IN THE HIGH COURT FOR THE STATE OF TELANGANA,
HYDERABAD
****
W.P.No.100 & 300 of 2020 Between:
W.P.No.100 of 2020 Pallerla Ramesh & 5 others.
Petitioners VERSUS Andhra Bank, Rep. by its Authorised Officer Warangal Branch, NRR Building Hanumakonda, Warangal & Another.
Respondents W.P.No.390 of 2020 K.Ramaswamy & 4 Others.
Petitioners VERSUS Andhra Bank, Rep. by its Authorised Officer Warangal Branch, NRR Building Hanumakonda, Warangal & Another.
Respondents JUDGMENT PRONOUNCED ON: 19.11.2021 HON'BLE SRI JUSTICE UJJAL BHUYAN AND HON'BLE DR.JUSTICE CHILLAKUR SUMALATHA
1. Whether Reporters of Local newspapers may be allowed to see the Judgments? : Yes
2. Whether the copies of judgment may be Marked to Law Reporters/Journals? : Yes
3. Whether His Lordship wishes to see the fair copy of the Judgment? : Yes ____________________ UJJAL BHUYAN, J 2 * HON'BLE SRI JUSTICE UJJAL BHUYAN AND HON'BLE DR.JUSTICE CHILLAKUR SUMALATHA + W.P.Nos.100 & 390 of 2020 % 19.11.2021 # Between:
W.P.No.100 of 2020 Pallerla Ramesh & 5 others.
Petitioners VERSUS Andhra Bank, Rep. by its Authorised Officer Warangal Branch, NRR Building Hanumakonda, Warangal & Another.
Respondents W.P.No.390 of 2020 K.Ramaswamy & 4 Others.
Petitioners VERSUS Andhra Bank, Rep. by its Authorised Officer Warangal Branch, NRR Building Hanumakonda, Warangal & Another.
Respondents ! Counsel for Petitioners : Sri T. VIJAYA KUMAR ^ Counsel for the respondents : Ms. V.Dyumani <GIST: > HEAD NOTE: ? Cases referred 1 (2016) 3 SCC 762 2 (2019) 9 SCC 94 3 (2014) 6 SCC 1 3 THE HON'BLE SRI JUSTICE UJJAL BHUYAN AND THE HON'BLE DR. JUSTICE CHILLAKUR SUMALATHA W.P.Nos.100 & 390 OF 2020 COMMN ORDER: (Per Hon'ble Sri Justice Ujjal Bhuyan)
Subject matter of both the Writ Petitions being identical, those were heard together and are being disposed of by this common judgment and order.
2 We have heard Mr. T.Vijaya Kumar learned counsel for the petitioners and Ms.Dyumani learned counsel for the respondent - Andhra Bank.
3 These two Writ Petitions have been filed under Article 226 of the Constitution of India seeking a declaration that action of the respondent - Andhra Bank in seizing and taking over physical possession of the schedule properties through advocate commissioner without serving any notice on the petitioners is illegal and arbitrary. Further prayer made is for a direction to the respondent - Andhra Bank to redeliver the schedule property to the petitioners.
4 It is stated that petitioners are tenants of the schedule property belonging to respondent No.2, who is the landlord. As per description given in the supporting affidavit, petitioners had taken on rent respective premises each measuring about 680 sq. yards wherefrom they are carrying on their jewellery business. Petitioners have been paying rent to respondent No.2 for the last several years. The schedule property is situated at Jammikunta village in Karimnagar district in the State of Telangana. 4 5 It is stated that petitioners have filed civil suits in the Court of Principal Junior Civil Judge, Huzurabad, seeking permanent and temporary injunctions against the respondents from evicting the petitioners from their respective premises. Principal Junior Civil Judge has passed injunction order in each of the suits. 6 According to the petitioners they are third parties having no knowledge about any transaction between respondent No.1-Andhra Bank and respondent No.2 - Jadala Nagarani as they are tenants of the schedule property. However, respondent No.1-Andhra Bank, in a high handed manner took over physical possession of the schedule property on 19.11.2019. Petitioners have contended that action of respondent No.1-Andhra Bank in approaching the Metropolitan Magistrate without disclosure of the fact that the schedule property was in occupation of tenants i.e. petitioners amounts to suppression of facts. Under Section 14 (1) (a) of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (briefly referred to hereinafter as 'SARFAESI Act'), respondent No.1-Andhra Bank was under an obligation to disclose that the physical possession of the schedule property was with the petitioners. But this crucial fact was suppressed. According to the petitioners, the landlord i.e. respondent No.2 is trying to evict the tenants i.e. the petitioners from the schedule property by misusing the provisions of the SARFAESI Act. Impugned action is not only violative of Section 14 of the SARFAESI Act, but is also in violation of the injunction orders of the civil court.
