G.Subhulakshmi vs Uco Bank on 30 July, 2025

[Cites 30, Cited by 0]

Kerala High Court

G.Subhulakshmi vs Uco Bank on 30 July, 2025

The petitioner in W.P.(C)No.15236 of 2025 filed this writ appeal under Section 5(i) of the Kerala High Court Act 1958, against the judgment dated 25.06.2025 passed by the learned Single Judge, dismissing that writ petition filed by the appellant/petitioner challenging Ext.P7 order dated 28.03.2025 of the Debts Recovery Appellate Tribunal, Chennai, which confirmed Ext.P3 order dated 27.11.2024 in S.A. No.618 of 2024 of the Debts Recovery Tribunal-II, Ernakulam.

2. The appellant obtained the entire ground floor and two shop rooms on the southern side of the upstairs portion of a two- storey building bearing No. AMCW-33/803 situated in 10.09 Ares of property in resurvey No.28 (old survey No.598/8/A/16, 8/A/18) Block No.46 of Alappuzha West Village, from the 2nd respondent for conducting a Scanning and Diagnostic Centre for a period of seven years, i.e., from 01.05.2023 to 30.04.2030, with a stipulation to pay a monthly rent of Rs.30,000/-, on the strength of Ext.P1 registered rent agreement bearing No.1648 of 2023 of 3 W.A. No.1577 of 2025 2025:KER:56062 SRO Alappuzha dated 29.04.2023. While the appellant was continuing as a tenant, she understood that the 1st respondent Bank proceeded against the property, including the building, which was offered as security by the 2nd respondent as a guarantor to the loan availed by M/s. Arafa Gold and Diamonds Private Ltd. from the 1st respondent Bank. Pursuant to the proceedings initiated by the 1st respondent under Section 14 of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 ('SARFAESI Act' for short), the Chief Judicial Magistrate, Alappuzha, appointed an Advocate Commissioner in M.C.No.327 of 2024. The Advocate Commissioner intimated to the appellant to vacate the premises and to hand over the physical possession of the secured asset to the 1st respondent Bank. Challenging the securitisation measures initiated by the 1st respondent Bank, the appellant filed S.A. No.618 of 2024 before the Debts Recovery Tribunal, Ernakulam. By Ext.P3 order dated 27.11.2024, the Debts Recovery Tribunal dismissed the securitisation application filed by the appellant. Though the appellant preferred an appeal before the Debts 4 W.A. No.1577 of 2025 2025:KER:56062 Recovery Appellate Tribunal, Chennai, as AIR (SA) No.1923 of 2024, by Ext.P7 order dated 28.03.2025, the appeal was dismissed. Challenging Ext.P7, the appellant preferred the writ petition under Article 226 of the Constitution of India seeking the following reliefs;

"(i) To call for the entire records leading to the issuance of Exhibit P7 Order proceedings of the Debt Recovery Appellate Tribunal, Chennai in AIR (SA) No.1923/2024 and to set aside the same, in the interest of justice.

(ii) To call for the entire records leading to the issuance of Exhibit P7 and Exhibit P3 to declare as illegal and to reconsider the matter on merits, in the interest of justice.

(iii) To declare that the entire securitisation proceedings initiated by the first respondent as illegal, arbitrary and against law and to keep in abeyance all the securitisation proceedings, in the interest of justice."

