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Allahabad High Court · body

2016 DIGILAW 1603 (ALL)

RAJEEV KUMAR v. STATE OF U. P.

2016-04-28

KRISHNA MURARI, VINOD KUMAR MISRA

body2016
JUDGMENT By the Court.—Petitioner claims to be tenant of premises No. 27/10, Shiv Shakti Nagar, Brahmpuri, Meerut under an agreement between him and one Manish Kumar, the owner of the said premises through a notary affidavit dated 6.1.2012 for a period of nine years on monthly rent of Rs. 2500/-. Admittedly, Manish Kumar (hereinafter referred to as borrower) took a loan of Rs. 25.00 lacs on 4.4.2014 from respondent No. 3-Bank. The premises in question was pledged as security to the loan. Borrower defaulted in repayment of installments and proceedings under Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (hereinafter referred to as SARFAESI Act) was initiated against the borrower. On failure on the part of borrower to make repayment of the outstanding debt in response to notice under Section 13 (2) of the SARFAESI Act, Bank exercised its right under Section 13 (4) to take possession of the secured assets of the borrower. However, since secured asset, namely, premises in dispute was under possession of the petitioner, respondent-Bank made an application under Section 14 (1) of SARFAESI Act before the District Magistrate seeking assistance in taking possession of the secured assets. Additional District Magistrate (Finance & Revenue) vide order dated 17.2.2016 allowed the application and it appears that in pursuance thereof after dispossessing the petitioner, possession has been taken over by the respondent-Bank. In the back ground of the aforesaid facts, petitioner has approached this Court seeking following reliefs : “(i) A writ, order or direction in the nature of certiorari quash the impugned order dated 17.2.2016 passed by respondent No. 2 in Application No. 35 of 2016 (Oriental Bank of Commerce v. M/s. Ishar Enterprises) under Section 14 (1) SARFAESI Act, 2002. (ii) A writ, order or direction in the nature of mandamus commanding the respondent No. 3 to open the lock/seize of the petitioner’s premises (ground floor).” 2. It is submitted by the learned counsel for the petitioner that in his capacity as tenant, the petitioner is a lessee and has right to be in possession of the property during the period of lease and his right cannot be taken away save by authority of law. It is submitted by the learned counsel for the petitioner that in his capacity as tenant, the petitioner is a lessee and has right to be in possession of the property during the period of lease and his right cannot be taken away save by authority of law. It is further submitted that provisions of SARFAESI Act do not provide that right of a lessee to remain in possession of the secured assets during the period of subsistence of lease automatically stands extinguished when secured creditor initiates any action under Section 13 of the SARFAESI Act. Referring to language used in sub-Section (13) of Section 13 of the SARFAESI Act, it is submitted that no borrower can proceed by way of sale, lease or otherwise any of the secured assets after receipt of notice under Section 13 (2) without consent of the secured creditor and there is no restriction on creation of lease of secured assets by the borrower before the receipt of notice by him under sub-section (2) of Section 13. It is also submitted that in the absence of any express language in the Act affecting a lease of a secured asset made by borrower in favour of lessee, the lease continues to be a valid lease even after the secured creditor initiates action under Section 13 of the SARFAESI Act. Relying upon the averments made in the writ petition, it is contended that agreement was entered into between the borrower and petitioner through notary affidavit on 6.1.2012 creating a tenancy/lease which is valid up to 5.1.2021 and admittedly, loan was taken by borrower from respondent No. 3 on 4.4.2014 and thus lease in his favour is a valid lease and he cannot be evicted except in accordance with law. 3. Sri Tarun Varma, learned counsel appearing for the Bank, in reply, submitted that in view of the provisions of Section 13 (4) of the SARFAESI Act, Bank as a secured creditor has a right to take over possession of the secured assets and since Section 35 gives over-riding effect to the provisions of the Act notwithstanding anything inconsistent therewith contained in any other law, sub-section 13 (4) will override the rights of lessee, if any, to remain in possession of the secured assets. 4. 4. In other words, the issue for consideration is what would be the effect of the proceedings initiated under the SARFAESI Act against a borrower on the rights of a lessee in possession of the secured assets under a lease created by the borrower. In the case in hand, admittedly, before the property in question was mortgaged with the respondent No. 3, borrower had already leased out the same in favour of petitioner. In view of the provision of Section 8 of the Transfer of Property Act, a valid lease of immovable property created in favour of a lessee by a person competent to transfer under Section 7 of the said Act, the lessee will have right to enjoy the leased property in accordance with the terms and conditions of the lease irrespective of whether a subsequent mortgagee of the immovable property has knowledge of the lease or not. 5. The situation may not be the same in a case where lease of the mortgaged property is created after receipt of notice referred to in sub-section (2) of Section 13 of the SARFAESI Ac. Sub-section (13) of Section 13 of the SARFAESI Act provides that no borrower shall lease any of his secured assets referred to in the notice without prior written consent of the secured creditor. Though the provisions of sub-section (13) and the provisions of the Transfer of Property Act enabling the borrower or mortgagor to make a lease are inconsistent with each other but sub-section (13) of Section 13 of the SARFAESI Act will override the provisions of Transfer of Property Act by virtue of Section 35 of the SARFAESI Act and thus, a lease of secured assets created by the borrower after he receives notice under Section 13 (2) from the secured creditor will not be a valid lease. Otherwise, where the lawful possession of secured assets is not with the borrower but with the lessee under a valid lease the secured creditor cannot take possession of the secured assets until and unless lawful possession of the lessee gets determined. Section 13 of the SARFAESI Act does not contain any such provision 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 for recovery of its secured debt. Section 13 of the SARFAESI Act does not contain any such provision 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 for recovery of its secured debt. Different modes by which lease gets determined is contained in Section 111 of the Transfer of Property Act which reads as under : “111. Determination of lease.