Supreme Court of India
HARSHAD GOVARDHAN SONDAGARversusINTERNATIONAL ASSETS RECONSTRUCTION CO. LTD.
- Citation
- 2014 INSC 955
- Decided
- 3 April 2014
- Disposal
- Appeal(s) allowed
- Bench
- A K PATNAIK
Holding
A lease made by the mortgagor is valid and binding on the secured creditor unless the mortgage deed expressly prohibits it, and Section 13(13) of the SARFAESI Act overrides such a lease if it is created after the borrower receives a notice under Section 13(2).
Summary
The appellants, who were tenants of premises mortgaged to banks, challenged the seizure of those premises by the secured creditors under the SARFAESI Act. The Supreme Court examined whether a lease made by the mortgagor, either before or after the mortgage, remains valid and binding on the secured creditor, and whether the SARFAESI Act overrides the rights of a lessee under the Transfer of Property Act. It held that a lease is valid and binding unless the mortgage deed expressly prohibits it and that Section 13(13) of the SARFAESI Act overrides Section 65A of the Transfer of Property Act for leases created after a notice under Section 13(2) is served. The Court further ruled that a lessee’s possession cannot be taken by the Chief Metropolitan Magistrate or District Magistrate under Section 14 unless the lease is determined under the Transfer of Property Act, and that the lessee has no remedy under Section 17 of the SARFAESI Act. Consequently, the orders of the magistrates granting possession to the secured creditors were set aside and the appeals were allowed.
Issues considered
- The validity and enforceability of a lease made by a mortgagor under Section 65A of the Transfer of Property Act when the mortgaged asset is subject to enforcement under the SARFAESI Act.
- Whether Section 13(13) of the SARFAESI Act overrides the mortgagor's power to lease under Section 65A after a notice under Section 13(2) is served.
- The jurisdiction of the Chief Metropolitan Magistrate/District Magistrate under Section 14 of the SARFAESI Act to take possession of a leased secured asset.
- The availability of any remedy for a lessee under Section 17 of the SARFAESI Act or under the Maharashtra Rent Control Act.
- The constitutional protection of a lessee’s right to possession under Article 300A of the Constitution.
Legislation cited
- Banking Regulation Act, 1949s. 9
- Companies Act, 1956s. 529A
- Income Tax Act, 1961s. 269-UD, s. 269-UE
- Maharashtra Rent Control Act, 1999s. 33, s. 34
- Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002s. 13, s. 14, s. 17, s. 34, s. 35
- Transfer of Property Act, 1882s. 105, s. 111, s. 65A
Subjects
leaseSARFAESI Actsecured creditormortgagorSection 65ASection 13Section 14Section 17possessionDebt Recovery TribunalArticle 300ATransfer of Property ActMaharashtra Rent Control Act
Judgment
• [2014] 11 S.C.R. 605
HARSHAD GOVARDHAN SONDAGAR A
v.
INTERNATIONAL ASSETS RECONSTRUCTION CO. LTD.
& ORS.
(Criminal Appeal No. 736 of 2014)
APRIL 03, 2014 B
[A.K. PATNAIK AND V. GOPALA GOWDA, JJ.]
Securitisation and Reconstruction of Financial Assets and
Enforcement of Security Interest Act, 2002 - ss. 13, 14 and C
17 - Proceedings under the Act - By the secured creditor
against the borrower - The secured assets consisting of
premises leased out by the borrower and was in possession
of the lessees - Whether the Act would affect the /ease - Held:
So long as the mortgage deed does not prohibit a mortgagor D
from making a /ease of the mortgaged property and so Jong
as the lease satisfies the requirements of s. 65A(2) of T.P.
Act, a /ease made by borrower as a mortgagor is valid and
binding on the secured creditor as a mortgagee - So Jong as
/ease of an immovable property does not get determined, E
possession of the Jessee is lawful - Initiation of proceeding
under s. 13 does not have the effect of determining the lease
- such lawful possession of a lessee cannot be taken under
the provisions of the Act - Hence the competent courts do not
have power to take possession uls. 14 from such lessee - F
Transfer of Property Act, 1882 - s. 65A.
Allowing the appeals, the Court
HELD: 1. Sub-section (1) of Section 65A of the
Transfer of Property Act states that the mortgagor has the G
power to make lease of a mortgaged property while he
is in lawful possession of the same subject to the
provisions of sub-section (2) of Section 65A of the
605 H
606 SUPREME COURT REPORTS [2014] 11 S.C.R. •
A Transfer of Property Act and such lease is binding on the
mortgagee. Sub-section (3) of Section 65A further
provides that such a power is available with the
mortgagor to make a lease of the mortgage property only
if and as far as a contrary intention is not expressed in
B the mortgage-deed. Thus, 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
c but is also binding on the secured creditor as a
mortgagee. [Para 12] [621-E-G]
2. Sub-section (13) of Secti~n 13 of the SARFAESI
Act, however, provides that after receipt of notice referred
to in sub-section (2) of Section 13 of the SARFAESI Act,
0 no borrower shall lease any of his secured assets
referred to in the notice, without the prior written consent
of the secured creditor. This provision in sub-section (13)
of Section 13 of the SARFAESI Act and the provisions of
the Transfer of Property Act enabling the borrower or the
E . mortgagor to make a lease are ·in.consistent with each
other. Hence, sub-section (13) of Section 13 of the
SARFAESI Act will override the provisions of Section 65A
of the Transfer of Property Act by virtue of Section 35 of
the SARFAESI Act, and a lease of a secured asset made
F by the borrowe·r after he receives the notice under sub-
section ·(2) of Section 13 froin the secured creditor
intending to enforce that secured asset will not be a valid
lease. [Para 15] [629-B-D]
'·
G 3. There is no provision in Section 13 of the·
SARFAESI Act that a I.ease in respect of a secured asset
shall stand determined when the secured creditor
decides to take the measures mentioned in Section 13 of
the said Act. Without the determination of a valid lease,
H the possession of the lessee is lawful and such lawful
-,..
• HARSHAD GOVARDHAN SONDAGAR v. INTERNATIONAL 607
ASSETS RECONSTRUCTION CO. LTD.
possession of a lessee has to be protected by all courts A
and tribunals. So long as a lease of an immovable
property does not get determined, the lessee tias a right
to enjoy the property and this right is a right to property
which cannot be taken away without the authority of law
as provided in Article 300A of the Constitution. [Para 16) B
[631-B-E]
4. Only if possession of the secured asset is required
to be taken under the provisions of the SARFAESI Act,
the secured creditor can move the Chief Metropolitan
Magistrate or the District Magistrate for assistance to take C
possession of the secured asset. Since Section 13 of the
SARFAESI Act does not provide that the lease in respect
of a secured asset will get determined when the secured
creditor decides to take the measures in the said section,
possession of the secured asset from a lessee in lawful D
possession under a valid lease is not required to be taken
under the provisions of the SARFAESI Act and the Chief
Metropolitan Magistrate or the District Magistrate,
therefore, does not have any power under Section 14 of
the SARFAESI Act to take possession of the secured E
asset from such a lessee and hand over the same to the
secured creditor. [Para 18) [634-F-H; 635-A]
5. When, therefore, a lessee becomes aware of the
possession being taken by the secured creditor, in F
respect of the secured asset, he may either surrender
possession or resist the attempt of the secured creditor
to take the possession by producing before the
authorised officer, proof that he was inducted as a lessee
prior to the creation of the mortgage or that he was a G
lessee under the mortgagor in accordance with the
provisions of Section 65A of the Transfer of Property Act
and that the lease does not stand determined in
accordance with Section 111 of the Transfer of Property
Act. [Para 21) [639-C-F]
H
608 SUPREME COURT REPORTS · [2014] 11 S.C.R. •
A 6. If the lessee resists the attempt of the secured
creditor tQ take possession, the authorised officer cannot
evict the lessee by force but has to file an application
before the Chief Metropolitan Magistrate or the District
Magistrate under Section 14 of the SARFAESI Act. If the
B Chief Metropolitan Magistrate or District Magistrate is
satisfied that there is no valid case, he can pass an order
for delivering possession of the secured asset to the
secured creditor. [Para 21J [639-F-H; 640-A, DJ
7. The SARFAESI Act, attaches finality to the decision
C of the Chief Metropolitan Magistrate or the District
Magistrate. But a statutory provisions attaching finality to
the decision of an authority excluding the power of any
other authority or Court to examine such a decision will
not be a bar for the High Court or this Court to exercise
D jurisdiction vested by the Constitution because a
statutory provision cannot take away a power vested by
the Constitution; Therefore, the decision of the Chief
Metropolitan Magistrate or the District Magistrate can be
challenged before the High Court under Articles 226 and
E 227 of the Constitution by any aggrieved party. [Para 22J
[640-F-GJ
Columbia Sportswear Company vs. Director of Income
Tax, Bangalore (2012) 11 SCC 224:' 2012 (7) SCR 187 -
F relied on. · ·
8. There is no remedy available under Section 17 of
the SARFAESI Act to the lessee to protect his lawful
possession under a valid lease. In view of sub-section (3)
of Section 17 of the SARFAESI Act, the Debts Recovery
G Tribunal has powers to restore possession of the
secured asset to the borrower only and not to any person
• such as a lessee. [Para 24J [643-D, E, HJ
9. The tenants do not have remedies under the
H Maharashtra Rent Control Act, 1999. Section 33 of the
• HARSHAD GOVARDHAN SONDAGAR v. INTERNATIONAL 609
· ASSETS RECONSTRUCTION CO. LTD.
Maharashtra Rent Control Act vests jurisdiction in the A
. courts named therein to decide disputes between the
landlord and the tenant and not disputes between the
secured creditor and the tenant under landlord· who is a
borrower of the secured assets. [Para 26] [645-D-E; 646-
F~ 8
Transcore vs. Union of India & Anr. (2008) 1 SCC 125:
2006 (9) Suppl. SCR 785 - held inapplicable.
