Ravinder Gupta vs State Bank Of India And Ors.

P.K. Bhasin, J

The appellant had filed objections before the Chief Metropolitan Magistrate, Rohini (CMM) in the proceedings initiated by the respondent No. 1 Bank herein under Section 14 of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 ('SARFAESI Act' in short) for getting an order of physical possession of property No. C-2/43, Ashok Vihar, Delhi-52 in which he was claiming to be in occupation as a lawful tenant on the ground and first floors since the year 2005. The case of the appellant before the CMM was that his landlords, who are the owners of the said entire property, had mortgaged it in favour of the respondent No. 1 Bank in the year 2008 to secure the repayment of loan given by it to respondent No. 2 Company while his tenancy had commenced in the year 2005 and which was renewed for ten years in 2012 and so he could not be evicted from the tenanted premises at the instance of the mortgagee Bank. The learned CMM rejected the appellant's objections vide order dated 26th October, 2016 and passed an order for taking over of possession of the said house No. C-43. The appellant then approached the Hon'ble Delhi High Court against the order of the CMM but did not succeed there also in view of there being a remedy available to a tenant also to approach DRT under Section 17 of SARFAESI Act. In view of the order dated 10.11.2016 passed by the Hon'ble High Court the appellant filed an application under Section 17 of SARFAESI Act before the Debts Recovery Tribunal-III, Delhi 'DRT' in short) describing it as an appeal against the order dated 26.10.2016 passed by the CMM.

The main prayers made by the appellant herein in his Section 17 application were for setting aside the order dated 26.10.2016 of the CMM and for restraining the respondent Bank from taking physical possession of the portion of property No. C-43 which was under his tenancy. The appellant had also made a prayer for an interim relief against his dispossession. The learned Presiding Officer of DRT had rejected the interim relief prayer of the appellant vide his one line order dated 28th November, 2016 to the effect that the appellant had no prima facie case and feeling aggrieved therewith the present appeal was filed.

This Tribunal vide order dated 5th December, 2016 while keeping the appeal pending after notice to the Bank had directed the Presiding Officer of the DRT to give reasons for the rejection of the interim relief prayer of the appellant and to send the same to this Tribunal. The learned Presiding Officer then gave his reasons and has forwarded to this Tribunal.

Though on receipt of reasons from the DRT for the rejection of interim relief to the appellant this Tribunal gave to the appellant an opportunity to raise objections against those reasons but at the time of hearing of the appeal on 28th December, 2016 the learned Counsel for the appellant had stated that there was no need of filing additional grounds of appeal since the only reason now given by the learned Presiding Officer of the DRT for not granting interim relief to the appellant is that the lease in favour of the appellant is not by a registered lease deed and so the appellant cannot seek any relief from DRT relying on unregistered lease deed and this reason, Counsel submitted, being against the law laid down regarding the rights of tenants whose landlords mortgage tenanted premises in favour of Banks while taking loans in the decision of the Hon'ble Supreme Court rendered on 20th January, 2016 in Vishal N. Kalsaria v. Bank of India & Ors., I (2016) SLT 393 : 226 (2016) DLT 474 (SC) : I (2016) DLT (Cri) 836 (SC) : I (2016) BC 471 (SC) : AIR 2016 SC 530, and so the reason given by DRT cannot be not sustained at all and, therefore, he would challenge the fresh reasoned order of the DRT orally without including additional grounds of challenge in the memorandum of appeal. Then he read out before this Tribunal the following paragraphs from the said judgment of the Hon'ble Supreme Court relied upon by him and concluded his submissions by submitting that the order of the DRT cannot be sustained in view of these observations of the Apex Court:

"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 override the provisions of the Rent Control Act. If the contentions of the learned Counsel for the respondent Banks are to be accepted, it would render the entire scheme of all Rent Control Acts operating in the country as useless and nugatory. Tenants would be left wholly to the mercy of their landlords and in the fear that the landlord may use the tenanted premises as a security interest while taking a loan from a Bank and subsequently default on it. Conversely, a landlord would simply have to give up the tenanted premises as a security interest to the creditor Banks while he is still getting rent for the same. In case of default of the loan, the maximum brunt will be borne by the unsuspecting tenant, who would be evicted from the possession of the tenanted property by the Bank under the provisions of the SARFAESI Act. Under no circumstances can this be permitted, more so in view of the statutory protections to the tenants under the Rent Control Act and also in respect of contractual tenants along with the possession of their properties which shall be obtained with due process of law.

