WWW.LIVELAW.
IN
REPORTABLE
IN THE SUPREME COURT OF INDIA
CRIMINAL APPELLATE JURSIDCITON
CRIMINAL APPEAL NO(s).843844 OF 2021
(Arising out of S.L.P. (Crl.) No(s). 29692970 of 2016)
HEMRAJ RATNAKAR SALIAN …APPELLANT(s)
VERSUS
HDFC BANK LTD. & ORS. …RESPONDENT(s)
J U D G M E N T
S.ABDUL NAZEER, J.
Leave granted.
2. These appeals are directed against the Orders dated
30.12.2015 and 06.01.2016 in Case C.C. No.381/SA/2014 passed
by the Chief Metropolitan Magistrate, Esplanade, Mumbai, rejecting
the Application (Exh.8) filed by the appellant herein for restraining
HDFC Bank, the first respondent herein, from taking possession of
Signature Not Verified
Digitally signed by
the property in the appellant’s possession.
NEETU KHAJURIA
Date: 2021.08.17
16:20:55 IST
Reason:
LL 2021 SC 387
WWW.LIVELAW.IN
3. HDFC Bank had granted financial facility to respondent nos.2
and 3 (for short, ‘the Borrowers’) of Rs.5,50,00,000/ (Rupees Five
Crore Fifty Lakhs). On 03.04.2013, the Borrowers had mortgaged a
property bearing Flat No.501, 5 th Floor, Solitaire, Village Kopari, Adi
Shankaracharya Road, MHADA Layout, Powai, Andheri (E), Mumbai
(for short, “the Secured Asset”) in favour of the Bank with an
intention to secure the said credit facility.
4. The accounts of the Borrowers were declared as non
performing assets (NPA) on 31.10.2013. On 25.01.2014, the Bank
issued a notice under Section 13(2) of the Securitisation and
Reconstruction of Financial Assets and Enforcement of Security
Interest Act, 2002 (for short, “SARFAESI Act”) to the Borrowers. It
is the case of the appellant that he is a tenant of the Secured Asset
on a monthly rent of Rs.20,000/ since 12.06.2012 with an
increase of 5% every year. He has been paying rent regularly to his
landlord since inception of his tenancy.
5. The appellant filed Exh.8 application before the Magistrate
seeking protection of his possession of the Secured Asset as the
Magistrate was ceased with the petition under Section 14 of
LL 2021 SC 387
WWW.LIVELAW.IN
SARFAESI Act filed by the respondent no.1Bank. Vide Order dated
30.12.2015, the intervention application of the appellant was
dismissed by the Magistrate holding that there was no registered
tenancy placed on record by the appellant.
6. We have heard learned counsel for the parties. Learned
counsel for the appellant would contend that the appellant is a
protected tenant under the provisions of the Maharashtra Rent
Control Act 1999. He has been paying rent regularly to the landlord.
He has also paid advance rent till 17.12.2018. There are continuous
rent receipts with him from the date of his induction as a tenant.
The tenant was residing in the said premises on the basis of an oral
tenancy from 12.06.2012. Therefore, he cannot be evicted from the
Secured Asset without due process of law.
7. On the other hand, learned counsel for the respondentBank
submits that the rent receipt said to have been issued by the
landlord for the period from 12.06.2012 to 12.05.2013 is of
12.05.2013 which is after the date of creation of mortgage in favour
of the Bank. There is absolutely no material to show that the
tenancy was created earlier to the date of mortgage. The tenancy
LL 2021 SC 387
WWW.LIVELAW.IN
pleaded by the appellant is an oral tenancy. At the time of grant of
facility, thirdparty valuers had confirmed that the Borrowers were
staying at the Secured Asset. The Borrowers, while making
representation to the Bank, have not claimed that any tenant is
staying at the Secured Asset. The tenancy claimed by the appellant
is an afterthought which cannot be believed in the facts and
circumstances of the case. He prays for dismissal of the appeal.
8. We have carefully considered the submissions made at the Bar
and perused the materials placed on the record.
9. As noticed above, it is the case of the appellant that he is a
tenant of the Secured Asset since 12.06.2012 and has paid advance
rent upto 17.12.2018. The documents produced by the appellant
are xerox copies of the rent receipts. However, in response to the
notice issued under Section 13(2) of the SARFAESI Act, the
Borrowers have sent a very detailed representation wherein they
have not claimed that any tenant is staying at the Secured Asset.
The appellant has pleaded tenancy from 12.06.2012 to 17.12.2018.
The rent receipt claiming tenancy from 12.06.2012 is a xerox copy
of 12.05.2013, which is after the date of creation of mortgage.
LL 2021 SC 387
WWW.LIVELAW.IN
10. Procedural mechanism for taking possession of the Secured
Asset is provided under Section 14 of the SARFAESI Act. Section
17 of the SARFAESI Act provides for the right of appeal to any
person including the borrower to approach Debt Recovery Tribunal
(DRT). Section 17 has been amended by Act No. 44 of 2016
providing for challenging the measures to recover secured debts (for
short, “the Amendment”). Under the Amendment, possession can
be restored to the borrower or such other aggrieved person. This
Amendment has come into force w.e.f. 1st September, 2016. This
Court in Harshad Govardhan Sondagar v. International Asset
Reconstruction Co. Ltd. & Ors. 1 has held that right of appeal is
available to the tenant claiming under the borrower. In Kanaiyalal
Lalchand Sachdev v. State of Maharashtra2 this Court has held
that DRT can not only set aside the action of the secured creditor
but even restore the status quo ante. Therefore, an alternative
remedy was available to the appellant to challenge the impugned
order under Section 17 of the SARFAESI Act even before the
amendment to Section 17 of the SARFAESI Act. However, given
1
(2014) 6 SCC 1
2
(2011) 2 SCC 782
5
LL 2021 SC 387
WWW.LIVELAW.IN
that the instant appeal has been pending consideration before this
Court from the year 2016, we propose to examine the case on
merits without directing the appellant to avail the alternative
remedy.
11. In Harshad Govardhan Sondagar (supra) this Court has
categorically held that if the tenancy claim is for any term exceeding
one year, the tenancy can be made only by a registered instrument.
It was held thus :
“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.”
LL 2021 SC 387
WWW.LIVELAW.IN
12. A ThreeJudge Bench of this Court in Bajarang Shyamsunder
Agarwal v. Central Bank of India & Anr.3, 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:
3
(2019) 9 SCC 94
7
LL 2021 SC 387
WWW.LIVELAW.IN
“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 “tenantinsufferance” visàvis 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 “tenantinsufferance” visàvis the
SARFAESI Act, due to the operation of Section 13(2)
read with Section 13(13) of the SARFAESI Act. A
LL 2021 SC 387
WWW.LIVELAW.IN
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
selfexecutory 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, thirdparty 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 “tenantinsufferance”, therefore,
he is not entitled to any protection of the Rent Act. Secondly, even if
LL 2021 SC 387
WWW.LIVELAW.IN
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.
…………………………………J.
(S. ABDUL NAZEER)
…………………………………J.
(KRISHNA MURARI)
New Delhi;
August 17, 2021.
10
LL 2021 SC 387