Mis Trade Well, a Proprietorship Firm, Mumbai and Anr.
vs. Indian Bank and Anr. 2007 CRI. L.J. 2544 - referred to. C
C.B. Gautam vs. Union of India and Ors. (1993) 1 SCC
78: 1992 (3) Suppl. SCR 12; /CIC/ Bank Ltd. vs. S/DCO
Leathers Ltd. and Ors. (2006) 10 SCC 452: 2006 (1) Suppl.
SCR 528; Shri Sanjeev Bansal vs. Oman International Bank
SAOG and Anr. 131 (2006) DLT 729; Sree Lakshmi Products o
vs. State Bank of India AIR 2007 Madras 148; Sunita
Jugalkishore Gilda vs. Rama/al Udhoji Tanna (dead) through
LRs. and Ors. (2013) 10 SCC 258; Central Bank of India vs.
State of Kera/a and Ors. (2009) 4 SCC 94: 2009 (3) SCR 735;
Authorised Officer, Indian Overseas Bank and Anr. vs. Ashok E
Saw Mill (2009) 8 sec 366: 2009 (11) SCR 599; United
Bank of India vs. Satyawati Tandon and Ors. (2010) 8 SCC
110: 2010 (9) SCR 1; Raghunath Rai Bareja and Anr. vs.
Punjab National Bank and Ors. (2007) 2 SCC 230: 2006 (10)
Suppl. SCR 287 - cited.
F
Case Law Reference:
2007 CRI. L.J. 2544 referred to Para 2
1992 (3) Suppl. SCR 12 cited Para 4
2006 (1) Suppl. SCR 528 cited Para 4 G
(2006) DLT 729 cited Para 8
AIR 2007 Madras 148 cited Para 8
2009 (3) SCR 735 cited Para 9
H
A
610 SUPREME COURT REPORTS
2009 (11) SCR 599 cited
[2014] 11 S.C.R.
Para 9
•
2010 (9) SCR 1 cited Para 9
2006 (10 ) Suppl. SCR 287 cited Para 10
(2013) 1o sec 258 'cited Para 13
B
. 2012 (7) SCR 187 relied on Para 22
2006 (9) Suppl. SCR 785 held Para 25
inapplicable
C CRIMINAL APPELLATE JURISDICTION : Criminal Appeal
No. 736 of 2014.
From the Judgment and Order dated 20.08.2011 of the
High Court of Judicature at Bombay in CRPIL No. 24 of 2011.
WITH
D ,
Criminal Appeal Nos. 737, 738, 739, 740, 741, 742, 743, 744,
745, 746, 747, 748, 749, 750, 751, 752, 753, 754, 755, 756,
757, 758, 759, 760, 761, 762, 763, 764, 765, 766, 767, 768,
769, 770, 771, 772, 773, 774, 775, 776, 777, 778, 779, 780,
E 781, 782, 783, 784, 785, 786, 787, 788, 789, 790, 791, 792,
793, 794, 795, 796, 797' 798. 799-800, 801, 802, 803, 804.-
805, 806 and 807 of 2014
C.A. Sundaram, Vikash Singh, Raju Ramachandran,
Pradeep Dewan, S. Balakrishnan, R. S. Suri, Sanjay Jain,
F Ramesh Singh, Sharvin Majumdar, Nikhil Goel, Marsook
Bafaki, Naveen Goel, A. Venayagam Balan, Dr. Kailash Chand,
Pratap Venugopal, Meenakshi Chauhan, Gaurav Nair (for K.
J. John & Co.), Ruchi Kohli, H. P. Sharma, Pankaj Kumar,
Subramonium Prasad, Sanjay Kumar Singh, Vijay Kumar, Anil
G Kumar Sangal, Siddharth Sangal, Nina Gupta, Mudit Sharma,
Lalit Bhasih, Ranjan Jha, Amar Dave, Krishnayan Sen, Rishad
. A. Chowdhury, Kunal Chatterji, Samta Thapa, Deepika Kalia,
Kapish Seth, Deepak Prakash, Haritha V.A., Yogmaya, Usha
Nandini V., 0. P. Gaggar, M. T. George, Sonal Jain, Rajiv M.
H Brahma, Shrish Kumar Mishra, Ajay Kumar Singh, Surya Nath
• HARSHAD GOVARDHAN SONDAGAR v. INTERNATIONAL 611
ASSETS RECONSTRUCTION CO. LTD.
Pandey, Sanjay Jain, Sanjeev Sagar, Chandra Bhushan A
Prasad, Niraj Gupta, Anupam Dhingra, Vinay Navare, Keshav
Ranjan, Satyajeet Kumar, Abha R. Sharma, Praveena Gautam,
Sarvesh Singh Baghel, R. N. Keshwani, Ram Lal Roy, Amrita
Singh, Pallavi Tayal Chaddha, Chanchal Kumar Ganguli, Sanjay
Kapur, Nidhi, Arun Aggarwal, Balaji Srinivasan, Chander B
Bhushan, S. S. Shamshery, Bhakti Vardhan, Shubhasis R.
Soren, Bharat Sood, R. C. Kohli,. Sanjay Bhatt, Dushyant
Kumar, Rabin Majumder for the appearing parties.
The Judgment of the Court was delivered by
c
A. K. PATNAIK, J. 1. Leave granted.
Facts:
2. The appellants claim to be tenants of different premises
in Mumbai. These premises were mortgaged to different banks D
as securities for loans advanced by the banks (hereinafter
referred to as 'the.secured creditors'). As the borrowers have
defaulted in repayment of their secured debts or instalments
thereof and their accounts in respect of such debts have been
classified by the secured creditors as non-performing assets, E
the secured creditors have issued notices of 60 days period
under sub-section (2) of Section 13 of the Securitisation and
Reconstruction of Financial Assets and Enforcement of Security
Interest Act, 2002 (for short 'SARFAESI Act') to the borrowers· .
saying that they intend to enforce the secured assets in the event F
of non-payment of the secured debts. As the borrowers have
failed to discharge their liability in full within the period of sixty
days from the date of notice, the secured creditors have
exercised their right under sub-section (4) of Section 13 of the
SARFAESI Act to take possession of the secured assets of G
the borrowers. The secured assets, however, consist of the
premises under possession of the appellants. The secured
creditors have, therefore, made a request under Section 14(1)
of the SARFAESI Act to the Chief Metropolitan Magistrate,
Mumbai, to take possession of the premises and handover the H
.t;.. ••
612 SUPREME COURT REPORTS [2014] 11 S.C.R. •
A possession ofthe premises to the secured creditors in
accordance with the provisions of Section 14 of the SARFAESI
Act. Threatened by dispossession of the premises under their
possession by the Chief Metropolitan Magistrate, Mumbai,
under Section 14 of the SARFAESI Act, the appellants have
B moved this Court in this batch of cases. Their case is that they
are not borrowers, but they are lessees of the borrowers and
are entitled to remain in possession of the secured assets.- A
Division Bench of the Bombay High Court in M/s Trade Well,
a Proprietorship Firm, Mumbai & Anr. v. Indian Bank & Anr.
·c [2007 CRI. L.J. 2544] has, however, held that when a secured
creditor takes measures under sub-section (4) of Section 13
of the SARFAESI Act on account of failure of the borrower to
repay his liability and approaches the Chief Metropolitan
Magistrate for assistance to take possession of the secured
D assets, the liability of the borrower having been crystallized,
there can be no adjudication by the Chief Metropolitan
Magistrate and possession has to be taken by a non-
adjudicatory process and there is no question of pointing out
to the Chit:)f Metropolitan Magistrate at that stage that the
E person who is to be dispossessed is a tenant. The Division
Bench of the Bombay High Court has further held in M/s Trade
Well (supra) that the remedy of the borrower as well.as a third-
party is to file an appli9ation under Section 17 of the SARFAESI
Act before the Debts Recover}' Tribunal and in case the
borrower or a third-party succeeds, the Debts Recovery Tribunal
F can restore possession of the secured assets to the borrower
or a third-party. This view taken by the Bombay High Court in
Mis Trade Well (supra) has been followed in the i_mpugned
judgment dated 20.08.2011 of the High Court passed in the
case of International Assets Reconstruction Company Limited
G v. Union of India & Ors. The grievarice of the appellants is that
if the impugned judgment of the High Court is implemented, the
appellants have no option but to surrender possession to the
Chief Metropolitan Magistrate, Mumbai, and move the Debts
Recovery Tribunal under Sectio_n 17 of the SARFAESI Act. Such
H a remedy, according to the appellants, is not actually available
• HARSHAD GOVARDHAN SONDAGAR v. INTERNATIONAL 613
ASSETS RECONSTRUCTION CO. LTD. [A.K. PATNAIK, J.]
under Section 17 of the SARFAESI Act and if the remedy is A
available, it is meaningless as they have to move out from the
tenanted premises and only in the event the Debts Recovery
J"ribunal decides in favour of the appellants, they may come back
to the tenanted premises. Aggrieved by the impugned
judgment, they have, therefore, filed these appeals by way of B
special leave under Article 136 of the Constitution.
Contentions of the learned counsel for the appellants:
3. Mr. C.A. Sundaram, learned senior counsel appearing
for the appellants, submitted that under Article 300A of the C
Constitution, every person has a constitutional right not to be
deprived of his property save by authority of law. He submitted
that a tenant is a lessee and has a right to be in possession of
the property of the lessor during the period of the lease and this
right cannot be taken away save by authority of law. He D
submitted that there is nothing in the provisions of the
SARFAESI Act, and in particular Section 13 of the said Act, to
show that this right of a lessee to remain in possession of the
secured asset during the period of the lease stands
extinguished when the secured creditor initiates action under E
Section 13 of the SARFAESI Act. He submitted that the
language of sub-section (13) of Section 13 of the SARFAESI
Act, however, shows that no borrower shall, after receipt of
notice under sub-section (2) of section 13, transfer by way of
sale, lease or otherwise any of his secured assets referred to F
in the notice, without the prior written consent of the secured
creditor. He submitted that this provision in the SARFAESI Act
is a clear indication that a lease of a secured asset by the
borrower before receipt of a notice by him under sub-section
(2) of Section 13 of the SARFAESI Act was not prohibited under
the said Act. He submitted that in the absence of any express G
language in the SARFAESI Act affecting a lease of a secured
asset made by the borrower in favour of a lessee, the lease
continues to be a valid lease even after the secured creditor
initiates action under Section 13 of the SARFAESI Act.
