Gujarat High Court
Dena Bank vs Shri Sihor Nagarik Sahakari Bank ... on 28 February, 2008
Equivalent citations: AIR 2008 GUJARAT 110, 2008 (5) ALJ (NOC) 999 (GUJ.) = AIR 2008 GUJARAT 110, 2008 AIHC (NOC) 620 (GUJ.) = AIR 2008 GUJARAT 110
Author: Akil Kureshi
Bench: Akil Kureshi
JUDGMENT Akil Kureshi, J.
1. Petitioner, Dena Bank, has in the present petition challenged an order dated 8th October, 2007 passed by the learned Civil Judge, Sihor below application Ex.5 in Regular Civil Suit No. 91/07. The petitioner has also challenged an order dated 8th October,2007 passed by the District Magistrate in case No. 30/2006-07. The petitioner has also challenged an order passed by the Debt Recovery Tribunal, Ahmedabad in Appeal No. 2-A of 2007.
2. Some facts necessary to appreciate the rival contentions be noted at this stage.
3. The petitioner is a nationalized bank. One of the branches of the petitioner bank is situated at Sihor in Bhavnagar district. The branch is located in a building known as Gautam Shopping Center which is owned by respondent No. 2 herein. The branch office of the petitioner Bank is situated on the first floor of the building. The petitioner bank claims to be the tenant of the said premises since 1986, having been inducted by respondent No. 2 herein.
4. In the year 1992, respondent No. 2 filed Suit No. 25/92 against the present petitioner before the Court of Civil Judge, Sihor for recovery of arrears of rent and possession of the suit premises. The suit, however, was dismissed for default. As per the averments made by respondent No. 2 in the plaint filed by him, possession and tenancy of the petitioner bank since 1.8.86 were admitted.
Subsequently also, a registered lease deed was entered into between the petitioner and respondent No. 2 on 30th December 2000 for a period between 1.8.2000 and 31.7.2001. It is further the case of the petitioner that even thereafter, the petitioner continued in the premises as a statutory tenant and has been paying rent regularly.
It appears that some time in the year 1996, respondent No. 2 obtained loan from respondent No. 1 which is a co-operative bank. To obtain loan, respondent No. 2 mortgaged Gautam Shopping Centre, the premises in which branch office of the petitioner Bank is situated. Since respondent No. 2 did not pay the loan installments regularly, respondent No. 1 Sihor Nagrik bank initiated action under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act 2002 (hereinafter to be referred to as "the Securitisation Act"). After issuance of notice under Sub-section (2) of Section 13 of the Securitisation Act, respondent No. 1 proceeded to take further action under Sub-section (4) of Section 13 thereof. Respondent No. 1 affixed possession notice dated 11.11.06 on the premises in question and also addressed a letter to the petitioner stating, inter alia, that from the date of possession notice, respondent No. 1 is in possession of the rented premises and the petitioner should therefore pay rent to respondent No. 1 bank and not to respondent No. 2. Accordingly, the petitioner has been paying rent to respondent No. 1 instead of respondent No. 2, original land-lord.
5. In appears that in order to take vacant possession of the premises in question, with the assistance of the police, respondent No. 1 approached the District Magistrate seeking an order under Section 14 of the Securitisation Act. The District Magistrate passed an order in favour of respondent No. 1 on 8.10.07 and directed that the actual physical possession of the entire premises, namely, Gautam Shopping Centre, including the portion which is in possession of the petitioner Bank be handed over to respondent No. 1 herein and in order to take such possession, whatever police arrangements necesssary be made.
In the meantime, the petitioner herein had approached the learned Civil Judge, Sihor by filing Regular Civil Suit No. 91/07. The petitioner had also preferred Ex.5 application seeking temporary injunction against present respondent No. 1 and 2 from evicting the petitioner from portion of the premises which is in possession of the petitioner Bank. On the said application Ex.5, learned Judge on 8th October 2007 issued notice but did not grant ex-parte ad-interim injunction.
Since the Trial Court had not granted ex parte injunction, the petitioner preferred Misc. Civil Appeal No. 135/07 before the Additional District Judge, Bhavnagar who, however, dismissed the appeal on 6.11.07.
The petitioner had also preferred Application No. 1 of 2007 before the Debt Recovery Tribunal under Section 17(1) of the Securitisation Act mainly praying that respondent No. 1 herein be prevented from taking physical possession of the property from the petitioner. The said pplication filed on 2nd July 2007 was, however, dismissed by the Debt Recovery Tribunal by an order dated 28.9.2007.
6. The petitioner has therefore approached this Court challenging the three orders mentioned hereinabove. To recapitulate, the petitioner challenges an order passed by the learned Civil Judge, Sihor, only issuing notice in application Ex.5 without granting ad-interim injunction. The petitioner also challenges the order passed by the District Magistrate granting assistance of police to respondent No. 1 to enable respondent No. 1 to take possession of the suit premises, including eviction of the petitioner bank. The petitioner also challenges the order passed by the Debt Recovery Tribunal rejecting the petitioner's application under Section 17 of the Securitisation Act.
