Kesharsingh Bhursingh Chaudhary vs Punjab National Bank on 16 March 2024

**JUDGMENT**

1. 1. This appeal is preferred by the Appellant against the order dated 15/04/2019 passed by Ld. Recovery Officer-II, DRT-II, Ahmedabad ("Ld. RO" for short) in Recovery Proceedings No.538/2017.

2. 2. Brief facts of the present Appeal, as averred by the Appellant, are as under:

1. 2.1 The Appellant is the lessee of the Shed No. E-17, First Floor, E-18 and E-19, GIDC, Gandhidham, Taluka Gandhidham Kutch. (hereinafter "property in question" for the sake of brevity) and doing his business upon the said plot since the year 1982 very smoothly, peacefully and uninterruptedly under the lease.

2. 2.2 A Lease Agreement dated 01.08.1982 for the 50 years was executed between the appellant and M/s. Vijay Industries and the lease commenced from 01/08/1982 and since then the appellant is in exclusive and peaceful possession of the said lease property, i.e., Shed No. E-17, First Floor, GIDC, Gandhidham, Taluka Gandhidham - Kutch. Similarly, a Lease Agreement dated 01/04/1990 for 50 years was executed between the Appellant and

M/s. Vijay Enterprise, and the lease commenced from 01/04/1990 and since then the Appellant is in exclusive and peaceful possession of the said lease property, i.e., Shed No. E-18 and E-19, GIDC, Gandhidham, Taluka Gandhidham - Kutch.

2.3 The Appellant is paying the lease amount to Respondent No. 2 as per Lease Agreements.

2.4 The Appellant humbly submits that somewhere in the year 2010, Respondent No. 2 was contemplating taking over of possession of the said lease property and in order to protect the possession, the Appellant had filed Regular Civil Suit No. 54/2010 and 50/2010 for the properties, viz. Shed No. E-17, First Floor, GIDC, Gandhidham, Taluka Gandhidham Kutch and Shed No. E-18 and E- 19, First Floor, GIDC, Gandhidham, Taluka Gandhidham Kutch, respectively, against Respondent No.2. Since it is a trite law that statutory tenant is required to be protected against the unlawful dispossession without the adjudication by the Civil Court., the Ld. Civil Court, Gandhidham, after taking evidences of the respective parties had decided the above referred R.C.S. No. 54/2010 and 50/2010 in favour of the Appellant vide its Judgment and decree dated 07/05/2013 and the Ld. Civil Court was pleased to grant the stay and ordered that the Appellant would not be removed from the said lease property without following due course of law by Respondent No.2 or any of his agents.

2.5 The original owner of the said lease property, i.e., Respondent No. 2 approached Respondent No.1 Bank, for various credit facilities and that in return it offered the property mentioned in the cause title as a security (mortgage) for due repayment of the said credit facility.

2.6 Respondent No. 2 failed to pay the dues of Respondent No. 1 Bank. The account of Respondent No.2 was classified as Non-Performing Asset and subsequently Respondent No. 1 had issued a Demand Notice for its dues on 16/07/2009 and Respondent No.2 was called upon to pay the outstanding dues of the Respondent No 1, however, Respondent No.2 again failed to repay the dues of Respondent No.1. Pursuant to failure in paying the outstanding dues of Respondent No.1, Respondent No.1 Bank made an application before Ld. District Magistrate for taking actual and physical possession of the said lease property.

2.7 The Appellant was totally unaware about such loan transactions between the Respondent No.1 and 2 or that the Respondent No.2 had mortgaged the said lease property to Respondent No.1 Bank. If at all /

Respondent no.2 had taken any loans from any of the Banks or Financial institutions by mortgaging the said lease property which is under the peaceful possession of the Appellant of whom he is a lawful lease holder as well, then all the contracts done between Respondent No.1 and Respondent No.2 are against the purview of the law because neither Respondent no. 1 nor Respondent No. 2 has ever obtained any consent or signatures of the Appellant while mortgaging the said lease property.

2.8 As soon the Appellant got the knowledge through Respondent No.2 that Respondent No.1 Bank is trying to take the possession of the said lease property, the Appellant filed an application before the Ld. District Magistrate, Bhuj- Kutch where Respondent No.1 Bank had filed an application under Section 14, not to take physical possession of the property in question, however, without considering the application of the Appellant the Ld. District Magistrate, Gandhidham had passed an order for taking the possession of the said lease property.