H
A
614 SUPREME COURT REPORTS · [2014] 11 S.C.R.
4. In support of this argument, he cited a decision of the
•
Constitution Bench of this Court in C.8. Gautam v. Union of
India & Ors. ((1993) 1 SCC 78]. In this case, the provisions of
Section 269-UD and Section 269-UE of the Income Tax Act,
1961 made by Parliament to prevent evasion of tax by transfer
B of immovable property for an apparent consideration less than
the market price of the property were under challenge as ultra
vires the Constitution. Sub-section (1) of Section 269-UD of
the Income Tax Act, 1961 provided that on an order for purchase
by the Central Government of an immovable property, the
C Central Government would be liable to pay as compensation
to the owner of the property an amount equal to the amount of
apparent consideration and sub-section ( 1) of Section 269-U E
provided that in case an order for compulsory purchase is
made under sub-section (1) of Section 269-UD, the property
in respect of which the order is made shall vest in the Central
0 Government free from all encumbrances and sub-section (2)
of Section 269-UE further provided that the transferor or any
other person who may be in possession of the immovable
property in respect of which an order under sub-section (1) of
Section 269-UD is made is required to surrender or deliver
E possession of the property to the appropriate authority or any
other person duly authorised by the appropriate authority within
fifteen days of the service of the order on him. This Court held
that if there is a lessee in occupation of the property concerned,
his leasehold rights would be destroyed and he would have to
F handover the possession of the property to the appropriate
authority or any other person nominated by the appropriate
authority and this clearly shows that an order for compulsory
purchase results in the leasehold rights being destroyed. This
Court further held that an order for compulsory purchase in such
G cases would necessarily result in gross injustice to the lessees
and to their being deprived of their rights without their being in
any way involved in the attempt at a tax evasion. This Court,
therefore, read down sub-section (2) of Section 269-UE so as
to make it inapplicable to bonafide lessees in possession of
H the property. He submitted that this Court should accordingly
• HARSHAD GOVARDHAN SONDAGAR v. INTERNATIONAL 615
ASSETS RECONSTRUCTION CO. LTD. [AK. PATNAIK, J.)
hold in this case that the rights of bonafide lessees under a A
lease ·executed prior to receipt of notice under sub-section (2)
of Section 13 of the SARFAESI Act by the borrower are not
affected by the action of secured creditor under Section 1.3 of
the SARFAESI Act. He relied on the observation of this Court
in /CIC/ Bank Ltd. v. S/DCO Leathers Ltd. & Ors. [(2006) 10 B
sec 452] that while enacting a statute, Parliament cannot be
presumed to have taken away the right to property which is a
constitutional right.
5. Mr. Sundaram next submitted that the view taken by the
Bombay High Court in Mis Trade Well (supra) and in the C
impugned judgment that a third-party such as a lessee can
under Section 17 of the SARFAESI Act make an application
before the Debts Recovery Tribunal and that in case he
succeeds, the Debts Recovery Tribunal can restore possession
of the. secured assets to the lessee is not at all correct. He D
referred to the provisions of sub-section (3) of Section 17 of
the SARFAESI Act to show that the Debts Recovery Tribunal
can restore possession of the secured assets only to the
borrower and not to the lessee. He submitted that the Debts
Recovery Tribunal has no power under Section 17 of the E
SARFAESI Act to restore possession of the secured assets
to a lessee. He submitted that under the SARFAESI Act no
notice either by the secured creditor or by the Chief Metropolitan
Magistrate or the District Magistrate is required to be given to
a lessee of the secured assets in possession of the secured F
creditor and in the absence of such a notice, the lessee will not
have any opportunity to move either the Debt Recovery Tribunal
under Section 17 or the Chief Metropolitan Magistrate or the
District Magistrate under Section 14 of the SARFAESI Act. He
submitted that sub-section (3) of Section 14 of the SARFAESI G
Act further provides that no act of the Chief Metropolitan
Magistrate or the District Magistrate or any officer authorised
by the Chief Metropolitan Magistrate or District Magistrate to
take possession of the secured assets shall be called in
question in any court or before any authority and this would H
616 SUPREME COURT REPORTS [2014] 11 S.C.R. •
A mean that a lessee would have no remedy against the decision
of the Chief Metropolitan Magistrate or the District Magistrate.
He submitted that as there is no remedy under the SARFAESI
Act to protect the lawful possession of the lessee under a lease
and the Act also does not bar the remedies under the
B respective local tenancy laws, this.Court should hold that the
remedies for the parties in a case where the secured assets
are in possession of the lessees are under the respective
tenancy laws. These arguments of Mr. Sundaram were adopted
by all other counsel. appearing for the lessees. .
c Contentions of the learned counsel for the respondents:
6. Mr. Vikas Singh, learned senior counsel appearing for
the State Bank of India and the Indian Banks Association,
submitted that while there are no restrictions on the right of the
D borrower to make a lease of an immovable property prior to
the mortgage, once a mortgage is created, his right to make a
lease of the mortgaged property is regulated by the provisions
of Section 65A of the Transf~r of Property Act, 1882. He
submitted that under Section 65A of the Transfer of Property
E Act, a mortgagor, while lawfully in possession of the mortgaged
property, has the power to make leases thereof subject to the
provisions of sub-section (1) of Section 65A of the said Act.
·He submitted that if a lease made by a mortgagor satisfies the
requirements of sub-sedion (2) of Section 65A of the Transfer
F of Property Act, it will be a valid lease and will be binding on
the secured creditor. He submitted that sub-section (3) of
Section 65A of the Transfer of Property Act further made it clear .
that if a contrary intention is expressed in the mortgage-deed,
prohibiting the mortgagor from making a lease of the
G mortgaged property while he is in lawful possession of the
same, the mortgagor cannot m'ake a lease and if such lease
is made, such lease will not_ be binding on the mortgagee.
According to him, possession of the lessee under the following
two categories of leases: (i) leases created prior to the
mortgage and (ii) leases created in accordance with Section
H
• HARSHAD GOVARDHAN SONDAGAR v. INTERNATIONAL 617
ASSETS RECONSTRUCTION CO. LTD. [A.K. PATNAIK, J.]
65A of the Transfer of Property Act is protected by law, and A
possession of other persons claiming to be lessees is not
protected by law.
7. Mr. Vikas srngh next submitted that sub-section (13) of
Section 13 of the SARFAESI Act further provides that no
B
borrower shall, after receipt of notice referred to in sub-section
. (2) of Section 13 of the SARFAESI Act, transfer by way of
lease, any of his secured assets referred to in the notice,
without prior written consent of the secured creditor. He
submitted that if the borrower makes a lease of the secured
assets after receipt of a notice under sub-section (2) of Section C
13 of the SARFAESI Act without the prior written consent of the
secured creditor, the lease would accordingly be void and the
possession of the secured asset of the lessee is not protected
bylaw.
D
8. In support of these submisions, Mr. Vikas Singh relied
on the decision of the Delhi High Court in Shri Sanjeev Bansal
v. Oman International Ba.nk SAOG & Anr. 131 (2006) DLT 729
and the decision of the Madras High Court in Sree Lakshmi
Products v. State Bank of India (AIR 2007 Madras 148) in E
which the two High Courts have held that tenancies created in
contravention of Section 65A of the Transfer of Property Act are
not binding on the secured creditor and cannot come in the way
of the secured creditor taking possession of the tenanted
premises under the SAR FAES I Act. He also cited the decision F
of this Court in Sunita Jugalkishore Gilda v. Rama/al Udhoji
Tanna (dead) through LRs. & Ors. [(2013) 10 SCC 258] in
which this Court has held that the rule of /is pendens in Section
52 of the Transfer of Property Act, 1882 applies to a suit on a
mortgage/by mortge1gee as well and, therefore, if a mortgagor G
grants a lease during the pendency of a suit for sale by the
mortgagee, the lessee is bound by the result of the suit. Relying
on this decision, he submitted that once the secured creditor
issues a notice to a borrower to take possession of a secured
asset and the borrower despite such notice, transfers the
H
618 SUPREME COURT REPORTS [2014] 11 S.C.R. •
A possession of the secured asset by way of lease to a lessee
without prior consent of the secured creditor, the lessee of such
a lease is bound to surrender possession of the secured asset
to the secured creditor.
8 9. Mr. Vikas Singh submitted that though the SARFAESI
Act is silent on the remedies available to a lessee who is in
lawful possession of a secured asset, in the case of the
aforesaid two categories of leases created pri1Jr to the
mortgage and created after the mortgage in accordance with
Section 65A of the Transfer of Property Act, the lessee has a
C remedy of filing an application under Section 17(1) of the
SAR FAES I Act as the application under Section 17(1) of the
SARFAESI Act can be filed by "any person" and not just the
borrower. He submitted that the SARFAESI Act has been
enacted to enable the secured creditors to recover the secured
D debts without the intervention of courts and tribunals and third-
parties claiming to be lessees but not bonafide lessees under
leases which are not in accordance with Section 65A of the
Transfer of Property Act should not be allowed to frustrate this
laudable object of the Act by preventing the secured creditors
E from taking the possession of the secured assets and realizing
the secured debts. In support of this submission, he referred
to the observations of this Court in Central Bank of India v.
