State Bank of India v. Raju George and Ors

What happened

The plaintiffs in C.S. No. 16 of 2022, respondents 2 to 4, sued to recover ₹3,26,55,269 and obtained an order of attachment over 24.93 ares in Thiruvalla Village, mortgaged to State Bank of India. The bank, on learning of the attachment, filed a claim petition under Order XXI Rule 58 of the Code of Civil Procedure as I.A. No. 7 of 2024, seeking to have it lifted. The Commercial Court, Thiruvalla dismissed it because no execution proceedings were pending, and the District Court, Pathanamthitta dismissed the appeal (C.M.A. No. 4 of 2026), relying on Axis Bank v. Hilal Ahamed Bhat to hold that when the property is proclaimed for sale by the secured creditor the attachment is automatically effaced, so the claim petition was not maintainable.

Questions before the court

• Can a civil court refuse to lift an attachment over mortgaged property on the ground that the attachment stands effaced upon publication of the notice of sale under section 13(8) of the SARFAESI Act?

Why the court ruled this way

The Court observed that a recent tendency had developed among civil courts not to follow the Full Bench decision in Fathima v. Canara Bank [2025 KHC OnLine 521]. A right that is liable to be extinguished by operation of law, such as the equity of redemption on publication of a notice of sale under section 13(8), cannot continue as the subject of an effective attachment after it is extinguished (paragraph 11). A right that depends on a statutory event and ends on its happening is not an unqualified proprietary interest capable of sustaining an attachment, and, given the secured creditor's priority under section 26E, the civil court cannot refuse to consider an application merely because the attachment would otherwise be effaced (paragraphs 18 and 22). The plaintiffs' fear that their rights would be defeated is answered by section 13(7), which requires the bank to hold sale proceeds in trust, apply them to costs and its dues, and pay the residue to the person entitled (paragraph 25).

Controlling point

Once a secured creditor with a mortgage prior to the attachment applies to lift it, the civil court must consider the application and, where the mortgage is prior, lift the attachment; it cannot refuse on the footing that publication of the sale notice effaces the attachment.

Order and next steps

The Court set aside the orders of the Commercial Court and the District Court, allowed the claim petition, and lifted the attachment ordered in C.S. No. 16 of 2022 over the claim-schedule property forthwith. The Commercial Court must issue communications to the Sub-Registrar's office and the Village Office to correct the records and remove the attachment entry, peremptorily on production of a certified copy of the judgment. The plaintiffs may work out their remedies for any residue under section 13(7).

Practical implications

A secured creditor who finds a later civil-court attachment on mortgaged property can apply under Order XXI Rule 58 to have it lifted, and need not wait for the notice of sale to be published. The unsecured claimant's remedy lies in any surplus held in trust under section 13(7).

Limits of this ruling

• The order applies where the mortgage is prior to the attachment; it protects other claimants only through the surplus under section 13(7).