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TMI Blog2016 (1) TMI 904X X X X Extracts X X X X X X X X Extracts X X X X ..... gistered under the provisions of the Registration Act and the Stamp Act. It is a settled position of law that once tenancy is created, a tenant can be evicted only after following the due process of law, as prescribed under the provisions of the Rent Control Act. A tenant cannot be arbitrarily evicted by using the provisions of the SARFAESI Act as that would amount to stultifying the statutory rights of protection given to the tenant. A non obstante clause (Section 35 of the SARFAESI Act) cannot be used to bulldoze the statutory rights vested on the tenants under the Rent Control Act. The expression ‘any other law for the time being in force’ as appearing in Section 35 of the SARFAESI Act cannot mean to extend to each and every law enacted by the Central and State legislatures. It can only extend to the laws operating in the same field. If the interpretation of the provisions of SARFAESI Act as submitted by the learned senior counsel appearing on behalf of the Banks is accepted, it would not only tantamount to violation of rule of law, but would also render a valid Rent Control statute enacted by the State Legislature in exercise of its legislative power under Article 246 (2) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... trol Act ) can be treated as a lessee, and whether the provisions of The Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (in short, the SARFAESI Act ) will override the provisions of the Rent Control Act. How can the right of the protected tenant be preserved in cases where the debtor-landlord secures a loan by offering the very same property as a security interest either to Banks or Financial Institutions, is also the essential legal question to be decided by us. 4. In all the appeals, the same question of law would arise for consideration. For the sake of convenience and brevity, we would refer to the relevant facts from the appeal arising out of S.L.P.(Crl.) No.8060 of 2015, which has been filed against the impugned judgment and order dated 29.11.2014 in M.A.No. 123 of 2011 in Case No.237 of 2010 passed by the learned Chief Metropolitan Magistrate, Esplanade, Mumbai, wherein the application of the appellant herein for impleadment as intervenor as well as stay of the order dated 08.04.2011 passed in Case No.237 of 2010 by the learned Magistrate, Esplanade, Mumbai, was dismissed. 5. Respondent Nos. 4 and 5 had approach ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essor. Where he does not produce proof of execution of a registered instrument in his favour and instead relies on an unregistered instrument or oral agreement accompanied by delivery of possession, the Chief Metropolitan Magistrate or the District Magistrate, as the case may be, will have to come to the conclusion that he is not entitled to the possession of the secured asset for more than a year from the date of the instrument or from the date of delivery of possession in his favour by the landlord. 4. It is to be highlighted that the intervener did not place on record any registered instrument to fulcrum his contention. So, in view of the ratio laid down in Harshad Sondagar s case (cited supra), I hold that the intervener is not entitled to any protection under the law. 6. The learned Chief Metropolitan Magistrate further held that when the secured creditor takes action under Section 13 or 14 of the SARFAESI Act to recover the possession of the secured interest and recover the loan amount by selling the same in public auction, then it is not open for the Court to grant an injunction under Section 33 of the Rent Control Act. The learned Chief Metropolitan Magistrate furthe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d, the SARFAESI Act was enacted by the Parliament with a view to regulate the securitisation and reconstruction of financial assets and enforcement of security interests against the debtor by securing the possession of such secured assets and recover the loan amount due to the Banks and Financial Institutions. The statement of objects and reasons of the SARFAESI Act reads as under: The financial sector has been one of the key drivers in India's efforts to achieve success in rapidly developing its economy. While banking industry in India is progressively complying with the international prudential norms and accounting practices, there are certain areas in which the banking and financial sector do not have a level playing field as compared to other participants in the financial markets in the world. There is no legal provision for facilitating Securitisation of financial assets of banks and financial institutions. Further, unlike international banks, the banks and financial institutions in India do not have power to take possession of securities and sell them. Our existing legal framework relating to commercial transactions has not kept pace with the changing commercial pract ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ction 69A of the Transfer of Property Act, but does not override the provisions of the Transfer of Property Act relating to the rights of a lessee under a lease created before receipt of a notice under sub-Section (2) of Section 13 of the SARFAESI Act by a borrower. Hence, the view taken by the Bombay High Court in the impugned judgment as well as in M/s Trade Well (supra) so far as the rights of the lessee in possession of the secured asset under a valid lease made by the mortgagor prior to the creation of mortgage or after the creation of mortgage in accordance with Section 65A of the Transfer of Property Act is not correct and the impugned judgment of the High Court insofar it takes this view is set aside. (emphasis laid by this Court) 12. Mr. Pallav Shishodia, the learned senior counsel appearing on behalf of the appellant in the appeal @ out of S.L.P. (C) No. 8060 of 2015 places reliance on the decision of this Court in Harshad Govardhan Sondagar (supra), to contend that prior tenancy in respect of the mortgaged property to the Bank is protected in terms of the Rent Control Act. The relevant paragraphs of the decision are quoted as under: 25. The opening words of su ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a lessee also. It is also possible to take a view that within 45 days from the date on which a possession notice is delivered or affixed or published under sub-rules (1) and (2) of Rule 8 of the Security Interest (Enforcement) Rules, 2002, a lessee may file an application before the Debts