57 Aggrieved thereby, these two Writ Petitions have been filed seeking the above reliefs.
8 This Court by order dated 06.01.2020, issued notices. 9 Respondent No.1 i.e. Andhra Bank has filed identical counter affidavits in both the writ petitions. Counter affidavits have been filed through Mr. N.Srinivas, who at the time of filing the affidavits, was serving as Chief Manager of the Warangal main branch of Andhra Bank and was also the authorized officer for KMC Campus branch of Andhra Bank. As the two affidavits are identical, for the sake of convenience, we take up the counter affidavit filed on behalf of respondent No.1 in Writ Petition No.100 of 2020.
(i) According to respondent No.1-Andhra Bank, petitioners have an adequate and efficacious alternative remedy under Section 17 of the SARFAESI Act and without exhausting the aforesaid remedy, have filed the two writ petitions. Therefore, the writ petitions should not be entertained.
(ii) On merit it is contended that M/s. Jadala Traders is a partnership firm in which husband of respondent No.2 is a partner. Respondent No.2 availed cash credit limit of Rs.4,00,00,000-00 from the State Bank of India, Kasibugga branch, Warangal. M/s. Jadala Traders had taken M/s. Siddardha Cotton Ginning and Pressing Industry located at Warangal to run the cotton ginning and pressing business activity. M/s. Jadala Traders, represented by its partners including husband of respondent No.2 had approached respondent No.1-Andhra Bank to take over the limits from State Bank of Hyderabad. In this 6 connection, respondent No.2 offered the premises bearing No.8-1- 104, Vennavanka main road, Jammikunta village in the district of Karimnagar as one of the collateral security amongst other securities.
(iii) Respondent No.2 deposited the title documents with the KMC branch, Warangal of respondent No.1-Andhra Bank on 03.6.2017 and thus created mortgage by deposit of title deeds which was confirmed by respondent No.2, vide registered memorandum of deposit of title deed No.2119-2017 dated 15.6.2017. While offering the aforesaid property, respondent No.2 declared vide letter dated 03.6.2017 that the property offered by her as security was free from encumbrances and third party claims and that she was the absolute owner of the property. Respondent No.1-Andhra Bank also obtained encumbrance certificate dated 20.6.2017, whereafter respondent No.1-Andhra Bank accepted the said property as security.
(iv) M/s. Jadala Traders availed cash credit limit of Rs.6,00,00,000/- from respondent No.1-Andhra Bank, but defaulted in repayment of the credit availed of. Because of such default, respondent No.1-Andhra Bank was constrained to classify the loan account of M/s. Jadala Traders as Non Performing Asset (NPA) on 22.01.2019, whereafter demand notice dated 01.02.2019 was issued to M/s. Jadala Traders quantifying the payable dues at Rs.6,28,28,555-58 as on 01.02.2019. The said notice was served on the borrower as well as on the guarantor.
(v) When M/s. Jadala Traders and its guarantor failed to pay the notified amount, as per the demand notice, respondent No.1 - 7 Andhra Bank was compelled to issue possession notice dated 02.5.2019, which was served upon husband of respondent No.2 and respondent N.2 herself. That apart, the possession notice was published in two newspapers i.e. New Indian Express and Namaste Telangana daily newspapers on 04.5.2019. Possession notice was also affixed on the secured asset. It is stated that respondent No.1- Andhra Bank had complied with the provisions of Rule 8 (1) (2) of the Security Interest (Enforcement) Rules, 2002 (briefly, the 'SARFAESI Rules' hereinafter).
(vi) It is stated that respondent No.1-Andhra Bank had issued notice under Rule 8 (6) of SARFAESI Rules on 13.6.2019, giving 30 days notice. Such notice was also published in the newspapers Sakshi and New Indian Express on 18.6.2019. It was notified that if there was failure to pay the due amount then respondent No.1- Andhra Bank may proceed to sell the property by inviting tender / auction / e-auction/ private treaty. There was no response to such notice by M/s. Jadala Traders, respondent No.2 and her husband Jadala Srinivas, thus failing to exercise the right of redemption, under Section 13 (8) of the SARFAESI Act.
