Sale Certificate under SARFAESI Act—Whether Registration Mandatory?

Introduction

Rule 9(6) of the Security Interest (Enforcement) Rules, 2002¹ (hereinafter “the Rules, 2002”) casts upon the authorised officer a statutory duty to issue a certificate of sale in the prescribed format in favour of the purchaser in whose favour the sale was confirmed and who complied with the terms of the payment. Section 17(2)(xii) of the Registration Act, 1908² exempts from registration a certificate of sale granted to the purchaser of any property sold by public auction by a “Civil or Revenue Officer”. Various High Courts across the country have considered the issue of registration of sale certificate issued by an Authorised Officer under the provisions of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (hereinafter “SARFAESI Act, 2002”)³ and Rules framed thereunder, however, there seems to be a lack of consensus amongst them. While some High Courts have taken a view that the authorised officer issuing a certificate of sale cannot be treated as a Civil or Revenue Officer and therefore, registration of the certificate of sale issued by such officer is compulsory, other High Courts have taken a contrary view. This article endeavours to clarify the confusion about the registration of sale certificates issued by the authorised officer under the provisions of the SARFAESI Act, 2002 and the Rules framed thereunder i.e. the Rules, 2002.

Issue

Whether a sale certificate issued by the authorised officer under the provisions of the SARFAESI Act read with Rules, 2002 requires registration. An ancillary question that needs to be answered is whether the “authorised officer” defined under Rule 2(a) of the Rules, 2002 can be equated with a Court or Revenue Officer for the purpose of Sections 17(2)(xii) and 89(4)⁴ of the Registration Act, 1908.

Conflicting Judgments of High Courts: A Glance

As mentioned in the introductory part, there is a lack of consensus amongst various High Courts on the issue of registration of the sale certificate issued by the authorised officer under the provisions of the SARFAESI Act, 2002, and the Rules framed thereunder. To understand the position, a few relevant judgments of High Courts dealing with the issue at hand are discussed below under two heads — one dealing with the judgments in favour of the registration and the other against the registration.

Registration of sale certificate mandatory

The Madhya Pradesh High Court in Mid India Power and Steel Ltd. v. M.P. Audyogik Kendra Vikas Nigam (Indore) Ltd.⁵, held that when the property of a borrower is sold by public auction by the authorised officer of the bank who is neither a Civil nor a Revenue Officer, one cannot claim that the sale certificate issued on the basis of such sale will be covered under Section 17(2)(xii) of the Registration Act and its registration is not compulsory. The term authorised officer has not been included in Section 17(2)(xii) of the Registration Act by way of amendment after coming into force of the SARFAESI Act. The definition of the term authorised officer under the Rules of 2002 also does not give it the meaning of Civil or Revenue Officer, the terms which find place in Section 17(2)(xii) of the Registration Act. In these circumstances, the sale certificate issued by the authorised officer cannot be construed to hold that it is by a Civil or Revenue Officer. With these observations, the registration of the sale certificate was held to be mandatory.

Similarly, the Punjab and Haryana High Court in Friends Traders v. State of Punjab⁶ held that the authorised officer would not be a Civil or Revenue Officer and thus the sale certificate issued by him would require registration. In Maurya Techno Securities (P) Ltd. v. Land and Development Office⁷, the High Court of Delhi observed that the sale certificate issued under the SARFAESI Act by virtue of which an immovable property was to be transferred required registration.

In R. Thiagarajan v. Inspector General of Registration⁸, a Full Bench of the High Court of Madras held that the sale certificate issued by an authorised officer who is neither Civil or Revenue Officer would not fall under Section 17(2)(xii) of the Registration Act and therefore, the registration of sale certificate issued by an authorised officer was held to be mandatory.

In Munirathnam Reddy Kamasani v. District Registrar ⁹, the High Court of Andhra Pradesh while following the ratio of Mid India Power¹⁰ and R. Thiagarajan¹¹ observed that bringing the authorised officer into the definition of a Civil or Revenue Officer would amount to “judicial legislation” which is not legally permissible and thus, the sale certificate issued by an authorised officer was held to be mandatorily registrable.

