2015 (4) TMI 1291 - HC - Indian Laws

Possession of mortgaged property - Section 14 of the SARFAESI Act - recovery by banks of amount due - existence of valid lease agreement or not - HELD THAT - Learned Magistrate has not granted the protection to the Petitioners pursuant to the directions given by the Apex Court in the case of HARSHAD GOVARDHAN SONDAGAR VERSUS INTERNATIONAL ASSETS RECONSTRUCTION CO. LTD ORS 2015 (11) TMI 1315 - SUPREME COURT and thereafter passed an order under Section 14 of the said Act where it was held that there is no provision in Section 13 of the SARFAESI Act that a lease in respect of a secured asset shall stand determined when the secured creditor decides to take the measures mentioned in Section 13 of the said Act. Without the determination of a valid lease the possession of the lessee is lawful and such lawful possession of a lessee has to be protected by all courts and tribunals. The ratio of the judgment in the case of HARSHAD GOVARDHAN SONDAGAR VERSUS INTERNATIONAL ASSETS RECONSTRUCTION CO. LTD ORS more particularly law laid down in paragraph 36 is binding on this Court. Therefore the learned Magistrate in our view has rightly passed order under Section 14 of the said Act. The total amount due is more than 200 Crores. Amount due to the consortium banks is 1, 000 Crores out of which 60% amount may be adjusted according to the Petitioners. Be that as it may. We are of the view that no case is made out for interference with the impugned order - Petition dismissed.

Summary

Issues:
1. Interpretation of Section 14 of the SARFAESI Act regarding possession of property by the bank.
2. Rights of tenants in a property subject to mortgage under SARFAESI Act.
3. Applicability of judgments in similar cases to the present situation.
4. Consideration of documents proving tenancy in possession disputes.
5. Impact of lack of registered lease agreements on tenant rights.
6. Examination of the relationship between tenants, borrowers, and guarantors.
7. Compliance with legal precedents and judgments in possession matters.
8. Evaluation of the Magistrate's decision under Section 14 of the SARFAESI Act.
9. Assessment of the total due amount and proposed settlement under the OTS scheme.
10. Request for clarification from the Apex Court on the judgment's applicability.

Analysis:
1. The petitioners challenged an order allowing the bank to possess a property under Section 14 of the SARFAESI Act, claiming to be tenants prior to the mortgage. The Respondent-Bank argued that tenants without registered lease agreements lack protection under the law, citing the Harshad Govardhan Sondagar case where tenants' rights were not recognized due to the absence of registered leases.

2. The petitioners relied on the Madras High Court judgment in a similar case to support their claim as tenants. The Respondent-Bank highlighted the petitioners' multiple roles as borrowers, guarantors, and signatories to loan documents, emphasizing their lack of registered lease agreements.

3. The court examined various documents presented by the petitioners to establish their tenancy rights. However, the Respondent-Bank contended that the legal principles established in the Harshad Govardhan Sondagar case were applicable, given the absence of registered lease agreements for the petitioners.

4. The court upheld the Magistrate's decision not to grant protection to the petitioners based on the legal precedents set in the Harshad Govardhan Sondagar case, emphasizing the binding nature of the judgment and the lack of sufficient evidence to support the petitioners' claims as tenants.

5. Despite the petitioners' challenge to the Magistrate's order through various capacities, including as borrowers and guarantors, the court found no grounds to interfere with the decision, dismissing all writ petitions. The court also noted the substantial amount due and the proposal for settlement under the OTS scheme.

6. The court declined the petitioners' request for interim relief continuation, considering their roles as directors, guarantors, and signatories to loan documents. The court refused to extend the interim order and allowed the petitioners to seek clarification from the Apex Court regarding the applicability of the Harshad Govardhan Sondagar judgment.