7. Learned advocates appearing for the parties have made detailed submissions about the validity of the orders under challenge. Learned advocate Shri Buch appearing for respondent No. 1 Sihor Nagrik Bank has vehemently submitted that civil court has no jurisdiction to entertain the suit filed by the petitioner Dena bank and that therefore, no injunction can be granted as prayed for.
8. The contentions of the petitioner were as follows:
1. It was contended that the petitioner bank is a lawful tenant occupying part of the suit premises. It is not open for respondent No. 1 to evict the petitioner from the said portion.
2. It was contended that civil court has jurisdiction to entertain the suit filed by the petitioner since the petitioner seeks to assert its tenancy rights and only civil court can decide such issues. My attention was drawn to the observations made by the Debt Recovery Tribunal in the impugned order dated 28.9.2007 wherein the Tribunal left the question of tenancy to be decided by the competent civil court.
3. It was contended that District Magistrate had no power to authorize eviction of the petitioner from the premises in question with the help of police force and the order is therefore bad in law.
4. It was further contended that the Debt Recovery Tribunal also erred in rejecting the application of the petitioner on the ground that it is only civil court which can decide the issue of tenancy and thereby leaving the petitioner without any remedy.
9. On the other hand, learned advocate Shri Hriday Buch appearing for respondent No. 1 bank strongly opposed the petition. His contentions were:
1. That civil court has no jurisdiction to entertain any suit or proceedings with respect to questions which only the Debt Recovery Tribunal under the Securitisation Act can decide. It was, therefore, contended that the suit filed by the petitioner bank before the Civil Court was not maintainable at all.
2. That as a financial institution having lent money to respondent No. 2, respondent No. 1 had all the rights in law to take possession of the secured assets to recover its dues. Indisputably, respondent No. 2 had not repaid the debts. Mortgage was created on the premises in question. Respondent No. 1 had, therefore, right to proceed under the Securitisation Act and take actual physical possession of the suit premises. If it meant that any tenant had to be evicted, it was open for the petitioner to do so.
3. That in view of the provisions contained in Sections 34 and 35 of the Securitisation Act, the petitioner bank cannot protect its tenancy rights over the premises in question and any right that the petitioner might have either as a statutory or contractual tenant, the same stand extinguished by operation of law and particularly Section 13 of the Securitisation Act.
4. That the Securitisation Act is enacted with a view to ensuring that the banks or financial institutions can effect speedy recovery. Permitting the petitioner to approach civil court to assert its tenancy rights would frustrate the purpose.
10. Learned advocates appearing for the parties placed reliance on several decisions of different High Courts as well as the Apex Court, reference to which will be made at an appropriate stage.
11. Before deciding the issues arising, it may be noted that there is no dispute that as defined in the Securitisation Act, respondent No. 2 is a "borrower", that respondent No. 1 Sihor Nagrik Bank is the "secured creditor", that respondent No. 2 has obtained "financial assistance" from respondent No. 1 by creating "security interest" in favour of respondent No. 1 and that Gautam Shopping Centre is the property on which such security interest is created and is thus the "secured asset". In view of this few provisions of the Securitisation Act may be noticed.
Section 13 of the Securitisation Act pertains to enforcement of security interest. Sub-section (1) of Section 13 empowers the secured creditor to enforce without the intervention of the Court or the Tribunal any security interest created in its favour in accordance with the provisions of the Act. Sub-section (2) of Section 13 of the Act envisages issuance of a notice to the borrower by the secured creditor. Sub-section (3A) of Section 13 requires the secured creditor to consider any representation or objection raised by the borrower in response to notice under Sub-section (2) of Section 13 and to communicate reasons for non-acceptance of such representation or objection. Proviso to Sub-section (3A), however, provides that reasons so communicated shall not confer any right on the borrower to prefer an application to the Debt Recovery Tribunal under Section 17 of the Act or to the District Court under Section 17A of the Act. Sub-section (4) of Section 13 permits the secured creditor to take recourse to one or more of the measures specified in Clauses (a) to (d) thereof, which include taking possession of secured assets of the borrower including the right to transfer by way of lease, assignment or sale for releasing the secured asset.
Sub-section (13) Section 13 provides that no borrower shall after receipt of notice under Sub-section (2) transfer by way of sale, lease or otherwise any of the secured assets referred to in the notice without prior written consent of the secured creditor. Section 13 to the extent relevant is reproduced hereinbelow:
13. Enforcement of security interest.-(1) Notwithstanding anything contained in Section 69 or Section 69A of the Transfer of Property Act, 1882 (4 of 1882), any security interest created in favour of any secured creditor may be enforced, without the intervention of the court or tribunal, by such creditor in accordance with the provisions of this Act.
