Can a provisional attachment, passed long after the creation of a mortgage, override a secured creditor’s statutory right and justify refusal of registration?

This question has raised a practical urgency as the Sub-Registrars refuse to register sale certificates, citing provisional attachments or attachment-before-judgment orders passed by civil courts, often invoking section 22-C (3) of the AP State amendment under the Registration Act, 1908.

In recent years, a recurring conflict has emerged at the intersection of civil litigation, banking recovery, and land administration. Banks and financial institutions, after enforcing their security interests under the SARFAESI Act, successfully auction mortgaged properties and issue sale certificates to auction purchasers. Yet, at the final and seemingly routine stage of getting the registration done, the process comes to an abrupt halt.

This administrative standstill has serious consequences. Auction purchasers are left with paper titles they cannot perfect, which is a demotivating aspect in auction purchases. When a sale certificate issued pursuant to an auction is met with refusal of registration by the authority, the entire object of the SARFAESI Act, which is a special legislation, gets defeated. The process which starts by issuance of notice for repayment traverses through multiple stages and culminates at auction, and issuance of sale certificate of mortgaged property for the purpose of recovery of secured credit comes to a halt at its very final stage, creating a fear in the mind of prospective bidders during such auctions where they are demotivated to invest money in the purchase of such assets as both the financial institutions as well as the purchasers are unaware or have no mechanism to ascertain the subsistence of attachment orders by civil courts over such properties.

This article examines that question by reading the CPC, the Transfer of Property Act, the SARFAESI Act, and the Registration Act together, and argues that procedural tools cannot be allowed to defeat vested substantive rights.

The attachment before judgment under Order XXXVIII Rule 5 of the Code of Civil Procedure is a preventive device. Its purpose is limited to restrain a defendant from dissipating property so as to defeat a possible decree. Crucially, an attachment, whether before or after judgment, does not create ownership, title, or any proprietary interest in the property. The property is merely brought under the custody of the court, restricting the judgment-debtor’s freedom to deal with it.

Similarly, Order XXXVIII Rule 10 makes this explicit as it states that attachment before judgment shall not affect the rights of people who had an interest in the property prior to the attachment. In other words, attachment does not create any new rights; it only preserves the property subject to existing rights.

A civil court attachment, therefore, operates only on the interest actually held by the defendant at the time of attachment. If the property is already mortgaged, the attachment can attach only to the residual interest remaining with the mortgagor. It cannot override a prior mortgage.

Section 58 of the Transfer of Property Act, 1882, defines a mortgage as a transfer of an interest in specific immovable property to secure repayment of a debt. This is not a mere contractual arrangement. It is a proprietary right that attaches to the property itself.

Once a mortgage is created, the mortgagee acquires an enforceable interest in the property, not only against the mortgagor but against the world at large, subject to prior encumbrances. The mortgagor thereafter retains only the equity of redemption, that is, the residual interest after accounting for the mortgage.

This distinction is often overlooked in civil litigation. Plaintiffs proceed on the assumption that the defendant owns the property absolutely, ignoring the fact that ownership has already been partially transferred through the mortgage. What remains with the borrower is only the equity of redemption. Accordingly, when a civil court orders attachment, it can attach only what the defendant actually owns at that point. It cannot dilute or displace the rights of a mortgagee whose interest was created earlier. The priority of the mortgage is inherent in its nature as a transfer of interest.

The SARFAESI Act, 2002, was enacted to address systemic delays in the recovery of secured debts. It enables banks and financial institutions to enforce security interests without court intervention, thereby ensuring speed and certainty.

The two provisions are particularly relevant for this issue was Section 35 gives the Act an overriding effect over all other laws. Additionally, Section 26-E, introduced later, explicitly accords priority to secured creditors over all other debts, claims, and encumbrances, provided the security interest is registered.

