TaxTMI 
TaxTMI 
2015 (10) TMI 2445
X X X X Extracts X X X X
X X X X Extracts X X X X
....ction 14(1) of the SARFAESI Act, the Chief Metropolitan Magistrate, Esplanade, Mumbai has, on an application made by the Cosmos Cooperative Bank Limited, directed as under: "ORDER Application is allowed. Judicial Clerk, who is incharge of Assistant Registrar of Bandra Center of Courts, Mumbai is appointed as the Court Commissioner to take possession of the secured assets viz 1)village Mohili, Tah. Kurla, and situated within registration district of Mumbai and subdistrict of Mumbai suburban district bearing S. No. 63/1(P); CTS No. 569 admeasuring about 2299 sq. yards and the said property with structure standing thereon and being constructed and 2) shop No. 1 admeasuring about 39.50 sq. mtrs. Situated on the ground floor of the building known as "Abhishek" standing on piece of land bearing plot No. S. No. 254 of village Vile Parle, TPS II Vile Parle, CTS No. 1257/2 to 6 of Vile Parle within the registration district and subdistrict of Mumbai city and Mumbai suburban and within the local limits of Greater Mumbai Municipal Corporation by taking such steps and using such force including breaking open the lock thereof or taking assistance of police, if required, at ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....0/. It is stated in para 3.3 of the Petition that one of the Directors of the second Respondent was admitted as a partner of Petitioner No. 1 firm. Thereafter, reliance is placed on para 3.4 of the Petition and the subparagraphs thereof to submit that the second Respondent has been issuing the rent receipts and there are also registrations and licences obtained under the Bombay Sales Tax Act, 1959 and the Central Sales Tax Act, 1956. The Petitioners have also been making payment of all utility charges in relation to the said property, including the electricity charges payable to Reliance Infrastructure Limited. Copies of all these documents and the registration certificate under the Bombay Shops and Establishment Act, 1948 have been annexed to this Writ Petition. It is claimed that Petitioner No. 1 has been carrying on business of trading in plywood and other wood products since the month of September, 2000. The said premises are the only place where the Petitioners store their stock of plywood and other wood products. They do not have any other premises and for use as godown or warehouse of adequate size. The Petitioners also place heavy reliance on the fact that Respondent No. 4 ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....xure 'Z' to the Petition passed by the Court of Small Causes at Mumbai, by which temporary injunction has been granted to the aforesaid effect. 8) The Petitioners, therefore, proceeded on the footing that they have taken the requisite steps to protect their lawful possession. However, the officers of Respondent No. 4 Bank attended the premises on or about 8th September, 2015 with a view to take possession thereof. It is for the first time that the Petitioners were informed that the said premises were mortgaged in favour of Respondent No. 4 and that they having failed to discharge the debt, the mortgage security can be proceeded against under the SERFAESI Act. That is how the Bank has proceeded and after taking the requisite measures in terms of section 13 has sought assistance of the learned Chief Metropolitan Magistrate so as to take peaceful possession of the premises. 9) It is then the Petitioners were made aware of a case, which was filed under section 14 of the SARFAESI Act in the Court of Chief Metropolitan Magistrate, Esplanade, Mumbai. After obtaining the requisite copies the Petitioners learnt about the impugned order dated 18th June, 2015. 10) It is in th....
