The Andhra Pradesh High Court has reaffirmed the primacy of secured creditors under the SARFAESI Act, holding that a validly registered mortgage created prior to a civil court attachment cannot be invalidated by subsequent attachment orders. This judgment clarifies the legal obligation of Sub-Registrars to register sale certificates issued under SARFAESI proceedings, even when properties are listed as prohibited due to pending civil litigation.
Background & Facts
The Dispute
The petitioner, IKF Finance Limited, a non-banking financial company, extended a business loan of Rs. 8.50 Crores to Andhra Pradesh State Government Employees Mutually Aided Co-operative House Building Society Limited (Respondent No. 3), with co-borrowers including Respondents No. 4 to 7. The loan was secured by a mortgage on Plot No. 765, registered on 22.04.2021 and 20.11.2020. The mortgage was duly recorded with the Sub-Registrar’s office.
Key Facts
- The loan account was classified as a Non-Performing Asset (NPA) on account of default by the borrowers.
- A demand notice under Section 13(2) of the SARFAESI Act was issued on 13.03.2023.
- A public auction notice was issued on 21.04.2025.
- Respondent No. 9, the auction purchaser, deposited the full sale consideration and received a sale certificate dated 30.05.2025.
- The sale certificate was presented for registration at the Sub-Registrar’s Office, Ibrahimpatnam, NTR District.
- Registration was refused on the ground that Plot No. 765 was included in a prohibited list due to an attachment order dated 28.09.2022 in O.S. No. 121 of 2022, filed by Respondent No. 8.
- The civil suit was filed in March 2022, after the mortgage was created.
- Respondent No. 8, the plaintiff in the civil suit, was not impleaded as a party to the mortgage transaction.
- The petitioner submitted a written request dated 17.06.2025 to the Sub-Registrar, referencing a prior High Court order in W.P. No. 3908 of 2022 directing registration of SARFAESI sale certificates despite attachments.
Procedural History
- 20.11.2020: First mortgage registration in favour of petitioner.
- 22.04.2021: Second mortgage registration confirmed.
- March 2022: O.S. No. 121 of 2022 filed by Respondent No. 8 against Respondents No. 3 to 6.
- 28.09.2022: Attachment order passed by Additional District and Sessions Judge, Vijayawada.
- 13.03.2023: Demand notice issued under SARFAESI Act.
- 21.04.2025: Public auction notice issued.
- 27.05.2025: Memorandum of Understanding executed for private treaty sale.
- 30.05.2025: Sale certificate issued to Respondent No. 9.
- 17.06.2025: Written request submitted to Sub-Registrar for registration.
- 09.07.2025: Amendment to Registration Act incorporating Section 22C came into force.
- 23.04.2026: Judgment delivered by the High Court.
The Parties' Positions
For the Petitioner
- The mortgage was created and registered before the attachment order.
- Section 26E of the SARFAESI Act mandates that secured creditor claims take priority over all other debts.
- The sale was conducted in full compliance with the SARFAESI Act and the Security Interest (Enforcement) Rules, 2002.
- The refusal to register the sale certificate violates established precedents, including City Union Bank Limited v. Sub-Registrar, Peddapalli.
- The presentation of the sale certificate was made before the amendment to the Registration Act on 09.07.2025.
For the Respondents
- The property is listed as prohibited due to the subsisting attachment order dated 28.09.2022.
- Section 22C of the Registration Act, as amended on 09.07.2025, empowers Sub-Registrars to refuse registration of properties under attachment.
- The sale certificate was not formally presented for registration in a manner compliant with the amended law.
Relief Sought
The petitioner sought a direction to the Sub-Registrar to register the sale certificate dated 30.05.2025, and to declare that refusal on grounds of subsequent attachment is illegal. The petitioner also sought a general direction for future registrations under similar circumstances.
The Legal Issue
The central question was whether a Sub-Registrar can refuse to register a sale certificate issued under the SARFAESI Act on the ground of a subsequent attachment order, when the mortgage in favour of the secured creditor was created and registered prior to such attachment, and when the sale certificate was presented for registration before the amendment to the Registration Act came into force.
