INDIAN OVERSEAS BANK THR. AUTHORISED OFFICERversusSTATE OF MAHARASHTRA THR. SECRETARY AND ORS

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                                       IN THE HIGH COURT OF JUDICATURE AT BOMBAY
                                               CIVIL APPELLATE JURISDICTION

                                             WRIT PETITION NO. 10120 OF 2022
                                                          WITH
                                           INTERIM APPLICATION NO. 427 OF 2026


                      Indian Overseas Bank
                      (Through its authorised officer)
                      5th Floor, Maker Tower-E,
                      Cuffe Parade, Mumbai- 400 005.                              …Petitioner
                                   vs.
                      The State of Maharashtra and Others                        ..Respondents

                      Mr. Cyrus Ardheshir, Senior Advocate a/w. Ms. Nandita Bajpai, Mr. Babu
                      i/b. Mr. Yogesh Pirthani, for petitioner.
                      Ms. Kavita Solunke, Addl.G.P. a/w. Smt. M.S. Bane, AGP for Respondent
                      Nos. 1, 3 and 4.

VISHAL                                            CORAM :      MANISH PITALE &
SUBHASH                                                        SHREERAM V. SHIRSAT, JJ.
PAREKAR
Digitally signed by
VISHAL SUBHASH
PAREKAR
Date: 2026.09.11
                                             RESERVED :         10th AUGUST, 2026
18:04:02 +0530
                                             PRONOUNCED : 11th SEPTEMBER, 2026
                                                        -------------

                      JUDGMENT : (Per Shreeram Shirsat, J.)


                      1.        By this petition, the petitioner, a secured creditor, is seeking to

                      quash the auction sale dated 7th April 2018 conducted by respondent

                      Nos. 3 and 4 with respect to the sale of the parcel of land bearing Survey

                      No. 43/1/B. Inter alia, the petitioner is also seeking directions to

                      respondent Nos. 3 and 4 to restore the rightful control and possession of

                      the parcel of land bearing Survey No. 43/1/B in favour of the Petitioner.


                      Vishal Parekar                                                    ...1
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2.        Before adverting to the rival submissions, it would be apposite to

narrate the description of the parties who have been arrayed as

Respondents in the petition and then to enumerate brief facts leading to

the filing of this Petition.

3.        The Respondent no 1 is the State of Maharashtra. Respondent no

2 is the general manager, District Industries Centre functioning under

the Directorate of Industries under the Government of Maharashtra.

Respondent no 3 is the Tahsildar, Taluka Khalapur district Raigad, who

conducted the auction of the subject land. Respondent no 4 is the Talati,

Kumbhavali Village, Taluka, Khalapur, District Raigad and Respondent

no 5 is the borrower, who had availed financial facility from the

petitioner Bank and had also a mortgaged the subject land with the

Petitioner Bank.

4.        In the year 2007, the petitioner had sanctioned financial facilities

to respondent No. 5, which were secured by way of equitable mortgage

by deposit of title deeds of the immovable property. The original title

deeds of the immovable properties were deposited with the petitioner,

and the charge was registered before the Registrar of Companies on 31st

January 2007 as and by way of public notice. As respondent No. 5

defaulted in making repayment of the financial facilities, the account of

respondent No. 5 was classified as NPA on 31 st December 2010.


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Thereafter,      the   petitioner   bank   proceeded   further   under       the

Securitisation and Reconstruction of Financial Assets and Enforcement of

Security Interest Act, 2002 (SARFAESI Act, 2002) and issued notice

under Section 13(2) of the Act on 28th September 2012.

5.        Thereafter, notice of possession dated 20th December 2012 under

Section 13(4) of the SARFAESI Act was also issued. In furtherance of the

said measures, the petitioner sold the mortgaged property in favour of

M/s. Kaushal Metal and Steel Private Limited and M/s. TGK Special

Steel Private Limited by way of auction. The said auction was held on

26th November 2021, and the sale certificate was issued on 22nd

February 2022 in respect of the entire parcel of land and the possession

was handed over in respect of the same. However, the petitioner bank

could not hand over the control with respect to the parcel of land

bearing Survey No. 43/1/B.