(vii) In such circumstances, respondent No.1-Andhra Bank issued sale notice dated 07.10.2019 fixing 15.11.2019 as the date of sale. Such notice was also published in Andhra Jyoti and Telangana Today daily newspapers on 10.10.2019 besides affixture at the secured asset.
(viii) It is stated that in the auction held pursuant to the sale notice dated 07.10.2019, Smt. G. Saroja, who had participated in the auction in respect of Item No.2 of the sale notice, was declared 8 as the highest bidder at Rs.1,00,31,000-00. On being so declared, she deposited 25% of the bid amount. In view of the interim order passed by this Court in a connected writ petition being W.P.No.24960 of 2019 (M/s.Jadala Traders Vs. Andhra Bank), the sale was however not confirmed.
(ix) Respondent No.1-Andhra Bank filed Crl.M.P.No.64 of 2019 under Section 14 of the SARFAESI Act for taking over physical possession of the schedule property (Item No.2). Learned Chief Judicial Magistrate, Karimnagar, passed order dated 15.7.2019 appointing an advocate commissioner for taking over physical possession of the schedule property. Advocate commissioner, in execution of warrant of commission, issued notices dated 22.7.2019 directing occupants to vacate the sale premises and to handover those premises to him for taking over physical possession. Advocate commissioner thereafter executed the warrant on 27.7.2019 and took over physical possession of the secured asset.
(x) According to respondent No.1-Andhra Bank, after the demand was raised by it, under Section 13 (2) of the SARFAESI Act, respondent No.2 in collusion with her husband Jadala Srinivas filed collusive suits before the civil courts at Huzurabad. Alleged lease agreements entered into by the petitioners are unregistered deeds; those are fabricated documents with the sole objective to prevent respondent No.1-Andhra Bank from proceeding under the SARFAESI Act. Reliance has been placed on Section 17
(d) of the Registration Act, 1908 as applicable to Telangana State whereby every lease deed of immovable property should be 9 compulsorily registered. Since the lease deeds are unregistered and unstamped, those would be inadmissible.
(xi) Respondent No.1-Andhra Bank has to recover an amount of Rs.6,28,28,555-58 as of 01.02.2019 along with future interest and charges from the borrower and/or guarantor.
10 In the circumstances respondent No.1 seeks dismissal of the two writ petitions.
11 As would be evident from the above, facts narrated by the petitioners are extremely inadequate and sketchy. However, in the counter affidavits filed by respondent No.1-Andhra Bank, the relevant facts have been disclosed, though it would have been much better if all the facts would have been narrated in seriatim with corresponding dates.
12 Be that as it may, learned counsel for the petitioners have assailed the impugned action of respondent No.1-Andhra Bank by contending that petitioners were dispossessed from the tenanted premises without putting them on notice and without giving them an opportunity of hearing. Petitioners being tenants, they cannot be evicted without following the provisions of the Transfer of Property Act, 1882 as well as the concerned Rent Control Act. Provisions of the SARFAESI Act have been misused by the landlord in collusion with respondent No.1-Andhra Bank to evict the protected tenants. In the process, respondent No.1 - Andhra Bank has also violated the injunction orders of the civil court. Learned counsel for the petitioners has placed reliance on a decision of the Supreme Court dated 20.01.2016 in the case of Vishal N. 10 Kalsaria Vs. Bank of India1 and submits that the mere factum of non-registration will not make the lease itself nugatory. Neither the landlord nor the banks can be permitted to exploit the factum of non-registration of tenancy deed against the tenant. Once a tenancy is created, a tenant can be evicted only after following the due process of law as laid down in the concerned Rent Control Act. 13 Submissions of learned counsel for the petitioners have been opposed by learned counsel for respondent No.1-Andhra Bank, who has also filed written arguments. In addition to opposing the writ petition on the ground of availability of alternative remedy under Section 17 of the SARFAESI Act, she further submits that petitioners are unregistered tenants of respondent No.2. Date of mortgage of the schedule property in favour of respondent No.1- Andhra Bank is 03.6.2017. At the time of offering the sale property as surety respondent No.2 had declared that the said security was free from encumbrances and third party claims. All the lease deeds are of the years 2016, 2017 and 2018. As per Section 17 (d) of the Registration Act, 1908, every lease of immovable property requires compulsory registration with effect from 01.4.1999 in respect of the State of Telangana. Therefore, the alleged lease deeds are inadmissible for want of registration. In so far the suits filed by the petitioners are concerned, learned counsel for respondent No.1 - Andhra Bank submits that Andhra Bank is not a party to such suits. One 'Mr. Adam' shown as care of Andhra Bank was made a party. In such circumstances, orders of the civil court would not be binding on respondent No.1-Andhra Bank. 1 (2016) 3 SCC 762 11 14 Respondent No.1-Andhra Bank had taken over physical possession of the schedule property through advocate commissioner appointed by the learned Chief Judicial Magistrate on 28.11.2019. Prior to taking over such possession, the advocate commissioner had issued notice to the inmates of the premises. 