Sri Abdul Khader vs Sadath Ali Siddiqui
2021 Latest Caselaw 5049 Kant

                              1


        IN THE HIGH COURT OF KARNATAKA AT BENGALURU
                                                           R
          DATED THIS THE 30TH DAY OF NOVEMBER, 2021

                           PRESENT

       THE HON'BLE MR. RITU RAJ AWASTHI, CHIEF JUSTICE

                            AND

     THE HON'BLE MR. JUSTICE SACHIN SHANKAR MAGADUM

          WRIT APPEAL NO.1102 OF 2021 (GM-RES)

BETWEEN:

SRI. ABDUL KHADER
S/O ABDUL SAMAD
AGED ABOUT 59 YEARS
R/AT NO.16
GROUND AND 1ST FLOOR
DUPLEX HOUSE, 12TH CROSS
KANAKANAGAR
R.T.NAGAR POST
BANGALORE - 560 032                        ....APPELLANT


(BY SRI AMARESH A. ANGADI, ADVOCATE)

AND:

1.     SADATH ALI SIDDIQUI
       S/O MOHAMMED NAJBATH ALI SIDDIQUI
       AGED ABOUT 57 YEARS
       NO.15, 2ND CROSS, 1ST MAIN
       MUDDAMMA GARDEN
       BENSON TOWN
       BANGALORE - 560 046
                                        2


2.   BANK OF MAHARASTRA
     BRIGADE ROAD BRANCH
     NO.55, REST HOUSE ROAD
     BRIGADE ROAD
     BANGALORE - 560 001
     BY ITS MANAGER                               ....RESPONDENTS

(R2 SERVED AND UNREPRESENTED)

     THIS APPEAL IS FILED UNDER SECTION 4 OF KARNATAKA
HIGH COURT ACT PRAYING TO SET ASIDE THE ORDER DATED
17.09.2021 PASSED IN W.P.NO.3628/2021 AND ETC.

     THIS APPEAL HAVING BEEN HEARD AND RESERVED FOR
JUDGMENT ON 15.11.2021, COMING ON FOR PRONOUNCEMENT OF
JUDGMENT THIS DAY, SACHIN SHANKAR MAGADUM J.,
DELIVERED THE FOLLOWING:

                               JUDGMENT

The captioned appeal is filed by the petitioner to the writ

petition assailing the correctness of the order dated

17.09.2021 passed by the learned Single Judge in

W.P.No.3628/2021.

2. The appellant herein approached the writ court

questioning the order dated 05.12.2019 passed by the

authority under the provisions of Section 14 of the

Securitisation and Reconstruction of Financial Assets and

Enforcement of Securities Interest Act, 2002 (for short 'the

SARFAESI Act'). The writ petition was strongly contested by

the respondent No.2/Bank by specifically contending that the

appellant has an alternate and equally efficacious remedy

under Section 17 of the SARFAESI Act. The learned Single

Judge having examined the rival contentions disposed of the

writ petition reserving liberty to the petitioner to avail

alternative remedy under Section 17 of the SARFAESI Act.

The appellant has questioned the said order before this Court.

3. Learned counsel appearing for the appellant

reiterating the grounds urged in the writ appeal would

vehemently argue and contend before this Court that what

was challenged before the learned Single Judge was an order

passed under Section 14 of the SARFAESI Act which is not

amenable to the jurisdiction of the Debt Recovery Tribunal

under Section 17 of the SARFAESI Act. Placing reliance on

sub-clause (3) of Section 14 of the SARFAESI Act, he would

submit to this Court that the appellant has no remedy of an

appeal and therefore, has rightly invoked the writ jurisdiction

and this aspect is not dealt by the learned Single Judge.

Learned counsel would further place reliance on Section 65-A

of the Transfer of Property Act, 1882 and would contend

before us that where a secured asset is in possession of a

lessee under a valid lease, the Chief Metropolitan Magistrate

or the District Magistrate have no power to invoke the

provisions of Section 14 of the SARFAESI Act and therefore,

would contend that the impugned order being contrary to the

dictum laid down by the Hon'ble Apex Court in the case of

Harshad Govardhan Sondagar vs. International Assets

Reconstruction Company Limited and Others1, is liable to

be examined by the writ court and therefore, he would

contend that the learned Single Judge was not justified in

dismissing the writ petition as not maintainable at threshold.

4. In support of his contention, learned counsel for the

appellant has placed reliance on the judgment rendered by the

(2014) 6 SCC 1

Hon'ble Apex Court in the case of Vishal N.Kalsaria vs. Bank

of India and Others2. Relying on this judgment, he would

submit to this Court that where a secured asset is in

possession of a lessee/tenant of borrower, tenant is entitled

for protection against unjust evictions in the light of the

provisions of the Rent Control Act. He would further place

reliance on the judgment rendered by the Hon'ble Apex court

in the case of Chairman, Indore Vikas Pradhikaran vs.

Pure Industrial Coke & Chemicals Ltd. and Others3 and

would contend that Article 300-A confers right to property and

on account of action of respondent No.2/Bank, his property

rights are affected and therefore, the appellant is entitled to

seek redressal of his grievances under writ jurisdiction. On

these set of grounds, he would submit to this Court that the

learned Single Judge has not examined all these significant

details and also the judgment of the Hon'ble Apex Court and

therefore, warrants interference at the hands of this Court.

