Gujarat High Court
Modern Advertisement vs District Magistrate on 11 March, 2020
Author: Biren Vaishnav
Bench: Biren Vaishnav
C/SCA/6634/2017 JUDGMENT
IN THE HIGH COURT OF GUJARAT AT AHMEDABAD
R/SPECIAL CIVIL APPLICATION NO. 6634 of 2017
With
CIVIL APPLICATION (FOR VACATING INTERIM RELIEF) NO. 1 of 2019
In
R/SPECIAL CIVIL APPLICATION NO. 6634 of 2017
With
R/SPECIAL CIVIL APPLICATION NO. 4706 of 2017
With
CIVIL APPLICATION (FOR VACATING INTERIM RELIEF) NO. 1 of 2019
In
R/SPECIAL CIVIL APPLICATION NO. 4706 of 2017
With
R/SPECIAL CIVIL APPLICATION NO. 5190 of 2017
With
R/SPECIAL CIVIL APPLICATION NO. 5191 of 2017
With
CIVIL APPLICATION (FOR VACATING INTERIM RELIEF) NO. 1 of 2019
In
R/SPECIAL CIVIL APPLICATION NO. 5191 of 2017
With
R/SPECIAL CIVIL APPLICATION NO. 5192 of 2017
With
CIVIL APPLICATION (FOR VACATING INTERIM RELIEF) NO. 1 of 2019
In
R/SPECIAL CIVIL APPLICATION NO. 5192 of 2017
With
R/SPECIAL CIVIL APPLICATION NO. 5193 of 2017
With
CIVIL APPLICATION (FOR VACATING INTERIM RELIEF) NO. 1 of 2019
In
R/SPECIAL CIVIL APPLICATION NO. 5193 of 2017
With
R/SPECIAL CIVIL APPLICATION NO. 5194 of 2017
With
R/SPECIAL CIVIL APPLICATION NO. 5195 of 2017
With
CIVIL APPLICATION (FOR VACATING INTERIM RELIEF) NO. 1 of 2019
In
R/SPECIAL CIVIL APPLICATION NO. 5195 of 2017
With
R/SPECIAL CIVIL APPLICATION NO. 5196 of 2017
With
CIVIL APPLICATION (FOR VACATING INTERIM RELIEF) NO. 1 of 2019
Page 1 of 19
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C/SCA/6634/2017 JUDGMENT
In
R/SPECIAL CIVIL APPLICATION NO. 5196 of 2017
With
R/SPECIAL CIVIL APPLICATION NO. 6639 of 2017
With
CIVIL APPLICATION (FOR VACATING INTERIM RELIEF) NO. 1 of 2019
In
R/SPECIAL CIVIL APPLICATION NO. 6639 of 2017
FOR APPROVAL AND SIGNATURE:
HONOURABLE MR.JUSTICE BIREN VAISHNAV
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1 Whether Reporters of Local Papers may be allowed to
see the judgment ?
2 To be referred to the Reporter or not ?
3 Whether their Lordships wish to see the fair copy of the
judgment ?
4 Whether this case involves a substantial question of law
as to the interpretation of the Constitution of India or any
order made thereunder ?
==========================================================
ANILKUMAR VALJIBHAI RAJPARA
Versus
DISTRICT MAGISTRATE & 4 other(s)
==========================================================
Appearance:
MS M O NARSINGHANI(3849) for the Petitioner(s) No. 1
MR.ISHAN JOSHI, AGP (99) for the Respondent(s) No. 1 in Special Civil
Application Nos.6634/2017 with CA 1/2019; SCA 4706/2017 with CA 1/2019;
SCA 5190/2017; SCA 5191/2017 with CA 1/2019; SCA 5192/2017 with CA
1/2019
MR.K.M.ANTANI, AGP for the Respondent(s) No. 1 in Special Civil
Application Nos.5193/2017 with CA 1/2019; SCA 5194/2017; SCA 5195/2017
with CA 1/2019, SCA 5196/2017 with CA 1/2019, SCA 6639/2017 with CA
1/2019
MR NAGESH C SOOD(1928) for the Respondent(s) No. 4,5
NOTICE SERVED(4) for the Respondent(s) No. 2
NOTICE UNSERVED(8) for the Respondent(s) No. 3
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C/SCA/6634/2017 JUDGMENT
CORAM: HONOURABLE MR.JUSTICE BIREN VAISHNAV
Date : 11/03/2020
COMMON ORAL JUDGMENT
1. In all these petitions under Article 226 of the Constitution of India, tenants of rented premises have challenged the orders passed by the District Magistrate under Section 14 of the Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 ('SARFAESI Act' for short). By the orders under challenge, the petitioners who were tenants, faced eviction from the properties rented out to them by the landlords. The landlords who were borrowers, their properties have been sought to be sold for their defaults in paying loans and having faced proceedings under the SARFAESI Act.