6.        The learned counsel for the petitioner submitted that while

executing the documents after issuance of sale certificate in favour of the

successful auction purchaser, the petitioner bank found that the survey

numbers of the parcel of land were different in the records of the Talathi

office (respondent No. 4) as compared with the original title deeds

deposited with the petitioner bank. Further inquiry revealed that the

new survey numbers were allotted in place of old survey numbers, and


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hence the discrepancy was found in the records.

7.        It was further submitted that when the petitioner carried out a

detailed inspection in the office of the Talathi, Khalapur, it was revealed

that the old Survey No. 46/1/2 has been allotted a new Survey No. as

43/1/B with no change in the area measurement, and the said property,

of which the original title deed was with the petitioner, had been

auctioned by the Tahsildar, Khalapur, and the name of respondent No. 5

was deleted and instead the name of the State of Maharashtra was

mutated in that place under the heading of "Clan, Vol. and Other Rights".

It was further submitted that the encumbrance was created in the name

of respondent No. 2, i.e the Financial Corporation, District Industries

Centre, Raigad, for an amount of Rs. 2,68,99,000/-. It was further

noticed that respondent No. 3, had received a letter from the Collector's

office, Raigad-Alibag, to recover an amount of Rs. 2,68,99,000/- owed

by respondent No. 5 to respondent No. 2 as arrears of land revenue in

terms of MLR Code, 1966.

8.        It was further submitted that after taking an in-depth survey, the

petitioner learnt that on 7/4/2018 the respondent No. 3, had held an

auction in respect of the said land. However, as no bids were received at

the said auction, the Talathi, as authorized by the State Government,

caused to transfer the same to Respondent No. 2 for a nominal bid of Rs.


Vishal Parekar                                                   ...4
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1/-, which was recovered by respondent No. 3.

9.        The Ld. Counsel further submitted that the auction was held

during the subsistence of enforcement measures under the SARFAESI

Act, which were already initiated by the petitioner bank, especially when

the possession in respect of the entire parcel of land was taken by way of

notice of possession dated 20th December 2012.

10.       The learned counsel for the petitioner, by way of an additional

affidavit, has placed on record the CERSAI registration certificate

wherein the date of registration is shown as 14th February 2015 and

submitted that case of the Petitioner is fully covered by the judgment of

the Full Bench in the case of Jalgaon Janta Sahakari Bank Limited vs.

Joint Commissioner of Sales Tax.

11.       Respondent No. 3 has filed an affidavit-in-reply. It is contended

that respondent No. 2 had requested the Collector, Raigad, vide letter

dated 23rd October 2012, about the recovery of government dues of Rs.

2,68,99,000/- from respondent No. 5, and accordingly the Collector,

Raigad, vide letter dated 3rd November 2012, directed respondent No. 3,

(Tahsildar, Khalapur), to recover the said government dues from

respondent No. 5. It is further contended that respondent No. 3, vide

letter dated 16th November 2012, directed the Talathi, Saza Madap,

Taluka Khalapur, to serve the notice to respondent No. 5 with respect to


Vishal Parekar                                                  ...5
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the recovery of the government dues. After the service of notice,

respondent No. 5 failed to deposit the amount as mentioned in the

notice, and therefore the Tahsildar (respondent No. 3), vide letter dated

8th February 2013, directed the Circle Officer, Vavoshi, to seize properties

of respondent No. 5 as per Rule 11 of the Maharashtra Realisation of

Land Revenue Rules, 1967, and to record encumbrance of the said

amount of Rs. 2,68,99,000/- in the other rights column of 7/12 extract

of the said lands.

12.       It is further contended that the Circle Officer, Vavoshi, accordingly

seized the said lands and recorded encumbrance of the said amount of

Rs. 2,68,99,000/- in the other rights column of 7/12 extracts of the said

lands and submitted a report to the Tahsildar, Khalapur. It is further

contended that thereafter auction of the said lands was scheduled on 7 th

April 2018. As no other person except Circle Officer, Vavoshi, and

Talathi, Madap, were present, who on behalf of the government, took

part in the said auction scheduled on 7 th April 2018, the Talathi, Madap,

purchased the lands on behalf of the government for a nominal price of

Re. 1/-, and the Respondent No 3 issued purchase certificate dated 7 th

April 2018 in the name of Government of Maharashtra as per Rule 14-B

of the Maharashtra Realisation of Land Revenue Rules, 1967. Thereafter,

respondent No. 3, vide mutation entry No. 1959 dated 16 th April 2018,


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recorded the name of Government of Maharashtra in the occupant's

column of the said 7/12 extract of the said land bearing Survey No.