3. The 1st respondent Bank had filed a counter affidavit dated 20.06.2025 opposing the reliefs sought in the writ petition and producing therewith Exts.R1(A) to R1(E) documents. It is contended in the counter affidavit filed by the 1st respondent that the 2nd respondent stood as guarantor to the credit facilities availed by the partnership firm M/s. Arafa Gold and Diamonds Private Ltd., by a sanction letter dated 14.03.2014 and had 5 W.A. No.1577 of 2025 2025:KER:56062 created an equitable mortgage of the subject properties in favour of the 1st respondent Bank. Subsequently, the very same borrower was sanctioned another cash credit facility to the limit of Rs.17/- Crores. The equitable mortgage already created by the 2nd respondent was extended to the credit facilities sanctioned on 13.11.2019 in respect of the properties covered by the sale deed No.1729 of 2005 dated 29.03.2025 of SRO Alappuzha, and the release deed No.168 of 2009 dated 13.01.2009. Later, the partnership firm was constituted as a company in the name of M/s.Arafa Gold and Diamonds Private Ltd., with the 2nd respondent as the Managing Director in the name of M/s.Arafa Gold and Diamonds Private Ltd. The credit facilities to the limit of Rs.17/- Crores already sanctioned were renewed by the sanction letter dated 29.06.2022. It is further contended by the 1st respondent that the lease was created in collusion between the appellant and the 2nd respondent in order to defraud the 1st respondent Bank. The lease is against the provisions in Section 65A of the Transfer of property Act, 1882 ('T.P Act' for short), read with Section 17(4-A) of the SARFAESI Act. It is also stated in the 6 W.A. No.1577 of 2025 2025:KER:56062 counter affidavit of the 1st respondent that the loan account was classified as a Non-Performing Asset ('NPA' for short) and notice under Section 13(2) of the SARFAESI Act was issued to the 2 nd respondent which ended up in the issuance of notice under Section 13(4) and filing of application before the Chief Judicial Magistrate, Alappuzha, under Section 14 of that Act. The appellant, during the pendency of her appeal before the Debts Recovery Appellate Tribunal, Chennai, moved this Court by filing OP(DRT) No.398 of 2024 praying for disposal of the appeal and the stay petition pending before the Debts Recovery Appellate Tribunal, Chennai, within a time frame and for the further direction to the 1st respondent Bank not to take any coercive steps to dispossess the appellant from the premises till the disposal of the OP(DRT). Some other persons who are similarly situated to that of the appellant also filed OP(DRTs) before this Court. By Ext.R1(C) common judgment dated 20.12.2024, this Court dismissed the OP(DRTs), holding that the petitioners therein have not made out a prima facie case for an interim protection. However, the learned Single Judge directed the Debts Recovery Appellate Tribunal to consider 7 W.A. No.1577 of 2025 2025:KER:56062 the appeal untrammelled by the observations contained in that judgment. In the writ petition, the appellant did not disclose the filing of the OP(DRT) before this Court and the adverse observations made in Ext.R1(C) judgment. The appellant did not approach this Court with clean hands.

4. After hearing both sides and on appreciation of materials on record, the learned Single Judge dismissed the writ petition as said above.

5. Heard the learned counsel for the appellant and the learned counsel for the 1st respondent. Considering the nature of the dispute, issuance of notice to the 2nd respondent is dispensed with.

6. The learned counsel for the appellant would argue that the appellant, being a tenant in possession of the portion of the building, based on a valid tenancy, cannot be dispossessed by invoking Section 14 of the SARFAESI Act. It is further argued by the learned counsel that the Kerala Buildings (Lease and Rent Control) Act, 1965 ('Rent Control Act' for short) has primacy over the SARFAESI Act, and a tenant can be evicted only by proving 8 W.A. No.1577 of 2025 2025:KER:56062 the grounds provided under Section 11 of the said Act. The learned counsel relied on the judgment of a learned Single Judge of this Court in Shiju Mani v. CSB represented by its Authorised Officer [2024 (2) KHC 68] in support of his arguments.

7. On the other hand, the learned counsel for the 1 st respondent argued that the 2nd respondent mortgaged the property to the Bank on 02.04.2014. After converting the loan into NPA, the tenancy was created by the 2nd respondent by inducting several tenants, including the appellant, in portions of the building. The tenancy in favour of the appellant was created on 29.04.2023. The notice under Section 13(2) of the SARFAESI Act was issued by the Bank to the 2nd respondent on 23.06.2023. By inviting our attention to Section 17(4-A) of the SARFAESI Act and Section 65A of the T.P Act, the learned counsel argued that the tenancy created by the 2nd respondent after the mortgage is in violation of Section 65A of the T.P Act, and hence, the appellant cannot claim protection from eviction. The learned counsel further argued that even the claim of tenancy raised by the appellant is a matter that has to be raised before the Debts Recovery Tribunal 9 W.A. No.1577 of 2025 2025:KER:56062 under Section 17(4-A) of the SARFAESI Act and not in a writ petition filed under Article 226 of the Constitution of India. By pointing out the terms and conditions of the mortgage, the learned counsel submitted that the 2nd respondent is prohibited from creating any encumbrance over the property after the mortgage, and for that reason also, the benefit of lease cannot be claimed by the appellant. It is also argued by the learned counsel for the 1 st respondent that the appellant filed O.P.(DRT)No.398 of 2024 before this Court, and that fact is suppressed in the writ petition. The learned Single Judge specifically noted that aspect in the impugned judgment. In support of his arguments, the learned counsel for the 1st respondent relied on the judgments of the Apex Court in Bajarang Shyamsunder Agarwal v. Central Bank of India [(2019) 9 SCC 94], and that of this Court in Kelukutty P.M and others v. Young Men's Christian Association and another [2016 (1) KHC 853] which he relied before the learned Single Judge also.

8. The points to be decided in this writ appeal are:

1) Whether the appellant who was inducted into the secured asset after the mortgage and conversion 10 W.A. No.1577 of 2025 2025:KER:56062 of the loan as NPA, but before the issuance of notice under Section 13(2) of the SARFAESI Act, can claim the protection under the provisions of the Kerala Buildings (Lease and Rent Control) Act, 1965, against eviction?