2. Since common questions of law and facts arise in all these petitions, facts from Special Civil Application No.4706 of 2017 are discussed.
2.1 The petitioner was inducted as a tenant by the respondent No.3 on 01.03.2010 for a period of nine years at a yearly rent of Rs.96000/- for an office premises at Surat. Rent agreement was entered into on 01.03.2010. The case of the petitioner is that the respondent nos.3 and 4 started raising disputes and stopped paying corporation bills. They came to the rented premises and demanded rent and threatened the petitioner of eviction. Regular Civil Suit No.186 of 2013 was filed by the petitioner before the Principal Senior Civil Judge, Surat, praying that the respondent landlords be restrained from evicting the petitioner. Application Exh.5 was granted Page 3 of 19 Downloaded on : Sat Sep 04 03:56:13 IST 2021 C/SCA/6634/2017 JUDGMENT on 16.01.2014 restraining the respondent nos.3 and 4 landlords from evicting the petitioner without following due process of law.
2.2 The petitioner received a notice on 04.01.2017 with the order of 21.12.2016 passed by the District Magistrate under Section 14 of the SARFAESI Act. On inquiry, the petitioner was told that the respondent nos.3 and 4 had mortgaged the rented premises on 25.06.2011 for availing cash credit facility. The mortgage was entered into on 25.06.2011 for availing cash credit facility from the respondent no.5-State Bank of India.
3. Ms.Narsinghani, learned counsel for the petitioner would submit that the orders under Section 14 have been passed without giving any opportunity of hearing. That the petitioner was inducted well before the property was mortgaged to the bank. Civil Suits filed by the tenant- petitioner was pending and eviction under the provisions of the SARFAESI Act could not be resorted to when the case of the petitioner was governed by the Rent Act.
4. While issuing notice in all these petitions, this Court had passed the following order:
" Draft amendment is allowed as prayed for, which shall be carried out forthwith.
Notice returnable on 07.04.2017. Learned AGP wavies service of notice on behalf of respondent No.1.
However, henceforth, petitioner shall deposit the amount of rent directly before respondent No.5 - State Bank of India.Page 4 of 19 Downloaded on : Sat Sep 04 03:56:13 IST 2021
C/SCA/6634/2017 JUDGMENT Respondent No.5 is entitle to raise an issue regarding standard rent in appropriate manner pursuant to case of Vishal N. Kalsaria vs. Bank of India & Ors. Reported in 2016 (3) SCC 762.
Petitioner has to file an undertaking that he will deposit the rent directly before respondent No.5
- State Bank of India. On filing such undertaking, let there be an interim relief in terms of para 7C. till returnable date.
The amount of rent, that may be deposited by the petitioner shall be credited towards debt of respondent No.3.
Direct Service TODAY is permitted."
5. Ms.Narsinghani would rely on the decision of the Supreme Court in the case of Vishal N. Kalsaria v. Bank of India and others reported in (2016) 3 SCC 762. She would submit that the Supreme Court while discussing the provisions of the SARFAESI Act and the Rent Control Registration, has held that when admittedly the mortgage was entered into after the rent agreement, it cannot be said that there is collusion between the landlord and the tenant to overcome the provisions of the SARFAESI Act. She also relied on a decision in the case of Bajarang Shyamsunder Agarwal v. Central Bank of India and Another reported in (2019) 9 SCC 64.
6. Mr.Nagesh Sood, learned advocate appearing for the bank relied on the affidavits filed in the petitions to contend that the petitioners have concealed material facts. The lease was entered into purely with a view to overcome the provisions of the SARFAESI Act. It was a specific condition on the mortgage deed that the property will not be encumbered for a charge created thereupon. Notice under Section 13(2) Page 5 of 19 Downloaded on : Sat Sep 04 03:56:13 IST 2021 C/SCA/6634/2017 JUDGMENT of the SARFAESI Act was issued and only with a view to escape the liability, the lease deed was entered into. He submitted that the provisions of the SARFAESI Act shall have effect notwithstanding anything concerning therein contained in any other law for the time being in force and by virtue of Section 13(4) read with Section 13(6), the mortgage assets shall vest with the bank free from all encumbrances. He further submitted that the lease agreements were in contravention of Section 65A of the Transfer of Property Act.
7. Considering the submissions made by the learned advocates for the respective parties, for the convenience of appreciating the facts, the date of the rent agreement and the date of mortgage deed and the Civil Suit filed by each petitioner are reproduced in a tabular form as under:
Special Civil Application Number Mortgage Rent Regular Date Agreement Civil Suit date Number 5190 of 2017 17.11.11 01.03.10 200 of 2013 Maganbhai J Dhameliya 5191 of 2017 29.02.12 01.09.11 265 of 2013 M/s. Modern Advertisement 5192 of 2017 17.11.11 01.09.11 163 of 2013 Bhaveshbhai Dulabhai Kukadiya 5193 of 2017 11.10.11 01.03.10 181 of 2013 Pravinbhai Dhanjibhai Kukadiya 5194 of 2017 29.02.12 01.08.11 330 of 2013 Vishal Vinubhai Balar 5195 of 2017 11.10.11 01.03.10 171 of 2013 Ramesh Laxmanbhai Bakhtariya 5196 of 2017 11.10.11 01.06.11 172 of 2013 Mr. Mafabhai Shiroya 6634 of 2017 29.06.11 15.06.11 179 of 2013 6639 of 2017 29.03.10 25.03.10 29.06.11 01.05.11 Page 6 of 19 Downloaded on : Sat Sep 04 03:56:13 IST 2021 C/SCA/6634/2017 JUDGMENT 4706 of 2017 25.06.11 01.03.10 186 of 2013
8. What is evident from the above table is that, admittedly, in all these cases, the rent agreement was entered into prior to the deed of mortgage. It is therefore an admitted and undisputed question of law which both the parties agree to that the issue is squarely covered by the decision of the Supreme Court in the case of Vishal N. Kalsaria (supra). While discussing the objects and provisions of the SARFAESI Act vis-a-vis the Rent Act, the Supreme Court held as under:
"23. The SARFAESI Act, which came into force from 21.06.2002, was enacted to provide procedures to the Banks to recover their security interest from the debtors and their collateral security assets as provided under the provisions of the Act. The scope of the Act was explained by this Court in the case of Transcore v. Union of India & Anr.[5] as under:
"12. The NPA Act, 2002 is enacted to regulate securitization and reconstruction of financial assets and enforcement of security interest and for matters connected therewith. The NPA Act enables the banks and FIs to realize long-term assets, manage problems of liquidity, asset- liability mismatch and to improve recovery of debts by exercising powers to take possession of securities, sell them and thereby reduce non- performing assets by adopting measures for recovery and reconstruction. The NPA Act further provides for setting up of asset reconstruction companies which are empowered to take possession of secured assets of the borrower including the right to transfer by way of lease; assignment or sale. The said Act also empowers the said asset reconstruction companies to take over the management of the business of the borrower....
13. Non-performing assets (NPA) are a cost to the economy. When the Act was enacted in 2002, the NPA stood at Rs 1.10 lakh crores. This was a Page 7 of 19 Downloaded on : Sat Sep 04 03:56:13 IST 2021 C/SCA/6634/2017 JUDGMENT drag on the economy. Basically, NPA is an account which becomes non-viable and non- performing in terms of the guidelines given by RBI. As stated in the Statement of Objects and Reasons, NPA arises on account of mismatch between asset and liability. The NPA account is an asset in the hands of the bank or FI. It represents an amount receivable and realizable by the banks or FIs. In that sense, it is an asset in the hands of the secured creditor. Therefore, the NPA Act, 2002 was primarily enacted to reduce the non- performing assets by adopting measures not only for recovery but also for reconstruction. Therefore, the Act provides for setting up of asset reconstruction companies, special purpose vehicles, asset management companies, etc. which are empowered to take possession of secured assets of the borrower including the right to transfer by way of lease, assignment or sale. It also provides for realization of the secured assets. It also provides for takeover of the management of the borrower company."
24. Thus, it becomes clear that the SARFAESI Act is meant to operate as a tool for banks and ensures a smooth debt recovery process. The provisions of SARFAESI Act make its purport amply clear, specifically under the provisions of Sections 13(2) and 13(4) of the Act, which read as under:
"13. Enforcement of Security interest.- (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 non-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). "(4) In case the borrower fails to discharge his liability in full within the period specified in sub-Page 8 of 19 Downloaded on : Sat Sep 04 03:56:13 IST 2021
C/SCA/6634/2017 JUDGMENT 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...."
25. Further, the provision under Section 35 of the SARFAESI Act provides that it shall override all other laws, which is quoted as hereunder:
"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."
26. Providing a smooth and efficient recovery procedure to enable the banks to recover the Non Performing Assets is a laudable object indeed, which needs to be ensured for the development of the economy of the Country. What has complicated the matters, however, is the clash of this laudable object with another laudable object, namely, to secure the rights of the tenants under the various Rent Control Acts. The history of these Rent Control Acts can be traced to as far back as the Second World War. At that time, due to the massive inflation and shortage of commodities, not only had the cost of living risen exponentially, the tenants were also often left to the mercy of the landlords as far as evictions or prices of rent were concerned. Rent Control Acts have been enacted by the different state legislatures to secure the rights of the weaker sections of the society, viz., the tenants. Justice Krishna Iyer aptly observed in the case of Miss Santosh Mehta v. Om Prakash & Ors.[6]:
"2. Rent Control laws are basically designed to protect tenants because scarcity of accommodation is a nightmare for those who own none and if evicted, will be helpless."
27. The preamble of the Rent Control Act reads as Page 9 of 19 Downloaded on : Sat Sep 04 03:56:13 IST 2021 C/SCA/6634/2017 JUDGMENT under:
"An Act to unify, consolidate and amend the law relating to the control of rent and repairs of certain premises and of eviction and for encouraging the construction of new houses by assuring a fair return on the investment by landlords and to provide for the matters connected with the purposes aforesaid......" It becomes clear from a perusal of the preamble of the Act that the ultimate object behind the enactment of this legislation is to control and regulate the rate of rent so that unnecessary hardship is not caused to the tenant, and also to provide protection to the tenants against arbitrary and unreasonable evictions from the possession of the property.
...
...
37. It is a settled position of law that once tenancy is created, a tenant can be evicted only after following the due process of law, as prescribed under the provisions of the Rent Control Act. A tenant cannot be arbitrarily evicted by using the provisions of the SARFAESI Act as that would amount to stultifying the statutory rights of protection given to the tenant. A non obstante clause (Section 35 of the SARFAESI Act) cannot be used to bulldoze the statutory rights vested on the tenants under the Rent Control Act. The expression 'any other law for the time being in force' as appearing in Section 35 of the SARFAESI Act cannot mean to extend to each and every law enacted by the Central and State legislatures. It can only extend to the laws operating in the same field.
...
39. If the interpretation of the provisions of SARFAESI Act as submitted by the learned senior counsel appearing on behalf of the Banks is accepted, it would not only tantamount to violation of rule of law, but would also render a valid Rent Control statute enacted by the State Legislature in Page 10 of 19 Downloaded on : Sat Sep 04 03:56:13 IST 2021 C/SCA/6634/2017 JUDGMENT exercise of its legislative power under Article 246 (2) of the Constitution of India useless and nugatory. The Constitution of India envisages a federal feature, which has been held to be a basic feature of the Constitution, as has been held by the seven Judge Bench of this Court in the case of S.R. Bommai & Ors. v. Union of India[11], wherein Justice K. Ramaswamy in his concurring opinion elaborated as under:
"247. Federalism envisaged in the Constitution of India is a basic feature in which the Union of India is permanent within the territorial limits set in Article 1 of the Constitution and is indestructible. The State is the creature of the Constitution and the law made by Articles 2 to 4 with no territorial integrity, but a permanent entity with its boundaries alterable by a law made by Parliament. Neither the relative importance of the legislative entries in Schedule VII, Lists I and II of the Constitution, nor the fiscal control by the Union per se are decisive to conclude that the Constitution is unitary. The respective legislative powers are traceable to Articles 245 to 254 of the Constitution. The State qua the Constitution is federal in structure and independent in its exercise of legislative and executive power. However, being the creature of the Constitution the State has no right to secede or claim sovereignty. Qua the Union, State is quasi-federal. Both are coordinating institutions and ought to exercise their respective powers with adjustment, understanding and accommodation to render socio-economic and political justice to the people, to preserve and elongate the constitutional goals including secularism.
248. The preamble of the Constitution is an integral part of the Constitution. Democratic form of Government, federal structure, unity and integrity of the nation, secularism, socialism, social justice and judicial review are basic features of the Constitution." (emphasis laid by this Court)"Page 11 of 19 Downloaded on : Sat Sep 04 03:56:13 IST 2021
C/SCA/6634/2017 JUDGMENT
9. What is evident therefore from the ratio of the judgment is that the rent law is a special law and when from the perusal of the preamble of the Act it becomes clear that it is with a view to protect the tenants from arbitrary eviction, the petitioners are entitled to the protection against eviction, particularly when except in the case of the petitioner of Special Civil Application No.6639 of 2017 suits are pending before the competent Trial Courts. Even in the case of Bajarang Shyamsunder Agarwal (supra), the Supreme Court has held that if a valid tenancy is in existence even prior to the creation of mortgage, the tenant's possession cannot be disturbed. The position of law in Vishal N. Kalsaria (supra)'s case has been affirmed by the Supreme Court.
"15. Section 17 provides for an invaluable right of appeal to any person including the borrower to approach the Debt Recovery Tribunal (hereinafter referred to as the "DRT"). In Harshad Govardhan Case (supra) this Court held that the right of appeal is available to the tenant claiming under a borrower, however the right of repossession does not exist with the tenant. However, in Kanaiyalal Lalchand Sachdev and Ors. vs. State of Maharashtra and Ors., (2011) 2 SCC 782, this Court held that the DRT can, not only set aside the action of the secured creditor, but even restore the status quo ante. We do not intend to express any view on this issue since it is not relevant for the disposal of this appeal. We also note that Parliament has stepped in and amended Section 17 by the Enforcement of Security Interest and Recovery of Debts Laws and Miscellaneous Provisions (Amendment) Act, 2016 (44 of 2016).
Under the amendment, possession can be restored to the "borrower or such other aggrieved person".
16. Section 35 of the SARFAESI Act provides an overriding effect over "anything inconsistent contained in any other law", in the following Page 12 of 19 Downloaded on : Sat Sep 04 03:56:13 IST 2021 C/SCA/6634/2017 JUDGMENT manner.
"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."
Section 35 is critical to this case and we will examine the conflicting views on Section 35.
17. The interplay between the SARFAESI Act and the right of the tenant was first examined by this Court in Harshad Govardhan Case (supra). It may be noted that the present appellant was a party to the aforesaid proceedings. This Court was confronted with the question as to whether the provisions of the SARFAESI Act affect the right of a lessee to remain in possession of the secured asset during the period of the lease. After noticing the scheme of the Act, this 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, this Court concluded that the Chief Metropolitan Magistrate /District Magistrate can pass an order for delivery of possession of secured asset in favour of secured creditor only when he finds that the lease has been determined in accordance with Section 111 of the T.P. Act.