46/1/B. It was therefore contended that in the facts and circumstances

of the case, the petitioner is not entitled to claim any relief and prayed

that the petition be dismissed.

13.       The petitioner has also filed an affidavit-in-rejoinder and has

contended that the petitioner bank holds the first and prior charge over

the mortgaged property, and the sale of mortgaged property conducted

by respondent No. 3 is void ab initio and not in conformity with the

provisions of the SARFAESI Act.

14.       The learned counsel for the petitioner also submitted that in the

present case, the schedule property Old Survey No 46/1/2 (new number

43/1/B) has not been attached, as in the panchanama dated

08/02/2013 relied upon by respondent No. 3, there is no description of

the property 46/1/2(old) as having been attached.

15.       The Ld. Counsel submitted that as per Section 26E of the Act,

2002, the Petitioner, who is a secured creditor, has priority over all other

debts and all revenues, taxes and cesses and other rates to be payable to

the Central or State Government or local authority.

16.       We have considered the rival submissions and before we proceed

to consider the same and dispose of the writ petition, it would be


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necessary to refer to the relevant paragraphs of the Full Bench judgment

of this Court in the case of Jalgaon Janta Sahakari Bank (supra). In

paragraph 85 of the said judgment, this Court held as follows:-

                 “85.       Priority means precedence or going before (Black’s
                 Law Dictionary). In the present context, it would mean the
                 right to enforce a claim in preference to others. In view of the
                 splurge of ‘first charge’ used in multiple legislation, the
                 Parliament advisedly used the word ‘priority over all other
                 dues’ in the SARFAESI Act to obviate any confusion as to inter-
                 se distribution of proceeds received from sale of properties of
                 the borrower/dealer. If a secured asset has been disposed of by
                 sale by taking recourse to the Security Interest (Enforcement)
                 Rules, 2002 it would appear to be reasonable to hold,
                 particularly having regard to the non-obstante clauses in
                 sections 31 B and section 26E, that the dues of the secured
                 creditor shall have ‘priority’ over all other including all
                 revenues, taxes, cesses and other rates payable to the Central
                 Government or State Government or local authority.”



17.       In the facts of the this case it will be pertinent to refer to

Paragraphs 151 to 154 as also paragraphs 297 to 300 of the said Full

Bench judgment, which read as follows:-

                 “151.      However, there could be attachments orders which
                 might have been issued much prior to giving effect to the 2011
                 Rules, as amended. In respect of such orders of attachment, we
                 consider it appropriate to express our views.
                 152.       The procedure to be followed in terms of the CPC
                 when an immovable property is put up for auction sale to
                 satisfy a decree of the court is to be found in Order 21, rules
                 54 and 66 of the CPC. It is mandatory for the court executing
                 the decree, to comply with the following stages before such
                 property is sold in execution of a particular decree :
                 (a) attachment of the immovable property;
                 (b) proclamation of sale by public auction;
                 (c) sale by public auction.
                    At each stage of the execution of the decree, when a
                 property is sold, it is mandatory that notice shall be served
                 upon the person whose property is being sold in execution of


Vishal Parekar                                                                 ...8
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                 the decree, and any property which is sold, without notice to
                 the person whose property is being sold, is a nullity and all
                 actions pursuant thereto are liable to be struck down/quashed.
                 However, the proceedings before us do not concern execution
                 of any decree.

                 153.      In these proceedings we are as much concerned with
                 proclamation itself as much with attachment. Insofar as
                 recovery pursuant to the MLR Code is concerned, not only the
                 provisions contained therein but also the provisions contained
                 in the 1967 Rules are to be complied with. Simply ordering an
                 attachment is not enough; a proclamation has to be issued in
                 the prescribed form and such proclamation must be made
                 public by beating of drum and such other mode as specified in
                 section 192 of the MLR Code and rule 11(2) of the 1967 Rules
                 before the property attached is sold.

