Gujarat High Court
Mahendra Kanjibhai Vagadiya vs Axis Bank Limited & 6 on 3 October, 2017
Author: S.G. Shah
Bench: S.G. Shah
C/SCA/17206/2017 ORDER
IN THE HIGH COURT OF GUJARAT AT AHMEDABAD
SPECIAL CIVIL APPLICATION NO. 17206 of 2017
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MAHENDRA KANJIBHAI VAGADIYA....Petitioner(s)
Versus
AXIS BANK LIMITED & 6....Respondent(s)
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Appearance:
MR SHALIN N MEHTA, SENIOR ADVOCATE WITH MR SHIVANG M SHAH
WITH MR PRANAV S DAVE, ADVOCATE for the Petitioner(s) No. 1
MR AMIT M PANCHAL, MR S NITHIN, MS ARUNIMA SINGH, MS SHIVANI
RAJPUROHIT, MR SIDDHARTH JHA, MR ANGESH A PANCHAL,
ADVOCATES for the Respondent(s) No. 1 - 4
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CORAM: HONOURABLE MR.JUSTICE S.G. SHAH
Date : 03/10/2017
ORAL ORDER
1. Affidavit-in-rejoinder by the petitioner is to be taken on record.
2. Heard learned senior advocate Mr. Shalin N. Mehta with Mr. Shivang M. Shah and Mr. Pranav S. Dave for the petitioner and learned advocates Mr. Amit M. Panchal with Mr. S. Nithin with Ms. Arunima Singh with Ms. Shivani Rajpurohit with Mr. Siddharth Jha with Mr. Angesh A.Panchal for respondents No.1 to 4 - bank since they have filed caveat. Respondents No.5 to 7 are not before the court as on date because even notice is not issued to them till date.
3. Considering the controversy raised by the Page 1 of 13 HC-NIC Page 1 of 13 Created On Sat Oct 07 07:24:07 IST 2017 C/SCA/17206/2017 ORDER respondents - bank, by filing their detailed affidavit-in-reply, though this is an initial order, at admission stage a detailed scrutiny was done based upon the rival submissions in detail and therefore, there is a need to pass a detailed order even at this stage. So far as petitioner's case is concerned, it is quite short and simple to the effect that for their business of "Mandap" service on contract basis, there was requirement of space to store their material and therefore, petitioner has entered into the rent agreement/lease-deed with respondents No.5 and 6 on 1.1.2009, copy of which is produced at Annexure-A. Such lease-deed is for 10 years from 1.1.2009 and Rs.10,000/- was agreed to be paid by the petitioner to respondents No.5 and 6 as monthly rent. It is undisputed fact that respondents No.5 to 7 are owners of the property in question, which is Plot Nos.1 to 15 bearing Revenue Survey No.1109/01, situated within the city limits of Jamnagar and known as "Aashirwad- 2" plot. Other conditions of rent deed are not much material at this stage. However, it is agreed between the parties that petitioner may construct the fencing on the open plot and apply for electric connection. However, when respondents No.5 and 6 had created hindrance in construction of fencing and giving No Objection Certificate (NoC) for electric connection, though agreed in such lease-deed, the petitioner has no option but to file a suit before the Civil Court Page 2 of 13 HC-NIC Page 2 of 13 Created On Sat Oct 07 07:24:07 IST 2017 C/SCA/17206/2017 ORDER at Jamnagar on 27.7.2016, which is numbered as R.C.S.No.262 of 2016. It is also relevant to note that the lease agreement restricts the petitioner to construct anything except fencing. In such suit being R.C.S. No.262 of 2016, petitioner has also prayed for interim relief to refrain the respondents No.5 and 6 from restraining the petitioner in construction of fencing and to issue NoC for getting electric connection. After hearing both the sides, the competent Civil Court has partly allowed the application at Exh.5 for interim relief and directed the respondents No.5 and 6 being defendants in that suit to issue NoC in favour of the petitioner for getting electric connection and to refrain from restraining the petitioner from constructing fencing around the lease property. It seems that pursuant to such interim relief, respondents No.5 and 6 have realised their limitation and therefore, they entered into a consent deed whereby defendant withdrew all this objections against the prayer of the petitioner and confirmed that they will not snatch away the possession of the rented premise without following due process of law and will not restrict the petitioner from using the property pursuant to rent note/lease-deed dated 1.1.2009. In short, respondents No.5 and 6 have agreed to abide by the conditions of such rent note by their consent purshis at Exh.17 in such suit, based upon which the Civil Court has decreed the suit in terms of such consent.