2) Whether the impugned Judgment of the learned Single Judge is erroneous or illegal, which warrants any interference by exercising the appellate jurisdic-

tion under Section 5(i) of the Kerala High Court Act 1958?

9. We consider both these points together, since they are interconnected. There are some admitted facts in the instant case. The fact that the 2nd respondent mortgaged the property, including the subject building to the 1st respondent Bank on 02.04.2014 is admitted. It is also not in dispute that the lease was created in favour of the appellant by virtue of Ext.P1 rent agreement dated 29.04.2023 for seven years, i.e, from 01.05.2023 to 30.04.2030. The issuance of notice under Section 13(2) of the SARFAESI Act on 23.06.2023 to the 2nd respondent by the Bank is also not in dispute. When the Bank proceeded against the secured asset, the appellant approached the Debts Recovery Tribunal, which ended in dismissal by Ext.P3 order dated 27.11.2024. The appeal filed 11 W.A. No.1577 of 2025 2025:KER:56062 by her before the Debts Recovery Appellate Tribunal, Chennai, was also dismissed by Ext.P7 order dated 28.03.2025.

10. The SARFAESI Act was enacted with an intention to regulate Securitisation and Reconstruction of Financial Assets and Enforcement of security Interest and to provide for a central database of security interest created on property rights, and for matters connected therewith or incidental thereto. It was enacted in response to a scenario where slow-paced recovery and staggering amounts of non-performing assets were looming over the Banks. In order to overcome the practical reality and keep in pace with the changing commercial world, the Narasimham Committee I and II and Andhyarujina Committee were constituted by the Central Government to provide solutions for the issues plaguing the banking system of the country. In culmination of the suggestions made by the aforesaid Committees, intended to enable the Banks to resolve the issue of liquidity and aim for reduction in the number of non-performing assets, the present Act has been enacted. The Preamble of the Act as well as the scheme of the Act give emphasis on efficient and expeditious recovery of 12 W.A. No.1577 of 2025 2025:KER:56062 bad debts.

11. Section 13 of the SARFAESI Act provides for the enforcement of security interest. It provides a self-executing mechanism for the Banks to recover the bad debts in an efficient manner. Sub-section (2) of Section 13 of the SARFAESI Act envisages a notice, which acts as the trigger point for initiation of the recovery process under the SARFAESI Act. In the said notice, the secured creditor is required to disclose information on the amount payable by the borrower and the secured interest intended to be enforced by the secured creditor in the event of non-payment of secured debts. If the borrower fails to discharge the liability, the secured creditor has four options, including taking possession of the secured assets of the borrower as provided under Section 13(4) of the SARFAESI Act.

12. Section 13(4) of the SARFAESI Act, which provides for recourse to the secured creditor on the failure of the debtor in discharging the loan, is extracted hereunder:

"(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 13 W.A. No.1577 of 2025 2025:KER:56062 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 for 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."

13. Section 13(13), which is relevant for the instant case, provides that no borrower shall, after receipt of notice referred to in sub-section (2), transfer by way of sale, lease, or otherwise 14 W.A. No.1577 of 2025 2025:KER:56062 (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.

14. Section 14 of the SARFAESI Act provides for a procedural mechanism for taking possession of property and documents with respect to the secured assets from the borrower by approaching the Chief Metropolitan Magistrate or District Magistrate to assist the secured creditor in taking possession of the secured asset.

15. Section 17 of the SARFAESI Act deals with the recourse that can be taken by an aggrieved person against the measures taken under Section 13(4) by the secured creditor.

16. Section 17(4-A) of the SARFAESI Act, which was inserted by Act 44 of 2016, with effect from 01.09.2016, deals with the claim of tenancy or leasehold right upon the secured asset, which reads thus;

"17(4A). Where-

(i) 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 15 W.A. No.1577 of 2025 2025:KER:56062 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."

(Underline Supplied)

17. Section 35 of the SARFAESI Act provides that 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.

18. Section 65A of the T.P. Act reads thus:

"65A. Mortgagor's power to lease.--(1)Subject to the provisions of sub-section (2), a mortgagor, while lawfully in 16 W.A. No.1577 of 2025 2025:KER:56062 possession of the mortgaged property, shall have power to make leases thereof which shall be binding on the mortgagee.

(2)(a)Every such lease shall be such as would be made in the ordinary course of management of the property concerned, and in accordance with any local law, custom or usage,

(b)Every such lease shall reserve the best rent that can reasonably be obtained, and no premium shall be paid or promised and no rent shall be payable in advance,

(c)No such lease shall contain a covenant for renewal,

(d) Every such lease shall take effect from a date not later than six months from the date on which it is made,

(e)In the case of a lease of buildings, whether leased with or without the land on which they stand, the duration of the lease shall in no case exceed three years, and the lease shall contain a covenant for payment of the rent and a condition of re-entry on the rent not being paid with a time therein specified.

