What does Section 13 of the SARFAESI Act, 2002 entail for secured creditors?

It empowers secured creditors to take possession of secured assets and sell them after giving notice, and the borrower may redeem the property under Section 13(8) before the sale is completed.

Can a mutation request be rejected solely because an appeal under Section 17 of the SARFAESI Act is pending before the DRT?

No. The Orissa High Court held that a duly registered sale certificate remains operative unless invalidated by the DRT, and pendency of such an appeal does not furnish a lawful ground to reject mutation.

Does the pendency of a civil suit or criminal case relating to the same land automatically bar mutation proceedings?

No. The Court clarified that mutation is a fiscal exercise that does not affect title, and the pendency of civil or criminal proceedings does not, by itself, justify refusing to update the Record of Rights.

Mutation proceedings are fiscal and do not affect title | OSS Rules & SARFAESI appeal not bar : Orissa HC

The Orissa High Court set aside a Tahasildar’s order rejecting a mutation application solely because a civil suit under the SARFAESI Act and a criminal case were pending before other forums. Holding that mutation proceedings are fiscal and do not affect title, the Court clarified that a registered sale certificate remains operative unless invalidated by the competent tribunal, restoring the earlier mutation order and directing correction of land records within two weeks.

Background & Facts

The Dispute

The schedule property was originally owned by Md. Nehal (Opposite Party No.3). He mortgaged it to UCO Bank, Ashoka Market, Bhubaneswar for a cash credit loan availed by M/S. Shreyans Progressive Consultancy Pvt. Ltd., Bhubaneswar. Upon default, the bank proceeded under Section 13 of the SARFAESI Act, 2002 to take possession, and the property was put to public auction after the owner failed to exercise his right of redemption. The petitioner participated in the auction, emerged as the highest bidder, and purchased the property for Rs.75,75,800/-. The bank issued a sale certificate in his favour on 19.11.2019, which was duly registered by the Sub-Registrar, Ghatagaon on 05.12.2019.

Key Facts

The property was mortgaged by the Managing Director of the firm in 2015 for a cash credit loan of Rs. 4 crores, with the parents of the Managing Director standing as guarantors.
Opposite Party No.3 was unaware that his property had been kept as collateral security.
The petitioner applied for mutation before the Additional Tahasildar, Keonjhar, which was registered as Mutation Case No. 806 of 2019.
By order dated 07.07.2020, the Additional Tahasildar allowed the mutation, directing correction of the Record of Rights (ROR) in favour of the petitioner and changing the Khata number from 105/81 to 105/156.
Opposite Party No.3 filed a mutation appeal (No. 13/2021) before the Sub-Divisional Magistrate, Keonjhar.
The appellate authority, by order dated 29.09.2022, set aside the order of the Additional Tahasildar.
The petitioner challenged that order in W.P.(C) No. 30048 of 2022.
By order dated 10.07.2025, a coordinate Bench of this Court quashed the appellate authority’s order and directed the Tahasildar, Ghatagaon to hear the mutation case afresh, without being influenced by the appellate authority’s observations.
On 20.09.2025, the Tahasildar rejected the mutation case, observing that a civil suit (S.A. No. 123 of 2019) and a criminal case (Capital P.S. Case No. 51 of 2020) were pending against the petitioner in respect of the same property.
After the impugned order, Opposite Party No.3 executed four sale deeds on the same day in connivance with the Tahasildar, who also functions as the Sub-Registrar, Ghatagaon, and caused encumbrance certificates to be created based on those deeds.
The petitioner and the bank requested the Tahasildar not to register the sale deeds or create further third-party interests, but by letter dated 06.10.2025 the petitioner was informed that his legal transferable right could not be denied and that he should seek relief from the court.
The schedule property comprises 22 plots situated in District-Keonjhar, Tahasil-Ghatagaon, Mouza-Khunta, previously Khata No. 105/81 and currently mutated Khata No. 105/156, Kissam-Gharabari, with a total area of Ac. 14.160 decimal.
The alleged consideration for the property in the revenue records is Rs.1,42,50,000/-, whereas the petitioner purchased it for Rs.75,75,800/-.

Procedural History

2015: Mortgage of the property by the Managing Director for a cash credit loan of Rs. 4 crores.
19.11.2019: Issuance of sale certificate by the bank in favour of the petitioner.
05.12.2019: Registration of the sale certificate by the Sub-Registrar, Ghatagaon.
07.07.2020: Order of the Additional Tahasildar allowing mutation and directing correction of ROR in favour of the petitioner.
29.09.2022: Order of the Sub-Divisional Magistrate setting aside the Additional Tahasildar’s order (Mutation Appeal No. 13/2021).
10.07.2025: Order of the Orissa High Court (W.P.(C) No. 30048 of 2022) quashing the appellate authority’s order and directing a fresh hearing.
20.09.2025: Impugned order of the Tahasildar, Ghatagaon rejecting the mutation case on the ground of pendency of S.A. No. 123 of 2019 and Capital P.S. Case No. 51 of 2020.
06.10.2025: Letter from the Tahasildar to the petitioner stating that his legal transferable right could not be denied.
01.10.2026: Date of the judgment under analysis.

Relief Sought

The petitioner seeks:

Quashing of the impugned order dated 20.09.2025.
Direction to the Opposite Parties to record the land records and issue ROR in favour of the petitioner over all 22 plots.
Declaration that the fraudulent sale deeds executed by Opposite Party No.3 in connivance with the Tahasildar are void ab initio.
Direction to Opposite Party No.5 to cancel the said fraudulent sale deeds.
Removal of the illegal recording of the names of Opposite Party No.3 and Opposite Parties Nos. 7 to 10 from the Encumbrance Certificate (E.C.) Register.
Any other appropriate writ or order in the interest of justice.