Arguments Presented
For the Petitioner
The petitioner relied on City Union Bank Limited v. Sub-Registrar, Peddapalli and M/s IKF Finance and Investments Limited v. State of Andhra Pradesh to argue that a prior mortgage takes precedence over a subsequent attachment under Section 26E of the SARFAESI Act. It was submitted that the sale certificate was presented on 17.06.2025, well before the amendment to Section 22C of the Registration Act on 09.07.2025, and therefore the law prevailing at the time of presentation must apply. The petitioner further cited the High Court’s order in W.P. No. 3908 of 2022, which directed Sub-Registrars to register SARFAESI sale certificates without objection to attachments. The argument emphasized that the civil suit was collusive and deliberately omitted the secured creditor.
For the Respondent
The respondents contended that the amendment to the Registration Act, effective 09.07.2025, introduced Section 22C, which permits refusal of registration for properties under attachment. They argued that the sale certificate was not properly presented for registration and that the property remained in the prohibited list. They further asserted that the amendment, even if prospective, created a new legal barrier that must be respected.
The Court's Analysis
The Court examined the timeline of events and the applicable law at the time of presentation of the sale certificate. It noted that the mortgage was created on 22.04.2021, while the attachment order was passed on 28.09.2022 - clearly subsequent. The Court held that the principle of prior in tempore, potior in jure applies: a prior mortgage prevails over a subsequent attachment.
"As on the date of presenting the sale certificates, there is no provision in the Registration Act which enables the Sub-Registrar or Joint Sub-Registrar to refuse registration on the ground of subsistence of an order of attachment passed before judgment by a civil Court."
The Court emphasized that the amendment to Section 22C of the Registration Act, effective 09.07.2025, has no retrospective effect. Since the sale certificate was presented on 17.06.2025, the law applicable was the pre-amendment regime, under which no statutory bar existed to registration on grounds of attachment. The Court relied on its own Division Bench judgment in W.P. Nos. 13040 of 2025 and batch (dated 04.02.2026), which had squarely held that refusal of registration on such grounds is legally unsustainable.
The Court further rejected the respondent’s argument that the sale certificate was not presented, noting the written communication dated 17.06.2025 and the clear refusal by the Sub-Registrar on the basis of attachment - which constitutes a de facto presentation. The Court observed that the civil suit was filed after the mortgage and that the secured creditor was not impleaded, indicating possible collusion.
The Court declined to issue a blanket direction for future registrations, holding that each case must be decided on its own facts.
The Verdict
The writ petition was allowed. The Court directed the Sub-Registrar to register the sale certificate dated 30.05.2025 in favour of Respondent No. 9, upon deposit of the requisite stamp duty and registration charges. No costs were awarded. The order was passed on 23.04.2026.
What This Means For Similar Cases
Prior Mortgage Trumps Subsequent Attachment
- Practitioners must assert that any attachment order issued after a registered mortgage cannot override the secured creditor’s rights under Section 26E of the SARFAESI Act.
- Sub-Registrars cannot refuse registration of SARFAESI sale certificates on grounds of post-mortgage attachments, provided the mortgage was registered before the attachment.
Timing of Presentation Determines Applicable Law
- The law in force on the date of presentation of the sale certificate governs registration, not the law in force at the time of auction or sale.
- If a sale certificate is presented before the effective date of a restrictive amendment (e.g., Section 22C of the Registration Act), the pre-amendment law applies.
- Practitioners must document and preserve proof of presentation (e.g., written requests, receipts, correspondence) to rebut claims of non-presentation.
Procedural Compliance Is Non-Negotiable
- Even if a property is listed as prohibited, the Sub-Registrar has no discretion to refuse registration if the mortgage predates the attachment and the sale was conducted under SARFAESI.
- Courts will not entertain objections raised by third parties who were not parties to the mortgage transaction.
- This judgment reinforces the need for secured creditors to act swiftly and document all steps under SARFAESI to preserve priority rights.
