2021 (8) TMI 1385 - SC - Indian Laws

Restraint from taking possession of the property in the Appellant s possession - eviction from the Secured Asset without due process of law - protected tenant (of secured asset) under the provisions of the Maharashtra Rent Control Act 1999 - HELD THAT - Procedural mechanism for taking possession of the Secured Asset is provided Under Section 14 of the SARFAESI Act. Section 17 of the SARFAESI Act provides for the right of appeal to any person including the borrower to approach Debt Recovery Tribunal (DRT). Section 17 has been amended by Act No. 44 of 2016 providing for challenging the measures to recover secured debts (for short the Amendment ). Under the Amendment possession can be restored to the borrower or such other aggrieved person. This Amendment has come into force w.e.f. 1st September 2016. This Court in HARSHAD GOVARDHAN SONDAGAR VERSUS INTERNATIONAL ASSETS RECONSTRUCTION CO. LTD ORS 2015 (11) TMI 1315 - SUPREME COURT has held that right of appeal is available to the tenant claiming under the borrower. In KANAIYALAL LALCHAND SACHDEV VERSUS STATE OF MAHARASHTRA 2011 (2) TMI 1277 - SUPREME COURT this Court has held that DRT can not only set aside the action of the secured creditor but even restore the status quo ante. Therefore an alternative remedy was available to the Appellant to challenge the impugned order Under Section 17 of the SARFAESI Act even before the amendment to Section 17 of the SARFAESI Act - However given that the instant appeal has been pending consideration before this Court from the year 2016 it is proposed to examine the case on merits without directing the Appellant to avail the alternative remedy. In Harshad Govardhan Sondagar this Court has categorically held that if the tenancy claim is for any term exceeding one year the tenancy can be made only by a registered instrument. A Three-Judge Bench of this Court in BAJARANG SHYAMSUNDER AGARWAL VERSUS CENTRAL BANK OF INDIA ANOTHER 2019 (9) TMI 569 - SUPREME COURT after considering almost all decisions of this Court in relation to the right of a tenant in possession of the secured asset has held that if a valid tenancy under law is in existence even prior to the creation of the mortgage such tenant s possession cannot be disturbed by the secured creditor by taking possession of the property. If a tenancy under law comes into existence after the creation of a mortgage but prior to issuance of a notice Under Section 13(2) of the SARFAESI Act it has to satisfy the conditions of Section 65-A of the Transfer of Property Act 1882. If a tenant claims that he is entitled to possession of a Secured Asset for a term of more than a year it has to be supported by the execution of a registered instrument. In the present case first of all there is a serious doubt as to the bona fide of the tenant as there is no good or sufficient evidence to establish the tenancy of the Appellant. According to the Appellant he is a tenant of the Secured Asset from 12.06.2012. However the documents produced in support of his claim are xerox copies of the rent receipts and the first xerox copy of the rent receipt is of 12.05.2013 which is after the date of creation of the mortgage - even if the tenancy has been claimed to be renewed in terms of Section 13(13) of the SARFAESI Act the Borrower would be required to seek consent of the secured creditor for transfer of the Secured Asset by way of sale lease or otherwise after issuance of the notice Under Section 13(2) of the SARFAESI Act and admittedly no such consent has been sought by the Borrower in the present case. There are no merit in these appeals which are accordingly dismissed.

Summary

Issues:
1. Appellant seeking protection of possession of a property against HDFC Bank.
2. Claim of tenancy under Maharashtra Rent Control Act.
3. Dismissal of intervention application by the Magistrate.
4. Availability of alternative remedy under Section 17 of SARFAESI Act.
5. Validity of tenancy claim and possession rights in the context of mortgage creation.
6. Interpretation of Section 13(2) and Section 13(13) of SARFAESI Act.
7. Examination of documents supporting tenancy claim.

Issue 1: Appellant seeking protection of possession of a property against HDFC Bank

The appeal is against the Orders rejecting the Appellant's application to restrain HDFC Bank from taking possession of a property mortgaged by Borrowers to the Bank. The Appellant, a tenant, claimed protection under the Maharashtra Rent Control Act.

Issue 2: Claim of tenancy under Maharashtra Rent Control Act

The Appellant contended to be a protected tenant under the Maharashtra Rent Control Act, paying rent regularly and holding continuous rent receipts. However, the Bank argued that the tenancy claim was an afterthought without substantial evidence.

Issue 3: Dismissal of intervention application by the Magistrate

The Magistrate dismissed the Appellant's intervention application due to the absence of a registered tenancy record. The Appellant argued for protection of possession based on oral tenancy rights.

Issue 4: Availability of alternative remedy under Section 17 of SARFAESI Act

The Court noted the availability of an alternative remedy under Section 17 of the SARFAESI Act for challenging the impugned order. However, due to the appeal's long pendency, the Court proceeded to examine the case on its merits.

Issue 5: Validity of tenancy claim and possession rights in the context of mortgage creation

The Court analyzed the Appellant's claim of tenancy from 12.06.2012 to 17.12.2018, noting the absence of a registered instrument supporting the tenancy. The Borrowers did not confirm the existence of a tenant at the time of mortgage creation.

Issue 6: Interpretation of Section 13(2) and Section 13(13) of SARFAESI Act

The Court discussed the implications of Section 13(2) and Section 13(13) of the SARFAESI Act concerning the rights of tenants and the operation of the Rent Act vis-à-vis SARFAESI Act proceedings.

Issue 7: Examination of documents supporting tenancy claim

The Court examined the documents presented by the Appellant, including xerox copies of rent receipts, in support of the tenancy claim. However, the Court found discrepancies in the evidence presented, leading to the dismissal of the appeals.

In conclusion, the Supreme Court dismissed the appeals, finding no merit in the Appellant's claims for protection of possession against HDFC Bank based on the tenancy rights under the Maharashtra Rent Control Act. The Court highlighted the importance of registered instruments to support tenancy claims and emphasized the need for substantial evidence to establish tenancy rights in cases involving mortgage creation and possession disputes.