X X X X Extracts X X X X
X X X X Extracts X X X X
....d part of section 107 of the Transfer of Property Act, 1882 would come into play, meaning thereby if there is a tenancy created and pursuant to which the lessee is put in possession it would denote this tenancy to be of month to month. That requires no registration. That tenancy has not been determined by the landlord. In the circumstances, the Bank would not be in a position to take possession from the tenant and when this tenancy is protected by the then Bombay Rent, Hotel and Lodging House Rates Control Act, 1947 (for short "the Bombay Rent Act") and the successor enactment, namely, the Maharashtra Rent Control Act, 1999. Once the law is construed to mean that a Bank can override such lawful tenancy, then, that would mean the protection granted by another State legislation for the benefit of tenants would be rendered nugatory. Such is never the intent of the legal provisions and which are relied upon by the Bank. Thus, Mr. Samdani would submit that the settled law is that the lease of more than one year under the indenture, which is unregistered, is void. However, equally well settled position in law and that is if a lessee is put in possession and is paying rent to the lessor, ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....he subject premises. Then, Mr. Pandey relies upon a document styled as a mortgage agreement dated 22nd June, 1998 by Respondent No.2 and states that the signatories thereto are Mr. Nensi L. Shah and branch manager of Respondent No. 4. It is this Nensi Shah who is the signatory to the tenancy agreement dated 1st September, 2000. Thus, the Petitioners, who were one time associates of Respondent Nos. 1 and 2, namely the borrowers and guarantors, have been put up by them in order to defeat the rights of the Bank and particularly the order and protection under section 14 of the SARFAESI Act. The reliance placed on the tenancy agreement is thus of no avail. That agreement is executed on 1st September, 2000. That is an unregistered agreement. Mr. Pandey would submit that after the promulgation of the Maharashtra Rent Control Act from 31st March, 2000, by virtue of section 55 thereof, an agreement for tenancy is to be registered and compulsorily. In the absence of a registered agreement, and a unregistered agreement subsequent to the mortgage and which cannot be said to be to the knowledge of the Respondent No. 4 Bank, the action and proceedings under the SARFAESI Act cannot be frustrated.....
X X X X Extracts X X X X
X X X X Extracts X X X X
....and purpose that the Act has been enacted. We need not refer to various provisions of the Act simply because the Hon'ble Supreme Court in decisions after decisions has emphasised that an interpretation be placed on its provisions which would subserve the above purpose and object. That is how section 13 appearing in Chapter III, titled as "Enforcement of Security Interest" has been interpreted. Notwithstanding anything contained in section 69 or section 69A of the Transfer of Property Act, 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. By subsection (4) it is provided that in case the borrower fails to discharge his liability in full within the period specified in subsection (2), the secured creditor may take recourse to one or more of the measures to recover his secured debts. One of the measures to recover the debt is to take possession of the secured assets of the borrower including the right to transfer by way of lease, assignment or sale, for realising the secured asset. By section 14, the Bank is enabled to approach the ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....uch default in repayment of the financial assistance the account of the borrower has been classified as a nonperforming asset; (vi) affirming that the period of sixty days notice as required by the provisions of subsection (2) of section 13, demanding payment of the defaulted financial assistance has been served on the borrower; (vii) the objection or representation in reply to the notice received from the borrower has been considered by the secured creditor and reasons for nonacceptance of such objection or representation had been communicated to the borrower; (viii) the borrower has not made any repayment of the financial assistance in spite of the above notice and the Authorised Officer is, therefore, entitled to take possession of the secured assets under the provisions of subsection (4) of section 13 read with section 14 of the principal Act; (ix) that the provisions of this Act and the rules made thereunder had been complied with: provided further that on receipt of the affidavit from the Authorised Officer, the District Magistrate or the Chief Metropolitan Magistrate, as the case may be, shall after satisfying the contents of the ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....Magistrate to render assistance. It would require a brief determination by the Chief Metropolitan Magistrate and for that purpose he must give due notice of this application to the affected parties and pass an order in accordance with law. Mr. Samdani has relied upon the following paragraphs in the judgment of the Hon'ble Supreme Court of India in the case of Harshad G. Sandagar (supra): "22. We may now consider the nature of the right of the lessee and as to when the lease under the Transfer of Property Act gets determined. Sections 105 and 111 of the Transfer of Property Act, which are relevant in this regard, are quoted hereinbelow: "105. Lease defined - A lease of immovable property is transfer of a right to enjoy such property, made for a certain time, express or implied, or in perpetuity, in consideration of a price paid or promised, or of money, a share of crops, service or any other thing of value, to be rendered periodically or on specified occasions to the transferor by the transferee, who accepts the transfer on such terms. Lessor, lessee, premium and rent defined. - The transferor is called the lessor, the transferee is called the lessee, ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....sset shall stand determined when the secured creditor decides to take the measures mentioned in Section 13 of the said Act. Without the determination of a valid lease, the possession of the lessee is lawful and such lawful possession of a lessee has to be protected by all courts and tribunals. ..... 25. The opening words of subsection (1) of Section 14 of the SARFAESI Act make it clear that where the possession of any secured assets is required to be taken by the secured creditor or if any of the secured assets is required to be sold or transferred by the secured creditor "under the provisions of the Act", the secured creditor may, for the purpose of taking possession or control of any such secured asset, request, in writing, the Chief Metropolitan Magistrate or the District Magistrate within whose jurisdiction any such secured asset or other documents relating thereto may be situated or found, to take possession thereof. Thus, only if possession of the secured asset is required to be taken under the provisions of the SARFAESI Act, the secured creditor can move the Chief Metropolitan Magistrate or the District Magistrate for assistance to take possession of the secured ass....
