Karnataka High Court Considers Writ Petitions by Asset Reconstruction Company Challenging Impounding of Agreement, Cancellation of Deed, and Gift Deed Registration. Petitions Involve Interpretation of SARFAESI Act, Karnataka Stamp Act, and Powers of Registration Authorities.

Writ petitions under Articles 226 and 227 challenging the actions of registration authorities and private respondents in relation to a secured property under the SARFAESI Act.

Petitioner ARCIL sought to quash: (1) impounding letter dated 28.02.2015 issued by Senior Sub-Registrar; (2) Deed of Cancellation and Deed of Declaration dated 03.10.2016; (3) registration of Gift Deed dated 30.09.2014 and subsequent transactions, and removal of entries from records.

The Senior Sub-Registrar impounded an agreement document at the instance of a complaint from Anti-Corruption Council of India, and the borrower Sridevi Hospital and its associates executed cancellation and declaration deeds and a gift deed while ARCIL was attempting to enforce security interest under SARFAESI Act.

The 7th Additional Chief Metropolitan Magistrate allowed ARCIL's application under Section 14 of SARFAESI Act to take physical possession on 28.03.2013. Criminal complaints filed by Sridevi Hospital were quashed by the High Court. In OS No.2731/2015, Sridevi Hospital sought stay of auction and impounding of documents; interim order was refused.

The petitioner is also a financial institution under Section 2(h)(ia) of Recovery of Debts due to Banks and Financial Institutions Act, 1993 and registered with the Reserve Bank of India under Section 3 of SARFAESI Act. The original lender - Indian Overseas Bank (hereinafter referred to as ‘IOB’) had for the purchase of the Secured Property and for the development and construction of residential flats/apartments on the Secured Property vide its sanction letters dated 12.04.2004, 17.11.2005, 20.06.2006, 24.12.2007 and 23.05.2008 granted diverse financial assistance to borrower – M/s.Sridevi Hospital. Sridevi having defaulted in making payment of the dues on the said loan accounts, the loan account was treated as non- performing asset as per Reserve Bank of India guidelines and it is thereafter that IOB executed a Deed of Assignment on 31.8.2013, whereunder IOB sold, assigned, transferred and released all financial assets pertaining to the account of IOB including all security interest, guarantees, rights, title and interest therein to ARCIL. Impounding and examination of instruments U/s 33 of the K.S.Act 1957 reg:- With reference to the above, an instrument of Agreement of conveyance is presented before me by the Anti-Corruption council of India which is described as agreement of conveyance Sridevi Hospital (Resolution plan and Broad terms and conditions) Which is executed on 27.9.2010 by Sri Devi Hospitals... in favour of Assets reconstruction company (Arcil) India Ltd.

Indian Overseas Bank (IOB) sanctioned financial assistance to Sridevi Hospital between 2004 and 2008 for purchase and development of property. Sridevi created an equitable mortgage by deposit of title deeds and executed loan documents. Upon default by Sridevi, the account was declared NPA. IOB assigned the financial assets and security interests to Asset Reconstruction Company (India) Limited (ARCIL) via Deed of Assignment on 31.08.2013. ARCIL issued notices under Section 13(2) and (4) of the SARFAESI Act and obtained physical possession of the secured property on 28.03.2013 following an order under Section 14 by the 7th Additional Chief Metropolitan Magistrate. Sridevi filed criminal complaints which were quashed. ARCIL published an auction notice on 15.03.2015. Sridevi then filed OS No.2731/2015 seeking stay and impounding of documents, alleging insufficient stamping, based on a letter from the Senior Sub-Registrar. ARCIL discovered the impounding letter dated 28.02.2015 had been issued pursuant to a complaint by Anti-Corruption Council of India. ARCIL filed WP No.28962/2015 challenging the impounding letter. Subsequently, ARCIL filed WP No.9193/2017 challenging a Deed of Cancellation and Deed of Declaration dated 03.10.2016, and WP No.9578/2017 challenging a Gift Deed dated 30.09.2014 registered in favor of Smt. Devi and subsequent transactions. All three writ petitions were heard together and reserved for orders on 27.11.2024. The order was pronounced on 20.12.2024.

• Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (SARFAESI Act): 3, 5(4), 13(2), 13(4), 14
• Recovery of Debts due to Banks and Financial Institutions Act, 1993: 2(h)(ia)
• Karnataka Stamp Act, 1957: 33
• Constitution of India: 226, 227