15 Lastly, learned counsel for respondent No.1-Andhra Bank placed reliance on a decision of the Supreme Court in Bajarang Shyamsunder Agarwal Vs. Central Bank of India2. She submits that there is absolutely no merit in the two writ petitions and thus those should be dismissed with exemplary costs. 16 Submissions made by learned counsel for the parties have been received the due consideration of the Court. 17 After hearing learned counsel for the parties and on consideration of the materials on record as well as taking an overall view of the matter, we have no hesitation to hold that the writ petitions are liable to be dismissed both on the point of alternative remedy as well as on merit.
18 First we take up the point of alternative remedy. Section 17 of the SARFAESI Act provides for filing of application against measures to recover secured debts. As per sub-section (1) of Section 17, any person (including borrower) if aggrieved by any of the measures referred to in sub-section (4) of Section 13 by the secured creditor or by his authorised officer, may make an application to the jurisdictional Debts Recovery Tribunal within 45 2 (2019) 9 SCC 94 12 days from the date on which such measures had been taken. Section 17 is extracted hereunder:
17. Application against measures to recover secured debts:- (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 measures 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. (1-A) An application under sub-section (1) shall be filed before the Debts Recovery Tribunal within the local limits of whose jurisdiction-
(a) the cause of action, wholly or in part, arises;
(b) where the secured asset is located; or
(c) the branch or any other office of a bank or financial institution is maintaining an account in which debt claimed for the time being.
(2) The Debts Recovery Tribunal shall consider whether any of the measures referred to in sub-section (4) of section 13 taken by the secured creditor for enforcement of security are in accordance with the provisions of this Act and the rules made thereunder. (3) If, the Debts Recovery Tribunal, after examining the facts and circumstances of 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 or restoration of possession, of the secured assets to the borrower or other aggrieved person, it may, by order,-
(a) declare the recourse to any one or more measures referred to in-sub-section (4) of section 13 taken by the secured assets as invalid; and
(b) restore the possession of secured assets or management of secured assets to the borrower or such other aggrieved person, who has made an application under sub-section (1), as the case may be; and
(c) pass such other direction 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.
(4) If, the Debts Recovery Tribunal declares 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 to take recourse to one or more of the measures specified under sub-section (4) of section l3 to recover his secured debt. (4-A) Where-
(i) any person, in an application under sub-section (1), claims any tenancy or leasehold rights upon the secured asset, the Debt Recovery Tribunal, after examining the facts of the case and evidence produced by the parties in relation to such claims shall, for the purposes of enforcement of security interest, have the jurisdiction to examine whether lease or tenancy,-
(a) has expired or stood determined; or
(b) is contrary to Section 65-A of the Transfer of Property Act, 1882 (4 of 1882); or
(c) is contrary to terms of mortgage; or
(d) is created after the issuance of notice of default and demand by the Bank under sub-section (2) of Section 13 of the Act; and
(ii) the Debt Recovery Tribunal is satisfied that tenancy right or leasehold rights claimed in secured asset falls under the sub-clause (a) or sub-clause (b) or sub-clause (c) or sub-clause (d) of clause (i), then notwithstanding anything to the contrary contained in any other law for the time being in force, the Debt Recovery Tribunal may pass such order as it deems fit in accordance with the provisions of this Act.13
(5) Any application made under sub-section (1) shall be dealt with by the Debts Recovery Tribunal as expeditiously as possible and disposed of within sixty days from the date of such application:
Provided that the Debts Recovery Tribunal may, from time to time, extend the said period for reasons to be recorded in writing, so, however, that the total period of pendency of the application with the Debts Recovery Tribunal, shall not exceed four months from the date of making of such application made under sub-section (1).