State of Kera/a and Others [(2°009) 4 SCC 94], Authorised
Officer, Indian Overseas Bank and Anotherv. Ashok Saw Mill
F [(2009) 8 SCC 366] and United Bank of India v. Satyawati
Tandon & Others [(2010) 8 SCC 11 O]. He submitted that the
remedy of a bonafide lessee is, therefore, to surrender
possession under Section 14 of the SARFAESI Act and to file
an application under Section 17(1) of the SARFAESI Act
G before the Debts Recovery Tribunal and in case he succeeds
before the Debts Recovery Tribunal to establish that the lease
was created prior to the mortgage and the lease was to the
knowledge of the secured creditor or that the lease was created
after the mortgage in accordance with Section 65A of the ·
H Transfer of Property Act, the Debts Recovery Tribunal will
• · HARSHAD GOVARDHAN SONDAGAR v. INTERNATIONAL 619
ASSETS RECONSTRUCTION CO. LTD. [A.K. PATNAIK, J.]
~
restore possession of the secured asset. The other counsel A
appearing for the respondents adopted the aforesaid
arguments of Mr. Vikas Singh and further submitted that the
appellants, who have not filed documents to show that they are
bonafide lessees, should not be afforded the protection against
the· action initiated by the secured creditors to·take possession B
of the secured asset under Section 13 of the SARFAESI Act.
10. Mr. Shrish Kumar Mishra, learned counsel appearing
for the Oriental Bank of Commerce in Civil Appeal arising out
of S.L.P. (C) No.6639 of 2012, however, made a departure
from the submissions made by Mr. Vikas Singh. He submitted C
that under sub-section (4) of Section 13 of the SARFAESI Act,
the secured creditor has a right to take over the possession of
the secured assets and since Section 35 ofthe SARFAESI Act
provides that the provisions of the SARFAESI Act shall have
effect, notwithstanding anything, inconsistent therewith contained D
in any other law for the time being in force, sub-section (4) of
Section 13 of the SAR FAE SI Act will override the rights of the
lessee to remain in possession of the secured assets. He relied
on a decision of this Court in Ragilunath Rai Bareja and
Another v. Punjab National Bank and Others. [(2007) 2 SCC E
230] for the proposition that the court must in accordance with
the mischief rule of interpretation give a purposive interpretation
to the provisions of the statute. He argued that if this mischief
rule of interpretation is adopted by this Court, then the correct
interpretation of sub-section (4) of Section 13 read with Section F
35 of the SARFAESI Act would be that a lease will stand
·terminated on the secured creditor deciding to take the
measures contemplated under sub-section (4) of Section 13
of the SARFAESI Act.
G
Opinion of the Court on the questions of law raised in
these Appeals:
11. The first question that we have to decide is whether
the provisions of the SAR FAES I Act have in any way affected
the right of a lessee to remain in possession of the secured H
A
620 SUPREME COURT REPORTS [2014] 11 S.C.R.
asset during the period of a lease. A 'secured asset' has been
•
defined in Section 2(zc) of the SARFAESI Act to mean the
property on which the security interest is created. In case of an
immovable property, a security interest is created in a secured
asset by way of a mortgage in favour of the secured creditor.
B There may be cases where before the mortgage is created in
respect of an immovable property, the borrower had already
leased out the immovable property in favour of a lessee either
as the owner or as a person competent or authorised to transfer
the immovable property in accordance with Section 7 of the
c Transfer of Property Act. If such a lease is made, by virtue of
Section 8 of the Transfer of Property Act, the lessee will have
the right to enjoy the leased property in accordance with the
terms and condition of the lease irrespective of whether a.
subsequent mortgagee of the immovable property has
knowledge of such a lease or not.
0
12. Afte:r the mortgage of an immovable property is created
by the borrower in favour of a secured creditor, the right of the
borrower to lease a mortgaged property is regulated· by Section
65A of the Transfer of Property Act. Section 65A of the Transfer
E of Property Act is extracted hereinbelow:
"65A. Mortgagor's power to lease.-(1) Subject to the
provisions of sub- section (2), a mortgagor, while ·lawfully
in possession of the mortg'aged property, shall have ,power
F 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
G 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.
H
• HARSHAD GOVARDHAN SONDAGAR v. INTERNATIONAL 621
ASSETS RECONSTRUCTION CO. LTD. [A.K. PATNAIK, J.]
(c) No such lease shall contain a covenant for renewal. A
(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 B
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.
c
(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, 0
operate in like manner and with all like incidents, effects
and consequences, as if such variations or extensions were
contained in that sub- section.
Thus, sub~section (1) of Section 65A of the Transfer of Property
Act states that the mortgagor has the power to make lease of E
a mortgaged property while he is in lawful possession of the
same subject to the provisions of sub-section (2) of Section
65A of the Transfer of Property Act and such lease is binding
on the mortgagee. Sub-section (3) of Section 65A further
provides that such a power is available with the mortgagor to F
make a lease of the mortgage property only if and as far as a
contrary intention is not expressed in the mortgage-deed. Thus,
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 G
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.
13. We may now consider whether the provisions of the H
A
622 SUPREME COURT REPORTS [2014] 11' S.C.R.
SARFAESI Act have the effect of terminating these valid leases
•
made by the borrower or the mortgagor made in accordance
with the provisions of the Transfer of Property Act. Section 35
of the SARFAESI Act , on which the High Court has placed
reliance in the case of Mis Trade Well (supra) as well as in
B the impugned judgment is reproduced hereinbelow:
"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
c instrurrient having effect by virtue of any such law."
Section 35 of the SARFAESI Act, therefore, provides that the
provisions of the SARFAESI Act shall have effect,
notwithstanding anything inconsistent therewith contained in any
D other law for the time being in force. Thus, if there is any
provision in the SARFAESI Act and if there is any provision in
any other law which is inconsistent therewith, the provision of
the SARFAESI Act will have effect and not the provision of any
other law. The only section in the SARFAESI Act which confers
E a statutory right on the secured creditor to take possession of
the secured asset and enforce the secured asset for the
realization of the secured debt is Section 13. We will, therefore,
have to find out whether there is any provision in Section 13 of
the SARFAESI Act which is inconsistent with the right of a
F borrower or a mortgagor to make a lease in accordance with
the provisions of the Transfer of Property Act and the
corresponding right of a lessee to remain in possession of the
property leased out to him during the peri9d of a lease.
14. Section 13 of the SARFAESI Act is extracted
G hereinbelow:
"13. Enforcement of security interest.-
(1 ). Notwithstanding anything contained in section 69 or
section 69A of the Transfer of Property Act, 1882 (4 of
H 1882), any security interest created in favour of any
• HARSHAD GOVARDHAN SONDAGAR v. INTERNATIONAL 623
ASSETS RECONSTRUCTION CO. LTD. [AK. PATNAIK, J.]
. secured creditor may be enforced, without the intervention A
of the court or tribunal, by such creditor in accordanee with
the provisions of this Act. ·
(2) Where any borrower, who is under a liability to a
secured creditor under a security agreement, makes any 8
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 C
secured creditor within sixty days from the date of notice
failing which the secured creditor shall be entitled to
exercise all or any of the rights under sub-section (4).
(3) The notice referred to in sub-section (2) shall give
details of the amount payable by the borrower and the D
secured assets intended to be enforced by the secured
creditor in the event of non-payment of secured debts bv
the borrower.
(3A) If, on receipt of the notice under sub-section (2), the
E
. borrower makes any representation or raises any objection,
the secured creditor shall consider such representation or
objection and if the secured creditor comes to the
conclusion that such representation or objection is not
acceptable or tenable, he shall communicate within 15
F
days of receipt of such representation or objection the
reasons for non-acceptance of the representation or
objection to the borrower:
Provided that the reasons so communicated or the likely
action of the secured creditor at the stage of G
communication of reasons shall not confer any right upon
the borrower to prefer an application to the Debts
Recovery Tribunal under Section 17 or the Court of District
Judge under Section 17A.
H
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624 SUPREME COURT REPORTS [2014] 11 S.C.R.
(4) In case the borrower fails to discharge his liability in
•
full within the period specified in sub-section (2), the·
secured creditor may take recourse to one or more of the
following measures to recover his secured debt, namely:-
(a) take possession of the secured assets of the
B
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
c 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,
D 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
E severable, the secured creditor shall take over the
management of such business of the borrower
which is relatable to the security or the debt;
(c) appoint any person (hereafter referred to as the
F 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
G 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.
H (5) Any payment made by any person referred to in clause
• HARSHAD GOVARDHAN SONDAGAR v. INTERNATIONAL 625
ASSETS RECONSTRUCTION CO. LTD. [A.K. PATNAIK, J.]
(d) of sub-section (4) to the secured creditor shall give A
such person a valid discharge as if he has made payment
to the borrower.
(SA) Where the sale of an immovable property, for which
a reserve price has been specified, has been postponed
8
for what of a bid of an amount not less than such reserve
price, it shall be lawful for any officer of the secured creditor,
if so authorised by the secured creditor in this behalf, to
bid for immovable property on behalf of the secured
creditor at any subsequent sale.
c
(58) Where the secured creditor, referred to in sub-section
(SA), is declared to be the purchaser of the immovable
property at any subsequent sale, the amount of the
purchase price shall be adjusted towards the amount of
the claim of the secured creditor for which the auction of p
enforcement of security interest is taken by the secured
creditor, under sub-section (4) of section 13.
(SC) The provisions of section 9 of the Banking Regulation
Act, 1949 (10 of 1949 shall, as far as may be, apply to E
the immovable property acquired by secured creditor
under sub-section (5A).
(6) Any transfer of secured asset after taking possession
thereof or take over of management under sub-section (4),
by the secured creditor or by the manager on behalf of the F
secured creditor shall vest in the transferee all rights in, or
in relation to, the secured asset transferred as if the
transfer had been made by the owner of such secured
asset.
