TMI Blog2015 (10) TMI 2445X X X X Extracts X X X X X X X X Extracts X X X X ..... f Section 107 of Transfer of Property Act, 1882 and lease of more than one year which is unregistered, is void. Respondent contends that petition is not a bonafide proceeding, is a collusive action, inasmuch as deed of mortgage executed would indicate as to how registered mortgage was created and by same signatories and same parties dealing with Petitioners – Petitioners have been put up by them in order to defeat rights of Bank and particularly order and protection under Section 14 – After promulgation of Maharashtra Rent Control Act by virtue of Section 55, an agreement for tenancy is to be registered and compulsorily - No false statement on oath was made by Respondent No. 4 Bank as it may be dealing with Petitioners as a client constituent, but it does not mean that Bank is aware of status of Petitioners in respect of premise. Held That:- If lease is not valid, possession is not lawful, then, there is no justification for interference in extra ordinary, discretionary and equitable jurisdiction of Court and merely because person in possession claims to be a lessee does not mean that he should be protected - Section 107 clearly states that a lease of immovable property from ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ict of Mumbai city and Mumbai suburban and within the local limits of Greater Mumbai Municipal Corporation by taking such steps and using such force including breaking open the lock thereof or taking assistance of police, if required, at the expenses of the applicant and deliver possession thereof along with documents/articles, if any, found therein to the authorised officer of the applicant after preparing panchanama and taking inventory of the secured assets. The Assistant Registrar concerned shall report compliance within one month from the receipt of the writ of commission. Issue writ of commission accordingly on payment of P.F. And ₹ 5,000/towards the Court Commissioner's fees, which, if deposited be credited to DLSA, Mumbai. 4) The present Petition is concerning the premises Survey No. 63, Hissa No. 1(Part), City Survey No. 569 and admeasuring 2299 square yards, situate at Village Mohili, Taluka Kurla in the registration District and SubDistrict of Mumbai Suburban. Petitioner No. 1 is a partnership firm registered under the Indian Partnership Act, 1932. The second Petitioner claims to be a partner of Petitioner No. 1 firm. 5) Respondent Nos. 1 a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lace where the Petitioners store their stock of plywood and other wood products. They do not have any other premises and for use as godown or warehouse of adequate size. The Petitioners also place heavy reliance on the fact that Respondent No. 4 Cosmos Bank is the banker of Petitioner No. 1 as well. They have availed of various loans or financial facilities from Respondent No. 4. They are against hypothecation of goods and stock which are lying in the said warehouse. There is a reference made in para 3.13 and subparagraphs thereof to the insurance policies and the insured party is stated to be the Respondent No. 4 Bank. The Petitioners rely upon the fact that when there were heavy floods on 26th July, 2005, their stocks of plywood and other goods lying in the said premises were destroyed. The insurance policy was assigned to Respondent No. 4 and the Petitioners claim a loss of ₹ 22,75,024/towards loss of these goods/stock. After the requisite investigation, the assignee of the insurance policy, namely, Respondent No. 4 Bank was awarded compensation by the New India Insurance Company Limited and even documents in that regard are referred to. This would demonstrate as to how th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ase, which was filed under section 14 of the SARFAESI Act in the Court of Chief Metropolitan Magistrate, Esplanade, Mumbai. After obtaining the requisite copies the Petitioners learnt about the impugned order dated 18th June, 2015. 10) It is in these circumstances that the impugned order has been challenged in this Petition by the Petitioners. 11) Mr. Samdani, learned Senior Counsel appearing for the Petitioners submits that Respondent No. 4 has approached the Court of learned Chief Metropolitan Magistrate, Esplanade, Mumbai pointing out that the said premises constitute a security interest created in its favour. It filed an affidavit, based on which the impugned order was passed. That affidavit states that on 28th November, 2005 the Bank sanctioned various credit facilities and to the tune of ₹ 600 lacs and these facilities were availed of by Respondent Nos. 1 and 2 and several other persons, who are impleaded as Respondents to case No. 154/SA/2015. The affidavit further states that to secure these facilities, these Respondents have created a mortgage of the said premises in favour of the Respondent Bank. There were defaults in repayment of amount of loan and on 31st M ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . Samdani would submit that the settled law is that the lease of more than one year under the indenture, which is unregistered, is void. However, equally well settled position in