Can Tenant Possess Property Beyond Prescribed Time In Absence of Registered Document ?
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Table of Content:-
- Background of the case
- Issues Raised
- Statutory Provisions Involved
- Submissions of the Parties
- Judgment Analysis
- Conclusion
- Case Laws:
- Harshad Govardhan Sondagar v. International Asset Reconstruction Co. Ltd. & Ors. [(2014) 6 SCC 1]
- Kanaiyalal Lalchand Sachdev v. State of Maharashtra [(2011) 2 SCC 782]
- Bajarang Shyamsunder Agarwal v. Central Bank of India & Anr [(2019) 9 SCC 94]
Hemraj Ratnakar Salian vs HDFC Bank Ltd. & Ors [Arising out of SLP (Crl.) No. 2969-2970/ 2016]
Background of the case
The concerned bank (HDFC) grants a loan to respondents No. 2 and 3 for Rs. 5, 50, 00,000, and for that purpose, the respondent had a mortgage a flat bearing No. 501, 5th Floor, Solitaire, in Kopari Village, Powai Andheri, Mumbai as the secured asset. On 13th October 2013, the borrowers were declared as Non Performing assets by the bank. The bank issued a notice under section 13 (2) of the SARFAESI Act, 2002 to the borrowers on 25th January 2014.
The present case was initiate by the appellant who is a tenant of the said secured asset on a monthly rent of Rs. 20, 000 and he was residing in the said property since 12th June 2012 and the amount of rent had been increasing 5% every year. The appellant filed the petition before the magistrate by seeking protection for his possession of the disputed property as the magistrate was already ceased with the application filed by the Respondent Bank under section 14 of the SARFAESI Act, 2002. The magistrate also dismissed the intervention application filed by the appellant on the ground that the appellant didn’t put any registered tenancy document on record.
Issues Raised
- Whether the tenant can be allowed possession when the tenancy was based on the oral agreement?
- Whether the tenancy claimed by the appellant is bona fide?
Statutory Provisions Involved
- Section 13 (2) of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (SARFAESI)
“Where any borrower, who is under a liability to a secured creditor under a security agreement, makes any default in repayment of secured debt or any instalment thereof, and his account in respect of such debt is classified by the secured creditor as on- performing asset, then, the secured creditor may require the borrower by notice in writing to discharge in full his liabilities to the secured creditor within sixty days from the date of notice failing which the secured creditor shall be entitled to exercise all or any of the rights under sub- section (4).”
- Section 14 of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (SARFAESI)
“Chief Metropolitan Magistrate or District Magistrate to assist secured creditor in taking possession of secured asset.-
(1) 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 this Act, the secured creditor may, for the purpose of taking possession or control of any such secured assets, 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, and the Chief Metropolitan Magistrate or as the case may be, the District Magistrate shall, on such request being made to him-
(a) Take possession of such asset and documents relating thereto; and
(b) Forward such asset and documents to the secured creditor.
(2) For the purpose of securing compliance with the provisions of sub- section (1), the Chief Metropolitan Magistrate or the District Magistrate may take or cause to be taken such steps and use, or cause to be used, such force, as may, in his opinion, be necessary. (3) No act of the Chief Metropolitan Magistrate or the District Magistrate done in pursuance of this section shall be called in question in any court or before any authority.”
- Section 17 of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (SARFAESI)
“Right to appeal.—
(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, 1[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 subsection (1) of section 17.]
[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 subsection (1) of section 17.]”
(2) The Debts Recovery Tribunal shall consider whether any of the measures referred to in subsection (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 subsection (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 of the secured assets to the borrower or restoration of possession of the secured assets to the borrower, it may by order, declare the recourse to any one or more measures referred to insubsection (4) of section 13 taken by the secured assets as invalid and restore the possession of the secured assets to the borrower or restore the management of the secured assets to the borrower, as the case may be, and pass such order as it may consider appropriate and necessary in relation to any of the recourse taken by the secured creditor under subsection (4) of section 13.
(4) If, the Debts Recovery Tribunal declares the recourse taken by a secured creditor under subsection (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 subsection (4) of section l3 to recover his secured debt.
(5) Any application made under subsection (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 subsection (1).
(6) If the application is not disposed of by the Debts Recovery Tribunal within the period of four months as specified in subsection (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.]”
Submissions of the Parties
The contention of the Appellant
- It was contended that the appellant was a protected tenant under Maharashtra Rent Control Act, 1999. He was paying rent regularly.
- It was also argued that the appellant had paid an advance rent to the landlord till 17th December 2018.
- It was urged that the tenants also had all the rent receipts since he was inducted as the tenant.
- He was residing in the said premises from 12th June 2012 on the basis of the oral tenancy.
- It was argued that he cannot be evicted in the lieu of due process of law.
The contention of the Respondent bank
- It was argued that the rent receipts placed on record by the appellant had been issued for the period of 12th June 2012 to 12th May 2013 is of the date of 12th May 2013 which is after the creation of mortgage made in favor of the bank.
- Even there was no proof submitted by the appellant to prove that his tenancy was created before the date of the mortgage.
- When the loan was granted a third party confirmed that the borrower was residing in the secured asset.
- The respondent prayed for the dismissal of the appeal.
Judgment Analysis
The court observed that when the notice was issued by the bank under section 13 (2) of the SARFAESI Act, 2002 the borrowers had given a detailed representation, and nowhere they claimed that any tenant was residing in the concerned secured asset. The court stated that section 17 of the SARFAESI Act, 2002 provides the right to appeal before DRT but the same was amended in 2016, and under the amended act possession can be restored to the borrower or any other aggrieved person. The court relied upon the ruling of Harshad Govardhan Sondagar v. International Asset Reconstruction Co. Ltd. & Ors. [(2014) 6 SCC 1] in which it was held that the right to appeal is also available for the tenant claiming under the borrower. But the court also provided that if the tenancy is for any term exceeding one year then it need to be registered accordingly.
The court further relied upon the judgment of Kanaiyalal Lalchand Sachdev v. State of Maharashtra [(2011) 2 SCC 782] in which it was held that the DRT has the power not only to set aside the action of the secured creditor but also restore the status quo ante.
The further court put reliance upon the ruling of Bajarang Shyamsunder Agarwal v. Central Bank of India & Anr [(2019) 9 SCC 94] in which it was held that if the tenancy is created even prior to the mortgage can be held valid and his possession cannot be disturbed by the secured creditor by taking the possession of the property.
But if the tenancy was created after the mortgage but before issuance of the notice under section 13 (1) of the SARFAESI Act then the tenant has to satisfy the conditions prescribed under section 65 A of the Transfer of Property Act, 1882. And if the tenancy was created for more than a year then it needs to be registered and if the tenancy was based upon the unregistered tenancy or oral agreement then in such a case tenant was not allowed to have possession of the secured asset for more than a time period prescribed under Transfer of Property Act, 1882.
Conclusion
The court held that in the present case there was no sufficient evidence given by the appellant to prove his tenancy. Moreover, the borrowers had also not claimed that any tenant was residing in the secured asset.
Further, the court held that if the tenant wants to continue his tenancy under section 13 (13) of the SARFAESI Act, 2002 then he needs to seek the consent of the secured creditor for the transfer of the concerned property either by way of sale or lease or in any other way after notice had been issued under section 13 (2) of the SARFAESI Act, 2002.
The court dismissed the present appeal.