G
(7) Where any action has been taken against a borrower
under the provisionS" of sub-section (4), all costs, charges
and expenses which, in the opinion of the secured creditor,
have been properly incurred by him or any expenses
incidental thereto, shall be recoverable from the borrower H
626 SUPREME COURT REPORTS · [2014] 11 S.C.R.
and the money which is received by the secured creditor
•
A
shall, in the absence of any contract to the contrary, be held
by him in trust, to be applied, firstly, in payment of such
costs, charges and expenses and secondly, in discharge
of the dues of the secured creditor and the residue of the
B money so received ·shall be paid to the person entitled
thereto in accordance with his rights and interests.
(8) If the dues of the secured creditor together with all costs,
charges and expenses incurred by him are tendered to the
secured creditor at any time before the date fixed for sale
c or transfer,. the secured asset shall not be sold or
transferred by the secured creditor, and no further step
shall be taken by him for transfer or sale of that secured
asset.
D (9) In the case cif financing of a financial asset .by more
than one secured creditors or joint financing of a financial
asset by secured creditors, no secured creditor shall be
entitled to exercise any or all of the rights conferred on him
under or pursuant to sub-section (4) unless exercise of
E such right is agreed upon by the secured creditors
representing not less th.an sixty percent in value of the
amount outstanding as on a record date and such action
shall be binding on all the secured creditors:
Provided that in the case of a company in liquidation, the
F amount realised from the sale of secured assets shall be
distributed in accordance with the provisions of section
529A of the Companies Act, 1956 (1 of 1956):
Provided further that in the case of a company being wound
G up on or after the commencement of this Act, the secured
creditor of such company, who opts to realise his security
instead of relinquishing his security and proving his debt
under proviso to sub-section (1) of section 529 of the
Companies Act, 1956 (1 of .1956), may retain the sale
H proceeds of his secured assets after depositing the
• HARSHAD GOVARDHAN SONDAGAR v. INTERNATIONAL 627
ASSETS RECONSTRUCTION CO. LTD. [A.K. PATNAIK, J.]
workmen's dues with the liquidator in accordance with the A
provisions of section 529A of that Act:
Provided also that the liquidator referred to in the second
proviso shall intimate the secured creditors the workmen's
dues in accordance with the provisions of section 529A Ei
of the Companies Act, 1956 (1 of 1956)·and in case such
workmen's dues cannot be ascertained, the liquidator shall
intimate the estimated amount of workmen's dues under
that section to the secured creditor and in such case the
secured creditor may retain the sale proceeds of the C
secured assets after depositing the amount of such
estimated dues with the liquidator:
Provided also that in case the secured creditor deposits.
the estimated amount of workmen's dues, such creditor
shall be liable to pay the balance of the workmen's dues D
or entitled to receive the excess amount, if any, deposited
by the secured creditor with the liquidator:
Provided also that the secured creditor shall furnish an
undertaking to the liquidator to pay the balance of the E
workmen's dues, if any.
Explanation.-For the purposes of this sub-section,-
(a) record date means the date ag~eed upon by the
secured creditors representing not less than three-fourth F
in value of the amount outstanding on such date;
(b) amount outstanding shall include principal, interest and
any other dues payable by the borrower to the secured
creditor in respect of secured asset as per the books of G
account of the secured creditor.
(10) Where dues of the secured creditor are not fully
satisfied with the sale proceeds of the secured assets, the
secured creditor may file an application in the form and
manner as may be prescribed to the Debts Recovery H
628 SUPREME COU~T REPORTS. [2014] 11 S.C.R. •
A Tribunal having jurisdiction or a competent court, as the
case may be, for recovery of the balance amount from the
borrower.
(11) Without prejudice to the rights conferred on the
secured creditor under or by this section the secured
B
creditor shall be entitled to proceed against the guarantors
or sell the pledged assets without first taking any of the
measures specified in clauses (a) to (d) of sub-section (4)
in relation to the secured assets under this Act.
c (12) The rightS of a secured creditor under this Act may
be exercised by one or more of his officers authorised in
this behalf in such manner as may be prescribed.
I
(13) No borrower shall, after receipt of notice referred to
D in sub-section (2), transfer by way of sale, lease or
otherwise (other than in the ordinary course of his
business) any of his secured assets referred to in the
notice, without prior written consent of the secured
creditor."
E 15. When we read the different provisions of Section 13
of the SAR FAES I Act extracted above, we find that sub-section
(4) of Section 13 provides that in case the borrower fails to
discharge his liability iri full within sixty days from the date of
notice provided in sub-section (2) of Section 13 of the
F SARFAESI Act, the secured creditor may take recourse to one
or more of the measures mentioned therein to recover his
secured debt. One ofthe measures mentioned in clause (a) in
sub-section (4) of Section 13 of the SARFAESI Act is to take
possession of the secured assets of the borrower. including the
G right to transfer by way of lease. Where, however. the lawful
possession of. the secured asset is not with the borrower, but
with the lessee under a valid lease, the secured creditor cannot
take over possession of the secured asset until the lawful
possession of the lessee gets determined. There is, however,
H no mention in sub-section (4) of Section 13 of the SARFAESI.
• HARSHAD GOVARDHAN SONDAGAR v. INTERNATIONAL 629
ASSETS RECONSTRUCTION CO. LTD. [A.K. PATNAIK, J.]
Act that a lease made by the borrower in favour of a lessee A
will stand determined on the secured creditor deciding to take
any of the measures mentioned in Section 13 of the said Act.
Sub-section (13) of Section 13 of the SARFAESI Act, however,
provides that after receipt of notice referred to in sub-section
(2) of Section 13 of the SARFAESI Act, no. borrower shall lease B
any of his secured assets referred to in the notice, without the
prior written consent of the secured creditor. This provision in
sub-section (13) of Section 13 of the SARFAESI Act and the
provisions of the Transfer of Property Act enabling the borrower
or the mortgagor to make a lease are inconsistent with each c
other. Hence, sub-section (13) of Section 13 of the SARFAESI
Act will override the provisions of Section 65A of the Transfer
of Property Act by virtue of Section 35 of the SARFAESI Act,
and a lease of a secured asset made by the borrower after he
receives the notice under sub-section (2) of Section 13 from
0
the secured creditor intending to enforce that secured asset will
not be a valid lease.
16. We may now consider the nature of the right of the
lessee and as to when the lease under the Transfer of Property
Act gets determined. Sections 105 and 111 of the Transfer of E
Property Act, which are relevant in this regard, are quoted
hereinbelow:
"105. Lease defined:- A lease of immovable property is
a transfer of a right to enjoy such property, made for a F
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
r~ndered periodically or on specified occasions to the
transferor by the transferee, who accepts the transfer on G
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,
H
A.
630 SUPREME COURT REPORTS [2014] 11 S.C.R.
share, service or other thing to be so rendered is called
•
the rent.
111. Determination of lease:- A lease of immovable
property determines-
B (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 (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 (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
E lessee yields up his interest under the lease to the
lessor, by mutual agreement between them,
(f) by implied surrender,
(g) by forfeiture; that is to say, (1 ). in case the lessee
F 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
G 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
• HARSHAD GOVARDHAN SONDAGAR v. INTERNATIONAL 631
ASSETS RECONSTRUCTION CO. LTD. [A.K. PATNAIK, J.]
(h) on the expiration of a notice to determine the A
lease, or to quit, or of intention to quit, the property
leased, duly given by one party to the other.
Section 105 thus .provides that a lessee of an immovable
property has a right to enjoy such property, for a certain time 8
· or in perpetuity when a lessor leases an immovable property
transferring his right to enjoy such property for a certain time
or in perpetuity. Section 111 of the Transfer of Property Act,
1882 provides the different modes by which a lease gets
determined. Thus, so long as a lease of an immovable property C
does not get determined, the lessee has a right to enjoy the
property and this right is a right to property and this right cannot
be taken away without the authority of law as provided in Article
300A of the Constitution. As we have noticed, there is no
provision in Section 13 of the SARFAESI Act that a lease in
respect of a secured asset shall stand determined when the D
secured creditor decides to take the measures mentioned in
Section 13 of the said Act. Without the determination of a valid
lease, the possession of the lessee is lawful and such lawful
possession of a lessee has to be protected by all courts and
tribunals. E
17. We may now look at the provisions of Section 14 of
the SARFAESI Act to find out whether it confers any power on
the Chief Metropolitan Magistrate or the District Magistrate to
assist the secured creditor in taking possession of the secured F
asset which is in lawful possession of the lessee under a valid
lease. Section 14 of the SARFAESI Act is extracted
herein below:
"14. Chief Metropolitan Magistrate or District
Magistrate to assist secured creditor in taking G
possession of secured asset (1) Where the possession
of any secured assets is required to be taken by the
secured creditor or if any of the secured asset is required
to be sold or transferred by the secured creditor under the
provisions of this Act, the secured creditor may, for the H
632 SUPREME COURT REPORTS [2014] 11 S.C.R. •
A purpose of taking possession or control of any such
secured asset, request, in writing, the Chief Metropolitan
Magistrate or the District Magistrate within whose
jurisdiction any such secured asset or other documents
relating thereto may be situated or found, to take
B possession thereof, and the Chief Metropolitan Magistrate
or, as the case may be, the District Magistrate shall, on
such request bein~ made to himt.
(a) take possession of such asset and documents
relating thereto; and .
c
(b) forward such assets and documents to the
. secured creditor.
Provided that any application by the secured creditor shall
be accompanied by an affidavit duly affirmed by the
D aurhorised officer of the secured creditor, declaring that-
(i) the aggregate amount of financial assistance
granted and the total claim of the Bank as on the
date of filing the appliCation; ·
(ii) the borrower has created security interest over
E
various properties and that the Bank or Financial
Institution is holding a valid and subsisting security
interest over such properties and the claim of the
Bank or Financial Institution is within the limitation
period;
F .
