Girish S/o Moreshwar Raul & Ors vs Authorised Officer, Punjab National Bank & Ors

Ashok Menon, Chairperson

The Appellants are in appeal aggrieved by the order dated 30.01.2024 in Interlocutory Application (I.A.) No. 145 of 2024 in Securitisation Application (S.A.) No. 30 of 2024 on the files of the Debts Recovery Tribunal, Nagpur (D.R.T.). The Appellants claim to be tenants in the property since 1965. They and their predecessors in interest claim to be in exclusive possession of the property, enjoying it uninterruptedly. The property originally belonged to a person named Yashwant D. Dhanwate and was leased out to the predecessor in interest of the Appellants namely M.R. Raul for a rent of ₹90 per month on 30.11.1965. A letter addressed to the aforesaid M. R. Raul by the original owner Yashwant D. Dhanwate is also produced to prove their tenancy. The Appellants have also produced rent receipts starting from July 1975 till 2012. There are also electricity bills obtained in the name of the Appellants and their predecessor dating from 1972 till December 2023. The aforesaid Yashwant D. Dhanwate sold the property to one Madhusuda Shrikrushna Ghule vide a registered sale deed executed on 28.07.2013. The said assignment deed clearly states that on the account of Income Tax liability and considering the occupation of the property by the tenants namely Prahalad Rai Saraf and M.R. Raul who are occupying the premises for residential purposes with their families and since the vendor was not receiving any rent and even otherwise the rent payable by the tenants has been very meagre considering the present rental value of the property, the property is being sold. The Appellants contend that they had tendered the rent to the purchaser Madhusudan Shrikrushna Ghule but it was not accepted. The erstwhile owner Yashwant D. Dhanwate had addressed the letter to the Appellants on 19.08.2013 intimating them about the sale of the property along with all rights and liabilities including the tenancy right which the Appellants were holding, to Madhusudan Shrikrushna Ghule and they were asked to deal with the present owner. In response to that, a letter was addressed to Mr. Ghule with no response. They had also sought protection under the Maharashtra Rent Control Act to continue in possession of the property. The aforesaid Madhusudan Shrikrushna Ghule sold the property to Respondent No. 2 in 2015. The second Respondent allegedly created a mortgage on 24.09.2015 in favour of the first Respondent Punjab National Bank. The second Respondent defaulted on payment of debt. Resultantly, the first Respondent initiated the Sarfaesi action under the provisions of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (‘SARFAESI Act’, for short) against the subject property. The Appellants came to know about that and facing the threat of being dispossessed from the property, they approached the D.R.T. with S.A.

In the impugned order, the D.R.T. has declined to grant any protection to the Appellants because they are holding over as tenants based on an unregistered lease deed. It is also opined that there is nothing on record to suggest that the Appellants have paid rent to the purchaser after the sale deed was executed by the original landlord on 29.07.2013 or to the subsequent purchaser the second Respondent who had mortgaged the property. It is now understood that the property has been sold in auction to M/s Silver Shine Techno Engineering LLP by the first Respondent and the sale certificate has already been registered on 08.12.2023. The possession of the property is intended to be taken today by the first Respondent armed with an order under Sec. 14 of the SARFAESI Act.

The main question that would arise for consideration, in this case, is whether the Appellants have prima facie produced evidence to indicate the existence of a tenancy before the mortgage The Hon’ble Supreme Court has in Vishal N. Kalsaria v/s Bank of India & Ors (2016) 3 SCC 762 observed thus:

