Bombay High Court
Aruna Kamal Singh vs Bank Of Baroda And 6 Ors on 21 December, 2021
Author: M. S. Karnik
Bench: Dipankar Datta, M. S. Karnik
23-WPL.29969.2021
IN THE HIGH COURT OF JUDICATURE AT BOMBAY
ORDINARY ORIGINAL CIVIL JURISDICTION
WRIT PETITION (L) NO.29969 OF 2021
Aruna Kamal Singh } Petitioner
vs.
Bank of Baroda and Ors. } Respondents
Mr. Vineet Naik, Senior Advocate a/w. Mr. Rajesh
Nagory, Mr. Rahul Sarda, Ms. Sonal Sanap i/b.
Apex Law Patners for petitioner.
Mr. Madhur Rai a/w. Ashish Kanojia i/b. PRS
Legal for respondent no.1 - Bank.
Mr. Vishal Kanade i/b. Mr. Nikhil Dongre for
respondent no.2.
CORAM: DIPANKAR DATTA, CJ &
M. S. KARNIK, J.
DATE: DECEMBER 21, 2021 P.C. :
1. The office of the Chairperson, Debts Recovery Appellate Tribunal, Mumbai (hereafter, "the DRAT(M)", for short) is vacant since September 15, 2021. This has led to proliferation of writ petitions under Article 226 of the Constitution of India before this Court challenging orders of the Debts Recovery Tribunals all over the State of Maharashtra. While hearing Writ Petition (L) No. 24293 of 2021 and Writ Petition (L) No. 24630 of 2021 on December 2, 2021, we had made, inter alia, the following order:-
123-WPL.29969.2021 "11. We, accordingly, direct that if any party is desirous of challenging an order passed by any DRT situated in the State of Maharashtra before the DRAT(M), he/she/it shall be at liberty to present an appeal before the DRAT(M) together with the requisite fees irrespective of whether the period of limitation has expired or not; however, after the appeal is preferred (together with application for condonation of delay, if any, or any other application including an application for stay), the order under challenge would remain stayed from the time the appellant makes a pre-deposit of at least 25% of the debt due from him/her/it, as claimed by the secured creditors or determined by the DRT, whichever is less. Once such pre-deposit is made, any secured creditor or party in whose favour an order has been passed by the DRT for effecting recovery shall remain injuncted from taking any action adverse to the interest of the appellant. Such pre-
deposit shall be without prejudice to the rights and contentions of the parties in the appeal before the DRAT(M). This arrangement shall continue till January 4, 2022 for the present.
*****
13. We make it abundantly clear that if borrowers/guarantors/other parties, aggrieved by orders of the DRTs, do not choose to prefer any appeal before the DRAT(M) with the requisite pre-deposit, they shall not be entitled to reap the benefit of this order and the secured creditors shall not be under any disability to proceed in accordance with law."
2. Close on the heels of such order, the Supreme Court while considering Petition for Special Leave to Appeal (C) No. 10911 of 2021, by its order dated December 16, 2021 made the following direction: -
" With a view to resolve the problem being faced by the parties, for the time being and purely as a stop-gap arrangement, we request the concerned High Court(s) to entertain the matters falling within the jurisdiction of DRTs and DRATs under Article 226 of the Constitution of India, till further orders.2
23-WPL.29969.2021 We make it clear that once the Tribunal(s) is/are constituted, the matters can be relegated to the Tribunals by the High Court(s)."
3. Reference to these orders is made at the outset for a specific purpose, to be indicated hereafter.
4. This petition under Articles 226 and 227 of the Constitution of India came to be instituted by the petitioner on December 20, 2021, as the facts would unfurl, obviously with a view to avoid pre-deposit of 25% as directed by the order dated December 2, 2021. The petitioner has taken exception to an order dated December 17, 2021 passed by the Debts Recovery Tribunal-I, Mumbai (hereafter, "the DRT", for short) below Interim Application No.622 of 2021 in Securitisation Application No.104 of 2021, thereby dismissing the interim application made for staying the action on the part of the respondent no.1 in taking possession of the premises situate at 151, Maker Tower A, Cuffe Parade, Mumbai - 400 005 (hereafter 'the subject premises", for short) and for setting aside an order passed by the Additional Chief Metropolitan Magistrate, Mumbai (hereafter "the ACMM", for short) under section 14 of the Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (hereafter "the SARFAESI Act", for short) as well as the Writ of Commission dated November 22, 2021.