In Samir Parida v. AO-cum-OHDC¹², the High Court of Orissa, after considering the Circular dated 24-10-2016 issued by Revenue and Disaster Management Department to Inspector General of Registration whereby registration of sale certificate issued by the authorised officer was made mandatory, directed the auction-purchaser to present the sale certificate for registration before the registering authority.

Registration of sale certificate not mandatory

In Mantosh Deb v. State of Tripura¹³, the High Court of Tripura dealt with the question whether the authorised officer of Tripura Gramin Bank can be treated as the Revenue Officer for the purpose of sale as carried out under the provisions of the SARFAESI Act. After analysing various provisions of the SARFAESI Act and relevant judgments, the Court held that the recovery officer or the authorised officer under the SARFAESI Act can be termed as the Revenue Officer for the purpose of attracting the exemption as provided by Section 17(2)(xii) of the Act, 2002.

In Sub-Registrar v. Tripower Enterprises (P) Ltd.¹⁴, the issue before the Division Bench of the High Court of Madras was whether the sale certificate which was presented for filing under Section 89(4) in Book 1 of the Registration Act, 1908 required payment of stamp duty and registration. While answering the said issue in negative, the Court also dealt with the issue whether the authorised officer under the SARFAESI Act is a Civil or Revenue Officer and held that in common parlance, if anyone is holding the responsibility of civil nature, other than any officer in military or naval service, then he would be reckoned to be a Civil Officer. In the light of the aforesaid, the authorised officer of the bank would fall within the definition of Civil Officer, especially when he is an officer of the nationalised bank. In that view of the matter, Section 17(2)(xii) of the Registration Act would be applicable and thereby the sale certificate issued by the authorised officer is not one of the documents that requires compulsory registration.

In G. Madhurambal v. Inspector General of Registration¹⁵ and L. Sangeetha v. Sub-Registrar¹⁶, the High Court of Madras has held that a reading of Section 17(2)(xii) of the Registration Act would show that a certificate of sale issued by a Civil or a Revenue Officer in evidence of a sale conducted by way of public auction is not compulsorily registrable. The Court also affirmed that a sale certificate issued by an officer appointed under the SARFAESI Act would be exempt from registration and the authorised officer of a bank would be a Revenue Officer.

In Bell Tower Enterprises LLP v. State of T.N.¹⁷ the Madras High Court, after considering the Full Bench judgment in R. Thiagarajan¹⁸, held that an authorised officer, who conducts a sale under the provisions of the SARFAESI Act, would be a Revenue Officer and the certificate issued by him in evidence of such sale, would be a document which is not compulsorily registrable under Section 17(2)(xii) of the Registration Act. It would be sufficient if the document is lodged with the Registrar under Section 89(4) to be filed by him in Book 1 maintained by him.

Analysis

Having noticed the conflicting judgments of various High Courts on the issue of registration of sale certificate issued by an authorised officer under the provisions of the SARFAESI Act, 2002 and Rules framed thereunder, we proceed to analyse the correct position of law on this issue.

Meaning of Civil or Revenue Officer

The term “civil officer” is defined in “Advanced Law Lexicon by P. Ramanatha Iyer” as “any officer holding appointment under the Government except in the military or naval service, whether the duties are executive or judicial or in the highest or the lowest departments”¹⁹. The term “Revenue Officer” is defined in Advanced Law Lexicon by P. Ramanatha Iyer as “an officer employed in or about the business of any branch of the public revenue”. This definition was culled out from the Explanation to Section 125²⁰ of the Evidence Act, 1872.

In Sheopatsingh v. Narishchandra²¹, the High Court of Rajasthan, while dealing with issues related to the Representation of the People Act, 1951²², observed that the term “revenue officer” includes such officers of the Income Tax, Sales Tax, and Irrigation Department as well as the Land Revenue Department, who are employed in the business of revenue.

In Gopi Parshad v. State of Punjab²³, it was held that the expression “revenue” means “the income of the nation derived from its taxes, duties, or other sources, for the payment of the nation’s expenses”. It is a term generally used in referring to the income of a Government or governmental sub-division and so used means all the public money which the State collects and receives from whatever source and in whatever manner.

Registration of sale certificates issued under other statutes

Other than the SARFAESI Act, there are various other statutes such as the Recovery of Debts [and Bankruptcy] Act, 1993²⁴ (RDB Act), Income Tax Act²⁵, IBC²⁶, etc. which deal with the sale of a defaulter’s property by the charge-holder or by a person authorised as per the statutory provisions and issuance of sale certificates to the successful purchaser. Under the Income Tax Act read with the relevant Rules, the Tax Recovery Officer is empowered to issue a sale certificate. If we see the provisions of the RDB Act, the Recovery Officer has been conferred the powers to issue sale certificate. Similarly, under the provisions of IBC read with the Liquidation Process Regulations²⁷, the liquidator is authorised to issue a sale certificate to the purchaser.

Registration of sale certificate issued under the RDB Act and Income Tax Act

In terms of Section 19(22)²⁸ of the RDB Act, the Presiding Officer of the Debts Recovery Tribunal (DRT) issues a certificate of recovery for payment of debt with interest under his signature to the recovery officer for recovery of the amount of debt specified in the certificate. The recovery officer, appointed under Section 2(k)²⁹ read with Section 7(1)³⁰ of the RDB Act, is empowered to recover the amount mentioned in the recovery certificate by any of the modes mentioned under Sections 25³¹ and 28³² of the RDB Act.

By virtue of Section 29³³ of the RDB Act, the provisions of the Second and Third Schedules to the Income Tax Act, 1961, and the Income Tax (Certificate Proceedings) Rules, 1962³⁴, as far as possible, apply with necessary modifications to the recovery of debts. Pertinently, the Second Schedule provides for the procedure for recovery of tax (to be read as debt instead of tax for the purposes of the RDB Act). The Third Schedule deals with the procedure for distraint by the assessing officer or tax recovery officer.

Rule 63 of the Second Schedule provides for confirmation of sale and states that where no application is made for setting aside the sale under the foregoing rules or where such an application is made and disallowed by the Tax Recovery Officer, the Tax Recovery Officer shall (if the full amount of the purchase money has been paid) make an order confirming the sale, and, thereupon, the sale shall become absolute. Rule 65 of the Second Schedule provides for sale certificate and states where a sale of immovable property has become absolute, the Tax Recovery Officer shall grant a certificate specifying the property sold, and the name of the person who at the time of sale is declared to be the purchaser.

As per Section 2(44)³⁵ “Tax Recovery Officer” means any Income Tax Officer who may be authorised by the Principal Chief Commissioner or Chief Commissioner or Principal Commissioner or Commissioner, by general or special order in writing, to exercise the powers of a Tax Recovery Officer and also to exercise or perform such powers and functions which are conferred on, or assigned to, an assessing officer under this Act and which may be prescribed.

Rule 21 of the Income Tax (Certificate Proceedings) Rules, 1962 provides for registration of the sale. It states that every Tax Recovery Officer granting a certificate of sale to the purchase of immovable property sold under the Second Schedule shall send a copy of such certificate to the registering officer concerned under the Registration Act, 1908³⁶, within the local limits of whose jurisdiction the whole or any part of the immovable property comprised in the certificate is situated.

The effect of a sale certificate issued by a Recovery Officer under the Recovery of Debts Due to Banks and Financial Institutions Act, 1993, was considered by this Court in Meera Thinakaran v. State of T.N.³⁷, wherein it was held that a sale certificate issued under Rule 65 of the Income Tax Rules, is only a document evidencing the conveyance that had already taken place and the same does not require registration.

In Shanti Devi L. Singh v. Tax Recovery Officer³⁸, the appellants purchased properties in auction sales conducted by the Tax Recovery Officer for recovery of income tax dues and were issued sale certificates. The question that arose before the Supreme Court was whether the sale certificate issued by the Tax Recovery Officer was liable to be registered under Section 17(1) of the Act, 1908 or was exempted from registration under Section 17(2)(xii) of the Act, 1908. The Supreme Court held that the term “revenue officer” used in Section 17(2)(xii) should not be read in any restricted sense. It was held that the term “revenue officer” is wide and comprehensive enough to include the Tax Recovery Officer who effects a compulsory sale for the recovery of an income-tax demand. With these observations, the Court held that it is not obligatory for the purchaser of property in a tax recovery sale to get the certificate of sale registered in order to perfect his title. The certificate of sale itself not being a compulsorily registrable document: vide S. 17(2)(xii), the transfer of title in his favour is not vitiated by the non-registration of the certificate.

Registration of sale certificate issued under IBC

Regulation 33 of the Insolvency and Bankruptcy Board of India (Liquidation Process) Regulations, 2016 provides the mode of sale. Schedule I appended thereto provides for steps to be taken by the liquidator for the sale of assets through auction or private sale. Point 13 under the head Auction states that on payment of the full amount, the sale shall stand completed, the liquidator shall execute a certificate of sale or sale deed to transfer such assets and the assets shall be delivered to him in the manner specified in the terms of sale. In terms of Section 5(18)³⁹ read with Section 3(19)⁴⁰ IBC, “liquidator” means an insolvency professional enrolled with an insolvency professional agency as its member and registered with the Insolvency and Bankruptcy Board of India as an insolvency professional.

In Nitin Garg v. SBI⁴¹, the National Company Law Appellate Tribunal, Principal Bench held that the sale certificate issued by the liquidator under the provisions of the IBC read with IBBI (Liquidation Process) Regulations does not require registration.

Registration of sale certificate issued under the SARFAESI Act

The SARFAESI Act, 2002, as is clear from the “Statement of Objects and Reasons”, was enacted to facilitate secured creditors to take possession and sell securities without the intervention of the court. Rule 2(a) of the Rules, 2002 defines “authorised officer” to mean an officer not less than a Chief Manager of a public sector bank or equivalent, as specified by the Board of Directors or Board of Trustees of the secured creditor or any other person or authority exercising powers of superintendence, direction, and control of the business or affairs of the secured creditors, as the case may be, to exercise the rights of a secured creditor under the SARFAESI Act. Rule 9(6) of the Rules, 2002 states that on confirmation of sale by the secured creditor and if the terms of payment have been complied with, the authorised officer exercising the power of sale shall issue a certificate of sale of the immovable property in favour of the purchaser in the form given in Appendix V to these Rules.

When we delve into the provisions of the Registration Act, 1908, we find that Section 17 of this Act deals with documents of which registration is compulsory. Sub-section (1) contains various instruments whose registration is compulsory whereas sub-section (2) contains a list of documents/instruments which are exempted from registration. In terms of Section 17(2)(xii), any certificate of sale granted to the purchaser of any property sold by public auction by a Civil or Revenue Officer is exempt from registration. In terms of Section 89 of this Act, copies of certain orders, certificates, and instruments are to be sent to the registering officer and filed. Section 89(4) states that every Revenue Officer granting a certificate of sale to the purchaser of immovable property sold by public auction shall send a copy of the certificate to the registering officer within the local limits of whose jurisdiction the whole or any part of the property comprised in the certificate is situated, and such officer shall file the copy in his Book 1.

There is no provision in the SARFAESI Act, 2002, or under its rules equating the authorised officer with a Civil or Revenue Officer. Pertinently, the provisions of Section 17(2)(xii) or Section 89(4) of the Registration Act have not been amended to include authorised officer under SARFAESI Act, 2002 within their ambit. While a glance at these statutory provisions may appear to state that the authorised officer under the provisions of the SARFAESI Act, 2002 is not covered under Sections 17(2)(xii) and 89(4) of the Registration Act, however, closer scrutiny of the statutory provisions in light of the object behind the enactment of the SARFAESI Act, 2002 shows otherwise and commands a wider and purposive interpretation of the term authorised officer.

