TaxTMI 
TaxTMI 
2013 (3) TMI 18
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.... Reliance group of companies; for the purpose of the said business, the firm had taken on lease the suit premises on 27.05.2006 and 27.12.2006; since the process was a continuous one, the lease period was extended on 21.10.2011; while the activities of the firm were going on, the second respondent herein offered the suit property as security for his business without any intimation to him; on 20.10.2011, he noticed a paper publication stating that the properties were to be auctioned by the fourth respondent and, hence, he filed the suit and also the application for the reliefs stated above. 3. The above case of the first respondent was resisted by the revision petitioner, contending that he was the successful auction purchaser of the suit property; the first respondent was not at all in possession of the suit property from 2006 onwards and, when that be so, the first respondent had no right to file the suit and also the application. 4. The application I.A.No.2266 of 2011 was allowed by the trial Court by an order, dated 12.01.2012, granting interim injunction. Peeved at the said order, this revision petition is directed. 5. Learned Senior Counsel for the petit....
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....n the case of Indian Bank v. Nippon Enterprises South, 2011 (2) CTC 474, wherein it was held as follows : "36. Under Section 13 (4) of the SARFAESI Act, the secured creditor can take possession of the secured assets of the borrower. There can be no difficulty in taking such possession of the secured assets either under Section 13 (4) or under Section 14 of the SARFAESI Act, if the secured asset is in the possession of the borrower or guarantor, as the case may be. SARFAESI Act entitles the creditor to take possession of the secured assets either by issuing possession Notice under Section 13 (4) or by making Application to the Chief Metropolitan Magistrate/District Magistrate to take physical possession under Section 14. Though the function of Chief Metropolitan Magistrate/District Magistrate is only ministerial, the provision of Section 14 confers drastic power to take possession even by use of force. The difficulty arises only in cases where the possession of the property is in the hands of the Tenant (lessee). The SARFAESI Act does not contain any specific provision enabling the secured creditor to take possession from the hands of a Tenant (lessee). On the other hand, the TN ....
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....nt. 8. Under the circumstances, the legal provisions that are relevant for consideration are: (1) Sections 13, 17 and 34 of The Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (in short, "the Act"), which provisions read as under: Section 13: "13. Enforcement of security interest. (1) Notwithstanding anything contained in Section 69 or Section 69-A of the Transfer of Property Act, 1882 (4 of 1882), any security interest created in favour of any secured creditor may be enforced, without the intervention of the court or tribunal, by such creditor in accordance with the provisions of this Act. (2) Where any borrower, who is under a liability to a secured creditor under a security agreement, makes any default in repayment of secured debt or any instalment thereof, and his account in respect of such debt is classified by the secured creditor as non-performing asset, then, the secured creditor may require the borrower by notice in writing to discharge in full his liabilities to the secured creditor within sixty days from the date of notice failing which the secured creditor shall be entitled to exercise all or....
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.... or may become due to the borrower, to pay the secured creditor, so much of the money as is sufficient to pay the secured debt." Section 17: "17. Right to appeal. (1) Any person (including borrower) aggrieved by any of the measures referred to in sub-section (4) of Section 13 taken by the secured creditor or his authorised officer under this chapter, may make an application along with such fee, as may be prescribed, to the Debts Recovery Tribunal having jurisdiction in the matter within forty-five days from the date on which such measure had been taken: Provided that different fees may be prescribed for making the application by the borrower and the person other than the borrower. Explanation. For the removal of doubts, it is hereby declared that the communication of the reasons to the borrower by the secured creditor for not having accepted his representation or objection or the likely action of the secured creditor at the stage of communication of reasons to the borrower shall not entitle the person (including borrower) to make an application to the Debts Recovery Tribunal under this sub-section. (2) The Debts Recovery Tribunal shall consider whether any of the mea....
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....bts Recovery Tribunal for expeditious disposal of the application pending before the Debts Recovery Tribunal and the Appellate Tribunal may, on such application, make an order for expeditious disposal of the pending application by the Debts Recovery Tribunal. (7) Save as otherwise provided in this Act, the Debts Recovery Tribunal shall, as far as may be, dispose of the application in accordance with the provisions of the Recovery of Debts Due to Banks and Financial Institutions Act, 1993 (51 of 1993) and the rules made thereunder." Section 34: "34. Civil court not to have jurisdiction. No civil court shall have jurisdiction to entertain any suit or proceeding in respect of any matter which a Debts Recovery Tribunal or the Appellate Tribunal is empowered by or under this Act to determine and no injunction shall be granted by any court or other authority in respect of any action taken or to be taken in pursuance of any power conferred by or under this Act or under the Recovery of Debts Due to Banks and Financial Institutions Act, 1993 (51 of 1993)." 9. Section 13 (1) of the Act would make it clear that any security interest created in favour of any secured c....
