sale considerations, the banks issued Sale Certificates under Rule 9(6) of the Security Interest (Enforcement) Rules 2002 to the auction purchasers. The banks then sought to register these Sale Certificates.
The High Court, considering the arguments presented by the counsel, referred to a previous judgment stating, “The preponderance of judicial opinion leads to the irresistible conclusion that the sale of the mortgaged property in favor of the auction purchaser and the sale certificate under the SARFAESI Act in such circumstances is free of all encumbrances.”
The court clarified that attachments made after the mortgage does not affect the rights of the secured creditor over the property, and such attachments have no impact on the sale conducted under the SARFAESI Act.
The High Court, therefore, allowed the writ petitions and granted the requested reliefs in the case titled “State Bank of India v. The State of Andhra Pradesh.”