5. The pleaded case in the petition runs thus. The petitioner is a 'protected tenant' in respect of the subject premises. It is claimed by the petitioner that she was given the subject premises for her residential use on tenancy basis by the respondent no.2 for the services which she was rendering and continued to render to the respondent no.2. The respondent 3 23-WPL.29969.2021 no.2, Rolta Private Limited, is a company incorporated under the provisions of the Companies Act. The petitioner had resigned from the respondent no.3, Rolta India Limited, in January 2001 so that she could concentrate on the business of the respondent no.2. It is the petitioner's case that, in lieu of compensation for the services rendered by her, the subject premises was given to her on tenancy basis. According to the petitioner, the tenancy rights in respect of the subject premises were allotted to her by the respondent no.2 at its Board meeting held on March 22, 2003 for her residential use. Pursuant thereto, a Tenancy Agreement was executed on March 23, 2003 between the respondent no.2 and the petitioner. Since then, she has been using the subject premises as her residence. On December 15, 2020, the petitioner received a notice dated November 30, 2020 from the respondent no.2. It was alleged therein that the respondent no.2 requires the subject premises for it's own use, and thus the petitioner was called upon to vacate the subject premises and hand over vacant possession thereof to the authorized representative of the respondent no.2 before December 29, 2020. Aggrieved thereby, the petitioner instituted a suit being R.A.D. Suit No. 530 of 2020 (hereafter "the said suit", for short) before the Small Causes Court at Bombay, inter alia, seeking declaration that the petitioner was a tenant of the subject premises. The said suit was decreed on consent on January 12, 2021, with the court declaring that the petitioner was a 'protected tenant' of the subject premises under the Maharashtra Rent Control Act, 1999 (hereafter "the Rent Act", for short), and restraining the respondent no.2 from dispossessing the petitioner from the subject premises.
423-WPL.29969.2021
6. It is the petitioner's further case that in or around June, 2018, she came to know that the respondent no.2 had availed a term loan of Rs.240 crore from the respondent no.1, a public sector bank. To secure repayment of the loan amount sanctioned, the respondent no.2 provided several securities, one of them being an equitable mortgage of the subject premises. Accordingly, the respondent no.2 executed a Memorandum of Deposit dated June 26, 2018 recording the creation of mortgage by deposit of title deed for the subject premises. It then came to the petitioner's knowledge that the respondent no.2 has defaulted in making repayment towards the above-mentioned credit facility and its loan account came to be classified as a Non- Performing Asset (NPA). Pursuant thereto, proceedings under Section 13 of the SARFAESI Act were initiated against the assets charged/mortgaged by the respondent no.2 in favour of the respondent no.1. Consequently, on November 15, 2019, a possession notice was issued by the respondent no.1 for the subject premises. The respondent no.1 filed an application being Case No.27/SA/2020 under Section 14 of the SARFAESI Act before the ACMM for taking possession of the subject premises. While acknowledging that the subject premises was not in possession of the respondent no.2, the borrower of the respondent no.1, the ACMM, by an order dated October 9, 2020, allowed the said application and permitted the respondent no.1 to take possession of the subject premises.
7. It is the contention of the petitioner that the details pertaining to the tenancy rights of the petitioner were not placed before the court of the ACMM by the respondent no. 1. Also, the 5 23-WPL.29969.2021 petitioner was not even made party to the proceedings before the court of the ACMM.
