TaxTMI 
TaxTMI 
2016 (2) TMI 582
X X X X Extracts X X X X
X X X X Extracts X X X X
.... by respondent No.3 - Bank on the premises of which the petitioner is a lessee be opened and the possession thereof be restored to the petitioner. 2. Briefly stated, the facts of the case emerging from the memorandum of the petition are to the following effect: 2.1 The petitioner is a Company, duly registered under the provisions of the Companies Act, 1956 and is being represented through its Director. Respondent No.1 is the District Magistrate, Valsad, and respondent No.2 is the Additional District Magistrate, Valsad. Respondent No.3 is the Central Bank of India, a Banking Company constituted under the Banking Companies Act (Acquisition and Transfer of Undertakings) Act, 1970. 2.2 The subjectmatter of the petition is the property at Plot No.6A, Ranchhodji Nagar, having three floors, situated near Dharampur road, Abrama, Taluka and District Valsad (hereinafter referred to as the disputed property), owned by respondent No.4 ("the original owner" for short). 2.3 The petitioner asserts that it is the lessee of the disputed property and is carrying on its business in the nature of a Mall known as "Mother Mall", which is being run by the petitionerCompany, of which he and his wife a....
X X X X Extracts X X X X
X X X X Extracts X X X X
....l District Magistrate (respondent No.2) passed the impugned order dated 09.05.2014, under Section 14 of the SARFAESI Act, providing police protection to the respondentBank for taking over the peaceful and vacant possession of the disputed property. The petitioner claims that this order was passed without verification regarding any leasehold rights created with regard to the disputed property. The petitioner has, therefore, impugned the order dated 09.05.2014 in the present petition. 2.10 Subsequently, on 29.05.2014, the authorised officer of the respondentBank made an application to the Superintendent of Police regarding the execution and implementation of the impugned order. On 11.06.2014, the respondentBank forcefully and, according to the petitioner, under the guise of the impugned order, carried out an inventory of the disputed property and took over forceful possession in an allegedly illegal manner, despite the fact that the property was occupied by the petitioner. On the same day, the petitioner raised objections by making a representation to the respondentBank against the taking over of the possession of the property. At the same time, the petitioner approached the Civil C....
X X X X Extracts X X X X
X X X X Extracts X X X X
....lication came to be dismissed. 2.17 By a letter dated 28.08.2014, the petitioner requested the respondentBank to return the goods lying in the disputed property. This letter was replied to by the respondentBank on 01.09.2014. On the very same day, the petitioner requested the Bank to compensate it under the provisions of Section 76 of the Transfer of Property Act, 1882 ("the T.P.Act" for short). Thereafter, on 03.09.2014, the respondentBank addressed a communication to the Superintendent of Police, requesting for police protection to shift the goods of the petitioner that were lying in the disputed premises. A copy of the said letter was also sent to the petitioner. On 04.09.2014, the respondentBank addressed a letter to the petitioner, asking it to come on 08.09.2014, to take away its goods from the disputed property. On 08.09.2014 and 22.09.2014, the petitioner addressed two letters to the respondentBank, pointing out that its case was covered by the principles of law enunciated by the Supreme Court in the case of Harshad Govardhan Sondagar v. International Assets Reconstruction Company Limited And Others reported in (2014)6 SCC 1. A legal notice was given by the respondentBank ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... 2015(1) Bankers' Journal 827 d) Manjudevi R.Somani v. Union of India and Ors. 2013( 2) GLH 390 4.2 That the impugned order and the resultant action of the respondent authorities is violative of Article 300A of the Constitution of India since, by virtue of the impugned order, the petitioner, who is a lessee, has been deprived of its possession of the leased property without any authority of law. The petitioner, being a lessee, has a right to be in possession of the secured asset during the period of such lease. There are no provisions in the SARFAESI Act that authorise the respondentauthorities to dispossess a lawful lessee from the secured asset during the subsistence of the lease. 4.3 That the lease in favour of the petitioner is legal and valid in view of the provisions of subsection 13 of Section 13 of the SARFAESI Act. The petitioner could not have been dispossessed till its lease could be determined under Section 14 of the SARFAESI Act by the District Magistrate. 4.4 That the impugned order is bad, illegal and violative of the principles of natural justice, inasmuch as the petitioner was entitled to a notice and an opportunity of hearing from the District Magistrate be....