2.9 The Appellant is still in actual and physical possession of the said lease property. Against the notice issued by the Ld. DM, Gandhidham and subsequent notice issued by the Ld. Mamlatdar,

Gandhidham, the Appellant preferred a Special Civil Application bearing No. 15083 of 2018 under the Article 226 and 227 on various grounds and considering merits and grounds as stated, the Hon'ble High Court was pleased to grant the interim relief and stayed the proceedings towards taking possession of the property in question.

2.10 Thereafter the Appellant filed objections before Ld. RO. The said objections were disposed of by Ld. RO vide impugned order dated 15/04/2019. Being aggrieved and dissatisfied by the said order, the Appellant has preferred the present Appeal.

1. 3. Respondent No.1 has filed its written submissions to the present Appeal vide Exh.R/6 and denied the averments and statements made by the Appellant. It has further contended that the Hon'ble High Court, by common order dated 19/11/2019 passed in SCA No.15083 of 2018 along with connected SCAs filed by the Appellant of Appeal No.4 of 2019 and Appeal No.5 of 2019, dismissed the petitions on the ground of alternative remedy and vacated the interim relief. It has also contended that the Appellant has not filed any SA u/s 17(4A) of the SARFAESI Act before this Tribunal challenging Section 14 order and the notice issued by Ld. Mamlatdar in pursuance thereof. Respondent No.1 has further contended that said Shed / Plot Nos.E-17, E-18 and E-19

were assigned to M/s. Vijay Lumbers Pvt. Ltd. (subsequently name was changed to Vijay Timber Industries Pvt. Ltd.) by way of three registered Deeds of Assignment dated 29/03/2000 executed by Vijay Timber Industries and M/s. Vijay Enterprise. Therefore, on 28/04/2010 when two Regular Civil Suits were filed before Ld. Civil Court, Gandhidham, the said Plots / Sheds E-17, E-18 and E-19 were not of the ownership of Vijay Timber Industries and M/s. Vijay Enterprise. Therefore, the grounds taken by the Appellant in the memo of Appeal are thoroughly misconceived and untenable and the Appeal deserves to be dismissed with cost.

1. 4. I have heard Ld. Counsel for the parties and considered written submissions filed by the respective parties along with documentary evidence on record.

2. 5. It is also an admitted position that no registered Lease Agreement exists between the Appellant and Respondent No.2 herein. It would be pertinent to refer to and reproduce the provisions of Section 17 of the Registration Act r/w Section 107 of the Transfer of Property Act, which read as under:- **Section 17 of The Registration Act, 1877:**

*"Documents of which registration is compulsory.—(1) The following documents shall be registered, if the property to which they relate is situate in a district in which, and if they have been executed on or after the date on which, Act No. XVI of 1864, or the Indian Registration Act, 1866, or*

/

the Indian Registration Act, 1871, or the Indian Registration Act, 1877, or this Act came or comes into force, namely:—

(a) instruments of gift of immovable property; (b) other non-testamentary instruments which purport or operate to create, declare, assign, limit or extinguish, whether in present or in future, any right, title or interest, whether vested or contingent, of the value of one hundred rupees and upwards, to or in immovable property;

(c) non-testamentary instruments which acknowledge the receipt or payment of any consideration on account of the creation, declaration, assignment, limitation or extinction of any such right, title or interest; and (d) leases of immovable property from year to year, or for any term exceeding one year, or reserving a yearly rent;

....."

Section 107 of The Transfer of Property Act, 1882:

"A lease of immovable property from year to year, or for any term exceeding one year or reserving a yearly rent, can be made only by a registered instrument. All other leases of immovable property may be made either by a registered instrument or by oral agreement accompanied by delivery of possession. Where a lease of immovable property is made by a registered instrument, such instrument or, where there are more instruments than one, each such instrument shall be executed by both the lessor and the lessee: PROVIDED that the State Government may from time to time, by notification in the Official Gazette, direct that leases of immovable property, other than leases from year to year, or for any term exceeding one year, or reserving a yearly rent, or any class of such leases, may be made by unregistered instrument or by oral agreement without delivery of possession."