Recovery Tribunal having jurisdiction in the matter for restoration of possession in case he is dispossessed of the secured asset. But when we read subsection (3) of Section 17 of the SARFAESI Act, we find that the Debts Recovery Tribunal has powers to restore 5 possession of the secured asset to the borrower only and not to any person such as a lessee. Hence, even if the Debt Recovery Tribunal comes to the conclusion that any of the measures referred to in sub-section (4) of Section 13 taken by the secured creditor are not in accordance with the provisions of the Act, it cannot restore possession of the secured asset to the lessee. Where, therefore, the Debts Recovery Tribunal considers the application of the lessee and comes to the conclusion that the lease in favour of the lessee was made prior to the creation of mortgage or the lease though made after the creation of mortgage is in accordance ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... into existence would not stand in the way of the court to determine whether there was in fact a lease otherwise than through such deed. (emphasis laid by this Court) 14. The learned senior counsel further contends that where a lease deed or document of tenancy in respect of the property in question is for a period exceeding one year, but such document has not been registered, then, by virtue of payment of rent, the relationship of tenancy between a landlord and the tenant comes into existence and in such cases, the tenant must be deemed to be a tenant from month to month and the same would amount to a tenancy from month to month. Thus, in the instant case, the tenancy of the appellants in respect of the property in question which is the secured asset of the Bank being from month to month would also be protected under the provisions of the Rent Control Act. 15. The learned senior counsel further contends that according to the decision of this Court in the case of Harshad Govardhan Sondagar (supra), if a person claiming to be a tenant or lessee either produces a registered agreement or relies on an oral agreement accompanied by delivery of possession, then such tenancy/posses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... substance the impugned legislation was for acquisition of contract carriages and not an Act which deals with inter-State trade and commerce. 17. The learned senior counsel further contends that the SARFAESI Act was enacted by the Parliament under Entry 45 of List I of the Constitution of India. It is a special Act with a special purpose and procedure laid down for the recovery of the secured asset of the debtor by the Bank to recover the amount due to it, and thus, any encroachment upon this Act should not be permitted, as it would defeat the laudable object of the Act, which has been enacted keeping in view the larger public interest. 18. Mr. Vikas Singh, the learned senior counsel appearing on behalf of the respondent State Bank of India in the appeal arising out of S.L.P. (C) No. 28040 of 2015 contends that the SARFAESI Act cannot be allowed to fail at the hands of the present appellants, who have no registered instrument of lease. 19. The learned senior counsel further contends that in light of the decision of this Court in the case of Harshad Govardhan Sondagar (supra), the present case is barred by res judicata. He places reliance on the three Judge Bench decision of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nected appeals adopted the arguments advanced by the aforesaid learned senior counsel appearing on behalf of some of the Banks. It was also contended that the appellants in the connected appeals have not been able to produce sufficient documentary evidence to prove that they are tenants in respect of the properties in question in the proceedings under Section 14 of the SARFAESI Act and hence, they have no locus standi to prefer the above appeals questioning the correctness of the Order passed by the learned Magistrate. We have carefully considered the above rival legal submissions made on behalf of the parties and answer the same as hereunder: 22. The SARFAESI Act, which came into force from 21.06.2002, was enacted to provide procedures to the Banks to recover their security interest from the debtors and their collateral security assets as provided under the provisions of the Act. The scope of the Act was explained by this Court in the case of Transcore v. Union of India Anr. (2008) 1 SCC 125 as under: 12. The NPA Act, 2002 is enacted to regulate securitization and reconstruction of financial assets and enforcement of security interest and for matters connected therewith. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he secured creditor as non-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). (4) In case the borrower fails to discharge his liability in full within the period specified in sub-section (2), the secured creditor may take recourse to one or more of the following measures to recover his secured debt, namely:-- (a) take possession of the secured assets of the borrower including the right to transfer by way of lease, assignment or sale for realising the secured asset.... Further, the provision under Section 35 of the SARFAESI Act provides that it shall override all other laws, which is quoted as hereunder: 35. The provisions of this Act to override other laws.- The provisions of this Act shall have effect, notwithstanding anything inconsistent therewith contained in any other law for the time being in force or any instrument having effect by virtue of any such law. Providing a smooth and efficient recovery proced ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d performs the other conditions of the tenancy, in so far as they are consistent with the provisions of this Act. Section 15, thus, restricts the right of a landlord to recover possession of the tenanted premises from a tenant. 