Sri. Ravi Kumar vs The Grain Merchants Co-operative Bank

A.S. Bopanna, J.—The appellant in this appeal is assailing the order-dated 20.06.2011 passed by the learned Single Judge in W.P. No. 21602/2011 (GM-RES). The learned Single Judge has relegated the appellant to his remedy before the learned Magistrate when the appellant in his writ petition had sought for a declaration that the appellant is a bona fide tenant and that he cannot be thrown out by force on invoking Sections 13 and 14 of Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (for short the ''SARFAESI Act'').

The brief facts are that the appellant claims to be a bona fide tenant in respect of the property bearing Municipal Nos. 5, 6, 7 and 8, Nataka Ratna Veeranna Road (SC Road), Bangalore - 560 009. The said tenancy is claimed under Sri. H.J. Siwani and Sri. M.J. Siwani pursuant to a lease agreement dated 01.12.2008 and it is contended that the rent in respect of the same is being paid. The respondent-Bank initiated action in respect of the said premises to secure possession as provided under Sections 13(4) and 14 of SARFAESI Act. The appellant claiming to be aggrieved by such action had filed the writ petition seeking protection to his physical possession by relying on a decision of a learned Single Judge of this Court in the case of Hutchinson Essar South Ltd. v. Union Bank of India and another AIR 2008 KAR 14. The writ petition filed by the appellant herein was however disposed of in limine allowing the appellant to rely on the said decision before the Magistrate wherein the proceedings u/s 14 of the SARFAESI Act was instituted.

In the instant appeal, since the respondents have been notified, they have appeared and by their objection statement have disputed the very contention of the appellant that he is a tenant of the property in question and that he is in possession. It is their case that Sri. M.S. Papanna and his family members borrowed loan under a transaction dated 23.11.1995 whereby the property in question was offered as security. Due to nonpayment of the loan amount, the first respondent had issued notice-dated 02.03.2006 u/s 13(2) of SARFAESI Act and further proceedings in that regard was initiated. It is only after the said process was commenced, the said borrower and family members executed a sale deed dated 02.04.2007 in favour of Sri. H.J. Siwani and Sri. M.J. Siwani and therefore, the same does not bind the respondents. When symbolic possession was taken on 07.07.2009 by publication of possession notice, the said borrower filed W.P. No. 21106/2009 which was dismissed for default. Thereafter, the said Sri. H.J. Siwani and Sri. M.J. Siwani filed a suit in O.S.No.25629/2011 claiming to be in lawful possession but, the prayer for temporary injunction was rejected on 30.05.2011. The said Sri. M.S. Papanna, the borrower also filed an appeal u/s 17 of SARFAESI Act in S.A. No. 301/2011 before DRT, which was dismissed on 16.06.2011. Physical possession of the property was taken on 21.06.2011. Referring to all the aforestated proceedings, the respondents allege collusion and that the lease agreement dated 01.12.2008 is sham and void. It is contended that when the alleged landlord of the appellant has taken a definite stand that they are in possession of the property, the question of the appellant being in possession does not arise. It is further contended that in any event, there is alternate remedy of appeal u/s 17 of SARFAESI Act. Hence, this appeal is liable to be rejected.

In the light of the above, we have heard Sri. Abhinav R learned counsel for the appellant and Sri. Gunasekaran, learned counsel for the respondents and perused the appeal papers.

In the facts and circumstance, the aspects that arise for consideration are:

(i) Whether the bona fide tenant/lessee in respect of the property which is offered as security to the lending Bank could be dispossessed in exercise of the power under Sections 13 and 14 of SARFAESI Act.

(ii) Whether the appeal provided u/s 17 of SARFAESI Act is an alternate and efficacious remedy available to such tenant/lessee and whether the expression ''any person'' in the said provision includes a tenant/lessee?

On the first proposition formulated above, reliance is placed by the learned counsel for the appellant on the decision of the learned Single Judge in the case of Hutchinson Essar South Ltd. and in the case of Nitco Roadways Private Limited and Others Vs. Punjab National Bank, to contend that only symbolic possession can be taken and that there can be no physical dispossession. The latter of the above referred decisions is rendered by following the conclusion in the former of the aforestated decisions. In the case of Hutchinson Essar South Ltd. the learned Single Judge on referring to the decisions rendered by the Hon''ble Supreme Court in the case of C.B. Gautam v. Union of India AIR 1994 SC 771 and in the case of Tata Consulting Engineers v. Union of India ITR 2006 (1994) 237 while examining the scope of Section 269 UE of the Income Tax Act, has arrived at the conclusion that the answer to the question whether the actual possession can be taken under Sections 13 and 14 of SARFAESI Act cannot be completely in the affirmative or in the negative. It is held that if the secured asset is in the possession of the borrower, its possession can be taken in accordance with the provisions contained in Sections 13 and 14 of SARFAESI Act. If the borrower has inducted somebody overnight only to defeat the rights of the bankers, then also the provisions of Sections 13 and 14 of SARFAESI Act can be pressed into service for taking possession. However, if the secured asset is in the possession of a bona fide lessee or tenant, he cannot be thrown out by invoking Sections 13 and 14 of SARFAESI Act, but the possession could be taken only in accordance with law. In that context, it is held that until the procedure of due process of law for eviction is followed, it would be open for the bank to retain symbolic possession and to sell the assets with the tenancy intact.