X X X X Extracts X X X X
X X X X Extracts X X X X
....re, such a request is made by the secured creditor and the Chief Metropolitan Magistrate or the District Magistrate finds that the secured asset is in possession of a lessee but the lease under which the lessee claims to be in possession of the secured asset stands determined in accordance with Section 111 of the Transfer of Property Act, the Chief Metropolitan Magistrate or the District Magistrate may pass an order for delivery of possession of secured asset in favour of the secured creditor to enable the secured creditor to sell and transfer the same under the provisions of the SARFAESI act. Subsection (6) of Section 13 of the SARFAESI Act provides that any transfer of secured asset after taking possession of secured asset by the secured creditor shall vest in the transferee all rights in, or in relation to, the secured asset transferred as if the transfer had been made by the owner of such secured asset. In other words, the transferee of a secured asset will not acquire any right in a secured asset under subsection (6) of Section 13 of the SARFAESI Act, unless it has been effected after the secured creditor has taken over possession of the secured asset. Thus, for the purpose of....
X X X X Extracts X X X X
X X X X Extracts X X X X
....rest (Enforcement) Rules, 2002 issued a demand notice dated .......... Calling upon the borrower Shri ........../ M/s. .......... To repay the amount mentioned in the notice being Rs.......... (in words ..........) within 60 days from the date of receipt of the said notice. The borrower having failed to repay the amount, notice is hereby given to the borrower and the public in general that the undersigned has taken possession of the property described hereinbelow in exercise of powers conferred on him/her under Section 13(4) of the said Act read with Rule 9 of the said Rules on this .......... Day of .......... Of the year ......... The borrower in particular and the public in general is hereby cautioned not to deal with the property and any dealings with the property will be subject to the charge of the .......... (name of the institution) for an amount Rs. .......... And interest thereon. _______________________________________________________ Description of the immovable property _______________________________________________________ All that part and parcel of the property consisting of Flat No. ..... /Plot No. ..... in Survey No. ..... /Cit....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... 227 of the Constitution to entertain a challenge to the advance ruling of the authority. 30. We may next consider whether a lessee has any remedy by way of an appeal under section 17 of the SARFAESI Act when the secured creditor attempts to take over possession of the secured asset which is in possession of the lessee. ..... 35. A further question of law raised in these appeals is whether the tenants have remedies under the tenancy law concerned. In the State of Maharashtra, the Maharashtra Rent Control Act, 1999 is in force and this Act applies to premises let for the purposes of residence, education, business, trade or storage specified in Schedule I and Schedule II to the Act as well as houses let out in areas to which the Bombay Rents, Hotel and Lodging House rates Control Act, 1947 applied before the commencement of the Act. Section 33 of the Maharashtra Rent Control Act is titled "jurisdiction of courts" and it provides that the courts named therein "shall have jurisdiction to entertain and try any suit or proceeding between a landlord and a tenant relating to the recovery of rent or possession of any premises and to decide any application made under the Ac....