(6) If the application is not disposed of by the Debts Recovery Tribunal within the period of four months as specified in sub-section (5), any party to the application may make an application, in such form as may be prescribed, to the Appellate Tribunal for directing the Debts 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 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. 19 Thus, from the above we find that an aggrieved person may make an application to the jurisdictional Debts Recovery Tribunal against any of the measures taken by or on behalf of secured creditor under sub-section (4) of Section 13. The limitation prescribed is 45 days from the date on which such measures had been taken.
20 Prior to amendment, Section 17 of the SARFAESI Act provided a right of appeal to any person including the borrower to approach the Debts Recovery Tribunal. Subsequent to the amendment, Section 17, as extracted above, provides for filing of an application to the Debts Recovery Tribunal by a person aggrieved by any action taken under the SARFAESI Act, more particularly, under Section 13 (4) thereof. An additional alternative remedy of appeal to the Appellate Tribunal is now provided under Section 18. In Harshad Govardhan Sondagar Vs. International Assets Reconstruction Co. Ltd3 Supreme Court held that the right to avail the remedy under Section 17 is available to a tenant claiming under a borrower. Therefore, petitioners claiming to be tenants under the borrower have a right to move the jurisdictional Debts Recovery Tribunal under Section 17 of the SARFAESI Act. 3 (2014) 6 SCC 1 14 This statutory remedy, which is an effective and efficacious alternative remedy, having not been availed of by the petitioners, we are of the view that this Court should not entertain the two writ petitions.
21 Though the two writ petitions could have been dismissed on the point of alternative remedy, since both the parties have pleaded and argued on merit as well, we feel that the same may also be adverted to. On merit also the writ petitions have to fail. We say this for the reasons mentioned in the following paragraphs. 22 Learned counsel for the petitioners placed reliance on a decision of the Supreme Court in Vishal N. Kalsaria (1 supra). In that case a two Judges Bench of the Supreme Court was confronted with the question as to whether a "protected tenant" under the Maharashtra Rent Control Act, 1999 could be treated as a lessee, and whether the provisions of the SARFAESI Act would override the provisions of the Rent Control Act. Thus the legal question before the Court was as to how the right of the protected tenant could be preserved in cases where the debtor landlord secures a loan by offering the very same property as a security interest to the bank or financial institution? Supreme Court held as follows:
The issue of determination of tenancy is also one which is well settled. While Section 106 of the Transfer of Property Act, 1882 does provide for registration of leases which are created on a year to year basis, what needs to be remembered is the effect of non- registration, or the creation of tenancy by way of an oral agreement. According to Section 106 of the Transfer of Property Act, 1882, a monthly tenancy shall be deemed to be a tenancy from month to month and must be registered if it is reduced into writing. The Transfer of Property Act, however, remains silent on the position of law in cases where the agreement is not reduced into writing. If the two parties are executing their rights and liabilities in the nature of a landlord-tenant relationship and if regular rent is being paid and accepted, then the mere factum of non-registration of deed will not make the lease itself nugatory. If no written lease deed exists, then 15 such tenants are required to prove that they have been in occupation of the premises as tenants by producing such evidence in the proceedings under Section 14 of the SARFAESI Act before the learned Magistrate. Further, in terms of Section 55(2) of the special law in the instant case, which is the Rent Control Act, the onus to get such a deed registered is on the landlord. In light of the same, neither the landlord nor the banks can be permitted to exploit the fact of non registration of the tenancy deed against the tenant.
23 Finally it was held that if the contention made on behalf of the bank was to be accepted i.e. the provisions of SARFAESI Act would override provisions of the various Rent Control Acts to allow a bank to evict a tenant from the tenanted premises, which has become a secured asset of the bank after the default on loan by the landlord, then the legislative powers of the State Legislatures would be denuded. Therefore, such contention was rejected. 24 The view of the two Judge Bench of the Supreme Court in Vishal N. Kalsaria case (1 supra) was considered later by a three Judge Bench of the Supreme Court in Bajarang Shyamsunder Agarwal case (2 supra), whereafter it was summed up as follows:
22. The second case which dealt with the issue of tenants' rights under the SARFAESI Act is Vishal N. Kalsaria Case (supra). This Court was concerned with the question Whether a "protected tenant" under the Maharashtra Rent Control Act, 1999 can be treated as a lessee and whether the provisions of the SARFEASI Act, will override the provisions of the Rent Act?
