Lkp Finance Ltd vs Co. Pvt. Ltd
2012 Latest Caselaw 380 Bom

                                         1

             IN THE HIGH COURT OF JUDICATURE AT BOMBAY
                    CIVIL APPELLATE JURISDICTION




                                                                            
                     WRIT PETITION NO. 9158 OF 2012




                                                    
    LKP Finance Ltd.                                 ..Petitioner
          versus
    International Asset Reconstruction




                                                   
    Co. Pvt. Ltd.                                    ..Respondent


    Mr. Rishabh Shah with Mr. Sandeep Manubarwala and Mr. Rajesh
    Chaudhary i/b. M/s. PDS & Associates for Petitioner.




                                            
    Mr. B. S. Colabawala i/b. PKA Advocates for Respondent.
                              igCORAM : D. D. SINHA AND
                                          SMT. V. K. TAHILRAMANI, JJ.

Order Reserved on : 22.10.2012

Order Pronounced on : 21.11.2012

ORDER : (Per : D. D. Sinha, J.)

1. Heard the learned counsel for the petitioner and the learned counsel

for the respondent.

2. Writ petition is directed against the order dated 15.5.2012 passed by

the Debt Recovery Tribunal - II, Mumbai whereby the Securitization

Application No. 18 of 2012 filed by the petitioner came to be

dismissed as well as judgment and order dated 7.8.2012 passed by the

Debts Recovery Appellate Tribunal, Mumbai, whereby Appeal No.

114 of 2012 filed by the petitioner against the order of the DRT came

to be dismissed.

3. The contention of the petitioner is that the petitioner was having a

possessory lien over the premises in question i.e. Office premises No.

106, 1st floor, 'A' Wing, 212, Dalamal Towers, Nariman Point,

Mumbai 400021 and was in possession of the premises therefore the

respondent could not have evicted the petitioner from the subject

premises by invoking the provisions of The Securitisation and

Reconstruction of Financial Assets and Enforcement of Security

Interest Act, 2002 ( "SARFAESI Act") for the default committed by

the REPL Engineering Limited in repayment of dues of the bank.

4. The counsel for the petitioner has submitted that the Tribunal has

erred in holding that the respondent had registered their charge with

the Registrar of Companies. The Tribunal has failed to appreciate the

documentary evidence filed by the parties and came to the erroneous

conclusion. It is contended that only State Bank of India and not the

Bank of Baroda or the other respondent had any charge over the

subject premises. This fact is also established by the Certificate of

Registration of Mortgage under Section 132 of the Companies Act.

Therefore, the finding given by the Tribunal is bad in law and

deserves to be quashed and set aside. Counsel for the petitioner has

submitted that the petitioner claimed to be in possession and has a

possessory lien over the premises in question. It is submitted that

REPL Engineering Ltd. (owner of the premises) in 1993, in 1994 and

in 1995 had taken loan for the power generation by wind power from

the petitioner, however could not repay the lease rents. On or about

1.11.1997, the REPL expressed its inability to settle its due and

offered the premises for the petitioner's use on condition that the

petitioner should credit monthly compensation and the outstanding

dues apart from payment of society dues, charges etc. The petitioner

claims to be in possession of the premises since 1.11.1997.

5. As against this, the counsel for the respondent supported the

impugned order and contended that M/s. Heat Shrink Technologies

Limited had availed certain credit facilities from the consortium

consists of Bank of Baroda, State Bank of India, SBI Commercial

and International Bank Limited, Bank International Indonesia and

HDFC Bank. It is contended that Heat Shrink Technologies Limited

at latter point of time was converted as RPEL Engineering Limited.

The borrowing company secured the amount of credit facility

extended by consortium bank, mortgaged its office premises No. 106,

1st floor, Dalamal Tower, Nariman Point, Mumbai 400021 (subject

premises) in favour of the State Bank of India. Borrower on 9.3.1995

through its then Director had deposited the title deeds of the

mortgaged property with State Bank of India. Memorandum of Entry

dated 9.3.1995 was made in the record of the bank and the charge was

registered with the Registrar of Companies (ROC) and ROC issued

Certificate of Registration of Mortgage dated 13.10.1995. The said

credit facility was extended by consortium bank and was renewed and

enhanced in 1996. On 23.12.1996 the title deed in respect of the said

mortgaged premises was deposited with the State Bank of India to

create mortgage in favour of State Bank of India and the consortium

bank. The Memorandum of Entry dated 23.12.1996 was made in the

relevant record of the bank and the charge was registered by ROC in

this regard on 31.1.1997 in favour of consortium. It is therefore

contended that the contention canvassed by the counsel for the

petitioner in this regard are wholly incorrect. It is contended that

though the petitioner claims to have a possessory lien and claimed

protection on the basis thereof cannot be sustained in law in view of

Section 65A of the Transfer pf Property Act, 1982. In the present case

the borrower has not created any lease or mortgaged assets in favour

of the petitioner and therefore the petitioner has got no statutory right

of possession over the secured premises.

6. We have considered the contentions canvassed by the respective

counsel. DRAT in paragraph 3 of its judgment has mentioned the

facts which are not in dispute. It reads thus:

"3. Few material facts are not in dispute between the parties. Undisputedly in the year 1993-1994, one M/s.