law and that is if a lessee is put in possession and is paying rent to the lessor, he is a tenant from month to month. Mr. Samdani would further submit that as far as the State of Maharashtra is concerned and where the rent control legislation is in force and applicable to the premises, the protection thereunder can be claimed and the monthly tenancy is permitted even dehors an unregistered lease. Mr. Samdani, therefore, submits that the Bank proceeded on the footing that the law laid down by the Hon'ble Supreme Court of India in the case of Harshad Govardhan Sondagar vs. International Assets Reconstruction Company Limited and Ors. reported in (2014) 6 SCC 1 would apply. However, that judgment itself clarifies that the overriding effect of the SARFAESI Act will not encompass the claim of the nature raised by the Petitioners. Mr. Samdani, therefore, was at pains to point out that this judgment cannot render any assistance to the Bank in this case. 13) We have summarised the contentions of Mr. Samdani ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... compulsorily. In the absence of a registered agreement, and a unregistered agreement subsequent to the mortgage and which cannot be said to be to the knowledge of the Respondent No. 4 Bank, the action and proceedings under the SARFAESI Act cannot be frustrated. That would mean a parliamentary statute enacted for expeditious recovery of loans, which are outstanding and without taking recourse of the normal legal process, is wholly defeated. Mr. Pandey would submit that in the instant case, no false statement on oath was made by Respondent No. 4 Bank. Respondent No. 4 Bank may be dealing with the Petitioners as a clientconstituent, but it does not mean that the Bank is aware of the status of the Petitioners in respect of the premises. Therefore, the reliance placed by Mr. Samdani on several decisions of the Hon'ble Supreme Court of India is entirely misplaced and the Petition be dismissed. 15) Mr. Samdani has placed reliance on the following decisions:( i) Harshad Govardhan Sondagar vs. International Assets Reconstruction Company Limited and Ors.(2014) 6 SCC 1. (ii) Ram Kumar Das vs. Jagdish Chandra Deo AIR (39) 1952 SC 23. (iii) Anthony vs. K. C. Ittoop and S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e measures to recover the debt is to take possession of the secured assets of the borrower including the right to transfer by way of lease, assignment or sale, for realising the secured asset. By section 14, the Bank is enabled to approach the Chief Metropolitan Magistrate or the District Magistrate within whose jurisdiction any such secured asset is situated and requesting him to render assistance to take possession of the same. By the proviso to subsection (1) of section 14 it is now mandated that the application has to be made by the secured creditor and which shall be accompanied by an affidavit duly affirmed by the authorised officer of the secured creditor declaring certain declarations. 17) Section 14 as is now enacted, reads as under: 14. Chief Metropolitan Magistrate or District Magistrate to assist secured creditor in taking possession of secured asset . 1) Where the possession of any secured asset is required to be taken by the secured creditor or if any of the secured asset is required to be sold or transferred by the secured creditor under the provisions of this Act, the secured creditor may, for the purpose of taking possession or control of any such se ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... further that on receipt of the affidavit from the Authorised Officer, the District Magistrate or the Chief Metropolitan Magistrate, as the case may be, shall after satisfying the contents of the affidavit pass suitable orders for the purpose of taking possession of the secured assets: provided also that the requirement of filing affidavit stated in the first proviso shall not apply to proceeding pending before any District Magistrate or the Chief Metropolitan Magistrate, as the case may be, on the date of commencement of this Act. (1A) This District Magistrate or the Chief Metropolitan Magistrate may authorise any officer subordinate to him ( i) to take possession of such assets and documents relating thereto; and (ii) to forward such assets and documents to the secured creditor. (2) For the purpose of securing compliance with the provisions of subsection (1), the Chief Metropolitan Magistrate or the District Magistrate may take or cause to be taken such steps and use, or cause to be used, such force, as may, in his opinion, be necessary. (3) No act of the Chief Metropolitan Magistrate or the District Magistrate any officer authorised by the Chi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... feree, who accepts the transfer on such terms. Lessor, lessee, premium and rent defined . The transferor is called the lessor, the transferee is called the lessee, the price is called the premium, and the money, share, service or other thing to be so rendered is called the rent. 111. Determination of lease. A lease of immovable property, determines (a) by efflux of the time limited thereby; (b) where such time is limited conditionally on the happening