24. When we understand the factual matrix in the backdrop of the objectives of the above two legislations, the controversy in the instant case assumes immense significance. There is an interest of the bank in recovering the Non Performing Asset on the one hand, and protecting the right of the blameless tenant on the other. The Rent Control Act being a social welfare legislation, must be construed as such. A landlord cannot be permitted to do indirectly what he has been barred from doing under the Rent Control Act, more so when the two legislations, that is the SARFAESI Act and the Rent Control Act operate in completely different fields. While SARFAESI Act is concerned with Non Performing Assets of the Banks, the Rent Control Act governs the relationship between a tenant and the landlord and specifies the rights and liabilities of each as well as the rules of ejectment with respect to such tenants. The provisions of the SARFAESI Act cannot be used to o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ered is on the landlord. In light of the same, neither the landlord nor the banks can be permitted to exploit the fact of non registration of the tenancy deed against the tenant. Further, the learned counsel for the appellants rightly placed reliance on a three Judge Bench decision of this Court in Anthony (supra). At the cost of repetition, in that case it was held as under: But the above finding does not exhaust the scope of the issue whether the appellant was a lessee of the building. A lease of immovable property is defined in Section 105 of the TP Act. A transfer of a right to enjoy a property in consideration of a price paid or promised to be rendered periodically or on specified occasions is the basic fabric for a valid lease. The provision says that such a transfer can be made expressly or by implication. Once there is such a transfer of right to enjoy the property a lease stands created. What is mentioned in the three paragraphs of the first part of Section 107 of the TP Act are only the different modes of how leases are created. The first paragraph has been extracted above and it deals with the mode of creating the particular kinds of leases mentioned therein. The thi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nce which the Judge draws from the direct, or perceptible facts; (ii) statements of the principles of law applicable to the legal problems disclosed by the facts; and (iii) judgment based on the combined effect of the above. A decision is only an authority for what it actually decides. What is of the essence in a decision is its ratio and not every observation found therein nor what logically follows from the various observations made in the judgment. Every judgment must be read as applicable to the particular facts proved, or assumed to be proved, since the generality of the expressions which may be found there is not intended to be exposition of the whole law, but governed and qualified by the particular facts of the case in which such expressions are to be found. It would, therefore, be not profitable to extract a sentence here and there from the judgment and to build upon it because the essence of the decision is its ratio and not every observation found therein. The enunciation of the reason or principle on which a question before a court has been decided is alone binding as a precedent. The concrete decision alone is binding between the parties to it, but it is the abstract r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... statutory rights of protection given to the tenant. A non obstante clause (Section 35 of the SARFAESI Act) cannot be used to bulldoze the statutory rights vested on the tenants under the Rent Control Act. The expression any other law for the time being in force as appearing in Section 35 of the SARFAESI Act cannot mean to extend to each and every law enacted by the Central and State legislatures. It can only extend to the laws operating in the same field. Interpreting the non obstante clause of the SARFAESI Act, a three Judge Bench of this Court in the case of Central Bank of India v. State of Kerala Ors. (2009) 4 SCC 94 has held as under: 18. The DRT Act and Securitisation Act were enacted by Parliament in the backdrop of recommendations made by the Expert Committees appointed by the Central Government for examining the causes for enormous delay in the recovery of dues of banks and financial institutions which were adversely affecting fiscal reforms. The committees headed by Shri T. Tiwari and Shri M. Narasimham suggested that the existing legal regime should be changed and special adjudicatory machinery be created for ensuring speedy recovery of the dues of banks and fin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d gave primacy to the right of secured creditor vis a vis other mortgagees who could exercise rights under Sections 69 or 69A of the Transfer of Property Act. However, this primacy has not been extended to other provisions like Section 38C of the Bombay Act and Section 26B of the Kerala Act by which first charge has been created in favour of the State over the property of the dealer or any person liable to pay the dues of sales tax, etc. 116. The non obstante clauses contained in Section 34(1) of the DRT Act and Section 35 of the Securitisation Act give overriding effect to the provisions of those Acts only if there is anything inconsistent contained in any other law or instrument having effect by virtue of any other law. In other words, if there is no provision in the other enactments which are inconsistent with the DRT Act or Securitisation Act, the provisions contained in those Acts cannot override other legislations. (emphasis laid by this Court) 31. If the interpretation of the provisions of SARFAESI Act as submitted by the learned senior counsel appearing on behalf of the Banks is accepted, it would not only tantamount to violation of rule of law, but would a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... spense with the procedure laid down under the provisions of the various Rent Control Acts and the law laid down by this Court in catena of cases, then the legislative powers of the state legislatures are denuded which would amount to subverting the law enacted by the State Legislature. Surely, such a situation was not contemplated by the Parliament while enacting the SARFAESI Act and therefore the interpretation sought to be made by the learned counsel appearing on behalf of the Banks cannot be accepted by this Court as the same is wholly untenable in law. 33. We are unable to agree with the contentions advanced by the learned counsel appearing on behalf of the respondent Banks. 34. In view of the foregoing, the impugned judgments and orders passed by the High Court/ Chief Metropolitan Magistrate are set aside and the appeals are allowed. We further direct that the amounts which are in deposit pursuant to the conditional interim order of this Court towards rent either before the Chief Metropolitan Magistrate/Magistrate Court or with the concerned Banks, shall be adjusted by the concerned Banks towards the debt due from the debtors/landlords in respect of the appellants in the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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