(2016) 3 SCC 762

(2007) 8 SCC 705

5. Heard the learned counsel appearing for the

appellant. Perused the material on record.

6. The respondent No.1 applied for a housing loan of

Rs.1.80 Crores and submitted an application on 18.09.2017.

The respondent No.1 pursuant to sanction of loan, deposited

title deeds by executing an equitable mortgage deed in favour

of the respondent No.2/Bank. This deed was executed on

03.11.2017. Therefore, as on 03.11.2017, a charge was

created over the property in question and the respondent

No.2/Bank by securing deposit of title deed had secured the

assets towards discharge of housing loan of Rs.1.80 Crores.

7. The present appellant is contesting the recovery

proceedings initiated by the respondent No.2/Bank under the

provisions of the SARFAESI Act on the strength of lease

agreement executed on 12.02.2018. The said agreement was

produced by the appellant as Annexure-B to the writ petition.

8. We have bestowed our anxious consideration to the

recitals of the lease agreement. Under the lease agreement,

the appellant claims that he has paid Rs.14 lakhs to the

respondent No.1 and the lease is for a period of two years

which would commence from 12.02.2018. If this document is

examined, we would find that pursuant to execution of lease,

the appellant claims that he has paid Rs.14 lakhs and

therefore, the respondent No.2/Bank cannot take possession

of the premises by invoking the provisions of Section 14 of the

SARFAESI Act and the action of the secured creditor is hit by

Section 65-A of the Transfer of Property Act.

9. Learned counsel for the appellant has raised two

questions of law before this Court. His contention is that the

action taken under Section 14 of the SARFAESI Act does not

fall within the ambit of Section 17(1) and therefore, in

absence of efficacious remedy, the present appellant who is

the lessee can maintain a writ petition under Articles 226 and

227 of the Constitution of India. The second question that is

raised by the appellant herein is that the appellant is the

lessee of the premises and therefore, the provisions of the

Rent Act has overriding effect over the SARFAESI Act and

therefore, the question as to whether the appellant is entitled

for protection requires to be adjudicated by the writ Court in

absence of efficacious remedy under the SARFAESI Act.

10. In the light of the arguments canvassed by the

learned counsel for the appellant, the following points would

arise for our consideration:

1) Whether an aggrieved person other than the principal borrower has a remedy against an order passed under Section 14 of the SARFAESI Act by a District Magistrate?

2) Whether the provisions of Rent Act has an overriding effect over the SARFAESI Act?

Re: Point No.1:

11. The first question raised by this Court that since the

Executive District Magistrate has passed an order under

Section 14 of the SARFAESI Act, the action under Section 14

does not contemplate any remedy under the SARFAESI Act is

misconceived. The Hon'ble Apex Court in the case of

Kanaiyalal Lalchand Sachdev and Others vs. State of

Maharashtra and Others4 has held that the action under

Section 14 constitutes action taken after stage of Section

13(4) of the SARFAESI Act and therefore, the grievance, if

any, falls within the ambit of Section 17(1) and therefore, the

aggrieved party has a remedy before the competent Tribunal

under Section 17(4A) of the SARFAESI Act.

12. The arguments canvassed by the appellant that

since the impugned order under challenge is passed under

Section 14 of the SARFAESI Act and therefore, the appellant

has no remedy would also not detain us for long in the light of

Section 17(4A) of the SARFAESI Act. Sub-section (4A) of

Section 17 would be relevant to the present lis and therefore,

the same is culled out as under:

(4) If, the Debts Recovery Tribunal declares the recourse taken by a secured creditor under sub-section

(2011) 2 SCC 782

(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 13 to recover his secured debt.

[(4A) 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 65A 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 subsection (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. The above said sub-section (4A) leaves no manner

of doubt that appellant who is asserting leasehold rights on

the ground that he is a tenant of the premises which is the

subject matter of recovery proceedings under the SARFAESI

Act, has an efficacious remedy under sub-section (4A) of

Section 17 of the SARFAESI Act. Therefore, what emerges

from the above said sub-section (4A) is that the DRT Act and

SARFAESI Act not only facilitate creation of special machinery

for speedy recovery of dues of banks and financial institutions,

but equally provides an adequate remedy to those who are in

possession of the secured assets either as a tenant or under

some other possessory rights.

14. The Hon'ble Apex Court in the case of Hemraj

Ratnakar Salian vs. HDFC Bank Ltd. and Others5, has

AIR 2021 SC 3880

declined to grant any relief even though a claim was made

that he was a tenant and therefore, is entitled for protection

under the Maharashtra Rent Control Act. Therefore, on

perusal of the above said sub-section (4A) and the judgment

of the Hon'ble Apex Court, we would sum up the issue by

relegating the appellant to work out his remedies before the

Debt Recovery Tribunal. The question as to whether a lawful

lease was created before the borrower pledged his properties

by depositing title deeds or whether the borrower had secured

the consent of secured creditor while leasing the secured asset

in favour of tenant are all questions to be examined by the

competent Tribunal under Section 17(4A) of the SARFAESI

Act.

