Tamil Nadu Registration Rules cannot bar registration of previously attached or mortgaged properties: Madras High Court

The Madras High Court recently held that a sub-registrar or any other concerned State government authority cannot refuse to register the sale certificate of a property merely on the ground that such property had previously been mortgaged or attached. .Justice N Sathish Kumar struck down the first proviso to Rule 55A(i) of the Tamil Nadu Registration Rules, which had empowered sub-registrars to refuse the registration of any document related to immovable properties if the latter had been mortgaged or attached or a sale or lease agreement existed over them. The proviso provided that such a bar on registration would continue until the time limit for filing a suit against such mortgage, attachment etc. was over. .The High Court said that Rule 55A(i), a subordinate legislation that came into effect on September 5, 2022, was "ex facie in conflict" with the provisions of the Parent Act and Transfer of Property Act, 1982 as well as Constitutional rights extended to property owners. Rule 55A (i) mandated that sale deeds or any other document pertaining to properties that have been mortgaged or attached, or, were the subject of sale or lease agreements, could only be registered after the lapse of the time limit for filing a civil suit, or, after the attachment was raised. This was despite the fact that Sections 48 and 56 of the Transfer of Property Act, 1982, permitted owners to deal with mortgaged or leased properties. Justice Kumar therefore, said that the Tamil Nadu Rules were, in effect, nullifying the above provisions of the 1982 Act. "The first proviso to Rule 55-A is clearly illegal and vitiated by a clear abuse of power," the High Court said, adding that such proviso had been introduced without any application of mind."Normally, a subordinate legislation like a rule is authorized by a substantive provision of law. However, this is a unique case where a rule is authorized by another rule," the High Court said. The Court added that the said proviso also went against the legal position settled in the division bench decision in Ramayee v Sub-Registrar, which was subsequently affirmed by the Supreme Court. "Thus, when the legal position has already been declared by the Division Bench of this Court and has been affirmed by the Supreme Court it is not open to the Inspector General of Registration to take a contra view and notify a subordinate legislation the effect of which is to completely render nugatory to the interpretation made by this Court. Ex-facie, the first proviso to Rule 55-A (i) is clearly illegal and is vitiated by a clear abuse of power," the Court observed..The Court was hearing a plea filed by Federal Bank challenging the decision of the sub-registrar in Pollachi district, to register the sale certificate of a property. Advocate AV Radhakrishnan, who appeared for the petitioner-bank, told the Court that the bank had extended a loan to a private party and the borrower had executed a mortgage in favour of the bank by depositing the title deeds of the property in question. When the borrower failed to repay the loan, the bank declared it as a non-performing asset, and as per procedure, auctioned the property and sold it to the highest bidder. However, when the bank approached the sub-registrar for the registration of the sale certificate of the auctioned property, the latter refused to do so on the ground that the said property had previously been attached under the GST Act. The petitioner argued that the attachment under the Goods and Services Tax Act (GST Act) was a provisional one, and had already lapsed. Special Government Pleader Yogesh Kannadasan, who appeared for the TN government authorities, told the Court that as per Rule 55A, if any property is attached or mortgaged or lease agreement is entered into, the sale deed cannot be registered. .The High Court, however, refused to accept such submission and said that since it held that the first proviso to Rule 55-A had been found to "be invalid and ultra vires, the respondent cannot refuse to register the document placing reliance on the aforesaid proviso."It directed the concerned authorities to register the sale certificate of such property within 15 days from the date of the order..[Read Judgment]