of some event by the happening of such event; (c) where the interest of the lessor in the property terminates on, or his power to dispose of the same extends only to, the happening of any event by the happening of such event; (d) in case the interests of the lessee and the lessor in the whole of the property becomes vested at the same time in one person in the same right; (e) by express surrender, that is to say, in case the lessee yields up his interest under the lease to the lessor, by mutual agreement between them; (f) by implied surrender; (g) by forfeiture, that is to say, (1) in case the lessee breaks an express condition which provides that, on breach thereof, t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... secured creditor can move the Chief Metropolitan Magistrate or the District Magistrate for assistance to take possession of the secured asset. We have already held that Section 13 of the SARFAESI Act does not provide that the lease in respect of a secured asset will get determined when the secured creditor decides to take the measures in the said section. Hence, possession of the secured asset from a lessee in lawful possession under a valid lease is not required to be taken under the provisions of the SARFAESI Act and the Chief Metropolitan Magistrate or the District Magistrate, therefore, does not have any power under Section 14 of the SARFAESI Act to take possession of the secured asset from such a lessee and hand over the same to the secured creditor. When, therefore, a secured creditor moves the Chief Metropolitan Magistrate or the District Magistrate for assistance to take possession of the secured asset, he must state in the affidavit accompanying the application that the secured asset is not in possession of a lessee under the valid lease made prior to creation of the mortgage by the borrower or made in accordance with Section 65A of the Transfer of Property Act prior to r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... AESI Act, unless it has been effected after the secured creditor has taken over possession of the secured asset. Thus, for the purpose of transferring the secured asset and for realizing the secured debt, the secured creditor will require the assistance of the Chief Metropolitan Magistrate or the District Magistrate for taking possession of a secured asset from the lessee where the lease stands determined by any of the modes mentioned in Section 111 of the Transfer of Property Act. 27. We may now deal with the remedies available to the lessee where he is threatened to be dispossessed by any action taken by the secured creditor under section 13 of the SARFAESI Act. Subrules (1) and (2) of Rule 8 of the Security Interest (Enforcement) Rules, 2002 provide for a possession notice where the secured asset is an immovable property. Subrules (1), (2) and (3) of Rule 8 of the Security Interest (Enforcement) Rules, 2002 as well as Appendix IV of the said Rules, which is the form of such possession notice, are extracted hereunder: 8. Sale of immovable secured assets. (1) Where the secured asset is an immovable property, the authorized officer shall take or cause to be taken pos ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g of Flat No. .. /Plot No. .. in Survey No. .. /City or Town Survey No. ../ Khasra No. .. within the registration subdistrict .. and District .. Bounded; On the north by On the south by On the east by On the west by Sd/Authorised Officer (Name of the institution) Date: Place: ___________________________________________________ 29. Subsection (3) of Section 14 of the SARFAESI Act provides that no act of the Chief Metropolitan Magistrate or the District Magistrate or any officer authorized by the Chief Metropolitan Magistrate or the District Magistrate done in pursuance of Section 14 shall be called in question in any court or before any authority. The SARFAESI Act, therefore, attached finality to the decision of the Chief Metropolitan Magistrate or the District Magistrate and this decision cannot be challenged before any court or any authority. But this Court has repeatedly held that statutory provisions attaching finality to the decision of an authority excluding the power of any other authority or court to examine such a decision will not be a bar for the High Court or this Court to exercise jurisdicti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e under the Act and the applications which are to be decided by the State Government or an officer authorized by it or the competent authority . The question of law that we have to consider is whether the appellants as tenants of premises in the State of Maharashtra including Mumbai will have any remedy to move these courts having jurisdiction under Section 33 of the Maharashtra Rent Control Act and obtain the relief of injunction against the secured creditor taking possession of the secured asset from the appellants. The answer to this question is in Section 34 of the SARFAESI Act, which is extracted hereinbelow: 34 Civil Court not to have jurisdiction. No civil court shall have jurisdiction to entertain any suit or proceeding in respect of any matter which a Debts Recovery Tribunal or the Appellate Tribunal is empowered by or under this Act to determine and no injunction shall be granted by any court or other authority in respect of any action taken or to be taken in pursuance of any power conferred by or under this Act or under the Recovery of Debts Due to Banks and Financial Institutions Act, 1993 (51 of 1993). A reading of the second limb of Section 34 of the S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n. Mr. Samdani, therefore, relied upon heavily on paras 36 and 37.1 and 37.2 of this judgment. 