Together, these provisions elevate the rights of secured creditors from contractual claims to statutorily protected priorities. Allowing a subsequent civil attachment to obstruct enforcement under SARFAESI would directly undermine the purpose of the Act. Such an interpretation would render statutory recovery mechanisms vulnerable to procedural orders passed in parallel litigation, defeating legislative intent.

The Registration Act, 1908, is fundamentally procedural law. It regulates the manner in which documents are recorded and made available for public records. It does not determine title or adjudicate competing claims.

Registering Officers are not vested with adjudicatory powers. Their role is to ensure compliance with statutory formalities, not to resolve disputes over priority or validity of rights.

State amendments such as Section 22-C(3) empower governments to notify certain classes of documents as non-registrable in the interest of public policy, primarily to curb fraud. However, this power is increasingly being invoked to refuse registration of SARFAESI sale certificates merely because a provisional civil attachment exists.

This approach stretches Section 22-C beyond its legitimate scope. The Registrar is neither competent nor authorised to determine whether an attachment overrides a mortgage. The Registration Act does not override SARFAESI, nor does it permit registrars to negate statutory sales conducted under a special law.

This core conflict crystallises at the registration counter. The bank has lawfully enforced its security, conducted an auction, and issued a sale certificate. The Sub-Registrar refuses registration, citing a civil attachment. And here comes the only way to resolve such a conflict: harmonious construction of these acts.

Each statute operates in its own domain, just like the CPC governs civil procedure, the Transfer of Property Act defines proprietary interests, the Registration Act prescribes formalities and the SARFAESI Act provides a special mechanism for enforcement of security and recovery of money.

When read together, they form a coherent framework. Procedural provisions cannot be interpreted to extinguish substantive rights and the Courts have consistently held that procedure is a handmaiden of justice, not its master.

Section 22-C does not empower registrars to nullify SARFAESI sales or elevate provisional attachments over prior mortgages. Registrars must act within the limited scope of their authority.

Judicial decisions across jurisdictions consistently hold that the attachment does not create proprietary rights. Prior mortgages prevail over subsequent attachments. Further, SARFAESI sale certificates are entitled to registration. Furthermore, Registrars cannot assume adjudicatory roles. Civil attachments fall away upon lawful enforcement of security. The judicial position is clear and settled.

High Courts have consistently held that SARFAESI proceedings cannot be stalled or diluted by subsequent civil court attachments. In Exxella Infraprojects Private Limited & Another v. The State of AP & Others, City Union Bank Ltd. v. Sub-Registrar, Peddapalli and Karur Vysya Bank Ltd. v. Sub-Registrar, it was categorically held that attachments obtained after creation of a mortgage do not affect the secured creditor’s right to enforce the security or obtain registration of the sale certificate.

Beyond doctrine, the implications can be considered serious. Uncertainty discourages the auction bidders, depresses auction values, delays recovery, and undermines confidence in secured lending. Purchasers are left with unusable assets. Banks suffer impaired recoveries. Allowing procedural obstacles to defeat secured credit runs counter to India’s economic and regulatory objectives.

Hence, a prior mortgage creates a real proprietary interest, whereas a provisional attachment does not. Enforcement under the SARFAESI Act merely gives effect to this pre-existing right. Neither subsequent civil court orders nor objections raised at the registration stage can lawfully defeat it. A harmonious reading of the CPC, the SARFAESI Act, and the Registration Act makes it clear that refusal to register SARFAESI sale certificates on the basis of provisional attachments is legally untenable. Security must mean certainty; otherwise, procedure becomes an instrument of injustice. The continued refusal to register sale certificates gravely prejudices banks and financial institutions, undermines recovery from secured assets, and defeats the very purpose of SARFAESI, calling for urgent interpretative or legislative clarification of Section 22-C of the Registration Act, 1908.

About the authors: Tagore Yaragorla is a Partner and Sanskriti Sinha is an Associate at TLH, Advocates & Solicitors.

Disclaimer: The opinions expressed in this article are those of the author(s). The opinions presented do not necessarily reflect the views of Bar & Bench.

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