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Judgment
This Securitisation Application (for short - `the SA') is filed on 30.05.2019 seeking to declare the entire proceedings initiated against the applicant's tenanted properties to be illegal; to call for records in Annexures - A7 & A8 and to set aside the entire Securitisation proceedings initiated by the Respondent bank under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act (for short - 'the Act')
The facts leading to filing of the present SA is that the Applicant is a 31-`1 Party claiming to be tenant on the secured asset is aggrieved by the Order dated 23.01.2019 passed by the CJM, Rural Court, Bengaluru in Crl.Misc.No.1012/2018 under Section 14 of SARFAESI Act. The SA came to be filed on 30.05.2019 along with IA No.1029/2019 a petition for condonation of delay of 82 days in filing the present Appeal.
2.1. The applicant is neither a borrower nor guarantor to the loan transaction. He is only a third party/tenant under the 2nd Respondent who had availed a loan along with 3rd respondent from the 15th defendant bank.
2.2. The secured asset has been rented out to the applicant by the land lord namely Mr. J. Kumaraswamy 2nd respondent on oral agreement commencing from April, 2016 and has paid a sum of Rs.10,00,000/- by way of cash towards security deposit with fixed monthly rent of Rs.12,500/- per month for the purpose of operating a school by name and style "YET Kids School" and the schedule premises was seized illegally by the Respondent No.1 Bank.
2.3. It is the case of the Applicant that the Respondents 2 & 3 has availed certain credit facilities from the Respondent No.1 Bank. Due to the default committed by the Respondent No.2 & 3, the Respondent No.1 has initiated recovery measures under the SARFAESI Act and has issued Demand Notice, Possession Notice, etc. to Respondent No.2 & 3 the schedule premises was seized illegally by the Respondent No.1 Bank. The fact of availment of loan by Respondents 2 & 3 was not brought to the knowledge of this Applicant.
2.4. The Applicant is a bonafide tenant in lawful possession of the schedule property under an oral lease agreement entered into with the land lord namely Mr. J. Kumaraswamy, the Respondent No.2 herein commencing from April, 2016 and has paid a sum of Rs.10,00,000/- by way of cash towards security deposit with fixed monthly rent of Rs.12,500/- per month for the purpose of operating a school by name and style "YET Kids School" and about 20 children were enrolled with the School for the upcoming academic year 2019- 20 with the School and operating tutorials in the evenings. On account of barbaric act of the Respondent No.1 the Applicant was not in a position to operate the school.
2.5. The Applicant further submits that the Respondent No.1 Bank has not given any opportunity to the Applicant herein before taking physical possession of the schedule property. Mandatory/Statutory notice of seven days as per the provisions of the Act has not been given to the Applicant. It is contended that there arose some disputes between the Applicant and the Respondent No.2 and Respondent No.2 has acknowledged the tenancy in the legal notice issued by him to the Applicant. herein.
2.6. In the grounds of the SA, it is contended that Respondent No.1 Bank without disclosing about the tenants on the schedule property has obtained an order from the ACMM Court and has illegally taken physical possession of the schedule property without due process of law, which is against the principles of natural justice and this inhuman act of the Respondent No.1 Bank has to be set aside.
2.7. The Applicant has not hypothecated any of the assets, such as furniture, fixtures, fittings, stationeries, etc. to the Respondent No.1 Bank, which also the bank has seized and locked.
2.8. It is submitted that the provisions of SARFAESI Act do not apply to the tenant, without due process of law, since he is neither a borrower nor a guarantor nor a mortgagor. Hence the action of the Respondent No.1 is illegal, arbitrary and has to be set aside and possession be restored to the tenant.
2.9. It is further averred that the Respondent No.1 Bank should not have evicted the Applicant who in fact intended to vacate the premises on getting back his deposit of Rs.10.00 Lakhs from the Respondents. In view of the aforesaid facts and circumstances, the measures taken by the Respondent Bank, legally require to be set aside in the interest of justice and equity.
The applicant has filed IA No.1029/2019 to condone the delay of 127 days in preferring the appeal under S.17 of the Act. The bank officials came to seize and take physical possession of the schedule property on 29.04.2018, took physical possession and seized the schedule premises on the very same day itself without giving mandatory notice to the occupants/tenants.
3.1 It is submitted that from the date of order passed by the ACMM i.e. 23.01.2019, till the date of filing application there is a delay of 127 days, but the actual delay as per the provision of the Act comes to 82 days only, hence prays to condone the delay of 82 days in filing the present Appeal.
The Respondent No.1 Bank filed its statement of objection to the main application as well in the IA 1029/2019 inter alia contending that the Respondents 2 & 3 availed credit facilities from the Respondent No.1 Bank and executed necessary documents, and also mortgaged the schedule property as security and executed memorandum of mortgage by deposit of title deeds by depositing the original documents in favour of the Respondent No.1 Bank.