23. After examining the legal and constitutional position, the Court held that while the SARFAESI Act has a laudable objective of providing a smooth and efficient recovery procedure, it cannot override the objective of Rent Acts to control the rate of rent and provide protection to tenants against arbitrary and unreasonable evictions. To resolve this conflict, this Court held that
a) The provisions of the SARFAESI Act cannot be used to override the provisions of the Rent Act. The landlord cannot be permitted to do indirectly what he has been barred from doing under the Rent Act.
b) While a yearly tenancy requires to be registered, oral tenancy can still be proved by showing that the tenant has been in occupation of the premises before the Magistrate under Section 14 of the SARFAESI Act.
c) The nonregistration of the tenancy deed cannot be used against the tenant. For leasehold rights being created after the property has been mortgaged to the bank, the consent of the creditor needs to be taken.16
d) Even though Section 35 of the SARFAESI Act has a non obstante clause, it will not override the statutory rights of the tenants under the Rent Control Act. The non obstante clause under Section 35 of the SARFAESI Act only applies to laws operating in the same field.
25 Before dealing further with Bajarang Shyamsunder Agarwal case (supra) we may mention that under Section 107 of the Transfer of Property Act, 1882, a lease of immovable property from year to year or for any term exceeding one year can be made only by a registered instrument. As per Section 106 of the said Act, more particularly, sub-section (1) thereof, in the absence of written contract or local law, a lease of immovable property shall be deemed to be a lease from year to year, terminable on the part of either lessor or lessee.
26 After examining various provisions of the SARFAESI Act including Section 35 thereof, which provides for an overriding effect, various provisions of the Transfer of Property Act including Section 65 (A) as well as considering the earlier decision of the Supreme Court in Harshad Govardhan Sondagar case (3 supra), the larger Bench of the Supreme Court held as follows:
24. While we agree with the principle laid out in Vishal N. Kalsaria Case (supra) that the tenancy rights under the Rent Act need to be respected in appropriate cases, however, we believe that the holding with respect to the restricted application of the non obstante clause under section 35 of SARFAESI Act, to only apply to the laws operating in the same field is too narrow and such a proposition does not follow from the ruling of this Court in Harshad Govardhan Case (supra).
25. In our view, the objective of SARFAESI Act, coupled with the T.P. Act and the Rent Act are required to be reconciled herein in the following manner:
a) If a valid tenancy under law is in existence even prior to the creation of the mortgage, the tenant's possession cannot be disturbed by the secured creditor by taking possession of the property. The lease has to be determined in accordance with Section 111 of the TP Act for determination of leases. As the existence of a prior existing lease inevitably affects the risk undertaken by the bank while providing the loan, it is expected of Banks/Creditors to have conducted a standard due diligence in this regard. Where the bank has proceeded to accept such a property as mortgage, it will be presumed that it has consented to the risk that comes as a consequence of the existing tenancy. In such a situation, the rights 17 of a rightful tenant cannot be compromised under the SARFAESI Act proceedings.
b) If a tenancy under law comes into existence after the creation of a mortgage, but prior to the issuance of notice under Section 13(2) of the SARFAESI Act, it has to satisfy the conditions of Section 65A of the T.P. Act.
c) In any case, if any of the tenants claim that he is entitled to possession of a secured asset for a term of more than a year, it has to be supported by the execution of a registered instrument. In the absence of a registered instrument, if the tenant relies on an unregistered instrument or an oral agreement accompanied by delivery of possession, the tenant is not entitled to possession of the secured asset for more than the period prescribed under Section 107 of the T.P. Act.
27 In the instant case, the tenancy agreements are not registered. However, the petitioners rely on such unregistered instrument or oral agreement of tenancy. As held by the Supreme Court, in such a situation, the tenant would not be entitled to possession of the secured asset for more than the period prescribed under Section 107 of the Transfer of Property Act, 1882 which period evidently has expired.
28 Therefore, on a totality of the facts and circumstances, we are of the view that both on the question of alternative remedy as well as on merit, the writ petitions have to fail. 29 Accordingly, both the writ petitions are dismissed. No order as to costs. Miscellaneous applications, if any, pending in these two writ petitions, shall also stand dismissed.
___________________ UJJAL BHUYAN, J _________________________________ Dr.CHILLAKUR SUMALATHA, J Date:19.11.2021.
L.R. Copy be marked B/o Kvsn