18. The Court further held that if the Chief Metropolitan Magistrate / District 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 an 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 mortgage or after the creation of the mortgage satisfying the requirements of Section 65A of the T.P. Act or even Page 13 of 19 Downloaded on : Sat Sep 04 03:56:13 IST 2021 C/SCA/6634/2017 JUDGMENT 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.
19. This Court also recognised the inconsistency between Section 13(13) of the SARFAESI Act and Section 65A of the Transfer of Property Act. While Section 13(13) of SARFAESI prohibits a borrower from leasing out any of the secured assets 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. This inconsistency was resolved by holding that the SARFAESI Act will override the provisions of the T.P. Act.
20. Before concluding, the Court in Harshad Govardhan Case (supra), distinguished the implications of a registered and an unregistered instrument/oral agreement, in the following manner:
"36. We may now consider the contention of the respondents that some of the appellants have not produced any document to prove that they are bona fide lessees of the secured assets. We find that in the cases before us, the appellants have relied on the written instruments or rent receipts issued by the landlord to the tenant. Section 107 of the Transfer of Property Act provides that a lease of immovable property from year to year, or for any term exceeding one year or reserving a yearly rent, can be made "only by a registered instrument" and all other leases of immovable property may be made either by a registered instrument or by oral agreement accompanied by delivery of possession. Hence, if any of the appellants claim that they are entitled to possession of a secured asset for any term exceeding one year from the date of the lease made in his favour, he has to produce proof of execution of a registered instrument in his Page 14 of 19 Downloaded on : Sat Sep 04 03:56:13 IST 2021 C/SCA/6634/2017 JUDGMENT favour by the lessor. Where he does not produce proof of execution of a registered instrument in his favour and instead relies on an unregistered instrument or oral agreement accompanied by delivery of possession, the Chief Metropolitan Magistrate or the District Magistrate, as the case may be, will have to come to the conclusion that he is not entitled to the possession of the secured asset for more than a year from the date of the instrument or from the date of delivery of possession in his favour by the landlord. (emphasis supplied)"
21. The second case which dealt with the issue of tenants' rights under the SARFAESI Act is Vishal N. Kalsaria Case (supra). This Court was concerned with the question Whether a "protected tenant"
under the Maharashtra Rent Control Act, 1999 can be treated as a lessee and whether the provisions of the SARFEASI Act, will override the provisions of the Rent Act?
22. After examining the legal and constitutional position, the 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 Rent Acts to control the rate of rent and provide protection to tenants against arbitrary and unreasonable evictions. To resolve this conflict, this Court held that:
22.1 The provisions of the SARFAESI Act cannot be used to override the provisions of the Rent Act. The landlord cannot be permitted to do indirectly what he has been barred from doing under the Rent Act.
22.2 While a yearly tenancy requires to be registered, oral tenancy can still be proved by showing that the tenant has been in occupation of the premises before the Magistrate under Section 14 of the SARFAESI Act.Page 15 of 19 Downloaded on : Sat Sep 04 03:56:13 IST 2021
C/SCA/6634/2017 JUDGMENT 22.3 The nonregistration of the tenancy deed cannot be used against the tenant. For leasehold rights being created after the property has been mortgaged to the bank, the consent of the creditor needs to be taken.
22.4 Even though Section 35 of the SARFAESI Act has a non obstante clause, it will not override the statutory rights of the tenants under the Rent Control Act. The non obstante clause under Section 35 of the SARFAESI Act only applies to laws operating in the same field.
23. While we agree with the principle laid out in Vishal N. Kalsaria Case (supra) that the tenancy rights under the Rent Act need to be respected in appropriate cases, however, we believe that the holding with respect to the restricted application of the non obstante clause under section 35 of 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 of this Court in Harshad Govardhan Case (supra).
24. In our view, the objective of SARFAESI Act, coupled with the T.P. Act and the Rent Act are required to be reconciled herein in the following manner:
24.1 If a valid tenancy under law is in existence even prior to the creation of the mortgage, the tenant's possession cannot be disturbed by the secured creditor by taking possession of the property. The lease has to be determined in accordance with Section 111 of the TP Act for determination of leases. As the existence of a prior existing lease inevitably affects the risk undertaken by the bank while providing the loan, it is expected of Banks/Creditors to have conducted a standard due diligence in this regard. Where the bank has proceeded to accept such a property as mortgage, it will be presumed that it has consented to the risk Page 16 of 19 Downloaded on : Sat Sep 04 03:56:13 IST 2021 C/SCA/6634/2017 JUDGMENT that comes as a consequence of the existing tenancy.
In such a situation, the rights of a rightful tenant cannot be compromised under the SARFAESI Act proceedings.
24.2 If a tenancy under law comes into existence after the creation of a mortgage, but prior to the issuance of notice under Section 13(2) of the SARFAESI Act, it has to satisfy the conditions of Section 65A of the T.P. Act.
24.3 In any case, if any of the tenants claim that he is entitled to possession of a secured asset for a term of more than a year, it has to be supported by the execution of a registered instrument. In the absence of a registered instrument, if the tenant relies on an unregistered instrument or an oral agreement accompanied by delivery of possession, the tenant is not entitled to possession of the secured asset for more than the period prescribed under Section 107 of the T.P. Act."
10. Mr.Sood learned counsel for the respondent pointed out that in Special Civil Application No.5191 and 5196 of 2017, there is a breach of undertaking filed before this Court and the petitioners are in arrears of rent. As far as Special Civil Application No.5190 and 5194 of 2017 are concerned, the petitioners have been evicted and the properties are sold.
11. Considering the issue raised in these petitions which is covered by the decision in cases of Vishal N. Kalsaria (supra) and Bajarang Shyamsunder Agarwal (supra), the petitions are partly allowed. The order dated 21.12.2016 passed by the District Magistrate under Section 14 of the SARFAESI Act are quashed and set aside. Petitioners of Special Civil Application No.5191 and 5196 of 2017 shall file an undertaking before this Court within a week from today Page 17 of 19 Downloaded on : Sat Sep 04 03:56:13 IST 2021 C/SCA/6634/2017 JUDGMENT that they will deposit the arrears of rent in accordance with their undertakings given before this Court in March, 2017 and they shall continue to pay such rents till the Civil Suit Nos.265 of 2013 and 172 of 2013 are decided by the competent Courts. Such deposit of rents including arrears shall be continued to be deposited with the State Bank of India subject to the outcome of the suits.
12. As far as Special Civil Application Nos.5190 and 5194 of 2017 are concerned, it will be open for the petitioners to join the subsequent purchasers (if sold) of such properties in the Civil Suit Nos.200 of 2013 and 330 of 2013 filed before the respective Courts.
13. Petitioners of Special Civil Application Nos.5192, 5193, 5195, 6634 and 4706 of 2017 shall also file undertakings within a week from today that they shall continue to pay rent including arrears, if any, deposit the same in accordance with their earlier undertakings of March 2017 filed with the SBI pending their suits i.e. Regular Civil Suit Nos.163 of 2013, 181 of 2013, 171 of 2013, 179 of 2013 and 186 of 2017 respectively before the competent Courts.
14. In the aforesaid petitions, the Trial Court shall expeditiously hear and decide the suits pending before them preferably within a period of six months from the date of receipt of copy of this order.
15. In Special Civil Application No.6639 of 2017, the petitioner shall file an undertaking that he will deposit the arrears of rent in accordance with their undertakings given Page 18 of 19 Downloaded on : Sat Sep 04 03:56:13 IST 2021 C/SCA/6634/2017 JUDGMENT before this Court in March, 2017. Such deposit of rents including arrears shall be continued to be deposited with the State Bank of India.
16. All the petitions are partly allowed.
17. No orders on the Civil Applications.
(BIREN VAISHNAV, J) ANKIT SHAH Page 19 of 19 Downloaded on : Sat Sep 04 03:56:13 IST 2021