(2) Where any borrower, who is under a liability to a secured creditor under a security agreement, makes any default in repayment of secured debt or any instalment thereof, and his account in respect of such debt is classified by the secured creditor as on-performing asset, then, the secured creditor may require the borrower by notice in writing to discharge in full his liabilities to the secured creditor within sixty days from the date of notice failing which the secured creditor shall be entitled to exercise all or any of the rights under Sub-section (4).
(3) The notice referred to in Sub-section (2) shall give details of the amount payable by the borrower and the secured assets intended to be enforced by the secured creditor in the event of non-payment of secured debts by the borrower.
(3A) If, on receipt of the notice under Sub-section (2), the borrower makes any representation or raises any objection, he secured creditor shall consider such representation or objection, the secured creditor comes to the conclusion that such representation or objection is not acceptable or tenable, he shall communicate within one week of receipt of such representation or objection the reasons for non-acceptance of the representation or objection to the borrower.
Provided that the reasons so communicated or the likely action of the secured creditor at the stage of communication of reasons shall not confer any right upon the borrower to prefer an application to the Debts Recovery Tribunal under Section 17 or the Court of District Judge under Section 17A.
(4) In case the borrower fails to discharge his liability in full within the period specified in Sub-section (2), the secured creditor may take recourse to one or more of the following measures to recover his secured debt, namely:
(a) 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;
(b) take over the management of the business of the borrower including the right to transfer by way of lease, assignment or sale for realising the secured asset;
Provided that the right to transfer by way of lease, assignment or sale shall be exercised only where the substantial part of the business of the borrower is held as security for the debt;
Provided further that where the management of whole of the business or part of the business is severable, the secured creditor shall take over the management of such business of the borrower which is relatable to the security or the debt.
(c) appoint any person (hereafter referred to as the manager), to manage the secured assets the possession of which has been taken over by the secured creditor;
(d) require at any time by notice in writing, any person who has acquired any of the secured assets from the borrower and from whom any money is due or may become due to the borrower, to pay the secured creditor, so much of the money as is sufficient to pay the secured debt.
xxxx xxxx (13) 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.
Section 14 of the Act empowers the Magistrate to ensure that possession of secured asset is taken by the secured creditor under the provisions of the Act. Section 14 reads as follows:
14. Chief Metropolitan Magistrate or District Magistrate to assist secured creditor in taking possession of secured asset.-(1) Where the possession of any secured assets is required to be taken by the secured creditor or if any of the secured assets 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 secured assets, request, in writing, the Chief Metropolitan Magistrate or the District Magistrate within whose jurisdiction any such secured asset or other documents relating thereto may be situated or found, to take possession thereof, and the Chief Metropolitan Magistrate or as the case may be, the District Magistrate shall, on such request being made to him--
(a) take possession of such asset and documents relating thereto; and
(b) forward such asset and documents to the secured creditor.
(2) For the purpose of securing compliance with the provisions of Sub-section (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 done in pursuance of this section shall be called in question in any court or before any authority.
Section 17 of the Act pertains to right to appeal. Sub-section (1) of Section 17 permits any person including the borrower who is aggrieved by any of the measures referred to in Sub-section (4) of Section 13 to make an application to the Debt Recovery Tribunal. Sub-section(2) of Section 17 provides, inter alia, that the Debt Recovery Tribunal shall consider whether any of the measures referred to in Sub-section (4) of Section 13 taken by the secured creditor for enforcement of security are in accordance with the provisions of the Act and the Rules made thereunder. Under Sub-section (3) of Section 17, if the Debt Recovery Tribunal comes to the conclusion that any of the measures under Sub-section (4) of Section 13 taken by the secured creditor are not in accordance with the provisions of the Act or the Rules, it may by order declare the recourse taken by the secured assets as invalid and restore the possession of the secured assets to the borrower or restore the management of the secured assets to the borrower, as the case may be and may also pass such order as found appropriate.
Under Section 18 of the Securitisation Act, a person aggrieved by an order made by the Debt Recovery Tribunal under Section 17 can appeal to the appellate Tribunal.
Section 34 of the Securitisation Act pertains to exclusion of the jurisdiction of Civil Court. Section 34 reads as follows:
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) Section 35 of the Securitisation Act gives overriding effect to the provisions of the Act. Section 35 reads as follows:
35. The provisions of this Act to override other laws.-The provisions of this Act shall have effect, notwithstanding anything inconsistent therewith contained in any other law for the time being in force or any instrument having effect by virtue of any such law.