The issue of determination of tenancy is also one which is well settled. While Section 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 Section 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 Section 14 of the SARFAESI Act before the learned Magistrate. Further, in terms of Section 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 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 third paragraph can be read along with the above as it contains a condition to be complied with if the parties choose to create a lease as per a registered instrument mentioned therein.

All other leases, if created, necessarily fall within the ambit of the second paragraph. Thus, de hors the instrument parties can create a lease as envisaged in the second paragraph of Section 107 which reads thus:

"All other leases of immovable property may be made either by a registered instrument or by oral agreement accompanied by delivery of possession."

It further saddens us to see the manner in which the decision in the case of Harshad Govardhan Sondagar (supra) has been misinterpreted to create this confusion. Random sentences have been picked up from the judgment and used, without any attempt to understand the true purport of the judgment in its entirety."

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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........"

Learned Counsel for the appellant further submitted that even if the copy of the unregistered lease deed between the appellant and his landlords were to be ignored the other documents such as rent receipts, telephone bills also placed on record by the appellant are also sufficient at least for forming a prima facie opinion about the existence of a monthly tenancy and that is all what a lessee facing the threat of dispossession from leased premises by a Bank exercising its draconian remedy under Section 14 of SARFAESI Act has to show while claiming an interim relief from the DRT when approached under Section 17(1) of the said Act and rest is a matter of evidence for adducing which opportunity has to be granted to a Security Applicant by the DRT. Therefore, Counsel submitted, the DRT was wrong in rejecting interim relief only on the ground that there is no registered leased deed between the appellant and his landlords without giving opportunity to the appellant to establish from other evidence that he is a lawful tenant in the mortgaged premises from which he is sought to be evicted.

On the other hand, learned Counsel for the respondent Bank submitted while supporting the earlier order of the DRT and the reason now given by it in compliance of the direction of this Tribunal for rejecting the interim relief to the appellant that the present appeal has become infructuous since when it was filed the only grievance raised on behalf of the appellant by his Counsel was that the DRT had not given any reason while passing the then impugned order dated 28th November, 2016 and so the appellant should now file a fresh appeal if at all he is aggrieved by the reasoned order now transmitted to this Tribunal by the DRT in compliance of the direction of this Tribunal given on 5th December, 2016. It was also submitted that this litigation has been initiated by the appellant at the instance of his so called landlords who also happen to be the Directors in the respondent No. 2 Company to whom crores of rupees had been lent by the Bank in the year 2008 and which had defaulted in repayment of the loan amount and when the Bank initiated action under Section 14 of SARFAESI Act over twenty crores of rupees were due from the borrower Company and the only intention behind this collusive litigation is to thwart the Bank's attempts being made to recover its dues by selling the mortgaged house. Learned Counsel also submitted that the alleged tenancy is sham transaction and that is evident from the fact that rent is being shown to be merely Rs. 1,320/-. p.m. in respect of two floors of a huge house in a prime locality in West Delhi where the monthly rent will not be less than a lac of rupees and rent of Rs. 1,320/- is being shown only to come under the purview of the Delhi Rent Control Act and to get the benefit of the judgments of the Apex Court wherein it has been held that lawful tenants cannot be evicted by Banks from its secured assets in exercise of its powers under the SARFAESI Act without the intervention of DRTs. Another reason urged for the dismissal of this appeal was that despite the fact that Bank had resisted the appellant's objections filed before the CMM on the ground that there existed no genuine tenancy the appellant has not impleaded his so called landlords who had at the time of taking loan in the year 2008 represented to the Bank that the house in question was in their own occupation and the Bank had also made all inquiries in that regard and even in subsequent years also they have been submitting affidavits that they continue to occupy the mortgaged house and even the latest property tax documents also show that the mortgaged house is owner occupied.