X X X X Extracts X X X X
X X X X Extracts X X X X
....Section 14 of the SARFAESI Act. The impugned order has been passed by the Additional District Magistrate only for providing police protection to the respondentBank. The role of the District Magistrate under Section 14 of the SARFAESI Act is very limited. It is only to assist the secured creditor in taking the possession of the secured asset, as the language of Section 14 would indicate. 6. The learned Assistant Government Pleader has referred to the following judgments in this regard: (i) Mansa Synthetic Pvt. Ltd. And Ors. v. Union of India - 2012(2) GLH 752 (ii) Standard Chartered Bank v. V.Noble Kumar And Others - (2013)9 SCC 620 7. The petition has been strongly resisted by Mr.K.M.Parikh, learned advocate for respondent No.3 - Bank, by making the following submissions: 7.1 That the petition ought not to be entertained as the petitioner has suppressed material facts. It is an admitted fact that the petitioner did not challenge the order under Section 14 of the SARFAESI Act at the relevant point of time, but participated in the auction proceedings of the secured asset conducted by the authorised officer of the respondentBank, though unsuccessfully. The participation of the....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ct Magistrate/ Chief Metropolitan Magistrate is a measure under Section 13(4) and the remedy lies under Section 17 of the SARFAESI Act. 7.4 That when an application is made under Section 17 of the SARFAESI Act by a person claiming to be a tenant under the borrower, or any person under whom the borrower claims title, the Debt Recovery Tribunal has jurisdiction to entertain the application and inquire into the question whether the applicant had any right, title, interest or possession, anterior to the creation of the security interest and to what extent such interest could be protected. In support of this submission, reliance has been placed upon a judgment of Kerala High Court in the case of N.P.Pushpangadan and Ors. v. The Federal Bank Ltd. And Ors. AIR 2012 Kerala 27. Another judgment relied upon by the learned advocate for the respondentBank is of the High Court of Madras in Shree Lakshmi Products Rep. By its Partner v. State Bank of India - AIR 2007 Madras 148, wherein it is held that any tenancy created by the mortgagor after the mortgage in contravention of Section 65A of the T.P.Act would not be binding on the Bank and in any event, such tenancy rights should stand determi....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... The learned advocate for the respondentBank has placed reliance upon a judgment of the High Court of Punjab and Haryana in the case of Punjab Chemical Industries v. District MagistratecumDeputy Commissioner, reported in 2014 Lawsuit (P&H) 3850, which, according to him, has been delivered after the judgment of the Supreme Court in Harshad Govardhan Sondagar v. International Assets Reconstruction Company Limited And Others (supra), wherein it is held that the order under Section 14 by the District Magistrate is to aid the Bank in order to realize the secured assets. It is submitted that the order under Section 14 of the SARFAESI Act has no independent existence but is an order analogous to execution proceedings, and is appealable under Section 17 of the SARFAESI Act. 7.8 Reliance has also been placed on another judgment of the Punjab and Haryana High Court in the matter between Padam Motors Pvt. Ltd. v. District MagistratecumDeputy Commissioner and Ors. Civil Writ Petition No.6691 of 2015 (O&M), decided on 28.04.2015. 8. On the strength of the above submissions, it is prayed that the petition be rejected. 9. Though served with notices of Rule, respondents Nos.4 and 5 have chosen ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....thers (supra), though later in point of time, but has chosen to follow the judgment in Kanaiyalal Lalchand Sachdev And Others v. State of Maharashtra And Others (supra) etc. which is an earlier one. 10.4 That the submission of the respondentBank that the lease deed has been executed after the mortgage deed and, therefore, the same would be hit by the provisions of Section 65A of the T.P.Act is not tenable, inasmuch as the law has now been settled by the Supreme Court in Harshad Govardhan Sondagar v. International Assets Reconstruction Company Limited And Others (supra), wherein it is clearly stated that Section 65A of the T.P.Act will have no applicability in view of Section 35 of the SARFAESI Act, which has the overriding effect on the provisions of Section 65A of the T.P.Act. In any event, the lease of the petitioner is in consonance with Section 13(13) of the SARFAESI Act. 11. This Court has heard learned counsel for the respective parties at length and has thoughtfully considered the submissions advanced at the Bar. 12. The main ground canvassed by the learned advocate for the petitioner is that the petitioner is a lessee which has been deprived of its possession of the disp....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ver, the lawful possession of the secured asset is not with the borrower, but with the lessee under a valid lease, the secured creditor cannot take over possession of the secured asset until the lawful possession of the lessee gets determined. There is, however, no mention in subsection (4) of Section 13 of the SARFAESI Act that a lease made by the borrower in favour of a lessee will stand determined on the secured creditor deciding to take any of the measures mentioned in Section 13 of the said Act. Subsection (13) of Section 13 of the SARFAESI Act, however, provides that after receipt of notice referred to in subsection (2) of Section 13 of the SARFAESI Act, no borrower shall lease any of his secured assets referred to in the notice, without the prior written consent of the secured creditor. This provision in subsection (13) of Section 13 of the SARFAESI Act and the provisions of the Transfer of Property Act enabling the borrower or the mortgagor to make a lease are inconsistent with each other. Hence, subsection (13) of Section 13 of the SARFAESI Act will override the provisions of Section 65A of the Transfer of Property Act by virtue of Section 35 of the SARFAESI Act, and a lea....