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4. However, it seems that after entering into rent agreement in the year 2009, between the year 2012 - 2015, respondents No.5, 6 and 7 have taken financial advances/loan from respondents No.1 to
4. Respondent No.7 is firm owned by respondents No.5 and 6. For getting such advances, respondents No.5 and 6 have executed one equitable mortgage deed depositing the title of the properties, which are mortgaged in favour of the bank. Such mortgage deed is dated 10.5.2011, whereas, lease-deed is dated 1.1.2009 i.e. prior to executing such mortgage deed. It is undisputed fact that property under reference being open residential plot Nos.1 to 15, is subject matter of such mortgage for which respondents No.5 to 7 have endorsed in such mortgage deed that they have not created any mortgage or charge or lien or other encumbrances whatsoever and that the mortgagor's title to the mortgaged property is marketable and free from encumbrances, charge, suit or proceedings, claim and demand of any nature whatsoever.
5. Therefore, when respondents No.5 to 7 could not pay the loan amount in time to respondents No.1 to 4, they have initiated recovery proceedings by issuing notice on 2.3.2016 and it is their case that they have taken possession of the premise under reference on 28.6.2016. It is further stated by the bank that respondents No.5 to 7 have not objected to such proceeding and confirmed that possession of the property has Page 4 of 13 HC-NIC Page 4 of 13 Created On Sat Oct 07 07:24:07 IST 2017 C/SCA/17206/2017 ORDER been taken by them. However, so far as possession is concerned, there is factual dispute between the parties inasmuch as, it is the case of the petitioner also that possession is never taken from him and that they are in possession of the suit property and that during the litigation before the civil court, which is referred herein above, the respondents No.5 to 7 have never taken stand that petitioner is not in possession and that pursuant to mortgage by them, possession was taken by the bank. Therefore, at this stage, so far as issue regarding possession is concerned, the only effective direction would be in the form of direction for maintaining status-quo by all the parties.
6. However, respondents No.1 to 4 have opposed the admission of petition on several factual and legal grounds, which needs to be answered because matters require consideration after calling respondents No.5 to 7 and therefore, it cannot be summarily rejected even on the ground of jurisdiction of this court or even on the ground of maintainability of such petition before this court. For the purpose, contentions of respondents No.1 to 4 require consideration.
7. It is contended by the respondents - bank that they have taken the possession on 28.6.2016. However, as already stated herein above, there is contradictory version so far as possession is concerned and when petitioner is in position to Page 5 of 13 HC-NIC Page 5 of 13 Created On Sat Oct 07 07:24:07 IST 2017 C/SCA/17206/2017 ORDER show by producing receipt of electricity charges for the month of September, 2017 to show that the electricity was consumed by them for which they have paid the bill and therefore, they are in possession. However, as already stated herein above, such fact needs to be decided only after calling respondents No.5 to 7 because respondents
- bank is claiming possession through respondents No.5 to 7 and it is not case of the bank that possession was taken from the petitioner.