12. In the case of Mardia Chemicals Ltd. v. Union of India , the Apex Court had the occasion to examine the entire scheme of the Securitisation Act and the different provisions made thereunder. While upholding the constitutional validity of the different provisions made in the said Act, the Apex Court, however found that though till the stage of making of the demand and notice under Section 13(2) of the Act, no hearing can be claimed by the borrower, however, secured creditor must bear in mind the say of the borrower before a process or recovery is initiated. If the borrower makes a representation or raises any objection to the demand under Section 13(2), the reasons, however, brief for not accepting such objection or representation must be communicated to the borrower. These principles have been given statutory effect by adding Sub-section (3A) to Section 13 of the Securitisation Act. In Mardia Chemicals Ltd (supra), the Apex Court further held that on measures taken under Sub-section (4) of Section 13 of the Act and before the date of sale/auction of the property, it will be open for the borrower to file an appeal under Section 17 of the Act before the Debts Recovery Tribunal. Requirement for deposit of 75% of the amount claimed before entertaining an appeal, however, was held to be oppressive and found unconstitutional. With respect to the scope of jurisdiction of the civil court, it was held that:
As discussed earlier in this judgment, we find that it will be open to maintain a civil suit in civil court within the narrow scope and on the limited grounds on which they are permissible, in the matters relating to an English mortgage enforceable without intervention of the court.
13. Thus, in Mardia Chemicals (supra) also a limited scope was left open even for the borrower to approach the civil court on limited grounds mentioned above.
14. At the outset, I may note that the Debt Recovery Tribunal committed no error in not entertaining the application of the petitioner herein. Though as person aggrieved it was open for the petitioner to approach the DRT under any of the measures which the secured creditor may take under Sub-section (4) of Section 13 of the Act, in so far as respondent No. 1 Sihor Nagrik bank, secured creditor seeking to take possession of secured asset after issuance of notice under Sub-section (2) of Section 13, is concerned, the same suffers from no illegality. At the instance of the petitioner bank, who is not the borrower and whose case is otherwise not that the borrower had repaid the dues of respondent No. 1 secured creditor regularly, there was little scope for the DRT to interfere with the action of respondent No. 1 in seeking to take possession of the secured asset. To that extent, the challenge of the petitioner must fail.
15. Two important questions, however still remain. First is regarding the interim injunction prayed for by the petitioner from the civil court. Incidentally, it would be necessary to decide whether civil court has jurisdiction to entertain the suit at all or not. Second question that calls for consideration is the legality of the order passed by the District Magistrate on the application filed by respondent No. 1 authorising use of force to evict the petitioner-bank from the tenanted premises.
16. Both questions, I propose to consider in the specific factual background arising in this petition. These peculiar facts are as follows:
1. That the petitioner, a nationalized bank, has taken on rent the premises belonging to respondent No. 2 since 1986. Since then the petitioner Bank has been occupying a portion of the building rented out to it and has been regularly paying rent thereof.
2. Respondent No. 2 had filed suit No. 25/92 against the petitioner seeking recovery of arrears of rent and possession of the rented premises. The plaintiff-land-lord-respondent No. 2 herein had in the said suit admitted tenancy and possession of the petitioner-bank.
3. Respondent No. 1 bank, released loan in favour of respondent No. 2 borrower in the year 1996.
4. The petitioner bank has produced on record, the application form submitted by respondent No. 2 to respondent No. 1 seeking loan. In this document dated 9.9.96, it is stated that portion of the property in question is in possession of the petitioner bank as tenant.
5. No dispute has been raised by respondent No. 1 with respect to the genuineness of the said document.
17. It would thus emerge that when respondent No. 1 released loan in favour of respondent No. 2 borrower, admittedly and to the knowledge of respondent No. 1, part of the premises being mortgaged by respondent No. 2 was in possession of the petitioner bank as a tenant. Thus, it is not a case where either the tenancy was created after the mortgage or even that a claim of pre-existing tenancy is being set up long after the loan is released. In fact, it is a case wherein admittedly, tenancy of the petitioner bank existed nearly 10 years before respondent No. 1 released loan in favour of respondent No. 2 by creating a charge over the tenanted property and the same was done by respondent No. 1 with full knowledge of the pre-existing tenancy.
18. Under these circumstances, the question is whether it is open for respondent No. 1 bank in exercise of powers under Section 13 of the Securitisation Act or any other provision contained therein to evict the petitioner bank and seek to take possession of the secured assets free from any occupation. In other words, question is, is it open for respondent No. 1 bank to extinguish an existing tenancy statutory or contractual ?
19. The subsidiary question is, if respondent No. 1 is not authorized to take any such steps, can it seek assistance of the Magistrate to use force to evict the tenant out of the secured asset. If without the use of authorized force under Section 14 of he Securitisation Act, respondent No. 1 is acting on its own volition and seeks to evict the tenant through coercive measures, whether the tenant can approach the civil court and seek protection or not is also a question that needs to be answered.