After giving my thoughtful consideration to the entire aspect of the matter and the rival submissions made before this Tribunal and perusing the material on record placed by the appellant as well as the Bank along with its reply to the appeal I have also come to the conclusion that the appellant has not been able to make out a prima facie case for grant of any interim relief to him and there are more than one reasons for coming to this conclusion and the DRT did not examine those aspects also which it ought to have done.

Firstly, as noticed already, the proceedings initiated by the appellant before the DRT are for challenging the order dated 26.10.2016 passed by the learned CMM and the prayer made before the DRT is for setting aside that order of the CMM but that challenge cannot be maintained before the DRT under Section 17 of SARFAESI Act in view of the fact that orders passed by CMM under Section 14 of SARFAESI Act are attached finality under Section 14(3). Even the Hon'ble Supreme Court has held in a judgment reported in II (2014) CCR 137 (SC) : II (2014) BC 340 (SC) : II (2014) DLT (Cri) 836 (SC) : III (2014) SLT 469 : (2014) 6 SCC 1, Harshad Govardhan Sondagar v. International Assets Reconstruction Company Limited and Others, (in para No. 29), which judgment the appellant himself is relying upon, that the orders passed by CMM under Section 14 of SARFAESI Act can be challenged only by way of a writ petition.

I am also of the prima facie view that even if the application filed by the appellant before the DRT is considered to be a simple application under Section 17(1) of SARFAESI Act and not an appeal against the order of the CMM that application moved by the appellant cannot be said to be within the period of limitation provided under Section 17(1) itself, It is the appellant's own case that on coming to know about the fact that the Bank had approached the CMM with a petition under Section 14 of the SARFAESI Act for an order of possession of the mortgaged property with police aid he had filed his objections there on 8.7.2016. That shows that the appellant had become aware of the measures initiated under Sections 14 of SARFAESI Act by the respondent Bank at least in July, 2016 but still he chose not to avail the remedy under Section 17(1) by approaching the DRT. There is no doubt that in September, 2016 the amendments brought in SARFAESI Act by the Parliament added Section 17(4A) in the SARFAESI Act specifically providing for an adjudication of the claim of applicants under Section 17(1) who claim to be the lessees of properties which are mortgaged with a Bank or some financial institution and are sought to be taken over by the secured creditor in exercise of its powers under Sections 13(4) and 14 of SARFAESI Act but the Hon'ble Supreme Court had even before this amendment in SARFAESI Act in its judgment in Harshad Govardhan Sondagar's case (supra) (in para No. 32) held that even a lessee in secured/mortgaged asset apprehending his dispossession therefrom at the instance of a Bank under the SARFAESI Act could avail of the remedy under Section 17(1) by approaching the DRT as an 'aggrieved person'. That remedy, however, had to be availed of even by the lessee within the limitation period of forty-five days. The appellant, however, did not choose to avail of the remedy under Section 17(1) of SARFAESI Act at the time when he came to know the filing of application under Section 14 of SARFAESI Act by the Bank in the Court of the CMM and instead he approached the CMM on 8.7.2016 with objections against the order of possession passed in June, 2016 in those proceedings. Those objections were filed by the appellant relying upon the judgment of the Hon'ble Supreme Court in Harshad Govardhan's case (supra) wherein it was held that when a Bank files an application Section 14 of SARFAESI Act the application has to be accompanied by an affidavit that the mortgaged property is not in occupation of a lawful lessee and if some lessee is in possession the CMM has to issue notice to that lessee. In the present case, the appellant had claimed that the Bank had concealed from the CMM that the mortgaged property was in occupation of a lessee and it was only when he had come to know about the proceedings initiated under Section 14 that he had filed objections. The CMM had granted interim relief to the appellant for some period before finally rejecting the appellant's objections. So, even if it is accepted for the time being that the order of the CMM rejecting the appellant's objections could be assailed before DRT, the application moved by the appellant before the DRT under Section 17(1) making the rejection of his objections by CMM to be the cause of action for approaching the DRT prima facie appears to be time barred having been filed in November, 2016 when the limitation period for any aggrieved person to approach the DRT under Section 17(1) is forty-five days which period, even if it is accepted to have started from the date when the appellant became aware of initiation of proceedings under Section 14, expired much before the filing of the application under Section 17(1) by the appellant and so no prima facie case for grant of interim relief can be said to have been made out by the appellant.