X X X X Extracts X X X X
X X X X Extracts X X X X
....on 13 of the SARFAESI Act by the borrower...... 26. ....Where, therefore, 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....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... It must be a matter which was material for the consideration of the court, whatever view the Court may have taken......" 19. Per contra, the learned advocate for the respondentBank has relied upon Prestige Lights Ltd. v. State Bank of India (supra), wherein, the Supreme Court has stated as under: "33. It is thus clear that though the appellant Company had approached the High Court under Article 226 of the Constitution, it had not candidly stated all the facts to the Court. The High Court is exercising discretionary and extraordinary jurisdiction under Article 226 of the Constitution. Over and above, a court of law is also a court o f equity. It is, therefore, of utmost necessity that when a party approaches a High Court, he must place all the facts before the court without any reservation. If there is suppression of material facts on the part of the applicant or twisted facts have been placed before the Court, the writ court may refuse to entertain the petitio n and dismiss it without entering into merits of the matter. 34. The object underlying the above principle has been succinctly stated by Scrutton, L.J., in R v. Kensington Income Tax Commrs,. [(1917) 1 KB 486 : 86 LJ ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....sclosing the fact that it had unsuccessfully participated in the auction and that the possession of the property had been handed over to respondent No.5 on 01.10.2015, is, in the view of this Court, a material fact, which would go to the very roots of the matter. 22. The petitioner is attempting to derive advantage from the principles of law enunciated by the Supreme Court in Harshad Govardhan Sondagar's case, at a stage when the auction has been concluded and the possession of the disputed property is no longer with the respondentBank. Had the petitioner approached the Court immediately after the passing of the order under Section 14 of the SARFAESI Act, the situation would have been different as, at that point of time, no auction had taken place. At this stage, the petitioner is trying to put back the clock and ignore the subsequent events of the auction taking place and the handing over of the possession of the property to respondent No.5. The said events cannot be ignored as the petitioner is seeking to do. 23. In Harshad Govardhan Sondagar's case, the facts of the case before the Supreme Court were to the effect that the appellants therein claimed to be tenants of different ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....eto, the suppression by the petitioner of the vital fact of the auction, its participation in it and handing over of the possession of the property to respondent No.5, makes it clear that though the petitioner has not come to the Court with clean hands, it is seeking to derive advantage from the principles of law enunciated by the Supreme Court in Harshad Govardhan Sondagar's case at this belated stage, without even challenging the auction proceedings. By suppressing material facts, the petitioner is seeking to obtain an order that would result in nullifying the proceedings of the auction in which thirdparty rights and interest have already been created. 27. As stated by the Supreme Court in Prestige Lights Ltd. v. State Bank of India (supra), it is of utmost importance that when a party approaches the High Court praying for the exercise of its discretionary and extraordinary jurisdiction under Article 226 of the Constitution of India, it must place all the facts before the Court candidly and without any reservation. If there is a suppression of material facts on the part of the petitioner or twisted facts have been placed before the Court, the writ Court may refuse to entertain t....