20. It is true that under Section 34 of the Securitisation Act, it is provided that no civil court shall have jurisdiction to entertain any suit or proceedings in respect of any matter which the Debt Recovery Tribunal or the Appellate Tribunal is empowered by or under the said Act to determine and no injunction can 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 the Act or under the Recovery of Debts Due Banks and Financial Institutions Act. It is equally true that Section 35 of the Securitisation Act gives overriding effect to the provisions contained in the Act notwithstanding anything inconsistent therewith contained in any other law for the time being in force or any instrument having effect by virtue of any such law.
21. Facts of this case however call for closer scrutiny of the legal provisions. As noted earlier, the petitioner is a tenant of part of the secured asset. Said tenancy was created long before the borrower mortgaged the property to secure debt taken from respondent No. 1. There is nothing in the Securitisation Act which would authorize respondent No. 1 to extinguish such a tenancy. Tenancy is a creation of a contractual relationship between the parties. Such tenancy would thereafter be statutory tenancy governed by the provisions contained in the Bombay Rents, Hotel and Lodging House Rates Control Act, 1947 (hereinafter referred to as "the Bombay Rent Act"). In view of relation between respondent No. 2 borrower and respondent No. 1 bank the secured creditor, it may be open for respondent No. 1 bank to take all such measures as may be authorized under the Securitisation Act including the measures enumerated in Sub-section (4) of Section 13. Such measures, however, would not permit respondent No. 1, in my view, to extinguish the preexisting tenancy between the petitioner and respondent No. 2. The case would have been different if the tenancy was created subsequent to creation of charge over the secured asset. The case perhaps also would have been different had the case of tenancy been set up after the creation of mortgage by the borrower in favour of the secured creditor. In the present case, however, admittedly, respondent No. 1 bank was well aware that the petitioner bank was the tenant of part of the premises 10 years before the loan was being released in favour of respondent No. 2.
22. Under Sub-section (4) of Section 13 of the Act, after issuing notice under Sub-section (2) and after disposing of objections/representations of the borrower, it is open for the secured creditor to take any of the measures specified therein. Such measures include taking of possession of the secured asset of the borrower including the right to transfer by way of lease or assignment or sale of such asset. Neither the right to take possession nor the right to sell the property would include the right to extinguish the pre-existing tenancy.
23. It is true that in the case of Transcore v. Union of India , the Apex Court obliterated the distinction between the symbolic possession and actual possession in following terms:
The authorized officer under Rule 8 has greater powers than even a court receiver as security interest in the property is already created in favour of banks/FIs. That interest needs to be protected. Therefore, Rule 8 provides that till issuance of the sale certificate under Rule 9, the authorized officer shall take such steps as he deems fit to preserve the secured asset. It is well settled that third party interests are created overnight and in very many cases those third parties take up the defence of being a bona fide purchaser for value without notice. It is these types of disputes which are sought to be avoided by Rule 8 read with Rule 9 of the 2002 Rules. In the circumstances, the drawing of dichotomy between symbolic and actual possession does not find place in the scheme of the NPA Act read with the 2002 Rules.
However, even if it is open for the secured creditor to take actual possession of the secured asset, such right does not necessarily include taking vacant possession of the premises in question under all circumstances. In a case like one on hand, when there is a preexisting admitted tenancy, in exercise of powers under Sub-section (4) of Section 13 of the Act, even if it is open for the secured creditor to take physical possession (as understood in contra-distinction to symbolic possession) of the property in question, such physical possession does not necessarily mean vacant possession thereof.
24. In Black's Law Dictionary, 7th Edition, the term 'possession' is described as the fact of having or holding property in one's power; the exercise of dominion over property; or the right under which one may exercise control over something to the exclusion of all others. The term 'take possession' as described in Advanced Law Laxicon by P.Ramanatha Aiyer, 3rd Edition, means, enter into possession; or take delivery of.
In Halsbury's Law of England, 4th Edn. in para 1214 and 1211 it is stated that the word 'possession' is used in various contexts and phrases, for example, in the phrase "actual possession" or "to take possession" or "interest in possession" or "estate in possession' or "entitled in possession". Legal possession is the possession which is recognized and protected as such by law. Legal possession is ordinarily associated with de facto possession; but legal possession may exist without de facto possession and de facto possession is not always regarded as possession in law. A person who although having no de facto possession is deemed to have possession in law is sometimes said to have constructive possession.
In Advanced Law Lexicon by P.Ramanatha Aiyer, 3rd Edn. while pointing out distinction between possession and occupation it is noted that occupation and possession are two different things. The concept of possession at any rate as it is understood in legal terminology is a complex one which need not include actual possession. It comprises rather the right to possess and right and ability to exclude others from possession and control coupled with mental element namely, animus possidendi, that is to say, in which all these rights and desire and intention of exercising them if need be.
It can thus been seen that the concept of possession and occupation are not necessarily one and same. In legal terminology, both have distinct and different meanings.