(iii) the borrower has created security interest over
various properties giving the details of properties
referred to in sub-clause (ii) above;
(iv) the borrower has committed default in
G repayment of the financial assistance granted
aggregating the specified amount;
(v) consequent upon such. default in repayment of
the financial assistance the account of the borrower
has been classified as a non-performing asset;
.H
• HARSHAD GOVARDHAN SONDAGAR v. INTERNATIONAL 633
ASSETS RECONSTRUCTION CO. LTD. [A.K. PATNAIK, J.]
(vi) affirming that the period of sixty days notice as A
required by the provisions of sub-section (2) of
section 13, demanding payment of the defaulted
financial assistance has been served on the
borrower;
B
(vii) the objection or representation in reply to the
notice received from the borrower has been
considered by the secured creditor and reasons for
non-acceptance of such objection or representation
had been communicated to the borrower;
c
(viii) the borrower has not made any repayment of
the financial assistance in spite of the above notice
and the Authorised Officer is, therefore, entitled to
take possession of the secured assets under the
provisions of sub-section (4) of section 13 read with D
section 14 of the principal Act;
(ix) that the provisions of this Act and the rules
made thereunder had been complied with:
Provided further that on receipt of the affidavit from the E
Authorised Officer, the District Magistrate or the Chief
Metropolitan Magistrate, as the case may be, shall after
satisfying the contents of the affidavit pass suitable orders
for the purpose of taking possession of the secured assets:
F
Provided also that the requirement of filing affidavit stated
in the first proviso shall not apply to proceeding pending
before any District Magistrate or the Chief Metropolitan
Magistrate, as the case may be, on the date of
commencement of this Act.] G
[1A) The District Magistrate or the Chief Metropolitan
Magistrate may authorise any officer subordinate to him,-
(i) to take possession of such assets and
documents relating thereto; and H
634 SUPREME COURT REPORTS
(ii)
[2014] 11 S.C.R.
to forward such assets and documents to tne
•
A
secured creditor.
(2) For the purpose of securing compliance with the
provisions of sub-section (1 ), the Chief Metropolitan
Magistrate or the District Magistrate may take or cause
B
to be taken such steps and use, or cause to be used, such
force, as may, in his opinion, be necessary.
(3) No act of the Chief Metropolitan Magistrate or the
District Magistrate done in pursuance of this section shall
c be called in question in any court or before any authority.
u
18. The opening words of sub-section (1) of Section 14
of the SAR FAES I Act make it clear that where the possession
D of any secured assets is required to be taken by the secured
creditor or if any of the secured asset is required to be sold or
transferred by the secured creditor "under the provisions of the
Act", the secured creditor may, for the purpose of taking
possession or control of any such secured asset, request, in
E writing, the Chief Metropolitan Magistrate or the District
Magistrate within whose jurisdiction any such secured asset or
other documents relating thereto may be situated or found, to
take possession thereof. Thus, only if possession of the
secured asset is required to be taken under the provisions of
the SARFAESI Act, the secured creditor can move the Chief
F Metropolitan Magistrate or the District Magistrate for assistance
to take possession of the secured asset. We have already held
that Section 13 of the SARFAESI Act does not provide that th~
lease in respect of a secured asset will get determined when
the secured creditor decides to take the measures in the said
G section. Hence, possession of the secured asset from a lessee
· in lawful possession under a valid lease is not required to be
taken under the provisions of the SAR FAES I Act and the Chief
Metropolitan Magistrate or the District Magistrate, therefore,
does not have any power under Section ·14 of the SARFAESI
H Act to take possession of the secured asset from such a lessee
•HARSHAD GOVARDHAN SONDAGAR v. INTERNATIONAL 635
ASSETS RECONSTRUCTION CO. LTD. [A.K. PATNAIK, J.]
and hand over the same to the secured creditor. When, A
therefore, a secured creditor moves the Chief Metr9politan
Magistrate or the District Magistrate for assistance to take
possession of the secured asset, he must state in the affidavit
accompanying the application that the secured asset is not in
possession of a lessee under the valid· lease made prior to B
creation of the mortgage by the borrower or made i.n
accordance with Section 65A of the Transfer of Property Act
prior to receipt of a notice under sub-section (2) of Section 13
of the SAR FAES I Act by the borrower. We would like to clarify
that even in such cases where the secured creditor is unable c
to take possession of the secured asset after expiry of the
period 60 days of the notice to the borrower of the intention of
the secured creditor to enforce the secured asset to realize the
secured debt, the secured creditor will have the right to receive
any money due or which may become due, including rent, from D
the lessee to the borrower. This will be clear from clause (d) of
sub-section (4) of Section 13, which provides that in case the
borrower fails to discharge his liability in full within the notice
period, the secured creditor may require, at any time by notice
in writing, any person who has acquired any of the assets from E
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
19. The opening words of sub-section (1) of Section 14
of the SARFAESI Act also provides that if any of the secured F
asset is required to be sold or transferred by the secured
creditor under the provisions of the Act, the secured creditor
may take the assistance of the Chief Metropolitan Magistrate
or the District Magistrate. Where, therefore, such a request is
made by the secured creditor and the Chief Metropolitan G
Magistrate or the District Magistrate finds that the secured
asset is in possession of a lessee bu"t the lease under which
the lessee claims to be in possession of the secured asset
stands determined in accordance with Section 111 of the
Transfer of Property Act, the Chief Metropolitan Magistrate or H
A
636 SUPREME COURT REPORTS (2014) 11 S.C.R.
the District Magistrate may pass an order for delivery of
•
possession of secured asset in favo1,1r of the secured creditor
to enable the secured creditor to sell and transfer the same
under the provisions of the SARFAESI Act. Sub-section (6) of
Section 13 of the SARFAESI Act provides that any transfer of
B secured asset after taking possession of secured asset by the
secured creditor shall vest in the transferee all rights in, or in
relation to, the secured asset transferred as if the transfer had
been made by the owner of such secured asset. In other words,
the transferee of a secured asset will not acquire any right in a
c secured asset under sub-section (6) of Section 13 of the
SARFAESI Act, unless it has been effected after the secured
creditor has taken over possession of the secured asset. Thus,
for the purpose of transferring the secured asset and for
realizing the secured debt, the secured creditor will require the
assistance of the Chief Metropolitan Magistrate or the District
0
Magistrate for taking possession of a secured asset from the
lessee where the lease stands determined by any of the modes
mentioned in Section 111 of the Transfer of Property Act.
20. We may now deal with the remedies available to the
E lessee where he is threatened to be dispossessed by any
action taken by the secured creditor under Section 13 of the
SAR FAES I Act. Sub-rules (1) and (2) of Rule 8 of the Security
Interest (Enforcement) Rules, 2002 provide for a possession
notice where the secured asset is an immovable property. Sub-
F rules (1) (2) and (3) of Rule 8 of the Security Interest
(Enforcement) Rules, 2002 as well as Appendix IV of the said
Rules, which is the form of such possession notice, are
extracted hereunder:
"8. Sale of immovable secured assets.- (1) Where the
G secured asset is an immovable property, the authorised
officer shall take or cause to be taken possession, by
delivering a possession notice prepared as nearly as
possible in Appendix IV to these rules, to the borrower and
by affixing the possession notice on the outer door or at
H .
such conspicuous place of the' property.
•
HARSHAD GOVARDHAN SONDAGAR v. INTERNATIONAL 637
ASSETS RECONSTRUCTION CO. LTD. [A.K. PATNAIK, J.]
(2) The possession notice as referred to in sub"rule (1) A
shall also be published, as soon as possible but in any
case not later than seven days from the date of taking
possession, in two leading newspaper] one in vernacular
language having sufficient circulation in that locality, by the
authorised officer. B
(3) In the event of possession of immovable property is
actually taken by the authorised officer, such property shall
be kept in his own custody or in the custody of any person
authorised or appointed by him, who shall take as much C
care of the property in his custody as an owner of ordinary
prudence would, under the similar circumstances, take of
such property .. : ... ."
"APPENDIX-IV
D
[See rule-8(1 )]
POSSESSION NOTICE
(for Immovable property)
E
Whereas
The undersigned being the authorised officer of the
_ _ _ _ _ _ _ (name of the Institution) under the
Securitisation and Reconstruction· of Financial Assets and
Enforcement of Security Interest [Act, 2002 (54 of 2002)] F
and in exercise of powers conferred under Section 13(12)
read with rule 9 of the Security Interest (Enforcement)
Rules, 2002 issued demand notice dated
_ _ _ _ _ _calling upon the borrower Shri
G
------~/M/s _ _ _ _ _ _ _to repay the
amount mentioned in the notice being Rs.
_ _ _ _ _ _(in words ) within 60
days from the date of receipt of the said notice.
H
638 SUPREME COURT REPORTS [2014] 11 S.C.R. •
A · The borrower having failed to repay the amount, notice is
hereby given to the borrower and the public in general that
the undersigned has taken possession of the property
described herein below in exercise of powers conferred
on him/ her under Section 13(4) of the said _27[Act] read
B with rule 9 of the said rules on this day
of_ _ _ _ _ _ _of the year_ _ _ _ _ __
The borrower in particular and the public in general is
hereby cautioned not to deal with the property and any
c dealings with the property will be subject to the charge of
. the (name of the Institution) for an
amount Rs. and interest thereon.
D Description of the Immovable Property
All that part and parcel of the property consisting of Flat
No. /Plot No. In Survey No. _ _ _/
E
City or Town Surv(i!y No., _______ /Khasara no.
_ _ _Within the registration Sub-district and
District· - - -
Bounded;.
F
On the North by
On the South by
On the East by
G
On the West by
Authorised Officer
(Name of the Institution)
Date:
H Place:
• HARSHAD GOVARDHAN SONDAGAR v. INTERNATIONAL 639
ASSETS RECONSTRUCTION CO. LTD. [A.K. ·PATNAIK, J.]