8. The respondent no.1 having issued a sale notice dated January 31, 2021, the respondent no.2 filed Securitisation Application No. 34 of 2020 before the DRT, challenging the notice issued and other actions taken by the respondent no.1 under the provisions of the SARFAESI Act. In Securitisation Application No. 34 of 2020, the petitioner filed an interim application seeking to intervene in the matter. However, the said interim application and the securitisation application were dismissed by the DRT by an order dated March 15, 2021 with liberty to the petitioner to file a separate securitisation application. Accordingly, in March 2021, the petitioner filed Securitisation Application (L) No. 145 of 2021 before the DRT, inter alia, seeking an order restraining the respondent no.1 from taking possession of the subject premises, pursuant to the order dated October 9, 2020 passed by the ACMM and the sale notice dated January 31, 2021, issued by the respondent no.1. In the said securitisation application, the petitioner filed Interim Application No. 165 of 2021 seeking stay of operation of the earlier sale notice dated January 31, 2021. The said securitisation application was heard along with Interim Application No. 165 of 2021 and the same was disposed of on the ground that no bids were received rendering the said interim application infructuous. Thereafter, during the pendency of Securitisation Application (L) No. 145 of 2021, a Writ of Commission dated November 22, 2021 came to be issued pursuant to the order dated October 9, 2020 read with order dated November 17, 2021 passed by the ACMM for taking forcible possession of the subject premises and delivering the 6 23-WPL.29969.2021 same to the authorized officer of the respondent no.1, which would have the effect of dispossessing the petitioner and evicting her from the subject premises on December 23, 2021. Pursuant to the Writ of Commission, by letter dated November 25, 2021, the respondent no.7 requested the Senior Police Inspector, Cuffe Parade Police Station to provide police protection/assistance at the time of taking possession of the subject premises on December 23, 2021 at 12:30 p.m. The petitioner immediately upon learning of the aforesaid developments filed Securitisation Application No. 104 of 2021 along with Interim Application No. 622 of 2021 seeking stay of the order dated October 9, 2020 passed by the ACMM and also for stay of the Writ of Commission dated November 22, 2021 issued pursuant to the order dated October 9, 2020. The petitioner learnt that the respondent no.1 has caused publication of sale notice dated November 29, 2021 in respect of the subject premises and informed the public at large about e-Auction thereof, scheduled on December 24, 2021. The said notice mentioned December 15, 2021 at 11.00 a.m. and 1.00 p.m. as the date for inspection of the subject premises. The petitioner filed Interim Application No. 631 of 2021 for stay of effect, operation and implementation of the sale notice dated November 29, 2021 in Securitisation Application No.104 of 2021. The DRT heard Interim Application No. 622 of 2021 on December 14, 2021, and dismissed the same by the impugned order dated December 17, 2021.
9. Mr. Naik, learned senior counsel for the petitioner submits that though the petitioner has a remedy of filing an appeal before the DRAT(M), the petitioner is compelled to file the present petition to secure her interest in the subject premises 7 23-WPL.29969.2021 considering that the office of Chairperson of the DRAT(M) is lying vacant. He further submits that the petitioner having been declared as a 'protected tenant' by the decree of the civil court, any action of dispossessing the petitioner taking resort to the SARFAESI Act would be contrary to the well 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 Act. In support of this submission, reliance is placed on the decision of the Supreme Court reported in (2016) 3 SCC 762 (Vishal N. Kalsaria vs. Bank of India), to contend that the SARFAESI Act does not override the provisions of the Rent Act; therefore, the impugned action of attempting to dispossess the petitioner is contrary to the provisions of law. He invites our attention to the tenancy agreement dated March 23, 2002 entered into between the respondent no.1 and the petitioner. Relying on clauses 2(g) and (h) of the agreement, he submits that though the respondent no.2 preserved its right to mortgage or create any charge over the subject premises, but the respondent no.1 cannot sell or get possession of the same while the user resides with the family members in the subject premises. He submits that during the subsistence of a valid tenancy agreement between the petitioner and the respondent no.2, more so when the Small Causes Court has declared the petitioner as a 'protected tenant', it is not open for the respondent no.1 to resort to measures under the SARFAESI Act to recover the possession of the subject premises.
10. On the aspect of the tenancy agreement not being registered, Mr. Naik refers to the provisions of Section 55 of the Rent Act to contend that it is the obligation of the landlord to get 8 23-WPL.29969.2021 the instrument registered and for his failure or omission to do so, the petitioner as tenant cannot suffer consequences flowing from such failure or omission.
11. We ought to record that Mr. Naik fairly invited our attention to the decision of the Supreme Court reported in (2019) 9 SCC 94 (Bajarang Shyamsunder Agarwal vs. Central Bank of India and Anr.) on which heavy reliance was placed by the DRT to dismiss the interim application in Securitisation Application No.104 of 2021.
12. We did not consider it necessary to call upon learned counsel for the respondent no.1 to address us.
13. After having heard Mr. Naik at some length and on perusal of the petition, its annexures and the impugned order, we are satisfied that this is one other frantic effort on the part of a defaulting borrower to thwart, by any means, enforcement of security interest by the respondent no.1 in terms of the provisions of the SARFAESI Act and that no case is made out to warrant any interference in the matter in the exercise of either the writ jurisdiction of this Court under Article 226 or its supervisory jurisdiction under Article 227 of the Constitution of India, for the reasons stated hereafter.