(3)The provisions of sub-section (1) apply only if and as far as a contrary intention is not expressed in the mortgage-

deed; and the provisions of sub-section (2) may be varied or extended by the mortgage-deed and, as so varied and extended, shall, as far as may be, operate in like manner and with all like incidents, effects and consequences, as if such variations or extensions were contained in that sub-

section." (Underline Supplied)

19. The right of the tenant who was inducted in a secured 17 W.A. No.1577 of 2025 2025:KER:56062 asset when a proceeding was initiated under the provisions of the Act to recover the debt by taking possession of that secured asset was examined by the Apex Court in Harshad Govardhan Sondagar v. International Assets Reconstruction Company Ltd. and others [(2014) 6 SCC 1]. In that judgment after noticing the scheme of the SARFAESI Act, the Apex Court held that if the lawful possession of the secured asset is not with the borrower, but with a lessee under a valid lease, the secured creditor cannot take possession of the secured asset until the lawful possession of the lessee gets determined and the lease will not get determined if the secured creditor chooses to take any of the measures specified in Section 13 of the SARFAESI Act. Accordingly, the Apex Court concluded that the Chief Metropolitan Magistrate/District Magistrate can pass an order for delivery of possession of secured asset in favour of the secured creditor only when he finds that the lease has been determined in accordance with Section 111 of the T.P Act.

20. In Harshad Govardhan [(2014) 6 SCC 1] the Apex Court further held that if the Chief Metropolitan Magistrate/District 18 W.A. No.1577 of 2025 2025:KER:56062 Magistrate is satisfied that a valid lease is created before the mortgage and the lease has not been determined in accordance with Section 111 of the T.P Act, then he cannot pass on order for delivery of possession of the secured asset to the secured creditor. In case, he comes to the conclusion that there is no valid lease either before the creation of the mortgage or after the creation of the mortgage satisfying the requirement of Section 65A of the T.P. Act, or even though there is a valid lease the same stands determined in accordance with Section 111 of the T.P. Act, he can pass an order for delivery of possession of the secured asset to the secured creditor.

21. In Harshad Govardhan [(2014) 6 SCC 1], the Apex Court considered the inconsistency between Section 13(13) of the SARFAESI Act and Section 65A of the T.P Act and by noting that while Section 13(13) of the SARFAESI Act prohibits a borrower from leasing out any of the secured asset after receipt of a notice under Section 13(2) without the prior written consent of the secured creditor, Section 65A of the T.P Act enables the borrower/mortgagor to lease out the property, the Apex Court held 19 W.A. No.1577 of 2025 2025:KER:56062 that the SARFAESI Act will override the provisions of the T.P. Act.

22. By noting Sub Sections (1) and (3) of Section 65A of the T.P.Act, in Harshad Govardhan [(2014) 6 SCC 1] the Apex Court held that so long as the mortgage-deed does not prohibit a mortgagor from making a lease of the mortgaged property and so long as the lease satisfies the requirements of sub-section (2) of Section 65A, a lease made by a borrower as a mortgagor will not only be valid but is also binding on the secured creditor as a mortgagee. The implication of a registered and unregistered instrument/oral agreement was also considered by the Apex Court in that judgment.

23. In Kelukutty P.M [2016 (1) KHC 853], the question that came up for consideration before the Division Bench of this Court was whether protection from proceedings under Section 14 of the SARFAESI Act is available to a tenant in the case of a lease created after mortgage with the consent of the Bank. After an elaborate analysis of the relevant provisions and the judgments of the Apex Court binding the field, the Division Bench held that the consent of the Bank there to create a post mortgage lease is of no 20 W.A. No.1577 of 2025 2025:KER:56062 consequence in a case where lease deeds were executed not in accordance with Section 65A(2) of the T.P. Act. In paragraph 23 of the said judgment the Division Bench of this court held thus;

"Lease to be executed subsequent to the mortgage were to be executed in accordance with Section 65A(2) and consent cannot be read to execute lease contrary to the provisions contained in Section 65A. Proceedings under Section 14 have been initiated for taking possession and in view of the law laid down by the Apex Court in Harshad Govardhan Sondagar's case (supra) if the lease executed after the mortgage is not in accordance with Section 65A of the 1882 Act, the lessee can be dispossessed. Principle of estoppel cannot be allowed to operate against the specific statutory provisions. Had the leases executed in favour of the appellants were in accordance with Section 65A, appellants might be right in their submission that they could resist the dispossession under Section 14. But we having found that the leases were not executed in accordance with Section 65A, the principle of estoppel cannot be pressed in the facts and circumstances of the case." (underline supplied)

24. The judgment of the Apex Court in Harshad Govardhan [(2014) 6 SCC 1] as well as the judgment of this Court in Kelukutty P.M [2016 (1) KHC 853] were rendered prior to the insertion of Section 17(4-A) in the SARFAESI Act. 21 W.A. No.1577 of 2025

