Madras High Court Allows Bank's Writ Petition for Registration of SARFAESI Sale Certificate Despite Prior Sale Deeds by Mortgagor. Sub-Registrar Directed to Register Sale Certificate as Unauthorised Sales by Mortgagor Do Not Bind Secured Creditor.

Writ petition under Article 226 of the Constitution seeking a writ of mandamus to compel the Sub-Registrar to register a sale certificate issued under the SARFAESI Act, despite the existence of prior registered sale deeds executed by the mortgagor in favour of third parties.

The petitioner bank sought a direction to the first respondent, the Sub-Registrar, to register the sale certificate dated 26.9.2023 issued in favour of the auction purchasers (respondents 18 to 20) or any future auction purchaser, ignoring the earlier registered sale deeds and General Power of Attorney executed by the second respondent in favour of respondents 3 to 17.

The Sub-Registrar refused to register the sale certificate on the ground that the property covered by the certificate had already been conveyed to respondents 3 to 17 through seven registered documents, and therefore, the same property could not be dealt with again. This refusal obstructed the bank's recovery process.

No previous court decisions. The refusal was an administrative act by the Sub-Registrar.

Whether the first respondent could lawfully refuse to register the sale certificate issued under the SARFAESI Act on the ground that the mortgagor had already sold the property to third parties by registered deeds, when those sales were executed without the secured creditor's consent and contrary to the terms of a partial discharge of mortgage deed. Whether disputed questions of fact regarding the bank officials' knowledge of or involvement in the prior sales could be adjudicated in a writ petition under Article 226.

The petitioner bank argued that the partial discharge of mortgage deed dated 16.4.2019 retained the property in S.No.102/2B2 measuring 1.52 acres under mortgage; the second respondent had no authority to sell that property; the sales to respondents 3-17 were not binding on the bank; and the Sub-Registrar's refusal was arbitrary. Respondents 3 to 6 and 9 to 14 contended that the second respondent was permitted to sell the property to repay the bank; the sale consideration was paid to the bank; the bank was aware and was a party to the sale deeds; and since the property was already under mortgage, the Sub-Registrar should not have registered those deeds in the first place. The first respondent (Sub-Registrar) refused registration on the sole ground that the property had already been conveyed to respondents 3-17, as per the records.

When a secured creditor retains a subsisting mortgage over a specific property under a partial discharge of mortgage deed, the mortgagor cannot unilaterally sell that property to third parties in a manner that binds the creditor. Any such sale is unauthorized and the registered sale deeds do not affect the creditor's security interest or its right to enforce the mortgage through SARFAESI proceedings. The Sub-Registrar cannot refuse to register a sale certificate issued under the SARFAESI Act merely because the same property appears to have been conveyed earlier by the mortgagor, if such conveyance is not binding on the creditor. Disputed questions of fact about the creditor's awareness or collusion in those earlier transactions are to be resolved in a proper civil suit and not in writ jurisdiction.

On a careful reading of the terms of the the partial discharge of mortgage deed, it is clear that the mortgagor, who is the second respondent, reconfirms that the mortgage that was created over an extent of 1.52 Acres in S.No.102/2B2... is retained by the petitioner bank and what have been released and discharged are only the properties measuring 0.79 cents in total situated at S.Nos.102/1J and 102/2A1... In view of the same, the sale that was made by the second respondent in favour of respondents 3 to 17 will not bind the petitioner bank. As a consequence, there was no bar for the petitioner bank to execute the sale certificate in favour of respondents 18 to 20... The issue as to whether the bank officials were aware of the sale deeds that were executed by the second respondent in favour of respondents 3 to 17 and as to whether the sale consideration was straight away received by the petitioner bank is a disputed question of fact, which cannot be decided in a writ petition.

The second respondent company availed credit facilities from the petitioner bank in 2014 and created an equitable mortgage by deposit of title deeds over lands in Mathigiri Village. Upon default, the bank initiated SARFAESI proceedings and issued a sale notice in October 2018. The second respondent applied for a one-time settlement, which was sanctioned on 13.3.2019 for Rs.380 lakhs, subject to conditions. After partial payment, the bank executed a partial discharge of mortgage deed on 16.4.2019, releasing 0.79 acres but retaining 1.52 acres in S.No.102/2B2. The second respondent failed to pay the balance amount, leading to cancellation of the OTS. The bank re-initiated SARFAESI proceedings and conducted an auction, issuing a sale certificate on 26.9.2023 in favour of respondents 18 to 20. When the sale certificate was presented for registration, the first respondent refused, citing seven prior registered sale deeds executed by the second respondent in favour of respondents 3-17. The bank thereupon filed this writ petition for mandamus.

• Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002:
• Constitution of India: Article 226
• Registration Act, 1908: