Kotapati Srinivasa Rao vs. The State Of Telangana

Facts

The petitioners, Kotapati Srinivasa Rao and Kothamasu Sunanda Pavani, participated in an auction conducted by ARCIL (Asset Reconstruction Company India Limited) under the SARFAESI Act for a commercial property. They were the highest bidders, offering Rs. 5,23,50,000/-. After paying the bid amount, ARCIL issued sale certificates on April 11, 2024. When the petitioners approached the Sub-Registrar, Azampura, Hyderabad, for registration, their request was orally refused. The refusal was based on a letter dated January 23, 2024, from the Assistant Commissioner (GST), Begumpet-II Circle, Hyderabad, demanding payment of GST and penalty amounting to Rs. 2,50,34,040/- and Rs. 25,03,400/- respectively, from the original debtor company, M/s. Arlen Trading Private Limited. The petitioners sought a writ of Mandamus to direct the registration authorities to register the sale certificates without being influenced by the GST demand.

Held

The Court held that the registration authorities cannot act upon letters issued by any authority other than those specified in the guidelines issued by a Full Bench of the High Court concerning Section 22A of the Registration Act. In this case, the Assistant Commissioner (GST) is not an authority mentioned in those guidelines. The Court referred to direction (xiv) of the Full Bench judgment, which states that registering officers shall not act upon and refuse registration of a document based on information furnished directly by any authority/officer other than those mentioned in the Guidelines. Therefore, the refusal to register the sale certificates based solely on the GST demand letter was incorrect. The Court directed the Registering Authority to receive, register, and release the sale certificates dated April 11, 2024, in accordance with the Registration Act, 1908, as expeditiously as possible, preferably within three weeks. The Registering Authority was also permitted to refuse registration if there were other valid objections, provided reasons were assigned in terms of Section 71 of the Act, 1908, and the decision was communicated to the petitioners.

Key Issues

1. Whether the action of the registration authorities in refusing to register the sale certificates, based on a letter from the Assistant Commissioner (GST) demanding payment from the original debtor, is arbitrary and illegal, violating Sections 26E and 35 of the SARFAESI Act and Section 22A(i)(e) of the Registration Act? Petitioner's arguments: The petitioners contended that Section 26E of the SARFAESI Act grants priority to secured creditors over all other debts, revenues, taxes, cesses, and rates. Section 35 of the SARFAESI Act states that its provisions override other laws. They argued that the GST demand letter does not constitute a notification under Section 22A of the Registration Act, which requires a Gazette notification to stop sale transactions. Therefore, the registration authorities' refusal was arbitrary and illegal. Revenue/State's arguments: The judgment does not record specific arguments from the State or registration authorities regarding their refusal to register the sale certificates. The Government Pleader for Stamps and Registration appeared, but their submissions are not detailed in the provided text.