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25. In Bajarang Shyamsunder Agarwal [(2019) 9 SCC 94], the secured asset, which is a residential flat in Andheri (West) Mumbai, was mortgaged by the borrower/landlord with the bank in equitable mortgage by depositing the title deeds with an intention to secure the credit facility. When the borrower failed to make the due repayment of the said credit facilities, the bank classified the debt as NPA. The Bank then issued a notice under Section 13(2) of the SARFAESI Act and thereafter made an application before the Chief Metropolitan Magistrate, Esplanade, Mumbai under Section 14 of the SARFAESI Act. The Chief Metropolitan Magistrate directed the Assistant Registrar to take possession of the secured asset, consequent to the application filed by the Bank under Section 14. The appellant /tenant in that case claimed that the landlord created the tenancy in his favour prior to the creation of the mortgage in favour of the Bank. Subsequent to the order of the Chief Metropolitan Magistrate, the borrower issued a legal notice to the appellant directing him to vacate the premises. The appellant/tenant therein preferred a suit before the Court of Small Causes and obtained an interim 22 W.A. No.1577 of 2025 2025:KER:56062 injunction restraining the borrower/landlord from disturbing his possession. Meanwhile, the High Court of Bombay in a criminal public interest litigation held that a Magistrate has the power to pass an order of eviction without giving an opportunity of hearing to the tenant under the SARFAESI proceedings. An appeal against the said order, along with a batch of other appeals, was heard by the Apex Court in Harshad Govardhan [(2014) 6 SCC 1] and directed the Magistrate to decide the application after giving the tenants an opportunity of hearing. The appellant/tenant preferred an application before the Chief Metropolitan Magistrate, Esplanade, Mumbai, and after hearing, the Chief Metropolitan Magistrate rejected that application holding that the appellant tenant being a tenant without any registered instrument is not entitled for possession of the secured asset for more than one year from the date of execution of unregistered tenancy agreement in accordance with the law laid down in Harshad Govardhan [(2014) 6 SCC 1]. Aggrieved by the same, the appellant/tenant filed the Special Leave Petition before the Apex Court, which resulted in a judgment in Bajarang Shyamsunder Agarwal. 23 W.A. No.1577 of 2025

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26. Though at the time of passing the judgment in Bajarang Shyamsunder Agarwal [(2019) 9 SCC 94] by the Apex Court, Section 17(4-A) was incorporated in the SARFAESI Act by way of amendment, the Court considered the earlier law since the same alone was necessary for the decision in that case. Apart from the principles laid down in Harshad Govardhan Case, the Apex Court noted the judgment in Vishal N. Kalsaria v. Bank of India and others [(2016) 3 SCC 762] wherein the issue was whether a protected tenant under the Maharashtra Rent Control Act, 1999, can be treated as a lessee and whether the provisions of the SARFAESI Act will override the provisions of the Rent Act. In Vishal N. Kalsaria [(2016) 3 SCC 762] after examining the relevant legal provisions, the Apex Court held that while the SARFAESI Act has a laudable objective of providing a smooth and efficient recovery procedure, it cannot override the objective of the Rent Act to control the rate of rent and provide protection to tenants against arbitrary, and unreasonable evictions.

27. In Bajarang Shyamsunder Agarwal [(2019) 9 SCC 94] the Apex Court held that while agreeing with the principles 24 W.A. No.1577 of 2025 2025:KER:56062 laid down in Vishal N. Kalsaria [(2016) 3 SCC 762] that the rights of the tenants under the Rent Act need to be respected in appropriate cases, however, the holding with respect to the restricted application of the non-obstante clause under Section 35 of the SARFAESI Act, to only apply to the laws operating in the same field is too narrow and such a proposition does not follow from the ruling in Harshad Govardhan [(2014) 6 SCC 1].

28. In Bajarang Shyamsunder Agarwal [(2019) 9 SCC 94], after opining that the objective of the SARFAESI Act, coupled with the T.P Act and the Rent Act, are required to be reconciled, the Court held as under:

"a) 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 25 W.A. No.1577 of 2025 2025:KER:56062 rights of a rightful tenant cannot be compromised under the SARFAESI Act proceedings.

b) 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 65A of the T.P. Act.

c) 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 T.P. Act". (underline supplied)

29. As noted above, the learned counsel for the appellant would argue that in Shiju Mani [2024 (2) KHC 68], a learned Single Judge of this Court held that a tenant in possession of a secured asset on the basis of a valid tenancy, cannot be dispossessed invoking Section 14 of the SARFAESI Act and for that the Bank has to initiate steps under the provisions of the Rent Control Act.