15. The Hon'ble Apex Court in the case of United Bank

of India vs. Satyawati Tondon and Others6 has come

down heavily on the courts including High Courts entertaining

writ petitions in respect of matters exclusively falling within

(2010) 8 SCC 110

the domain of SARFAESI Act. The Hon'ble Apex Court at

paragraph 55 has expressed its serious concern that despite

repeated pronouncement, High courts have been entertaining

writ petitions ignoring the availability of statutory remedies

under the DRT Act and SARFEASI Act.

16. Therefore, the contention of the appellant that the

orders under Section 13 of the SARFAESI Act are only

amenable to the appellate jurisdiction under Section 17(1) of

the SARFAESI Act is totally misconceived. The said issue is

dealt by the Hon'ble Apex Court in the judgment cited supra

and therefore, the contention urged by the appellant that

since he has no remedy under the provisions of the SARFAESI

Act, he can maintain a writ petition before this Court under

Articles 226 and 227 of the Constitution of India cannot be

acceded to. Accordingly, point No.1 formulated above is

answered in the affirmative.

Re: Point No.2:

17. Regarding the second point raised by this Court, it

would be useful for us to cull out Section 26-E of the

SARFAESI Act, which reads as follows:

"26E. Priority to secured creditors.-

Notwithstanding anything contained in any other law for the time being in force, after the registration of security interest, the debts due to any secured creditor shall be paid in priority over all other debts and all revenues, taxes, cesses and other rates payable to the Central Government or State Government or local authority.

Explanation.-for the purposes of this section, it is hereby clarified that on or after the commencement of the Insolvency and Bankruptcy Code, 2016 (31 of 2016), in cases where insolvency or bankruptcy proceedings are pending in respect of secured assets of the borrower, priority to secured creditors in payment of debt shall be subject to the provisions of that Code."

18. On plain reading of Section 26-E of the SARFAESI

Act, we would find that the secured creditor has precedence

over all other charges. By Amendment Act 44 of 2016 which

came into effect from 01.09.2016, a new provision was

incorporated into the SARFAESI Act and therefore, under

Section 26-E of the SARFAESI Act, priority in payment has

been statutorily created in favour of the secured creditor over

all other debts including taxes payable to the Central

Government or the State Government on registration of

security interest. The non obstante clause under the provision

makes the intention of the parliament explicit that even

against statutory charges created under the Central Act,

secured creditor shall have the right for priority in payment

and priority to release the debt for bringing the secured asset

for sale. The non obstante clause used in Section 26-E is a

tool by which legislature gives complete predominance to that

provision over all other provisions of law.

19. The present appellant is asserting right on the basis

of the lease agreement. On perusal of the recitals in the lease

deed, it is found that the appellant has paid Rs.14 lakhs and

the lease would commence from 12.02.2018 for a period of

two years. This lease agreement is executed by the

respondent No.1/landlord after deposit of title deeds by

executing equitable mortgage deed on 03.11.2017. Therefore,

we are unable to understand, under the lease agreement, how

the appellant can assert and claim right under Section 65-A of

the Transfer of Property Act. Even if the appellant had any

such right under Section 65-A of the Transfer of Property Act,

even then in terms of Section 26-E of the SARFAESI Act, the

secured creditor has precedence and first charge over the

secured assets and it is well within the jurisdiction of the Bank

to proceed against the secured assets.

20. A secured creditor in whose favour the security

interest has been created has a priority in sale and payment

over all other charges, if any. The appellant, even otherwise,

cannot agitate his rights against the secured creditor. If he

has paid any amount under the lease agreement, and if there

is a breach on the part of the respondent No.1/landlord, it

would give rise to civil consequences and therefore, the

appellant has to seek redressal of his grievances before a

competent civil Court. Therefore, in the light of discussion

made supra, point No.2 formulated by this Court that the

provisions of the Rent Act would override the provisions of the

SARFAESI Act is misconceived and the same is answered in

the negative.

21. The judgment cited by the appellant in the case of

Vishal N.Kalsaria (supra) does not come to the aid of the

appellant herein. It is not in dispute that the lease deed is

executed by the respondent No.1/landlord subsequent to

deposit of title deeds in favour of the respondent No.2/Bank.

Therefore, as discussed supra, the question as to whether

there was a valid lease has to be adjudicated under section

17(4A) of the SARFAESI Act. Therefore, in the light of the

provisions of Sections 26-E and 17(4A) of the SARFAESI Act,

an aggrieved person other than the principal borrower can

seek adjudication of his rights, more particularly a tenant can

seek redressal of his grievance as to whether there was a valid

and lawful tenancy created much prior to principal borrower

depositing the title deeds with the secured creditor. All these

rival contentions can be examined in the light of the provisions

of Section 17(4A) of the SARFAESI Act.

22. For the foregoing reasons, the writ appeal is devoid

of merits and the same is accordingly dismissed.

The pending interlocutory applications, if any, stand

disposed of.

Sd/-

CHIEF JUSTICE

Sd/-

JUDGE

CA