“30. The issue of determination of tenancy is also one which is well settled. While Sec. 106 of the Transfer of Property Act, 1882 does provide for registration of leases which are created on a year-to-year basis, what needs to be remembered is the effect of non-registration, or the creation of tenancy by way of an oral agreement. According to Sec. 106 of the Transfer of Property Act, 1882, a monthly tenancy shall be deemed to be a tenancy from month to month and must be registered if it is reduced into writing. The Transfer of Property Act, however, remains silent on the position of law in cases where the agreement is not reduced into writing. If the two parties are executing their rights and liabilities in the nature of a landlord-tenant relationship and if regular rent is being paid and accepted, then the mere factum of non-registration of deed will not make the lease itself nugatory. If no written lease deed exists, then such tenants are required to prove that they have been in occupation of the premises as tenants by producing such evidence in the proceedings under Sec. 14 of the SARFAESI Act before the learned Magistrate. Further, in terms of Sec. 55 (2) of the special law in the instant case, which is the Rent Control Act, the onus to get such a deed registered is on the landlord. In the light of the same, neither can the landlord nor the banks be permitted to exploit the fact of non-registration of the tenancy deed against the tenant.”

Again in Bajrang Shyamsunder Agrawal v/s Central Bank of India & Ors. (2019) 9 SCC 94 the Hon’ble Supreme Court relying upon the earlier decision of Vishal N. Kalsaria (supra) observed thus:

“22. After examining the legal and constitutional position, the Court held that while SARFAESI Act has a laudable objective of providing a smooth and efficient recovery procedure, it cannot override the objective of the Rent Acts to control the rate of rent and provide to protection to tenants against arbitrary and unreasonable evictions. To resolve this conflict, this Court held that:

22.1. The provisions of the SARFAESI Act cannot be used to override the provisions of the Rent Act. The landlord cannot be permitted to do indirectly what he has been barred from doing under the Rent Act.

22.2. While a yearly tenancy requires to be registered, oral tenancy can still be proved by showing that the tenant has been in occupation of the premises before the Magistrate under Sec. 14 of the SARFAESI Act. 22.3. The non-registration of tenancy deed cannot be used against the tenant. For leasehold rights being created after the property has been mortgaged to the bank, the consent of the creditor needs to be taken. 22.4. Even though Sec. 35 of the SARFAESI Act has a non obstante clause, it will not override the statutory rights of the tenants under the Rent Control Act. The non obstante clause under Sec. 35 of the SARFAESI Act only applies to laws operating in the same field.

While we agree with the principle laid out in Vishal N Kalsaria case that the tenancy right under the Rent Act need to be respected in appropriate cases, however, we believe that the holding with respect to the restricted application of the non obstante clause under Sec. 35 of the SARFAESI Act, to only apply to the laws operating in the same field is too narrow and such a proposition does not follow from the ruling of this Court in Harshad Govardhan case.”

Even in the subsequent decision, the Hon’ble Supreme Court has in Hemraj Ratnakar Salian vs HDFC Bank Ltd. & Ors 2021 SCC OnLine SC 611, the Hon’ble Supreme Court has observed that the Rent Act would not come to the aid of a “tenant-in-sufferance” vis -a -vis SARFAESI Act due to the operation of Sec. 13(2) read with Sec. 13(13) of the SARFAESI Act. However, in that decision, it is also held that a person claiming tenancy had set up an oral tenancy but there was no sufficient evidence to establish the tenancy. The rent receipts were Xerox copies obtained after the creation of the mortgage and were unacceptable.

In the instant case, the tenancy is admitted even in the assignment deed executed by the original landlord in 2013. There is no evidence of any termination of tenancy. True, there is no evidence regarding payment of rent to the present landlord but the mere fact that they did not attorn to the tenancy by accepting rent will not terminate the tenancy which has been in existence since 1965. The Appellants’ case needs to be agitated on its merits based on the catena of decisions available on this point. Their claim cannot be thrown overboard at the threshold. The impugned order is, therefore, set aside and the Respondent is restrained by means of an injunction from handing over possession of the property to the auction purchaser till the disposal of the S.A. on its merits. Efforts shall be made by the D.R.T. to dispose of the S.A. as expeditiously as possible untrammeled by whatever is observed in the order of this Tribunal or the impugned order.

The Misc. Appeal is disposed of.