30. In Shiju Mani [2024 (2) KHC 68], the issue before a learned Single Judge of this Court was regarding the eviction of a 26 W.A. No.1577 of 2025 2025:KER:56062 tenant who had been in possession of the secured asset much before the creation of the mortgage in favour of the Bank, based on an oral agreement. In Paragraph 53 of that judgment the learned Single Judge held that even if a lease is terminated, if the lease is falling within the ambit of the Rent Control Act, then eviction of the tenant from the tenanted premises can be only by resort to the provisions of the Rent Control Act. Such eviction has to be on any of the grounds falling under Section 11. By relying on Section 11(1) of the Rent Control Act, the learned Single Judge observed that as per the said eviction, notwithstanding anything to the contrary contained in any other law or contract, a tenant shall not be evicted, whether in execution of a decree or otherwise, except in accordance with the provisions of that Act. The learned Single Judge by quoting Section 2(6) of the Rent Control Act held that a tenant continuing in possession after the termination of his tenancy also cannot be evicted from the building except under the provisions of the Rent Control Act since the said Section defines a tenant, so as to include a person continuing in possession after his termination of tenancy as a statutory tenant. 27 W.A. No.1577 of 2025

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31. Though the learned Single Judge referred the judgment of the Apex Court in Bajarang Shyamsunder Agarwal [(2019) 9 SCC 94] wherein it was held that the obstante clause in Section 35 of the SARFAESI Act cannot be given restricted application, by stating that the Apex Court has also held in the same judgment that the tenancy rights under the Rent Control Act need to be protected in appropriate cases, the learned Single Judge held that the petitioners therein who are in possession of the tenanted premises for more than 50 years can be evicted only in compliance of the provisions of the Rent Control Act.

32. In Shiju Mani [2024 (2) KHC 68] the learned Single Judge held that Section 2(3) of the Rent Control Act defines the term landlord to include the person who is receiving or is entitled to receive the rent of a building, whether on his own account or on behalf of another or on behalf of himself and others or as an agent, trustee, executor, administrator, receiver or guardian or who would so receive the rent or to be entitled to receive the rent, if the building were let to a tenant and hence the Bank which has a right to take over physical possession of the secured asset which 28 W.A. No.1577 of 2025 2025:KER:56062 is a tenanted premises, can resort to the provisions of the Rent Control Act for evicting the tenants occupying the secured asset. The provisions under sub-section (4)(d) of Section 13 of the SARFAESI Act made for the secured creditor to demand any person who has acquired any of the secured assets from the borrower or from whom any money is due and may become due to the borrower, to pay the secured creditor, so much of the money as is sufficient to pay the secured debt was also taken into consideration by a learned Single Judge to hold that the Bank can be treated as a landlord for the purpose of the Rent Control Act to evict the tenants in the secured assets.

33. In the instant case, the lease was created after the mortgage. Therefore, the facts of Shiju Mani [2024 (2) KHC 68] are entirely different from the case at hand. However, since it was argued by the learned counsel for the appellant that the learned Single Judge held in Shiju Mani [2024 (2) KHC 68] that a tenant in possession on the basis of valid tenancy can be evicted from the premises only by resorting to the provisions of the Rent Control Act, even if the lease is terminated, we are compelled to 29 W.A. No.1577 of 2025 2025:KER:56062 look into that aspect also in this judgment.

34. The Rent Control Act does not define lease. Section 105 of the T.P Act defines lease as under:

105. Lease defined.--A lease of immovable property is a transfer of a right to enjoy such property, made for a certain time, express or implied, or in perpetuity, in consideration of a price paid or promised, or of money, a share of crops, service or any other thing of value, to be rendered periodically or on specified occasions to the transferor by the transferee, who accepts the transfer on such terms.

Lessor, lessee, premium and rent defined.--The transferor is called the lessor, the transferee is called the lessee, the price is called the premium, and the money, share, service or other thing to be so rendered is called the rent."

35. Section 107 of the T.P Act deals with the manner in which leases have to be made. The said Section reads thus:

"107. Leases how made. - 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.

All other leases of immovable property may be made either by a registered instrument or by oral agreement accompanied by delivery of possession.

Where a lease of immovable property is made by a registered instrument, such instrument or, where there are more instruments than one, each such instrument shall be 30 W.A. No.1577 of 2025 2025:KER:56062 executed by both the lessor and the lessee. Provided that the State Government may, from time to time, by notification in the Official Gazette, direct that leases of immovable property, other than leases from year to year, or for any term exceeding one year, or reserving a yearly rent, or any class of such leases, may be made by unregistered instrument or by oral agreement without delivery of possession".

36. Section 111 of the T.P Act deals with the determination of lease. The said Section is extracted hereunder:

"111. Determination of lease.--A lease of immovable property determines--

(a) by efflux of the time limited thereby;

(b) where such time is limited conditionally on the happening of some event--by the happening of such event;

(c) where the interest of the lessor in the property terminates on, or his power to dispose of the same extends only to, the happening of any event--by the happening of such event;

(d) in case the interests of the lessee and the lessor in the whole of the property become vested at the same time in one person in the same right;

(e) by express surrender; that is to say, in case the lessee yields up his interest under the lease to the lessor, by mutual agreement between them;

(f) by implied surrender;

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(g) by forfeiture; that is to say, (1) in case the lessee breaks an express condition which provides that, on breach thereof, the lessor may re-enter or (2) in case the lessee renounces his character as such by setting up a title in a third person or by claiming title in himself; or (3) the lessee is adjudicated an insolvent and the lease provides that the lessor may re-enter on the happening of such event; and in any of these cases, the lessor or his transferee gives notice in writing to the lessee of his intention to determine the lease;

(h) on the expiration of a notice to determine the lease, or to quit, or of intention to quit, the property leased, duly given by one party to the other".

37. On anxious consideration of the various provisions under the T.P Act, the Rent Control Act and the SARFAESI Act, referred to above in the light of the judgments of the Apex Court in Harshad Govardhan [(2014) 6 SCC 1] and Bajarang Shyamsunder Agarwal [(2019) 9 SCC 94] we are of the firm view that the protection under the provisions of the Rent Control Act is available only to a tenant who was legally inducted to the secured asset by the borrower and not to a tenant who occupy the secured asset in violation of provisions of law. A proposition to the contra will give rise to a situation wherein a cunning defaulter may 32 W.A. No.1577 of 2025 2025:KER:56062 induct a person to the secured asset by creating a false tenancy with a view to defeat the steps that would be taken by the bank, at any stage of the security proceedings. From the principles laid down in Bajarang Shyamsunder Agarwal [(2019) 9 SCC 94] it is evident that Section 35 of the SARFAESI Act has overriding effect on all other laws having inconsistent provisions.

38. In Shiju Mani [2024 (2) KHC 68], the learned Single Judge, after holding that a tenant in possession with valid tenancy can be evicted only by taking recourse under Section 11 of the Rent Control Act, in paragraph 60 of that judgment held that the forum competent to decide the legal issue arising from the proceedings under the SARFAESI Act is the Debts Recovery Tribunal. The learned Single Judge by referring to Section 17(4-A) of the SARFAESI Act held that if the Tribunal finds that the lease or tenancy is one falling within the ambit of the Rent Control Act, the Tribunal necessarily has to relegate the parties to the Rent Control Court for eviction of the tenant. The learned Single Judge has noted that the Debts Recovery Tribunal has jurisdiction to examine whether a lease or a tenancy has expired or stood 33 W.A. No.1577 of 2025 2025:KER:56062 determined. Having noted so, the learned Single Judge held that even if lease is terminated, if the lease is within the ambit of Rent Control Act, the eviction of the tenant from the secured asset can be only by resort to the provisions of the Rent Control Act. We are unable to agree with the above reasoning of the learned Single Judge. As discussed hereinabove, the protection to the tenant in possession of a secured asset is available under the provisions of the Rent Control Act, only if he is lawfully inducted and not to a tenant who was inducted in violation of any of the provisions of law that make the tenancy illegal. When Section 35 of the SARFAESI Act gives overriding effect to that Act on all other laws having inconsistent provisions, and Section 17(4-A) gives authority to the Debts Recovery Tribunal to examine whether a lease or a tenancy has expired or determined, then it is the Debts Recovery Tribunal to determine that question. If the Tribunal finds that the lease is not lawful or has already terminated, then there is no necessity to relegate the parties to the proceedings under the Rent Control Act. To that extent, the judgment of the learned Single Judge in Shiju Mani [2024 (2) KHC 68] did not express 34 W.A. No.1577 of 2025 2025:KER:56062 the correct position of law.

39. While coming to the instant case, as noted above, the appellant obtained the rooms on rent from the 2 nd respondent on 29.04.2023. The property of the 2nd respondent, including the building wherein the appellant was inducted as a lessee, was mortgaged to the 1st respondent Bank on 02.04.2014, much before the execution of the lease deed, by creating an equitable mortgage. Ext.R1(A) produced by the 1st respondent, along with the counter affidavit filed in the writ petition, is the written statement filed by the 1st respondent before the Debts Recovery Tribunal-II, Ernakulam, in S.A. No.618 of 2024 with the Annexures therein. The equitable mortgage was created initially on 02.04.2014 and subsequently extended on 01.01.2015, 28.03.2018, and 29.06.2022, as evident from the Annexures produced with Ext.R1(A) written statement of the Bank. As per the terms and conditions of the mortgage produced by the 1 st respondent Bank, there is a condition as clause (i), which restrains the mortgagor from creating any further charge, lien or encumbrance over the assets and properties of the firm charged 35 W.A. No.1577 of 2025 2025:KER:56062 to the Bank in favour of any other Banks, Financial Institution, Company, Firm or person without the Bank's prior permissision in writing. It also restrains the mortgagor from selling, assigning the mortgage or otherwise disposing of any of the fixed assets charged to the Bank and undertaking any activity other than that for which the facilities have been sanctioned without prior written permission of the Bank as per clauses (j) and (k). These conditions were incorporated when the loan was initially sanctioned. On the same terms and conditions, the loan was renewed on 13.11.2019. For the second time also, the same terms and conditions were incorporated while the loan was renewed on 29.06.2022.