4.1 Due to default committed by the Respondents 2 & 3, the loan account has become NPA and for recovery of its dues enforced the security interest created by the Respondents 2 & 3 under SARFAESI Act and the Respondent No.1 Bank issued demand notice to the Applicant under Section 13(2) of SARFAESI Act demanding repayment of the entire loan amount towards the loan.
4.2 The Respondents 2 & 3 have received and acknowledged the said notice and did not raise any objection nor did they repay the loan dues. Thereafter, the Respondent No.1 Bank issued Possession Notice under Section 13(4) of the act on 21.11.2016 and took notional possession of the secured asset and the possession notice is duly served and published in two local dailies. Further the Respondent bank has taken actual possession of the secured asset by obtaining an order from ACMM, Bengaluru in favour of the Respondent No.1 Bank.
4.3 It is submitted that the only contention raised by the Applicant is that he has entered into an oral agreement of lease with the 2nd and 3rd Respondents and as a tenant, his possession needs to be protected and the order of the jurisdictional magistrate is illegal, since he is a protected tenant and he cannot be dispossessed.
4.4 The contention of the Applicant that he is a tenant under an oral agreement of lease is false and claims to have paid a security deposit of Rs.10,00,000/-, he has neither produced any receipt from the Respondents 2 & 3 nor has he mentioned the details thereof.
4.5 Further it is submitted that only a registered tenant is protected from dispossession, but in the present case, the applicant is not a registered tenant as there is no subsisting lease between the parties. The applicant has been set up by the 2nd and 3rd Respondents to somehow enter the premises by making false submissions.
4.6 The Respondents 2 & 3 have approached this Tribunal on two different occasions and sought various reliefs and they did not comply with the conditions attached to the interim order and those petitions were dismissed. This Respondent therefore prays to dismiss the application.
In the objection of the Respondent No.1 for the delay application, it is submitted that the physical possession was taken in the presence of the Applicant and has full knowledge about the action taken by the Respondent No.1 Bank, further in the delay application the Applicant has not specified a single reason to explain the delay in filing the Application. Hence, the Respondent prayed to dismiss the delay application with costs.
Heard the submissions of Ld. Counsels for the parties and perused the records.
The solitary question that falls for determination in this SA is Whether the applicant is a lawful tenant or lessee entitled to protection in terms of S.17(4A) of the Act?
As per the amended provisions of the Act. S.17(4A) has vested the authority, power and jurisdiction on this Tribunal to examine and determine the claim of lease or tenancy came to be inserted in the Act w.e.f. 01.09.2016 and reads thus :
"(4A) Where- (1) any person, in an application under sub-section (1), claims any tenancy or leasehold rights upon the secured asset, the Debt Recovery Tribunal, after examining the facts of the case and evidence produced by the parties in relation to such claims shall, for the purposes of enforcement of security interest, have the jurisdiction to examine whether lease or tenancy,- (a) has expired or stood determined; or (b) is contrary to section 65A of the Transfer of Property Act, 1882; or (c) is contrary to terms of mortgage; or (d) is created after the issuance of notice of default and demand by the Bank under sub-section (2) of section 13 of the Act; and
(ii) the Debt Recovery Tribunal is satisfied that tenancy right or leasehold rights claimed in secured asset falls under the sub-clause (a) or sub-clause (b) or sub-clause (c) or sub-clause (d) of clause (i), then notwithstanding anything to the contrary contained in any other law for the time being in force, the Debt Recovery Tribunal may pass such order as it deems fit in accordance with the provisions of this Act.".
Admittedly, the present SA is filed under S.17[1] of the Act with a delay of 127 days being aggrieved by the Order passed by the ACMM Bengaluru in Crl. Misc. No.1012/2018 on 23.01.2019.
8.1 The applicant is a third party claiming legitimate rights as a tenant over the schedule property under anoral lease agreement commencing from the month of April, 2016 with the Respondents 2 & 3.
8.2 The claim of tenancy is based on oral agreement entered between the applicant and the land lord Mr. J. Kumaraswamy the respondent herein. The tenure of the tenancy commences from the month of April 2016 on a fixed rent of Rs.12,500 per month along with a security deposit of Rs.10,00,000/- by way of cash. However, the applicant has not produced any documents that he was in possession form April 2016 till the possession was taken nor has produced any rent receipt from the Respondents 2 & 3.
8.3 The Annexure-A2 is the statutory legal notice issued by the owner under Section 106 of the Transfer Property Act to vacate the premises and it is seen in the notice that the oral lease commenced from 01.02. 2016 for a rent of Rs.50,000/- per month without any security deposit.
8.4 In view of the fact that there was irregularity in paying the rent, the landlord has asked the tenant to vacate the premises to which Annexure-A3 is the reply dated 25.07.2018 issued by the Applicant countering the contentions in the statutory notice and disputing the commencement of the tenancy of the Scheduled Property.