The learned counsel for the respondents on the other hand relied on the decision of the Hon''ble Supreme Court in the case of Transcore Vs. Union of India (UOI) and Another, with specific reference to paragraphs 37 and 73. The Hon''ble Supreme Court while examining the provisions of the Recovery of Debts Due to Banks and Financial Institutions Act, 1993 (''DRT Act'' for short) and SARFAESI Act has considered the aspect relating to possession under Sections 13 and 14 of the SARFAESI Act and has held that the word ''possession'' is a relative concept and is not an absolute concept. It has been held that dichotomy between symbolic and physical possession does not find place in the Act. Thereafter, it is indicated that the manner of taking possession and also the correctness of the procedure followed could be examined in a proceedings u/s 17 of the SARFAESI Act. The entire consideration by the Hon''ble Supreme Court was in the background of the inter se right between the banker and borrower and as such, the decision would not be of assistance to answer the points under consideration in this appeal.

In fact, the learned Single Judge in the case of Hutchinson Essar South Ltd. has taken note of the decision in Transcore and thereafter with reference to the tenancy and the leasehold right that is involved, has arrived at the conclusion by relying on the other pronouncements of the Hon''ble Supreme Court. We are therefore in agreement with that view taken in the said case and hold that the physical possession of a bonafide tenant/lessee would remain protected notwithstanding the power available to the lending Bank under Sections 13 and 14 of the SARFAESI Act and such bonafide tenant/lessee can be dispossessed only in accordance with law. It would however be open for the Bank to take symbolic possession and proceed farther to take steps to sell the property with the tenancy/leasehold right intact, if they choose to do so. Such protection would however not be available to a person who has been inducted in a manner to defeat the right of the Bank and such person cannot be considered as a bonafide tenant. In such situation, the procedure contemplated under Sections 13 and 14 would be sufficient compliance for taking physical possession as well. The first point raised is answered accordingly.

In view of the above; we are unable to accept the contention of the learned counsel for the appellant that no action can be initiated under the provision of SARFAESI Act in respect of the property wherein a person other than the borrower or guarantor is in possession. In this regard, though it is contended that only Sections 69 and 69-A of the Transfer of Property Act, 1882 (for short the ''T.P. Act'') have been excluded by employing non-obstante clause and therefore, the right available to a tenant u/s 106 of the T.P. Act cannot be taken away under Sections 13 and 14 of SARFAESI Act, in our opinion, the same cannot be an absolute bar for more than one reason. Firstly, Sections 69 and 69-A of T.P. Act relate to the sale of the property by a mortgagee and the appointment of receiver relating to such property and since under the SARFAESI Act the power of sale of the property offered as security is contemplated, the Legislature has thought it fit to incorporate the same and as such, the non-incorporation of Section 106 in the non-obstante clause does not take away the right of exercising the power available under Sections 13 and 14. Further, while considering the above aspect, we have concluded that the right of a bona fide tenant in any event would be protected since the procedure as contemplated in law for the purpose of eviction/ejectment would have to be followed and it is only in respect of a: person who has been inducted in a manner to defeat the right of the bank the procedure contemplated u/s 13 and 14 would be sufficient compliance. Therefore, the argument that under no circumstance the provisions of the SARFAESI Act can be applied to a property which is claimed to be a tenanted premise is liable to be rejected.

The next question that would arise is as to which is the appropriate forum to decide whether the person claiming protection from physical dispossession is a bonafide tenant or not so as to adopt any one of the above stated procedure. The learned counsel for the respondents has relied on the decision of the Hon''ble Supreme Court in the case of Kanaiyalal Lalchand Sachdev and Others Vs. State of Maharashtra and Others, to contend that a writ petition under Articles 226 and 227 of the Constitution of India in a case relating to possession under Sections 13 and 14 would not be maintainable since an alternate and efficacious remedy is available u/s 17 of the SARFAESI Act to an aggrieved person. The learned counsel for the appellant however seeks to distinguish the same by contending that the said decision is rendered in the background of the issue raised by a borrower. It is contended that the entire scheme of the SARFAESI Act does not contemplate a situation relating to a third party but would only regulate the rights and obligation between the Banker, borrower and guarantor. Reference is made to Section 13 and it is contended that the possession contemplated therein is from the borrower and the appeal u/s 17 of SARFAESI Act would therefore relate only to the borrower and at best the guarantor and none else.

