2014 (1) TMI 1905 - HC - Indian Laws

Effects of attachments effected subsequent to the creation of equitable mortgage - Sale of mortgaged property - preponderance of judicial opinion - can attachment be effaced after the property is purchased by another in sale conducted by the Recovery Officer of the Debts Recovery Tribunal? - HELD THAT - The preponderance of judicial opinion leads to the irresistible conclusion that the sale of the mortgaged property in favour of the petitioner under Ext. P5 sale certificate under the Act is free of all encumbrances. The attachments effected subsequent to the mortgage created in favour of the bank do not affect the title and ownership of the petitioner over the subject property. Such attachments have no impact on the sale conducted under the Act and the same ceases to have any effect or fall to the ground the moment the sale is confirmed in favour of the petitioner. The Sub Registrar and the Village Officer are directed to efface the attachments effected subsequent to the mortgage from the relevant records. Otherwise those attachments would remain as a permanent taboo prejudicially affecting the marketability and title to the property even though they ceased to have any legal efficacy. Petition allowed.

Summary

Issues:
1. Can attachments made after the creation of an equitable mortgage be removed after the property is sold by the Recovery Officer of the Debts Recovery Tribunal?

Analysis:
The case involved the fifth respondent mortgaging property to a bank as security for a loan. The bank filed for recovery under the Recovery of Debts Due to Banks and Financial Institutions Act, 1993. The Recovery Officer proceeded to recover the debt through the sale of the property. The petitioner emerged as the highest bidder at the sale, and the sale was confirmed without any applications to set it aside. However, subsequent encumbrances were discovered through an encumbrance certificate obtained by the petitioner.

The petitioner sought a declaration that the sale of the property under the Act was free of encumbrances and that the attachments made after the mortgage did not affect their title. The court examined relevant statutory provisions, including Section 64 of the Code of Civil Procedure, 1908, and Order XXXVIII Rule 10 CPC. Previous judicial decisions were also considered to determine the impact of attachments on the sale of mortgaged property.

The court referred to various judgments, emphasizing that attachments subsequent to a mortgage do not affect the title conveyed through a sale. The court concluded that the sale in favor of the petitioner was free of encumbrances, and the attachments made after the mortgage had no legal impact on the petitioner's ownership rights. The court granted the declaration sought by the petitioner and directed the relevant authorities to remove the post-mortgage attachments from the records within two months to prevent any adverse impact on the property's marketability and title.

In summary, the court allowed the Writ Petition, ruling in favor of the petitioner and directing the removal of subsequent attachments from the property records to safeguard the petitioner's ownership rights and marketability of the property.