8.5 It is discernible from the notice at Para-5 of the reply that the land lord had leased the property and had undertaken to let out the schedule premises for a period of 15 years for running the school. Thus on examination of Annexure A2 and A3 it is explicit that there is no jural relationship of landlord and tenant as per the legal notices exchanged between them.
8.6 Further, the applicant has relied on Annex-A7 certificate of Affiliation and some photographs of the kids in the premises and board of the School is also seen. Though the applicant claims to have entered into an oral agreement for a period of 11 months which has also expired in the month of February or April 2017, it is only to be concluded that there is no jural relationship of landlord and tenant.
8.7 Even if there is any oral agreement in place, the period of 11 months has expired on February 2017 and the applicant's claim of tenancy is a holding over on the property. There are no averments with regard to the written agreement or the extension of the alleged oral agreement, nor the applicant has produced the rent receipts evidencing the tenancy.
8.8 The Respondent No.2 & 3 are the borrowers who have defaulted in the repayment and hence the bank has proceeded under the SARFAESI Act as per Annexure A4 13(2) Notice. It is evident that after classification of the account as NPA on 29.02.2016, the bank has issued Section 13(2) Notice dated 30.11.2016 demanding a payment of Rs.68,52,399/-.
8.9 The 13(2) notice is received by the 2nd and 3rd respondents as evidenced at Document No.6,7 and 8 filed under Section 14 Application. Since the borrowers did not comply with the demand made, the bank has proceeded and issued Section 13(4) possession notice. The borrower and the guarantor did not liquidate the liability; hence the bank has proceeded under Section 14 and took possession of the secured Asset.
8.10 The material on record would go to show that the account was classified as NPA on 29.02.2016 and Section 13(2) Notice was issued on 30.11.2016 and the applicant claiming tenancy is a tenant at sufferance. Even otherwise the land lord has mortgaged the property as collateral security by way of deposit of title deeds on 08.10.2013 and after the receipt of 13(2) notice dated 30.11.2016, the mortgagor is barred in extending the lease as per Section 13(13) of the SA Act without the permission/consent of the secured creditor. S.13[13] is as under:
"No borrower shall, after receipt of notice referred to in sub-section (2) transfer by way of sale, lease or otherwise (other than in the ordinary course of his business) any of his secured assets referred to in the notice without prior written consent of the secured creditor".
In any case, considering the averments made by the applicant himself, that he was a tenant who had entered into an oral agreement, such tenancy impliedly does not carry any covenant for renewal, as provided under Section 65A of T.P. Act. Therefore, in any case, Section 13 (13) SARFAESI Act bars entering into such tenancy beyond Feb, 2017.
8.11 As the notice under Section 13 (2) SARFAESI Act was issued on 30.11.2016, subsequent reckoning of the tenancy is barred. Such person occupying the premises, when the tenancy has been determined, can only be treated as a 'tenant in sufferance', who do not have any legal rights and are akin to trespassers.
8.12 The law with respect to claim for tenancy / lease is also well settled in the latest judgement of the Hon'ble Apex Court of a in the case of Bajarang Shyamsunder Agarwal Vs Central Bank of India and another; wherein it is held that if any 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" and the protection from recovery proceedings under the SARFAESI Act is not available to a 'tenant-in-sufferance', i.e a tenant who continues to be in possession even after the expiry of the lease period.
8.13 The applicant's claim of tenancy based on oral agreement without any supporting documents is found to be not lawful as per above judgement, and as also as per Section 17(4-A)(i)(a) of SARFAESI Act.
8.14. Considering the factual pleadings of the case coupled with the documents relied upon by both the parties, the Tribunal holds that the applicant is not a bonofide tenant on the secured asset and the claim of the tenancy is not justified. Therefore, no right flows to the applicant to resist the measures initiated by the Respondent bank. Hence, the Tribunal has no hesitation in holding that the applicant has no right to question the orders passed by the Hon'ble ACMM, Bangalore or proceedings initiated by the Bank who are holding the public money as trustee to recover the same.
8.15 At the same time the Respondent bank is also duty bound to recover the dues legally under the procedures permissible under the law. Since the applicant has no locus standi to challenge the measures, the IA No.1029/2019 to condone the delay does not merit any consideration. Even otherwise going by the averments in the delay application, the applicant admits delay of 82 days from the date of the order of Hon'ble ACMM, Bangalore. However, no valid justification is made out by the applicant to condone the delay. Accordingly, IA No.1029/2019 also stands dismissed.
In view of the foregoing observations, the unnumbered SA in D.No.1221/2019 is liable to be dismissed
In the Result:-
(a) D.No.1221/2019 in un-numbered SA is dismissed.
(b) Interim Order if any stands vacated and pending IAs are also disposed as infructuous.
(c) No order as to costs.
(Dictated to the PS(P3), after its transcription and necessary corrections, signed and pronounced by me in the Open Court on this 1st Day of October, 2020)