Heat Shrink Technologies Ltd. (at present REPL) had availed certain credit facilities from the consortium

banks i.e. Bank of Baroda, State Bank of India, SBI Commercial and International Bank Ltd., Bank

International Indonesia and HDFC Bank Ltd. Heat Shrink Technologies Ltd. later on was converted as REPL Engineering Ltd. The borrower company to secure

the amount of credit facilities extended by the consortium banks mortgaged its office premises No. 106,

admeasuring 855 sq. feet situated on 1 st floor, Dalamal

Tower, Nariman Point, Mumbai 400021 (hereinafter referred to as "mortgaged premises") in favour of State Bank of India. The borrower had executed various

necessary documents for availing the credit facilities as well as mortgaging its property referred to above. The

borrower on 09.03.1995 through its then Director, Late Mr. B. S. Doctor had deposited the title deeds of the

mortgaged premises with State Bank of India with intention to create mortgage in favour of State Bank of India and the consortium banks. In this respect, the

Memorandum of Entry dated 09.03.1995 was made in the record of the bank and the charge was registered with the Registrar of Companies (hereinafter referred as "ROC"), Mumbai. The ROC issued Certificate of Registration of Mortgage dated 13.10.1995. The said credit facilities were further extended by consortium banks and were renewed and enhanced in the year 1996.

Consequently, late Mr. S. B. Doctor again on 23.12.1996 deposited the title deeds in respect of the said mortgaged

premises with State Bank of India with intention to create mortgage in favour of State Bank of India and the

consortium banks. In this respect, the Memorandum of Entry dated 23.12.1996 was made in the relevant record

of the bank. Consequently, the said charge was registered by the ROC on 31.01.1997."

7. In the instant case, the petitioner admittedly is neither a tenant nor a

lessee of the mortgage premises and only claims to have right over

the mortgaged premises on the basis of promissory lien. It is also not

in dispute that the original borrower had created mortgage of secured

premises in favour of the respondent bank (consortium) while the

petitioner has been or was permitted by the original borrower to

occupy the mortgage premises. The short question which arises for

consideration is ..........

"Whether the mortgagor can permit the petitioner to

occupy the mortgaged premises after creating mortgage

in contravention of provisions of Section 65-A of the

Transfer of Property Act?"

It is brought to the notice of this Court that the said issue is

considered by the Division Bench of Madras High Court in the case

of Sree Lakshmi Products Rep. by its partner vs. State Bank of

India [AIR 2007 Madras 148] in the backdrop of provisions of

Section 65-A of the Transfer of Property Act. Relevant observations

made in paragraph 8 of the said decision, reads thus :

"8. In Sanjeev Bansal v. Oman International Bank SAOG, 2006(4) BC 299 (DB) Delhi High Court, a

similar contention was raised by the petitioner therein that he being a tenant and in physical possession of the mortgaged property is protected under the provisions of

the Delhi Rent Control Act and cannot be dispossessed without taking recourse to the provisions of the Delhi

Rent Control Act. Repelling this contention the Court

held that the protection afforded by the Rent Control Act to a tenant is from the landlord of the premises and the landlord of the premises cannot recover possession from

the tenant unless he takes recourse to any of the grounds as available to him under Rent Control Act and the right

of the tenant is fully protected notwithstanding anything contrary contained in any other law or contract. This

protection is however not available against the mortgagee who seeks to enforce his right under the SARFAESI Act against the principal borrower who had mortgaged the

property in question by duly and validly executing the memorandum of mortgage in favour of the mortgagee. The Court further held that Section 65-A of the Transfer of Property Act clearly mandates that the duration of lease to be executed by the mortgagor cannot exceed 3 years. The Court therefore, concluded in paragraph 6 as follows:

"Manifestly the said unregistered lease was created for the alleged unlimited period through

unregistered lease deed in complete contravention of Section 65-A of the Transfer of

Property Act as per the said provision of Section 65-A, the lessee can enjoy the protection if the

lease is created by the mortgagor in conformity with the mandate of requirements laid down in Section 65-A of Transfer of Property Act and not

otherwise. Neither the mortgagor nor the lessee can defeat the right of mortgagee and no lessee

can claim any protection unless his tenancy is as

per the requirements of Section 65-A of Transfer of Property Act."

8. In the present case, the claim of the respondent bank stands on a

much better footing since the petitioner is neither a tenant nor lessee

of the mortgaged premises and claims its right over the mortgaged

premises on the basis of possessory lien. In view of the facts and

circumstances involved in the present case it is evident that the

mortgagor though in a given case can let out the mortgaged premises

which will be binding on the mortgagee, however, it must be as per

the mandate of Section 65-A of the Transfer of Property Act the

duration of such lease cannot exceed three years and therefore the

observations made in paragraph 8 of the decision makes it implicitly

clear that neither the mortgagor nor the lessee can defeat the right of

mortgagee and no lessee can claim any protection unless its tenancy

is as per the requirement of Section 65-A of the Transfer of Property

Act. In the instant case the original borrower has not let out the

mortgaged premises to the petitioner nor the petitioner claims

possession over the mortgaged premises on the basis of any lease

deed but claims the promissory lien over the premises on the basis of

the letter dated 1.11.2011 issued by the Authorised Signatory,

without there being any document of lease or tenancy created in its

favour. Therefore, in view of requirement laid down in Section 65-A

of the Transfer of Property Act, the petitioner cannot claim any

protection only on the basis of promissory lien.

We answer the question in negative.

9. For the reasons stated herein above, petition suffers from lack of

merits. Same is dismissed.

                                                     (D. D. SINHA, J.)





    Chandka                                   (SMT. V. K. TAHILRAMANI, J.)