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....f the case and evidence produced by the parties, comes to the conclusion that any of the measures referred to in sub-section (4) of Section 13, taken by the secured creditor are not in accordance with the provisions of this Act and the rules made thereunder, and require restoration of the management of the business to the borrower or restoration of possession of the secured assets to the borrower, it may by order, declare the recourse to any one or more measures referred to in sub-section (4) of Section 13 taken by the secured creditors as invalid and restore the possession of the secured assets to the borrower or restore the management of the business to the borrower, as the case may be, and pass such order as it may consider appropriate and necessary in relation to any of the recourse taken by the secured creditor under sub-section (4) of Section 13. Also, if the Debts Recovery Tribunal declares that the recourse taken by a secured creditor under sub-section (4) of Section 13 is in accordance with the provisions of this Act and the rules made thereunder, then, notwithstanding anything contained in any other law for the time being in force, the secured creditor shall be entitled t....
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....rride the local law, which, in this case is, Tamil Nadu Buildings (Lease & Rent Control) Act. Section 13 (13) of the SARFAESI Act operates as an attachment/injunction restraining the borrower from disposing of the secured assets and, therefore, any tenancy created after such notice would be null and void. Any tenancy created by the mortgager after the mortgage would not be binding on the bank, and, in any event, such tenancy rights shall stand determined once action under Section 13 (4) has been taken by the bank. Also, as, in the case on hand, the first respondent is claiming tenancy prior to the creation of mortgage and such tenancy is disputed by the revision petitioner, who is the auction purchaser, and also the bank, the secured creditor, the remedy of the first respondent is to approach DRT by way of an application under Section 17 of the Act to establish his rights. 14. While holding as above, this Court is also concerned about another Division Bench decision of this Court in Indian Bank's case, relied upon by the learned Senior Counsel for the respondents. On analysing the legal position and the ruling of the said Division Bench, it could be seen that a tenant, who is in....
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....agistrate to take physical possession under Section 14. Though the function of Chief Metropolitan Magistrate/District Magistrate is only ministerial, the provision of Section 14 confers drastic power to take possession even by use of force. The difficulty arises only in cases where the possession of the property is in the hands of the Tenant (lessee). The SARFAESI Act does not contain any specific provision enabling the secured creditor to take possession from the hands of a Tenant (lessee). On the other hand, the TN Rent Control Act contemplates that a Tenant is entitled in law to continue to be in possession unless he is evicted under the provisions of the said Act. SARFAESI Act being mainly procedural and the TN Rent Control Act being exclusively dealing with the substantive right of Tenants, both the Acts operate on different fields. Only in the event the SARFAESI Act contains a provision to enable the Bank to take possession of a secured asset from a lessee, then only it can be held that there is conflict between the SARFAESI Act and the TN Rent Control Act in which case, the TN Rent Control Act should give way for the SARFAESI Act to have overriding effect. However, the....
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....' case would reveal a situation where a tenancy is created after the mortgage and for the reasons best known, it would defeat the creditor's claims for recovery of possession in case of default or non-performing asset's liabilities. 17. In the present case, it is clear that the tenancy is created after the mortgage of the property in question to the secured creditor, namely, bank. When that is the position, the ratio laid down by the Division Bench in Sree Lakshmi Products' case will have a bearing on the matter. As the tenant has come into picture only after the property in question has been mortgaged to the secured creditor, in the absence of placing of the Division Bench decision in Sree Lakshmi Products' case before the Division Bench in Indian Bank's case, with great respect to the Division Bench, I say that the ratio laid down by the Division Bench in Sree Lakshmi Products' case will hold the field to the facts of the present case. When the tenant knows well that there will be a recovery or taking over of the possession of the mortgaged property or otherwise and enters into a lease agreement with the landlord, it is for him to seek protection before the appropriate forum n....