40. Ext.P1 rent agreement executed between the appellant and the 2nd respondent is for a period of seven years. As stipulated under Section 107 of the T.P Act, the said rent agreement is registered. However, while going through the materials on record, it is evident that Ext.P1 rent agreement falls under the mischief of violation of Section 65A(2)(e) of the T.P. Act. As already noted, Section 65A(2)(e) provides that in the case of a lease of buildings, whether leased with or without the land on which they stand, of a 36 W.A. No.1577 of 2025 2025:KER:56062 mortgaged property, the duration of the lease shall in no case exceed three years and the lease shall contain a covenant for payment of the rent and a condition of re-entry on the rent not being paid within a time therein specified. Ext.P1 rent agreement, being the one executed for a period of seven years and without a covenant to re-entry in case of failure to pay the rent, violates this clause in Section 65A of the T.P. Act. Since Ext.P1 lease deed was executed contrary to Section 65A(2)(e) of the Transfer of Property Act and the terms and conditions of the mortgage, the appellant is not entitled to claim the benefit of a tenancy that created in her favour. In that circumstance also, the appellant is not entitled to claim that she can be evicted from the subject property only by taking recourse under Section 11 of the Rent Control Act.

41. Apart from all, we notice that as rightly held by the learned Single Judge, the filing of an original petition as O.P.(DRT) No. 398 of 2024 by the appellant before this Court during the pendency of the appeal before the Debts Recovery Appellate Tribunal was suppressed while filing the writ petition. Such a pleading is conspicuously absent in the writ petition. It is trite that 37 W.A. No.1577 of 2025 2025:KER:56062 the Relief under Article 226 of the is a discretionary one. It is therefore fundamental that a litigant approaching the Court under Article 226 of the Constitution of India should come with clean hands and disclose all material facts. Non-disclosure or suppression of material facts would disentitle a litigant from obtaining any relief.

42. In Prestige Lights Ltd. v. State Bank of India [(2007) 8 SCC 449] the Apex Court held that a prerogative writ remedy is not available as a matter of course. In exercising its extra - ordinary powers, a writ Court would need to bear in mind the conduct of the party invoking such jurisdiction. If the applicant does not disclose full facts or suppresses material facts or is otherwise guilty of misleading the Court, the Court may dismiss the action without adjudicating the matter.

43. In K.D.Sharma v. Steel Authority of India Ltd. [(2008) 12 SCC 481] the Apex Court held as under:

"34. The jurisdiction of the Supreme Court under Article 32 and of the High Court under Article 226 of the Constitution is extraordinary, equitable and discretionary. Prerogative writs mentioned therein are issued for doing substantial justice. It is, therefore, of utmost necessity that the 38 W.A. No.1577 of 2025 2025:KER:56062 petitioner approaching the writ court must come with clean hands, put forward all the facts before the court without concealing or suppressing anything and seek an appropriate relief. If there is no candid disclosure of relevant and material facts or the petitioner is guilty of misleading the court, his petition may be dismissed at the threshold without considering the merits of the claim."

44. During the course of arguments, to a query made by this Court, the submissions of the learned counsel for the appellant was that O.P.(DRT) No.398 of 2024 was disposed by this Court directing the Debts Recovery Tribunal, untrammelled by the observations in that judgment and hence the appellant did not plead regarding filing of that OP(DRT) in the writ petition. But, while considering the nature of the dispute between the parties, we are of the view that the appellant ought to have disclosed the filing and disposal of OP(DRT) No.398 of 2024 in the writ petition, since the suppression of the same cannot be accepted, when viewed in the angle of a fair litigation.

Having considered and pleadings and materials on record and the submissions made at the Bar, in the light of the discussions above, we find that the appellant is not entitled to claim protection from eviction by resorting to the provisions under the Rent Control 39 W.A. No.1577 of 2025 2025:KER:56062 Act and hence not entitled to the reliefs sought under Article 226 of the Constitution of India. Consequently, we find no ground to interfere with the impugned judgment of the learned Single Judge.

In the result, the writ appeal stands dismissed.

Sd/-

ANIL K.NARENDRAN, JUDGE Sd/-

sks                             MURALEE KRISHNA S., JUDGE

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