The Legal Issue

The central question was whether a sale certificate duly registered by the registering authority can be ignored or disregarded merely because an appeal under Section 17 of the SARFAESI Act, 2002 challenging the legality of the e-auction sale is pending before the Debts Recovery Tribunal, and whether mutation proceedings can be rejected on the sole ground of pendency of civil and criminal cases concerning the same property.

Arguments Presented

For the Petitioner

The petitioner, through Senior Advocate Mr. D. Mohapatra and Advocate Mr. L. Tripathy, contended that the Tahasildar acted beyond his jurisdiction by rejecting the mutation application despite the existence of a valid, duly registered sale certificate. It was argued that the bank, having taken possession under Section 13 of the SARFAESI Act and subsequently auctioned the property, transferred any right the petitioner had to the bank, and that the petitioner became a bona fide auction purchaser by paying the consideration as the highest bidder. The petitioner emphasized that he could have redeemed the mortgaged property under Section 13(8) of the SARFAESI Act but chose not to, and that the mere pendency of a challenge before the DRT does not, by itself, divest the right accrued under the sale certificate. Furthermore, the petitioner submitted that there is no prohibitory order from the DRT restraining mutation or affecting the operation of the sale certificate, and that the Tahasildar’s reliance on the decision in Bhimabai Mahadeo Kambekar v. Arthur Import and Export Co. & Ors. was misplaced because that decision does not lay down an absolute bar on mutation whenever a civil suit is pending.

For the Respondent (State)

The Standing Counsel for the State, Mr. G. Mohanty, supported by Advocates Mr. C. Mishra and Mr. A.P. Bose, argued that the petitioner ought to have availed the alternative statutory remedy of appeal under Rule 42 of the OSS Rules or revision before the Board of Revenue under Section 32 of the OSS Act, and that the writ application was not maintainable where disputed questions of fact were involved. It was contended that, because a civil suit (S.A. No. 123 of 2019) and a criminal case (Capital P.S. Case No. 51 of 2020) were pending before competent forums, the Tahasildar rightly refrained from entertaining the mutation claim to avoid multiplicity of proceedings. The respondent further asserted that the validity of the e-auction notice, reserve price and sale certificate is directly under challenge before the DRT in S.A. No. 123 of 2019, and that a criminal case alleging fraud in the mortgage creation is under active investigation, making any correction of the record of right premature and improper.

The Court's Analysis

The Court first addressed the maintainability of the writ application. It noted that, while an appeal under Rule 42 of the OSS Rules and a revision under Section 32 of the OSS Act are available, the petitioner had not availed those remedies. However, relying on the principle that a pure question of law can be entertained by a writ court even when an alternative remedy exists, the Court framed the issue as a pure question of law: whether a duly registered sale certificate can be ignored solely because of a pending SARFAESI appeal. The Court held that the question is indeed one of law and that a detailed factual investigation is unnecessary.

Turning to the merits, the Court examined the scope of mutation proceedings under the OSS Act and Rules. It emphasized that mutation is a fiscal exercise intended to update the Record of Rights for revenue purposes and that, under settled law, an entry in the record of rights neither creates nor extinguishes title over land. The Court cited the principle that mutation does not confer title, and therefore the Tahasildar is not required to adjudicate on the validity of underlying transactions when processing a mutation request.

The Court then distinguished between a document being under challenge and a document having been set aside by a competent forum. It observed:

“There is a distinction between a document being under challenge and the document having been set aside by a competent forum. Unless and until the competent forum adjudicates on the challenge and invalidates the sale certificate, the same continues to remain an operative document evidencing the sale in favour of the petitioner.”

Accordingly, the mere pendency of an appeal under Section 17 of the SARFAESI Act does not automatically invalidate the sale certificate; the certificate remains operative until the DRT, after adjudication, sets it aside. The Court further noted that the pendency of a criminal case (Capital P.S. Case No. 51 of 2020) does not, by itself, furnish a lawful ground to reject a mutation claim in the absence of any order restraining mutation or affecting the operation of the sale certificate.

The Court criticized the Tahasildar’s reliance on Bhimabai Mahadeo Kambekar v. Arthur Import and Export Co. & Ors., pointing out that the Supreme Court’s observation in that case was made in the specific factual context of civil suits relating to land and does not establish an immutable rule that mutation must remain pending whenever a civil suit is pending. The Court stressed that the decision must be understood in its factual milieu and that the settled principle remains that mutation does not create or extinguish title.

Consequently, the Court found that the Tahasildar committed an error of law by rejecting the mutation claim solely on the ground of the pending SARFAESI appeal and the criminal case. The impugned order dated 20.09.2025 was deemed unsustainable and liable to be quashed.

The Verdict

The petitioner succeeded. The Court set aside the impugned order dated 20.09.2025 and restored the order dated 07.07.2020 passed by the Tahasildar, Ghatagaon, which had allowed the mutation and directed correction of the Record of Rights in favour of the petitioner. The Tahasildar is directed to give effect to the restored order by making the necessary correction in the ROR without further delay and, in any event, not later than two weeks from the date of production of a certified copy of this judgment by the petitioner. The Court clarified that such correction shall not be construed as an adjudication or declaration of title in favour of the petitioner. As for the fraudulent sale deeds executed by Opposite Party No.3, the Court refrained from adjudicating their validity in the present proceeding, leaving the parties to pursue their remedies before the competent forum.

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