14. In our view, the issue raised by the petitioner is no longer res integra, being squarely covered by the decision of the Supreme Court in Bajarang Shyamsunder Agarwal (supra).
15. Seldom are facts of two cases alike. It is well known that one additional or different fact can make a world of difference between conclusions in two cases even when the same principles are applied in each case to similar facts. However, the factual 9 23-WPL.29969.2021 similarities of the case at hand and the case before the Supreme Court are worth noting. First, the petitioner here and the appellant before the Supreme Court laid the claim of being tenants in respect of the secured assets and the specific plea is that of being inducted as tenants therein prior to creation of mortgage by the relevant borrower, i.e., the landlord. The next noticeable feature is that both the tenants claimed to be tenants on the basis of unregistered instruments. Thirdly, both of them claimed that they were protected tenants under the Rent Act. Finally, the secured assets in both the cases are in Mumbai and hence Metropolitan Magistrates stationed in Mumbai have considered the applications under Section 14 of the SARFAESI Act. Apart from the last feature, the first three are very relevant and have a material bearing on the point in issue. Despite the similarities or the lack of it, we are inclined to the view that this case stands on worse footing than the appellant's case in Bajarang Shyamsunder Agarwal (supra). In that case any apparent relation between the tenant/appellant and the landlord/defaulting borrower is not discernible. However, the present case is one which bares the dual identity of the petitioner, the first is the so-called claim of being a tenant under the defaulting borrower and the other as a Director of such defaulting borrower. It has not been shown that the petitioner on the date of creation of mortgage ceased to be a Director. In view thereof and considering the detailed discussion made by the Supreme Court on the interplay of the SARFAESI Act, the Rent Act and the Transfer of Property Act, 1882 (hereafter "the TP Act", for short) qua cases of the nature under consideration, we are not called upon to dilate on the issue further and the 10 23-WPL.29969.2021 discussion in Bajarang Shyamsunder Agarwal (supra) on such interplay makes our task easy.
16. In Bajarang Shyamsunder Agarwal (supra), the Supreme Court had the occasion to consider its previous decisions, reported in (2014) 6 SCC 1 (Harshad Govardhan Sondagar vs. International Assets Reconstruction Company Limited) as well as Vishal N. Kalsaria (supra). The latter decision was partly affirmed and partly overruled. While so overruling, the Court observed as follows: -
"24. In our view, the objective of the SARFAESI Act, coupled with the TP 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 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 SARFEASI Act, it has to satisfy the conditions of Section 65-A of the TP Act.
24.3. In any case, if any of the tenants claim that he is entitled to possession of a secured asset for a term of more than a year, it has to be supported by the execution of a registered instrument. In the absence of a registered instrument, if the tenant relies on an unregistered instrument or an oral agreement accompanied by delivery of possession, the tenant is not entitled to possession of the 11 23-WPL.29969.2021 secured asset for more than the period prescribed under Section 107 of the TP Act."
(emphasis ours)
17. In order to enjoy protection from dispossession of the subject premises as a 'protected tenant', it was imperative for the petitioner to demonstrate a valid tenancy existing from a time before creation of mortgage. That has not been demonstrated. Admittedly, the tenancy agreement was not registered. The submission of Mr. Naik that in terms of the provisions of Section 55 of the Rent Act the obligation of registering the instrument was on the landlord, does not carry the case of the petitioner any further. Omission to register the instrument would obviously expose the landlord to consequences as provided by the Rent Act, but that per se will not stand in the way of enforcement of the security interest having regard to the provisions of section 35 of the SARFAESI Act. We have also searched in vain to find out from the petition as to whether, at or about the time the mortgage was created, the factum of tenancy was revealed by the respondent no.2/borrower or the petitioner herself to the respondent no.1/secured creditor. The petitioner being the spouse of the Managing Director of the respondent no.2/borrower and herself being a Director thereof, cannot feign ignorance of what transpired between the respondent no.2 and the respondent no.1/secured creditor. She cannot also evade action under the SARFAESI Act by claiming to be a 'protected tenant' in respect of the subject premises by virtue of the civil court's decree, which appears to have been passed on consent between the parties to the suit (the respondent no.1/secured creditor being nowhere in the picture), and particularly without a 12 23-WPL.29969.2021 registered instrument as well as absence of compliance of the requisites of the TP Act.