In the backdrop of the above contention, it is no doubt true that in the case of Kanaiyalal Lalchand Sachdev, the issue under examination was that of a borrower. However, the Hon''ble Supreme Court has held that the Act contemplates efficacious remedy for the borrower or ''any person'' affected by the action u/s 13(4) by providing appeal to the DRT. In the said decision, the Hon''ble Supreme Court has taken note of its earlier decision in the case of United Bank of India v. Satyawati Tondon and Ors AIR 2010 SCW 5267 wherein this aspect has been considered more comprehensively and it has been held as hereunder:

There is another reason why the impugned order should be set aside. If respondent: No. 1 had any tangible grievance against the notice issued u/s 13(4) or action taken u/s 14, then she could have availed remedy by filing an application u/s 17(1). The expression ''any person'' used in Section 17(1) is of wide import. It takes within its fold-not only the borrower but also guarantor or any other person who may be affected by the action taken u/s 13(4) or Section 14. Both the Tribunal and the Appellant Tribunal are empowered to pass interim orders under Sections 17 and 18 and are required to decide the matters within a fixed time schedule. It is thus evident that the remedies available to an aggrieved person under the SARFAESI Act are both expeditious and effective. Unfortunately, the High Court overlooked the settled law that the High Court will ordinarily not entertain a petition under Article 226 of the Constitution if an effective remedy is available to the aggrieved person and that this rule applies with greater rigour in matters involving recovery of taxes, cess, fees, other types of public money and the dues of banks and other financial institutions. In our view, while dealing with the petitions involving challenge to the action taken for recovery of the public dues, etc., the High Court must keep in mind that the legislations enacted by Parliament and State Legislatures for recovery of such dues are code unto themselves inasmuch as they not only contain comprehensive procedure for recovery of the dues but also envisage constitution of quasi-judicial bodies for redressal of the grievance of any aggrieved person. Therefore, in all such cases, High Court must insist that before availing remedy under Article 226 of the Constitution, a person must exhaust the remedies available under the relevant stature.

(emphasis supplied)

The perusal of the above would indicate that the expression ''any person'' used in Section 17(1) of the SARFAESI Act would take in its fold not only the borrower, but also the guarantor and also any other person who may be affected by the action taken u/s 13(4) or Section 14. Hence, in our opinion, when a person who is in possession of the secured property is not the borrower, but claims to be a bonafide tenant/lessee and contends that he is affected by the action taken under Sections 13(4) and 14, such person also falls within the domain of the expression any person'' and is therefore entitled to file an appeal u/s 17 of the SARFAESI Act and therefore, such tenant/lessee also has an alternate and efficacious remedy and his grievance need not be examined in a petition under Articles 226 and 227 of the Constitution of India. Further the issue as to whether a person is a bonafide tenant or not would involve disputed question of fact which cannot be resolved in a writ proceedings.

Hence, a person claiming to be a tenant/lessee of any premises regarding which action has been initiated under Sections 13 and 14 and if aggrieved by such action would have to avail the remedy of appeal u/s 17 of the SARFAESI Act. In such appeal, the DRT would have to determine as to whether the appellant therein is a bonafide tenant and if the finding is in the affirmative, such appellant would have to be provided the protection of his possession till he is evicted in accordance with law. On the other hand if the finding is to the contrary, all that the Tribunal would have to notice is as to whether the procedure as contemplated u/s 13 and 14 of SARFAESI Act as required to be followed while taking possession from the borrower or the guarantor has been complied and the result will depend on such examination.

In view of the above conclusion, a brief reference to the factual matrix in the instant case would indicate that the appellant herein claims right to the property as a bonafide tenant while the same is disputed by the respondent/bank referring to certain civil proceedings initiated by the alleged lessor of the appellant. These are aspects which would have to be determined by the DRT in an appeal u/s 17 of the SARFAESI Act since as held by the Hon''ble Supreme Court the DRT would have the power of even restoring the possession if the person has been illegally dispossessed. To the said extent, we are of the opinion that the order dated 20.06.2011 passed in W.P. No. 21602/2011 which is impugned in the instant appeal is to be modified holding that the remedy for the appellant is before the DRT and not before the learned Magistrate as ordered by the learned Single Judge.

The appeal is accordingly disposed of in the above terms. No order as to costs.