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Merely on the ground that an application filed by the petitioner under Section 17 of the Act challenging the auction sale is pending, it cannot be a ground to stay all further proceedings. This was held by the Hon’ble justice Sri V. Bharathidasan in the case of M/s.V.K.S.Agro Foods Hi Tech Rice Industry Vs. The Tahsildar and Ors. on the 29^th of July before the Hon’ble High Court of Judicature at Madras.

The brief facts of the case are, the petitioner availed loan from the second respondent Bank and created a secured interest by way of deposit of title deeds. Thereafter, the petitioner committed default in payment and hence notice under Section 13(2) of the SARFAESI Act was issued by the second respondent on 18.02.2016. Thereafter, possession notice was also issued under Section 13(4) of the Act on 14.07.2016. Challenging these notices, the petitioner filed applications under Section 17 of the Act in S.A.Nos.259 and 498 of 2018 before the Debts Recovery tribunal and the DRT also granted interim order with certain conditions. As the conditions were not complied with, the property was brought for auction sale and the third respondent was the successful bidder and auction was also confirmed in its favour. Challenging the auction sale proceedings, petitioner filed another application under Section 17 of the Act in S.A.No.250 of 2020 on the file of the DRT, Coimbatore and the same is pending. Thereafter, in a writ petition seeking a direction to desist the bank from confirming the same pursuant to the notice dated 19.06.2020, this Court directed the DRT, Coimbatore, to dispose of the application within a period of eight weeks and the said application is also still pending. In the meantime, based on the sale certificate issued by the second respondent, the third respondent approached the first respondent Tahsildar seeking mutation of revenue records in its favour and the first respondent is also taking steps to pass an order in favour of the third respondent. Thus, the present petition is filed seeking a stay on the matter.

The counsel for the petitioner submits that, he application filed by the petitioner under Section 17 of the Act is yet to reach finality and the second respondent has only taken symbolic possession and actual possession is with the petitioner. It is further stated that if mutation in the revenue records is permitted before the disposal of the application filed by the petitioner to set aside the auction sale, serious prejudice will be caused to the petitioner. It is further stated that serious irregularities have been committed in the conduct of the auction sale, and the petitioner is having valid grounds to set aside the auction sale before the DRT, the petitioner also has a fair chance in succeeding in the proceedings before the DRT. The counsel for the respondent submitted that, based on the sale certificate issued by the second respondent, the third respondent approached the first respondent seeking transfer of patta and considering the pendency of the application filed by the petitioner before the DRT, Coimbatore, the application filed by the third respondent was not considered and it is still pending with the first respondent. It is further stated that earlier in the application filed by the petitioner before the DRT, interim stay was granted with condition to deposit some amount, since the petitioner failed to comply with the condition, interim order was vacated and as on date, there is no order staying the auction sale, therefore the petitioner cannot prevent the statutory authorities from discharging their duties only on the ground of pendency of proceedings before the DRT.

The learned judge heard both the counsels and observed that The law is well settled in this aspect that, unless any interim order is passed by the DRT, the secured creditor can take recourse to any measure to recover its secured debts and the borrower or any other person may file an application under Section 17 of the Act, at any stage including the management of business is taken over or possession of the secured asset of the borrower, including right to transfer is taken over by the secured creditor. The court relied on the judgement in Lakshmi Shankar Mills (P) Ltd. and Ors Vs. The Authorised Officer/Chief Manager, Indian Bank and Ors reported in 2008-2-L.W-381 wherein it was  held that “there will not be any automatic stay of proceedings on filing of an application under Section 17 of the Act.”

Applying this to the current case, the court held that, “Merely on the ground that an application filed by the petitioner under Section 17 of the Act challenging the auction sale is pending, it cannot be a ground to stay all further proceedings pursuant to the sale certificate issued by the second respondent. The transfer of patta is dealt with under the Tamil Nadu Patta Pass Book Act, 1983. The first respondent Tahsildar is bound by the above said Act, and there is no prohibition under the Tamil Nadu Patta Pass Book Act restraining the Revenue Authorities from transferring the patta based on the pendency of proceedings before a Civil Court or Tribunal.” Thus the petition was dismissed since no merit was found.

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