It may also be noted that under Rule 8 and 9 of the Security Interest (Enforcement) Rules, the procedure for sale of immovable secured is laid down. Sub-rule (1) of Rule 8 provides that in case of immovable secured assets, the authorized officer shall take or cause to be taken possession, by delivering a possession notice to the borrower and by affixing the possession notice on the outer door or at such conspicuous place of the property. Sub-rule (2) of Rule 8 requires publication of such possession notice in two leading newspapers having sufficient circulation in the locality. Sub-Rule (3) inter alia provides that in the event of possession of immovable property being actually taken by the authorized officer, such property shall be kept in his own custody or in the custody of any person authorized or appointed by him, who shall take as much care of the property in his custody as a owner of ordinary prudence would under the similar circumstances. Sub-rule (5) of Rule 8 pertains to valuation report of the property which the authorized officer has to obtain before effecting sale thereof. Sub rule (6) of Rule 8 requires notice of 30 days to the borrower for sale of immovable secured assets. Proviso to Sub-rule (6) of Rule 8 provides that if the sale of such secured asset is being effected by either inviting tenders from the public or by holding public auction, the secured creditor shall cause a public notice in two leading newspapers having sufficient circulation in the locality setting out the terms of sale which shall include besides others, description of the immovable property to be sold including the details of the encumbrances known to the secured creditor.
From the various provisions made in Rule 8 and 9 of the Rules, it would be clear that the Legislature also recognizes taking possession of the secured asset even where it is not necessarily free from all encumbrances. The property can be put to sale only after the possession is taken by the authorized officer. However, at the time of putting to property to sale either by tender or by public auction, proviso to Sub-rule (6) of Rule 8 envisages issuance of public notice which will include beside other details, the details of encumbrances on the immovable property being sold. Rule 9 of the said Rules pertains to time of sale, issues of sale certificate and delivery of possession, etc. Sub-rule (7) of Rule 9 speaks of immovable property sold subject to any encumbrances. Sub rule (10) of Rule 9 also provides that certificate of sale issued under Sub-rule (6) shall specifically mention whether the purchaser has purchased the immovable secured asset free from any encumbrances known to the secured creditor or not.
In the case of State of H.P. v. Tarsem Singh , the Apex Court in para 7 of the decision observed that:
"The word Sencumbrance" means a burden or charge upon property or a claim or lien upon an estate or on the land. "Encumber" means burden of legal liability on property, and, therefore, when there is encumbrance on a land, it constitutes a burden on the title which diminishes the value of the land. In Abdul Karim Khan v. Managing Committee, George High School, it was held that encumbrance would include easementary right of drainage over the land. In Rashid Allidina v. Jiwandas Khemji it was laid down that the word "encumbrance" has always been understood to include easementary right. In Ganga Vishnu Swaika v. Machine Mfg. Co. Ltd., it was ruled that an easementary right to discharge water on other's land comes within the meaning of encumbrance on the right of the land.
25. It would thus appear that though under Sub-section (4) of Section 13 of the Securitisation Act upon satisfying certain conditions it would be open for the secured creditor to take possession of the secured asset, such power does not necessarily under all circumstances, include power to take vacant possession of the secured asset. In other words while asserting its rights under Section 13(4) of the Securitisation Act, it is not open to the secured creditor to summarily evict a pre-existing tenant and thereby extinguish his tenancy contrary to contract between the landlord and the tenant or the Rent Act applicable particularly when such tenancy was known to the secured creditor before advancement of loan to the borrower. It may be noted that the Securitisation Act gives sweeping powers to banks and financial institutions who are not necessarily nationalized banks to recover their debts. Such powers include enforcement of security rights without recourse to court of law. Nothing under the Securitisation Act, however, empowers the secured creditor to extinguish a tenancy which is admittedly shown to be existing before the advancement of loan to the borrower and of which the loaner had prior knowlwedge.
26. Acceptance of the contention of the learned Counsel for respondent No. 1 that in view of powers under subsection (4) of Section 13 of the Act it is open for the secured creditor to seek eviction summarily of an occupier of a secured assets, in the present case, would amount to authorizing termination of a long standing preexisting tenancy which can be done only in terms of the provisions contained in the Bombay Rent Act. It would also authorise the secured creditor to override terms of contract between the land lord and the tenant - a contract to which such secured creditor is not even a party.
27. In that view of the matter, despite overriding effect given to the provisions contained in the Securitisation Act under Section 35 over any other law for the time being in force, I do not find that the Act empowers the secured creditor to extinguish a preexisting tenancy. In so far as present factual situation is concerned, I find that there is nothing inconsistent in the Bombay Rent Act with Securitisation Act so as to give overriding effect to the provisions contained in the Securitisation Act. Overriding effect can be given when it is pointed out that the provisions of the other Act (Bombay Rent Act in the present case) are inconsistent with the provisions of the Securitisation Act. Since I find that nothing contained in the Securitisation Act empowers the secured creditor to extinguish an admitted preexisting tenancy, I do not find that the provisions in this regard contained in the Securitisation Act are in any manner inconsistent with the Bombay Rent Act.
