2007 (2) TMI 313 - HC - Companies Law

Summary

Issues Involved:
1. Protection of tenant under the Tamil Nadu Buildings (Lease and Rent Control) Act.
2. Rights of the bank under the SARFAESI Act.
3. Jurisdiction of the High Court under Article 226 of the Constitution of India.
4. Validity of unregistered lease deeds.
5. Conflict between SARFAESI Act and State Rent Control laws.

Issue-wise Detailed Analysis:

1. Protection of tenant under the Tamil Nadu Buildings (Lease and Rent Control) Act:
The petitioner argued that as a tenant in possession of the property under a lease deed, they are protected by the Tamil Nadu Buildings (Lease and Rent Control) Act and cannot be evicted without following the due process outlined in the Act. The petitioner claimed that the lease was initially established in 1986 and renewed in 2003, with rent payments acknowledged by the respondent bank.

2. Rights of the bank under the SARFAESI Act:
The respondent bank invoked the SARFAESI Act to take symbolic possession of the property due to the borrower's failure to repay the loan. The bank argued that under Section 13(4) of the SARFAESI Act, they are entitled to take physical possession of the secured assets, and any transfer of such assets after taking possession shall vest in the transferee all rights as if the transfer was made by the owner. The bank also cited the Supreme Court's ruling in Transcore v. Union of India, which affirmed the bank's right to take possession under the SARFAESI Act.

3. Jurisdiction of the High Court under Article 226 of the Constitution of India:
The respondent contended that the petitioner's remedy lies in approaching the Debt Recovery Tribunal (DRT) under Section 17 of the SARFAESI Act, as held in Mardia Chemicals Ltd. v. Union of India. The High Court's extraordinary jurisdiction under Article 226 should not be invoked in this matter.

4. Validity of unregistered lease deeds:
The respondent challenged the validity of the unregistered lease deeds relied upon by the petitioner, alleging they were sham documents created to defeat the bank's legitimate claim. The bank referenced the Delhi High Court's ruling in Sanjeev Bansal v. Oman International Bank SAOG, which stated that unregistered leases exceeding three years are not protected under Section 65A of the Transfer of Property Act.

5. Conflict between SARFAESI Act and State Rent Control laws:
The court noted that the SARFAESI Act has an overriding effect over other laws, including State Rent Control laws, as held in S. Shameem v. City Police Commissioner. The provisions of the SARFAESI Act effectively nullify the rights of tenants under State Rent Control laws when the secured creditor takes possession under Section 13(4).

Conclusion:
The court dismissed the writ petition, emphasizing that the petitioner should seek remedy through the DRT. The court affirmed that the SARFAESI Act overrides conflicting State laws, and any tenancy created after the mortgage notice under Section 13(13) is null and void. If the petitioner files an application before the DRT within two weeks, the DRT should consider it on its merits without raising objections on the ground of limitation.