18. Let us now ascertain the reason assigned by the DRT in the impugned order for dismissing the interim application. It reads: -
"10. Admittedly, the applicant is one of the directors of the Respondent no.2 company and also wife of the Managing Director of the Company. The alleged tenancy is claimed as of 2003 whereas, the mortgage was created subsequent to that and at the time of creation of mortgage the applicant was also on the board of directors, but the fact of any such tenancy was not disclosed to the bank, therefore, as rightly stated by Ld. Counsel for the respondent No.1 that now the applicant cannot be permitted to raise any objection qua the mortgage as well as any objection on basis of said tenancy. A person cannot take advantage of his own wrong.
16. Admittedly in the present matter the alleged document of tenancy is unregistered documents. Further so far as rent receipt is concerned the applicant by way of Annexure B produced a letter which reveals that rent was agreed Rs.100/- that too as one time payment in 2003. The said document is highly doubtful. The applicant failed to produce any other good or sufficient evidence to establish her tenancy on the Property in question."
19. Obviously, there are findings of fact in the above excerpt. In exercise of the power of judicial review, it would have been open to us to issue a writ of certiorari if it were shown that in recording the said findings, the DRT had erroneously refused to admit admissible and material evidence, or had erroneously admitted inadmissible evidence, which influenced the impugned findings. Further, the findings of fact based on no evidence could be regarded as perverse, amounting to an error of law and, thus, amenable to correction by a writ of certiorari. Interference would also have been called for if the DRT had acted illegally or improperly as, for instance, deciding a question without giving an 13 23-WPL.29969.2021 opportunity of hearing to the party affected by the order, or adopting a procedure in dealing with the dispute which is opposed to the principles of a fair hearing. In fine, it is only an error of law apparent on the face of the record that can be corrected by a writ, but not an error of fact howsoever grave it may appear to be. These are principles of law governing exercise of writ jurisdiction, which are well-settled. If any authority is required, useful reference may be made to the Constitution Bench decision of the Supreme Court reported in AIR 1964 SC 477 (Syed Yakoob vs. K. S. Radhakrishnan).
20. The DRT has disbelieved the plea of tenancy raised by the petitioner. We find that apart from the tenancy agreement, which is an unregistered instrument, no other document had been produced before the DRT, viz. payment of property tax, bills evincing payment of electricity charges, etc. in support of the claim that the petitioner was a tenant. The DRT, in dismissing the interim application, did not commit any procedural illegality, far less patent illegality, thereby depriving the petitioner to put forward her case sufficiently for which its order would warrant interdiction. We also do not see any reason to hold that the DRT, in proceeding to record its findings in the impugned judgment, committed such an error of law apparent on the face of the record that the same requires correction by a writ of Certiorari. The question of any interference, thus, does not and cannot arise.
21. Accordingly, the impugned order of the DRT is upheld and the writ petition stands dismissed. We, however, record that quite reluctantly we have restrained ourselves from imposing heavy costs on the petitioner.
1423-WPL.29969.2021
22. Since Securitisation Application No. 104 of 2021 is pending on the file of the DRT, it shall proceed to deal with and decide the same on its own merits and in accordance with law. However, the point raised herein having been finally decided, it shall not be allowed to be re-agitated in course of hearing of the said securitisation application.
23. Before parting, we may record that prior to dictating our order we had given an option to Mr. Naik to obtain instructions from the petitioner as to whether she is willing to prefer an appeal under section 18 of the SARFAESI Act and reap the benefit of the order dated December 2, 2021, referred to by us at the beginning of this order. After obtaining instructions, Mr. Naik submitted that the petitioner would invite an order from us on the merits of her claim. It is in pursuance thereof that we have proceeded to decide the petition on merits. Sight cannot be lost of the fact that despite being a debtor of the respondent no. 1/creditor, neither the respondent no.2/borrower nor the petitioner is interested in clearing the debts; instead, she has indulged in an unmeritorious litigation before this Court despite the law being well-settled calling for condemnation of her SALUNKE conduct, which we hereby do.
JV Digitally signed by SALUNKE J V Date: 2021.12.22 19:15:00 +0530 (M. S. KARNIK, J.) (CHIEF JUSTICE) 15