And it is not that whenever some person approaches DRT claiming himself to be a tenant and raises a grievance that he was being sought to be dispossessed from the tenanted premises in his occupation by some Bank/Financial Institution he becomes automatically entitled to get interim protection against his dispossession. Even the Hon'ble Supreme Court has not said so either in Kalsaria's judgment (supra) or in Harshad Govardhan's judgment (supra) strongly relied upon by the learned Counsel for the appellant. All that has been held in these judgments is that even lessees of mortgaged properties have a right of audience before the Fora under the SARFAESI Act as well as Recovery of Debts Due to Banks and Financial Institutions Act, 1993 but not that without even establishing prima facie case they become entitled to some interim relief. The aggrieved person including a lessee has to approach the DRT within the limitation period prescribed under Section 17(1) and then only he would become entitled to pray for some interim relief otherwise consequences for filing a delayed application have to follow which include rejection of interim relief also.

Just because the learned CMM had for some time stayed its own direction for delivery of possession of the mortgaged property to the Bank in exercise of the power under Section 14 of SARFAESI Act the appellant cannot get any interim relief in the proceedings under Section 17(1), benefit of which interim relief granted by the CMM was also sought to be taken by the appellant in the present proceedings.

I am also in agreement with the submission of the learned Counsel for the Bank that since the so called landlords of the appellant had themselves submitted affidavits before the Bank at the time of grant of loan to respondent No. 2 in the year 2008 that they were in occupation of the property to be mortgaged and thereafter also they had been submitting similar affidavits claiming their continuous occupation in the property in question and which stand of the Bank was made known to the appellant before the CMM's Court the landlords should have been impleaded in the present proceedings and the appellant having not impleaded them an adverse inference can be drawn even at the stage of consideration of the appellant's prayer for interim relief that they would have disowned the tenancy being pressed into service by the appellant in case they had been brought before the DRT.

Even though view taken by learned DRT that the appellant has no prima facie case for grant of interim relief for the reason that he does not have registered lease deed in his favour may not be free from doubt in view of the judgment of the Hon'ble Supreme Court in Kalsaria's case (supra) cited by the Counsel for the appellant this Appellate Tribunal is still competent to examine the appellant's case from other angles also which, in fact, even the DRT should have examined. This Tribunal is not debarred from passing any other order which ought to have been passed by the DRT in the facts and circumstances of the case and in my considered view the DRT should have examined the aforesaid deficiencies in the appellant's case which this Tribunal has highlighted while agreeing with the conclusion of the learned Presiding Officer of the DRT that there is no prima facie case made out for the grant of interim relief to the appellant.

In case, the appellant finally succeeds before the DRT he can always be restored back the possession of the premises in which he claims to be in occupation as a lawful tenant and which relief before the amendments in SARFAESI Act made effective in September, 2016 could not be granted to lessees in view of the decision of the Hon'ble Supreme Court in Harshad Govardhan's case (supra) (para No. 32) but now after the 2016 amendment in the SARFAESI Act the DRT can grant the relief of restoration of possession of mortgaged property even to the successful lessees. So, it cannot be said that the appellant's legal battle will be rendered infructuous in case possession of the premises in question is taken from him by the Bank through Court receiver, as was also the submission advanced by the Counsel for the appellant. For the aforesaid reasons, this appeal is dismissed but making it clear that this dismissal is only on a prima facie view of different aspects in the matter and not a final expression of opinion which the DRT shall take while finally disposing of the appellant's Securitisation Application under Section 17(1).