WP/41226/2014 of Mubashir Alam S/o. Mr.Shaik Ahmed Alam, Vs Union Bank of India, Rep. by its Branch Manager, on 31 December 2014

THE HON'BLE SRI JUSTICE K.C.BHANUAND

THE HON’BLE MRS JUSTICE ANIS

WRIT PETITION No.41226 OF 2014

ORDER:- (per Hon’ble Sri Justice K.C.Bhanu)

This writ petition is filed seeking to issue a writ of Mandamus todeclare the action of respondent No.1 in threatening to take over thepossession of residential Flat No.506, 5[th] Floor of ParushuramApartment bearing MCH No.10-2-317/A/8 to 15, Vijay Nagar Colony,Beside B.S.N.L. Office, Hyderabad without issuing any notice andwithout following the procedure contemplated under the Securitizationand Reconstruction of Financial Assets and Enforcement of SecurityInterest Act, 2002 (for short, “the SARFAESI Act”) as illegal andarbitrary, and consequently, to direct respondent No.1 not to take anycoercive steps against the petitioner without following the due processof law.

2. Respondent No.2 is the owner of the aforementioned flat. Thepetitioner was inducted into possession of the said residential flat as atenant on monthly rent of Rs.1,000/- and to that effect, a leaseagreement, dated 08.10.2013, was entered into in between them. Atthe time of execution of the said lease agreement, the petitionerdeposited a sum of Rs.11.00 lakhs towards refundable advance andhe has been regularly paying the monthly rent. The said leaseagreement also stipulates that if respondent No.2 intends to evict thepetitioner from the premises in question, he has to give two months’prior notice. On 27.12.2014, the officials of respondent No.1 came tothe premises of the petitioner to take over the possession of theproperty saying that respondent No.2 availed loan and committeddefault in payment of the loan amount. The petitioner is not aware ofthe said loan. Neither respondent No.1 nor respondent No.2 intimated him about the financial transactions between them. Hence, he filed thepresent writ petition.

3. Heard.

4. Admittedly, the petitioner is not a valid tenant and he wasinducted into possession of the secured asset under a registered leasedeed. Therefore, petitioner is not in lawful possession of the securedasset. Section 17 of the Registration Act, 1908 provides that everylease document is compulsorily registerable. It is by way ofsubstitution by A.P. Act No.4 of 1999, which came into effect from01.04.1999. The contention of the learned counsel for the petitionerthat the petitioner is a valid tenant, cannot be accepted in view of thedecision reported in HARSHAD GOVARDHAN SONDAGAR V.INTERNATIONAL ASSETS RECONSTRUCTION COMPANY

LIMITED AND OTHERS[[1]], wherein it was held at para Nos.28 and32 as under:

“28. A reading of sub-rules (1) and (2) of Rule 8 of the SecurityInterest (Enforcement) Rules, 2002 would show that the possessionnotice will have to be affixed on the outer door or at the conspicuousplace of the property and also published, as soon as possible but inany case not later than seven days from the date of takingpossession, in two leading newspapers, one in vernacular languagehaving sufficient circulation in that locality, by the authorised officer.At this stage, the lessee of an immovable property will have notice ofthe secured creditor making efforts to take possession of the securedassets of the borrower. When, therefore, a lessee becomes aware ofthe possession being taken by the secured creditor, in respect of thesecured asset in respect of which he is the lessee, from thepossession notice which is delivered, affixed or published in sub-rule(1) and sub-rule (2) of Rule 8 of the Security Interest (Enforcement)Rules, 2002, he may either surrender possession or resist theattempt of the secured creditor to take the possession of the securedasset by producing before the authorised officer proof that he wasinducted as a lessee prior to the creation of the mortgage or that hewas a lessee under the mortgagor in accordance with the provisionsof Section 65-A of the Transfer of Property Act and that the leasedoes not stand determined in accordance with Section 111 of theTransfer of Property Act. If the lessee surrenders possession, thelease, even if valid, gets determined in accordance with clause (f) ofSection 111 of the Transfer of Property Act, but if he resists theattempt of the secured creditor to take possession, the authorisedofficer cannot evict the lessee by force but has to file an applicationbefore the Chief Metropolitan Magistrate or the District Magistrateunder Section 14 of the SARFAESI Act and state in the affidavit accompanying the application, the name and address of the personclaiming to be the lessee. When such an application is filed, theChief Metropolitan Magistrate or the District Magistrate will have togive a notice and give an opportunity of hearing to the personclaiming to be the lessee as well as to the secured creditor,consistent with the principles of natural justice, and then take adecision. If the Chief Metropolitan Magistrate or the DistrictMagistrate is satisfied that there is a valid lease created before themortgage or there is a valid lease created after the mortgage inaccordance with the requirements of Section 65-A of the Transfer ofProperty Act and that the lease has not been determined inaccordance with the provisions of Section 111 of the Transfer ofProperty Act, he cannot pass an order for delivering possession ofthe secured asset to the secured creditor. But in case he comes tothe conclusion that there is in fact no valid lease made either beforecreation of the mortgage or after creation of the mortgage satisfyingthe requirements of Section 65-A of the Transfer of Property Act orthat even though there was a valid lease, the lease standsdetermined in accordance with Section 111 of the Transfer ofProperty Act, he can pass an order for delivering possession of thesecured asset to the secured creditor.