                 154.       We are of the considered opinion, on facts and in the
                 circumstances, that unless attachment of the defaulter's
                 immovable property is ordered in the manner ordained by the
                 MLR Code and as prescribed by the MRLR Rules and due
                 proclamation thereof is made, even the creation of charge on
                 such immovable property may not be of any real significance,
                 not to speak of demonstrating with reference to evidence that
                 the transferee had actual or constructive notice of such charge.
                 If there has been an attachment and a proclamation thereof
                 has been made according to law prior to January 24, 2020 or
                 September 1, 2016, i. e., the dates on which Chapter IV-A of
                 the SARFAESI Act and section 31B of the RDDB Act,
                 respectively, were enforced, the Department may claim that its
                 dues be paid first notwithstanding the secured dues of the
                 secured creditors; but in the absence of an order of attachment
                 being made public in a manner known to law, i. e., by a
                 proclamation, once Chapter IVA of the SARFAESI Act or section
                 31B, as the case may be, has been enforced, the dues of the
                 secured creditor surely would have “priority”. In other words,
                 if the immovable property of the defaulter is shown to have
                 been attached in accordance with law prior to Chapter IVA of
                 the SARFAESI Act, or for that matter section 31B of the RDDB
                 Act, being enforced, and such attachment is followed by a
                 proclamation according to law, the “priority” accorded by
                 section 26E of the former and section 31B of the latter would
                 not get attracted.
                 …….        ……………

                 297.      A question that comes to the fore is whether the
                 petitioner would be deprived of the right of priority in
                 payment on account of the measures initiated by the
                 respondents before the registration of the security interest with


Vishal Parekar                                                                  ...9
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                 the CERSAI ?

                 298. Two affidavits in reply are filed on behalf of the
                 respondents. In the first affidavit filed by Mr. Pradeep G. Kadu,
                 Joint Commissioner of State Tax, the claim of the petitioner is
                 resisted on the ground that the Department had lodged its
                 claim with the petitioner-bank before the 2016 Amending Act.
                 In the affidavit in reply filed by Mr. Prasad Joshi, Joint
                 Commissioner of State Tax, it is contended that a demand
                 notice was issued to K. K. Steel on February 29, 2016, levying
                 a demand of Rs. 1,08,91746 for the period April 1, 2010 to
                 March 31, 2011. When it was noticed that the auction sale
                 notice was published by the petitioner on June 6, 2016, the
                 Department apprised the petitioner by a letter dated July 7,
                 2016 that K. K. Steel owed sales tax dues to the tune of Rs.
                 1,62,58,945 plus interest thereon. The petitioner was directed
                 to take note of the “first charge” and make a full disclosure to
                 the prospective purchasers. It was further affirmed that on
                 June 30, 2016, the Department had informed the Chairman of
                 the Heritage Co- op. Housing Society Ltd. as well to take note
                 of the first charge and to not permit transfer of the secured
                 asset, without NOC from the Department.

                 299.      The aforesaid correspondence emanating from the
                 Department, at best, shows that the Department had levied a
                 demand of the sales tax dues on the proprietor of K. K. Steel,
                 the borrower, and asserted that under section 37 of the MVAT
                 Act, the State had first charge on the asset of the assessee. In
                 the two affidavits filed on behalf of the respondents, what is
                 conspicuous by its absence is the assertion that the
                 respondents had ordered attachment of the secured asset in
                 conformity with the provisions of MLR Code and the MRLR
                 Rules. No endeavour was made by the respondents to show
                 that the warrant of attachment and order of attachment were
                 issued and there was a proclamation of the attachment order.

                 300.        Likewise, the Sales Tax Commissioners did not claim
                 that they registered the claim with the CERSAI to adhere to the
                 mandate contained in section 26B(4) of the SARFAESI Act.
                 Non-registration of the claim and/or order of attachment
                 entails the consequences envisaged by sub-section (2) of
                 section 26C of the SARFAESI Act. Thus, dual disability sets in.
                 First, in the absence of material to show that the first charge
                 under section 37 of MVAT Act was enforced by a valid
                 attachment order before the registration of security interest by
                 the petitioner with the CERSAI, the petitioner cannot be
                 deprived of the right of priority under section 26E of the
                 SARFAESI Act. Secondly, with the registration of the security
                 interest with the CERSAI on July 9, 2020, coupled with the


Vishal Parekar                                                                 ...10
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                 absence of registration of the Department's demand and/or
                 order of attachment, the claim of the respondents becomes
                 subservient to the right of the secured creditor.”