A reading of sub-rules (1) and (2) of Rule 8 of the Security A
Interest (Enforcement) Rules, 2002 would show that the
possession notice will have to be affixed on the outer door or
at the conspicuous place of the property and also published,
as soon as possible but in any case not later than seven days
from the date of taking possession, in two leading newspapers, B
one in vernacular language having sufficient circulation in that
locality, by the authorised officer. At this stage, the lessee of
an immovable property will have notice of the secured creditor
making efforts to take possession of the secured assets of the
borrower. C
21. When, therefore, a lessee becomes aware of the
possession being taken by the secured creditor, in respect of
the secured asset in respect of which he is the lessee, from the
possession notice which is delivered, affixed or published in
sub-rule (1) and sub-rule (2) of Rule 8 of the Security Interest D
(Enforcement) Rules, 2002, he may either surrender possession
or resist the attempt of the secured creditor to take the
possession of the secured asset by producing before the
authorised officer proof that he was inducted as a lessee prior
to the creation of the mortgage or that he was a lessee under E
the mortgagor in accordance with the provisions of Section 65A
of the Transfer of Property Act and that the lease does not stand
determined in accordance with Section 111 of the Transfer of
Property Act. If the lessee surrenders possession, the lease
even if valid gets determined in accordance with clause (f) of F
Section 111 of the Transfer of Property Act, but if he resists the
attempt of the secured creditor to take possession, the
authorised officer cannot evict the lessee by force but has to
file an application before the Chief Metropolitan Magistrate or
the District Magistrate under Section 14 of the SARFAESI Act G
and state in the affidavit accompanying the application, the
name and address of the person claiming to be the lessee.
When such an application is filed, the Chief Metropolitan
Magistrate or the District Magistrate will have to give a notice
and give an opportunity of hearing to the person claiming to be H
A
640 SUPREME COURT REPORTS [2014) 11 S.C.R.
the lessee as well as to the secured creditor, consistent with
•
the principles of natural justice, and then take a decision. If the
Chief Metropolitan Magistrate or District Magistrate is satisfied
that there is a valid lease created before the mortgage or there
is a valid lease created after the mortgage in accordance with
B the requirements of Section 65A of the Transfer of Property Act
and that the lease has not been determined in accordance with
the provisions of Section 111 of the Transfer of Property Act,
he cannot pass an order for delivering possession of the
secured asset to the secured creditor. But in case he comes
c to the conclusion that there is in fact no valid lease made either
before creation of the mortgage or after creation of the
mortgage satisfying the requirements of Section 65A of the
Transfer of Property Act or that even though there was a valid
lease, the lease stands determined in accordance with Section
111 of the Transfer of Property Act, he can pass an order for
0
delivering posse~sion of the secured asset to the secured
creditor.
22. Sub-section (3) of Section 14 of the SARFAESI Act
provides that no act of the Chief Metropolitan Magistrate or the
E District Magistrate or any officer authorised by the Chief
Metropolitan Magistrate or District Magistrate done in
pursuance of Section 14 shall be called in question in any court
or before any authority. The SARFAESI Act, therefore, attaches
finality to the decision of the Chief Metropolitan Magistrate or
F the District Magistrate and this decision cannot be challenged
before any court or any authority. But this Court has repeatedly
held that statutory provisions attaching finality to the decision
of an authority excluding the power of any other authority or
Court to examine such a decision will not be a bar for the High
G Court or this Court to exercise jurisdiction vested by the
Constitution because a statutory provision cannot take away a
power vested by the Constitution. To quote, the observations
of this Court in Columbia Sportswear Company v. Director of
Income Tax, Bangalore [(2012) 11 SCC 224]:
H
•• HARSHAD GOVARDHAN SONDAGAR v. INTERNATIONAL 641
ASSETS RECONSTRUCTION CO. LTD. [AK. PATNAIK, J.)
"17. Considering the settled position of law that the powers A
of this Court under Article 136 of the Constitution and the
powers of the High Court under Articles 226 and 227 of
the Constitution could not be affected by the provisions
made in a statute by the Legislature making the decision
of the tribunal final or conclusive, we hold that sub-section B
(1) of Section 245S of the Act, insofar as, it makes the
advance ruling of the Authority binding on the applicant, in
respect of the transaction and on the Commissioner and
income-tax authorities subordinate to him, does not bar the
jurisdiction of this Court under Article 136 of the c
Constitution or the jurisdiction of the High Court under
Articles 226 and 227 of the Constitution to entertain a
challenge to the advance ruling of the Authority."
In our view, therefore, the decision of the Chief Metropolitan
Magistrate or the District Magistrate can be challenged before D
the High Court under Articles 226 and 227 of the Constitution
by any aggrieved party and· if such a challenge is made, the
High Court can examine the decision of the Chief Metropolitan
Magistrate or the District Magistrate, as the case may be, in
accordance with the settled principles of law. E
23. We may next consider whether a lessee has any
remedy by way of an appeal under Section 17 of the SARFAESI
Act when the secured creditor attempts to take over possession
of the secured asset which is in possession of the lessee. Sub- F
sections (1), (2) and (3) of Section 17 of the SARFAESI Act
are extracted hereinbelow:
"17. Right to appeal.-(1) Any person (including
borrower), aggrieved by any of the measures r13ferred·to
in sub-section (4) of section 13 taken by the secured G
creditor or his authorised officer under this Chapter, may
make an application alongwith such fee, as may be
prescribed to the Debts Recovery Tribunal having
jurisdiction in the matter within forty-nve days from the date
on which such measure had been taken: H
642 SUPREME COURT REPORTS [2014] 11 S.C.R. •
A Provided that different fees may be prescribed for making
the application by the borrower and the person other than
the borrower.
Exp/anation.-For the removal of doubts, it is hereby
declared that the communication of the reasons to the
borrower by the secured creditor for not having accepted
his representation or objection or the likely action of the
· secured creditor at the stage of communication of reasons
to the borrower shall not entitle the person (including
borrower) to make an application to the Debts Recovery
c Tribunal under this sub-section.
(2) The Debts Recovery Tribunal shall consider whether
any of the measures referred to in sub-section (4) of section
13 taken by the secured creditor for enforcement of
D security are in accordance with the provisions of this Act
and the rules made thereunder.
(3) If, the Debts Recovery Tribunal, after examining the
facts and circumstances of the case and evidence
produced by the parties, comes to the conclusion that any
E
of the measures referred to in sub-section (4) of section
13, taken by the secured creditor are not in accordance
with the provisions of this Act and the rules made
thereunder, and require restoration of the management of
the business to the borrower or restoration of possession
F of the secured assets to the borrower, it may by .order,
declare the recourse to any one or more measures
referred to in sub-section (4) of section 13 taken by the
secured creditors as invalid and restore the possession
of the secured assets to·· the borrower or restore the
G management of the business to the borrower, as the case
may be, and pass such order as it may consider
appropriate and necessary in relation to any of the
· recourse taken by the secured creditor under sub-section
(4) of section 13."
H
• HARSHAD GOVARDHAN SONDAGAR v. INTERNATIONAL 643
ASSETS RECONSTRUCTION CO. LTD. [A.K. PATNAIK, J.]
24. When we read sub-seciion (1) of Section 17 of the A
SARFAESI Act, we find that under the said sub-section "any
person (including borrower)", aggrieved by any of the measures
referred to in sub-section (4) of Section 13 taken by the secured
creditor or his authorised officer under the Chapter, may apply
to the Debts Recovery Tribunal having jurisdiction in the matter B
within 45 days from the date on which such measures had been
taken. We agree with the Mr. Vikas Singh that the words 'any
person' are wide enough to include a lessee also. It is also
possible to take a view that within -45 days from the date on
which a possession notice is delivered or affixed or published c
under sub-rules (1) and (2) of Rule 8 of the Security Interest
(Enforcement) Rules, 2002, a lessee may file an application
before the Debts Recovery Tribunal having jurisdiction in the
matter for restoration of possession in case he is
dispossessed of the secured asset. But when we read sub- D
section (3) of Section 17 of the SARFAESI Act, we find that
the Debts Recovery Tribunal has powers to restore possession
of the secured asset to the borrower only and not to any person
such as a lessee. Hence, even if the Debt Recovery Tribunal
comes to the conclusion that any of the measures referred to E
in sub-section (4) of Section 13 taken by the secured creditor
are not in accordance with the provisions of the Act, it cannot
restore possession of the secured asset to the lessee. Where,
therefore, the Debts Recovery Tribunal considers the
application of the lessee and comes to the conclusion that the
lease in favour of the lessee was made prior to the creation of F
mortgage or the lease though made after the creation of
mortgage is in accordance with the requirements of Section
65A of the Transfer of Property Act and the lease was valid and
binding on the mortgagee and the lease is yet to be
determined, the Debts Recovery Tribunal will not have the power G
to restore possession of the secured asset to the lessee. In our
considered opinion, therefore, there is no remedy available
under Section 17 of the SARFAESI Act to the lessee to protect
his lawful possession under a valid lease.
H
644 SUPREME COURT REPORTS [2014] 11 S.C.R.
•
A 25. The High Court, however, has relied on Transcore v.
