Kanakalatha vs Housing Development Finance Corporation Ltd.

K. Vinod Chandran, J.—The petitioner is aggrieved by the proceedings initiated under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 [for brevity "SARFAESI Act"] against a property in which the petitioner claims to be a lease-holder. The property proceeded against by the respondents 1 and 2 belongs to respondents 3 to 5, being the legal heirs of the original borrower. The petitioner''s reliance is on Exhibit P2 lease deed. The petitioner''s contention is that, the said lease is covered by Section 65A of the Transfer of Property Act, 1882 [for brevity "TP Act"], which has been protected in the judgment reported in Harshad Govardhan Sondagar Vs. International Assets Reconstruction Company Ltd. and Others, . In fact the specific finding of the Hon''ble Supreme Court with respect to the same is seen in paragraph 12:

"Thus, sub-section (1) of S. 65A of the Transfer of Property Act states that the mortgagor has the power to make lease of a mortgaged property while he is in lawful possession of the same subject to the provisions of sub-section (2) of S. 65A of the Transport of Property Act and such lease is binding on the mortgagee. Sub-section (3) of S. 65A further provides that such a power is available with the mortgagor to make a lease of the mortgage property only if and as far as a contrary intention is not expressed in the mortgage-deed. Thus, so long as the mortgage-deed does not prohibit a mortgagor from making a lease of the mortgaged property and so long as the lease satisfies the requirements of sub-section (2) of S. 65A, a lease made by a borrower as a mortgagor will not only be valid but is also binding on the secured creditor as a mortgagee".

The Supreme Court has essentially found that so long as the mortgage deed does not prohibit a mortgagor from making a lease of the mortgaged property and such lease satisfies the requirements of sub-section (2) of Section 65A, then necessarily the mortgagor would be bound by such lease. Hence, fundamentally the facts which are coming to fore, have to be examined and normally this Court would not endeavour to do so, but for the fact that a mere perusal of Exhibit P2 would show that the present lease projected by the petitioner is not covered by sub-section (2) of Section 65A. In the first place, it is to be noticed that the lease agreement was one entered on 31.03.2010 for a period of eleven months and the lease stood expired as early as on 28.02.2011. Further, the learned counsel appearing for the respondents alertly points to a specific clause in Exhibit P2, where there is a clause for renewal, for purposes of which, it was indicated that there should be a specific written agreement entered into between the parties. No such agreement having been entered, there could be no lease inferred for the purpose of Section 65A and such clause for renewal is a violation of sub-clause (1) of Section 65A(2). Further, clause (b) of sub-section (2) of Section 65A specifically restricts any premium to be specified in the agreement and contrary to that, Exhibit P2 reveals Rupees Two lakhs as having been given to the lessor; by the lessee for continuing in occupation of the lease-hold premises during the period of lease, without any interest thereon. The secured creditor, hence, is saved on the lease being determined under Section 111 of the TP Act. In such circumstances, it cannot be said that the petitioner''s case would be covered under the exception carved out in the aforesaid judgment and in that context, the writ petition has to be dismissed.

In the result, the writ petition stands dismissed. No costs.