First proviso to Rule 55-A of TN Registration Rules ultra vires and unconstitutional to the Registration Act, as well as the substantive provisions of TP Act: Madras High Court

Madras High Court

Madras High Court: In a writ petition filed against the order passed by the Sub Registrar rejecting the request of Federal Bank for registration of the Sale Certificate, Sathishkumar, J. held that the first proviso to Rule 55-A is invalid and ultra vires, and the respondent cannot refuse to register the document placing reliance on the aforesaid proviso.

In the case at hand, the Bank is a secured creditor of the property which was mortgaged in their favour in 2017. The mortgage deed was registered before the Sub Registar. As the mortgagor failed to repay the outstanding amount, the loan account was classified as a non-performing asset, and action was initiated under the Securitisation and Reconstruction of Financial Assets and Enforcement of Securities Interest Act, 2002 (‘SARFAESI Act’). Consequently, the property was sold through a public auction, and a sale certificate was also issued. When the sale certificate was presented for registration, the impugned order was passed rejecting the request of the petitioner for registration of sale certificate on the sole ground that property was provisionally attached under Section 83 of the Goods and Services Tax Act, 2017.

Placing reliance on Govt. of A.P. v. P. Laxmi Devi, (2008) 4 SCC 720,the Court said that though the Rule 55(A) of the Tamil Nadu Registration Rules has not been directly challenged, but when a subordinate legislation is ex facie found to be in conflict with the provision of the Parent Act and Transfer of Property Act, as well as Constitutional rights, the subordinate legislation will have to yield to substantive law governing the field and Constitution.

Further, in view of the above-mentioned Judgment, the Court tested the validity of Rule 55A of the Registration Act.

The Court said that, prior to the insertion of Rule 55-A the Registrar could refuse to register a document if it fell within any of the categories in Sections 22-A and 22-B of the Act or under Section 34 or if the case fell within any of the circumstances set out in Rule 162 of the Registration Rules. However, it has become a practice for Sub-Registrar to refuse registration of documents citing internal circulars, requiring them to produce title deeds to scrutinise title etc. Further, a corresponding amendment has also been made to Rule 162 of the Registration Rules authorizing the refusal of registration on any of the grounds set out in Rule 55-A.

The Court noted that Rule 55-A (i) authorises the Registrar to refuse registration of the document unless the presentant produces the previous original sale deed by which the executant acquired right over the property, and the encumbrance certificate pertaining to the property; and said that it is not difficult to foresee that a literal application of this rule would lead to several absurd results.

The Court further noted that the newly introduced Clause XX is preceded by Clauses I-XIX authorising the Registrar to refuse registration on the grounds set out therein and said that each of the clauses authorising the Registrar to refuse registration from Clauses I to XIX specifically refers to a substantive provision of law in the Registration Act or in some other legislation like the Income Tax Act, 1961 as the source of power. Clause XX on the other hand, does not refer to any substantive provision of law. Strangely and most curiously it authorises the Registrar to refuse registration for non-production of original deed or record as specified in Rule 55-A.

It further said that, normally, a subordinate legislation like a rule is authorised by a substantive provision of law. However, this is a unique case where a rule is authorised by another rule. Thus, the Court opined that in the absence of any substantive provision of law in the parent legislation, Clause XX is clearly beyond the powers of the Inspector General of Registration, as the scheme of Rule 162, particularly Clauses I to XIX, makes it very clear that the grounds for refusal must be traceable to a substantive provision of law in the Registration Act or other legislation.

The Court opined when the legal position has already been declared by the Division Bench in N. Ramayee v. Sub-Registrar, 2020 SCC OnLine Mad 5231, that 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. Thus, the Court held that the first proviso to Rule 55-A (i) is clearly illegal and is vitiated by a clear abuse of power.

Further, the Court said that the first proviso appears to have been drafted without any application of mind. For instance, the limitation period for redeeming a mortgage is 30 years. Under the first proviso, if there exists a mortgage over the property, no document can be registered until the said limitation period has expired. As per Ramayee’s case (supra), this nullifies the substantive provisions of Sections 48 and 56 of the Transfer of Property Act which gives effect to the principle that there is no bar in dealing with a property which is the subject matter of the mortgage. Similarly, it is an elementary principle of law that a purchaser of a mortgaged property takes the property subject to the mortgage.

Moreover, the other provision barring registration is execution of the lease and insisting of no objection certificate. The Court noted that a lease is only a transfer of right to enjoy the property in favour of the lessee, the ownership is always vested with the owner. Merely because transfer of right to enjoy such property is created in favour of the tenant or lessee, it cannot be said that owner has no right to deal with the property.

Thus, the Court after placing reliance on State of Rajasthan v. Basant Nahata, (2005) 12 SCC 77 and J.K. Industries Ltd. v. Union of India, (2007) 13 SCC 673, held that the first proviso to Rule 55-A is, therefore, invalid as it goes beyond the powers conferred on the Inspector General of Registration and is clearly ultra vires and unconstitutional to the Parent Act as well as the substantive provisions of the Transfer of Property Act.

[The Federal Bank Ltd v Sub Registrar, 2023 SCC OnLine Mad 878, decided on 08-02-2023]

Order by: Justice N. Sathishkumar.

Advocates who appeared in this case :

For Petitioner: A.V. Radhakrishnan;

For Respondent: Special Govt. Pleader Yogesh Kannadasan.

*Apoorva Goel, Editorial Assistant has reported this brief.

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