28. This being the situation, I find that it was wholly impermissible for the District Magistrate to authorize use of force to evict the petitioner from the tenanted premises. Since it was not open for respondent No. 1 secured creditor to seek eviction of the petitioner from the tenanted premises, it was equally impermissible for the District Magistrate to authorize such an action through use of force in purported exercise of powers under Section 14 of the Securitisation Act. The learned Magistrate could have authorized only such act which the secured creditor was otherwise authorized to take in furtherance of the provisions of Sub-section (4) of Section 13 or any other provisions of the Securitisation Act. When I find that it was not open for the secured creditor to extinguish the tenancy and to seek eviction of the tenant, in the facts of the present case, such action cannot be legally enforced in term of provisions contained in Section 14 of the Securitisation Act.
29. The next question is whether the civil court could have entertained the suit filed by the petitioner.
30. The bar of civil court entertaining any suit emerges from the provisions contained in Section 34 of the Securitisation Act. As noted, it provides, inter alia that no civil court shall have jurisdiction to entertain any suit or proceedings in respect of any matter which the DRT or the Appellate Tribunal is empowered under the Act to determine. It is further provided that no injunction shall be granted by any court in respect of any action taken or proposed in pursuance of any power conferred under the Securitisation Act.
31. In the present case, I find that the attempt of respondent No. 1 to evict the petitioner did not have legal force and such power did not flow from the provisions contained in Sub-section (4) of Section 13 of the Securitisation Act or any other provisions contained therein. That being the situation, the action of the secured creditor to proceed to take vacant possession of the secured asset would be de hors the provisions contained in the Securitisation Act. The scheme of provisions in Sections 13 and 14 of the Securitisation Act would show that after having issued notice under Sub-section (2) of Section 13 and having proceeded to dispose of the objection/representation of the borrower, it is open for the secured creditor to take any of the measures under Sub-section (4) of Section 13. One such step which the secured creditor can take is to take possession and to proceed to sell the secured asset.
If the secured creditor needs the use of legal force in order to take possession of the secured asset, it can approach the Magistrate under Section 14. However, if the secured creditor proposes to take any action which is de hors the provisions contained in the Securitisation Act and further takes coercive measures to enforce such an action, such action would be completely and wholly without authority of law. It is not an action which the creditor would be taking irregularly under the Act, but de hors the provisions contained therein. Validity of such an action cannot be tested by the Debt Recovery Tribunal under Section 17 of the Act. Such action can be judged by the civil court under common civil law. In the case of Sahebgouda v. Ogeppa AIR 2003 SC 2743, the Apex Court observed that it is well settled that civil court has jurisdiction to try all suits of civil nature and the exclusion of jurisdiction of the civil court is not to be lightly inferred. Such exclusion must be either explicitly expressed or clearly implied.
32. It is true that different High Courts have expressed different opinion on this aspect of the matter. The decisions cited at the Bar need to be discussed at this stage. 29.02.2008
33. In the case of Oriental Bank v. Naresh Khushaldas 2007 (3) GCD 1885 (Guj), this Court was concerned with a case where the plaintiff had created an equitable mortgage in favour of the bank by depositing the original title deed and obtained loan. Upon non-payment of installments with interest by the plaintiff, the bank initiated proceedings under the Securitisation Act. To frustrate the recovery of the bank, the son of the plaintiff filed a suit claiming himself to be the tenant of the suit property and obtained injunction. Further admitted position was that the suit property came to be allegedly rented out by the borrower after creation of charge of equitable mortgage. It was in this background that the court found that civil court had no jurisdiction since Section 34 of the Securitisation Act would apply. The ratio laid down in the said decision, in view of peculiar facts, would not apply in the facts of the present case since there are vital factual differences.
34. In the case of Sree Lakshmi Products v. State Bank of India AIR 2007 Madras 148, a Division Bench of the High Court made following observations in para 9:
Any tenancy created by the mortgager after the mortgage in contravention of Section 65-A would not be binding on the bank/FI, and in any event such tenancy rights shall stand determined once action under Section 13(4) has been taken by the bank/FI. When the petitioner is claiming a tenancy prior to the creation of mortgage an such tenancy is disputed by the bank the remedy of the petitioner is to approach DRT by way of an application under Section 17 of the SARFAESI Act to establish its rights.
It can be seen that the entire focus of the Division Bench in the said decision was with respect to creation of tenancy after the mortgage in contravention of Section 65-A of the Transfer of Property Act. Though in the case before the Madras High Court the tenant had put up a case of preexisting tenancy, such claim was disputed by the bank and it was in that respect the Bench found that such disputes can be decided only by the Debt Recovery Tribunal. In the present case, as I have noted earlier,tenancy was not only pre-existing, the bank had sufficient notice thereof at the time of creating mortgage.
