2019 (9) TMI 569 - SC - Indian Laws

Tenant's Appeal Dismissed: Court Orders Vacate in 12 Weeks, Citing Unsubstantiated Tenancy Claims Under SARFAESI Act.

Bajarang Shyamsunder Agarwal Versus Central Bank of India & Another

The Court dismissed the appellant-tenant's appeal, finding the tenancy claim unsubstantiated and likely fabricated to impede the bank's recovery under the ... Stay on execution of order passed under Section 14 of SARFAESI Act, 2002 - possession of the property/secured asset - failure to make due repayment of credit facilities - NPA - HELD THAT:- The interplay between the SARFAESI Act and the right of the tenant was first examined by this Court in Harshad Govardhan Case [2015 (11) TMI 1315 - SUPREME COURT]. It may be noted that the present appellant was a party to the aforesaid proceedings. This Court was confronted with the question as to whether the provisions of the SARFAESI Act affect the right of a lessee to remain in possession of the secured asset during the period of the lease. After noticing the scheme of the Act, this Court held that if the lawful possession of the secured asset is not with the borrower, but with a lessee under a valid lease, the secured creditor cannot take possession of the secured asset until the lawful possession of the lessee gets determined and the lease will not get determined if the secured creditor chooses to take any of the measures specified in Section 13 of the SARFAESI Act - Accordingly, this Court concluded that the Chief Metropolitan Magistrate /District Magistrate can pass an order for delivery of possession of secured asset in favour of secured creditor only when he finds that the lease has been determined in accordance with Section 111 of the T.P. Act. This Court also recognised the inconsistency between Section 13(13) of the SARFAESI Act and Section 65A of the Transfer of Property Act. While Section 13(13) of SARFAESI prohibits a borrower from leasing out any of the secured assets after receipt of a notice under Section 13(2) without the prior written consent of the secured creditor, Section 65A of the T.P. Act enables the borrower/mortgagor to lease out the property. This inconsistency was resolved by holding that the SARFAESI Act will override the provisions of the T.P. Act. Considering the counterfactual pleaded by the Appellant-tenant himself, that he was a tenant who had entered into an oral agreement, such tenancy impliedly does not carry any covenant for renewal, as provided under Section 65A of T.P. Act. Therefore, in any case, Section 13 (13) SARFAESI Act bars entering into such tenancy beyond January, 2012. As the notice under Section 13 (2) SARFAESI Act was issued on 30.04.2011, subsequent reckoning of the tenancy is barred. Such person occupying the premises, when the tenancy has been determined, can only be treated as a ‘tenant in sufferance’. We should note that such tenants do not have any legal rights and are akin to trespassers - he operation of the Rent Act cannot be extended to a ‘tenant in sufferance’ visavis the SARFAESI Act, due to the operation of Section 13(2) read with Section 13(13) of the SARFAESI Act. A contrary interpretation would violate the intention of the legislature to provide for Section 13(13), which has a valuable role in making the SARFAESI Act a self executory instrument for debt recovery. Moreover, such an interpretation would also violate the mandate of Section 35, SARFAESI Act which is couched in broad terms. This case, does not mandate the additional protection to be provided under the Rent Act, to the appellant-tenant herein. The lower Courts are correct in ordering delivery of possession to the respondent no. 1bank as the tenancy stands determined - In the present case, as we are in the year 2019, which is 7 years beyond the deadline of 2012, it is ordered that the appellant-tenant shall hand over the possession of the secured asset within 12 weeks of this order to the Assistant Registrar at Bandra Centre of Courts, Mumbai, who in turn shall deliver the same to the respondent no.1 bank - Appeal dismissed. Issues Involved:1. Validity of the tenancy claimed by the appellant-tenant.2. Applicability of the SARFAESI Act over the Rent Act.3. Rights of the tenant under the SARFAESI Act.4. Determination of tenancy under the Transfer of Property Act (T.P. Act).Issue-wise Analysis:1. Validity of the tenancy claimed by the appellant-tenant:The appellant-tenant claimed to have been in possession of the secured asset since January 2000 based on an oral agreement. However, the tenancy was not supported by a registered instrument, which is a requirement for leases exceeding one year as per Section 107 of the T.P. Act. The appellant-tenant produced only xerox copies of rent receipts, which were insufficient to substantiate the claim of tenancy. The respondent no.1 bank contested the bona fides of the appellant-tenant, arguing that the claim was fabricated to obstruct the bank's recovery process under the SARFAESI Act. The Court concluded that the appellant-tenant failed to provide conclusive evidence of a valid lease.2. Applicability of the SARFAESI Act over the Rent Act:The Court examined the interplay between the SARFAESI Act and the Maharashtra Rent Control Act, 1999. It referred to the Vishal N. Kalsaria Case, which held that the SARFAESI Act cannot override the Rent Act's objective of protecting tenants from arbitrary evictions. However, the Court in this case found that the appellant-tenant's claim did not merit protection under the Rent Act, as the tenancy was not bona fide and was created to defeat the SARFAESI proceedings.3. Rights of the tenant under the SARFAESI Act:The Court analyzed whether the appellant-tenant was entitled to protection under the SARFAESI Act. It referred to the Harshad Govardhan Case, which established that a tenant's possession cannot be disturbed if a valid lease exists prior to the mortgage. However, the appellant-tenant's lease was not proven to be valid or bona fide. The Court noted that the appellant-tenant's claim of tenancy was not disclosed during the SARFAESI proceedings, further casting doubt on its legitimacy.4. Determination of tenancy under the Transfer of Property Act (T.P. Act):The Court reiterated that any lease exceeding one year must be registered as per Section 107 of the T.P. Act. The appellant-tenant's reliance on an oral agreement without a registered instrument meant that the tenancy could not be recognized for more than a year. The Court also highlighted that the appellant-tenant's status as a 'tenant in sufferance' did not grant any legal rights, akin to being a trespasser, as per precedents like R.V. Bhupal Prasad v. State of A.P.Conclusion:The Court concluded that the appellant-tenant's claim of tenancy was not supported by sufficient evidence and was likely fabricated to obstruct the bank's recovery process. The rejection of the stay application by the Chief Metropolitan Magistrate was upheld, and the appellant-tenant was ordered to hand over possession of the secured asset within 12 weeks. The appeal was dismissed, emphasizing that devious practices to obstruct legitimate dues recovery cannot be appreciated by the Court.