6. In light of the aforesaid provisions of law, a reference deserves to be made to the observations of the Hon'ble Apex Court in **Bajarang Shyamsunder Agarwal V/s. Central Bank of India, reported in (2019)9 SCC 94**, which read as under:

"20. Before concluding, the Court in *Harshad Govardhan Sondagar v. International Assets Reconstruction Co. Ltd.*, (2014) 6 SCC 1 : (2014) 3 SCC (Civ) 1, distinguished the implications of a registered and an unregistered instrument/oral agreement, in the following manner:

"36. We may now consider the contention of the respondents that some of the appellants have not produced any document to prove that they are bona fide lessees of the secured assets. We find that in the cases before us, the appellants have relied on the written instruments or rent receipts issued by the landlord to the tenant. Section 107 of the Transfer of Property Act provides that a lease of immovable property from year to year, or for any term exceeding one year or reserving a yearly rent, can be made "only by a registered instrument" and all other leases of immovable property may be made either by a registered instrument or by oral agreement accompanied by delivery of possession. Hence, if any of the appellants claim that they are entitled to possession of a secured asset for any term exceeding one year from the date of the lease made in his favour, he has to produce proof of execution of a registered instrument in his favour by the lessor. 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."

7. Ld. Counsel for the Respondent-Bank has relied on the recent judgment of the Hon'ble Supreme Court of India in the case of **Hemraj Ratnakar (Supra)** wherein the **Hon'ble Supreme Court has followed the judgment in Bajrang Shyamsundar Agarwal's Case (Supra)**. While following its previous judgment, the Hon'ble Supreme Court has enunciated the law on the point of claim of tenancy by an unregistered document in the following manner:- *"12. A Three-Judge Bench of this Court in Bajarang Shyamsunder Agarwal v. Central Bank of India & Anr., after considering almost all decisions of this Court, in relation to the right of a tenant in possession of the secured asset, has held that if a valid tenancy under law is in existence even prior to the creation of the mortgage, such tenant's possession cannot be disturbed by the secured creditor by taking possession of the property. If a tenancy under law comes into existence after the creation of a mortgage but prior to issuance of a notice under Section 13(2) of the SARFAESI Act, it has to satisfy the conditions of Section 65A of the Transfer of Property Act, 1882. If a tenant claims that he is entitled to possession of a Secured Asset for a term of more than a year, it has to be supported by the execution of a registered instrument. In the said decision of this Court, it was clarified that in the absence of a registered instrument, if the tenant only relies upon an unregistered instrument or an oral agreement accompanied by delivery of possession, the tenant is not entitled to possession of the secured asset for more than the period prescribed under the provisions of the Transfer of Property Act. It was held thus:*

*"24.1. If a valid tenancy under law is in existence even prior to the creation of the mortgage, the tenant's possession cannot be disturbed by the secured creditor by taking possession of the property. The lease has to be determined in accordance with Section 111 of the TP Act for determination of leases. As the existence of a prior existing lease inevitably affects the risk undertaken by the bank while providing the loan, it is expected of banks/creditors to have conducted a standard due diligence in this regard. Where the bank has proceeded to accept such a property as mortgage, it will be presumed that it has consented to the risk that comes as a consequence of the existing tenancy. In such a situation, the rights of a rightful tenant cannot be compromised under the SARFAESI Act proceedings.*

*24.2. If a tenancy under law comes into existence after the creation of a mortgage, but prior to the issuance of notice under Section 13(2) of the SARFAESI Act, it has to satisfy the conditions of Section 65-A of the TP Act.*

*24.3. In any case, if any of the tenants claim that he is entitled to possession of a secured asset for a term of more than a year, it has to be supported by the execution of a registered instrument. In the absence of a registered instrument, if the tenant relies on an unregistered instrument or an oral agreement accompanied by delivery of possession, the tenant is not entitled to possession of the secured asset for more than the period prescribed under Section 107 of the TP Act."*

13. It was further held that the Rent Act would not come to the aid of a "tenant-in-sufferance" vis-à-vis SARFAESI Act due to the operation

*of Section 13(2) read with Section 13(13) of the SARFAESI Act. It was held as follows:*