32. When we read sub-section (1) of Section 17 of the SARFAESIAct, we find that under the said sub-section "any person (includingborrower)", aggrieved by any of the measures referred to in sub-section (4) of Section 13 taken by the secured creditor or hisauthorised officer under the chapter, may apply to the DebtsRecovery Tribunal having jurisdiction in the matter within 45 daysfrom the date on which such measures had been taken. We agreewith Mr Vikas Singh that the words "any person" are wide enough toinclude a lessee also. It is also possible to take a view that within 45days from the date on which a possession notice is delivered oraffixed or published under sub-rules (1) and (2) of Rule 8 of theSecurity Interest (Enforcement) Rules, 2002, a lessee may file anapplication before the Debts Recovery Tribunal having jurisdiction inthe matter for restoration of possession in case he is dispossessedof the secured asset. But when we read sub-section (3) of Section 17of the SARFAESI Act, we find that the Debts Recovery Tribunal haspowers to restore possession of the secured asset to the borroweronly and not to any person such as a lessee. Hence, even if theDebts Recovery Tribunal comes to the conclusion that any of themeasures referred to in sub-section (4) of Section 13 taken by thesecured 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 theapplication of the lessee and comes to the conclusion that the leasein favour of the lessee was made prior to the creation of mortgage orthe lease though made after the creation of mortgage is inaccordance with the requirements of Section 65-A of the Transfer ofProperty Act and the lease was valid and binding on the mortgageeand the lease is yet to be determined, the Debts Recovery Tribunalwill not have the power to restore possession of the secured asset tothe lessee. In our considered opinion, therefore, there is no remedyavailable under Section 17 of the SARFAESI Act to the lessee toprotect his lawful possession under a valid lease."

When there is no valid lease made either before creating the mortgageor after creating the mortgage satisfying the requirements of Section65-A of the Transfer of Property Act, the creditor may take recourse totake possession of the secured asset of the borrower including theright to transfer by way of lease, assignment or sale for realising thesecured asset or that the creditor may make an application before theChief Metropolitan Magistrate or District Magistrate to assist thesecured creditor in taking possession of the secured asset. Petitioner,who is not a valid lease holder, cannot have locus standi to challengethe measures that may be taken by the secured creditor in invoking theprovisions of SARFAESI Act. Hence, the writ petition is liable to bedismissed.

5. Accordingly, the Writ Petition is dismissed. There shall be noorder as to costs. Miscellaneous Petitions, if any, pending in this WritPetition shall stand closed.

______________________

JUSTICE K.C.BHANU

_______________

JUSTICE ANIS

Date: 31.12.2014

AMD

THE HON'BLE SRI JUSTICE K.C.BHANUAND

THE HON’BLE MRS JUSTICE ANIS

WRIT PETITION No.41226 OF 2014

DATE: 31.12.2014

AMD

[1](2014) 6 Supreme Court Cases 1