X X X X Extracts X X X X
X X X X Extracts X X X X
....t has clarified that if there is a tenancy of the premises in the State of Maharashtra including Mumbai, then, whether parties to it could take recourse to the remedies provided by the Maharashtra Rent Control Act and obtain the relief of injunction against the secured creditor taking possession of the secured asset from the Appellant would depend upon the nature of the relief and protection sought. The Hon'ble Supreme Court, after referring to section 34 of the SARFAESI Act and the overriding effect given to it, according to Mr. Samdani, concluded that the said Courts and set up under the Maharashtra Rent Control Act cannot grant the protection by taking cognizance of the dispute between the secured creditor and the tenant under landlord who is a borrower of the secured creditor. The second limb of section 34 restraining it from granting an injunction would come into play. Thus, when action is sought to be taken by the secured creditor under section 13 of the SARFAESI Act or by the Chief Metropolitan Magistrate under section 14 thereof, the Court or the authority mentioned in section 33 of the Maharashtra Rent Control Act cannot grant the injunction to prevent such action. Mr. Sam....
X X X X Extracts X X X X
X X X X Extracts X X X X
....f delivery of possession in his favour by the landlord. 24) We are of the opinion that this clarification of the Hon'ble Supreme Court would assist us in reaching the conclusion that we propose to reach. The Hon'ble Supreme Court was considering a case where parties like the Appellants before it claim that they are lawful tenants/lessees. Therefore, the Hon'ble Supreme Court clarified that if the lease is an annual one, then, in terms of the law, it can only be evidenced by a registered instrument. Absent such registered instrument that lease cannot be said to be affecting any of the measures under the SARFAESI Act. Meaning thereby, the Chief Metropolitan Magistrate or the District Magistrate, as the case may be, are not prevented from proceeding to pass orders on the application and rendering the requisite assistance merely because such persons claim that they are in possession of the secured assets. 25) In the present case, undisputedly, there is a statement of fact in the Petition itself and that the agreement dated 1st September, 2000, copy of which is at Annexure 'B' contemplates rate of Rs. 60,000/payable annually and which was increased subsequently. Admittedly, this t....
X X X X Extracts X X X X
X X X X Extracts X X X X
....d shall be registered under the Registration act, 1908, (XVI of 1908). (2) The responsibility of getting such agreement registered shall be on the landlord and in the absence of the written registered agreement, the contention of the tenant about the terms and conditions subject to which a premises have been given to him by the landlord on leave and licence or have been let to him, shall prevail, unless proved otherwise. (3) Any landlord who contravenes the provisions of this section shall, on conviction, be punished with imprisonment which may extend to three months or with fine not exceeding rupees five thousand or with both." 28) In such circumstances, Mr. Samdani would rely upon the fact that even if there is no registration, still, for approaching the Courts and Tribunals under the Rent Control Act, that is not an impediment. He relies upon subsection (2) of section 55 as reproduced above. We are not concerned with a case of a statute governing the landlord tenant relationship. No provision thereof falls for our interpretation. We are concerned with the situation where no registered agreement of tenancy being placed on record, could the Chief Metropolitan ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... the rent control legislation intervening that the Court found that the Civil Court will have no jurisdiction. The Trial Court, in that case found that the Appellant before the Hon'ble Supreme Court is not a tenant as the lease was void on account of non registration of the lease deed. In the First Appeal, the District Judge held that in spite of nonregistration of the instrument, there was a valid tenancy of the building and hence the appellant could not be evicted except in accordance with the provisions of the Rent Act. In the Second Appeal by the Respondent landlord before the Hon'ble Supreme Court, the Single Judge of the High Court, Kerala set aside the judgment and remanded the matter back to the Trial Court. It in that context that the Appellant approached the Hon'ble Supreme Court and urged that in spite of there being no registered instrument, there could be a lease and covered by the rent control legislation. It is in this context that the observations from paras 6 onwards as made and heavily relied upon by Mr.Samdani. We do not think that reliance placed on this decision and the further decisions of the Hon'ble Supreme Court would advance the case of the Petitioners any....