2017 (2) TMI 867 - HC - Indian Laws

Bank's actions challenged under Securitization Act; Tenancy rights to be addressed by Tribunal

The petitioners challenged the respondent Bank's actions under the Securitization and Reconstruction of Financial Assets and Enforcement of Security ... Proceedings under the SARFAESI Act initiated by the respondent Bank against the said borrowers - petitioners herein are the tenants in the properties by virtue of lease/tenancy documents executed - Held that:- It is well settled that when the remedy under Section 17 of the Act is available to approach by way of appeal before the Debt Recovery Tribunal, the petitioners have to avail the same. The petitioners are entitled to raise all the issues including the claim of tenancy while pursuing such alternative forum. The stage at which the case is placed, is an appropriate stage where the remedy before the Tribunal could be properly pursued. It is held by the Supreme Court that order under section 14 of the Act also constitutes post-13(4) stage to avail alternative remedy and challenge the order passed under section 14 of the Act. In United Bank of India vs. Satyawati Tondon and Others [2010 (7) TMI 829 - SUPREME COURT], the Supreme Court cautioned about the High Court readily entertaining writ petitions even though an efficacious remedy of appeal under section 17 is available to the aggrieved party. Learned advocate for the petitioners fairly stated that he would approach the Tribunal by preferring appeal and raise all the contentions which are sought to be raised in this petition. The petitioners are permitted accordingly, and therefore relegated to the remedy of appeal under Section 17 of the Act before the Debts Recovery Tribunal. Issues:Challenge against measures taken by the respondent Bank under the Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002.Analysis:The petitioners challenged the respondent Bank's actions under the Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002. They sought to set aside the notice issued by the bank and prevent the bank from dispossessing them, claiming to be lawful tenants of the premises. The petitioners also requested to restrain the bank from taking coercive measures regarding the properties.Referring to the facts, one petitioner leased a property in Ahmedabad and the other rented a property in Mehsana. The respondent bank issued a notice under Section 13(4) of the SARFAESI Act to the borrowers, claiming dues for the mortgaged property. The petitioners argued that they were tenants based on lease/tenancy documents, citing the decision in Harshad Govardhan Sondagar vs. International Assets Reconstruction Company Limited [(2014) 6 SCC 1].The court noted the amendment to Section 17 of the Act through the Enforcement of Security Interest and Recovery of Debts Laws (Amendment) Act, 2016. The amendment allowed the Debts Recovery Tribunal to examine claims of tenancy or leasehold rights on secured assets for enforcement of security interest. The Tribunal could determine the validity of the lease or tenancy in such cases.The court emphasized that the Tribunal had jurisdiction to examine all issues, including tenancy rights, and parties could provide evidence for their claims. The petitioners were advised to pursue the remedy of appeal under Section 17 before the Tribunal to address their contentions regarding tenancy rights.The petition was disposed of with the petitioners being directed to approach the Tribunal through an appeal. The court did not delve into the merits of the case, leaving it to be decided by the Tribunal. The aspect of any delay in filing the petition would be considered by the Tribunal while dealing with the case.