8. Respondents - bank has also contended that they have issued notice to sell the property on 9.12.2016 and they have already sold the property in public auction and therefore, now, petition is unwarranted. Suffice to say that if possession of the property is with the petitioner as a tenant of respondents No.5 to 7, even if bank or the auction purchaser becomes owner of the property, either in lieu of mortgage deed in favour of the bank or pursuant to auction sale in favour of the auction purchaser, the settled legal position, because of provisions of Rent Act, is quite clear that purchaser of the property with a tenant, would not get absolute right to get the property vacated immediately, but, at the most, he may be owner with tenant and Rent Law would be applicable now to him as a landlord in place of original landlord. Thereby, such landlord would get limited right of eviction, but in any case, they would not get absolute right to get the premise vacated from the tenant without following Page 6 of 13 HC-NIC Page 6 of 13 Created On Sat Oct 07 07:24:07 IST 2017 C/SCA/17206/2017 ORDER due process of law. Therefore, issuance of sale notice and auction sale so also accepting the auction money from proposed auction purchaser by the respondents - bank, would not change the legal position except what is stated herein above, whereby, the auction purchaser would be at the most owner of the property with tenant and thereby, he may be landlord and would be entitled to rent. So far as eviction of tenant is concerned, thereby, so far as possession of the property is concerned, the new landlord has to follow the provisions of Rent Act without fail. This is the precise situation in the present case and therefore, as discussed herein after, the other judgments and provisions of law referred by the respondents - bank would not be much material. However, when respondents - bank has submitted to refer such matter to Division Bench because of cited cases, I have no option, but to distinguish the details of such other cited cases and the present case for my determination to admit this petition with interim relief to maintain status-quo of the suit property by all th parties.
9. For the purpose, at the most, petitioner may be required to join the auction purchaser since his name is disclosed by the respondents - bank in affidavit-in-reply. So far as possession and right of auction purchaser is concerned, even respondents - bank has admitted in their affidavit that the new owner of the open land has Page 7 of 13 HC-NIC Page 7 of 13 Created On Sat Oct 07 07:24:07 IST 2017 C/SCA/17206/2017 ORDER brought the open land from bank on as is where is basis, which would mean and imply that any claim or whatsoever regarding the open land, has to be taken up against the third party. It is further contended that therefore, the petitioner has not only moved the wrong forum, but have also impleaded wrong parties. If it is so, the respondents - bank have nothing to bother about, when petition is against respondents No.5, 6 and 7 also. On the contrary, on 17.9.2017, the bank has addressed a detailed complaint to the Station House Officer of 'A' Division Police Station, Jamnagar calling the investigating officer to initiate complaint against the petitioner for alleged offences committed by him u/ss.159, 207, 268, 351, 421, 444, 503, 507 and 34 of the Indian Penal Code. Therefore, when complaint is u/s.441 for criminal trespass also, irrespective of right to possession, which is disputed fact and needs to be resolved by competent court, the fact remains that the respondents - bank have admitted that possession is with the petitioner. Moreover, such complaint and pleading in paragraph 19 of the affidavit-in-reply by respondents - bank is contrary.
10. In paragraph 17 of the affidavit-in-reply, when respondents - bank confirms that they are claiming possession based upon admission of respondents No.5 to 7 in Securitisation Application No.191 of 2016, it is quite clear and obvious that relevant documents or such Page 8 of 13 HC-NIC Page 8 of 13 Created On Sat Oct 07 07:24:07 IST 2017 C/SCA/17206/2017 ORDER proceedings are very much relevant for its scrutiny so also the presence of respondents No.5 to 7 before considering the allegation regarding fraud, if any committed by the petitioner, because, prima facie, it seems that fraud, if any committed with the respondents - bank, is probably by respondents No.5 to 7 and not by the petitioner. However, this is only a presumption, and it would be subject to investigation and scrutiny of relevant facts, documents and circumstances either by the investigating agency or by competent court.