Though the Full Bench of the Madras High Court in R. Thiagarajan⁴², after considering the Supreme Court’s judgment in B. Arvind Kumar v. Govt. of India⁴³, held that the sale certificate issued by an authorised officer who is neither Civil nor Revenue Officer would not fall under Section 17(2)(xii) of the Registration Act, however, subsequent to the said Full Bench judgment, the Supreme Court in Esjaypee Impex (P) Ltd. v. Canara Bank⁴⁴ held that the mandate of law in terms of Section 17(2)(xii) read with Section 89(4) of the Registration Act, 1908 only required the authorised officer of the bank under the SARFAESI Act to hand over the duly validated sale certificate to the auction-purchaser with a copy forwarded to the registering authorities to be filed in Book 1 as per Section 89 of the Registration Act. Thereafter, in Realty Associates v. General Manager and Authorised Officer⁴⁵, the Supreme Court observed that the effect of the filing of the copies under the said Section 89 has the same effect as registration and obviates the requirement of any further action. In light of the judgment of the Supreme Court in Esjaypee Impex⁴⁶, the Madras High Court in G. Madhurambal⁴⁷, Bell Tower Enterprises⁴⁸, and L. Sangeetha⁴⁹ has clearly observed that the judgment of the Full Bench in R. Thiagarajan⁵⁰ has been uprooted by the subsequent judgment of the Supreme Court in Esjaypee Impex⁵¹.

Similarly, the Division Bench of the Madras High Court in Tripower Enterprises (P) Ltd.⁵² considered the Full Bench judgment in R. Thiagarajan⁵³, however, in view of the later judgment of the Supreme Court in Esjaypee Impex⁵⁴, proceeded to observe that the authorised officer would be a Civil Officer for the purpose of Section 17(2)(xii) of the Registration Act. The judgment of the Madras High Court in Tripower Enterprises (P) Ltd.⁵⁵ was assailed before the Supreme Court by filing SLP(C) No. 18331 of 2022 which was tagged along with SLP(C) No(s). 16949 of 2022 in Inspector General of Registration v. G. Madhurambal⁵⁶. The Supreme Court while dismissing the said appeals vide order dated 11-11-2022 affirmed its judgments/orders in Esjaypee Impex⁵⁷ and Realty Associates⁵⁸, thereby settling the law that the sale certificate issued by the authorised officer under the SARFAESI Act, 2002 and Rules framed is not required to be registered under the provisions of the Registration Act.

One may tend to argue that the observations made by the Supreme Court in Esjaypee Impex⁵⁹ and Realty Associates⁶⁰ cannot be read to understand that registration of sale certificate issued under the provisions of the SARFAESI Act is exempted under Section 17(2)(xii) of the Registration Act since those observations were made by the Supreme Court while dealing with the issue of registration for the purpose of filing it in Book 1 as required under Section 89 of the Registration Act. This argument fails to hold water in light of the subsequent judgment of the Supreme Court in G. Madhurambal⁶¹ which upheld the High Court’s observations wherein it was observed that a sale certificate issued by an officer appointed under the SARFAESI Act would be exempt from registration and the authorised officer of a bank would be a Revenue Officer. Another reason why this argument fails is that the term “Revenue Officer” appearing in Sections 17(2)(xii) and 89(4) of the Registration Act, is to be given the same meaning and to be construed to indicate the same person⁶² and therefore, for this reason also, the authorised officer shall be construed to be included within the term “revenue officer”.