35. In the case of Business India Builders and Developers Ltd v. Union Bank of India , a Division Bench of the Kerala High Court was considering a case wherein, the mortgage was created by the borrower in favour of the bank with the declaration that Swe hereby agree and undertake not to mortgage, charge, encumber, lease, dispose of or deal with the property mortgaged by me/us/ the company to cover the guarantee during the continuance of the said facilities to M/s. Anupam by the bank. Despite the said declaration, contrary to the said stipulation, the petitioner inducted a tenant in the premises and had taken up the stand that the tenant cannot be evicted under the provisions of the Securitisation Act. It was in this background that the Division Bench observed that:
Lease is therefore an encumbrance over the property. In any view the borrower is bound by the terms and conditions stipulated in Annexure R2 dated 20.1.95, by which he had undertaken that he would not lease out the property. Contrary to the said stipulation the tenant was put in possession and therefore by virtue of Securitisation Act there is no necessity of the Bank resorting to provisions of the Rent Control Act for evicting the tenant.
Once again, the fact situation in the said case is vitally different from one on hand. The borrower had after creation of mortgage, in violation of specific stipulation, inducted a tenant and thereafter urged that the tenant cannot be evicted under the Securitisation Act. On all counts, the factual situation in the present case is dissimilar.
36. In the case of Makboolhusen R. Maniyar v. Bank of Baroda 2006 (3) GLH 362 I do not find that any ratio is laid down in the judgment which can be applied in the facts of the present case. It was a case wherein the petitioner had approached the High Court contending that he was the bonafide purchaser of the property for consideration and he, therefore, cannot be evicted by the bank or financial institution to realize the debts. It was in that background the court opined that the DRT alone can have jurisdiction. Facts of the said case being vitally different, the ratio laid down in the said decision does not apply to the facts of the present case.
37. In all the above decisions relied upon by respondent No. 1 Bank, one discernible factor which is vitally and materially different from the present case is that in those cases, either the tenancy was created after the mortgage was created or that the claim of preexisting tenancy was highly debatable and hotly disputed by the bank. In the present, consistently, I have found that the tenancy was not only pre-existing, it was brought to the notice of respondent No. 1 bank in writing at the time of sanction of loan and the mortgage was created. It is in this narrow compass and peculiar factual situation that I have found that it is not open for respondent No. 1 bank to resort to the provisions contained in the Securitisation Act so as to evict the tenant. Any such action would be wholly unauthorized and de hors the provisions of the Securitisation Act. Such action would, therefore, be outside the purview of the Securitisation Act and would be open to challenge before the civil court under ordinary civil law.
38. On the other hand, learned single Judge of the Karnataka High Court in the case of Hutchison Essar South Ltd. v. Union Bank of India AIR 2008 Karnataka 14 opined that though the secured asset is in the possession of borrower, its possession can be taken in accordance with the provisions contained in Sections 13 and 14 of the Securitisation Act, if the borrower has inducted somebody overnight only to defeat the rights of the bankers, then also, provisions of Sections 13 and 14 of the Act can be pressed into service. 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 the Securitisation Act.
39. In the case of Manager, UCO Bank v. Samar Sarkar AIR 2008 Calcutta 9, learned single Judge of the Calcutta held that for recovery of dues of the borrower, the bank is not authorized to evict the tenant from the mortgaged property and suit by the tenant is not barred under Section 17 of the Securitisation Act.
40. Reliance is placed by the respondents on the decision of this Court in the case of Bank of India v. Pankaj Dilipbhai Hemnani wherein the learned Judge held that the Chief Metropolitan Magistrate or the District Magistrate exercising powers under Section 14 of the Securitisation Act is not exercising judicial powers, but merely enforcing authority and must render assistance to the creditor in realizing the secured asset. The said decision also cannot be pressed in service to support the order passed by the District Magistrate which is also under challenge in this petition. As already noted earlier, respondent No. 1 bank was not authorized to evict the tenant from the suit premises. Any assistance or use of force to achieve such purpose is also therefore not authorized under law.
41. Under the circumstances, the petition is disposed of by giving following directions:
1. The impugned order dated 28.9.2007 of the Debt Recovery Tribunal is upheld.
2. The impugned order dated 8.10.2007 of the District Magistrate passed under Section 14 of the Act is set aside.
3. It is further held that civil court would have jurisdiction to entertain the suit of the present petitioner. Application Ex.5 is, however, on notice stage. The same shall be disposed of after hearing both sides. However, till such time the application is disposed of the petitioner shall not be evicted from the suit premises.
With the above directions, the petition is disposed of. Rule is made absolute to the above extent.
In view of the above order, Civil Application does not survive and the same is also disposed of accordingly.