11. So far maintainability of the petition is concerned, the respondents - bank is relying upon the amended provisions of the Securitization Act wherein w.e.f. 1.9.2016 sub-section 4-A is added in Section 17. Section 17 of the SARFAESI Act provides for an application against measures to recover the secured debts, amongst which following section has been amended as sub-section 4-A w.e.f. 1.9.2016, which reads as under:-
"(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 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 Page 9 of 13 HC-NIC Page 9 of 13 Created On Sat Oct 07 07:24:07 IST 2017 C/SCA/17206/2017 ORDER of Property Act, 1882 (4 of 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."
The bare reading of such section makes it clear that though there is a reference of claims by agency and leasehold rights, by all means, it cannot be said that it nullifies the provisions of the Rent Act in any manner whatsoever. With due respect to the legislature, it is undisputed fact that such amendment seems to be incorporated only with a view to negativate the judicial pronouncement by the Apex Judicial Authority of the country, namely, Supreme Court of India. The Hon'ble Supreme Court of India has in its judgment dated 17.2.2016 in the case of Indian Bank Ltd. Vs. Nippon Enterprises South, Chennai & Ors. reported in 2016(3) SCALE 378 held as under:-
1. The short issue to be decided in these appeals is whether the appellant, who has been successful in the SARFAESI proceedings against the owner of the secured assets, automatically can have the same say as against the tenant in the premises.
2. That issue has been considered in the various Judgments of this Court and the latest one is in "Vishal N. Kalsaria Vs. Bank of India & Ors." in Crl. Appeal No. 52 of 2016 decided on 20.01.2016, reported in (2016) 1 SCALE 172 and at paragraph 30, this Court has observed as under :- "It is a settled position of law that once tenancy is created, a tenant can be Page 10 of 13 HC-NIC Page 10 of 13 Created On Sat Oct 07 07:24:07 IST 2017 C/SCA/17206/2017 ORDER 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......."
3. In view of the above, these appeals are dismissed. However, we make it clear that the dismissal of these appeals shall not stand in the way of the appellant-Bank taking recourse to any remedy under any law for evicting the first respondent.
No costs.
The bare reading of the above judgment makes it clear that the Rent Act would prevail over the SARFAESI Act. Therefore, it seems that to facilitate the financial institutions to recover their dues speedily, the Legislature has come forward with above amendment of Section 17 of SARFAESI Act in form of sub-section (4-A). However, the bare reading of such amendment makes it clear that the Debts Recovery Tribunal has jurisdiction to examine only four issues with reference to lease-deed or right of tenancy as enumerated in sub-section (4A)(i) as Clause (a) to (d). The clause (a) clearly extends the jurisdiction to verify that whether lease-deed has expired or in existence. Clause (b) confers jurisdiction to examine that whether lease-deed is contrary to Section 65(A) of the Transfer of Property Act, clause (c) empowers the Debt Recovery Tribunal to verify that whether lease- deed is contrary to terms of mortgage and clause
(d) envisages scrutiny that whether lease-deed is created after issuance of notice of default and demand by the bank u/s.13(2) of the SARFAESI Act.
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12. At this stage, learned advocate Mr. Amit M. Panchal for the respondents - bank has with all fairness submitted that looking to the heavy board, court may not dictate detailed order, since respondents - bank does not press for reasoned order except a clarity that bank and auction purchaser are free to initiate appropriate proceedings for fraud, if any committed by the respondents No.5 to 7 as per law.
13. In view of above disclosure, since matter requires consideration, let rule be issued, making it returnable on 14.12.2017, with a direction to maintain status-quo by all the parties. Learned advocate Ms. Shivani Rajpurohit waives service of notice of rule for and on behalf of respondents No.1 to 4. However, it is made clear that respondents - bank is free to initiate appropriate proceedings in accordance with law against respondents No.5 to 7 for fraud, if any committed by them while executing mortgage-deed. The bank is also free to issue sale certificate, if sale is confirmed in favour of the auction purchaser. However, in that case, auction purchaser would be owner with tenant and his right would be subject to outcome of this petition. For the purpose, petitioner has agreed to join auction purchaser as respondent. He may file draft amendment.
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