*"35. The operation of the Rent Act cannot be extended to a "tenant-in-sufferance" vis-à-vis the SARFAESI Act, due to the operation of Section 13(2) read with Section 13(13) of the SARFAESI Act. A contrary interpretation would violate the intention of the legislature to provide for Section 13(13), which has a valuable role in making the SARFAESI Act a self executory instrument for debts recovery. Moreover, such an interpretation would also violate the mandate of Section 35, SARFAESI Act which is couched in broad terms."*

*14. In the present case, first of all there is a serious doubt as to the bona fide of the tenant, as there is no good or sufficient evidence to establish the tenancy of the appellant. According to the appellant, he is a tenant of the Secured Asset from 12.06.2012. However, the documents produced in support of his claim are xerox copies of the rent receipts and the first xerox copy of the rent receipt is of 12.05.2013 which is after the date of creation of the mortgage. It is pertinent to note here that the Borrowers have not claimed that any tenant is staying at the Secured Asset. At the time of grant of facility, third-party valuers had also confirmed that the Borrowers were staying at the Secured Asset. Be that as it may. The appellant has pleaded tenancy from 12.06.2012 to 17.12.2018. This is not supported by any registered instrument. Further, even according to the appellant, he is a "tenant-in-sufferance", therefore, he is not entitled to any protection of the Rent Act. Secondly, even if the tenancy has been claimed to be renewed in terms of Section 13(13) of the SARFAESI Act, the Borrower would be required to seek consent of the secured creditor for transfer of the Secured Asset by way of sale, lease or otherwise, after issuance of the notice under Section 13(2) of the SARFAESI Act and, admittedly, no such consent has been sought by the Borrower in the present case.*

*15. In view of above, we do not find any merit in these appeals which are accordingly dismissed."*

8. On careful consideration of the aforesaid documentary evidences on record, it appears that the Appellant has pleaded tenancy from 1982 and 1990 for the respective premises. This is not supported by any registered instrument. In light of the law laid down by the Hon'ble Apex Court in the aforesaid judgments, this Tribunal is of the opinion that no legal relationship of tenant and landlord can be said to have been created by an unregistered instrument. In the present case, admittedly, no registered Lease Agreement has been executed between the Appellant and Respondent No.2. The Appellant is a tenant at sufferance who continues to hold possession of the properties in question on the basis of unregistered Lease Agreements. Thus, in absence of proof of execution of a registered instrument in their favour, the Appellant is not entitled to possession of the secured asset for more than a year from the date of so-called delivery of possession in his favour by the landlord.

1. 9. It was also submitted by the Ld. Counsel for the Appellant that the Appellant is protected under the provisions of the Rent Act and he cannot be evicted from the properties in question by the secured creditor who gave loan to the borrower / landlord, in view of the provisions of Section 35 of the SARFAESI Act.

2. 10. In this context, the Hon'ble Supreme Court has again clarified the position with regard to effect of Section 35 of the SARFAESI Act by making following observations in the same judgment in **Bajarang Shyamsunder's case (Supra):**

*"35. The operation of the Rent Act cannot be extended to a "tenant-in-sufferance" vis-à-vis the SARFAESI Act, due to the operation of Section 13(2) read with Section 13(3) of the SARFAESI Act. A contrary interpretation would violate the intention of the legislature to provide for Section 13(13), which has a valuable role in making the SARFAESI Act a self-executory instrument for debts recovery. Moreover, such an interpretation would also violate the mandate of Section 35, SARFAESI Act which is couched in broad terms."*

1

1. 11. On perusal of the impugned order dated 15/04/2019 passed by Ld. RO, it appears that Ld. RO has rightly appreciated the aspect that the two lease agreements in question are unregistered. Ld. RO has examined validity of the said lease agreements in context of Section 17(1)(d) of the Registration Act read with Section 107 of the Transfer of Property Act. As such, no interference with the impugned order of Ld. RO is required.

2. 12. In view of the aforesaid discussion, the present Appeal is hereby dismissed with no order as to cost.

3. 13. File be consigned to record.

4. 14. Registry is directed to provide copy of this Judgment free of cost to all the parties.

Pronounced in the open Court on 16^th day of March, 2024.

(Laxman Madhani) Presiding Officer DRT-II, Ahmedabad

\*ykb\*