18.       In the present case, as noted hereinabove, there is no averment in

the affidavit in reply as to whether the Respondent No 3 had at any

point of time registered with CERSAI. The affidavit is conspicuously

silent about any CERSAI registration. The affidavit in reply also does not

indicate any further action taken beyond the attachment of the property,

like beating of drum or other customary mode or its copy being affixed

on some conspicuous part of the secured asset and also on the notice

board of the concerned Talathi office as noted in paragraphs 152 and

153 of the Full Bench judgment. Therefore, in our view, in the facts of

the present case, by simply attaching the property and taking no steps

towards proclamation in the manner as required, for recovery of dues,

would not give priority to the said dues over the dues of the secured

creditor like the petitioner under the provisions of the Securitisation Act.


19.       We, therefore, see no reason to deny the benefit of the said

judgement to the petitioner herein, which is admittedly a secured

creditor and is seeking to recover its dues under the provisions of the

Securitisation Act in accordance with law. In such a situation, the

encumbrance / charge shown on the said property by the respondent

No.3 ought not to prevail over the charge of the petitioner as a secured

Vishal Parekar                                                          ...11
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creditor. Therefore, we are inclined to allow the writ petition.


20.       It is made clear that the writ petition being allowed does not mean

that this Court has held that respondent Nos.2 to 4 are otherwise not

entitled to recover their dues. Respondent Nos.2 to 4 can proceed in

accordance with law, but so far as priority is concerned as per the

position of law, noted hereinabove, the dues of the petitioner as secured

creditor clearly have priority over those of the said respondents.


21.       Needless to mention that the Petitioner bank having sold the

secured asset to M/s. Kaushal Metal and Steel Private Limited and M/s.

TGK Special Steel Private Limited, subject to the other compliance under

the SARFAESI Act, will get a clear title free from encumbrances claimed

by the Respondent Nos 2 to 4.


22.       In view of the above, the writ petition is allowed in terms of

prayer clause (a) and (b)


          a] This Hon'ble court be pleased to call for the Records and

          proceedings in respect of the auction proceedings conducted

          by the Respondent No.3 and 4 on 07/04/2018 for sale of the

          said parcel of land bearing as survey No.43/1/B and after

          examining the legality and propriety of the same be pleased

          to quash and set aside the said auction sale dated


Vishal Parekar                                                     ...12
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          07/04/2018 thereby declaring the transfer of the said land to

          the Respondent No.2 as Null and void.


          b] This Hon'ble Court be pleased to issue appropriate writ in

          the nature of mandamus, certiorari or such other writ and or

          direction or order under Article 226 of the Constitution of

          India, directing the Respondent No.3 and 4to restore the

          rightful control and possession of the parcel of land bearing

          Old survey no. 46/1/2 which is now renumbered as new

          survey no as 43/1/B/in favour of the petitioner who is a

          secured creditor and has original title deed of the said land

          and has a rightful charge over the said lad by way of the

          equitable mortgage.


23.       All consequential steps like deleting the Mutation Entry No 1959

dated 16th April, 2018 having the name of Government of Maharashtra

in the occupant’s column of 7/12 extract of the land bearing Survey No

43/1/B shall be taken by the Respondent No 2 to 4 within 4 weeks from

the date of the order.


24.       If the petitioner finds that after its dues are satisfied there is any

surplus amount remaining, it shall notify Respondent Nos 2 to 4

accordingly and the Respondent Nos. 2 to 4 shall be entitled to residual


Vishal Parekar                                                      ...13
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proceeds from the sale of the secured asset, if any. Needless to mention

that the Respondent Nos. 2 to 4 or the Collector’s Office Raigad-Alibaug

are free to enforce action in accordance with law against any other

assets or the properties of the Respondent No 5, as may be permissible

under law.


25.       The Writ petition stands disposed of accordingly and all other

pending applications, if any, also stand disposed of.




          (SHREERAM V. SHIRSAT, J.)              (MANISH PITALE, J.)




Vishal Parekar                                               ...14