While interpreting the provisions of the SARFAESI Act vis-à-vis the provisions of the Registration Act, it needs to be taken note that in terms of Section 37⁶³ of the SARFAESI Act, 2002, the provisions of the SARFAESI Act and the Rules made thereunder shall be in addition to and not in derogation of the RDB Act. As mentioned above, by virtue of Section 29 of the RDB Act, the provisions of the Second and Third Schedules to the Income Tax Act, 1961, and the Income Tax (Certificate Proceedings) Rules, 1962, as far as possible, apply with necessary modifications to the recovery of debts. We have already seen that the Supreme Court in Shanti Devi L. Singh⁶⁴ while dealing with the issue of registration of sale certificate issued by the Tax Recovery Officer held that the term “revenue officer” under Section 17(2)(xii) of the Registration Act is wide enough to include a Tax Recovery Officer and therefore, the sale certificate issued by him would be exempted from registration. For this reason, also, the authorised officer under the SARFAESI Act would fall within the ambit of a “revenue officer” and therefore, the sale certificate issued by the authorised officer would not require registration.

To counter the interpretation as given above, one may argue that the provisions of the Income Tax Act cannot be taken recourse to while dealing with issues under the provisions of the SARFAESI Act, 2002 since the SARFAESI Act is a complete code and provisions of the SARFAESI Act do not expressly provide for application of the Income Tax Act. For the same reason, another argument that can be raised here is that the observations of the Supreme Court in Shanti Devi L. Singh⁶⁵ made in reference to Tax Recovery Officer cannot be applied to the authorised officer under the provisions of the SARFAESI Act and Rules framed thereunder. However, these arguments fail to sustain when read in light of the judgment of the Supreme Court in Mathew Varghese v. M. Amritha Kumar⁶⁶. In this case, the Supreme Court observed that in absence of provisions regarding adjournment of sale or issuance of fresh proclamation of sale under SARFAESI Act, 2002, by virtue of Section 37 of the SARFAESI Act, 2002, provisions of Section 29, RDB Act, 1993 will be applicable and, by virtue of stipulation contained in Section 29, RDB Act, 1993, provisions of Rule 15(2), Schedule II Part I of the Income Tax Act, 1961 have to be followed when notice of sale notified as per Rules 8 and 9(1) of 2002 Rules read with Section 13(8), SARFAESI Act, 2002, gets postponed. Thus, when provisions of Income Tax Act can be followed there is no reason why the interpretation given based on those provisions be applied and therefore, for this reason also, the authorised officer like the Tax Recovery Officer would fall within the ambit of Revenue Officer.

Another moot point that is often raised by the parties is that even if it is accepted that an authorised officer of a nationalised bank being a public officer falls within the ambit of “Civil or Revenue Officer” under Section 17(2)(xii) of the Registration Act, an authorised officer of a private bank or a financial institution shall remain outside the ambit of “Civil or revenue officer”. There cannot be a dispute to the proposition that an authorised officer under the provisions of the SARFAESI Act and Rules framed thereunder is a statutory officer like a Tax Recovery Officer under the Income Tax Act and a liquidator under the provisions of the IBC. In the humble opinion of the author, an authorised officer while discharging his functions under the provisions of the SARFAESI Act and Rules framed thereunder retains the characteristics of a statutory officer irrespective of the status of secured creditor i.e. whether the secured creditor who appointed him as an authorised officer was a nationalised bank or a private bank/financial institution. In fact, neither the provisions of the SARFAESI Act nor the Rules framed thereunder differentiates between the authorised officer of a nationalised bank and that of a private bank/financial institution and therefore, the authorised officer deriving his authority from a statute i.e. SARFAESI Act, 2002 must be read as a part and parcel of the “Civil or Revenue Officer’ used under Section 17(2)(xii) of the Registration Act.

Conclusion

In light of the relevant statutory provisions, judgments and the analysis done, the author is of the view that an authorised officer under the provisions of the SARFAESI Act and Rules framed thereunder falls within the ambit and scope of “Civil or Revenue Officer” used under Section 17(2)(xii) of the Registration Act and therefore, the sale certificate issued by him does not require registration, however, it goes without saying that unless necessary amendments are made in the respective statutes, the parties would keep on raising such issues. The time has come when the legislature needs to give a quietus to this issue considering the object behind the enactment of the SARFAESI Act as well as the Registration Act.