—A lease of immovable property determines— (a) by efflux of the time limited thereby; (b) where such time is limited conditionally on the happening of some event by the happening of such event; (c) where the interest of the lessor in the property terminates on, or his power to dispose of the same extends only to, the happening of any event-by the happening of such event; (d) in case the interests of the lessee and the lessor in the whole of the property become vested at the same time in one person in the same right; (e) by express surrender; that is to say, in case the lessee yields up his interest under the lease to the lessor, by mutual agreement between them; (f) by implied surrender; (g) by forfeiture; that is to say, (1) in case the lessee breaks an express condition which provides that, on breach thereof, the lessor may re-enter or (2) in case the lessee renounces his character as such by setting up a title in a third person or by claiming title in himself; or (3) the lessee is adjudicated an insolvent and the lease provides that the lessor may re-enter on the happening of such event; and in any of these cases the lessor or his transferee gives notice in writing to the lessee of his intention to determine the lease; (h) on the expiration of a notice to determine the lease, or to quit, or of intention to quit, the property leased, duly given by one party to the other.” 6. There being no provision in Section 13 of the SARFAESI Act to the effect that lease in respect of secured assets shall stand automatically determined whenever the secured creditor decides to take any of the measures mentioned in Section 13 of the SARFAESI Act to recover its secured debt in view of the provisions of Transfer of Property Act so long as a lease of an immovable property does not get determined, the lessee has a right to enjoy the property. The right to enjoy the property being a right to the property itself, the same cannot be taken away without authority of law in view of Article 300-A of the Constitution. Thus, without the determination of a valid lease, the possession of lessee is lawful and such lawful possession of a lessee is liable to be protected. 7. One of the measures mentioned in Section 13 of the SARFAESI Act is to take possession of the secured assets of borrower including right to transfer by way of lease. However, where lawful possession of the secured assets is not with the borrower but with the lessee under a valid lease, secured creditor cannot take possession of the secured assets unless lease gets determined and the lessee is liable to be dispossessed. 8. For the same reason, it has to be held that possession of the secured assets from a lessee in lawful possession under a valid lease cannot be taken under the provisions of SARFAESI Act and the Chief Metropolitan Magistrate/District Magistrate will not have any power under Section 14 of the SARFAESI Act to take possession of the secured assets from the lessee and hand over the same to the secured creditor. 9. Having analyzed the legal position, we now proceed to apply the same to the facts of the case in hand. Admittedly, petitioner claims to have a lease of the premises in dispute in his favour on the basis of notarized document for a period of nine years on payment of rent. The question for consideration is whether the notarized document which is a deed of rental agreement (Annexure ‘1’ to the writ petition) upon which the petitioner places reliance can be said to be a document to establish that he is bona fide lessee of the secured assets. Section 107 of the Transfer of Property Act prescribes how the lease is to be made. “107. Section 107 of the Transfer of Property Act prescribes how the lease is to be made. “107. Lease how made.—A lease of immovable property from year to year, or any term exceeding one year, or reserving a yearly rent, can be made only by a registered instrument. All other leases of immovable property may be made either by a registered instrument or by oral agreement accompanied by delivery of possession. Where a lease of immovable property is made by a registered instrument, such instrument or, where there are more instruments than one, each such instrument shall be executed by both the lessor and the lessee; Provided that the State Government may from time to time, by notification in the Official Gazette, direct that leases of immovable property, other than leases from year to year, or for any term exceeding one year, or reserving a yearly rent, or any class of such leases, may be made by unregistered instrument or by oral agreement without delivery of possession.” 10. A bare reading of the provision goes to show that lease of immovable property from year to year or for any term except one year can be made only by registered agreement and all other leases of immovable property can be made either by registered instrument or oral agreement though by delivery of possession. In the case in case the period mentioned in the document is from 6.1.2012 to 5.1.2021 i.e. 09 years under Section 107 of the Transfer of Property Act such a instrument has to be necessarily registered. Since the petitioner has failed to produce any registered document executed in his favour by the lessor, he cannot be held to be entitled to remain in possession of the secured assets for any term except one year from the date of execution of the document. Admittedly, the document being relied upon by the petitioner, executed on 6.1.2012, is an unregistered document, his possession is liable to be protected for a period of one year from the said date. Thus, only irresistible conclusion is that petitioner is not entitled to possession of the secured assets for more than one year from the date of instrument/date of rental agreement dated 6.1.2012. 11. Thus, only irresistible conclusion is that petitioner is not entitled to possession of the secured assets for more than one year from the date of instrument/date of rental agreement dated 6.1.2012. 11. In view of the above facts and discussions, there is no illegality in the impugned order dated 17.2.2016 passed under Section 14 of the SARFAESI Act for putting the respondent-Bank in possession of the secured assets. 12. Writ petition accordingly fails and stands dismissed in limine. 13. In the facts and circumstances, we do not make any order as to costs. ——————