23) We are unable to agree with Mr. Samdani and for more than one reason. True it is, that these conclusions of the Hon'ble Supreme Court would enable parties like the Petitioners to approach this Court to challenge the proceedings and the order under section 14 of the SARFAESI Act but that is in exceptional circumstances. This Court cannot as a matter of course entertain a Writ Petition under Articles 226 and 227 of the Constitution of India and interdict or interfere with the proceedings or the order of the Magistrate. Everything depends upon the facts in each case. If the lease is not valid, the possession is not lawful, then, there is no justification for interference in the extra ordinary, discretionary and equitable jurisdiction of this Court. Merely because the person in possession claims to be a lessee does not mean that he should be protected. Else, grant of the injunction/stay/interim relef will be the rule and denial an exception. Such is not the sweep of the observations and conclusions of the Supreme Court in Sondagar's case (supra). The Hon ble Supreme Court may h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ttedly, this tenancy agreement is unregistered. It is therefore that Mr. Samdani would rely upon the second limb of section 107 and to urge that so long as the Petitioner is put in possession, then, the lease is created and which is month to month. First of all section 107 of the Transfer of Property Act in clearest terms states 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. Mr. Samdani would submit that for the purpose of monthly tenancy, the present instrument and in writing is enough. Since the Maharashtra Rent Control Act is applicable to the said premises, then, according to Mr. Samdani, the Petitioners could have legally protected their possession, which is otherwise lawful and valid, by approaching the competent Court/Tribunal under the Maharashtra Rent Control Act, 1999. That is what they have done and therefore, the Chief Metropolitan Magistrate should have put the Petitioners to notice and only then passed the imp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n Magistrate be attributed with the knowledge of any valid and lawful tenancy in favour of the Petitioners and equally the Bank canbe said to be obliged to make a declaration in that behalf and not making such a declaration is fatal. We have found from the object and purpose of the SARFAESI Act and the interpretation which is required to be placed on section 14 thereof, that the omission, if any, in the given facts and circumstances was not fatal. Apart therefrom, the claim of tenancy in this case is prima facie doubtful. The parties to the written agreement of tenancy and at least one of them is a signatory to the prior registered mortgage deed. Yet, he is bold enough to create a tenancy in respect of one of the mortgaged properties. 29) The reliance placed by Mr. Samdani on other judgments of the Supreme Court is of no assistance. The other judgment which has been relied upon particularly in the case of Ram Kumar Das (supra) would denote that the tenancy created and in that case from month to month was since inception. In the backdrop of such undisputed factual position, the Hon ble Supreme Court concluded that the parties did not intend to create a lease for one year. The lea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ny further. If a claim of contractual tenancy and statutory tenancy, which has been dealt with in the other judgments of the Hon ble Supreme Court. Those are on the footing that the provisions of the rent control legislation will enable the tenant holding over to assert and protect his claim. Even if the contractual tenancy has come to an end, the statutory protection can be availed of. We are not holding that the action of the Bank in the present case determines the tenancy, if any. It is while dealing with an argument of suppression of a relevant and material fact by the Bank that we have held that such is not the factual position. The tenancy was not known to the Bank, a third party in the absence of registration of the instrument. Hence, it cannot be held guilty of suppression. None of these judgments can be of any assistance. Finally, the concept of tenant holding over and noted by the Hon ble Supreme Court in the case of Budh Ram (supra) is also of no avail. The lease deed is required to be registered if the rent is required to be paid from year to year. However, when the lease was of one year and it expired, the tenant could be regarded as a tenant holding over and a monthly ..... X X X X Extracts X X X X X X X X Extracts X X X X
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