Union of India & Anr. [(2008) 1 SCC 125] for holding that the
SARFAESI Act provides ·for recovery of possession by non-
adjudicatory process and it removes all fetters on the right of
the secured creditor and that the secured creditor is entitled to
B take recourse to any one or more of the measures specified
in Section 13(4) of the SARFAESI Act to recover a secured
debt,. notwithstanding anything contained in any other law for
the time being in force. The High Court has also relied on the
aforesaid decision of this Court in the case of Transcore
c (supra) to record• a finding that the scheme of Section 13(4)
read with Section 17(3) of the SARFAESI Act shows that if the
borrower is dispossessed not in accordance with the provisions
of the SARFAESI Act, the Debts Recovery Tribunal is entitled
to restore status quo ante. The High Court has also relied on
·the observations of this Court in Transcore (supra) that the
0
disputes which are sought to be avoided by Rule 8 read with
Rule 9 of the Security Interest (Enforcement) Rules, 2002 are
those where third party interest is created overnight and third
party takes up the defence of being a bona fide purchaser for
E value without notice. We have perused the aforesaid decision
of this Court in Transcore (supra) and we find that in that case,
the question whether the secured creditor, in exercise of its
rights under Section 13 of the SARFAESI Act, can take.over
possessipn of the secured asset in possession of a Jessee
under a valid lease was not considered nor was the question
F whether there is anything in the SARFAESI Act inconsistent with
the right of a lessee to remain in possession of the secured
asset under the Transfer of Property 'Act considered. In our
view, therefore, the High Court has not properly appreciated the
judgment of this Court in Transcore (supra) and has lost sight
G of the opening words of sub-section (1) of Section 13 of the
SARFAESI Act which state that notwithstanding anything
contained in section 69 or section 69A of the Transfer of
Property Act, 1882, any security interest created in favour of
any secured creditor may be enf9rced, without the intervention
H of the court or tribunal, by such creditor in accordance with the
•'
• HARSHAD GOVARDHAN SONDAGAR v. INTERNATIONAL 645
ASSETS RECONSTRUCTION CO. LTD. [AK. PATNAIK, J.]
provisions of the Act. The High Court has failed to appreciate A
that the provisions of Section 13 of the SARFAESI Act thus
OVE;!rride the provisions of Section 69 or section 69A of the
Transfer of Property Act, but does not override the provisions
of the Transfer of Property Act relating to the rights of a lessee
under a lease created before receipt of a notice under sub- B
section (2) of Section 13 of the SARFAESI Act by a borrower.
Hence, the view taken by the Bombay High Court in the
impugned jµdgment as well as in Mis Trade Well (supra) so
far as the rights of the lessee in possession of the secured
asset under a valid lease made by the mortgagor prior to the c
creation of mortgage or a~ter the creation of mortgage in
accordance with Section 65A of the Transfer of Property Act
is not correct and the impugned judgment of the High Court
insofar it takes this view is set aside.
26. A further question of law raised in these appeals is D
whether the tenants have remedies under the concerned
tenancy law. In the State of Maharashtra, the Maharashtra Rent
Control Act, 1999 is in force and this Act applies to premises
let for the purposes of residence, education, business, trade
or storage specified in Schedule I and Schedule II of the Act E
as well as·houses let out in areas to which !be Bombay Rents,
Hotel and Lodging House Rates Control ·Act, 1947 applied
before the commencement of the Act. Section 33 of the
Maharashtra Rent Control Act i·s titled 'Jurisdiction of courts'
and it provides that the courts named therein 'shall have F
jurisdiction to entertain and try any suit or proceeding between
a landlord and a tenant relating to the recovery of rent or
possession of any premises and to decide any application
made under the Act and the applications which are to be
decided by the State Government or an officer authorised by it G
or the Competent Authority. The question of law that we have
to consider is whether the appellants as tenants of premises
in the State of Maharashtra including Mumbai will have any
remedy to move these courts having jurisdiction under Section
33 of the Maharashtra Rent Control Act and obtain the relief of H
A
646 SUPREME COURT REPORTS [2014] 11 S.C.R.
injunction against the secured creditor taking possession of the
•
secured asset from the appellants. The answer to this question
is in Section 34 of the SARFAESI Act, which is extracted
herein below:
I
"34. Civil court not to have jurisdiction.- No civil court.shall
B
have jurisdiction to entertain any suit or proceeding in
respect of any matter which a Debts Recovery Tribunal or
the Appellate Tribunal is empowered by or under this Act
to determine and no injunction shall be granted by any
court or other authority in respect of any action taken or to
c. be taken in pursuance of any i)ower conferred by or under
this Act or under the Recovery of Debts Due to Banks and
Financial Institutions Act, 1993 (51 of 1993).
A reading of the second limb of Section 34 of the SARFAESI
D Act would show that no injunction shall be granted by any court
or other authority in respect of any action taken or to be taken
in pursuance of any power conferred by or under the Act. Thus,
when action is sought to be taken by the secured creditor under
Section 13 of the SARFAESI Act or by the Chief Metropolitan
E Magistrate or the District Magistrate under Section 14 of the
SARFAESI Act, the Court or the authority mentioned i_n Section
33 of the Maharashtra Rent Control Act cannot grant the
injunction to prevent such action by the secured creditor or by
the Chief Metropolitan Magistrate or the District Magistrate.
F Even otherwise, Section 33 of the Maharashtra Rent Control
Act vests jurisdiction in the courts named therein to decide
disputes between the landlord and the tenant and not disputes
between the secured creditor and the tenant under landlord who
is a borrower of the secured assets.
G 27. 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
H receipts issued by the landlord to the tenant. Section 107 of
• HARSHAD GOVARDHAN SONDAGAR v. INTERNATIONAL 647
ASSETS RECONSTRUCTION CO. l Tb. [A.K. PATNAIK, J.]
the Transfer of Property Act provides that a lease of A
immoveable 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
immoveable property may be made either by a registered
instrument or by oral ·agreement accompanied by -delivery of B
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 favour by the lessor. Where he does not c
produce proof of execution of a registered instrument in his
favour and ins!ead 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 D
to the possession of the secured asset for more than an year
from the date of the instrument or from the date of delivery of
possession in his favour by the landlord.
Orders and directions of this Court in the facts of the
cases before the Court:, E
28. Having expressed our opinion on the different
questions of law raised in these appeals, we may now pass
orders and directions considering the broad facts of the three
different categories of the case before us: F
(i) In Criminal Appeals arising out of Special leave Petition\
(Criminal) Nos.9426 of 2012, 9170 .of 2012, 9163 of 2012,
9253 of 2012, 9164 of 2012, 9160 of 2012, 379 of 2013,
1467 of 2013, 1782 of 2013, 3575 of 2013, 4062 of 2012,
4063 of 2012, 4053 of 2012, 4068 of 2012, 4119 of 2012, G
4129 of 2012, 7835 of 2013, 8365 of 201.3, 9217 of 2013,
10346 of 2013, 6587 of 2012, 6639 of 2012, 6523 of
2012, 6622 of 2012, 7731 of 2012, 7747 of 2012, 4618
of 2012, 1666 of 2012, 4066 of 2012, 4111 of 2012, 4123
of 2012, 4115 of 2012, 4118 of 2012, 4127 of 2012, 7733 H
A
648 SUPREME COURT REPORTS [2014] 11 S.C.R.
of 2012, 614 of 2013, 3579 of 2013, 3580 of 2013, 3581
•
of 2013, 4024 of 2013, 4032 of 2013, 4030 of 2013, 4025
of 2013, 4031 of 2013, 3715 of 2013, 3563 of 2013,
5533-5534 of 2013, 2914 of 2013, 2915 of 2013 and
10502 of 2013, the appellants claim that they are in
B possession of the secur~d asset under a lease made prior
to the mortgage but the Chief Metropolitan Magistrate,
Mumbai, has passed orders under Section 14 of the
SARFAESI Act for delivery of possession of the secured
asset to the respective secured creditors. These ·orders
c passed by the Chief Metropolitan Magistrate, Mumbai, are
set aside and the matters are remitted to the Chief
Metropolitan Magistrate to pass 'fresh orders in
accordance with this judgment and any other law that may
be relevant after giving an opportunity of hearing to the
appellants and the secured creditors.
0
(ii) In Criminal Appeals arising out of Special Leave
Petition (Criminal) Nos.4064 of2012, 4117 of2012, 4114
of 2012, 4124 of 2012, 4052 of 2012, 4058 of 2012, 4061
of 2012, 4057 of 2012, 4620 of 2012, 6612 of 2012, 7744
E of 2012, 7749 of 2012, 7743 of 2012, 4130 of 2012 and
4125 of 2012 when the appellants filed the Special Leave
Petitions under Article 136 of the Constitution of India, the ·
applications of the secured creditors under Section 14 of
the SARFAESI Act were pending. In case the applications
F are still pending, the Chief Metropolitan Magistrate or the
·/ District Magistrate, as the case may be, will consider the
. claims of the appellants that they were in possession of
the secured asset Linder a lease made prior to the creation
of the mortgage and decide the applications under Section
G 14 in accordance with this judgment and any other law that
may be relevant. In case, during the pendency of these
appeals, orders have been passed by the Chief
Metropolitan Magistrate or the District Magistrate under
Section 14 of the SARFAESI Act, the orders so passed
H will stand quashed and the Chief Metropolitan Magistrate
• HARSHAD GOVARDHAN SONDAGAR v. INTERNATIONAL 649
ASSETS RECONSTRUCTION CO. LTD. [A.K. PATNAIK, J.]
or the District Magistrate will pass fresh orders in A
accordance with this judgment and any other law that may
be relevant after giving an opportunity of hearing to the
appellants and the secured creditors.
(iii) In the Criminal Appeals arising out of Special Leave.
8
Petition (Criminal) Nos.4619 of 2012, 6598 of 2012, 6522
of 2012, 7745 of 2012, 7746 of 2012 and 4120 of 2012,
when the Special Leave Petitions were filed under Article
136 of the Constitution of India, no application under
Section 14 of the SARFAESI Act had been filed by the
secured creditors. In case such application under Section C
14 of the SARFAESI Act has been filed in the meanwhile
or is filed in future, the Chief Metropolitan Magistrate or
the District Magistrate, as the case may be, will decide the
applications in accordance with this judgment and any
other law that may be relevant after giving opportunity of D
hearing to the appellants and the secured creditors.
(iv) In all these appeals, the Chief Metropolitan Magistrate
or the District Magistrate, ·as the case may be, will pass
final orders under Section 14 of the SARFAESI Act within E
four months from the date of filing of certified copy of this
judgment by either the lessee/tenant or the secured
creditor.
(v) With the aforesaid directions and orders, the appeals
are allowed. The parties shall bear their own costs.
F
Kalpana K. Tripathy Appeals allowed.
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